Contractors Must Provide Sufficient Notice Of The Basis And Amount Of A CDA Claim

The U.S. Court of Appeals for the Federal Circuit recently decided the case of K-Con Building Systems, Inc. v. United States, No. 2014-5062 (Fed. Cir. Feb. 12, 2015). While this construction case reaffirms some relatively unremarkable concepts of liquidated damages and changes, it does provide some helpful guidance for all federal contractors regarding the required contents of claims against the government under the Contract Disputes Act (“CDA”) .

K-Con Building Systems, Inc. (“K-Con”) contracted with the U.S. Coast Guard to build a $582,641 cutter support team building in Port Huron, Michigan. The project was supposed to be completed by November 20, 2004. The Coast Guard accepted the building as substantially complete on May 23, 2005, and withheld payment of $109,554 in liquidated damages (“LD’s”) computed at the contractually determined level of $589 per day. On July 28, 2005, K-Con submitted a CDA claim to the contracting officer requesting remission of the LD’s, asserting that the LD’s constituted an impermissible penalty. The claim also obliquely mentioned that the Coast Guard had failed to issue extensions to the completion date as a result of changes to the contract, but K-Con never set out any more facts behind this extension issue. The Contracting Officer denied the claim, and K-Con filed suit in the US Court of Federal Claims.

On December 15, 2006, while the case was pending in court, K-Con made new claims to the Contracting Officer. The new claims detailed the alleged changes only briefly mentioned in the original claim and then asserted $196,126.38 for additional work allegedly resulting from the alleged changes. The new claim also sought time extensions for the alleged additional work. These second claims were denied by the Contracting Officer and then K-Con amended its complaint to add the “new” claims.

The U.S. Court of Federal Claims ultimately granted the government summary judgment on all grounds asserted. K-Con appealed to the Federal Circuit.

The Federal Circuit made short work of the merits of K-Con’s appeal. It held that a $589 per day LD provision was enforceable and not unreasonable on a $582,641 construction project. It also held that K-Con’s belated 2006 claim for $196,126.38 for additional work was untimely in light of 48 C.F.R. § 52.243-4(d) which required K-Con to present notice of claims within twenty (20) days of the alleged 2004 changes.

The important lessons from this case are the Court’s discussions about what are the necessary elements of a “claim.”

A claim is “ ‘a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.’ ” . . . . A claim need not “be submitted in any particular form or use any particular wording . . . [, but it must provide] a clear and unequivocal statement that gives the contracting officer adequate notice of the basis and amount of the claim.”

. . .

Our longstanding demand that a claim adequately specify both the amount sought and the basis for the request implies that, at least for present purposes, we should treat requests as involving separate claims if they either request different remedies (whether monetary or non-monetary) or assert grounds that are materially different from each other factually or legally.

Slip Op. at 5-6. Using this analysis, the Federal Circuit dismissed K-Con’s time extension “claim” because none of the required details of this “claim” were presented to the Contracting Officer in K-Con’s 2005 claim. Because the claim was never properly presented to the Contracting Officer, the courts lacked jurisdiction to hear such claims under the CDA.

The moral of this story is to make sure that all claims are thought through, well developed, and factually supported with an eye towards potential future litigation before submitting them to the Contracting Officer. Failure to properly articulate or identify all required elements of a claim may result in such claims being summarily denied – by both contracting officers and the courts.