MOTION TO DISMISS GRANTED IN PART: October 10, 2008
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MOTION TO DISMISS GRANTED IN PART: October 10, 2008
CBCA 97
WHEELER LOGGING, INC.,
Appellant,
v.
DEPARTMENT OF AGRICULTURE,
Respondent.
Alan I. Saltman and Eric Pohlner of Saltman & Stevens, P.C., Washington, DC,
counsel for Appellant.
James L. Rosen, Office of the General Counsel, Department of Agriculture, San
Francisco, CA, counsel for Respondent.
Before Board Judges SOMERS, STERN, and POLLACK.
Opinion for the Board by Board Judge STERN. Board Judge POLLACK dissents in part.
STERN, Board Judge.
This case arises from the denial by the Department of Agriculture (USDA or respondent) of
Wheeler Logging, Inc.’s (Wheeler or appellant) claim for damages as a result of USDA’s alleged
breach of a timber sale contract between USDA and Wheeler. Wheeler claims that USDA
breached the contract when it suspended Wheeler’s work for approximately three months.
USDA moves to dismiss the appeal for lack of jurisdiction based upon appellant’s failure to
properly certify its claim.
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2
Background
In 2001, appellant submitted a claim for $492,057.95 to USDA for the damages
incurred as a result of the alleged breach. This claim was submitted to USDA’s contracting
officer and certified by appellant on November 3, 2002, in accordance with the requirements
of the Contract Disputes Act (41 U.S.C. § 605). Wheeler claimed $381,019.95 for lost profits,
$21,038 for interest on equipment loans and a line of credit, and $90,000 representing the
amount of a loan that Wheeler needed to restart operations. The claim was supported by
Wheeler with figures for equipment rates, salaries and hours worked for certain employees,
interest payments, and the cost of operating during the suspension period. The claim was
denied by USDA on August 12, 2004. The appeal was filed November 9, 2004.1
On December 28, 2004, appellant’s counsel forwarded a revision of appellant’s claim
to respondent’s counsel. This claim was much more extensive than the original. In this
submission, appellant presented a new damages claim, on the basis that the first claim was not
“properly calculated.” Appeal File, Exhibit E at 530. The new claimed amount was
$482,429.28.2 Revisions were as follows:
•
Idle equipment costs, not previously claimed, were now claimed at $192,480.
•
Lost profits of $381,019.95 were originally claimed. Appellant said that this
amount was overstated. The new claim revised this amount to $220,897.
Numerous calculations were revised to arrive at this figure, including those
involving anticipated revenue and total expenses.
•
Unabsorbed overhead, not previously claimed, was now submitted at $62,581.
•
Interest expenses on the deposit on the timber sale were calculated at $1553.
This amount was not previously claimed.
1
The appeal was brought before the Department of Agriculture Board of
Contract Appeals (AGBCA). Pursuant to statute, all the cases pending before the AGBCA
were transferred to the Civilian Board of Contract Appeals on January 6, 2007. Pub. L. No.
109-163, § 847, 119 Stat. 3136 (2006).
2
On April 24, 2008, as part of settlement discussions, Wheeler’s claim was
again revised, to a total of $311,624.63. Most of the claim elements of the second claim
were included, though the amounts were reduced. Because of the similarity between the
claim elements in the third and the second claim, and because this claim was submitted as
part of settlement discussions, we do not address it here.
CBCA97
3
•
Other interest payments of $4895 were claimed.
•
The original claim of $90,000, for the amount of the loan required to restart
operations, was dropped. Appellant stated that this claim should have been
solely for the interest on the loan.
Thus, though the underlying assertion of breach of contract remained the same and the
total claim amount did not increase, entirely new claim elements were added. A significant
amount of new supporting data was presented with this claim, in approximately twenty pages
of printed schedules. The dollar amounts of the new claims and the supporting data were not
certified or presented to the contracting officer. USDA asserts that the Board lacks
jurisdiction over this appeal due to appellant’s failure to certify and present this revised claim
to the contracting officer for decision.
Discussion
The Contract Disputes Act (CDA) requires that a contractor make its claim in writing,
submit it to the contracting officer, and provide a certification of the claim if it is more than
$100,000.3 41 U.S.C. § 605 (2000). Lack of a proper certification deprives the Board of
jurisdiction to proceed on the claim. Tecom, Inc. v. United States, 732 F.2d 935, 937 (Fed.
Cir. 1984); W.M. Schlosser Co. v. United States, 705 F.2d 1336, 1338-39 (Fed. Cir. 1983).
A “clear and unequivocal statement that gives the contracting officer adequate notice of the
basis and amount of the claim” is required. Contract Cleaning Maintenance, Inc. v. United
States, 811 F.2d 586, 592 (Fed. Cir. 1987). We find that Wheeler’s initial claim to the
contracting officer was properly presented and certified.
The legislative history of the CDA demonstrates Congress’ intent to hold contractors
accountable for amounts claimed from the Government. “An important objective of Congress
was to ‘discourag(e) the submission of unwarranted contractor claims.’” Paul E. Lehman,
Inc. v. United States, 673 F.2d 352, 354 (Ct. Cl. 1982) (citing S. Rep. No. 1118, 95th Cong.,
2d Sec. 5, reprinted in 1978 U.S.C.C.A.N. 5235, 5239). “The purposes of the certification
requirement are to discourage the submission of unwarranted contractor claims and to
3
The certification shall state “that the claim is made in good faith, that the
supporting data are accurate and complete to the best of [the certifier’s] knowledge and
belief, that the amount requested accurately reflects the contract adjustment for which the
contractor believes the government is liable, and that the certifier is duly authorized to certify
the claim on behalf of the contractor.” 41 U.S.C. § 605(c)(1).
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4
encourage settlements.” Lehman, 673 F.2d at 354 (citing Folk Construction Co. v. United
States, 226 Ct. Cl. 602 (1981)). See also Newell Clothing Co., ASBCA 24482, 80-2 BCA
¶ 14,774, discussing the intent of Congress to encourage fair settlements through the
requirement of certification. The certification provision of the legislation sought to establish
accountability on the part of the contractor and provide assurance to the contracting officer
that he or she could resolve the claim, if merited, with some confidence that the contractor had
vouched for the accuracy of the amounts and data submitted. Congress also desired to prevent
the submission of fraudulent claims. Ingalls Shipbuilding, Inc. v. O’Keefe, 986 F.2d 486 (Fed.
Cir. 1993). That intent would be thwarted if a contractor is permitted to fundamentally revise
a certified claim by changing the claim elements and the amounts requested without
recertification, especially where the changes are based on facts that were known to the
contractor at the time of the submission of the original claim.
The courts and boards of contract appeals have permitted amendments or changes to
claims without recertification and resubmission to the contracting officer in certain limited
instances. The case before us does not fall within one of these exceptions. As long as the
claim continues to arise from the same operative facts and requests essentially the same relief,
then a mere change in legal theory for recovery does not necessitate resubmission to the
contracting officer. Scott Timber Co. v. United States, 333 F.3d 1358, 1365 (Fed. Cir. 2003).4
However, the matter before us does not involve a change of legal theory.
In another line of cases permitting revisions of claims without resubmission and
recertification, it has been recognized that during the course of litigation, facts may be
developed that cause changes in the amount of a contractor’s claim. It would be disruptive
to the flow of litigation if any such change required a re-submission and new certification of
the claim. Thus, the amount of a claim may be changed during the course of litigation if
reasonably based on further information. See Tecom, 732 F.2d 935, 938. However, even if
4
Unlike the case before us, in Scott, after a significant amount of litigation had
occurred, the United States Court of Federal Claims permitted the plaintiff to assert a slightly
different legal argument from the one presented to the contracting officer. Scott Timber Co.
v. United States, 40 Fed. Cl. 492, 499 (1998). The plaintiff continued to seek the same relief
presented to the contracting officer. Id. at 500. The court permitted the plaintiff to file an
amended complaint since that version only added an additional theory of recovery. Scott
Timber Co. v. United States, 44 Fed. Cl. 170, 182 (1999). See also Cerberonics, Inc. v.
United States, 13 Cl. Ct. 415 (1987), in which the court also permitted the plaintiff to file a
complaint augmenting the legal theory that had been presented to the contracting officer.
The court permitted the amendment where the action in the court was for the “identical sum”
presented to the contracting officer. Id. at 418-19.
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the change is based on facts developed during litigation, if the fundamental character of the
claim is changed, recertification and resubmission to the contracting officer would be
required. Contract Cleaning Maintenance, Inc., 811 F.2d 586, 591. “On appeal to the Board
or in a direct access action in the Claims Court, a contractor may increase the amount of his
claim . . . but may not raise any new claims not presented and certified to the contracting
officer.” Santa Fe Engineers, Inc. v. United States, 818 F.2d 856, 858 (Fed. Cir. 1987)
(citations omitted, emphasis in original).
Based on this rationale, the boards and courts have not permitted changes to a claim,
without a new certification and presentation to the contracting officer, where the revised claim
is based on facts and data that existed at the time that the initial claim was filed.
In GAP Instrument Corp., ASBCA 55041, 07-1 BCA ¶ 33,567, the board dismissed
the increased portion of a contractor’s claim amount that had not been presented to the
contracting officer since the facts upon which that portion of the claim amount were based
were known or reasonably available to the appellant when the original claim was certified.
In E. C. Morris & Son, Inc., ASBCA 30385, 86-2 BCA ¶ 18,785, the board contrasted
Tecom with the situation before it, where the facts upon which the increase in claim amount
was based were “available at the time of the original claim submission.” See also
Consolidated Defense Corp., ASBCA 52315, 03-1 BCA ¶ 32,112.
Similarly, the Court of Federal Claims has rejected an attempt by a contractor to add
a previously unasserted claim for home office overhead to its claim before the court, even
though the claim arose from the same operative facts as those underlying the claim presented
to the contracting officer. Kunz Construction Co. v. United States, 12 Cl. Ct. 74, 79 (1987).
The court stated,
The case law permits the Claims Court to exercise jurisdiction over a claim the
dollar amount of which has been enlarged in this court over the amount
presented to the contracting officer: (1) if the increase in the amount of the
claim is based on the same set of operative facts previously presented to the
contracting officer . . . and (2) the court finds that the contractor neither knew
nor reasonably should have known, at the time when the claim was presented
to the contracting officer, of the factors justifying an increase in the amount of
the claim.
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6
Id. (citations omitted). See also Modeer v. United States, 68 Fed. Cl. 131 (2005).5
Here, appellant’s certified claim, submitted in 2002, was mainly composed of a claim
for lost profits (about $380,000) and a claim for the amount of a loan allegedly required to
restart operations (about $90,000). The revised claim submitted in 2004 cut almost in half the
lost profit claim and totally eliminated the loan claim. Instead, the revised claim added new
elements not previously submitted to USDA -- a claim for idle equipment (about $192,000)
and an unabsorbed overhead claim of about $62,000. There were also changes in the amount
and basis for the claim of interest. Thus, both the type and amounts of much of the claim
were substantially revised. The revised claim also included a significant amount of supporting
data never presented to the contracting officer. The new claims and supporting data for idle
equipment costs (about forty percent of the total claim), unabsorbed overhead (about thirteen
percent of the total claim), and interest were not certified or presented to the contracting
officer in compliance with the CDA.
Of further significance is the timing of the claim resubmission. The appeal from the
original claim submission was filed on November 9, 2004. The claim was significantly
revised on December 28, 2004, prior to the onset of discovery or other litigation activity
before the board. Thus, the rationale used by the courts and boards in giving leeway in claim
amount resubmissions so as not to disrupt ongoing litigation is largely inapplicable here.
Finally, all of the changes were made based on information available to Wheeler at the
time it filed its initial claim. No new information had come into Wheeler’s possession from
litigation or otherwise. According to Wheeler, the sole basis for the resubmission was its own
error in determining the type and amount of damages due. If we were to permit this new
claim to be filed without certification, we would thwart the intent of the CDA to create
accountability on the part of the contractors that submit claims to the government. We might
5
The dissent relies on Tecom for the determination that Wheeler’s second claim
need not be certified. The dissent ignores the very important fact that the change in the claim
amount in Tecom was based on “new information on damages.” Tecom, 732 F.2d at 937.
The court permitted the claim to be revised because of this new information that was not
available at the time that the initial claim was submitted. Based on this holding, board and
court decisions after Tecom have required claims to be recertified and resubmitted to the
contracting officer where revisions to the initial claim amount were based on information that
existed and was available for the contractor’s use at the time the original claim was filed.
Cases involving claim amount changes based on new facts which have come to light after
the filing of the initial claim are not on point.
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7
also encourage the careless preparation of claims. The majority of the claim elements now
asserted were never certified and presented to the contracting officer. The contracting officer
did not have the benefit of considering these claim elements when he issued the decision from
which this appeal is taken. These new claims must be certified and presented to the
contracting officer to comply with the requirements of the CDA.
In summary, three important factors mandate our conclusion that the new elements of
the claim must be certified and presented to the contracting officer: 1) there was a significant
change to the claim elements, amounts, and supporting data, 2) the changes occurred prior to
the onset of active litigation, and 3) the changes were based on facts that were in appellant’s
possession at the time it filed the certified claim.
Conclusion
The Board has jurisdiction only over the lost profits claim, in the amount of $220,089,
that was presented to the contracting officer and certified in accordance with the CDA. The
remainder of the current claim is new and must be certified and presented to the contracting
officer before those elements of the claim can be appealed to the Board.
The motion is GRANTED IN PART. The Board lacks jurisdiction over appellant’s
claim for idle equipment costs, unabsorbed overhead, and interest. Those parts of the claim
are dismissed.
________________________________
JAMES L. STERN
Board Judge
I concur:
_____________________________
JERI KAYLENE SOMERS
Board Judge
CBCA 97
8
POLLACK, Board Judge, concurring in part and dissenting in part.
Wheeler initially certified its claim under the Contract Disputes Act (CDA or Act) in
the sum of $492,057.95 to the contracting officer (CO) on November 3, 2002. The
certification was to a claim initially filed on August 20, 2001. Wheeler sought compensation
due to the claimed improper suspension of its contract by the Forest Service (FS or
Government). The $492,057.95 was broken down into three elements, $381,019.95
designated as lost profits, $21,038 in interest on equipment that Wheeler was unable to utilize
during the suspension, and $90,000 for a loan needed to restart operations. The claim
covered the period of December 11, 2000, to March 16, 2001. Appellant calculated its lost
profits by coming up with the net income it expected per day and multiplying that by eightyone lost operating days. Along with the claim, appellant provided as support various listings
and calculations, among which were a list of equipment used on the project, job hours, days,
rates, and weekly income. Appellant also provided a list of lost wages, with monthly salary
numbers for various home office officials. The CO did not immediately act on the claim, but
rather asked Wheeler, in April and October 2002, to provide the FS with more information
to support Wheeler’s claim. Specifically the CO sought additional supporting information
as to equipment invoices, lease agreements, general administrative costs, and other items.
Wheeler, through counsel, provided additional information under cover letter of November
3, 2002, along with a certification of the claim.
Some time after the certified claim and the additional supporting information was
filed, Wheeler changed counsel. On August 12, 2004, the CO issued his final decision on
the November 2002 certified claim. On November 9, 2004, Wheeler filed a timely appeal
at the Department of Agriculture Board of Contract Appeals (AGBCA). On December 28,
2004, Wheeler, through counsel, submitted a letter to the CO, along with a summary wherein
it revised its claim downward to $482,429.28. The revision changed a number of damage
elements. In essence, it revised the lost profits to $220,897, dropped the loan to restart
operations, and added idle equipment of $192,480, unabsorbed overhead of $62,581, and two
interest items of $1553 and $4895, respectively. Thereafter, when appellant filed its
complaint at the AGBCA, the complaint reflected the revised numbers and damage elements.
Subsequently, the Government wrote to Wheeler demanding that Wheeler provide a
certification of the revised claim, citing as the basis the changes that Wheeler had made as
to amount and categories. Wheeler, through counsel, wrote back and asserted that the claim
did not need to be recertified, contending that the revision arose from the same operative facts
as those underlying the claim submitted to and considered by the CO. Counsel for Wheeler
stated that the revision was solely a recalculation of the initial claim. The parties then
proceeded with processing of the appeal, engaging in discovery and filing multiple motions
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9
on various procedural disputes. In January 2007, the appeal was transferred to the Civilian
Board of Contract Appeals (CBCA), as part of the board consolidation legislation.
On May 27, 2008, the FS filed a motion to dismiss. In that motion, the FS charges that
the Board does not have jurisdiction over the matter, because the claim had so changed as to
mandate recertification. Appellant resists, contending that the claim arises out of the same
operative facts and that under law it is simply a recalculation and revision and not a new
claim.
The Board is not unanimous in our decision on the FS motion. I concur as to the
decision to retain jurisdiction over the lost profits. I dissent, however, to the remainder of the
majority ruling.
The majority asserts that since this claim (which it agrees arises from the same
operative facts) is revised in significant dollars and categories from the dollars and categories
of damages set out in the certified claim, the revision must be newly certified. It cites case
law holding that to avoid certification, appellant would have to show that the information
used to make the revisions was from information that appellant did not have available to it
at the time of the initial certification and was new. It further states that the facts that form the
basis for the revised claim were available to Wheeler at the time Wheeler submitted its
certification to the claim and that according to Wheeler, the sole basis for re-submission was
Wheeler’s own error in calculation of the type of damages due. Therefore, the majority
concludes that if the Board permitted the “new claim” to be filed without certification, it
would thwart the intent of the CDA to create accountability on the part of contractors to
submit claims to the Government. Under the majority, if a contractor reconsiders or
reassesses data that it did or could have had available (the majority finding that the facts used
in the reassessment were available) at the time of the submission of the disputed certification,
then it must recertify the matter as a new claim. In contrast, I find that under the controlling
case precedent from the Court of Appeals for the Federal Circuit (Court of Appeals) and as
reflected in the CDA, as long as the operative facts of the claim remain the same (the claim
itself is not fundamentally changed) and all that changes is dollar amounts and damage
categories, no new certification is required to a previously properly certified claim.
Discussion
Respondent contends that when Wheeler revised its claim as to categories of damages,
it created a new claim that requires independent certification. It contends that a claim is to
be considered as new, if the contractor adds or asserts new categories of damages, even if the
changes in categories and dollars arise out of the same operative facts as the claim that had
been originally certified and presented to the CO. According to the FS, the only time a
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10
change in dollars and damage elements does not require a new certification is where the
amended dollars or damage elements can be shown by the contractor to have been based on
new information or upon data that arose or was not available until after the initial claim’s
certification. The majority essentially agrees with the FS and finds that where facts that form
the basis of the revision to the certified claim were available to the contractor at the time the
contractor submitted its initial certification, the revision must be considered a new claim and
certified as such. Applying that to this case, they conclude that where a contractor reassesses
or reworks its numbers or damage categories, the contractor will have to file a new
certification, unless the contractor can show that the information used for the reassessment
was newly found or not available to the contractor at the time of certification.
The position of the FS and majority is incorrect. The case law developed under the
CDA provides otherwise. Where the operative facts upon which an initial certification are
based stay the same, a party can modify and revise dollars and damage elements, without
having to recertify the claim. Absent a change in operative facts, one has the same claim.
Scott Timber Co. v. United States, 333 F.3d 1358, 1365 (Fed. Cir. 2003); Santa Fe
Engineers, Inc. v. United States, 818 F.2d 856, 858 (Fed. Cir. 1987); Contract Cleaning
Maintenance, Inc. v. United States, 811 F.2d 586, 591 (Fed. Cir. 1987) (revision did not
change fundamental character of claim); Tecom, Inc. v. United States, 732 F. 2d 935, 937-38
(Fed. Cir. 1984); J.F. Shea Co. v. United States, 4 Cl. Ct. 46, 54-55 (1983).
The CDA requires that a CO shall issue a decision on any submitted claim within a
specified time window, and for claims over $100,000, the contractor shall certify that the
claim is made in good faith, that the supporting data are accurate and complete to the best of
the contractor’s knowledge and belief, and that the amount requested accurately reflects the
contract adjustment for which the contractor believes the Government is liable. Finally, the
certifier must be duly authorized to certify the claim on behalf of the contractor. The Act
does not specifically address how an increase or revision to the damages calculation of a
claim (based on the same operative facts as the initial claim) affects the status of the initial
certification to the CO and how it affects the ensuing jurisdiction of a board or court over
such certified claim. The CDA does not address revisions to a certified claim. The Act has
no direction saying that revisions of dollars or claim elements create a new claim that requires
a new certification. In response to the silence of the CDA, the appellate court in Tecom
addressed the matter of revision of certified claims and concluded that a new claim is not
created simply because of a change in dollar amount, or implicitly, a change in damage
elements.
In Tecom, the court directly addressed the standard to be applied when a contractor
changes or revises damages or damage elements on a claim that had been properly certified
to the CO. The contractor’s contract was for one year with the possibility of the contract
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11
being extended for two option years. The base year of the contract was to run from 1 October
1980 to 30 September 1981, and if exercised, the first option would begin on 1 October 1981.
Sometime during the base year, Tecom encountered additional costs which it claimed were
due to a change in the manner it was required to perform the contract. As such it presented
a claim to the CO for $11,000. Because this claim was under $50,000, Tecom did not certify
it to the CO, nor was certification requested by the Government. The Government issued a
final decision denying the $11,000 claim. We do not have the date on which Tecom filed the
initial claim, but do know that the initial claim reflected an estimate of the difference between
what Tecom expected to expend and what it actually expended. Additionally, at the time the
claim was submitted, it covered costs and damages associated with a single contract year.
The CO issued his decision denying the claim in January 1982, thus after the start of the first
option period. Accordingly, Tecom knew, prior to the CO decision, but after certification,
that it would be performing a three-year rather than one-year contract, and, because it had
completed the first year of work, it had real numbers rather than an estimate upon which to
seek recovery.
Tecom appealed the CO decision to the ASBCA. Soon thereafter (again no specific
date provided), Tecom, in pleadings, increased the dollar value of the claim to $72,752.10.
(See Tecom, ASBCA 26022, 82-2 BCA ¶ 16,121, at 80,028). The Court of Appeals decision
references “final complaint” but provides no further amplification. The change to Tecom’s
claim was an approximate seven fold increase. In its decision (Tecom, 732 F. 2d, at 937), the
Court of Appeals stated that Tecom had explained that changes in the amount of its claim
were due to “an improved evaluation of the original estimate on the basis of the first year’s
experience [of the contract] and due to a projection that increased the sum for the expected
three-year term of the contract.” We have no specific breakdown (but for the two-year
increase in time) as to the damage elements or categories that took the claim from $11,000
to $72,752.10. Nevertheless, I note that it is likely that along with the dollar change, there
were also changes in some of the damage elements.
Because the increase in Tecom’s claim exceeded $50,000 and the claim addressed by
the CO had not been certified, the Government moved for dismissal, asserting that the claim
for $72,752.10 required certification before Tecom could proceed further. It is not clear from
the Court of Appeals decision whether or not the Government had moved for dismissal at the
ASBCA or whether the Government first raised the re-certification issue at the appellate
level. However, since the matter of jurisdiction is a matter of law, it is not crucial for my
analysis here, at what level the Government first raised the issue. In responding to the
motion, the Court of Appeals ruled in favor of Tecom, finding that no further certification
was required.
In deciding, the Court explained:
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Where no certification of the claim was earlier compelled because the amount
asked was properly less than $50,000 at the time, the contractor could legally
increase its monetary demand before the ASBCA in view of the intervening
prolongation of the contract and the experience of actual operation. There is
no violation of either the letter or the purpose of the certification requirement
of the Contract Disputes Act, i.e. to push contractors into being careful and
reasonably precise in the submission of claims to the contracting officer. This
case is comparable in that respect to J. F. Shea Company, Inc. v. United States,
4 Cl. Ct. 46, 54-55 (1983), in which the Claims Court upheld the right of a
“direct access” contractor-plaintiff in that court to increase his monetary
demand, without further certification on the basis of new information on
damages. We agree with that decision that “it would be most disruptive of
normal litigation procedure if any increase in the amount of a claim based upon
matters developed in litigation before the court [or board] had to be submitted
to the contracting officer before the court [or board] could continue to a final
resolution on the claim.” Id. at 54. There the claim had originally been
certified and was later enlarged, but that difference is irrelevant to the general
principle that a monetary claim properly considered by the contracting officer
(here, because it was less than $50,000 and covered only one year) need not be
certified or recertified if that very same claim (but in an increased amount
reasonably based on further information) comes before a board of contract
appeals or a court. FN2
FN2. Of course, we do not mean to countenance an evasion of
the certification requirement, for instance, a deliberate
understatement of amount in the original claim with the intent to
raise it on appeal (on the basis of information readily available
at the earlier time), or a careless initial appraisal failing to satisfy
the criteria of 41 U.S.C. 605(c)(1).
In the wording above, the Tecom court clearly provides that one can increase (and
thereby modify the damages of a claim) and still have the “very same claim.” There is
nothing in Tecom which says that an enlargement of the same claim or changing or modifying
damage elements mandates a new certification or creates a new claim. In fact, the only
instance cited in Tecom, which requires a new certification, is where evidence shows that a
contractor withheld information so as to intentionally evade the certification requirement or
submitted the claim with such a careless appraisal that it defeats the purpose of the
certification. Beyond those identified elements, Tecom describes an enlargement of a claim
as being “irrelevant” to the need to newly certify a claim which was validly certified when
made. To constitute a new claim, the nature of the claim must change. A change in damages
CBCA 97
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must arise from issues that are different from the issues which formed the basis of the claim
presented to the CO. I do recognize that the Court of Appeals in Tecom referenced the fact
that the increase in the claim in that case was derived from the intervening prolongation of
the contract and experience of actual operation. As such, I concede that the information used
in Tecom can be properly characterized as “new information.” However, that said, I do not
find that Tecom’s holding is limited to only the specific facts of the case or that the Court of
Appeals’ choice of the wording “further information” was intended to be limited to only the
specific fact pattern of Tecom. The scope of Tecom is not that narrow, particularly when the
wording “further information” is read in the context of the Tecom footnote and read in
conjunction with the facts in Shea (facts more expansive then simply prolongation and
experience of actual operations). As I discuss below, the facts in Shea, as is the case in
Wheeler, involve reassessing old information.
Wheeler’s claim for wrongful suspension has not changed. The dollars for the idle
equipment and unabsorbed overhead arise from the same actions that were presented to the
CO as the basis of the claim. All that has changed is that Wheeler has reallocated the dollars
it seeks and instead of seeking to make itself whole through lost profits, has reduced that
figure and has sought compensation for other claimed losses. The revisions cover the same
time period and ask for relief for the same reasons. As to the change to the dollar total, the
new sum in Wheeler has in fact been reduced from the sum certified. When I compare the
Tecom changes (from $11,000 to $72,000 and the change from one year of damages to three)
to Wheeler’s augmentation of its claim, I am hard pressed to find how Wheeler should
require a new certification.
Any analysis as to Tecom’s holding on recertification requires us to look at the Claims
Court decision in Shea, 4 Cl. Ct. 46 (1983). Tecom cited Shea as an example of when a new
certification is not required, Tecom, at 937-38. In citing Shea with approval, Tecom clearly
shows that an increase or change in a claim, based on a reassessment of information, does
not require new certification, absent a change in the facts upon which the claim is to be
based.
Shea certified its claim for close to four million dollars in June 1980. The CO denied
the claim in May 1981 and Shea took a direct access suit to the court in May 1982. Upon
filing its complaint, Shea increased its claim by over $1.6 million from what had been
presented to the CO. It claimed that the increase was due to a computational error in
calculating the original claim and due to the need for adjustment to reflect findings of a
Department of Interior (DOI) audit. Shea, at 937-38. It is significant that by Shea’s own
description, the revisions it made were revisions to information that Shea had at the time of
the initial certification. In fact, what Shea did was reassess the information which it had used
to come up with its initial claim number. An increase due to a computational error, as well
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as a change due to challenges from a Government audit, by definition involve the reworking
of the data and information that Shea had at the time of the certification, but had used and
then viewed differently. Tecom, in favorably citing Shea, implicitly acknowledges that a
reassessment and reworking of existing numbers and elements (such as in Shea) would
qualify under the Tecom standard of “further information.” The phrase “further information,”
does not exclude reassessment of existing information. For me to interpret “further
information” more narrowly would require me to conclude that Shea was decided incorrectly.
That, of course, is not the case, given Tecom’s approval of that decision. I find it very
difficult to make any material distinction between the facts in Shea and those before us in
Wheeler.
In supporting its decision, the court in Shea, at 54, relied upon earlier ASBCA
authority, particularly Newell Clothing Co. ASBCA 24482, 80-2 BCA ¶ 14,774. In Newell,
the ASBCA stated (and it remains good law) that once a certification is complete, a
contractor is not precluded from changing the amount of damages or producing additional
data in support of the damages, absent the damages or data being about a new claim, one
which has different operative facts and not simply a different damage result. Newell at
72,916. Newell focused purely on the operative facts and whether a contractor was
presenting the same or introducing a new claim. Nothing in Newell carved out a separate
category for damage adjustments. As noted at the outset of this discussion, the operative
facts test remains good law.
Before leaving Shea, I note that the court in Shea provided language regarding the
need to balance recertification with disruption to the litigation process and that language was
thereafter cited in Tecom, at 937. I do not doubt that disruption is a factor to be considered.
However, Shea did not turn on disruption to the litigation process. Although the court
addressed disruption in dicta, the fact is that the increase in Shea was first presented to the
Government in Shea’s complaint. Accordingly, and as with Wheeler (and in Tecom), the
increase to the claim was made early in the tribunal proceedings and as such, a new
certification would not have been unduly disruptive. Therefore, notwithstanding little
likelihood of disruption, the courts in Tecom and Shea each nevertheless determined that no
new certification was needed.
In Santa Fe Engineers, Inc. v. United States, the claim that had been certified changed
from a delay and impact claim due to three specific change orders to a claim for total
disruption of the contract caused not only by the three changes, but also due to collective
nature of all problems, changes, and directives issued on the project. There were a
multiplicity of changes issued during the project and the revision to the claim was based upon
those added items. But for damages due to the three changes, none of what Santa Fe was
adding had previously been addressed or submitted to the CO. The court concluded that the
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revision, because it added numerous additional issues, constituted a profound alteration to
Santa Fe’s claim, changed the scope, and as such, required a new certification. In discussing
the law, the court stated:
On appeal to the Board or in a direct access action in the Claims Court, a
contractor may increase the amount of his claim, Tecom, 732 F.2d at 937-38,
but may not raise any new claims not presented and certified to the contracting
officer. J.F. Shea Co. v. United States, 4 Cl. Ct. 46, 54 (1983) (cited with
approval in Tecom, supra).
818 F.2d at 858.
Once again, the court affirmed that new claims, which require new certification, arise out of
new and added claims for entitlement and not revisions or augmentations in dollars and
elements. In order to constitute a new claim, one must have a change in scope, and not
simply a revision of damages.
In both Tecom and Shea there were substantially greater dollar changes than in
Wheeler, yet in each instance, the tribunal focused on an operative facts test. Similarly in
Contract Cleaning Maintenance, 811 F.2d 586, 588-90 (Fed. Cir. 1987), dollar comparisons
were also substantially greater than the ones in Wheeler. There, the initial claim was filed
in May 1976 for $23,232.98. In 1979, appellant sought an additional $66,606.45, bringing
the total claim to $99,000, with all claims arising out of unpaid invoices. In 1983, the
Government issued a final decision (which appeared to include an affirmative claim).
Contract Cleaning Maintenance appealed the decision and then, through a direct access suit
at the COFC, sought $99,609.69, a sum well above the threshold for certification at that time.
The Government moved to dismiss on the basis of lack of certification. The lower court
agreed with the Government, holding that the appellant’s March 1979 letter for $99,609.69
constituted a claim under the Act which needed to be certified. The Court of Appeals,
however, overturned that decision. In ruling as it did, the Court once again established that
an increase in costs, if derived from the same operative facts, does not require a re
certification. It said that the increase in the claim to $99,265.43 did not change the
fundamental character of the claim, which was based upon invoices the appellant had
submitted, but which the Government had refused to pay.
This Board is bound by the precedent of the Court of Appeals for the Federal Circuit,
which as demonstrated in Tecom, Contract Cleaning Maintenance, and other cases cited
above, continues to follow the operative facts test, even where dollar values and damage
elements are substantially amended. Dollar changes or damage changes do not create a new
claim, absent a fundamental change in the operative facts. The appellate court has not created
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an additional or separate test, solely based on dollars and damage elements. The majority
provides no appellate decision which states (in an instance with no change in operative facts)
that board jurisdiction does not extend to consideration (without a new certification) of
claims for damages of different types and amounts from the specific claims certified to the
CO. Similarly the majority provides no appellate decision holding that a new certification
is required, absent the contractor showing that a revision to the certified claim arose solely
from new information or information that was not available at the time of the initial
presentment. Lacking citations to such authority, I conclude that where the claim arises out
of the same operative facts (as in Wheeler) and where the increase was due to a re-assessment
by new counsel (or appellant), no new certification is required. The fact that the contractor
and its attorney revisited information that was available at the time of the initial presentment
is not a legal basis to require a new certification of a previously properly certified claim,
based on the same operative facts.
I recognize that the Tecom wording “reasonably based on further information,” 732
F.2d at 938, is not specifically defined in the body of that decision (except in the footnote,
which I address below). However, the Tecom wording does not say “reasonably based on
new information,” nor does it state, “information not previously available.” Rather, the
language in Tecom is clearly broader and more inclusive than what the majority contends.
The broader nature of the wording is even more evident, when the sentence and wording
“further information” are read in conjunction with footnote 2 (which appears at the end of
the phrase), The footnote specifies what will not qualify as “further information.” It makes
clear that an increase or damage adjustment that is shown to be based upon information that
was intentionally withheld so as to defeat the certification requirement, or was so carelessly
appraised that it would have the same result will not be allowed and will require new
certification. Applying that standard, it follows that as long as the dollars and elements
chosen and presented for submission in the initial certification were the result of a good faith
effort and decision to accurately present the claim for which the contractor believed it was
entitled, then a later damage revision (absent a change in operative facts) is not a change so
as to require new certification. The Tecom court, as well as the drafters of the CDA, were
concerned with the situation where a contractor purposefully sandbagged a claim to avoid
certification and then used the withheld information to increase the claim without having to
go through the process. There is no suggestion that Wheeler has done that.
Claims are commonly not stagnant. In initially presenting a claim for certification, a
contractor and its attorney look at various data and decide what best sets out the claim.
Decisions are made as to what damages and what categories should be sought, and that
typically is based upon perceptions as to ability to prove the item and legal authority for the
cost. It is not uncommon for a contractor to consider alternative approaches to damages. At
a given point, the contractor chooses what it believes it can best properly certify. Thereafter,
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as the process moves forward, it is the norm for contractors and their attorneys to rework,
retest, and refine dollar claims, as they continue to pursue potential settlement or simply
proceed in preparation for ultimate litigation. Often, after a second or third look at numbers
or categories, a contractor reassesses and revises aspects of the damage claim. In the
reassessment, the contractor may conclude that one of the potential quantum witnesses is
more convincing or credible than initially thought. It may conclude that a damage element
initially rejected is stronger than initially thought. Under the FS and the majority positions,
an addition or change in damage categories which was arrived at through the above process
would require a new certification. The majority would require new certification, because it
reads “further information” to exclude any reassessment of existing information. That is
unwarranted.
Finally, the drafters of the CDA called for only one certification for a claim. The
drafters did not specify that adjustments or revisions to a properly certified claim would
restart the process, even though amendment of dollars and damage elements have been
common in the claims process and in court and board proceedings. If the drafters intended
that a new certification would be required, whenever a contractor adjusted or changed
damage amounts or elements, then one would think they would have so specified.
Wheeler started with a claim of $492,057.95. It later reduced its claim, but in doing
that reallocated costs and added damage categories that had not previously been certified.
While the damages were revised, the basic claim for improper suspension stayed the same.
Nothing in the damage revisions alters the basic facts and claim that Wheeler will have to
prove to secure entitlement. Based on my reading of the CDA and the Court of Appeals’
precedent, I do not find that Wheeler’s adjusted claim requires a new certification.
Existing Case Law
In its briefing, the FS cites a number of board and court cases which have held that
even where the operative facts remain the same, a revision to damage elements of a claim will
require a new certification, absent the contractor showing that the revision was due to new
information on damages that was not reasonably available to the appellant at the time it
submitted its original claim.
While none of the cited cases specifically discusses whether a re-assessment such as
that here qualifies as “further information” under Tecom, I recognize that there is a line of
cases, cited by both the FS and the majority, that supports the position that if information
supporting an increase or change in elements existed at the time of the certification, then the
claim must be recertified. Those cases purport to follow the direction of Tecom. As I have
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explained above, I find that Tecom provides no such standard and the cases are incorrect in
their interpretation and application of the law.
However, because there are cases which support the majority position, I will briefly
discuss why I find them to be in error. It is pertinent that none of the cases cited by the
majority involves a situation where the total claim amount actually decreased. That said, I
understand that the FS and majority consider a change in damage categories to be sufficient
to trigger the need for a new certification, regardless of whether the overall dollars increase
or not.
My review finds that the cases relied on by the FS and majority find their genesis in
three principal decisions, Toombs & Company, ASBCA 35085, et. al., 89-3 BCA ¶ 21,997;
D.E.W., Inc., ASBCA 35173, 89-3 BCA ¶ 22,008; and LDG Timber Enterprises, Inc. v.
United States, 8 Cl. Ct. 445, 454 (1985). Each, in my view, has deviated from the Tecom
standard in interpreting the wording “further information.” Each has substituted a more
stringent test than that required by Tecom and the CDA. Citing Tecom as authority, Toombs
introduces a requirement that the information on which the increase is based cannot be
information that was available at the time of the certification. D.E.W. followed and adopted
the same standard. The problem with the above is that while the cases claim to rely on Tecom
for the “new information” standard, nowhere is that language or limitation reflected in
Tecom, either implicitly or directly. Tecom uses the wording “further information,” which
on its face is much more expansive than simply “new information” or “information not then
available.” Moreover, “further information” has to be read in the context of the footnote
dealing with intentional understatement or carelessness. The significance of intentional
withholding is in fact supported by one of the cases cited by the majority. In E.C. Morris
& Son, Inc., ASBCA 30385, 86-2 BCA ¶ 18,785 at 94,653, the ruling turned on a factual
finding by the board as to a deliberate understatement of the claim by appellant at the time
of the certification. There, appellant’s president had advised the board that the data upon
which the disputed added amount was based was available at the time of the original
submission and that it was not utilized, because he hoped that his original claim could be
settled for a lower number. In deciding that a new certification was required, on a knew or
should have known basis, the board specifically found that while there was not a blatant
evasion of the certification requirement, there was a deliberate understatement of the original
claim with an apparent intent to raise the dollar claim on appeal. The discussion as to
deliberate withholding is consistent with my reading of Tecom. We have no similar fact
situation to E.C. Morris in this case.
As to LDG, which has been liberally cited by the Claims Court and Court of Federal
Claims, that case turned on the court’s finding that there had been a difference in operative
facts (not based on dollars). As the court there noted, LDG at 454, the revision was not
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merely an aspect of a claim that had already been submitted to the CO. Notwithstanding, the
basis of the decision, the court in dicta identified and set out an additional and in my view
new test for recertification, and that test has been followed in subsequent cases, Under the
LDG new test, before a revision could avoid recertification, a contractor was required to
show that it neither knew nor reasonably should have known of the additional aspects of the
claim at the time of the claim’s initial presentment to the contracting officer. As with
Toombs and D.E.W., the court in LDG created new law. I have no problem with finding that
a new certification would be required if the contractor intentionally withheld information as
to the dollar amount or intended change in elements in making the certification, and did so
to avoid the certification requirement. In fact, that is what Tecom specifically provides.
However, that is far different from a contractor having information or data and choosing at
the time of certification to present an alternative or what he/she considered a stronger case
to the CO for certification. A contractor is entitled to submit what it thinks at the time is its
best claim and if it does that and certifies that claim, without the intention to game the system
and the adjustment does not change the operative facts, that initial certification is the only one
required.
In reviewing the case law, while the majority of ASBCA cases have relied on the “new
information” or “should have known test,” there are a number of cases in which the panel
addressed the matter of re-certification without citing to or applying those standards as a
prerequisite. In Morgan & Son Earthmoving, Inc., ASBCA 53524, 02-2 BCA ¶ 31,874, at
157,483, the board stated that as long as a new claim was not being asserted, revision or
refinement of the certified amount claimed while on appeal and /or proof of greater amount
would be permitted without further certification, citing to D. J. Barclay Co., ASBCA 28908,
85-1 BCA ¶ 17,922.
In Trepte Construction Co., ASBCA 38555, 90-1 BCA ¶ 22,595, at 113,385, decided
on the basis that the amended claim presented a new set of operative facts, the board stated:
A recurring issue is whether allegations raised in pleadings or otherwise before
the Board constitute new claims or are merely extensions of claims which the
contracting officer had the opportunity to consider. That determination turns
on whether the matter raised before the Board differs from the essential nature
or the basic operative facts of the original claim. Bay Decking Company,
ASBCA 33868, 89-2 BCA ¶ 21,834, Cerebonics, Inc. v. United States, 13 Cl.
Ct. 415 (1987); Stencel Aero Engineering Corp., ASBCA 28654, 84-1 BCA
¶ 16,951. The introduction of additional facts which do not alter the nature of
the original claim, a dollar increase in the amount claimed before the Board,
or the assertion of a new legal theory of recovery, when based upon the same
operative facts as included in the original claim, do not constitute new claims.
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Three other ASBCA cases merit comment and support the conclusion that dollar and
accompanying damage element revisions do not equate to a new claim. Bick-Com Corp.,
ASBCA 24782, et. al., 84-1 BCA ¶ 16,957 (1983) (which was cited in Barclay), a decision
with both a concurrence and dissent, contains a good discussion of the impact of increasing
a claim and shows how the ASBCA (without reference to Tecom) understood the CDA. In
Bick-Com the contractor increased its claim from approximately $300,000 to $450,000, a
50% increase. In the principal opinion, the board stated at 84,321:
We have held in Harnischfeger Corporation, ASBCA No. 23130, 24556, 80-2
BCA ¶ 14,541 that:
The certification is a statement made in good faith to the best of
the contractor’s knowledge and belief. It does not preclude
proof of a higher amount at the hearing . . . .
At 71,679. In short, then, revision of the amount claimed and/or proof of a
greater amount is permitted without further certification. See Newell Clothing
Company, ASBCA No. 24482, 80-2 BCA ¶ 14,774; Computer Sciences
Corporation, ASBCA No. 27275, 83-1 BCA ¶ 16,452; Continental DrillingU. S., AGBCA No. 81-182-1, 82-1 BCA ¶ 15,545.
The board then continued that the Government had failed to demonstrate that the increase
in the added amount contained in appellant’s second amended complaint changed the
character of the claim. The board therefore concluded that the contractor need not submit for
certification.
In the concurring opinion, Judge Andrews reviewed the legislative history surrounding
certification and noted that at one point there was a proposal to limit the evidence presented
to the board and courts to that evidence presented to the CO. That was not adopted. But in
setting out his view, Judge Andrews stated:
The ASBCA is not limited to consideration of evidence presented to the
contracting officer. Once a claim has been presented and certified, there is no
basis in the Contract Disputes Act to prohibit changes in the requested recovery
or to limit the evidence. The fact that more money is requested of the board,
does not make it a new claim.
84-1 BCA at 84,323. The dissent in Bick-Com saw matters differently. It asserted that the
matter should be re-certified, stating, as a policy basis, that failure to allow such an increase
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without requiring the party to re-certify would undermine the Act’s objective of deterring
inflated claims. I find the principal opinion and concurrence more convincing.
E.C. Schleyer Pump Co., ASBCA 33900, 87-3 BCA ¶ 19,986, and Batteast
Construction Co., ASBCA 30452, et. al., 89-3 BCA ¶ 21,933, do not involve certification,
but do address what additions to a claim are augmentation and which create a new claim that
must be submitted for an independent CO decision. In Schleyer, the board found that the fact
a contractor did not include delay costs in his original claim to the CO for the costs of a
change, did not preclude him from including delay costs in his amended complaint. It was
considered part of the same claim. In Batteast, the board similarly allowed a contractor to
adjust its claim without having to seek a new decision. There the board concluded that the
added allegations of delay arose out of the same operative facts as the claim for equitable
adjustment due to a constructive change. As the board stated in Schleyer, 87-3 BCA at
101,264:
Appellant is not precluded here from seeking delay costs associated with such
an equitable adjustment merely because it failed to request them in the claim
submitted to the contracting officer. “Delay costs are merely additional areas
of alleged damages all of which arose from the complaint which formed the
basis of appellant’s claims to the contracting officer . . . .” Spradlin
Corporation, ASBCA No. 23974, 81-2 BCA ¶ 15,423. No new claim is being
raised.
Of the cases cited by the FS and majority, none involves an analysis of solely a
change in claim elements. In each case, there was an accompanying increase in the dollar
value of the claim. Whether the tribunal would have ruled as it did, without an accompanying
increase in dollars, is simply unknown.
Finally, the majority references a statement by counsel for Wheeler which the majority
quotes as saying that the basis of Wheeler’s December 2004 revision was Wheeler’s “error
in calculation of the type and amount of damages.” The cited statement was a single line in
a multi-page summary of appellant’s revised claim. Based on my reading of Tecom and the
CDA, a finding of error in the initial certified claim is irrelevant to whether or not a new
certification must be provided (absent a finding carelessness or intentional withholding, for
which there is no evidence). In fact, the statement as to an “error in calculation” very closely
tracks the explanation that had been provided by the contractor in Shea and found by the
court not to trigger a new certification. That said, even if the presence of the “error in
calculation” is relevant to the majority granting the motion, then in my view, that makes a
favorable ruling on the FS motion to dismiss inappropriate at this juncture. That is because
granting the motion would implicitly rely upon factual findings relating to the significance
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of the statement and would draw adverse inferences against appellant as to the meaning,
scope, and intention of the wording, as used in the revised claim summary. Of particular
concern is that the wording has not been in issue in the motion, is being highlighted for the
first time in the majority ruling; and as such, appellant has had no opportunity to comment
or address the point.
Conclusion
Our obligation is to correctly apply the law. Notwithstanding respect for precedent
(even if not binding from the ASBCA), I cannot agree with a result that continues to
perpetuate an unwarranted modification of the Tecom holding and is contrary to what I find
the CDA to require. There may be a case where the changes to dollars and elements are so
distinct and expansive as to constitute a fundamental change and as such require a new
certification. I do not find that here. As to the majority’s decision regarding the lost profits,
I concur that the motion on that matter should be denied.
__________________________
HOWARD A. POLLACK
Board Judge
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.