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Jurisdictional Implications of CDA’s Presentment Requirement

A claim under the Contract Disputes Act (CDA) must first be presented to and denied by the contracting officer (CO) before it can be appealed to a Board of Contract Appeals (BCA) or the Court of Federal Claims (COFC). Adjudicative forums have consistently held the CDA’s presentment requirement to be jurisdictional. That is, for a BCA or the COFC to exercise jurisdiction over a CDA appeal, the underlying claim must first have been presented to the CO for a final decision. Contractors may satisfy the presentment requirement by submitting the claim to the CO in accordance with the requirements of the CDA. While the CDA does not require the claim to be submitted in a particular form, it must typically provide a clear and unequivocal statement that gives the CO adequate notice of the basis and amount of the claim. The CO must then issue a final decision on the claim. The contractor may appeal the CO’s final decision at a BCA or the COFC within 90 days or 12 months, respectively.

In Avant Assessment v. U.S., No. 20-1185C, a decision issued on May 7, 2024, the COFC dismissed an appeal from a CDA claim for a lack of subject matter jurisdiction because the contractor failed to first present its claim to the CO. The appeal was part of a long-running litigation relating to contracts first issued by the U.S. Army in 2011 for foreign language testing materials to assess the proficiency of military linguists. The Army terminated the contracts for default in 2013, but following a successful appeal at the Armed Services Board of Contract Appeals (ASBCA), the default termination was converted into a termination for the government’s convenience. Following the successful convenience conversions, the contractor submitted termination settlement proposals to the CO, which were denied. After the CO’s denial, the contractor again appealed the CO’s final decision to the ASBCA. Notably, during the discovery phase in the second round of ASBCA litigation, the contractor learned that the government had not only retained the rejected testing materials but also “used” them by transferring them to a third party. Therefore, the contractor demanded payment for the rejected test materials. The contractor alleged that the Army had constructively accepted the rejected testing materials by retaining and using them after rejection. Alternatively, the contractor argued that the Army improperly rejected the testing materials. The ASBCA dismissed a large portion of the contractor’s claim for lack of jurisdiction since the contractor’s constructive acceptance claims had not first been first presented to the CO.

Importantly, for the remainder of the termination for convenience claim, the ASBCA entered judgment, which became final. The contractor then submitted the dismissed portion of its constructive acceptance claims to the CO for a final decision, which the CO again denied. At this stage, the contractor switched forums and brought its appeal before the COFC. In Avant Assessment, LLC v. United States, 159 Fed. Cl. 632, 641 (2022), the government filed its first motion to dismiss, alleging that the contractor’s claims were barred by the doctrine of claim preclusion since ASBCA had previously entered final judgment. In that decision, the COFC partially denied the government’s motion to dismiss, determining that the contractor’s UCC claims were not barred by claim preclusion because they were based on different operative facts that only became known during the ASBCA litigation. There, the COFC ruled that the contractor could not have included its unknowable UCC claims in its termination for convenience settlement proposals because the UCC claims were based on facts uncovered in the ASBCA appeal. However, the remaining counts in the contractor’s complaint relating to termination for convenience were dismissed due to claim preclusion.

Following that 2022 COFC decision, the government filed a second motion to dismiss, this time requesting that the Court dismiss the contractor’s UCC claims for not meeting the presentment requirement. Specifically, the government alleged that the contractor’s assertions regarding the government’s use of the rejected test items, which the Court had determined were based on different operative facts that became known during the ASBCA litigation, were never presented to the CO per the requirements of the CDA. The government argued that if the operative facts underlying the contractor’s UCC claims were sufficiently different from what was before the ASBCA to avoid the claim preclusion bar, then the contractor was required to present those facts (and the underlying claims) to the CO before filing the appeal at the COFC. Thus, the government argued that the COFC lacked jurisdiction over the contractor’s surviving UCC claims because the CO had never been put on notice regarding these claims. Therefore, in successfully avoiding the bar of claim preclusion in the previous motion to dismiss, the contractor had inadvertently argued itself out of the COFC’s jurisdiction.

Meanwhile, the contractor argued that its UCC claims were included in the plain language of the certified claim letters submitted to the CO. Specifically, the contractor took the position that its claim presented to the CO mentioned “use rights” in the context of the government’s enjoyment of exclusive ownership and retention of the rejected items to the contractor’s detriment. Therefore, according to the contractor, its UCC claims asserting that the government constructively accepted the rejected items by retaining them, also put the CO on notice regarding its UCC claims. However, the Court rejected this argument. In dismissing the contractor’s UCC claims for lack of jurisdiction, the COFC explained that it was the government’s post-rejection “use” of the items (in addition to the retention) through the transfer of items to a third party, which first became known to the contractor during the discovery phase of the prior ASBCA litigation. Therefore, any claims relating to the government’s post-rejection “retention” conduct alone did not survive the claim preclusion bar. Only the contractor’s UCC claims based on the government’s post-rejection “use” of the items were not precluded because the government’s post-rejection “use” by third-party transfer was discovered during the ASBCA litigation. However, since the contractor had not presented this specific factual premise to the CO, the contractor’s UCC claims had failed to satisfy CDA’s presentment requirement and, therefore, had to be dismissed.

CDA requires contractors to first present their claims to the CO and obtain a final decision before bringing appeals before a BCA or the COFC. While recent Federal Circuit decisions have held various claim processing requirements, such as the sum certain requirement, as non-jurisdictional but mandatory, contractors should still be mindful that adjudicative forums have consistently held the CDA’s presentment requirement to be jurisdictional. As demonstrated in this case, multiple appeals involving the same set of underlying operative facts may present added complications due to res judicata, if litigated separately. Therefore, where possible, contractors should seek to bring such appeals together and strive to present their related claims to the CO as soon as practical. Notably, the outcome here would have been the same even if the presentment requirement were only considered mandatory and not jurisdictional since the CO was never actually put on notice regarding the facts relating to the contractor’s post-retention use of the items underlying its UCC claims. Contractors should be cognizant that when new facts giving rise to additional claims are uncovered during the discovery phase of appeals litigation, contractors may need to put the CO on notice regarding such facts and present such additional claims to the CO. If the particular facts necessitate it, contractors should request a stay in proceedings during appeals litigation to present their additional claims promptly. Presenting the additional claims to the CO for a final decision on time may help avoid potential jurisdictional complications further down the road during appeals litigation.

This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.

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Res judicata provides that when a final judgment has been entered on the merits of a case, it is a finality as to the claim or demand in controversy. Therefore, in federal contract claims litigation, contractors are typically required to bring all their claims arising out of the same contract in the same litigation. The doctrine of res judicata, which encompasses the related doctrines of issue and claim preclusion, may apply when a contractor litigates a matter at a Board of Contract Appeals and later brings a suit with the same or similar set of operative facts at the Court of Federal Claims (COFC). Issue preclusion prohibits a losing party from relitigating already litigated issues. Meanwhile, claim preclusion prevents litigation of matters that have not been litigated but should have been raised in an earlier litigation. Therefore, the doctrine of claim preclusion operates as an affirmative defense, warranting the dismissal of matters that should have been raised in earlier litigation with the same or similar set of operative facts.

In Avant Assessment, LLC v. U.S., 159 Fed. Cl. 632 (2022), the COFC dismissed parts of the complaint based on the doctrine of claim preclusion, finding that the plaintiff should have raised certain arguments during its prior litigation at the Armed Services Board of Contract Appeals (ASBCA). The Army issued the contracts underlying the claims for the acquisition of foreign language testing materials to gauge the proficiency of military linguists. Under the contract, the government retained intellectual property rights in both accepted and rejected items as the contracts provided the government sole ownership and exclusive rights to the testing materials. Army had initially terminated the contracts for default, but the default terminations were later converted into convenience terminations as a result of the contractor’s successful appeals at the ASBCA. Following the successful convenience conversions, the contractor submitted termination settlement proposals to the contracting officer (CO), which were denied. After the CO’s denial, the contractor again appealed the CO’s adverse decision to the ASBCA.

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The government retains the right to terminate a contract for default when the contractor fails to meet its performance obligations. The default termination, commonly considered one of the most undesirable outcomes for contractors, may nevertheless be converted into a termination for the government’s convenience if, on appeal, the government fails to prove that its default termination decision was justifiable. Notably, when the contractor appeals the government’s decision to terminate its contract for default, it is the government’s burden to prove default termination in the first instance. In other words, the government must demonstrate the correctness of its actions in terminating a contract for default. When contract modifications change the terms of the original contract such that the government’s default termination decision is no longer justified under the modified contract, adjudicative forums will typically convert the default termination to one for the convenience of the government, citing the change in circumstances from contract award to termination.

The Armed Services Board of Contract Appeals (ASBCA) in ASBCA 58866 and ASBCA 58867 converted the Army’s terminations for default for two similar contracts into terminations for convenience due to changes in the terms of the contracts due to later modifications. The Army awarded the underlying contracts for the acquisition of thousands of foreign language test items to assess the proficiency of military linguists. The contracts included the Federal Acquisition Regulation (FAR) 52.212-4 clause: “Contract Terms and Conditions—Commercial Products and Commercial Services.” During the performance, the government was only responsible for paying for the items it accepted, with no apparent definition of what constituted an acceptable item, presumably leaving the acceptability determination at the government’s discretion. The government retained intellectual property rights in both accepted and rejected items as the contracts provided the government sole ownership and exclusive rights to the deliverables. After the contracts were awarded to the same contractor, the Army issued nearly identical modifications, stating that any foreign language test items still required under the contracts but not accepted by the government would be “automatically descoped” from the contract. The Army eventually terminated the contracts for default, citing the contractor’s failure to provide the agreed-upon number of acceptable items.

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To file appeals under the Contract Disputes Act (CDA), contractors are required to first submit their claims to the contracting officer (CO) for a contracting officer’s final decision (COFD). The Federal Acquisition Regulation (FAR) § 33.211(a)(4)(v) requires COs to include in their final decisions a notice detailing the contractor’s rights to appeal the COFD at the Boards or the COFC. Such notice of contractor appeal rights should include language substantially similar to the following:

“This is the final decision of the Contracting Officer. You may appeal this decision to the agency board of contract appeals. If you decide to appeal, you must, within 90 days from the date you receive this decision, mail or otherwise furnish written notice to the agency board of contract appeals and provide a copy to the Contracting Officer from whose decision this appeal is taken.”

As detailed in the appeal rights notice, the contractor has ninety (90) days to appeal the COFD to an appropriate Board of Contract Appeals or up to twelve (12) months to appeal the decision at the Court of Federal Claims (COFC). The receipt of the COFD by the contractor triggers the beginning of the CDA appeals limitations period, within which the contractor must appeal the COFD at a Board of Contract Appeals (BCA) or the Court of Federal Claims (COFC). Notably, in cases where the government issues a decision terminating a contract for default, the receipt of notification of the CO’s decision to terminate the contract begins the CDA appeals limitation period. Such a default termination notice must typically contain the contractor appeal rights language detailed above. However, the omission of the appeals rights language in the termination notice does not, by itself, negate an otherwise final decision. Additionally, the lack of such an appeal rights notice also does not stop the receipt of the COFD from triggering the CDA appeals limitation period – unless the contractor can demonstrate detrimental reliance or prejudice stemming from the omission of such notice.

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The government may terminate a federal contract if the contractor fails to meet its contractual obligations. The contracting officer (CO), in such cases, issues a final decision terminating the contract for default and outlines the reasons for the default. In the event of a termination for default, the government is only liable to the contractor for the portion of the contract that was already performed. While the CO may exercise discretion to terminate a contract for default, such a decision is appealable to the Board of Contract Appeals or the Court of Federal Claims (COFC) pursuant to the Contract Disputes Act (CDA). The CO’s decision to terminate may be set aside by the adjudicative forum if it is arbitrary, capricious, or constitutes an abuse of the CO’s discretion. For instance, a decision to terminate for default may be arbitrary and capricious if there is a lack of nexus between the CO’s decision to terminate the contract for default and the contractor’s performance on the contract. In such situations, while the concerned adjudicative forum may lack the ability to provide injunctive relief, it may nevertheless convert the CO’s default termination to one for the government’s convenience.

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Jurisdictional Implications of CDA’s Presentment Requirement

TILLIT LAW Federal Contract Claims Insights