Legal Matters | Archive

Government contractors: know your legal rights

by David Zerbee
for Virginia Business
April 2007

Many companies — particularly in Northern Virginia and Hampton Roads — provide support to federal government agencies. If your company is one of these, do you know what to do in the event there is a dispute? How do you prepare in advance, and how should you proceed after a dispute arises?

Like most procedures with federal government contracting, disputes are governed by federal statutes.

In 1978, the Contract Disputes Act (CDA) was enacted to set forth procedures to deal with disputes. This CDA process applies to all disputes relating to a government contract. A federal contractor that has a dispute must follow the CDA’s mandated procedures carefully or it risks losing its rights in a legal dispute with a government agency.

The CDA includes a standard “disputes” clause, which defines the rights and duties of a contractor in dispute with the government. One of the important provisions in the CDA requires the contractor to continue performance pending resolution of a dispute.

The following dispute process is a general guideline for federal government disputes.

A. Initiating "Claims"
A contractor initiates the disputes process by presenting a “claim” to the contracting officer. A claim is “a written demand or written assertion by one of the contracting parties” seeking relief under the contract. If your company is a subcontractor to the prime contractor, you are not “one of the contracting parties” to the government’s contract. Therefore, you must rely on the prime contractor to preserve your rights and seek your damages unless your subcontract with the prime contractor has language to preserve some of your rights.

B. Contracting Officer's Decision
If the contractor and government are unable to negotiate a resolution to the dispute, the contracting officer must issue a final decision, which is the government agency's position regarding the claim. After the decision is issued, or if the officer fails to provide a final decision after a period of time, the contractor may appeal the claim to an administrative board of contract appeals (BCA) or the U.S. Court of Federal Claims.

C. Appeal to Board of Contract Appeals
There are 11 agency BCAs, which have been established to hear and decide contract disputes between government contractors and agencies under the rules and regulations of the CDA.

A contractor initiates an appeal to a BCA by filing a “Notice of Appeal” within 90 days of receipt of the contracting officer’s final decision. If the contractor fails to file within the 90-day period, it waives its right to proceed. The notice of appeal is usually a simple letter or BCA form stating the date of the officer’s final decision, the contract number and that the contractor is appealing the contracting officer’s decision.

The BCA will then inform the parties that the case has been “docketed.” Under the standard BCA rules, the contractor must file a complaint within 30 days of the docketing notice. The government then has 30 days to file its answer.

Proceedings at BCAs are typically less formal than in most courts. The BCA's administrative judge generally follows the federal rules applicable to federal courts in making procedural and evidentiary decisions. Discovery is available in much the same fashion as in cases before federal district courts or the Court of Federal Claims.

After the complaint and answer have been filed and discovery has occurred, a hearing will be held. Post-hearing briefs are filed by the respective parties and the decisions of the BCA are rendered by a three-judge panel. The BCA's decision may be appealed to the Federal Circuit Court of Appeals.

If your company is a subcontractor, you will not be a party to the BCA proceeding, but may be called upon as a witness in the discovery and hearing. This involvement may be critical to the decision rendered by the three-judge panel.

D. Appeal to U.S. Court of Federal Claims
Another path for the contractor is to initiate proceeding at the Court of Federal Claims by filing a complaint within one year after the contractor receives the contracting officer’s final decision. Failure to file the complaint within this 12-month period will result in dismissal.

The government agency has 60 days to file an answer to the contractor's complaint to the court. Thereafter, discovery may be conducted by both parties.

Unlike the BCAs, the Court of Federal Claims has more formal procedures. A decision of the court is rendered by a single judge presiding over the case. That judge's decision may be appealed to the Federal Circuit Court of Appeals.

Again, the subcontractor is not a party to the court hearing, but its involvement may be critical to the decision rendered.

Conclusion
In conclusion, while government contractors have enumerated rights in contract disputes with government agencies, the subcontractor does not have a right to participate in any dispute negotiations and/or hearings.

If your company is a subcontractor on a government project, you should negotiate certain protections in your subcontract with the prime contractor. Most important among your protections is a right to participate in any dispute with a government agency to help negotiate a settlement in all parties’ — and not merely the prime contractor’s — best interest.

Another part of the subcontract agreement where a subcontractor can protect itself is in the provision that requires the subcontractor to continue its performance in the event of a dispute. The prime contractor requires this because continued performance under its contract with the federal government is a precondition to exercising its rights under the CDA dispute clause. There are a variety of ways to ensure that you will receive the benefit of your continued performance. In the end, scrutinizing the language of every clause in your subcontracts before signing them will help you avoid surprises later.

David Zerbee is a business attorney in the Herndon offices of Executive Counsel PLC, a business law firm composed primarily of former corporate general counsel. He can be reached at dzerbee@exec-counsel.com.