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Government Contractors

Q&A: Lost in Time – The Statute of Limitation and Time Limits on Government Contracts

Approximately a year ago, we included an article in our newsletter concerning the six-year statute of limitations (“SOL”) on the assertion of claims under the Contract Disputes Act (“CDA”). This is an area of continuing confusion because it is still developing. In addition to the CDA six-year period, there are other time limits on government contractor actions in regard to government contracts. In a question-and-answer format, this blog will attempt to clarify some of the questions regarding the CDA six-year SOL and other timeliness issues.

Q: Does a claim have to be for money?

A: No. A claim can be a monetary claim (i.e., one for money) or a non-monetary claim requesting the interpretation or adjustment of contract terms.

Q: Is every request for money under a contract a claim?

A: No. The definition of a claim excludes routine requests for payments under contracts from the definition of a claim. Thus, periodic vouchers requesting payment under cost reimbursement or time and material contracts or requests for progress payments would not be considered claims when they are submitted. However, they can be converted into a claim if the government disputes the amount requested or unreasonable delays in paying the requested amount.

Q: We received a change order under a government contract that increases the costs we will incur in performing the contract. Can we submit a claim for the increased costs?

A: Yes. A request for a price adjustment resulting from a contract change has been interpreted as not being a routine request for payment. Therefore, you can file a claim for the increased costs. However, you do not have to do so. Instead, you may request an equitable adjustment to the contract price using the procedures of the Changes clause.

Q: Because a request for an equitable adjustment under the Changes clause is not a routine request for payment and can be asserted as a claim, does that mean that I have six years within which to request the equitable adjustment?

A: Do not get procedures confused. If you wish to pursue your price adjustment through the Disputes process, you have six years from the date the change order was issued within which to file your claim. However, if you pursue the price adjustment through the procedures in the Changes clause, you must assert your right to the equitable adjustment within the time stated in the applicable Changes clause and in any event, before final payment on the contract.

Q: Does the submission of a proposal to establish final indirect cost rates start the six-year SOL period?

A: Not necessarily. If the proposal contains unallowable costs, the question is when should the Defense Contract Audit Agency (“DCAA”) have known of the unallowable costs being included in the proposal. This is a question of fact that needs to be answered on a case-by-case basis.

Q: We have included consultant costs in our proposed final indirect cost rates for several years. Because the amount of consultant costs has been rather small, DCAA has never audited those costs. This year, we had substantial costs from the same consultant we have been using for years. DCAA audited this year’s costs and questioned them for lack of adequate documentation, although the consultant has provided the same documentation to support its costs each year. Did the SOL begin to run on the government’s ability to question these costs when they became material and were audited by DCAA?

A: Probably not. Instead, the SOL began to run when you first submitted a proposal to establish final rates years ago. Unless you hid those costs, they were there for audit by DCAA. The fact that DCAA did not take advantage of its ability to audit those costs does not mean that it can claim ignorance of them so that the SOL only begins to run when DCAA actually audited the costs.

Q: We had a cost reimbursement subcontract under which we received final payment more than three but less than four years ago. DCAA now wants to audit that subcontract. They are threatening to question all costs under that subcontract if we cannot produce records that substantiate the costs claimed. Can they question the costs if we have destroyed the records in the normal course of business?

A: This brings up an inconsistency in the Federal Acquisition Regulation (“FAR”). Under the Audit clause FAR 52.215-2, (sub)contractors are only required to maintain records for audit for three years after final payment on the (sub)contract or for any shorter period provided in FAR Subpart 4.7. However, FAR Subpart 4.7 requires some records to be maintained for up to four years after final payment. DCAA relies upon the time periods identified in FAR Subpart 4.7 as establishing the records retention period for contractors, not realizing that Subpart 4.7 is not binding on (sub)contractors and that it is the terms of the (sub)contract that bind (sub)contractor. Therefore, if you have complied with the records retention period specified in 52.215-2, DCAA cannot question costs based on the fact that you do not have records for which the records retention period has expired.

Q: For years, we submitted proposals to a certain contracting office. However, we generally lost to one particular competitor on a repetitive basis. Recently, the contracting officer conducting those acquisitions was convicted of taking bribes from the other contractor. Is it too late for us to file protests with the Government Accountability Office (“GAO”) against those earlier awards that occurred years ago?

A: No. The general rule is that a disappointed bidder must file a protest against an award within 10 days of discovering the basis for the protest. Here, you did not discover the basis for a protest until the contracting officer was convicted of accepting bribes. Unlike the six-year SOL in the CDA, the GAO’s bid protest rules do not have a time frame within which the basis for a protest must be discovered.

Q: We recently discovered that a former employee has filed a False Claims Act (“FCA”) complaint against us. The alleged fraud occurred more than six years ago. Is this complaint barred by the CDA six-year SOL?

A: No. The CDA SOL does not apply to actions brought under the FCA. The FCA contains its own six-year SOL for private citizens to bring an action. However, the government has the right to intervene in an action brought by a citizen. In that case, an extended SOL applies. For these purposes, the government has three years after it knew or should have known of the false claim within which to bring an action and in any event must bring the action within ten years after the false claim was submitted.

There are other time limits that apply to actions under Federal contracts. Consequently, if you have any questions concerning whether an action by you or the government is timely, do not hesitate to contact one of our experienced GovCon professionals for assistance.

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