ASBCA Reaffirms that Unilateral Contract Definitization Is Not a Government Claim; Appeals of Lockheed Martin Aeronautics Company, ASBCA Nos. 62505, 62506

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Government’s motion to dismiss appeal for lack of jurisdiction is granted. The contractor appealed a unilateral contract definitization—that is, an action by the contracting officer setting the price for a contract that had been awarded without a price. The government moved to dismiss the appeal arguing that the contractor had to file an claim with the agency before it could appeal a definitization. But the contractor argued that a definitization action was itself a government claim that was directly appealable. The board agreed with the government, finding that the matter was governed by 1988 board decision, which held that a definitization action is not a government claim; instead, it is a matter of contract administration subject to a contractor claim. The contractor argued that since 1988, board caselaw had expanded the definition of a claim so that it now included definitization actions. But the board found that no subsequent cases were distinguishable from and had not overruled the 1988 decision.

Lockheed Martin had two contracts with the Air Force to upgrade F-16 aircraft. Each contract was an undefinitized contract action meaning that it was awarded before the final price was set. Lockheed was allowed to charge the government for costs until the price was definitized. The contracts provided that in the event the parties could not agree on a final prize, the contracting officer could determine a reasonable price.

For several years, the parties attempted to negotiate a final price but were unable to agree. So, in 2020, the contracting officer unilaterally issued a contract modification setting the price for each contract. Instead of filing a claim challenging the price definitization, Lockheed appealed to the ASBCA. The government moved to dismiss the appeal, arguing that the board lacked jurisdiction because Lockheed had not filed a claim challenging the definitization action.

Lockheed contended that it didn’t to file a claim because the definitization action itself constituted a government claim. Lockheed reasoned that the FAR Disputes Clause defines a claim as a demand or written assertion by one of the parties that seeks the payment of money, the adjustment or interpretation of contract terms, or “other relief” relating to the contract. Lockheed argued that definitization action fell under the “other relief” prong of the definition and thus it was entitled to appeal definitization without first filing a claim.

A majority of the board, however, found that this issue was controlled by a case from 1988, Bell Helicopter Textron, ASBCA No. 25950, 88-2, ¶ 20,656. In that case, the board held that a contract definitization is not a government claim; rather, definitization is an act of contract administration subject to a claim by a contractor.

But Lockheed argued that cases decided since Bell Helicopter had expanded the scope of the “other relief” category of claims to now include definitization actions. The board reviewed these other cases and found that they had not overruled Bell Helicopter, either explicitly or implicitly, and they had not appreciably changed the legal terrain regarding “other relief.” In fact, the board found that most of the cases Lockheed cited were distinguishable from Bell. Those other cases that fell under the “other relief” category involved, in some way, the taking of property from the contractor by the government. That is a wrong that is ripe for relief. Contract definitization, on the other hand, seeks nothing from the contractor; it merely establishes the price of the contract.

Lockheed also argued that Bell Helicopter should not control because that case had been wrongly decided. The board reasoned that even if this argument was compelling, it did not have the authority to ignore Bell. Only the board’s Senior Deciding Group of the Federal Circuit has the power to overrule board precedent. Thus, the board was still bound by Bell.

A judge on the panel, Judge Clark, dissented from the majority opinion. Judge Clark reasoned that the Bell decision had only considered whether contract definitization fell under the first two categories—demand for payment, contract adjustment—of the FAR’s claim decision. Bell never actually considered whether a definitization action feel under the “other relief” category. Thus, Judge Clark opined, this left the door open to determine whether contract definitization constituted other relief. Moreover, Judge Clark continued, Bell’s “contract administration” approach has not been followed by subsequent cases. Given the jurisprudence since Bell, a definitization action should be considered a government claim.

Lockheed is represented by Stephen J. McBrady, Skye Mathieson, Michelle D. Coleman, and John Nakoneczny of Crowell & Moring LLP. The government is represented by Jeffrey P. Hildebrant, Caryl A. Porter, and Christopher M. Judge-Hilborn of the Air Force.

ASBCA - Lockheed Martin Aeronautics Company (2)