Federal Circuit Court of Appeals Reverses ASBCA Holding That ROICC Was Authorized to Commit Government To Compensable Contract Changes

Donald C. Winter v. CATH-DR/BALTI JOINT VENTURE
2007 U.S. App. Lexis 19565 (Fed. Cir., August 17, 2007)

The United States Court of Appeals for the Federal Circuit (“CAFC”) affirmed in part, reversed in part, and vacated and remanded in part the United States Armed Services Board of Contract Appeals (“ASBCA”) decision that CATH-dr/Balti Joint Venture (“CATH-Balti”) was entitled to an equitable adjust for contract modifications, issued by the Resident Officer in Charge of Contracts (“ROICC”), that called for work not covered under its contract with the United States Navy (“Navy”). The primary basis for reversal was the unambiguous language of the Federal Acquisition Regulation (“FAR”), e.g., 48 C.F.R. § 1.601(a) and 48 C.F.R. § 43.102, Defense Federal Acquisition Regulation Supplement (“DFARS”), 48 C.F.R. § 201.602-2, and FAR Clause 48 C.F.R. § 52.243-4 (Changes Clause), DFARS Clause 48 C.F.R. § 52. 201-7000 (Contracting Officer’s Representative), and Naval Facilities Engineering Command (“NAVFAC”), 5252.201-9300 (Contracting Officer Authority) and 5252.242-9300 (Government Representatives), which were incorporated into the contract and clearly indicated that the ROICC did not have the authority to change the scope of work or authorize compensable changes.

On September 29, 1998, CATH-Balti was award a contract for the historical renovation of a dental research facility at the Great Lakes Naval Training Center, Illinois. Before commencing performance a preconstruction conference was held. During the preconstruction conference the Navy explained that the ROICC, who was also the project manager, would administer the contract and all correspondence should be addressed to the attention of ROICC. Further, the Navy informed CATH-Balti that no work was to “be performed beyond the contract requirements without written notification from the ROICC” and that CATH-Balti should submit a request for equitable adjustment to the ROICC if it felt that a contract modification was required. Where the ROICC determined there was no entitlement, or the CATH-Balti did not agree with the proposed entitlement, CATH-Balti was directed to request a Contracting Officer’s Final Decision, using the procedures outlined in the Disputes Clause, 48 C.F.R. § 52.233-1, including continuing performance until the issuance of a final decision. Shortly after commencing performance the Navy sent CATH-Balti a letter that reassigned the day-to-day administration of the contract to Engineer in Charge (“EIC”). The Navy also directed CATH-Balti to send all correspondence regarding the contract to the EIC.

Throughout performance CATH-Balti submitted numerous Requests for Information (“RFI”) requesting, among other things, clarification of the contract requirements and gave notice of site conditions that may require deviation from the contract specifications. In each case, the ROICC signed the response to the RFI. When the renovation work was substantially complete CATH-Balti submitted a cumulative request for a contract modification to the EIC. After the ROICC’s failed to respond to CATH-Balti’s request it submitted a certified request for a final decision to the Contracting Officer. The Contracting Officer responded finding entitlement to an equitable adjustment for 12 claims. In this decision, the Contracting Officer requested that CATH-Balti and the ROICC negotiate the amount of entitlement for four of these claims, one of which was based on differing site conditions, and would not issue a final decision prior to the outcome of these negations. CATH-Balti made several attempts to meet with the ROICC, but no meeting ever occurred and CATH-Balti appealed to the ASBCA. During the early stages of this action the Contracting Officer issued his “Second Final Decision” denying all of CATH-Balti’s claims. Thus, forcing the ASBCA to consider entitlement and damages for each claim anew.

CATH-Balti argued that the ROICC had the authority to bind the Navy and thus it was entitled to the requested equitable adjustments or, in the alternative, the Contracting Officer ratified the ROICC’s modifications when it responded to CATH-Balti’s certified request. In response, the Navy argued at the ASBCA that CATH-Balti was not entitled to an equitable adjustment because the Contracting Officer did not direct the work set forth in the claims and that under the contract only the Contracting Officer has the authority to change the scope of work or authorize compensable changes. The ASBCA held that the ROICC had the authority to commit the government to compensable contract changes. As the ASBCA found the ROICC had the authority to issue compensable change it did not address the issue of whether the Contracting Officer ratified the ROICC’s modifications.

The Navy appealed this decision. On appeal, the CAFC held that neither the ROICC nor the EIC had actual authority to bind the government, be it implied or expressed. The CAFC noted that the contract clearly did not and could not, pointing to 48 C.F.R. § 201.602-2, and FAR Clause 48 C.F.R. § 52.243-4, grant this authority as the Contracting Officer can not delegate its authority to make any commitment or changes that affect the price, quality, quantity, delivery or other terms and conditions of a contract to its representative. Further, the CAFC found that the ability to bind the Government was not an integral part of the duties assigned to either the ROICC or the EIC, thus the authority to make compensable changes to the contract was not implied. The CAFC, however, affirmed with regard to CATH-Balti’s claims, based on differing site conditions, and remanded the issue of whether the Contracting Officer’s response to Cath-Balti’s certified request constituted ratification of the ROICC’s action. Judge Prost dissented as to the ratification issue as he found that the Contracting Officer’s response to Cath-Balti’s certified request did not constitute ratification because, among other things, the Contracting Officer did not adopt ROICC’s prior actions, but merely sought that the ROICC and CATH-Balti meet to determine if an adjustment would be appropriate.

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