Petition for Writ of Certiorari — Mayfair Construction Co. v. United States

Supreme Court brief1988

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oO ~ @ Supreme Court, U.S.

FILED

NO. 88- ail Jie

JOSEPH F. SPANIOL, JR.

| CLERK

| IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1988

MAYFAIR CONSTRUCTION COMPANY,

Petitioner,

THE UNITED STATES,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Richard C. Walters

Alan H. Kent

1111 19th Street, N.W.

Suite 1000

Washington, D.C. 20036

(202) 463-2976/2960

Attorneys for Petitioner

SCHNADER, HARRISON, SEGAL

& LEWIS

1111 19th Street, N.W.

Washington, D.C. 20036

Of Counsel

QUESTIONS PRESENTED FOR REVIEW

1.. Whether an interim federal procurement

regulation and government contract

clause, in effect when a government con-

tract is issued, are still enforceable

after they have been repudiated and

retracted by the regulating agency as

contravening the statute they were to

implement (i.e., the Contract Disputes

AGG -0& i976, as amended, 41 U.S.C.

§§ 601-613 (1982) (the "CDA")).

= Whether the CDA requires that a govern-

ment contract claim be "in dispute" in

order to qualify as a "claim," under

that Act.

LIST OF PARTIES

Mayfair Construction Company and the

United States were the only parties to this

case in the United States Court of Appeals for

the Federal Circuit, and before the Armed Ser-

vices Board of Contract Appeals.

a a Na

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW........... i

LIST OF PARTIRCGs « ¢castccunehs ee eee eae i

TABLE OF AUTHORS Aes ces Chee eee sewers ii

TABLE OF CONTENTS OF APPENDIX............ iii

PETITION FOR A WRIT OF CERTIORARI........ 1

OPINICNS BELA... 204 cb ok eer esa ae 2

JURISDICTION. «..< 6s 5.5 eee eee ee 3

FEDERAL STATUTE AND REGULATIONS INVOLVED. “

STATEMENT OF THE CARE. ci. cn aeveueeaneyb cus 5

REASON FOR ALLOWING THE WRIT............. 8

The Court of Appeals Decided A

Federal Question In A Way Which

Conflicts With Applicable Decisions

Of This Court: The Decision Below

Suggests That Substantive Rights

Under A Government Procurement

Statute May Be Undermined By

Executive Agency Regulations And

Boilerplate Contract Clauses

Repudiated By The Agency As

Contravening THO Statute... .essecseccs 8

CONCLUSION... . «06 «4:5 nents a baa ye 12

TABLE OF AUTHORITIES

Cases

R.G. Beer, Eng BCA No. 4885, 85-2 B.C.A.

(CCH) 9 18, 1626 :<sveus ee ee eens Cee ress G,; aa

Cases (continued)

Esprit Corp. v. United States, 6 Cl.Ct.

546 (1984), aff'd, No. 85-996, Slip

Ops Geen. Gab. GELY BU, 29BS). ccc ccces 7

Federal Election Commission v.

Democratic Senatorial Campaign

oS eS SD ey ee} eee ae

Tera Advanced Services, 85-2 B.C.A.

EE a a aa 6

Statutes and Regulations

OS ES rier 3

Se Vetoes © Meetae CLDBS Pace ccccas throughout

OFPP Interim Regulations, 44 Fed. Reg.

RUUD o Gs 6o6 es We ed cece ce eeesas 4,10

OFPP Policy Letter 80-3, Final

Regulations, 44 Fed. Reg. 31035-31037

I i ee aia cI a bnn 0b 6 6 6 0.6m 6 ee «80 8 6 >

ee eb eweseceses 3

Seen be oe) eb eo 6 oO wlele sere 3

rr eee ol ale od eee eee eee ee 1

TABLE OF CONTENTS OF APPENDIX

Notice to Counsel issued by United

States Court of Appeals for the

SE a App. 1

Cover Sheet of United States Court

of Appeals for the Federal Circuit

in Mayfair Construction Company v.

ec ree. MR. MOS ISO L. ccs ceaces App. 2

433.

TABLE OF CONTENTS OF APPENDIX (continued)

Majority Opinion of United States

Court of Appeals for the Federal

Circuit in Mayfair Construction

Company v. United States, No.

Ly rr oO ree ST eke App.

Dissenting Opinion of Bennett, J.

in Mayfair Construction Company v.

United States, No. 87-1251.......... App.

Order of United States Court of

Appeals for the Federal Circuit

Denying Petition for Rehearing...... App.

Order of United States Court of

Appeals for the Federal Circuit

Denying Suggesting for Rehearing

oe eee tee) ae ee ee App.

Majority Opinion of Armed Services

Board of Contract Appeals in

Mayfair Construction Company,

BE TD. Dd a6 ch RRS oes ibe App.

Dissenting Opinion of Duvall, A.J. in

Mayfair Construction Company, ASBCA

SOD, Se aS ne Oe dite e ee ee i a ee en App.

Relevant Portions of OFPP Interim

Regulations, 44 Fed. Reg. 12519-

pio Be py ) re ra ee ere ae App.

Relevant Portions of OFPP Policy

Letter 80-3, Final Regulations, 45

Fed. Reg. 31035-31037 (1980)........ App.

iv.

NO. 88-

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1988

MAYFAIR CONSTRUCTION COMPANY,

Petitioner,

THE UNITED STATES,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Petitioner, Mayfair Construction Company

("Mayfair"),* prays that a writ of certiorari

issue to review the judgment of the United

States Court of Appeals for the Federal Cir-

cuit, entered on March 9, 1988, ina cause

Rule 28.1 listing of all parent compan-

ies, subsidiaries and affiliates: None.

there entitled Mayfair Construction Company,

Appellant v. The United States, Appellee, No.

87-1251 in that court, which affirmed a deci-

sion of the Armed Services Board of Contract

Appeals ("ASBCA") in Appeal of Mayfair Con-

struction Company, ASBCA No. 30800, 87-1

B.C.A. (CCH) 419,542, denying Mayfair's

appeal on a claim under Section 12 of the

CDA. Mayfair's Petition for Rehearing With

Suggestion for Rehearing In Banc was denied

by the United States Court of Appeals for the

Federal Circuit on June 9, 1988.

OPINIONS BELOW

The United States Court of Appeals for

the Federal Circuit, by 2 to 1 majority deci-

sion of a three-judge panel, reported at 841

F.2d 1576, affirmed an earlier decision of

the Armed Services Board of Contract Appeals

("ASBCA"), reported at 87-1 B.C.A. (CCH)

q 19,542, which likewise was a split decision,

of a 3 to 2 majority. Copies of the majority

and dissenting opinions in both the Court of

Appeals and the ASBCA are set forth in the

o2e

eee

Appendix hereto. (See Appendix ("App.") 3,

12, 41 and 66).

JURISDICTION

The decision of the Armed Services Board

of Contract Appeals was dated December 23,

1986. (App. 41) An appeal from that decision

was taken to the United States Court of

Appeals for the Federal Circuit. The judgment

of the Court of Appeals was dated March 9,

1988 and was entered on that day. (A copy of

the Notice to Counsel regarding such judgment

issued by that court is set forth in the

Appendix. See App. 1.) Subsequently, May-

fair filed a Petition for Rehearing With Sug-

gestion for Rehearing In Banc, which Petition

and Suggestion were both denied by the United

States Court of Appeals for the Federal Cir-

cuit on June 9, 1988. (Copies of the orders

containing those denials are set forth in the

Appendix. See App. 37 and 39.) The jurisdic-

tion of this Court is invoked under 28 U.S.C.

§ 1254(1) (1982), and Rules 20.2 and 20.4 of

the Revised Rules of this Court, effective

from June 30, 1980, as amended to May 1, 1987.

FEDERAL STATUTE AND REGULATIONS INVOLVED

Involved in this case are the following

federal statutes and regulations:

Be The Contract Disputes Act of 1978,

Pub. L. No. 95-563, 92 Stat. 2383-2391 (1978)

(amended 1982), 41 U.S.C. §§ 601-613 (1982)

("CDA") which provides, in pertinent part, as

follows:

Sec. 12. Interest on amounts found

due contractors on claims shall be

paid to the contractor from the

date the contracting officer

receives the claim pursuant’ to

Section 6(a) from the contractor

until payment thereof.

41 U.S.C. § 611 (1982).

Be Interim Regulations promulgated by

the Office of Federal Procurement Policy

(OFPP), 44 Fed. Reg. 12519-12524 (1979). A

copy of the relevant portions of those

Interim Regulations is appended hereto. See

App. 84.

PP Final OFPP Regulations under OFPP

Policy Letter 80-3, 45 Fed. Reg. 31035-31037

(1980). A copy of the relevant portions of

those Final Regulations is appended hereto.

See App. 90.

STATEMENT OF THE CASE

This Petition seeks review of a reported

decision of the United States Court of Appeals

for the Federal Circuit regarding remedies

afforded to Government contractors under a

basic federal procurement statute, the Con-

tract Disputes Act of 1978, as amended, 41

U.S.C. §§ 601-613 (1982) (the "CDA"). The

case originated as an appeal by petitioner,

Mayfair, to the Armed Services Board of Con-

tract Appeals ("ASBCA") from a decision of a

Department of Defense Contracting Officer.

That decision denied Mayfair's claim for in-

terest on costs claimed under a federal

Government contract which had been terminated

for the Government's convenience. The ASBCA,

by a 3 to 2 majority, denied Mayfair's appeal.

The United States Court of Appeals for the

oS<

Federal Circuit, by a 2 to 1 majority panel

decision, affirmed the ASBCA ruling. Dis-

senting opinions were filed in both the ASBCA

and the Court of Appeals.

The ASBCA majority opinion (App. 41) held

that Mayfair's termination settlement proposal

did not constitute a "claim" under the CDA

(i.e., a claim to which remedies under the CDA

would apply, including interest under Section

12 of that statute, 41 U.S.C. § 611 (1982)),

because it was not "in dispute." The ASBCA

majority took the position that the CDA itself

requires claims to be "in dispute" before they

can be considered "claims" under that Act --

a position which was admittedly contrary to

that previously espoused by two other major

federal boards of contract appeals.?

In contrast, the Court of Appeals

majority opinion (App. 3) held Mayfair's

a. See R.G. Beer, Eng BCA No. 4885, 85-2

B.C.A. (CCH) 18,162; Tera Advanced

Services, GSBCA No. 7109, 85-2 B.C.A.

(COn) ¥ 17,941.

iin ia et Sait. ts SAMIR. OE

termination proposal not to be a CDA "claim"

solely on the basis of a regulatory clause

promulgated by the Office of Federal Procure-

ment Policy ("OFPP") on an interim basis and

incorporated by reference into Mayfair's con-

tract, a clause which defined the term "claim"

for CDA purposes to be one "which is in dis-

pute." The Court of Appeals majority chose

not to rule on whether the Act itself required

"claims" to be "in dispute."* Senior Circuit

Judge Bennett, in a dissenting opinion (App.

12), posited that coverage of the CDA was not

intended to be restricted to claims which

develop into "disputes."

Petitioner filed with the Court of

Appeals a Petition for Rehearing with Sugges-

tion For Rehearing In Banc, arguing that the

Court's majority opinion violated precedent

x The Court of Appeals likewise avoided

dealing with that issue directly in an

earlier case. See Esprit Corp. v. United

States, 6 Cl.Ct. 546 (1984), aff'd, No.

85-996, Slip op. (Fed. Cir. July 30,

1985).

before this Court which requires rejection of

regulations and clauses found to be incon-

sistent with the purposes underlying the

statutes they are to implement. The Petition

and Suggestion were both denied. Two Circuit

Judges took exception to these denials. (See

App. 37 and 39).

REASON FOR ALLOWING THE WRIT

This case merits this Court's review for

the following special and important reason:

The Court Of Appeals Decided A Federal

Question In A Way Which Conflicts With

Applicable Decisions Of This Court: The

Decision Below Suggests That Substantive

Rights Afforded Under A Government Procurement

Statute May Be Undermined By Executive Agency

Regulations And Boilerplate Contract Clauses

Repudiated By The Agency As Contravening

The Statute

The Court of Appeals majority here has

given effect to an interim regulation and

contract clause which the regulatory agency

itself (the OFPP) repudiated and retracted

because they were inconsistent with the

purposes of the Act which they were intended

to implement, the Contract Disputes Act of

1978, as amended, 41 U.S.C. §§ 601-613 (1982)

eQ<-

(the "CDA"). See App. 19-20, Dissenting Op.

of Bennett, J. This Court has long recognized

that “administrative constructions" of sta-

tutes must be rejected whenever they are "in-

consistent with the statutory mandate" or

"frustrate the policy that Congress sought to

implement." Federal Election Commission v.

Democratic Senatorial Campaign Committee, 454

U.S. 27, 32 (1981) (and cases cited therein).

In essence, the Court of Appeals

majority here indicates that it does not

matter whether’ the statute itself was

intended to limit CDA "claims" to those "in

' so long as the parties "agreed" to

dispute,'

so limit CDA coverage by way of a contract

provision defining the term "claim" in that

manner.* For the reasons cogently presented

4. The Court of Appeals majority opinion

states in this regard:

If we were to decide that the CDA

does not require a dispute, this

would not mean that the CDA pro-

hibits the parties from agreeing to

[Footnote continued on next page]

in the dissenting opinion of Senior Circuit

Judge Bennett (see App. 12), the OFPP Interim

Regulations, 44 Fed. Reg. 12519-12524 (1979)

and "Disputes" clause set forth therein (here-

inafter the "interim 'Disputes' Clause"), when

defining the term "claim" for CDA purposes as

only a claim "which is in dispute," were

clearly inconsistent with the CDA, because

Congress never intended to limit coverage of

that Act and the remedies afforded thereunder

to claims that the Government chooses to dis-

pute. Indeed, the plain language of the Act

clearly indicates that it was intended to

cover all Government contract claims, App.

70-71, ASBCA No. 30800, dissenting op. of

Duvall, A.J. Any regulation which imposes as

a pre-condition to contracting with the

[Footnote continued from previous page]

such a requirement, and there is

nothing in the language of the CDA

to suggest such a prohibition.

App. 9-10, Majority Op. (underscoring in

the original.

o iii

a x cecil

Government the inclusion of a mandatory con-

tract clause which would restrict that cover-

age to "disputed" claims would most certainly

frustrate and undermine the statutory mandate

and policies which Congress sought to imple-

ment when enacting the CDA. Such a regulation

and clause must therefore be rejected. See

Federal Election Commission, 454 U.S. at 32.

Thus, the Court of Appeals was plainly and

palpably wrong in enforcing and giving effect

to the interim regulations and "Disputes"

clause, which the OFPP itself deemed improper

"administrative constructions" of the CDA.

There are broader implications of the

Court of Appeals majority decision here. It

suggests that any substantive rights offered

to a class of persons by a Government pro-

curement statute may be undermined by an

executive agency regulation imposing on con-

tractors boilerplate Government contract

clauses which contravene the statutory

intent. The import of the Court of Appeals

majority opinion is that an executive agency

-l1l-

may obtain through such clauses a contractor's

"agreement" to limit or waive rights and reme-

dies expressly granted by Congress under a

statute, unless the statute itself expressly

"prohibits" such an "agreement." Unless this

Court reviews and rejects such reasoning, pro-

curement regulations and clauses promulgated

by an executive agency at the time of a

federal contract solicitation will be given

effect regardless of whether such regulations

or clauses are subsequently repudiated by the

agency as frustrating the purposes of the

statute they were intended to implement.

Without this Court's intercession, the Court

of Appeals decision here would confer upon

executive agencies the power to circumvent

the will of Congress at any time, by the mere

insertion of boilerplate contract clauses

which contractors are powerless to change.

See App. 23, Dissenting Op. of Bennett, J.;

citing R.G. Beer, Eng BCA No. 4885, 85-2

B.C.A. (CCH) | 18,162 at 91, 199.

«ttm

ee Pe eee ee ee ee a a ee ee |

CONCLUSION

For the foregoing reasons, this petition

for writ of certiorari should be granted.

Respectfully submitted

Richard C. Walters

lla be —

Alan H. Kent

1111 19th Street, N.W.

Suite 1000

Washington, D.C. 20036

(202) 463-2976/2960

Attorneys for Petitioner

SCHNADER, HARRISON, SEGAL

& LEWIS

1111 19th Street, N.W.

Washington, D.C. 20036

Of Counsel

«i3<

APPENDIX

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

717 Madison Place, N.W.

Washington, D.C. 20439

Francis X. Gindhart Telephone: 633-6550

Clerk Area Code 202

NOTICE TO COUNSEL

The Court today announced its decision

in the attached appeal or appeals.

A copy of the Court's opinion or opinions

is enclosed, and judgment thereon has been en-

tered today as required by Rule 36, Federal

Rules of Appellate Procedure.

Costs may be recovered (by Petitioner or

Respondent) as provided by Rule 39, Federal

Rules of Appellate Procedure.

If sanctions have been imposed, please

make check payable to the U.S. Treasury and

forward same to the opposing attorney of

record.

Very truly yours,

Francis X. Gindhart, Clerk

By Spencer C. Greene

Deputy Clerk

App. 1

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1251

MAYFAIR CONSTRUCTION COMPANY,

Appellant,

Vv.

THE UNITED STATES,

Appellee.

Richard C. Walters, Schnader, Harrison,

Segal & Lewis, of Washington, D.C., argued

for appellant. With him on the brief was

Alan H. Kent.

Carolyn E. Galbreath, Commercial

Litigation Branch, Department of Justice, of

Washington, D.C., argued for appellee. With

her on the brief were Richard K. Willard,

Assistant Attorney General, David M. Cohen,

Director and Thomas W. Petersen, Assistant

Director. Also on the brief were Larry W.

Mohl and Michael S. Moran, Defense Logistics

Agency, of St. Louis, Missouri, of counsel.

Appealed from: Armed Services Board of

Contract Appeals

App. 2

;

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1251

MAYFAIR CONSTRUCTION COMPANY,

Appeliant,

Vv.

THE UNITED STATES,

Appellee.

DECIDED: March 9, 1988

Before MARKEY, Chief Judge, BENNETT, Senior

Circuit Judge, and BISSELL, Circuit Judge.

BISSELL, Circuit Judge.

Mayfair Construction Company (Mayfair)

appeals from a decision of the Armed Services

Board of Contract Appeals (ASBCA), Mayfair

Construction Co., ASBCA NO. 30800, 87-1 BCA

49 19,542, denying Mayfair's appeal. We

affirm.

BACKGROUND

On September 5, 1980, the Department of

the Air Force awarded a contract to Mayfair

for the "Pacer Down" facilities restoration

App. 3

project at McConnell Air Force Base, Kansas,

in the amount of $4,176,296. This contract

incorporated by reference the March 1979 ver-

sion of the Defense Acquisition Regulation

Disputes clause.

On January 28, 1982, the contracting

officer terminated the contract for the con-

venience of the government. Mayfair sub-

mitted a termination settlement proposal to

the contracting officer on June 17, 1982, in

the amount of $990,937.29. By letter of

August 2, 1982, Mayfair's counsel denominated

the June 17, 1982 proposal as a claim under

the Contract Disputes Act of 1978 (CDA), 41

U.S.C. § 601 et. seq. (1982), and enclosed

certification of the proposal as a claim.

On December 11, 1984, Mayfair forwarded

an updated termination settlement proposal to

the contracting officer in the amount of

$610,172, and certified this proposal as a

claim under the CDA. The proposal included a

request for interest from August 2, 1982, to

App. 4

December 10, 1984, in the amount of

$146,612.12.

On February 14, 1985, the parties entered

into a termination supplemental agreement

under which they agreed that the government

would pay Mayfair $438,346 for its termination

costs. This agreement, however, expressly

reserved Mayfair's claim for interest. On

the same date, the contracting officer issued

a final decision denying Mayfair's claim for

interest. Thereafter, Mayfair appealed to the

ASBCA, which held that the Disputes clause of

the contract defined "claim" to require the

existence of a dispute; no dispute existed

between the parties, therefore no claim

existed; and consequently, no interest would

be allowable under the CDA where there was no

claim.

ISSUES

ix Whether Mayfair's termination

settlement proposal constitutes a claim.

ro Whether Mayfair may recover

interest on its termination settlement

proposal.

OPINION

The contract at issue specifically

incorporated by reference the March 1979

version of the Disputes clause. That clause

defined claim as follows:

(b) "Claim" means:

(1) a written request submitted to the

Contracting Officer;

(2) for payment of money, adjustment of

contract terms, or other relief;

(3) which is in dispute.

44 Fed. Reg. 12,524 (1979) (emphasis added).

It is beyond cavil that under this clause, no

claim exists unless it involves a dispute.

As a matter of fact, the ASBCA found here

that no dispute existed between the parties.

It looked to Mayfair's substantial concurrence

with an August 1982 government audit report,

and the large reductions Mayfair made there-

App. 6

after in its proposed settlement. It noted

that excluding the $146,612.12 interest ele-

ment of Mayfair's December 1984 settlement

proposal, the final settlement agreement for

$438,346 gave Mayfair only $25,213.88 less

than the $463,559.88 it had requested in

December 1984. As a result, the ASBCA charac-

terized Mayfair and the government during this

period as being in "a pre-dispute, negotiation

posture."

Mayfair, 87-1 BCA at 98,744.

We must treat the ASBCA's’~ factual

findings as final unless "fraudulent, or arbi-

trary, or capricious, or so grossly erroneous

as to necessarily imply bad faith," or unless

those findings are "not supported by substan-

tial evidence." 41 U.S.C. § 609(b) (1982).

There is nothing here to suggest these find-

ings are fraudulent, arbitrary, capricious,

Or grossly erroneous. With respect to the

Pit lense shes owns B ae A at.

; substantial evidence standard, this "means

such relevant evidence as a reasonable mind

might accept as adequate to support a con-

al eal DOE fie,

clusion." Universal Camera Corp. v. National

App. 7

labor Relations Bd., 340 U.S. 474, 477 (1951)

(quoting Consolidated Edison Co. v. National

Labor Relations Bd., 305 U.S. 197, 229

(1938)). In our view, a reasonable fact-

finder could have found as the ASBCA did.

Therefore, we hold that the ASBCA's conclusion

that no dispute existed between Mayfair and

the government is supported by substantial

evidence. Under the terms of the controlling

contractual provision, consequently,

Mayfair's termination settlement proposal did

not constitute a claim.

Mayfair attempts to resist this result

with two arguments. First, Mayfair states

that a revised Disputes clause that did not

require a claim to be disputed superseded the

March 1979 Disputes clause in Mayfair's con-

tract. Mayfair notes that the new clause was

issued on April 30, 1980, well before the

award of the subject contract, on September 5,

1980. This argument, however, does not wash.

The new clause applied only to contracts re-

sulting from solicitations issued on or after

App. 8

June 1, 1980. 45 Fed. Reg. 31,035, 31,037

(1980). Because the solicitation for the

subject contract was dated February 17, 1980,

Mayfair, 87-1 BCA at 98,741, the new clause

is inapplicable.

Mayfair also contends that the CDA does

not require a claim to be disputed, and as

such, the terms of the Disputes clause

requiring a dispute are in violation of the

statute. In order to dispose of this case,

we need not, and do not, decide whether the

CDA requires a claim to be disputed.* If we

were to decide that the CDA requires a dis-

pute, the March 1979 Disputes clause would

certainly be valid. If we were to decide

that the CDA does not require a dispute, this

would not mean that the CDA prohibits the

parties from agreeing to such a requirement,

* The dissent focuses on construing the

CDA, and determines that the CDA does not re-

quire a claim to be disputed. The dissent's

analysis, however, virtually ignores the con-

tract clause requiring the existence of a dis-

pute. In contrast to the dissent, we consider

the terms of that clause to be dispositive.

App. 9

and there is nothing in the language of the

CDA to suggest such a prohibition. Thus,

Mayfair's argument that the March 1979

Disputes clause is in violation of the CDA is

without merit.

Mayfair's request for interest on its

termination settlement proposals is governed

by the Court of Claims decision in Nab-Lord

Associates v. United States, 682 F.2d 940

(Ct. Cl. 1982). There the Court of Claims

held that the CDA does not authorize an in-

terest award unless a contractor demands

interest on a claim cognizable under the CDA.

Id. at 943-44. For the reasons aliready given,

Mayfair's termination settlement proposals

were not cognizable claims. Therefore, any

demand for interest that relies on these

proposals as the underlying basis for an

interest demand must fail.

In its December ll, 1984 settlement

proposal, Mayfair demanded interest on its

August 2, 1982 proposal on the theory that

App. 10

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the earlier proposal had been properly certi-

fied as a CDA claim. However, because the

earlier settlement proposal was not a claim,

the demand for interest was unallowable.

Because Mayfair also certified its

December 11, 1984 proposal as a CDA claim, it

alleges that interest should run on the in-

terest component of that "claim." We may dis-

pose of this argument without reaching the

broader issue of whether the CDA permits in-

terest to run on an interest claim. Having

held that the interest component of the

December 1984 proposal was unallowable, no

corpus remains on which interest can run.

Therefore, no basis exists on which Mayfair

may recover interest.

AFFIRMED

App. 11

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1251

MAYFAIR CONSTRUCTION COMPANY,

Appellant,

Vv.

THE UNITED STATES,

Appellee.

BENNETT, Senior Circuit Judge, Dissenting.

I respectfully dissent. The majority

concludes that substantial evidence supports

the board's conclusion that no "dispute"

existed between the parties since the govern-

ment's final settlement payment was "only"

$25,213.88 less than Mayfair's second ter-

mination settlement proposal, which had been

certified as a claim pursuant to the require-

ments of the Contracts Disputes Act (CDA), 41

U.S.C. § 605(c)(1) (1982). That alone pro-

vides ample reason to dissent since, in my

view, a disagreement over $25,213.88 is a

App. 12

quite substantial and sufficient dispute,

even assuming that a dispute was indeed

needed for the existence of a CDA claim under

the terms of the subject contract. However,

the issue over the existence of a dispute is

not even that close, as the evidence of

dispute was far greater than a disagreement

over $25,213.88.

Following the government's termination

for convenience of the Mayfair contract on

January 28, 1982, Mayfair submitted a termina-

tion settlement proposal in the amount of

$990,937.29. On August 2, 1982, Mayfair

identified and certified the settlement pro-

posal as a claim under the CDA. Over 2 years

later, in December 1984, Mayfair submitted a

second certified settlement "proposal" in the

amount of $463,559.88 (not including an amount

claimed as interest on that figure). It was

not until May 28, 1985, that the government

paid Mayfair $438,346, which represented the

second proposal amount minus the disputed

App. 13

$25,213.88, in settlement of its termination

for convenience claim.

Thus, Mayfair did not receive the

government's final payment until 40 months

after the government terminated the contract

and the final payment received was

$552,591.29 less than Mayfair's initial

settlement proposal, which had been certified

as a CDA claim almost 3 years before. In

light of the time taken to resolve the amount

due following the government's termination

and the difference of over a half a million

dollars between Mayfair's initial claim and

the government's final payment, I do not

hesitate in concluding that substantial

evidence does not support the majority's (and

the board's) conclusion that the initial

termination settlement proposal submitted by

Mayfair was merely part of the usual and

ordinary process of a convenience

termination, and therefore could not consti-

tute a claim since the parties were in “a

pre-dispute, negotiation posture." See

App. 14

Hectares iiiiiaainiasaiaaiiial

Se a E

a eee ee ee ————_ «

Mayfair Construction Co., ASBCA No. 30800,

87-1 BCA 47 19,542.

My disagreement with the majority,

however, is much more fundamental than a

difference of opinion over the length of time

or the amount of money needed to constitute a

"dispute." In my view, a contractor's certi-

fied settlement proposal following the ter-

mination of a contract for the convenience of

the government is as much a claim against the

government related to a contract, see 41

U.S.C. § 605(a), as more “traditional” claims

stemming from such events as constructive

changes, delay, or defective specifications

which unquestionably are treated as claims

under the CDA. Yet here the majority unjusti-

fiably allows contractor claims arising from

convenience terminations to be segregated from

all other types of claims arising from con-

tracts with the government, despite no such

App. 15

distinction being made in the cpa.2/ Not only

is the majority's position without support in

the clear legislative history surrounding the

enactment of the CDA, but it will serve as a

strong disincentive to accurate submission

and good faith negotiation of termination

settlement proposals by contractors and to

timely and orderly consideration of termina-

tion claims by the government. At a minimum,

the majority view must be seen as heralding,

at least with respect to termination claims,

a return of the pre-CDA days of inflated

settlement proposals as precursors to bar-

1/ See Walber Construction Co., HUD BCA No.

80-445-C2, 83-2 BCA 47 16,885 (concluding that

the Federal Acquisition Regulations not al-

lowing interest on amounts due under a settle-

ment agreement arising out of a termination

for convenience were supersedeed by the CDA).

In fact, the board in Walber specifically

noted that although a termination settlement

agreement claim is intended to be negotiated

rather than unilaterally decided by the con-

tracting officer and was not therefore subject

to the pressure of a right to interest for

less-than-immediate payment, the CDA made no

such distinction between types of claims.

Id. at 84,031.

App. 16

gaining and of litigation as the primary

means of claim resolution.

Congress chose not to provide an express

definition of "claim" in the CDA statute.

But, as the dissenting board opinion in this

case ably points out, there is no evidence

that Congress intended "claim" to have a

special meaning apart from its plain,

ordinary meaning. 87-1 BCA at 98,746

(ordinary meaning of "claim" is "'a demand

for something rightfully or allegedly due;

assertion of one's right to something'"

(citation omitted) ); see also Contract

Cleaning Maintenance, Inc. v. United States,

811 F.2d 586, 592 (Fed. Cir. 1987); Paragon

Energy Corp. v. United States, 645 F.2d 966,

971-76 (Ct. Cl. 1981); cf. In re Remington

Rand Corp., No. 87-5063 (3d Cir. Jan. 6,

1988) (Congress used "claim" in the CDA in

the *sraditional sense--as a legal cause of

action). In the absence of contrary legis-

lative history, the plain meaning of a statute

should be followed. Consumer Product Safety

App. 17

Commission v. GTE Sylvania, Inc., 447 U.S.

102, 108 (1980); Horner v. Jeffrey, 823 F.2d

1521, 1525 (Fed. Cir. 1987). I am able to

discern no congressional intent to exclude

contractor claims resulting from government

terminations for convenience from the pro-

visions of the CDA. See Essex Electro

Engineers v. United States, 702 F.2d 998,

1003 (Fed. Cir. 1983).2/

Nor is there any evidence that Congress

intended "claim" to incorporate, for the

purposes of the CDA, the additional

requirement of a dispute. As the board

dissent also correctly points out, "claim"

and "dispute" were not used synonymously by

2/ In Essex, this court allowed interest on

a termination for convenience claim from the

date that the claim was certified to the con-

tracting officer. The court made no sugges-

tion that claims stemming from the termination

of a contract for the convenience of the

government fell outside the terms of the CDA.

In fact, the court in Essex also noted that

the interest provision of the CDA superseded

the interest clauses in the contracts liti-

gated under the Act. 702 F.2d at 1003 &n.9.

Congress in the text of the CDA. See 87-1

BCA at 98,747. Furthermore, the erroneous

requirement of a dispute contained in the

interim 1979 regulations defining "claim,"

referenced in the contract at issue, was

deleted from the final regulations adopted in

1980. 3/ Deference to an interpretation of an

agency charged with administration of a

statute is not required where that interpreta-

tion conflicts with the statutory mandate or

would conflict with the policy that Congress

sought to implement. E.g., Jeffrey, 823 F.2d

at 1531. This would appear to be especially

true where the interpretation in question has

af The final regulations provided the fol-

lowing definition:

(i) As used herein ‘'claim' means a

written demand or assertion by one of

the parties seeking, as a legal right,

the payment of money, adjustment or

interpretation of contract terms, or

other relief, arising under or relating

to this contract.

87-1 BCA at 98,743 (quoting 45 Fed. Reg.

31035 (May 9, 1980)). See also Paragon, 645

F.2d at 976.

App. 19

been repudiated by the agency which origi-

nally proposed it. See generally R.G. Beer

Corp., ENG BCA No. 4885, 85-2 BCA 4 18,162.

In short, the unmistakable legislative intent

of Congress was to provide interest on all

contractor claims arising from contracts with

the government, regardless of whether the

claims were litigated or settled after nego-

tiation. See 41 U.S.C. § 611; R.G. Beer,

85-2 BCA at 91,199.

In determining that no valid claim under

the CDA existed in the present case, the

board majority rejected the analysis of R.G.

Beer and instead relied on Racquette River

Construction Co., ASBCA No. 26486, 82-1 BCA

7 15,769. The board in Racquette River

relied on a lack of a dispute and a lack of

delay in settlement beyond a reasonable time

to conclude that the contractor's settlement

proposal following a termination for the

government's convenience was not a claim.

But examination of the facts indicates that

the contractor submitted a claim for $91,454

App. 20

Bt iret 0,

and the government questioned at least

$32,138 of it. Thus, the board's conclusion

in Racquette River that no dispute existed

appears contrived since much of the board's

opinion delineates the contractor position

and the corresponding government proposal,

and then decides between the disputed posi-

tions. Even more curiously, the board in

Racquette River had also disallowed reimburse-

ment of attorney fees incurred in preparation

of the claim against the government since

"even prior to the incurrence of these fees,

the conflict between the parties was disputa-

tious and did reach the level of becoming a

claim against the Government." 82-1 BCA at

78,052. In my view, Racquette River cannot

be used as support for the result in this

case since it contains a fundamental incon-

sistency in denying attorney fees due to the

"disputatious" nature of the claim, yet also

denying interest on the same claim because

App. 21

there was "no dispute" at the time of the

claim's submission.-—

The majority here attempts to avoid

addressing the issue of whether the require-

ment of a dispute as a prerequisite for a

claim under the CDA contravenes the statute

by concluding that the CDA does not prohibit

the parties from agreeing to additional re-

quirements not expressly contemplated or

provided by Congress in the statute. How-

4/ In the present case, the government

points to inconsistent assertions in Mayfair's

letter containing its August 2, 1982 certifi-

cation. In that letter, Mayfair attempted to

draw a distinction between certification of a

"claim" under the CDA sufficient to start the

time for interest and a "prosecuted claim"

for which recovery of legal fees associated

with negotiation of a settlement proposal

would not be reimbursed by the government.

The government argues that Mayfair's attempted

distinction between "CDA claim" and "prose-

cuted claim" shows that Mayfair's settlement

proposal was not a claim, despite the certifi-

cation. Rejection of Mayfair's attempted dis-

tinction may indicate that by electing to

certify its claim under the CDA, Mayfair

correspondingly ended any possible entitlement

to reimbursement for subsequent attorney fees

associated with settlement negotiations con-

cerning the claim, but it is not determinative

as to whether its initial proposal should be

considered a CDA claim once certified.

App. 22

ever, the clear intent of Congress should not

be permitted by this Court to be sidestepped

so easily by the parties. It is quite doubt-

ful that Congress intended, as the majority

allows here, for the parties to create a dif-

ferent definition of claim in every contract

involving the government, especially since

the government is the party which provides

that definition through its regulations

governing its procurement process. As was

observed by the board inR.G. Beer,

‘{i]t would indeed be ironic if, by

simply publishing a new and self-

serving definition of the familiar

term "claim," one of the contracting

parties could regain its superior

bargaining power and turn the event

selected by Congress to "provide a

specific date from which interest

will be paid" into a variable date,

and the benefit intended to "serve

as an incentive" for early submis-

Sion of claims into a disincentive

to early claim submittal or settle-

ment.

85-2 BCA at 91,199.

~The CDA was designed to end the prior

practice rampant in the government contracting

area where a contractor would submit grossly

App. 23

inflated claims that had little relation to

the facts, were improper as a basis for

settlement, and were intended only as a start-

ing point for bargaining. See Fidelity Con-

struction Co. v. United States, 700 F.2d 1379,

1382-83 (Fed. Cir.) (citing legislative his-

tory of the CDA), cert. denied, 464 U.S. 826

(1983). To treat termination for convenience

settlement proposals differently from other

claims related to contracts and to ignore or

prevent their certification as CDA claims

encourages a return to submission of inflated

proposals as a precursor to bargaining and

contradicts the entire purpose of the CDA.

This is not the type of negotiation posture

intended by Congress or that should be

encouraged by this court.

The legislative purpose behind 41 U.S.C.

§ 611, the interest provision in the CDA,

adds further support for this conclusion. As

discussed in Fidelity, 700 F.2d at 1384, Con-

gress was concerned with fully compensating

contractors for additional costs incurred in

App. 24

continuing performance under a contract. See

also 87-1 BCA at 98,747. In the case of

termination for convenience, the contractor's

work may have been terminated prior to his

receiving adequate compensation for’ the

performance already completed. No interest

is allowed for the time during which the

contractor prepares the termination claim

prior to its submission and certification.

Allowing interest to accrue from the time

that a contractor claim related to a contract

is certified comports with congressional

intent in providing adequate compensation to

the contractor on its claims which are

upheld. Furthermore, treating termination

settlement claims no differently from other

claims requires, through contractor

compliance with the CDA certification

provisions, the submission of good faith

claims with accurate and complete supporting

data, which facilitates the orderly

resolution of any quantum due as a result of

the termination. See 41 U.S.C. § 605(c)(1);

App. 25

see also United States v. Turner Construction

Co., 827 F.2d 1554, 1561 (Fed. Cir. 1987).

The CDA interest provision also serves

to provide "an additional inducement for the

settlement of claims short of litigation."

Brookfield Construction Co. v. United States,

661 F.2d 159, 164 (Ct. Cl. 1981). It makes

little sense to say that termination settle-

ment claims should not be treated as claims

under the CDA because they are merely in the

predispute posture of negotiation, since a

purpose of the CDA is to facilitate the set-

tlement of claims short of litigation. Main-

tenance of a predispute posture should be

encouraged, not penalized. Requiring a dis-

pute before interest can accrue pushes the

parties that much closer to litigation and

only serves to encourage "creation" of a

dispute in order to permit the payment of

interest. If all other claims arising from

contracts with the government’ currently

handled under the CDA can be settled short of

litigation, and that is the clear intent and

App. 26

purpose of the statute, it does not follow

that treating settlement proposals in the

same manner would somehow lead to a different

result.

Allowing interest to contractors on

their claims under the CDA was intended by

Congress to make the bargaining process more

equal so that the government could not un-

reasonably delay the claim analysis to the

contractor's detriment. Since other types of

CDA claims (not involving fraud) can be nego-

tiated and settled, the fact that termination

Claims have historically been negotiated

rather than merely granted or denied by the

contracting officer is no reason to treat

termination settlement claims differently from

other claims under the CDA. Thus, I would

conclude that a contractor should be able to

elect to certify its settlement proposal as a

CDA claim following a termination for the con-

venience of the government. Since Mayfair did

exactly that, and there has been no suggestion

that its initial certification was otherwise

App. 27

defective, I would conclude that Mayfair's

termination settlement proposal was a valid

CDA claim from August 2, 1982, the date on

which the claim was validly certified in

accordance with the CDA.

This court has held that a contractor

can recover CDA interest even where the under-

lying quantum claim has been settled as long

as the quantum claim was subject to the act

and the settlement agreement did not extin-

guish the interest claim. ReCon Paving, Inc.

v. United Statees, 745 F.2d 34 (Fed. Cir.

1984). Since, unlike the majority, I would

conclude that appellant's certified termina-

tion settlement proposal was a cognizable

claim under the CDA and since the parties

specifically excluded Mayfair's claim for in-

terest from their settlement agreement, I

would conclude that Mayfair is entitled to

interest in accordance with the terms of 41

U.S.C. § 611:

Interest on amounts found due

contractors on claims shall be paid

to the contractor from the date the

App. 28

contracting officer receives the

claim pursuant to section 605(a) of

this title from the contractor until

payment thereof. The interest pro-

vided for in this section shall be

paid at the rate established by the

Secretary of the Treasury .

According to the parties’ stipulations, the

total interest due on the $438,346 payment by

the government for the period from the date

of the initial certification of the claim,

August 2, 1982, to the date of payment,

May 28, 1985, would be $171,229.09. In my

view, Mayfair is entitled to recover that

amount.

The “Interest on Interest" Claim

In addition to the above amount, Mayfair

also asserts that the interest element of its

certified claim of December ll, 1984, is it-

self a claim under the CDA which entitles it

to interest on the amount found due on that

disputed claim element. In accordance with

that theory, Mayfair alleges that since the

CDA interest owed on the $438,346 ultimately

paid amounted to $146,052 as of December 11,

1984, it is entitled to CDA interest on that

App. 29

amount for the period from December 14, 1984,

the date that the contracting officer received

the certified interest claim, through the

future date when the $146,052 is ultimately

paid by the government. Although the majority

does not reach the so-called “interest on

interest" issue in light of its holding that

no interest is to be awarded at all, I will

indulge in a brief comment thereon for the

sake of completeness.

As evidenced by the use of the term

"shall" in section 611, the terms of the sec-

tion are mandatory. When a proper CDA claim

(including certification) has been filed by

the contractor and an amount stemming from

the claim found to be due to the contractor,

the ccentractor is entitled to receive

interest on that amount from the date that

the claim was certified. E.g., Fidelity, 700

F.2d at 1385. In fact, although it is

uniformly done, it does not appear that the

contractor need specifically mention that it

seeks interest on the underlying claims in

App. 30

order to recover the interest under the

statute since payment of such interest is

mandatory. So, absent a dispute over whether

the underlying claim is indeed a claim,

payment of interest on the amount paid on the

claim should necessarily follow in accordance

with the statute, and the issue of additional

interest on that interest does not arise.

Here, however, since there was a dispute

over whether Mayfair's termination settlement

proposal could be certified as a CDA claim,

the issue did arise. The board in this case

unanimously agreed that no interest could be

paid to Mayfair on the unpaid interest

because only simple interest can be awarded

against the Government. See Brookfield, 661

F.2d at 170; United States v. Mescalero Apache

Tribe, 518 F.2d 1309, 1331-32 (Ct. Cl. 1975),

cert. denied, 425 U.S. 911 (1976); Central

Mechanical, Inc., ASBCA No. 29193, 85-2 BCA

§ 18,005. However, the asserted “compound

interest" in this case appears to stem from

the fact that Mayfair seeks interest on an

App. 31

unpaid amount which itself happens to be

interest. Thus, it appears that the interest

sought here is indeed simple interest rather

than compound interest, albeit simple interest

based on an amount which happens to be in-

terest itself, and therefore the claim for

such should not necessarly be denied on that

basis.

Nevertheless, I would also hold that

interest could not be recovered on the unpaid

interest of $171, 222.092/ because the under-

lying claim to the "interest on interest"

claim, the claim for interest on the termina-

of Assuming such interest recoverable, any

claim for interest on unpaid interest would

not actually accrue until the principal (the

unpaid interest) is paid and the interest

thereon is not. In this case, the alleged

claim for interest on the unpaid interest

accrued on May 28, 1985, so Mayfair's claim

(and attempted certification thereof) for

"interest on interest" made on December 10,

1984, was premature. Thus, contrary to

Mayfair's alleged computation method, any

additional recoverable interest should be

based on the entire amount of interest owed

on the settled claim ($171,222.09) from the

date that the settled claim was paid but the

interest was not.

App. 32

LLL

dnltites it ert,

tion claim, is not itself a claim under the

CDA. Section 605(a) of the CDA provides that

"[ajll claims by a contractor against the

government relating to a contract shall be in

writing and shall be submitted to the con-

tracting officer for a decision." (Emphasis

supplied.) In my view, the termination claim

at issue here is a claim by a contractor

against the government relating to a contract;

however, the "claim" for CDA interest on that

claim relates not to the contract, but to the

CDA itself. Since section 611 only provides

for the payment of interest on claims received

pursuant to section 605(a), the limited waiver

of sovereign immunity contained in the CDA

does not appear to extend to the payment of

interest on unpaid CDA interest. See, e.g.,

Soriano v. United States, 352 U.S. 270, 276

(1957) (the "limitations and conditions upon

which the Government consents to be sued must

be strictly observed and exceptions thereto

are not to be implied"); Fidelity, 700 F.2d

at 1383 (no interest shall be awarded absent

App. 33

an express contractual provision or an Act of

Congress specifically providing for payment).

The conclusion that a claim for interest

on unpaid CDA interest is not itself a cog-

nizable CDA claim is buttressed by the deci-

sion of the Court of Claims in Brookfield.’

In an extensive analysis of the CDA interest

provision, the court in Brookfield made no

mention of allowing additional interest on

the CDA interest ultimately determined to be

due. Furthermore, in reaching its conclusion,

the court also held that certification of the

claim for CDA interest was not necessary.

6/ In Brookfield, the court held that a

contractor was entitled to recover interest

on claims pending before the contracting

officer on March l, 1979, the effective date

of the CDA, despite the absence of an

interest provision in the contract, and

awarded simple interest on the amounts of the

underlying claims from March 1, 1979 through

the date of payment of those claims. 661

F.2d at 168-170.

+ ate Pal anal ect she

As for the post-Act interest

claim itself (distinguished from the

underlying claims), no certification

is necessary even though we assume

arguendo that the claim was present-

ed after March 1, 1979. Once the

amounts for the underlying claims

are set, the determination of the

amount of post-Act interest is ob-

jective, legal, and mathematical,

not lending itself to certification

nor serving any of certification's

fraud-preventive goals. It would

be needless, redundant, and overly-

technical to require certification

of that interest claim.

661 F.2d at 166-67.

The holding in Brookfield that claims

for CDA interest do not need to be certified

is a strong indication that such interest

claims, while arising from the CDA, do not

arise under a contract so as to qualify as

CDA claims. Thus, claims for CDA eendee

would not themselves be entitled to CDA

interest. See Nab-Lord Associates v. United

States, 682 F.2d 940, 944 (Ct. Cl. 1982) (in

order for a contractor to receive interest

under the CDA there must be an underlying

claim for quantum which is governed by the

act). Accordingly, for the reasons given, I

App. 35

would affirm that part of the board's decision

holding that no additional interest could be

recovered under the CDA on the $171,222.09

interest on the termination claim.

App. 36

Sen a ee ay

NOTE: This Order has not been prepared for

publication in a printed volume because it

does not add significantly to the body of law

and is not of widespread legal interest. It

is a public record. It is not citable as

precedent.

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1251

MAYFAIR CONSTRUCTION COMPANY,

Appellant,

THE UNITED STATES,

Appellee.

ORDER

A suggestion for rehearing having been

filed in this case,

UPON CONSIDERATION THEREOF, itis

ORDERED that the petition for rehearing

be, and the same hereby is, denied.

Judges Smith and Newman would grant the

suggestion.

FOR THE COURT:

Francis X. Gindhart

Francis X. Gindhart, Clerk

App. 37

6/9/88

Date

cc: Mr. Richard C. Walters

Ms. Carolyn Galbreath, DOJ

App. 38

NOTE: This Order has not been prepared for

publication in a printed volume because it

does not add significantly to the body of law

and is not of widespread legal interest. It

is a public record. It is not citable as

precedent.

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

Corrected copy)

87-1251

MAYFAIR CONSTRUCTION COMPANY,

Appellant,

Vv.

THE UNITED STATES,

Appellee.

ORDER

A suggestion for rehearing in banc having

been filed in this case,

UPON CONSIDERATION THEREOF, itis

ORDERED that the suggestion for

rehearing in banc is declined.

Judges Smith and Newman would grant the

suggestion.

FOR THE COURT:

Francis X. Gindhart

Francis X. Gindhart, Clerk

App. 39

6/9/88

Date

cc: Mr. Richard C. Walters

Ms. Carolyn Galbreath, DOJ

App. 40

ne ee ee eee eRe ae See ee

DECISION OF THE ARMED SERVICES BOARD -

OF CONTRACT APPEALS IN

MAYFAIR CONSTRUCTION COMPANY

ASBCA No. 30800, December 23, 1986

Contract No. F14614-80-C-0018

Reported at 87-1 B.C.A. (C.C.H.) 4 19,542:

For the appellant: Schnader, Harrison,

Segal & Lewis, Washington, D.C., by Harold F.

Blasky and Richard C. Walters. For the

government: Richard F. Pier, Trial Attorney,

Defense Contract Administration Services

Region, St. Louis (DLA).

Opinion by Administration Judge Ruberry

with Administrative Judges Watkins and Arons

concurring; Administrative Judge Duvall dis-

senting; Administrative Judge Harper concurred

with the dissent.

[Text of Opinion]

The question presented by this appeal is

whether appellant can recover interest sania

the Contract Disputes Act of 1978 (CDA) (41

U.S.C. § 601 et. seq.) on the amount agreed

to as settlement for termination of the

contract for convenience of the Government.

App. 41

Appellant maintains that it is due interest

on the settled amount from the time it certi-

fied the settlement proposal and labeled the

proposal a claim under the CDA. The Govern-

ment contends that interest is not payable

for three reasons; first, because the termina-

tion settlement proposal was not a claim under

the CDA since the amount was not disputed;

second, because termination settlement pro-

posals traditionally have not been considered

to be claims and; third, because the termina-

tion settlement proposal was not properly cer-

tified as a claim under the CDA. The Govern-

ment does not question the sufficiency of the

text of the certification, but argues that

the certification was ineffective because it

was signed by an individual not properly

authorized to certify a claim under the CDA

and implementing regulations. Also at issue

is appellant's contention that the claim for

interest was itself a claim cognizable under

the CDA, entitling it to recover interest on

the interest allegedly accrued on the amount

App. 42

_ eee eV

oe see eee Le

of the settlement. There are no facts in

dispute. The appeal is before the Board on

the record, supplemented by a joint stipula-

tion of facts, pursuant to Board Rule ll.

Findings of Fact

The following is a summary of the

essential facts, most of which have been

stipulated by the parties.

Appellant's bid on the solicitation

dated 17 February 1980 for the "Pacer Down"

facilities, restoration project at McConnell

AFB, Kansas was signed by Mr. Phillip W.

Akwa, Contract Administrator, on behalf of

appellant (Stip 2).

By letter dated April 15, 1980, Mr. Paul

Cocose, appellant's president, notified Air

Force contracting personnel at McConnell AFB

that Mr. Akwa was authorized to execute the

construction contract and to negotiate and

execute any modifications and time changes to

that contract (Stip. 3).

On or about 5 September 1980 the contract

was awarded to appellant in the amount of

App. 43

$4,176,296. The contract was executed by Mr.

Akwa on behalf of appellant (Stip. 4).

Mr. Akwa likewise ener ted many

bilateral modifications to the contract on

behalf of Mayfair. However, bilateral

modifications Nos. 2 and 3 were executed by

Mr. A. Karwat, Project Manager and Mr.

Charles Whalen, Assistant Contracting

Administrator, signed Mod 4 (Stip. 5).

During the course of contract per-

formance, Mr. Akwa was Mayfair's chief repre-

sentative at most meetings with Government

officials concerning any matters relating to

the contract (Stip. 6).

The contract was terminated for conven-

ience of the Government on or about 28 January

1982 (Stip. 7). Subsequently, by letter

dated March 17, 1982, Mr. Cocose confirmed to

Government contracting officials that Mr. Akwa

was continuing in his capacity as contract ad-

ministrator for the project, and, as such, had

full authority to bind appellant (Stip. 8).

App. 44

A AO, MS ON te i we

The delegation of authority to Mr. Akwa

was acknowledged by Mr. R.D. Fischer, the

Government's Termination Contracting Officer

("TCO") by letter dated June 16, 1982 to Mr.

Cocose. In that letter, the TCO insisted

that all correspondence be signed by the

contract administrator (Stip. 9).

By letter dated June 17, 1982 from Mr.

Akwa to the TCO, Mayfair submitted a Termina-

tion Settlement Proposal in the amount of

$990,937.29. By letter dated August 2, 1982,

to the 2cO, Mayfair's counsel forwarded

Mayfair's certification of that proposal

specifically identified as a "claim" under

the CDA. That CDA certification was executed

by Mr. Akwa on behalf of appellant (Stip. 10).

On January 21, 1983, the TCO was orally

notified that Mr. Akwa no longer represented

Mayfair and that Mr. Cocose was personally

assuming Mr. Akwa'’s duties as contracts admin-

istrator. This notification was confirmed in

writing by Mr. Cocose's letter to the TCO

dated March 1, 1983. All subsequent CDA

App. 45

certifications with respect to Termination

Settlement Proposal updates were executed by

Mr. Cocose, including settlement proposals

submitted in June ($567,545) and August

($578,394) 1984. Stip. 11; R4, tab 5)

The reasons for the substantial

reduction in the $990,937.29 initially

proposed by appellant are not entirely

clear, but the record indicates that "The

contractor basically concurred" with the

findings of a Government audit report issued

in August 1982 (R4, tab 6).

The Termination Settlement Proposal,

updated December 11, 1984, certified by Mr.

Cocose as a claim under the CDA in the amount

of $610,172, included as an element of Settle-

ment Expenses in Schedule E of DD Form 541,

Settlement Proposal (Total Cost Basis), a

claim for CDA interest in the total amount of

$146,612.12. The computation of that amount

was set forth on a separate sheet attached to

the Settlement Proposal form and refiected the

accrual of interest (at rates promulgated

App. 46

semi-annually by the United States Secretary

of the Treasury for purposes of the CDA) from

August 1, 1982, the date when appellant's

initial CDA certification was transmitted to

the TCO, until December 10, 1984 (Stip. 12;

R4, tab 8).

By Termination Supplemental Agreement

No. AOOOO1l dated February 14, 1985, the

parties agreed to a settlement with respect

to appellant's Settlement Proposal.

Expressly reserved from the Termination

Supplemental Agreement was appellant's claim

for interest. It was agreed that that

portion of appellant's Settlement Proposal

would be the subject of a unilateral

determination to be issued by the TCO (Stip.

re be

By letter also dated February 14, 1985,

the TCO issued a Final Decision denying

Mayfair's claim for interest on that Termina-

tion Settlement Proposal. A timely appeal

from that Final Decision was made by appel-

lant's counsel by letter dated February 20,

App. 47

1985 (Stip. 14). The contracting officer's

denial was based on the contention that a

settlement proposal is not a claim as

defined in Federal Acquisition Regulations

(FAR 33.001) but is a routine request for

payment pursuant to the Termination Clause,

and therefore interest is not payable.

The undisputed amount agreed upon under

Termination Supplemental Agreement No.

AOOOO1, $438,346, was paid by the Government

on May 20, 1985 and received by appellant on

May 28, 1985 (Stip. 15).

The parties have agreed that the correct

amount of interest, if found to be allowable,

from August 2, 1982 until December 10, 1984,

was $146,052 (Stips. 16 and 17).

The parties further have agreed that in

the event the Board should find the contractor

entitled to CDA interest on the termination

settlement amount eventually determined due,

that additional CDA interest would be due for

the period December 11, 1984 uv to and in-

cluding the date of payment under Termination

App. 48

at renee. castles Mestitehnaa! expats

Supplemental Agreement No. AQOOO1, May 20,

1985. Such additional interest was agreed to

be $25,170.09 (Stip. 18).

The contractor is also claiming interest

on the interest amount of $146,052 represent-

ing the interest accruing on that amount from

December 14, 1984 until payment-.is made by the

Government of the $146,052 (Stip. 19).

The record includes an affidavit from

appellant's president stating that as part of

his duties he appointed Mr. Akwa as

appellant's contracts administrator for the

project, that Mr. Akwa was in complete control

of all aspects of contract administration,

including submission and negotiation of all

claims on appellant's behalf and was appel-

lant's senior official in charge of the work

site until January, 1983, and that modifica-

tions 2 and 3 (Stip. 5, supra) were minor

modifications signed by subordinates of Mr.

Akwa under a delegation of authority from

him.

Applicable Statutory, Regulatory

and Contract Provisions

Under the CDA, all claims by a contractor

against the Government relating to a contract

shall be in writing and shall be submitted to

the contracting officer for a decision (41

U.S.C. § 605(a)). The CDA requires the con-

tractor to make a prescribed certification of

all claims over $50,000. The CDA does not

define a claim. Early in 1979, shortly after

enactment of the CDA, the Office of Federal

Procurement Policy (OFPP) issued interim

regulations defining a "claim" as a matter in

dispute and in March 1979 a Disputes Clause

was promulgated utilizing that definition, 44

Fed. Reg. 12524. That clause (DAR 7-602.6),

which was included in appellant's contract,

stated, in pertinent part:

Disputes. (a) This contract is subject

to the Contract Disputes Act of 1978 (41

U.S.C. 601, «et seqg.). If a dispute

arises relating to the contract, the

contractor may submit a claim to the

App. 50

Contracting Officer who shall issue a

written decision on the dispute in the

manner specified in DAR 1-314 (FPR

1-1.318).

(b) "Claim" means:

(1) a written request submitted to

the Contracting Officer;

(2) for payment of money, adjustment

of contract terms, or other relief;

(3) which is in dispute or remains

unresolved after a reasonable time for

its review and disposition by the

Government; and

(4) for which a Contracting

Officer's decision is demanded.

or amendments to such requests for pay-

ment exceeding $50,000, or with any

amendment causing the total request in

dispute to exceed $50,000, the Contractor

shall certify, at the time of submission

as a claim, as follows:

I certify that the claim is made in good

faith, that the supporting data are

accurate and complete to the best of my

knowledge and belief; and that the amount

requested accurately reflects the con-

tract adjustment for which the contractor

believes the Government is liable.

(Contractor's

Name )

(Title)

(d) The Sevanduead shall pay the

contractor interest:

(1) on the amount found due on claims

submitted under this clause;

(2) at the rates fixed by the Secretary

of the Treasury, under the Renegotiation

Act, Public Law 92-41;

(3) from the date the Contracting Officer

receives the claim until the Government

makes payment.

The definition in the final OFPP regula-

tions issued the following year, was as

follows:

App. 52

ee oer,

ee ee Ee ee

(b) Definition of Claim:

(i) As used herein ‘claim’ means a

written demand or assertion by one of

the parties seeking, as a legal right,

the payment of money, adjustment or

interpretation of contract terms, or

other relief, arising under or relating

to this contract.

(ii) A voucher, invoice, or request for

payment that is not in dispute when

submitted is not a claim for the

purposes of the Act. However, where

such oubmi ssion is subsequently not

acted upon in a reasonable time, or

disputed either as to liability or

amount, it may be converted to a claim

under Section 6(a) of the Act...

(45 Fed.Reg. 31035 dtd May 9, 1980)

The OFPP prescribed a new Disputes

clause utilizing this language, and the new

clause was made a part of the Defense

Acquisition Regulations by the DAR council on

June 25, 1980 as paragraph (c) of the clause.

App. 53

Paragraph (b) of the new clause read as

follows:

{b) Except as provided in the Act, all

disputes arising under or relating to

this contract shall be resolved in

accordance with this clause.

The Federal Acquisition Regulation (FAR

33.201) uses essentially the same definition

except that the FAR states that "a voucher,

invoice, or other routine request for payment

that is not in dispute when submitted is not

a claim." (Emphasis added)

Section 12 of the CDA, 41 U.S.C. § 611,

provides for interest on contractor claims as

follows:

Interest on amounts found due contractors

on claims shall be paid to the contractor

from the date the contracting officer

receives the claim pursuant to Section

6({a) from the contractor until payment

thereof....

Appellant points out that the contract

Termination for Convenience of the Government

App. 54

dt A st teal hen

clause refers to the contractor's submission

as a “claim", particularly in paragraph (c)

thereof, to wit:

Termination, the Contractor shall submit

to the Contracting Officer his termina-

tion claim, in the form and'with certi-

fication prescribed by the Contracting

Officer.

The Government counters that the

regulation in effect at the time of the

termination here (DAR 8-213.2 (c)) expressly

prohibited interest on termination for con-

venience settlement amounts, as follows:

paid by the Government on the amount due

under a settlement agreement or a settle-

ment by determination. Interest may,

however, be allowed on successful con-

tractor appeals to the contracting

officer's determination in accordance

with the Payment of Interest on

Contractors' Claims clause in 7-104. 82.

App. 55

The FAR contains a substantially

identical prohibition (FAR 49.112-2(d)):

(d) Interest. The Government shall

not pay interest on the amount due under

a settlement agreement or a settlement

by determination. The Government may,

however, pay interest on a successful

contractor appeal from ae contracting

officer's determination under the

Disputes clause at 52.233-1.

The CDA does not specify who must

certify a claim on a contrractor's behalf

when it requires "the contractor" to certify

the claim. However, both the Federal

Acquisition Regulation (FAR) and its

predecessor, the Defense Acquisition

Regulation (DAR), furnish specific guidance

in this regard.

FAR 33.207(c) provides, in pertinent

part:

(c)(2) If the contractor is not an

individual, the certification shall be

executed by-

App. 56

(i) A senior company official in

charge at the contractor's plant or

location involved; or

(ii) An officer or general partner

of the contractor having overall respon-

sibility for the conduct of the con-

tractor's affairs.

Language identical to that in subsection

(c)(2) (i) and (ii) above was previously

applied in defense contracts through DAR

1-314(L)(2) and in other federal agency

procurements through Paragraph 1.7 of OFPP

Policy Letter No. 80-3 (45 Fed. Reg. 31,035

May 9, 1980).

DECISION

The Government's contention that the

August, 1982 cértification of appellant's

settlement proposal\ was ineffective because

Mr. Akwa, the individual who signed it, was

not authorized to do so is not supported by

the facts. Mr. Akwa executed the original

contract on appellant's behalf, negotiated

and executed modifications to the contract,

App. 57

and administered the contract with full

authority. He was the senior company

official in charge of the work site until

January, 1983. Consequently, under governing

regulations he was authorized to execute the

certification. See Transamerica Insurance

Co. v. United States [32 CCF @% 73,012], 6 Cl.

Ct. 367 (1984). There is no legal basis for

the Government's contention that Mr. Akwa

required a specific grant of authority from

the company's Board of Directors to execute

the certification and other documents for

appellant.

With respect to the question of whether

CD interest on the settled amount is due

appellant, we addressed the issue of whether

a settlement proposal is a claim for CDA

interest purposes in Racquette River Construc-

tion, Inc., ASBCA NO. 26486, 82-1 BCA

91 15,769. Faced with the identical Disputes

clause we have in this contract, we said:

In the instant case appellant

submitted its settlement proposal in the

App. 58

A= oe OO ele a amaliallagall

amount of $91,454 on 17 November 1980.

At that point its proposal was, to use

the terminology of the Disputes clause,

"a written request ... for payment of

money." However, it was neither for an

amount in dispute or unresolved beyond a

reasonable time, nor did appellant, at

that point, demand a decision by the

contracting officer. Appellant's

17 November 1980 settlement proposal was

therefore no a "claim" See, R.G.

Robbins Co., Ime. ASBCA NO. 26521,

7 January 1982, slip. op. at 7.

The DCAA audit report was issued on

16 January 1981. In that report, the

auditor questioned costs totalling

$32,138, and recommended approval of the

remaining $59,316 proposed by appellant.

Following a series of unsuccessful

settlement negotiations, held pursuant

to the provisions of the termination for

convenience clause, appellant, on

16 March 1981, requested that a contract-

App. 59

ing officer's final decision be issued.

On that date, having a written request

for payment of money, an amount in dis-

pute, and a demand for the issuance of a

contracting officer's final decision, we

conclude that appellant's proposal

ripened into a claim.

Appellant is therefore entitled to

be paid interest on the amount held

allowable in this decision from 16 March

1981 until payment thereof or any portion

thereof.

Cf. HSQ Technology, ASBCA No. 32272,

86-3 BCA 97 19,221 (prior history of disagree-

ments over amounts due under contract showed

that settlement proposal-upon being certified-

was actually ta disputed claim); also _ see

A Machine Company, ie.» ASBCA No.

29739, 86-1 BCA 7 18,684. No history (such

as we fourd in HSOQ Technology) is present in

this case. The settlement proposal was sub-

mitted as the first step in the usual and

5 entalt

ordinary process following a termination for

convenience.

The absence of such a transforming

history also means that the prohibition of

DAR 8-213.2(c) applies here. Cf. HSQ

Technology, supra. Any notion that the DAR

provision was merely a pre-CDA relic which

the DAR Council had neglected to retire has

been: dispelled by the almost identical

prohibition in FAR, supra, adopted long after

the CDA was enacted. The regulation supports

our conclusion that - at least when the

Disputes clause in this contract is present -

a termination for convenience settlement pro-

posal is not ordinarily a CDA claim when

submitted (whether certified or not).

Subssquent actions are usually necessary for

the matter to ripen into a claim. Racquette

River Construction, Inc., supra.

No such effective actions occurred in

this case. The belated labeling of the

settlement proposal as a CDA claim by appel-

lant's counsel and submission of a certifica-

App. 61

tion in August 1982 contrast sharply with

appellant's substantial concurrence with the

auditor's findings made that same month and

the large reduction in appellant's proposed

settlement which followed. Except for the

interest sought ($146,612.12), the settlement

amount ultimately agreed upon ($438,346) was

only $25,213.88 less than appellant's updated

proposal in December 1984 ($610,172). Thus,

aside from the interest issue introduced by

appellant's counsel, the termination for

convenience settlement proceeded to agreement

without apparent dispute.

Appellant argues that the Disputes

clause in this contract and the regulations

upon which it was based are contrary to the

clear mandates of the CDA that interest be

paid on all claims. It points to the revised

definition of claim in OFPP's 9 May 1980

policy letter (supra) as supporting its

position that the settlement proposal, when

certified, became a CDA claim.

Unlike FAR 49.112-2(d), supra, which

expressly prohibits payment of interest on

termination for convenience settlements, the

revised regulation does not refer to settle-

ment proposals expressly. Furthermore, the

change to the definition of claim, inter

alia, was described as a merely "technical

change". (45 F.R. 31035)

Neither the legislative history of the

CDA nor the administrative history of the

implementing regulations speak clearly on

whether CDA interest applies to a proposed

settlement following a termination for

convenience. Nor do we agree that the CDA

itself is so clear that the Disputes clause

in this contract and the regulations on which

it was based are invalid. There is a time-

honored presumption in favor of the validity

of an administrative determination made

pursuant to statute. Coleman v. Paccar,

iee., €24 U.S. 1301, 47 L. Ed. 2d 67 (1976);

Trans Akaska Pipeline Rate cases, 436 U.S.

631, 56 L. Ed. 591 (1978). In promulgating

App. 63

——————————EEeeVv'Vrlue

its interim regulation, the OFPP was acting

pursuant to statute (41 U.S.C. 405a). And

specifically applicable to whether interest

is allowable is the long established principle

that interest is not allowed against the

Government unless Congress or a contract

plainly authorizes it. This "entrenched

immunity" is a part of sovereign immunity.

Brookfield Construction Co. v. United States

[29 CCE 4 81;076),: 28 Cet. Ci.’ Sa, 662 B26

159 (1981).

Neither this Board nor the United States

Claims Court has been able to find that the

CDA or the Disputes clause plainly authorizes

payment of interest while the Government and

contractor are in a pre-dispute, negotiation

posture. Esprit Corp., Inc. v. United States

[32 cor ¢ 73,0601, 6 CL. Ce. - See <2008),

affirmed without discussion of this issue,

Appeal No. 85-996 (unpublished) (Fed. Cir.,

July 30, 1985) 4 F.P.D. 7 36; Hoffman

Construction Co. v. United States [32 CCF

q 73,279},. 7 Cl. €&. 928 42980); Racguecce

App. 64

River Construction, Ine. ,; supra; Fortec

Constructors, _ASBCA~ No. 27601, 983-1 BCA

q 16,402; Cf. J.M.T. Machine Company, Inc.,

ASBCA No. 29739, 86-1 BCA ff 18,684, motion

for recon. den. 86-2 BCA J 18,917.

However, we need not and do not decide

whether, under the "new" (1980) Disputes

clause, a dispute is a pre-condition to

entitlement to CDA interest.

Moreover, as we have discussed

previously, with regard to termination of

convenience settlements specifically the DAR

(and now FAR) prohibit such interest. Such

regulations have the force and effect of law,

and their mandates must be accorded the same

respect as a congressional enactment. Paul

v. United States [9 CCF { 71,972], 371 U.S.

245, 9L. Bd. 292 (1963).

We must respectfully disagree with the

contrary view of the Engineer Board (R.G.

Beer Corporation, ENG BCA No. 4885, 85-2 BCA

71 18,162; Barter Engineering Corporation, ENG

BCA Nos. 4754, 4791, 85-3 BCA f 18,342).

App. 65

Other cases cited by appellant are either

dictum (e.g., Tera Advanced Services Corp.,

GSBCA No. 7109, 85-2 BCA q 17,941) or clearly

involved disputed claims (e.g., Walber Con-

struction Company, Inc., HUD BCA No. 80-445-

C2, 83-2 BCA 1 16,885).

We conclude that appellant cannot

recover interest under the CDA on the agreed

settlement.

Our rejection of the claim for interest

on the settlement amount also effectively

disposes of appellant's claim for interest on

unpaid interest. Even if we had sustained

the basic interest claim, appellant would not

be entitled to recover interest on interest.

Central Mechanical, Inc., ASBCA No. 29193,

85-2 BCA 4 18,005; Sierracin/Sylmar, ASBCA

No. 31179, 86-1 BCA § 18,688, 3 January 1986.

The appeal is denied.

Dissenting Opinion of Administrative

Judge Duvall

I dissent from the holding of the

majority that the appelllant cannot recover

App. 66

interest on the agreed settlement because of

the requirement in the interim Disputes

clause utilized in the contract that the

claimed amount must be disputed, and because

a Defense Acquisition Regulation prohibited

interest on termination for convenience

settlement amounts. Section 12 of the CDA

requires payment of interest on contractor

claims. The Government cannot contravene the

plain meaning of a statute by enforcing a

contrary regulation or utilizing a Disputes

clause that denies payment of interest by

stretching the meaning of the word claim

beyond the commonly accepted definition

without the clear support of ilegislative

history. Appellant is due interest on the

settled amount from the date of contracting

officer receipt of the letter identifying

appellant's termination for convenience

proposal as a claim under the CDA and trans-

mitting a certification of the claim.

As the Beard noted in J.M.T. Machine,

ASBCA No. 29739, 86-1 BCA § 18,684, disagree-

App. 67

ment exists between and within the tribunals

regarding the requirement for the existence

of an antecedent dispute in order to have a

"claim" under the _ CDA. Racquette River

Construction, Inc., ASBCA No. 26846, 82-1 BCA

"1 15,769; Esprit Corp., Inc. v. United States

[32 CCF 9 73,069}, 6 Cl. Ct. 546 (1984),

aff'd by unpublished decision, Apeal No.

85-996 (Fed. Cir. July 30, 1985); Hoffman

Construction Co. v. United States [32 CCF

Constructors, ASBCA No. 27601, 83-1 BCA

1 16,402; R.G. Beer Corporation, ENG BCA No.

4885, 85-2 BCA § 18,162; Barter Engineering

Corporation, ENG BCA Nos. 4754 and 4791, 85-3

BCA 7 18,342; Vepco, Inc., ASBCA No. 26993,

on motion to dismiss, 82-2 BCA 7 15,824; R.G.

Robbins Co. Inc., ASBCA No. 26521, on motion

to dismiss, 82-1 BCA 4% 15,643; Tera Advanced

Services Corp., GSBCA No. 7109, 85-2 BCA

1 17,941.

The contradictory opinions expressed in

Racquette River, followed by the majority,

App. 68

and R.G. Beer illustrate the conflict over

application of the interim clause and the

meaning of the word claim in the CDA. The

ASBCA held in Racquette River that no CDA

claim exists where the contractor fails to

meet the requirments of the clause, including

the existence of a dispute. In R.G. Beer,

the Corps of Engineers Board took a contrary

position. It held that the definition in the

interim Disputes clause is inoperative because

it conflicts with the final OFPP deectubions

and accompanying clause which omitted the

requirement for the existence of a dispute to

have a claim, except in the case of invoices,

vouchers, and other regular payments under

the contract. The Corps Board concluded that

the interim clause was contrary to the intent

of Congress which was to provide interest on

monies found due on contractor's claims

whether settled or litigated, and to provide

an incentive for early submission of claims.

The majority opinion ignores the

fundamental precept that the starting point

for interpreting a statute is the language

itself. If the statutory language is clear,

it is ordinarily conclusive. See Consumer

Project Safety Comm. v. GTE Sylvania, Inc.

447 U.S. 102, 108 (1980). The word "claim"

as commonly used has a plain meaning. It is

defined as "a demand for something rightfully

or allegedly due; assertion of one's right to

something." Webster's New World Dictionary

(1968 edit.). I have found no other recog-

nized authority on either common or legal

usage applying the requirement of a dispute

to the meaning of the word claim. Under case

law, the conception of a claim against the

Government normally connotes "a demand for

money or for some transfer of public property"

United States v. McNinch, 356 U.S. 595, 599

(1958). However, the word has been given

special meaning in the context of particular

statutes. Cf., John C. Grimberg Co., Inc. v.

United States {30 CCF @% 70,884], 1 FPD 8

App. “70

(CAFC 1983) (Claims Court jurisdiction over

bid protests under the Federal Courts Improve-

ment Act of 1982). In order to amend the

common definition, e.g., require the existence

of an antecedent dispute, the Board would

have to find in the legislative history an

intent on the part of Congress to ive the

term a special meaning in the context of

Government contracting.

The history of Section 12, calling for

payment of interest, offers no clear insight

into the definition of the word "claim" as

used in the CDA. As stated in the Senate

Report, Section 12 executes recommendation 11

of the Commission on Government Procurement,

established by Congress in 1969 to examine

the existing procurement system. That recom-

mendation was to "Pay interest on claims

awarded by administrative and judicial

forums." In making this recommendation, the

successful party, and that these goals are

frustrated if final payment of a judgment

ignored long delays and losses resulting from

a lengthy mandatory review procedure. The

commission determined that without interest,

the contractor would bear additional financial

burdens as a result of such extended delays.

The commission also stated that it believed

payment of interest would serve as additional

inducement to settle claims short of litiga-

tion, noting that:

The prospect of agencies being

required to pay interest on claims

delayed by litigation encourages’ the

agencies to avoid these payments by

settling claims at an early stage and

gives the contractor added bargaining

power with the assurance of full payment

if the claim is eventually paid.

While the report may be read as implying

that the commission intended that interest be

paid on disputed claims, any such intent, if

it existed, was not carried out in the Senate

App. 72

bill which, in final form, was adopted by

both houses. The bill reported out of

committees of the Senate (S3178) stated in

Section 12 that "Interest on amounts found

due contractors on claims shall be paid to

the contractor from the date the claim under

Section 5 [now 6] accrues until payment Pi

the Senate joint committee report on the

legislation noted that the contractor's cost

ef financing required additional changed work

uncompensated by progress payments was a

legitimate business expense and stated that

the interest section of the bill:

provides interest to the contractor

upon a favorable decision on his claim

from the point in time the cause of

action raises [arises] or the additional

costs are incurred, whichever is later,

to the date of payment following either

a final decision of the agency board or

a court of competent jurisdiction, or a

settlement between the contractor and

the Government prior to a decision by

the agency boards or the courts.

(S. Rep. No. 1118, 95th Cong., 2d Sess. 32

(1978)).

When the bill was presented on the

fioor, st was amended to provide for

beginning interest when a claim was filed

with the contracting officer. Sen. Robert

Byrd explained that the change was deemed

necessary to fix the actual starting date of

interest, expressing concern that contractors

might delay submission of claims, preventing

early review and possible disposal of the

claim. The amendment, according to the

Senator, would "serve as an incentive for

contractors to submit claims as soon as they

are identified." (124 Cong. Rec. 36267

(1978)).

This history of the development of the

interest requirement provides no basis for

concluding that Congress intended to equate a

claim with a dispute in the context of payment

of interest. In fact, the evolution of the

App. 74

actual language of Section 12 indicated a

contrary intent. A claim could "accrue",

i.e., the cause of action could arise or

additional costs could be incurred with the

contractor bearing the cost of financing the

additional work, well before a disagreement

between the parties existed. The Senate

report indicates that Congress intended to

compensate contractors for such financing

costs. The last minute change in language to

begin interest from the claim filing date

does not affect this observation.

I also note that the Act itself (Pub. L.

No. 95-563), while not defining the word

claim, does not equate a claim with a dispute

and suggests that they are not synonymcus

terms. Its preamble identified it as an Act

"to provide for the resolution of claims and

disputes relating to Government contracts

awarded by executive agencies." (Emphasis

added) In two paragraphs, Sec 6(a) and

14(i), the CDA uses the word "claim" and

"dispute" separated by the disjunctive "or".

App. 75

oe VT

However, some support can be found in

the legislative history for the proposition

that a dispute must exist in order to have a

claim. The Senate Report, in outlining the

purpose of the Act, stated:

The Contract Disputes Act of 1978

provides a fair, balanced, and compre-

hensive statutory system of legal and

administrative remedies in resolving

Government contract claims. The Act's

provisions help to induce resolution of

more contract disputes by negotiation

prior to litigation; equalize the bar-

gaining power of the parties when a

dispute exists; provide alternate forums

Suitable to handle the different types

of disputes; and insure fair and equit-

able treatment to contractors and Govern-

ment agencies.

(S. Rep. at 1)

The Claims Court considered this

language, and the Procurement Commission's

intent to use interest as an incentive to the

App. 76

Government to timely settle claims to avoid

litigation, together with the established

doctrine that waivers of sovereign immunity

should be strictly construed, in concluding

that a claim must be disputed and that

Congress wanted interest to run against the

Government only when the Government delayed

in resolving disputes. Esprit Corp., supra.**

It is apparent that in conflicting

opinions, Boards and the Claims Court have

erred in attempting to divine a clear con-

gressional mandate with respect to either the

requirement or lack thereof for an antecedent

disagreement in order to have a written re-

**The facts in Esprit distinguish that

case from this appeal. There the contractor

claimed interest from the time of submission

of requests for contract modifications that

were not demands for specified sums of money

and were not addressed to the contracting

officer for decision under the Act. In

affirming the Claims Court decision, the

United States Court of Appeals for the

Federal Circuit in an unpublished opinion

determined that the "dispositive factor" was

that the contractor failed to submit the

types of claims called for in Sec. 6(a) of

the Act. My opinion does not conflict with

this determination.

App. 77

quest for payment constitute a claim, although

in my opinion the previously mentioned con-

gressional intent to compensate contractors

for financing costs and final language of the

bill both weigh in favor of an intent to

award interest on claims irrespective of the

existence of a dispute. Absent a clear

expression of intent in the legislative his-

tory to give the word claim a special meaning

in the context of Government contract law, it

should be given its plain meaning. There is

no reason to create an ambiguity where none

exists concerning the definition of the word

claim as used in the Disputes Act. In the

absence of ambiguity the doctrine of strict

construction of waiver of sovereign immunity

is not applicable here. The Act expressly

provides for payment of interest on claims.

Since the common definition of the word claim

does not contain a requirement for an existing

dispute, the requirement in the temporary

Disputes clause used in this contract that

the request for payment be in dispute in

App. 78

order to constitute a CDA claim contravenes

the plain meaning of the statute.

This defect in the definition of a claim

was removed in the 1980 final OFPP regulation.

I find it incongruous for the majority to

rely on "a time honored presumption in favor

of the validity of an administrative deter-

mination made pursuant to statute" in

applying the temporary Disputes Clause claim

definition to deny interest since that

definition was changed to eliminate the

element of a dispute from the definition in

the final Disputes clause adopted after

solicitation but prior to award of this

contract. I note, as the Engineer Board did

in R.G. Beer, that in 1982 the DAR Council

proposed revisions to the Disputes clause

which are set off in brackets in the language

quoted below:

(c)(1) As used herein, "claim"

means a written demand or assertion by

one of the parties seeking, as a matter

of right, the payment of money, adjust-

App. 79

ment, or interpretation of contract

terms, or other relief, arising under or

relating to this contract [and disputed

by the other party.] However, a written

demand by the Contractor seeking the

payment of money in excess of $50,000 is

not a claim until certified in

accordance with (d) below).

(2) A voucher, invoice, other rou-

tine request for payment [or other con-

tract administration matter such as a

change or settlement proposal] that is

not in dispute when submitted is not a

claim for the purpose of the Act. How-

ever, where such [contractor] submission

is subsequently disputed [by the Con-

tracting Officer] either as to liability

Or amount [or is] not acted upon in a

reasonable time, [the contractor] may

convert [it] to a claim pursuant to the

Act by complying with the submission and

certification requirements of this

clause.

App. 80

38 Federal Contracts Report 695 (Oct. 25,

1982)

The revisions were not adopted. In a

letter to the DAR Council commenting on the

proposals dated 28 January 1983, the OFPP

objected to the changes, stating that they

did not properly implement the Act, and that

"The Act does not require that a claim be

"disputed by the other party’, nor does it

require that a claim be submitted under the

Disputes clause." Government Contracts Re-

ports, CCF, % 92,682. I also find that the

labelling of appellant's proposal as a claim

under the CDA is an implicit demand for a

contracting officer's decision. Luedtke

Engineering Company, ENG BCA No. 4556, 82-2

BCA 9 15,851. The Board erred in applying

the interim Disputes clause in Racquette

River, and that decision should be overruled

to the extent it addressed the issue of

whether the settlement proposal was a claim

for CDA interest purposes under the clause.

App. 81

Since interest is due on this claim

under the Contract Disputes Act, the regula-

tion which prohibits interest on termination

for convenience settlements contravenes the

statute and does not apply. HSQ Technology,

ASBCA 32272, 86-3 BCA @ 19,221; Walber Con-

struction Company, Inc., HUD BCA No. 84-445-

C2, 83-2 BCA 7 16,885.

Further, I conclude that appellant's

termination for convenience proposal did not

fall within the request for payment exception

to the definition of a claim under either the

FAR, as the contracting officer held in his

final decision, or para (b)(ii) of the OFPP's

final regulation. The exceptions to the

definition of a claim are meant to apply to

routine payment requests under the contract

payments clause, such as progress payments,

and not to requests for extraordinary pay-

ments, including termination for convenience

settlement proposals. This view is buttressed

by the above mentioned failure to adopt the

clause changes proposed by the DAR Council in

App. 82

1982. I note in this connection that the

Termination for Convenience clause as well as

standard equitable adjustment clauses call

such requests for payment "claims".

I agree with the majority that appellant

is not entitled to interest on unpaid in-

terest. Such an award would be contrary to

the Board's decision in Central Mechanical,

Inc., ASBCA No. 29193, 85-2 BCA 7 18.005. In

denying such a claim the Board there noted

the general rule that where a statute requires

the payment of interest, only simple interest

can be awarded against the Government. The

Board cited Brookfield Construction Co. v.

United States [29 CCF 7 81,878], 661 F.2d 159,

170 (Ct. Cl. 1981), where the Court of Claims

expressed the view that there is no support

for the award of compound interest rather than

simple interest under the CDA. Appellant has

given us no sound reason for overturning our

decision in Central Mechanical.

App. 83

Relevant Portions of OFPP Interim

Regulations, 44 Fed. Reg. 12519-12524 (1979):

OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

UNIFORM RULES OF PROCEDURE FOR BOARDS OF

CONTRACT APPEALS AND RELATED REGULATIONS

Interim Final Rules

February 26, 1979

AGENCY: Office of Federal Procurement Policy

(OFPP), Office of Management and Budget.

ACTION: Notice of Interim Final Uniform

Rules of Procedure for Boards of Contract

Appeals and related regulations.

SUMMARY: This document sets out the text of

interim rules which boards of contract

appeals must adopt as well as rules which the

Department of Defense, the General Services

Administration, and the National Aeronautics

and Space Administration must incorporate in

their procurement regulations.

On November 1, 1978, the President

signed into law Pub. L. 95-563, the "Contract

Disputes Act of 1978." That Act, among other

things requires changes to the Rules of

App. 84

Procedure currently in use by the Boards of

Contract Appeals of the procuring agencies,

as well as certain other changes in contract

clauses and procurement regulations by

March 1, 1979. Proposed Rules of Procedure

and related regulations were published for

comment in the January 25, 1979, FEDERAL

regulations set forth below incorporate the

changes required by Pub. L. 95-563, and

reflect many of the comments received on the

proposed Rules and regulations. Some of the

changes to the Rules and regulations made as

a result of comments received are significant.

These Rules and regulations are therefore

issued as implementation of Pub. L. 95-563,

effective on March 1, 1979, on an interim

basis, and will automatically become final on

June 1, 1979 unless changed before that time.

This will enable the Office of Federal Pro-

curement Policy to evaluate additional com-

ments on the Interim Rules and regulations.

App. 85

The Rules of Procedure are to be adopted

uniformly by all Boards of Contract Appeals.

x *© & &

s. Payment of Interest on Contractor's

Claims. The Government shall pay interest on

contractor's claims as prescribed in paragraph

(d) of the Disputes Clause.

II. Disputes Clause.

1. Sections 7-103.12 and 7-602-6 of

the Defense Acquisition Regulation and

Sections 1-7.102-12 and 1-7.602-6 of the

Federal Procurement Regulations are amended

to provide as follows:

The Contracting Officer shall insert the

following clause in all contracts unless

exempted by the head of the agency under 41

U.S.C. 603(c).

Disputes. (a) This contract is subject

to the Contract Disputes Act of 1978 (41

U.S.C. 601, et seg.). If a dispute arises

relating to the contract, the contractor may

submit a claim to the Contracting Officer who

shall issue a written decision on the dispute

App. 86

in the manner specified in DAR 1-314 (FPR

1-1.318).

(b) "Claim" means:

(1) a written request submitted to the

Contracting Officer;

(2) for payment of money, adjustment of

contract terms, or other relief;

(3) which is in dispute or remains

unresolved after a reasonable time for its

review and disposition by the Government; and

(4) for which a Contracting Officer's

decision is demanded.

amendments to such requests for payment

exceeding $50,000, or with any amendment

causing the total request in dispute to

exceed $50,000, the Contractor shall certify,

at the time of submission as a claim, as

follows:

I certify that the claim is made in good

faith, that the supporting data are accurate

ond complete to the best of my knowledge and

belief; and that the amount requested

App. 87

EE CY

accurately reflects the contract adjustment

for which the contractor believes the Govern-

ment is liable.

(Contractor's Name)

(Title)

(d) The Government shall pay the

contractor interest:

(1) on the amount found due on claims

submitted under this clause;

(2) at the rates fixed by the Secretary

of the Treasury, under the Renegotiation Act,

Public Law 92-41;

(3) from the date the Contracting Officer

receives the claim, until the Government makes

payment.

(e) The decision of the Contracting

Officer shall be final and conclusive and not

subject to review by any forum, tribunal, or

Government agency unless an appeal or action

is timely commenced within the times specified

by the Contract Disputes Act of 1978.

(f) The Contractor shall proceed dili-

gently with performance of this contract,

pending final resolution of any request for

relief, claim, appeal or action related to

the contract, and comply with any decision of

the Contracting Officer

(End of Clause)

* * * *

Relevant Portions of OFPP Policy Letter

80-3, Final Regulations, 45 Fed. Reg.

31035-31037 (1980):

Final Contract Disputes Regulatory Coverage

and Contract Disputes Clause

AGENCY: Office of Federal Procurement Policy,

Office of Management and Budget.

ACTION: Policy Directive.

SUMMARY: This policy directive sets forth

amendments to be made to the Federal Procure-

ment Regulations (FPR), the Defense Acquisi-

tion Regulations (DAR), and the National

Aeronautics Procurement Regulations (NASAPR)

relating to contract disputes regulatory

coverage and the contract dispute clause.

The final Disputes clause and regulations

also provide technical changes from the in-

terim clause and regulations with regard to

payment of interest, procedures for certifica-

tion of a claim exceeding $50,000, and other

areas. These changes are made to better

reflect the intent of the Contract Disputes

Act.

OFPP Policy Letter 80-3

To the Heads of Executive Departments and

Establishments

Subject: Regulatory Guidance on Pub. L.

95-563, the Contract Disputes Act of 1978

There is a need in Government for

uniformity and consistency in the application

of procurement policy. This directive

provides the uniform policy applicable to the

Contract Disputes Act of 1978. The clauses

and regulatory coverage that follow articulate

this uniform policy. The Defense Acquisition

Regulation (DAR), the Federal Procurement

Regulations (FPR), and the National Aero-

nautics and Space Administration Procurement

Regulations (NASA PR) shall be amended to

conform to this policy. This guidance

supersedes in its entirety the guidelines

previously published in the Federal Register,

Mod

Ke)

i i

on March 7, 1979 (44 FR 12519), and June 14,

1979 (44 FR 24228).

I. Regulatory Coverage-Resolution of Claims

ha Contract Disputes Act of 1978:

(a) General. The Contract Disputes Act

of 1978 (Pub. L. 95-563, 41 U.S.C. 601-613)

establishes procedures and requirements for

asserting and resolving claims by or against

contractors relating to a contract subject to

the Act. In addition, the Act provides for

the payment of interest on contractor claims,

for the certification of contract claims in

excess of $50,000, and a civil penalty for

contractor claims that are fraudulent or

based on a misrepresentation of fact.

(b) Definition of Claim:

(i) As used herein "claim" means a

written demand by one of the contracting

parties seeking, as a legal right, the

payment of money, adjustment or interpretation

of contract terms, or other relief, arising

under or related to the contract.

App. 92

(ii) A voucher, invoice, or request for

payment that is not in dispute when submitted

is not a claim for the purposes of the Act.

However, where such submission is subsequently

not acted upon in a reasonable time, or

disputed either as to liability or amount, it

may be converted to a claim under Section

6(a) of the Act as provided in Section 3,

below.

Mutual Agreement. It is the Government's

policy, consistent with the Act, to try to

resolve all claims by mutual agreement at the

contracting officer's level, without liti-

gation. Implementation of this policy

depends on an open mind with regard to the

matter in dispute and the adequacy of the

information provided in support of the claim

by both the contractor and the Government.

In appropriate circumstances, before issuance

of a contracting officer's decision on a

claim, informal discussions between the par-

ties, to the extent feasible, by individuals

App. 93

who have not participated substantially in

the matter in dispute, can aid in the

resolution of differences by mutual agreement

and should be considered.

aie Initiation of a Claim-Except as

provided in the Act, (a) contractor claims

shall be made in writing and submitted to the

contracting officer for a decision, and (b)

claims by the Government against a contractor

shall be the subject of a contracting officer

decision.

4. Contracting Officer's Decision:

(a) When a claim by or against a

contractor cannot ke satisfied or settled by

agreement and a decision on the claim is

necessary, the Contracting Officer shall:

(i) Review the facts pertinent to the

claim;

(ii) Secure assistance from legal and

other advisors; and

(iii) Coordinate with the contract

administration office or Contracting Office

when appropriate.

eS. & & 2

S. Payment of Interest on Contractor's

Claims-The Government shall pay interest on a

contractor claim on the amount found due and

unpaid, from the date the Contracting Officer

receives the claim until the date payment is

made, at the rates fixed by the Secretary of

the Treasury pursuant to the Renegotiation

Act, Pub. L. 92-41.

6. Disputes Clause:

(a) The Act applies to all disputes with

respect to contracting officer decisions on

matters arising out of or relating to a

contract. Agency Boards of Contract Appeals

(BCA) created under the Act have the same

jurisdiction as the Court of Claims with

respect to a claim that is subject to the

Act. Thus, the statutory agency BCAs

continue to have all of the authority they

possessed before the Act with respect to

App. 95

disputes arising under a contract, as well as

authority to decide disputes relating to a

contract. The Disputes clause set forth in

Part II recognizes the all disputes authority

established by the Act, and states certain

requirements and limitations of the Act for

the guidance of contractors and contracting

agencies. It is not intended to affect the

rights and obligations of the parties as

provided by the Act, nor to constrain the

authority of the statutory agency BCAs in the

handling and deciding of contractor appeals

pursuant to the Act.

xz ©£& 2 @

II. Contract Disputes Clause

The following clause shall be included

in all contracts subject to the contract

Disputes Act unless (1) exempted by the head

of the Agency under 41 U.S.C. 603(c), or (2)

modified in accordance with DAR 1-314 or FPR

1-1.318:

Disputes Clause:

(a) This Contract is subject to the

Contract Disputes Act of 1978 (Pub. L.

85-563).

(b) Except as provided in the Act, all

disputes arising under or relating to this

contract shall be resolved in accordance with

this clause.

(c)(i) As used herein, “claim" means a

written demand or assertion by one of the

parties seeking, as a legal right, the

payment of money, adjustment or interpretation

of contract terms, or other relief, arising

under or relating to this contract.

(ii) A voucher, invoice, or request for

payment that is not in dispute when submitted

is not a claim for the purposes of the Act.

However, where such submission is subsequently

not acted upon in a reasonable time, or

disputed either as to liability or amount, it

may be converted to a claim pursuant to the

Act.

App. 97

(iii) A claim by the contractor shall be

made in writing and submitted to the contract-

ing officer for decision. A claim by the

Government against the contractor shall be

subject to a decision by the Contracting

Officer.

(d) For contractor claims of more than

$50,000, the contractor shall submit with the

claim a certification that the claim is made

in good faith; the supporting data are

accurate and complete to the best of the

contractor's knowledge and belief; and the

amount requested accurately reflects the

contract adjustment for which the contractor

believes the Government is liable. The

certification shall be executed by the

contractor if an individual. When the

contractor is not an individual, the

certification shall be executed by a senior

company official in charge at the

contractor's plant or location involved, or

by an officer or general partner of the

App. 98

contractor having overall responsibility for

the conduct of the contractor's affairs.

(e) For contractor claims of $50,000 or

less, the Contracting Officer must render a

decision within 60 days. For contractor

claims in excess of $50,000, the Contracting

Officer must decide the claim within 60 days

or notify the contractor of the date when the

decision will be made.

(f) The Contracting Officer's decision

shall be final unless the contractor appeals

or files a suit as provided in the Act.

(g) The authority of the Contracting

Officer under the Act does not extend to

claims or disputes which by statute or

regulation other agencies are expressly

authorized to decide.

(h) Interest on the amount found due on

a contractor claim shall be paid from the

date the claim is received by the Contracting

Officer until the date of payment.

(i) Except as the parties may otherwise

agree, pending final resolution of a claim by

App. 99

ooo

the contractor arising under the contract,

the contractor shall proceed diligently with

the performance of the contract in accordance

with the contracting officer's decision.

* * * *

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.