When contractor claims against the government don’t involve money

Usually, contractors protest to the government over matters related to money. But there's a long history of non-monetary damage, usually related to interpretati...

Usually, contractors protest to the government over matters related to money. But there’s a long history of non-monetary damage, usually related to interpretation of a contract. To hear more about a recent case that has affirmed this line of claim, Federal Drive with Tom Temin spoke with Haynes Boone procurement attorney Dan Ramish.

Interview Transcript:

Tom Temin Dan, tell us about this case, who protested and what did they protest over and what happened.

Dan Ramish So, Tom, this case was a contract disputes act, non-monetary claim by a company called J &J Maintenance. And J & J Maintenance brought a non-monetary claim relating to how costs were reimbursed under its contract. It had a time and materials contract and under a time materials contract, the materials part is reimbursed at cost, and the government and the contractor disagreed over how to calculate cost. J & J said its cost was its subcontractors price plus markup, and the government took the position that only the cost to the subcontractor was reimbursable under the contract. And so there was effectively a contract interpretation dispute. But as part of this dispute, the government took the position that this was not a valid, non-monetary claim that you could put a number on this. And that question was posed by a federal circuit decision in 2018. You mentioned in our intro here that non-monetary claims have a long history at both the Boards of Contract Appeals and at the Court of Federal Claims. And that’s true. Actually. The Boards of Contract Appeals heard Nonmonetary claims before the Contract Disputes Act was even enacted in 1978. The Court of Federal Claims gained Nonmonetary claim jurisdiction in the nineties with amendments to the Tucker Act. So there was a long history at both tribunals of hearing claims that did not involve requests from the government for money.

Tom Temin But it sounds like this did involve a request for money because it was the basis for cost reimbursement.

Dan Ramish Well, so there’s a fine point here, and this was the government’s argument and was also the argument in the 2018 federal circuit decision that changed this area of the law. So the issue in securiforce was a convenience termination. The contractor brought a non-monetary claim saying that this convenience termination was a breach of contract, and the Federal Circuit said you’re styling your claim as a non-monetary claim. But in fact, ultimately the only significant consequence of your claim will be getting money from the government. And the Federal Circuit said, Well, yes, this will be a second proceeding after we determine whether there’s a breach or not. You would only get money damages by bringing a second claim. Still, at the end of the day, this is reducible to money and there are no non-monetary stakes here.

Tom Temin Right. Because every contract has consideration, which is money. Otherwise, it’s not a contract.

Dan Ramish This is part of what’s complicated here, Tom, that I mean. Of course, at the end of the day, claims involve money. The federal Circuit, though, in securiforce, raised the question of whether there were any claims. Still, that did not just involve money, but involved other significant consequences to contractors. And J & J addressed this question squarely. J & J said, hey, yes, there are costs involved here, but we’ll avoid incurring additional costs depending on the outcome of the case, and we’ll change our performance. So one of its grounds for non-monetary claim was submission of supply house invoices or or special invoices that showed the subcontractors costs. And J & J said, Well, if you decide in our favor, we’ve been providing these invoices under protest, we’ll stop performing that task. And not performing a task is a significant consequence independent of money damages from the government and similarly avoiding incurring costs. They said, Well, if we can’t recover markup on subcontractors, maybe we’ll self perform, maybe we’ll directly purchase the materials instead of having the subs purchase them so that we can get markup on it.

Tom Temin All right. What was the decision in this case?

Dan Ramish So the board agreed with the contractor that the ability to avoid incurring costs and to avoid performing a contractual task were under the securiforce decision and the test in securiforce significant consequences that supported a non-monetary claim.

Tom Temin We’re speaking with Dan Ramish. He’s a procurement attorney with Haynes Boone. And tell us exactly why this is such an important case.

Dan Ramish The reason this is important, the distinction between the monetary and non-monetary claim is that there are jurisdictional requirements for a monetary claim. So if you’re stating a monetary claim, it has to be stated in that sum certain it has to have a specific amount that you’re demanding. And it also requires for claims over $100,000 that the contractor certify the claim. And so in this case, J & J had not stated the sum certain in its claim, and it also had not certified, I think actually wasn’t required, a certified was below the threshold. But in any event, the decision on non-monetary claims affects the jurisdictional requirements. And the board said here, if you don’t have to perform a task or if you can avoid incurring costs, then you have a valid, non-monetary claim that doesn’t need to meet the monetary claim requirements.

Tom Temin Okay, so all of this detail means what then? What’s the significance of this case? That non-monetary is a real thing that can be sued in these different protest venues and that contractors should be able to do that? Right.

Dan Ramish The reason that non-monetary claims jurisdiction is important is that when you have a valid, non-monetary claim, it doesn’t need to meet the jurisdictional requirements for monetary claims. So monetary claims need to be stated in sum-certain. And if the claim amount is over $100,000, the contractor is required to certify the claim. So here, if the board said if the contractor can avoid performance of a contractual task or can avoid incurring costs, then those are significant consequences that are not monetary, that support a non-monetary claim and therefore you don’t have to state it sum-certain. And if it’s over $100,000, you don’t have to certify.

Tom Temin But jurisdiction, isn’t that where you take the claim to whether it’s federal district court or to the boards of contract appeals?

Dan Ramish Yes. So the argument over non-monetary versus monetary claims is whether the boards and the court of federal claims have jurisdiction to decide non-monetary claims at all or appeals of non-monetary claims. And the J & J maintenance decision demonstrates that it’s still possible for contractors to bring non-monetary claims at the boards and at the court of federal claims, even under the demanding securiforce test. And that’s good news for both contractors and the government like because where non-monetary claims are asserted in appropriate circumstances, they have the potential to resolve disputes early on between the contractor and the government before there’s major disruption or expense, and that can prevent the dispute from becoming a larger problem.

Tom Temin Right. It seems like you should look at all of those clauses that might potentially cause money issues. Way to the left of finding out somewhere during the performance of the contract is, wait a minute, we don’t agree on what I’m submitting to you. It seems like this should be established at the time of the award or even at the time of negotiations before the award so that you don’t have these non-monetary claims even come up in the first place.

Dan Ramish Yes, it is preferable, certainly for contractors who have to continue performing it during the pendency of a dispute to get some kind of resolution, sometimes in the form of a non-monetary claim so that they can alter their performance accordingly based on the judgment.

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