Firm-fixed-price contracts place maximum risk and full responsibility upon the contractor for all costs and resulting profit or loss incurred in performing a government contract. Fixed price contracts provide for a price that is not subject to any adjustment based on the contractor’s cost experience. Meanwhile, fixed-price contracts with economic price adjustments provide for upward or downward revisions of the stated contract price upon the occurrence of specified contingencies. There are three general types of price adjustments. First, price adjustments based on established prices provide for increases or decreases from an agreed-upon level in published prices of specific items. Second, adjustments based on actual costs of labor or materials contemplate increases or decreases in the specified costs of labor or materials actually experienced by the contractor during contract performance. Finally, adjustments based on labor or material cost indexes provide for increases or decreases in labor or material cost standards or indexes identified explicitly in the contract. In fixed-price contracts that do not provide for economic price adjustments, the contractor assumes the risk of unexpected costs not attributable to the government.

The Contract Disputes Act (CDA) requires contracting officers (COs) to issue their final decision on contractor claims in writing and mail or otherwise furnish the decision to the contractor. To be legally valid, the CO’s final decision must adhere to specific content requirements. For instance, 41 U.S.C. § 7103(e) requires the CO’s final decision to state the reasons for the decision and inform the contractor of its appeal rights. The appeals rights notice should include language substantially similar to the notice provided in Federal Acquisition Regulation (FAR) § 33.211(a)(4)(v). The CO is not required to include specific findings of fact in the final decision, and if included, such facts are not binding in a subsequent appeal. Notably, the FAR further expands upon the content requirements for the final decision. FAR § 33.211(a)(4) requires the final decision to include a description of the claim along with references to the relevant contract terms. The CO must also explain the factual areas of agreement and disagreement, and provide a statement of the decision along with a supporting rationale. However, despite the requirements to provide a supporting rationale, the CO’s final decision need not necessarily be voluminous. On appeal, dispute adjudicative forums rarely find that the final decision is legally defective due to a lack of sufficient rationale.

The Contract Disputes Act (CDA) requires contracting officers (COs) to issue a final decision on claims of $100,000 or less within 60 days. For claims greater than $100,000, COs must render a final decision within a reasonable period and notify the contractor within 60 days of the claim, a specific time within which the decision will be issued. If the CO fails to notify the contractor within 60 days of a specified time within which he would issue the decision, the contractor may file an appeal based on a deemed denial of its claim. Adjudicative forums have consistently held that the CDA requires COs to pinpoint a particular date for the issuance of the decision, with a general timeframe found insufficient to meet statutory requirements. Additionally, the time specified by the CO to render his final decision may not be contingent upon the occurrence of a future event. In situations where the CO specifies a time for the issuance of the final decision, but the calculation of the particular date is dependent upon some future event, the contractor is within its rights to file its appeal on a deemed denial basis.

In Armed Services Board of Contract Appeals (ASBCA) No. 56097, the Space and Naval Warfare Systems Command (SPAWAR) awarded a contract for the manufacturing and supply of communications data links to enable U.S. Navy ships to exchange intelligence information with military aircraft. During performance, the contractor identified six entitlement issues and submitted a request for equitable adjustment (REA). The contractor later converted the REA into a CDA claim and submitted it for the CO’s final decision on May 8, 2007. Before the expiration of the 60 days following the receipt of the certified claim, the CO sent a letter notifying the contractor that SPAWAR intended to respond to the claim by approximately December 14, 2007. On July 3, 2007, the contractor filed its notice of appeal with the Board based on a deemed denial. In response, the Navy filed a motion to dismiss the contractor’s appeal as premature. In its decision on the motion, the Board noted that the CO’s notification had failed to comply with CDA requirements because it did not establish a fixed date by which the CO would issue his final decision. Specifically, the CO informed the contractor of SPAWAR’s intent to respond by approximately December 14, 2007. The Board found such an “intent” to respond by an “approximate” date insufficient under the CDA. Consequently, the Board denied the government’s motion to dismiss, directed the CO to issue a final decision by December 14, 2007, and exercised its discretion to stay proceedings until the CO issued his final decision.