GOVERNMENT SHUTDOWN CLAIMS

Here we go again. Use the word search feature in the upper left-hand corner to find what we have written about government shutdowns. Be sure to add the government's sovereign act defense. In summary, the shutdown is a constructive suspension that is redressable under the Changes clause; declaratory relief is also available, and the government contract defense should not absolve the government of responsibility.

Why is the shutdown a constructive suspension? The first sentence of the Suspension clause provides: "suspend, delay. or interrupt all or any part of the work." The clause also provides that the remedy is under any equitable adjustment clause.

Yes, try to get direction from your contracting officer. If the past is prologue, he or she will not respond. You are on your own. Seek expert advice, but above all, use your sound business judgment. Weigh the risks. If the government is foolhardy enough to terminate for default, the suspension as a sovereign act is an absolute defense to the termination.

Read what I have written about REAs and claims. The quickest way to ADR, appeal, and judicial resolution of the damage caused by the shutdown is to file a claim and skip the REA. Your contracting officer will likely not feel responsible and will not issue a final decision, leaving you to file an appeal based on deemed denial.

In fact, start with a nonmonetary claim to avoid the 60-day wait for the contracting officer's decision. You can add the monetary claim later. In both cases, you need to ask for the conclusion and open with an attempt to go ADR from the start.

HOW TO WRITE A CLAIM

1.    Send a letter in simple, concise terms to the contracting officer who claims relief.

2.      The letter says it is a claim under the Contract Disputes Act of 1978 and FAR Parts 2.101 and 33.201 through 214.

3.      In the letter, state that you request a final decision of the contracting officer as required by the Contract Disputes Act of 1978 and FAR 33.211.

4.      Certify the claim (if it exceeds $100,000.00) as follows:  I certify that the claim is made in good faith, that the supporting data are accurate and complete to the best of my knowledge and belief, that the amount requested accurately reflects the contract adjustment for which the contractor believes the government is liable; and that I am duly authorized to certify the claim on behalf of the contractor.  Do not deviate from this language found in FAR 33.207(c).

5.      Be sure to state a sum certain as the claim amount.

6.      Point out that interest runs on the claim from the time of its receipt.  FAR 33.208.

7.      Be sure to request a final decision as required by FAR 33.211.

8.      Appeal the decision (or the failure to render one) to the appropriate Board.

bill@spriggslawgroup.com

FREE GOVERNMENT CONTRACTS WEBINAR

Announcing a Free Webinar for All Levels of Experience 

Spriggs Law Group, with over 50 years of experience, invites your organization to reserve up to six people to attend a 60-minute Zoom webinar during which Mr. Spriggs will discuss the topics listed below, and he will answer questions. You and they will receive a copy of the 28-page slide PowerPoint written presentation and a copy of the meeting recording.

• How to excel at contract management.

• Identifying the contract performability risks and language conflicts.

• Monitoring contract performance to spot changes and compensable delays.

• Identifying constructive changes and engagement with the warranted contracting officer.

• Implied by law government obligations.

• Timing and staffing of dispute resolution, including negotiation and ADR.

• REAs, claims, calculating damages, transparency, appeals, and declaratory judgments.

• Terminations and subcontracts considerations. 

Email me with at least two suggested dates and times. I also will need the participants' email addresses so I can send them the Zoom invitation. bill@spriggslawgroup.com

EXTENDING EQUITY IN GOVERNMENT CONTRACTING

 

Just how far should the concept of equity extend in government contracting? The regulation dealing with terminations for convenience makes it clear that when the government enters the marketplace and contracts with a private party it must exercise equity when it decides to terminate the contract for its own convenience. Read FAR 49.201. The concept of equity is discussed in practical terms. From that regulation is quite clear the government owes a special duty to a contractor when the government exercises the unique to its system unilateral termination of an existing contract.

The concept of equity expressed in the termination for convenience regulation should be extended to other aspects of government procurement. It makes sense that the rules be relaxed for convenience terminations. However, when it comes to the allocation of risk relating to changes and disputes, equity should be extended to permit avoidance by standards familiar in the private commercial world. The government should extend the same consideration to its contractors as in the private contracting sector when it shuts down and refuses to pay its bills. Public contracting should allocate risk to the government in any situation where to act otherwise would unduly punish the contractor or unjustly enrich the government.

bill@spriggslawgroup.com

THE CONTRACTOR'S RIGHT TO STOP WORK

When does the contractor have the right to stop work?

The Court of Appeals for the Federal Circuit has held that “[u]pon material breach of

a contract, the non-breaching party has the right to discontinue the performance of the contract

Stone Forest, 973 F.2d at 1550; Malone v. United States, 849 F.2d 1441, 1446 (Fed.

Cir. 1988) (holding that material breach by the Government “provides Malone with a legal right

to avoid the contract [and] discharges Malone’s duty to perform”); Kap-Sum Properties, 13

BCA at 173,833 (citing Malone). The Court further explained, “The choice of remedy

is generally with the non-breaching party, and only in exceptional circumstances will equity

require the non-breaching party to continue to perform the remainder of the contract.” Stone

Forest, 973 F.2d at 1552. “[I]f a contract is not clearly divisible, by the

intention of the parties, the breaching party can not require the non-breaching party to

continue to perform what is left of the contract.” Id.

What is a material breach by the government?

In determining whether a failure to render or to offer performance is material,

the following circumstances are significant:

(a) the extent to which the injured party will be deprived of the benefit

which he reasonably expected;

(b) the time to which the injured party can be adequately compensated for

the part of that benefit of which he will be deprived;

(c) the time to which the party fails to perform or to offer to perform

will suffer forfeiture;

(d) the likelihood that the party failing to perform or to contribute to perform

will cure his failure, taking account of all the circumstances, including any

reasonable assurances;

(e) the extent to which the behavior of the party failing to perform or to

offer to perform comports with standards of good faith and fair dealing.

Practical solution

If the breach goes to the essence of the contractor's expectation, the breach most likely will be determined to be material. At that point, the contractor is well advised to seek declaratory relief from the board or court.

Failure to do so could be a waiver of the breach. Stopping work without judicial relief could result in termination for default. The pendency of litigation is not a legal defense to a T for D.

Many factors contribute to the decision to stop work before the judicial determination of declaratory relief. Most are not strictly related to the merits of the legal arguments.

bill@spriggslawgroup.com