Government Contracts Award for Government’s Prior Breach and CDA Interest Affirmed
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Monday, August 5, 2019

Award for Government’s Prior Breach and CDA Interest Affirmed

By Government Contracts Editorial Staff

The Court of Appeals for the Federal Circuit affirmed an award of more than $44 million for private security contractor costs because the Armed Services Board of Contract Appeals had jurisdiction over the contractor’s affirmative defense. After the government determined that PSC costs were not allowable under the Logistics Civil Augmentation Program contract, it withheld contract payments to recapture more than $44 million in previously paid PSC costs. The contractor submitted claims for the withheld amounts in 2007, 2009, and 2010, arguing the costs were allowable, but the Court of Appeals for the Federal Circuit held the contract prohibited the use of PSCs (59 CCF ¶80,726). On remand, the board found the contractor incurred the PSC costs as a result of the government’s failure to provide adequate protection, which constituted a prior material breach (17-1 BCA ¶36,779). The board awarded the claimed amounts and Contract Disputes Act interest for periods beginning on the dates the contractor submitted the claims.

No Claim to Adjust Contract Terms. On appeal, the government repeated its argument the board lacked jurisdiction because the contractor did not submit a breach of contract claim as a timely, certified CDA claim. The CDA’s jurisdictional requirement of submission of a claim to a contracting officer (41 USC 7103(a)(1)) applies to contractor claims and affirmative defenses that seek an adjustment of contract terms. However, affirmative defenses asserted under the contract, such as common law defenses of prior material breach or fraud, do not require a CO’s final decision. Here, the contractor asserted the affirmative defense of prior material breach under the contract as written. Although the LOGCAP contract prohibited the use of PSCs, the government’s prior material breach excused the contractor’s noncompliance.

Accrual of Interest. The government also argued CDA interest should not have begun to accrue on the initial claim filing dates because the contractor did not raise its successful breach of contract defense until September 2011. However, no authority requires a contractor to state in a claim the legal theory on which it ultimately recovers to start the running of interest. 41 USC 7109(a)(1) requires only that the CO receive a certified CDA claim, which occurred here. In addition, cases standing for the proposition that defenses to government claims alone are not entitled to CDA interest were distinguishable because the contractors in those cases did not file CDA claims. (Secretary of the Army v. Kellogg Brown & Root Services, Inc., CA-FC, 63 CCF ¶81,695)

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