ASBCA Limns the Boundary Between an REA and Claim, Finds Contractor Can’t Implicitly Convert REA into Claim by Accident; Appeal of BAE Systems Ordnance Systems, Inc., ASBCA No. 62416

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Government’s motion to dismiss appeal as untimely is denied. The contractor had submitted requests for equitable adjustment to the agency, which had been denied. The government argued that those REAs had, in fact, been claims, and because the time between the denial of the purported REAs and the appeal exceeded the CDA’s statute of limitation, the appeal was untimely.  The board, however, found that REAs were not claims because the contractor had never requested a final decision and did all it could to avoid converting the REAs into claim. The government contended the contractor implicitly requested a final decision. But the board refused to find that a contractor could make an implicit request for final decision by accident.

BAE Systems Ordnance Systems, Inc. had contracts with the Army. During performance, an issue arose concerning which party would be responsible for environmental conditions at the worksite. BAE sent letters to the Army labelled as “REAs,” in which the company requested an equitable adjustment for the contracts. Each letter included the REA certification language from DFARS 252.243-7002. The letters did not include any language required for claim certification under the Contract Disputes Act.

The contracting officer responded to the letters. In those responses, the CO referred to BAE’s submissions as REA’s. The CO stated that BAE had failed to establish it was entitled to an adjustment. The CO gave BAE the opportunity to submit additional information in support of the REAs, but she also stated that BAE could submit a claim if it disagreed with the determination.

In accordance with the CO’s advice, BAE submitted a claim to the Army. The claim sought the same amount of money as the REAs. The claim also included the proper certification language required by the Contract Disputes Act. The CO acknowledged receipt of the claim, but never issued a final decision. BAE appealed the deemed denial to the ASBCA.

The Army moved to dismiss BAE’s appeal as untimely. The Army cited the Federal Circuit’s decision in Hejran Hejrat Co. Ltd. v. United States Army Corps of Engineers, 930 F.3d 1354 (Fed. Cir. 2019), in which the court held that a communication with the CO styled as an REA was in fact a claim. The Army contended that BAE’s REAs were also claims, and the CO’s decision on those REAs were final decisions. The Army reasoned that the time between the denial of the purported REAs and the appeal exceeded the CDA’s statute of limitation, so BAE’s appeal was too late.

The board began by noting the difference between an REA and claim. An REA is a request from a contractor to consider adjusting contract terms. A claim is a written demand by one of the contracting parties seeking, as a matter of right, the payment of money or the adjustment of contract terms. Because REAs are less adversarial, contractors often prefer them over claims to preserve the relationship with the agency.

The board acknowledged, however, that the line between an REA and claim is somewhat blurry. The distinction often comes down to whether the contractor requested a final decision. As happened in Hejran Hejrat, even if the contractor expressly disavows any intention of submitting a claim, they can implicitly request a final decision, which will convert the REA into a claim.

BAE argued that its use of the REA certification on its letters prevented the REAs from being considered a claim. But the board reasoned that the type of certification used does not make a difference. This case involved application of the statute of limitations. Claims with defective certification can be brought as soon their denied, which begins the running of the statute of limitations. In other words, the running of the statute of limitations is not affected by a certification. While the type of certification used provides context for the evaluating the parties’ communications, it is not dispositive.

Instead, the board reasoned, the primary factor in determining whether an REA is a claim is whether the contractor has requested a final decision. Here, BAE did not make an explicit request for a final decision.

But the Army argued that BAE implicitly requested a final decision. The board disagreed. BAE sent three letters to the Army, none of which requested a final decisions. The government asked for more information. BAE provided the information, but did not provide any further certification or request a final decision.

The board contrasted this case with the facts in Hejran Hejrat in which the circumstances between the parties changed as the conversation went forward. There, the communications implied that the contractor was seeking a final decision. In this case, however, BAE did all it could to keep its REAs from becoming claims. The board declined to find that BAE made an implicit request for a final decision by accident. Whether a contractor submits a claim or REA, the board concluded, should be up the contractor.

BAE is represented by Michael A. Richard of Obermayer Rebmann Maxwell & Hippel LLP. The government is represented by Scott N. Flesch, Lieutenant Colonel Gregory T. O’Malley and Lieutenant Colonel Jess R. Rankin.

ASBCA - BAE Systems Ordnance Systems