Nonmonetary claims can be used to truncate the appeal process and to obtain relief on the question of whether the contractor is free to stop work. This process also can lead to a negotiated resolution of disputes.
We've written about obtaining declaratory relief during contract performance. A nonmonetary claim can be submitted during contract performance. The 60 decision delay does not apply, and the board or court can have jurisdiction to hear the claim and enter declaratory judgment. Let's drill down and examine the rules on obtaining declaratory relief. In the case from which we quote in the remainder of this article, the Civilian Board of Contract Appeals (CBCA) ultimately declared the contractor was permitted to stop work. The portion quoted here established the contractor's right to be heard.
In Alliant, the Federal Circuit concluded that the boards of contract appeals and the Court of Federal Claims have broad discretion to issue declaratory relief during performance of a contract, including the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. Alliant, 178 F.3d at 1270-71. Thus, declaratory relief in situations involving a “fundamental question of contract interpretation or a special need for early resolution of a legal issue” is appropriate. Id. at 1271. See also Kellogg Brown & Root Services, Inc., 13 BCA ¶ 35,411 (KBR).
Alliant has set forth three criteria for a court or board to consider when evaluating the appropriateness of declaratory relief: (1) whether the claim involves a live dispute between the parties, (2) whether a declaration will resolve that dispute, and (3) whether the legal remedies available to the parties would be adequate to protect the parties’ interests.
Regarding the first criteria, the parties agree that the claim involves a live dispute between the parties. KT has been ordered to proceed with CLIN 0002, the construction phase of the contract, on plans that it claims will cost hundreds of millions of dollars over the FTP specified in SA-007. The disagreement clearly exists, it has significant ramifications, and it continues to impact appellant. KBR at 173,712.
Here there is clearly a dispute as to whether the contractor has an obligation to perform. The Federal Circuit advises that to hold that a contractor has a contractual obligation to perform in accordance with the contracting officer’s decision until it receives a different ruling on the scope of the contract does not mean that it must postpone seeking such a ruling until it has performed in full and seeks compensation for the additional work that the contract did not require.
If appellant must continue work when it believes it is not obligated to do so, a fundamental issue is implicated in the contract, and in the face of potential cost overruns of hundreds of millions of dollars, it has a special need for early resolution of this issue. Were the Board to find that the Government has breached the contract, and that therefore the appellant, in the face of the Government’s breach, is entitled to stop work, the essential dispute between the parties would be determined. Though every detail in dispute would not be resolved, the parties would at least have a fundamental framework within which to analyze those remaining issues. See, KBR at 173,713. Therefore, the Alliant second prong is satisfied.
When taken in the light most favorable to the appellant, the facts alleged suggest that appellant’s legal remedies short of a declaratory judgment are inadequate to protect its interests. The VA proffers that KT can rely on the contract’s changes clause to recoup funds it must expend while performing the construction. But the Alliant court found that to file a claim under the changes clause for compensation when the work is completed can be an inadequate remedy. 178 F.3d at 1269. Here, the appellant alleges that completion of the work would increase its price for completion of the project, as currently designed, by at least $200 million, or more than 30% of the initial ECCA. This would be, at the least, a cardinal change to the contract, and would require appellant to serve as long-term banker for the Government, while it makes its way through the pitfalls of submitting claims under the changes clause to a contracting officer who, according to KT, does not have funds allocated to the contract beyond the $582,000,000 ECCA.1 At this stage, appellant’s legal remedy must be assumed to be inadequate and it has a special need for early interpretation of the contract. As the Federal Circuit suggests, to hold that KT has a contractual obligation to perform in accordance with the contracting officer’s decision until it receives a different ruling on the scope of the contract does not mean that it must postpone seeking such a ruling from the Board until it has performed in full and seeks compensation. Id. at 1266.
MOTION TO DISMISS DENIED:
May 22, 2014
CBCA 3450
KIEWIT-TURNER, A JOINT VENTURE,
Appellant,
v.
DEPARTMENT OF VETERANS AFFAIRS,
Respondent.
bill@spriggslawgroup.com
