Government Claims Are Subject to the Statute of Limitations Just Like Contractor Claims

Under the Contract Disputes Act, the Government is subject to the same six year statute of limitations in filing its (a government) claim that contractors are. As is the case with contractors, the date cannot be manipulated by either party, as shown in Raytheon Missile Systems, ASBCA No. 58011, Jan. 28, 2013. (Government claims include refunds for defective pricing, overpayments made, money owed because of a change in Cost Accounting Standards (“CAS”), etc.) If a claim is not submitted within 6 years after accrual of the claim, the Boards of Contract Appeals and the Court of Federal Claim lack jurisdiction, and the Government’s (or contractor’s claim) will never get its day in court, and that is what happened in the Raytheon case.

Raytheon submitted a CAS Disclosure Statement at the end of 1998, and then modified a definition of “major subcontracts” in a proposal submitted on May 14, 1999 for remanufacture (“Reman”) of Tomahawk missile systems. On Jan. 20, 1999, Raytheon submitted a price proposal which was reviewed by the Navy, the Defense Contract Audit Audit Agency (“DCAA”) and the Defense Contract Management Agency (“DCMA”). The DCMA price analyst issued a report on the proposal dated July 26, 1999.

In 2005, the same DCMA price analyst performed a second review of the price data submitted by Raytheon in 1999 for a second contract for remanufacture of Tomahawks. On April 3, 2006, relying on the 1999 and 2005 reports, DCAA issued a draft “condition statement” making allegations about the 1999 Reman pricing, and asserting that Raytheon’s actions resulted in a significant price increase to the government. When Raytheon noncurred, DCAA issued an audit report on September 22, 2006 claiming a $9.2 million impact on the contract.

On Oct. 13, 2006, the Contracting Officer issued an initial determination of CAS noncompliance, based on the audit report. On November 29, 2011, the Contracting Officer issued a final decision, finding Raytheon had failed to follow its CAS disclosure, and demanding $10.2 million plus $6.9 million in interest (total of $17.1 million).

The Board made some salient points about claims, including government claims:

  • Once challenged (as Raytheon challenged the Navy), the proponent alleging jurisdiction bears the burden of proving facts sufficient to support jurisdiction.  It was the Navy who had to prove the claim was within 6 years of accrual.
  • A claim accrues under the Contract Disputes Act when “all events that fix the alleged liability…and permit assertion of the claim, were known or should have been known.”
  • Monetary damages need not have been incurred, although some injury must have occurred to have the claim accrue.  FAR 33.201
  • The question is when liability would have been fixed, not the date of the Government’s claim or some subsequent date of an audit.  The Board held that “the claim makes clear that the events fixing government’s liability occurred in 1999, long before Nov. 29, 2005 (as the government alleged).
  • Claim accrual does not turn upon what a party subjectively understands; it objectively turns upon what facts are reasonably knowable (i.e. if not concealed, they are knowable –and the Board did not find any facts concealed here)
  • There is no basis for the government’s assertion that claim accrual is based only upon the knowledge of the individual clothed by a contracting party with authority to assert the claim.  The Board said that nothing in FAR 33.201 “contemplates permitting such gamesmanship.”
  • Accrual of a contracting party’s claim is not suspended until it performs an audit or other financial analysis to determine the amount of its damages.

The Board concluded that the government’s own admissions demonstrated that it was on notice of injury as least as early as August 26, 2005. Raytheon’s July 20, 1999 price proposal, the DCMA price analyst’s August 26, 2005 report, and other materials generated in 1999, indicated that the government had been financially damaged by Raytheon’s alleged noncompliance. “The fact the government waited until 2006 to declare in an audit report that these earlier materials provided notice is irrelevant—delay by a contracting party assessing the information available to it does not suspend the accrual of a claim.”

The Government was out of luck. The ASBCA held that there was “no evidence of trickery here” and no evidence of misconduct by Raytheon. The Government could not seek $17.1 million from Raytheon based on these facts, and the case was dismissed by the Board for lack of jurisdiction.

Related Post

Season 11: Episode 12: FAR Facts

Hello and thank you for joining us for Episode 11 of Fun with the FAR Season 11! In our next session, we will cover FAR Part 17 (Special Contracting Methods) and Part 18 (Emergency Acquisitions). As we prepare for our 12th episode of Season 11, here are a few Episode...

Season 11: Episode 11: FAR Facts

Hello and thank you for joining us for Episode 10 of Fun with the FAR Season 11! In our next session, we will cover FAR Part 16 (Types of Contracts). As we prepare for our 11th episode of Season 11, here are a few Episode 11 FAR Facts for us to think about:   Contract...

Season 11: Episode 10: FAR Facts

Hello and thank you for joining us for Episode 9 of Fun with the FAR Season 11! In our next session, we will cover FAR Part 15.4 (Special focus on contract pricing). As we prepare for our 10th episode of Season 11, here are a few Episode 10 FAR Facts for us to think...