When is a Request for Equitable Adjustment a Claim?
By: Michael Hawkes
Published Date: August 12, 2019
Most government contractors are familiar with the disputes procedure on government contracts. A dispute arises between the contractor and the Government. The contractor submits a Request for Equitable Adjustment (“REA”) or a claim. If the contractor submits a REA and the REA is unsuccessful, it submits a claim. The Contracting Officer issues a final decision on the claim and, if the contractor is not satisfied with that final decision, it can appeal to the appropriate board of contract appeals or the Court of Federal Claims.
Since the contractor can submit either a REA or a claim, the question has been what is the difference between a REA and a claim? This is an important question because it is the submission of a claim that triggers the disputes procedure.
The FAR defines a claim as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.” FAR 52.233-1(c). The FAR does not define the term REA although the term is used in the FAR.
Government contractors and their counsel often have distinguished a REA from a claim by stating that a REA generally does not contain the required FAR certification and does not request a Contracting Officer’s final decision – both of which are key requirements for the boards of contract appeals or the Court of Federal Claims to have jurisdiction over the appeal under the Contracts Disputes Act (“CDA”). 41 U.S.C. § 7103. Contractor claims in excess of $100,000 must be certified. FAR 33.207(a). The contractor representative signing the certification has to certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of his/her knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the contractor believes the Government is liable; and that the person is duly authorized to certify the claim on behalf of the contractor. FAR 33.207(c). It should be noted, however, that the Department of Defense requires contractors to certify any REA that exceeds $150,000. DFARS 252.243-7002, Requests for Equitable Adjustment. The contractor has to certify that the REA is made in good faith and that the supporting data are accurate and complete to the best of the person signing the certification’s knowledge and belief.
Recently, the Court of Appeals for the Federal Circuit weighed in on when a REA can be a claim. Hejran Hejrat Co. Ltd., No. 2018-2206 (July 17, 2019). The case involved an appeal from an Armed Services Board of Contract Appeals (“ASBCA”) decision dismissing the contractor’s appeal because the contractor’s REA did not meet the requirements of a CDA claim. Hejran Hejrat Co. Ltd, ASBCA No. 61234, 18-1 BCA ¶ 37039 (2018). Specifically, the ASBCA held that the REA was not a claim because it did not request a Contracting Officer’s final decision. The ASBCA stated that, while the contractor need not explicitly request a final decision, the contractor had to express its desire for a final decision in the submission. Having concluded that the contractor avoided language that could fairly be interpreted as a request for a final decision, the ASBCA dismissed the appeal.
The contractor appealed the ASBCA’s decision to the Federal Circuit, which reversed the ASBCA’s decision and held that contractor in fact had submitted a CDA claim. The Federal Circuit held that a submission styled as a REA still can be a claim if it meets the requirements of a CDA claim. The Federal Circuit rejected the argument that the contractor had not requested a final decision. The Federal Circuit held that the contractor requested a final decision by requesting that the Contracting Officer provide specific amounts of compensation. The Court noted that the contractor submitted a sworn statement attesting to the truth of the submission, included detailed factual bases for its alleged losses, and claimed a sum certain based on those losses. Quoting from an earlier decision, the Federal Circuit stated that it was “loathe to believe” that a reasonable contractor would submit a payment request after a dispute had arisen solely for the Contracting Officer’s information and without at the very least an implied request for a decision on entitlement.
While the contractor ultimately prevailed on the jurisdictional issue, the case is a reminder that, if the contractor wants to submit a CDA claim it must ensure that its submission meets the requirements of a claim. Namely, for monetary claims, the contractor must seek a sum certain, request a Contracting Officer’s final decision, and certify the claim if it is over $100,000. If the contractor fails to do so, the Government may challenge whether the board of contract appeals or the Court of Federal Claims has jurisdiction over the claim and the appeal.