Following up on our past articles,1 in this BRIEFING PAPER we summarize notable Contract Disputes Act (CDA) decisions by the courts and boards of contract appeals from the second half of 2021. With holdings both timeless and at times novel, we draw inspiration from similarly unforgettable lines from classic cinema. "Fasten your seatbelts. It's going to be a bumpy [and detailed case law summary]."
Rebel Without A [Contract]: "You Say One Thing, He Says Another, And Everybody Changes Back Again"
The existence of an implied-in-fact contract is difficult to prove, and contractors would do well to remember that trying to imply a contract in the absence of a formal written agreement is "risky business." Two recent cases make this point and left disappointed contractors in their wake.
In Intellicheck, Inc., 2 the Armed Services Board of Contract Appeals (ASBCA) ruled that an agency's inaction could not constitute acceptance of an offer to form a contract. A federal government subcontractor argued it formed an implied-in-fact contract with the Navy to store and maintain government property until the Navy provided disposal instructions. The task order in question ended on September 6, 2012, and the prime contractor filed a claim against the Navy to recover additional costs incurred during performance on September 23, 2013. The prime contractor and the Navy reached a settlement on August 22, 2014, and the settlement included a release of all subcontractor costs. In April 2015, the subcontractor contacted the Navy, advising that it was still in possession of "very large marine buoys that had to be stored in rented space and required ongoing maintenance." The subcontractor disposed of this property, in accordance with the Navy's instructions, in December 2015. The subcontractor then submitted a certified claim for main-tenance and storage costs dating from August 2014 based on an alleged implied-in-fact contract to maintain the property safely, which the Navy denied. The board reasoned that no implied-in-fact contract existed between the subcontractor and the Navy, because there was no evidence of mutuality of intent to contract or an unambiguous offer and acceptance. The board first rejected the subcontractor's argument that by entering into an express contract with the prime, the Navy also had entered into an impliedin-fact contract with the subcontractor. The board next rejected the subcontractor's argument that, after the close out of the express contract, the Navy, "through its actions of not providing timely disposal instructions," accepted the subcontractor's unstated offer of continuing to maintain the property. In short, the board held that the parties' inaction did not constitute evidence of creating a new, implied-in-fact contract between the Navy and the subcontractor. While the Navy knew the subcontractor retained possession of the property, the Navy never took any action that could be interpreted to create a new contract with the subcontractor. While this may seem an unfair result, it is an important reminder that subcontractors lack privity with the government and should ensure their subcontracts provide adequate remedies. Of note, the board observed that the ongoing storage costs and disposal of the property "should have been addressed before the Navy and the prime executed the August 2014 settlement agreement and before the task order was closed out."
In 6601 Dorchester Investment Group, LLC v. United States, 3 the contractor's mistake was trusting a government agent without authority, interactions with whom could not generate an implied-in-fact contract. The contractor alleged that it was incentivized to participate as a landlord in a Department of Housing and Urban Development (HUD) housing voucher program targeted to veterans based on a Department of Veterans Affairs (VA) agent's promise to reimburse the contractor for any unpaid rent owed by, or apartment damage caused by, the veteran participants. Apparently the contractor actually did receive some such payments, and when they stopped, it sued in the U.S. Court of Federal Claims (COFC) based on an implied-in-fact contract. The COFC held the contractor failed to allege facts sufficient to establish that there was any meeting of the minds with the government, and even had there been, the contractor failed to establish that the individual with whom the contractor communicated had actual authority to bind the government or that any reasonable inference could have been made that the agent had implied actual authority. Furthermore, any government agreement to reimburse the contractor on behalf of the veteran participants in the HUD program would have directly contravened the express regulation of that program in several respects. Again, relying on an implied contract with the government is never where a company should aim to be. The best practice is to verify that the official has actual authority to contract and agree to the terms, and to document the agreement in writing.
Garden Stat[ute Of Limitations]: "[G]ood Luck Exploring The Infinite Abyss"
The CDA's six-year statute of limitations4 can prove devastating when contractors fail to timely assert their claims. Even worse when that failure results from legitimate confusion regarding when a claim accrues. Three dueling statute of limitations decisions in the second half of 2021, two finding a contractor's claims untimely and the other reaching the opposite result, tease out the intricacies of this doctrine. These cases reinforce that the central inquiry is when a contractor could bring its claim under the specific factual circumstances'a contractor may be reasonable to wait to file in some circumstances but cannot bide its time in others.
First, in BNN Logistics, 5 the ASBCA, relying on the U.S. Court of Appeals for the Federal Circuit's decision in Electric Boat Corp. v. Secretary of the Navy, 6 clarified that a claim accrues when a contractor knows of some sort of injury, not when it finds out the precise amount of damages resulting from that injury. The unlucky contractor in this case received invoices back from the Army explaining that the Army was deducting the contractor's payments due to performance issues. While the contractor argued that its claim did not accrue until it actually received the lesser payment from the Army, not when it received these notices, the board disagreed and held the claim accrued when the deductions were known to the contractor, i.e., when it received the invoices from the Army. If the contractor "believed the deductions were not proper, it could have raised a claim for the deductions upon receipt of the invoices." Unfortunately for the contractor, it did not submit its claim until more than six years had passed beyond this time, rendering its claim for these deductions untimely
In Triple Canopy, Inc. v. Secretary of the Air Force, 7 the contractor correctly took the FAR-mandated procedural steps before filing its claim, and the Federal Circuit ruled that claim did not accrue until those steps were complete. In this case, the government of Afghanistan imposed a tax on the contractor in March 2011, which the contractor appealed. The Department of Defense also requested that Afghanistan waive this tax. In July 2011, Afghanistan resolved the contractor's appeal by reducing the tax assessment by half, and that same month the contractor paid the reduced assessment. The contractor did not submit certified claims to the contracting officer until June 2017, seeking reimbursement of this amount under the Federal Acquisition Regulation (FAR) "Foreign Tax" clause.8 The board held the contractor's claim to be untimely, reasoning that the...
