HOW TO WRITE A PASS THROUGH AGREEMENT

A contractor and subcontractor may agree to pass through to the government the subcontractor's request for equitable adjustment.  Here is a suggestion on how to write that "pass through" or "sponsorship" agreement adapted from published literature of the Public Contract Law Section of the American Bar Association:

SPONSORSHIP OF REQUESTS FOR EQUITABLE ADJUSTMENT (REA)

Subcontractor will give Contractor a fully supported written REA within five (5) years after the REA accrues but in no event later than final payment under this Agreement or Subcontractor shall be barred from any remedy for such REA.

Subcontractor will cooperate fully with Contractor in prosecuting the REA against the Owner and will be bound by the outcome unless Contractor does not afford Subcontractor a reasonable opportunity to participate in the resolution of the REA or Contractor, having determined to discontinue its own prosecution of the REA, does not afford Subcontractor an opportunity to continue to prosecute the REA in Contractor’s name.

Contractor shall cooperate with Subcontractor in prosecuting the REA against the Owner but Contractor shall have the sole right to make final decisions on prosecution and settlement of the REA.   Subcontractor will take the lead in prosecuting the REA against the Owner and Contractor will assist Subcontractor by allowing Subcontractor to pursue the REA in Contractor’s name.

Subcontractor shall submit with the REA a certification to Contractor, signed by an authorized representative of the Subcontractor that the claim is made in good faith, the supporting date are accurate and complete to the best of the signatory’s knowledge and belief, the amount requested accurately reflects the contract adjustment for which Subcontractor believes the U.S. Government is liable and the signatory is authorized to certify the REA on behalf of Subcontractor.  Subcontractor indemnifies and holds Contractor harmless from damages, costs (including attorney fees) and other liabilities arising from any breach of such certification or any violation of law against misrepresentation, fraud or false statements.

Contractor and Subcontractor will each bear its own costs of prosecuting the REA.

Subcontractor shall proceed diligently with performance of this Agreement pending final resolution of any REA arising under this agreement.

This clause applies to any REA, claim or appeal arising under or related to this subcontract agreement.

 bill@spriggsconsultingservices.com

DO T FOR D DEFENSES REQUIRE SUBMISSION OF A CLAIM?

When a contractor appeals a decision to terminate its contract for default, must that contractor also submit to the contracting officer a claim, obtain a decision on that claim and appeal the decision or the failure to render it?  At least 11 fairly recent cases have addressed this issue and the decisions have left the waters very murky.  Until recently, all a contractor had to do was appeal the termination for default and avail itself of the panoply of defenses available including, for example, acts of the government in its contractual capacity, which include constructive changes.

As a result of Maropakis Carpentry, Inc. v. United States, 609 F. 3d 1323 (Fed. Cir. 2010), and its progeny, a contractor must consider the need to file a separate claim seeking an adjustment in the terms of the contract.  When does a particular defense require an adjustment in the terms of the contract?  When does the defense require that a claim be submitted to the contracting officer?

The cases addressing these issues do not provide a clear answer.

In ERKA Constr. Co., Ltd. ASBCA No. 57618, 12-2 BCA para. 35,129, the Board said if the defense could be a constructive change which could lead to a contract adjustment, the contractor was required to submit that claim and having failed to do so, the Board granted the government's motion to dismiss.  Other cases have suggested that a defense requiring the interpretation of contract language but not a contract adjustment might also require a claim be submitted to the contracting officer.

Wow.  Almost any defense may raise issues of contract interpretation.

So where does a contractor stand today?  If terminated for default (or if defending any other government claim) must a contractor also submit a claim and request a contracting officer's final decision on that claim?  Recently, the ASBCA stated: "Based on these decisions, it is clear that, while all possible defenses need not be submitted to a contracting officer for a final decision, a contractor contesting liquidated damages or a default termination due to excusable delay must submit a claim for a time extension before appealing to the Board."  ECC CENTCOM Constructors, LLC, ASBCA No. 60647, September 4, 2018.

Our advice is that a contractor should always file a claim asserting entitlement to a contract adjustment in a default termination appeal.  Request a final decision and either appeal the decision or appeal the failure to render it (FAR Part 33).  If the adjustment requested to support the defense involves money, also submit with the claim a sum certain.

It may be better to be safe than sorry.  The claim can be submitted after the appeal on the termination for default is taken.  The second appeal of the claim itself can be consolidated with the T for D appeal.  We've had two recent ASBCA appeals in which this has happened.

bill@spriggslawgroup.com