Generally, when a contracting officer (CO) determines that a contractor owes the Government money and issues a decision saying as much, the contractor challenges the decision by filing an appeal with a board of contract appeals or an action in the Court of Federal Claims. Last year, in Beechcraft Defense Co., the ASBCA surprised the Government contracts bar by ordering the agency to file the complaint in the appeal of a CO’s decision and explain (assert) why the company purportedly owed the Government more than $5.8 million for alleged noncompliance with the Cost Accounting Standards. Since Beechcraft Defense, several contractors have brought actions at the ASBCA appealing CO decisions without filing a complaint. In these cases, the contractors have argued that the COs’ decisions assessing liability amounted to Government claims and the Government should file the complaint.
The question arose whether the Beechcraft twist on the typical claim dispute procedure might apply in other contexts. DynPort Vaccine Co. is a recent decision from the ASBCA that provides helpful precedent indicating that contractors confronted with a disadvantageous unilateral modifications might be successful with arguments similar to Beechcraft.
In DynPort Vaccine, the CO issued a unilateral modification after the contractor and the agency failed to reach an agreement concerning the contractor’s entitlement to a cost increase for studies that were required following the company’s replacement of a subcontractor. The CO asserted that the additional studies were necessary as a result of the contractor’s “carelessness in its conduct of the work or the degree of its disregard of contractual duties”—and that the agency was not responsible for the increased costs. The contractor disagreed, and after three months of unsuccessful negotiations, the CO directed the contractor to perform corrective or replacement work at no cost to the Government.
The contractor appealed to the ASBCA and argued that the unilateral modification and the CO’s accompanying letter constituted a de facto final decision by the CO and requested that the Board direct the Government to file the initial pleading. The agency moved to dismiss, arguing that the modification was an act of contract administration—not a government claim.
The Board disagreed with the Government and provided a well-reasoned explanation. First, the Board rejected the proposition that a contractor must have completed performance for a modification to be considered beyond ordinary contract administration. Second, the Board determined that the unilateral modification qualified as a CDA claim. The Board stated that “claim” should be read broadly, and the CO issued the unilateral modification to end a five-month dispute regarding whether the contractor was entitled to reimbursement for the work. The Board stated:
The CO has ordered [the contractor] to perform changed work in a cost-reimbursement contract without compensation pursuant to one of the remedies available to it in an Inspection clause in the contract which requires the CO to have found the contractor to have committed serious failures in performing the contract’s requirements. This does not strike us as a dispute as to ordinary contract administration.
The Board concluded that because the contracting officer “is the only one that knows specifically what facts he relied on” and no explicit decision was issued, the Government should file the pleading.
In DynPort Vaccine, the contractor was stuck between the proverbial rock and hard place. The Government had directed the company to incur more than $4 million in expenses at no cost to the Government. If the contractor refused, the Government could terminate the contract for default and rate the contractor poorly in past performance assessments. If the contractor complied, it may be unable to recoup the costs. The ASBCA’s decision establishes a viable option for a contractor in a similar situation to consider pursuing.