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CDA Claims Against Fair Adjustment Requests | Fox Rothschild LLP and other news

This is the fourth part of a series of eight articles on advanced strategies for certified claims under the Contract Disputes Act (CDA). Certified claims are the primary means available to government contractors to recover losses due to changes, delays, inefficiencies, and other government-caused issues—especially important for contractors looking to maintain positive cash flow when facing the prospect of an economic slowdown or recession.

You can see previous posts here: Part 1, Part 2Part 3

So far in this series, I have focused on strategies for preparing, filing, and litigating CDA claims. But is a claim the only way to ask the government for more time and/or money? No. Contractors may also submit a Request for Fair Adjustment (REA).

So, if you’re owed time and money under a contract, is your next step going to be a CDA or REA claim? There is no one-size-fits-all answer, and contractors must carefully consider their own unique circumstances before choosing a path forward.

Key differences

At their core, CDA Claims and REA have a lot in common. The contractor seeks damages based on the government’s impact on the contract. Whether you are pursuing an REA or a Claim (or both – see more below). Contractors should be aware of the relevant provisions for the provision of remedies and requirements related to notification and supporting documentation.

In terms of differences, REAs tend to be less formal than claims and are a request for a negotiated settlement of the disputed amount. Mandatory elements of a CDA claim (such as claiming a specific amount) are not required in REA. But note that REAs above the simplified acquisition threshold presented to US Department of Defense agencies require certification in two ways.

In addition, REA lacks the same automatic trigger requiring a prompt response from the Agency. The complaint boggles the government and sets a fixed time limit for a formal response (usually 60 days from the filing date). On the other hand, there is no hard or fixed time frame within which a contracting officer must respond to an REA.

What if the government rejects the REA (or doesn’t respond)?

If the contracting officer lets the REA sit for too long – or the negotiations break down – the contractor has the option to convert the REA into a CDA claim.

The requirements for converting an REA into a requirement are not onerous. Typically, a contractor can rely on the same base document, but add a request for the contract officer’s final decision, a certain amount, and certification (if necessary).

Reimbursement of training costs

Contractors should also consider potential hidden money in Claims and REAs. For example, contractors may include “contract administration” costs as part of the damages claimed in the REA. These costs may include attorneys’ and consultants’ fees incurred in preparing and filing the REA. This advantage alone often convinces contractors to start at the REA stage (rather than filing a Claim straight away).

Attorney’s and counsel’s fees for preparation are not recoverable under the Claim unless the contractor has submitted the REA first. However, the CDA provides for a refund of interest on any amount payable in respect of a Claim. Depending on how long it takes to resolve the Claim and the amount wagered, the interest collected can be significant and should not be overlooked as part of the overall strategy.

Consider personal relationships

The decision to start the negotiation process with an REA or a claim can have many different driving factors including (unsurprisingly) time and money.

As stated above, the Claim offers an immediate advantage by requiring a response from the government by a certain date. The Contracting Officer will either grant or deny the Claim or offer a partial settlement. On the other hand, REAs offer the contractor the opportunity to recover preparation costs and fees.

In addition to these obvious important factors, I suggest considering personal relationships before making a decision. When there is a good working relationship between the contractor and the government, there is a greater chance of finding common ground on RIA. Direct jumps to claims can have a chilling effect on these negotiations.

When these relationships are already frozen, there may be a sense of futility in filing an REA (i.e., a sense that the request for adjustment will be ignored and dragged on indefinitely). In these circumstances, going directly to the Claim at least gives some confidence and allows the clock to start counting on the CDA percentage.

Again, there is no one size fits all approach, but there are strategic steps for each unique situation.

Come back next Tuesday (November 29) when I talk about disputes and other grounds for action against the government that are not properly included in the REA or the lawsuit.

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