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The Rules cover such requirements as what should be included in the contractor's letter of appeal to the board, decision of the appeal with or without a hearing, the taking of depositions, and, if hearings are to be held, where and how they are to be conducted. The Rules should be carefully studied before an appeal is attempted, particularly if the contractor is prosecuting his own claim."

Of particular interest to the small business contractor is the optional accelerated procedure provided by some of the boards. In the case of the Armed Services Board of Contract Appeals, if the appeal involves $25,000 or less, the contractor may elect an accelerated procedure which causes the case to be moved ahead on the board's docket, and the pleadings and hearing can be waived. The Board will attempt to issue its written decision within 30 days. If the contested amount is $5,000 or less, the Board member may render an oral decision at the conclusion of a hearing. The small business contractor seeking an early redress of his claim is greatly benefited by the optional procedure. The Atomic Energy Commission has stated to this Committee that they routinely suggest to a small contractor that he elect the accelerated procedure when he has not already done so.8

The importance of this accelerated procedure is emphasized by the fact that, on the average, it takes a year from the time the case is docketed until the decision is rendered. During this time, the contractor must bear the financial burden of his claim. Recently there has been some mitigation of this burden through the allowance of interest on the claimed amount. Pursuant to the "Payment of Interest of Contractors' Claims" clause, interest, as established by the Secretary of the Treasury, is applicable to the amount ultimately found due the contractor from the date the notice of appeal from the contracting officer's decision is sent by the contractor until the date the dispute is resolved either by a court award or issuance of a supplemental agreement.


The site of the hearing of the boards is usually in Washington, D.C. at or near the headquarters of the agency. Most of the Rules of the various boards provide for the hearings to be held outside of Washington if requested, and it would benefit the parties. As a result, it is not uncommon for hearings to be conducted elsewhere, and if the claimant is a small business, the agencies have indicated a greater willingness to grant the request. Claimants cannot count on this accommodation being made in every case. Budgetary restraints and other considerations may cause the denial of a request for a field site hearing.1



The contractor may seek the assistance of a Federal court by two means. First, he might be able to appeal the decision of the board of

6 It may be of interest that these boards have reported to the Committee that many appeals are prosecuted by the small business contractor without the direct representation of an attorney. The board member assigned to hear the case will to a limited extent assist the contractor who is unrepresented by counsel. 7U.S. Department of Defense, Rules of the Armed Services Board of Contract Appeals, 1 Sept. 1973. Rule 12.

The optional accelerated procedure has only recently been enlarged to be applicable to claims of between $5,000 and $25,000. The enormous effect of this change in jurisdiction on the number of appeals is seen in the table in Appendix B, p. 12.

8 Letter from Paul H. Gantt, Chairman, Atomic Energy Board of Contract Appeals, July 10, 1972. ASPR 7-104.82, as found in Defense Piocruement Circular No. 100, May 25, 1972; NAŠA PRD 72-13 Commerce Clearing House, Government Contracts Reporter.

79.171 at 75,223-11; FPR 1-1.322, 37 Fed. Reg. 15152 (1972).

10 The Commission on Government Procurement has recommended the establishment of a "regional small claims boards system" for disputes involving $25,000 or less. This would assure the contractor a more convenient site for appealing his claim and possibly a more informal, expeditious proceeding. Report of the Commission on Government Procurement, op. cit., vol. IV, p. 22.


contract appeals. Appeal of a board decision is limited by the Wunderlich Act, which provides that the decision of a board of contract appeals is final with respect to a question of fact and cannot be appealed to a Federal court unless that decision is "fraudulent or capricious or arbitrary or so grossly erroneous as necessary to imply bad faith, or is not supported by substantial evidence." Questions of law, if decided by the board, may be appealed without the limiting factors applicable to questions of fact.

The second means of entering the Federal court is by asserting a claim not based on a clause in the contract. This would usually be an alleged act of the Government which is claimed to be a breach of the contract. As an example, it could be claimed that the Government issued a change in the requirements of the contract not permitted by the Changes clause. Since this would not be a claim "arising under this contract," the contractor is not obligated to submit it to the contracting officer for a decision. Instead, the contractor could proceed directly to the court to obtain reimbursement for the additional expenses made necessary by this change.

Whether the contractor is appealing a decision of a board of contract appeals or is proceeding directly to court, if the claimed amount is $10,000 or less, he has a choice of courts. He may file suit in the nearest Federal district court or in the U.S. Court of Člaims located in Washington, D.C.12 For all claims in excess of $10,000, the contractor may only look to the Court of Claims.

Appeal to a court naturally requires the assistance of an attorney. It can be a lengthy and costly process for the contractor. Thus the small businessman is not usually interested in pursuing his claim to this level unless the amount is very substantial.

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11 41 U.S.C. § 321 (1970).

12 28 U.S.C. 1491: Jurisdiction of the Court of Claims. 28 U.S.C. 1346; Jurisdiction of the U.S. District Courts with respect to contract claims against the United States (Tucker Act).


Under the Changes clause, the claim for adjustment of the contract price must be asserted within a period which is usually thirty days from the date of receipt of the change order. The contracting officer is authorized to receive and consider claims submitted after the period has run if he finds the facts justify the extension. Similar time limitations on submitting a claim are found in some other clauses.

After the contracting officer has rendered his final decision on a claim, the Disputes clause provides that the contractor can appeal the decision within a designated number of days from its receipt.

Contract claims in general must be brought to a Federal court within six years of the time they accrue. If a board decision has been rendered, the time runs from the date of the decision.13 When an administrative remedy is not available, it may be more difficult to identify when the period of limitation begins.


Appeal of Board of Contract Appeals Decisions

Until recently, either the Government or the contractor could appeal a board of contract appeals decision to the Comptroller General for his review and holding. The Government's right of appeal has been largely withdrawn by a recent decision of the Supreme Court. On April 24, 1972, the U.S. Supreme Court held that awards obtained by contractors from contract appeals boards constitute settlements between the parties that bind the Government.14 Payment of these awards cannot be blocked by the General Accounting Office or challenged by the Justice Department unless there is a showing of fraud or bad faith.

Likewise, the Comptroller General has determined that he will not entertain similar appeals by the contractor absent a showing of fraud or bad faith.15 This is unfortunate for the small businessman who would like to save the expense in time and money of appealing to the Court of Claims or the U.S. District Court.

Review of Claims

The Comptroller General, aside from the restricted appeal review, does have authority to review breach of contract claims of contractors concurrently with the courts.16

In deciding whether he should file a claim with the General Accounting Office or institute suit in a Federal court, a contractor should consider several factors.

First, the General Accounting Office acts upon the written record rather than upon the basis of formal hearings. For that reason, claims may sometimes be settled more promptly than in the courts.

Second, an unfavorable decision by the General Accounting Office does not preclude consideration of the same claim by the courts. However, the General Accounting Office will not consider a claim which has been passed upon by a court of competent jurisdiction.

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Third, suits usually must be filed in the courts within 6 years after the cause of action arises;17 but claims may be filed in the General Accounting Office within 10 years from such time.18

Fourth, when the claim involves primarily a question of fact on which the administrative agency and the claimant are in disagreement, the General Accounting Office generally accepts the conclusion of the administrative agency, in the absence of a clear showing to the contrary.

As a practical matter, the Comptroller General does not review many claims of this type; nevertheless, circumstances may be such that it would be beneficial, particularly to the small contractor, to avail himself of this forum.

Liquidated Damages

Special mention should be made of the authority of the Comptroller General in the remission of liquidated damages. By statutory authority, the Comptroller General is authorized to remit liquidated damage in circumstances of unfairness.19 It has been suggested that, where applicable and appropriate, relief is promoted by couching the application in terms of one or more of the following five factors: the contractor should stress any evidence of legal excusability of performance; the cause of the delay was beyond the contractor's actual physical control; the contractor expended extra effort either in attempting to prevent the delay or performed on time in spite of delaying influences; the cost of the delay to the Government was trivial by comparison with the amount of liquidated damages assessed for the delay; and finally, if applicable, the Government failed to act in an appropriate manner, and the contractor in reliance on the Government was prejudiced.20

An application for remission of liquidated damages is made simply by writing to the Comptroller General or the procuring agency. The Comptroller General will, in turn, request a review and recommendation by the appropriate procuring agency head. The recommendation is then referred to the Comptroller General for his determination. This process of application for relief is independent of other administrative or judicial rights otherwise described in this paper.


Aside from the disputes process or suit in a Federal court, the contractor can also file for relief with the procuring agency under Public Law 85-804. This law provides that the President may authorize any department or agency "which exercises functions in connection with the national defense" to contract or amend contracts or make advance payments irrespective of other laws pertaining to these matters, if the action would facilitate the national defense.21 Besides the Department of Defense, Executive Order 10789 of November 14, 1958, delegates authority for extraordinary contractual relief to the Department of Treasury, Department of Interior, Department of Agriculture, Department of Commerce, Atomic Energy Commission, General Services Administration, Office of Civil and Defense Mobilization, Na

17 28 U.S.C. 2501 (1970).

18 31 U.S.C. 71a (1970).

19 10 U.S.C. 2312 (1970); 41_U.S.C. 256a (1970).

20 John E. Preston, "The Role of the Comptroller General in Remitting Liquidated Damages," Federal Bar Journal (Spring 1971), 144-154.

21 50 U.S.C. 1431 (1970).

tional Aeronautics and Space Administration, Federal Aviation Agency, Tennessee Valley Authority, and Government Printing Office. There are three main types of relief provided: amendments of a contract without consideration, amendments correcting mistakes and ambiguities, and formalization of informal commitments.

With regard to amendments without consideration, normally a contracting officer cannot amend the contract without receiving a benefit for the Government such as a reduction in the contract price. This is consistent with basic legal principle. Nevertheless, where there is an actual or threatened loss sustained and the continued operation of the contractor is essential to the national defense, relief is authorized to the extent it will avoid the impairment. The loss may be occasioned by the Government's committing some unfair act which has cost the contractor extra money in the performanance of the contract. A description of how to present this type of claim is found in the Armed Services Procurement Regulation at 17-207 and the Federal Procurement Regulations at § 1-17.207.

A second cause for relief would be evidence of a mutual mistake by both the contractor and the Government. This is not usually a mere underestimation of the work or costs when bidding on the solicitation. The contractor is required to describe the precise error explaining when it was discovered and when the contracting officer was notified.

Finally, relief is given by the formalization of informal agreements. This is a ratification or legal adoption of an unauthorized act of a Government agent which led the contractor to believe that he had a contract with the Government and incurred expenses. A written authorization by the contracting officer is the only basis for a valid Government contract; thus the informal commitment must be formalized by a written document. Furthermore, it must be shown that at the time the commitment was made, it was impracticable to use normal procurement procedures.22

Application for relief is made to a contract adjustment board. Each board consists of a chairman and several members. The contractor presents his case in the form of a letter to the board accompanied by all documentary evidence. The board issues a memorandum of decision either approving or denying the request.


The small businessman who contracts to provide goods or services with a company having a Government contract may find that his contract contains many of the same clauses as those in the contract between the Government and the prime contractor. Based upon the monetary amount of the subcontract, many of these clauses are required in the subcontract. These are commonly known as "flow-down provisions." Nevertheless, even though the subcontractor may have a contract having many of the required Government clauses, he does not generally have access to the disputes mechanism described above. That is, he cannot present a claim directly to a contracting officer for resolution and appeal the decision to a board of contract appeals.2

22 50 U.S.C. § 1432(f) (1970).


23 The Atomic Energy Commission in 10 C.F.R.,Chap. 1, Part 3, Subpart A, § 3.1(a)(i) (ii) provides for its Board to hear disputes brought by subcontractors where there is a cost-type prime contract and a Disputes clause has been included in the subcontract.

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