Saturday, June 1, 2013

WHEN, WHY AND HOW TO CONVERT THE REA TO A CLAIM

One of our most popular discussions deals with how to prepare a request for equitable adjustment (REA).  In response, we've had a number of questions about when, why and how to convert the REA to a claim.  Again, there is no guidance in the regulations in answer to these questions so we suggest answers based on our experience.

The REA is not defined in FAR Part 2.  A claim is defined there as follows:
"Claim" means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.
The regulation goes on to say a routine invoice is not a claim.  It then states:
The [routine request] may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.
We believe it is reasonable to treat the REA as if it were a routine request for payment.  It is a request, not a claim.  The intent is to negotiate a settlement of the matters raised in the submission.  The costs of preparing, presenting, negotiating and settling the request are allowable costs.  The intent behind the request is to reach agreement to modify the contract to provide some or all of the relief requested.

A claim arises when the "submission" (the word used in the above referenced quote for which we substituted "routine request" in brackets) is disputed or is not acted upon in a reasonable time.  FAR Subpart 33.2 covers the initiation and certification of a claim, interest on claims and all the rules relating to the contracting officer's decision on a claim.  The distinguishing characteristics between the REA and a claim are a claim must be certified (if over $100K), interest runs on it from date of receipt and the contracting officer is obliged to render a decision on it from which the contractor can appeal to the tribunal of its choice.


In practice, unless it knows its request will be disputed, the contractor usually submits the REA first.  Then, if the contractor meets resistance, either in the form of delay or denial, the contractor should "convert" the REA to a claim, certify it (probably in any event) and request the contracting officer's final decision.  Most often this is accomplished by simply resubmitting the REA with a cover letter providing the requisite certification and request for decision.

A claim, in any event, must be submitted within 6 years of its accrual.  The REA can be submitted any time before final payment.  The judicial tribunals do not have jurisdiction to hear the claim unless it has been certified (if over $100K) and the contracting officer has either rendered a decision or failed to do so within a reasonable time (60 days for small claims).

bill@spriggslawgroup.com    http://www.spriggslawgroup.com/

1 comment:

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