As previously reported here, the Court of Federal Claims and the Armed Services Board of Contract Appeals have held that the 6-year statute of limitations for bringing a claim applies equally to both the Government and its contractors. In Sikorsky Aircraft Corp. v. United States, Nos. 09-844C & 10-741C (Fed. Cl. July 18, 2012), the Court, once again, applied the Contract Disputes Act (CDA) statute of limitations to a Government claim. By regulation, the time limit begins to run when the claim has accrued, which means the time when the party knew or should have known all of the facts surrounding the claim. FAR 33.201. The Court held that the Government’s internal administrative procedures do not delay the accrual of the Government’s claim – the Government, just like a contractor, only has 6 years from when it knew or should have known the facts within which to bring its claim.
At issue in this case was the Government’s claim that the contractor owed $80 million dollars for violating the Cost Accounting Standards (CAS). The Government brought its claim in 2008, but the contractor argued the claim accrued in 1999 when the contractor revised its Disclosure Statement to reveal its cost accounting practices. The Government argued that the claim did not accrue until after the contractually-required dispute resolution procedures were complete. In this case, the contract contained FAR 52.230-6, which set forth procedures for reviewing a contractor’s cost accounting practices. These procedures began with the contractor’s submission of a disclosure statement. Then, the Government audited the disclosure statement for adequacy and compliance with the CAS and issues a determination of compliance or noncompliance. If noncompliance is material, the contractor must describe changes to the accounting practices to remedy the noncompliance and provide an estimate of the cost impact on the Government as a result of the noncompliance. The Government and contractor will negotiate the cost impact on the Government, and if an agreement is not reached, the Contracting Officer will issue a final decision.
The Government relied on a 1967 Supreme Court opinion to argue that the Contracting Officer had to follow the procedures set forth under FAR 52.230-6 before the contract would “permit assertion of the claim.” In this case, the Contracting Officer did not issue his final decision regarding the cost impact estimate until 2008, thus the Government argued that the claim did not accrue until that time. The Court rejected this argument finding that the CDA, passed in 1978, supersedes the Supreme Court opinion. The Court stated, “[T]he CDA gives the government complete control over when it may assert a claim. The government, just like the contractor, is not required to wait on a board of contract appeals. . . . And while the government may have its own internal review procedures that it must follow prior to submitting a claim, nothing in the CDA mandates such procedures, nor can such procedures delay accrual of a claim.” Ultimately, the Court found that there was a factual dispute as to when the Government knew or should have known the facts surrounding this claim so the court did not grant the Government’s motion for summary judgment. However, the Court determined that the Government’s internal procedures for reviewing a contractor’s compliance with the CAS and negotiating the cost impact do not delay when the claim accrues.
The case serves as a reminder that contractors should be vigilant concerning when both their own claims and the Government’s claims accrue. If the Government initiates administrative procedures in an attempt to resolve a claim, this does not extend either party’s 6-year time limit for asserting their rights under the CDA. Additionally, increasing delays in DCAA audits may result in untimely Government claims. The Court has demonstrated that it will strictly enforce this limit against both parties to bar untimely claims.
Katie Calogero is the attorney responsible for the content of this article.