This is the fourth of an eight-part series addressing cutting-edge strategies for Certified Claims under the Contract Disputes Act (CDA). Certified Claims are the primary avenue available to government contractors to recover damages due to changes, delays, inefficiencies, and other government-caused issues – a particularly important point for contractors seeking to maintain positive cashflow while facing the prospect of an economic slowdown or recession.
You can check out previous posts here: Part 1, Part 2, Part 3
In this series so far, I’ve focused on strategies for preparing, submitting, and litigating CDA Claims. But is a Claim the only way to request additional time and/or money from the government? No. Contractors can also submit a Request for Equitable Adjustment (REA).
So, if you are owed time and money on a contract, should your next move be a CDA Claim or an REA? There is no one-size-fits-all answer – and contractors should carefully consider their own unique circumstances before choosing a path forward.
At their core, CDA Claims and REAs share an awful lot in common. The contractor seeks damages based on government-caused impacts to a contract. Whether pursuing an REA or a Claim (or both – see more below). Contractors should be cognizant of the relevant remedy granting clauses and requirements related to notice and supporting documentation.
In terms of differences, REAs are generally less formal than Claims and amount to a request for negotiated settlement of a disputed amount. The mandatory elements of a CDA Claim (like demanding a Sum Certain) are not required in an REA. But do note that REAs above the simplified acquisition threshold submitted to agencies in the DoD require a two-prong certification.
In addition, REAs lack the same automatic trigger requiring a prompt response from the Agency. A Claim puts the government “on the clock” and establishes a fixed deadline for a formal response (typically 60 days from the date it is filed). On the other hand, there is no firm or fixed deadline for the Contracting Officer to respond to an REA.
What If the Government Rejects the REA (or Fails to Respond)?
If the Contracting Officer lets the REA sit too long – or there is a breakdown in negotiations – the contractor has the option to convert the REA into a CDA Claim.
The requirements to convert an REA into a Claim are not onerous. Typically, the contractor can rely on the same core document – but add a request for a Contracting Officer’s Final Decision, Sum Certain, and Certification (if required).
Recovering Preparation Costs
Contractors should also consider the potential hidden money in Claims and REAs. For example, contractors can include “contract administration” costs as part of the damages sought in an REA. These costs can include the attorneys’ fees and consultants’ fees incurred in preparing and submitting the REA. This benefit alone often convinces contractors to start at the REA stage (rather than immediately submitting a Claim).
Attorney and consultant prep fees are not recoverable as part of a Claim, unless the contractor submitted an REA first. However, the CDA does provide for the recovery of interest on any amount that becomes due on a Claim. Depending on how long the Claim takes to resolve and the amount at stake, the interest collected can be considerable and should not be overlooked as part of an overall strategy.
Consider Personal Relationships
The decision to start the negotiation process with an REA or a Claim can have many different driving factors – including (unsurprisingly) time and money.
As outlined above, a Claim offers the immediate advantage of requiring a response from the government by a specified date. The Contracting Officer will either grant or deny the Claim – or offer a partial settlement. On the other hand, REAs offer the contractor an opportunity to recoup preparation costs and fees.
In addition to these obviously important factors, I suggest considering the personal relationships involved before making a decision. When there is a good working relationship between the contractor and the government, there is a better probability of finding a common ground on a REA. Jumping straight to a claim can have a chilling effect on those negotiations.
When those relationships are already on ice, there can be a sense of futility in submitting an REA (i.e., the sense that the request for adjustment will be ignored and linger indefinitely). In those circumstances, proceeding directly to a Claim at least offers some certainty and allows the clock to begin to run on CDA interest.
Again, there is no one-size-fits-all approach – but there are strategic moves for every unique situation.
Come back next Tuesday (November 29) when I’ll cover disputes and other causes of action against the government that are not properly included in an REA or Claim.
Nick Solosky is a Partner in Fox Rothschild’s Government Contracts Practice Group. You can reach Nick directly at NSolosky@FoxRothschild.com or 202-696-1460.