# Petition for Writ of Certiorari — Mayfair Construction Co. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0099%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1988 - **Citation:** 488 U.S. 980 ## Text YVO"-4 2g 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, V. 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. «.. 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, We 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 f = 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 ————_ « ii se 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. . + 3 Fs | 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 4/ 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 % 3 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, Ws 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 aE 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. (c) In the case of disputes requests 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: (c) After receipt of a Notice of 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: (c) Interest. No interest shall be 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 a 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 S 73,279}, 7 ©. €t. S26 4306037" Serecec 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 Ww 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 REGISTER. The Interim final Rules and 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. (c) In the case of disputed requests or 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 TT 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 'O Ke) Ke) ae 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. (c) Government Policy on Settlement by 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. ee 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. * * * * --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0099%3A1. Public record. Not legal advice.