Federal Circuit Court Of Appeals Addresses Definition of “Claim” Under The Contract Disputes Act

Ellett Constr. Co., Inc. v. United States,
93 F.3d 1537, U.S. App. LEXIS, August 26, 1996

A settlement proposal in response to a termination for the convenience of the Government is a non-routine claim subject to the jurisdiction of the courts pursuant to the Contracts Disputes Act, provided that the settlement proposal ripens into a claim after negotiations have reached an impasse.

James M. Ellett Construction Company, Inc. (“Contractor”) entered into a contract for the construction of a logging road with the United States (“Government”). The Government ultimately terminated a part of the contract for its convenience. The Contractor submitted both a “request for equitable adjustment” for changed work and a “settlement proposal” to resolve the termination for convenience. The Federal Circuit Court of Appeals ultimately held that both the request for equitable adjustment and the settlement proposal were “claims” under the Contract Disputes Act (“CDA”) and therefore the Court had jurisdiction to hear the dispute.

To reach its decision, the court relied on its recent opinion in Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995), which addressed the definition of a “claim” under the CDA. The Reflectone Court held that a “non-routine” request for payment did not have to be “in dispute” in order to be considered a “claim” under the CDA. The Reflectone case requires that the non-routine request for payment be (1) a written demand or assertion, (2) seeking as a matter of right, (3) the payment of money in a sum certain.

The Ellett court had little trouble ruling, under the Reflectone decision that the Contractor’s request for equitable adjustment was a claim under the definition announced in Reflectone. The more significant part of the opinion is the analysis of the settlement proposal and whether it constituted a claim under Reflectone. The court found that the termination settlement proposal met all three of the Reflectone requirements and further held that a settlement proposal, by its nature, was “non-routine” as that term is used in Reflectone.

The court went on, however, to state that not every non-routine submission constitutes a claim because, under the CDA, a claim must be submitted to the contracting officer for a decision. The court acknowledged that when a contractor submits a termination settlement proposal, it is for the purpose of negotiation, not for a final decision. Under the terms of the contract’s Termination for Convenience clause, the parties agreed to attempt to reach a settlement in the event of a termination for convenience. The Court held that, “Once the negotiations reached an impasse, the proposal, by the terms of the FAR and the contract, was submitted for decision; it became a claim.” The Court noted that the Contractor, after waiting approximately one year for a decision on its settlement proposal, wrote the contracting officer and demanded that it accept its proposal. The court found that the negotiations had reached an impasse and that the settlement proposal had ripened into a claim.

 

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