The Contract Disputes Act (CDA)1 governs all aspects of contractor claims against the government and government claims against contractors. Most contractors are at least familiar with the rules concerning claims against the government, but few are aware that the rules work both ways.
The CDA provides that “each claim by the federal government against a contractor relating to a contract shall be submitted within six years after accrual of the claim.”2 The rules concerning claims, both by and against the government, are incorporated into FAR, Part 33, Subpart 33.2, Disputes and Appeals.” It defines “accrual of claim” as “the date when all events, that fix the alleged liability of either the government or the contractor and permit assertion of the claim, were known or should have been known.”3 Elsewhere, it states that the six-year limitation applies (only) to contracts awarded after October 1, 1995, and requires the contracting officer to “issue a written decision on any government claim initiated against a contractor within six years after accrual of the claim.”4
Recently, the CDA six-year statute of limitations has been used very successfully by contractors to dismiss claims at inception. In January 2012, the Armed Services Board of Contract Appeals (ASBCA) dismissed a $6.4M claim by the government against Boeing Co. for the impact of an accounting practice change disclosed in 2000 because it was outside the CDA statute of limitations.5 Another claim against Raytheon Co. for more than $25M was similarly dismissed by the Federal Court of Claims in April 2012.6 A case of great interest to contractors whose incurred cost proposals are audited by DCAA, is one decided in December 2012, wherein the ASBCA dismissed claims for unallowable costs allegedly included in an incurred cost proposal as untimely under the Contracts Disputes Act.7 The Board’s decision focused on the date the ICS was submitted, rather than the date of audit, as the point in time where the government knew or should have known of the inclusion of the unallowable costs. Most recently, the ASBCA dismissed the government’s $17M claim against Raytheon for a CAS non-compliance as untimely under the CDA’s statute of limitations.8
These cases are of great concern to DCAA as they face a seemingly infinite backlog of incurred cost audits. Their most recent tactic is to attempt to reset the statute of limitations clock by requesting contractors to correct some part of an over-aged incurred cost proposal and then demand that the contractor execute a new certification, no matter how minor the correction or which schedules were affected. Some requests are as minor as reformatting or renaming schedules to conform to the new FAR requirements.9
Their theory is that any recertification by the contractor will “toll” or extend the statute of limitations, effectively restarting the clock. This theory has not been litigated and is, in fact, disputed by some legal authorities. Many contractors are resisting requests to update or revise proposal schedules not affecting the claimed rates. Even when they are willing to correct old proposal schedules, many are questioning the demand to recertify the claimed rates when they were not affected by the changes. Certainly, any contractor facing such a demand should seek legal counsel before executing a new or re-certification of any old proposal.
Don’t reset that clock!
1 Codified at 41 U.S.C. §§ 601-613 and implemented by FAR 33.202, Contract Disputes Act, July 3, 1995 2 See 41 U.S.C. § 7103(a)(4)(A) 3 See FAR 33.201, Definitions 4 See FAR 33.206(b), Initiation of a Claim 5 See ASBCA, No. 57490, 1/6/2012 6 See Raytheon Co. v. United States, Fed. Cl., No. 09?306C, 4/2/12 7 See Raytheon Co., ASBCA, Nos. 57576 & 57679, 12/17/12 8 See Raytheon Missile Systems, ASBCA, No. 58011, 1/28/13 9 See FAR 52.216?7(d)(2) (June 2011)