A Familiar Dilemma
A contractor working on a federal government project submits a properly certified claim to the Contracting Officer. Within the required 60-day response period, the Contracting Officer notifies the contractor that additional time is required to properly review and evaluate the claim and that a decision on the claim will be issued by a certain date many months in the future. Under protest and considerable objection, the contractor waits patiently. Just shy of the newly established deadline, the contractor is informed by the Contracting Officer that additional time is necessary to evaluate the claim and that a decision on the claim will not be reached by the extended deadline. Instead, the contractor is advised that a final decision on the claim will be issued by a new date months in the future.
What options does the contractor have? Pursuant to the Contract Disputes Act of 1978 (“CDA”), the contractor’s claim is not ripe for litigation until: (1) a proper claim is submitted to the relevant Contracting Officer; and (2) the contractor receives a final decision on the claim. What rights does the contractor have when the Contracting Officer fails to issue a “final decision?”
The foregoing facts are drawn directly from the United States Court of Federal Claims’ decision in Rudolph & Sletten, Inc. v. United States, 120 Fed. Cl. 137 (2015), which was issued earlier this year. In Rudolph & Sletten, the contractor submitted a certified claim to the government seeking $26,809,003 for, among other damages, costs attributable to alleged government-caused delay and disruption, additional consultant costs, and the cost of extra work undertaken by the contractor. Under the CDA, the Contracting Officer was required to, “within 60 days of receipt of a submitted certified claim over $100,000 – (A) issue a decision; or (B) notify the contractor of the time within which a decision will be issued.” 41 U.S.C. § 7103(f)(2).
The government’s Contracting Officer advised the contractor within the initial 60-day period that due to the complexity and extensive nature of the claim, a final decision would not be issued for nine months. Although the contractor disputed whether the nine-month response period was reasonable, the contractor refrained from further action. Days before the government’s self-imposed nine-month response period was set to expire, the contractor was notified that eight additional months were needed. Rightfully frustrated with the persistent delay, the contractor filed a lawsuit on the claim. The government responded to the lawsuit by moving to dismiss the case on grounds that the contractor failed to obtain a “final decision.” In the alternative, the government requested that the lawsuit be stayed pending the imminent issuance of a final decision on the claim by the Contracting Officer.
In connection with the pending motions, the Court of Federal Claims was tasked with determining whether the Contracting Officer’s failure to issue a “final decision” within the original time frame identified during the initial 60-day period operated as a “deemed denial” of the contractor’s claim that would operate as a “final decision” for purposes of establishing the court’s jurisdiction.
Does The Failure To Issue A Response Within The Original Time Identified Operate As A “Final Decision” Under The CDA?
As a backdrop to the Court of Federal Claims decision, two important points must be made: (1) the CDA expressly provides that a claim is deemed denied when a Contracting Officer fails to issue a decision within the required time period; and (2) the CDA provides that a deemed denial operates as a final decision. See 41 U.S.C. § 7103(f)(5). The question before the Court of Federal Claims, however, was whether a Contracting Officer’s failure to issue a decision before expiration of its own unilaterally established deadline similarly operates as a deemed denial, despite the Contracting Officer’s effort to unilaterally establish a second extension to the response deadline? In Rudolph & Sletten, the Court of Federal Claims answered this question with an unwavering “YES.”
The Court of Federal Claim’s decision focused on the express language in section 7103(f)(2), set forth above. In looking at the plain language of the statute, the court concluded that the statute explicitly requires the Contracting Officer either to issue a decision within 60 days, or to set a firm and reasonable deadline for issuing a final decision during this initial 60-day period. Importantly, the court noted that no authority provides the government with the right to a second unilateral extension outside the original 60-day period. Thus, the court held that passage of the government’s self-imposed deadline to respond to the claim constituted a “deemed denial” of the claim and operated as a final decision for purposes of allowing the contractor to pursue other options. Despite this ruling, the Court of Federal Claims stayed the contractors’ lawsuit for 30 days pending issuance of a decision by the Contracting Officer because by the time the court heard the motion to dismiss, the additional eight-month period identified by the Contracting Officer was nearly complete.
Will This Clarity Result In Less Claim Response Delay?
While the Court of Federal Claims’ decision in Rudolph & Sletten appears to be a victory for government contractors, there are at least three likely consequences of the ruling that contractors should anticipate:
1. Given the government no longer has the ability to obtain an extension to its response time outside of the initial 60-day period, contractors will likely encounter more unnecessarily prolonged initial response dates;
2. The government’s likely effort to unnecessarily prolong the initial response period will result in more contractors having to seek court intervention to direct the Contracting Officer to issue a decision within a more reasonable (and significantly shorter) period of time, an option that is available to contractors under the CDA (41 U.S.C. § 7103(f)(4)); and
3. Even if a claim is deemed denied as a result of the Contracting Officer’s failure to issue a final decision within the initially established response period, the Court of Federal Claims can still stay properly initiated proceedings if a decision by the Contracting Officer appears imminent.
Further, as noted in the Rudolph & Sletten decision, there appears to be some contrary authority in several Board of Contract Appeals cases that state that a Contracting Officer need only provide a “good faith estimate” during the initial 60-day period for when a decision will be rendered and that the “good faith estimate” can be extended if doing so is reasonable. Thus, it is not clear whether a Board of Contract Appeals would necessarily reach the same result reached by the Court of Federal Claims in Rudolph & Sletten.
Although Rudolph & Sletten may eliminate some uncertainty regarding the government’s ability to continually extend claim response deadlines, it is unlikely to significantly minimize the response delay with which many contractors are all too familiar. To ensure minimal delay, contractors must be vigilant and informed of their rights and options under the CDA, and not hesitate to seek counsel and involve the court early in the claim process.