Jump to content
The Wifcon Forums and Blogs

joel hoffman

Request for Equitable Adjustment, Continued

Recommended Posts

The thread at this location is closed for further comment:

http://www.wifcon.com/discussion/index.php?/topic/625-request-for-equitable-adjustment-rea/

While I was browsing that thread this morning.  I remembered that formerfed and others mentioned that some agencies drag their feet in resolving REA's (and unpriced changes, too).  Apparently, some take little or no action until at, near, or after contract performance.  Some agencies then include them all in "wrap-up" modifications.. 

The industry is now planning to fight back with proposed legislation. I didn't see a description in the WIFCON "Contracting Bills in Current Session" page at http://www.wifcon.com/todayslegislation.htm yet.   However, a coalition of design and construction industry groups has recently been working with some congressional members and their staffs to work up a proposed bill that would require government agencies to notify Congress of their policies and typical timeframes for resolving REA's and unpriced changes.  The proposal would also require some sort of interim payments by as much as 50% of the REA or unpriced change, while the Agency has the action to resolve.

 

Share this post


Link to post
Share on other sites

If I get input into the bill, can I request that the full value of a UCA definitization proposal be paid, on an interim basis, if the agency has failed to definitize within 180 days of receiving it? (Note that's not 180 days after the UCA was awarded, as required by statute. Nobody seems to pay attention to that. It's 180 days after the contractor submits the definitization proposal.)

From this side of the table, it's hard to understand the government's failure to take action to definitize once there is a proposal and a proposed price. I've had a client or two that has had to wait many months to definitize; meanwhile, they are not permitted to bill 100% of their incurred costs. The impact to cash flow can be crippling.

Share this post


Link to post
Share on other sites

help:

Just curious: Rather than put up with government foot-dragging, why don't contractors submit claims, which trigger a statutory deadline (of a sort)?

Share this post


Link to post
Share on other sites

Vern, although your question was directed toward H2H, I work with several contractors in regard to government contracts.  Most of those contractors are small business concerns.  Based on my experience with these small business concerns, there are several reasons why they do not file a claim.

First, in many cases, they feel that if they file a claim it will tick of the contracting officer.  If they do, they not get future work from the government or the government will make their lives miserable in regard to ongoing contracts.  In this regard, on several occasions, the government has tried to bully the contractor out of filing a claim.  I had one instance where the government actually threatened to report the contractor for fraud if it filed a claim.

Next, they erroneously believe that they will need to hire an attorney to file a claim.  The cost to do so is a big deterrent to filing a claim.  Also, finding an attorney to take their case is a problem since many small businesses cannot afford to pay the hourly rate that attorneys skilled in government contract law charge.

Another issue is a lack of knowledge as to what is required to file a claim.  In some instances, these companies do not even know that they can file a claim.  Obviously, the level of sophistication of these contractors is not high.

In summary, in my experience, contractors act in this way out of fear and a lack of knowledge.

 

Share this post


Link to post
Share on other sites

Retreadfed nailed it. Oftentimes the contractors are in protracted negotiations and they hope they can get a resolution. They tend to believe that filing a claim is the nuclear option.

Share this post


Link to post
Share on other sites

The last time PepeTheFrog Googled "REA vs claim," the first result is an article from this website:

http://lmgtfy.com/?q=REA+vs+claim

The second result is also from this website-- from the great Vern Edwards!

Both were good reads and handy references for the layman.

In the first article, the author states that some federal lawyers "advise the Contracting Officer to ignore or deny most REAs to force the contractor to submit a CDA claim to obtain relief." PepeTheFrog hopes this is not widespread, but has regretfully seen this more than once with clients.

Doesn't that practice seem to fly in the face of FAR 1.102-2(c): "Conduct business with integrity, fairness, and openness"?

Has anyone else seen this type of "stonewall" from a federal agency, forcing the contractor to submit a claim under the Contract Disputes Act?

Also, a response deadline for an REA seems reasonable and analogous to the response deadline for a claim, but what is the next step? For a claim, lack of response means it's a "deemed denial" and you can appeal to the Court of Federal Claims. When your REA is ignored, you convert it into a claim for, as some have said, the "nuclear option."

What would be the consequence of the federal agency not responding to the REA in a timely manner?

Share this post


Link to post
Share on other sites

I have never heard of a government lawyer telling a CO to ignore an an REA in order to force a claim submittal.

Here is my more or less standard experience with REAs:

So the CO is sitting in his office when the REA comes in by mail or FedEx. The CO has a lot to do, but he looks at the REA, vaguely remembers the change order, sends it off to the COR for “technical evaluation,” and doesn’t think about it again until two months later, when the contractor’s rep calls and asks about its status. He tells the rep he’ll call him back. Later he’s chatting with the COR when he remembers the call from the rep and asks, “Where are you on the tech eval?” The COR lies and says its almost done and then offers one of the three standard COR positions on REAs:

(1) “We don’t owe him a nickel.”

(2) “We owe him what he wants.” or

(3) “We owe him something, but not as much as he’s asking for.”

Great, thinks the CO. Very helpful. I don’t believe (1) or (2), and (3) doesn’t tell me anything I need to know.

Eventually, and after a few more calls (or threats), the COR delivers either a less than half-baked memo or an unintelligible package two inches thick recommending something or other. The CO reads the thing, ambles down to the COR’s office, asks, “Can we talk about this?” and proceeds to try to figure something out. He then calls the contractor’s rep and asks for more “data.” By now, a good three to four months have passed. All the while the CO continues to be occupied with other work that is more highly prioritized by the program manager.

Eventually there begin a series of phone calls between the CO and the COR and the contractor’s rep, who is supported by an engineer or two. (If the contractor is in a pleasant or fun location, the CO and the COR may decided on face-to-face, in-depth "fact finding" at the contractor's facility.)

The CO is clueless about what the “right” amount is. He just wants to clear the thing without being taken for a ride, either by the COR or the contractor. But, eventually, the CO offers some amount. If it’s reasonably close and if the contractor isn’t going broke, the contractor might take it. If its unreasonable, or if the contractor has already lost a bundle and wants more, the contractor might reject it.

If an ACO, DCAA, and indirect cost rates or CAS compliance are involved, multiply the above by several factors of complexity, obstinacy, and unpleasantness, especially if the ACO and the contractor are in the middle of negotiating FPRAs or fighting over  CAS interpretation and application.

And so it goes until, as is usually the case, they ultimately settle, or, as is relatively rare, the contractor submits a certified claim and the CO has to go see the lawyer with the COR in tow.

After meeting with them, the lawyer looks at the package, looks in a mirror, and asks herself: Why didn’t I take that job prosecuting litterbugs?

That's as I remember it, more or less. But it's been awhile. Maybe things have changed.

Share this post


Link to post
Share on other sites

Incompetence reigns. And those KO's want to hire contractors using performance capability evaluation criteria.

Not necessarily related but you mentioned that you never heard of government lawyers advising KOs to delay acting on REAs to force claims. I was told numerous times over the years that the Air Force liked to force claims so that the Judgement Fund would be used to pay the contractor.  The AF PMs even asked us why we didn't  consider such an approach. We would reserve funds to cover possible liability for REAs and claims. Therefore, those funds weren't available to the AF customer for user requested changes and desired enhancements  

Somebody was obviously teaching them the practice of using up as much funding as possible then let the Judgement Fund pay the claims costs. It was routine for AF MILCON projects to be awarded at prices far exceeding the Programmed Amount...

in my 12 or so years experience as construction agent for the AF, that Service displayed Ferrari desires with only Yugo budgets. 

Share this post


Link to post
Share on other sites

Vern, let me add a couple more factors that sometimes come into play when a contracting officer receives an REA. 

The CO requested and received an audit report from DCAA on the REA.  The audit report questioned many areas of cost on questionable grounds that you do not feel are supportable.  However, your agency has just received an IG report stating that your agency does not do enough to support DCAA audit findings.  You are also aware of your agency's policy of requiring you to justify any rejection of a DCAA audit finding.  Finally, you have just read the DCAA memorandum on reporting contracting officers who do not follow DCAA audit recommendations to the agency IG.

The REA is in regard to a contract supporting a high visibility program that has congressional interest.  The HCA has just received a letter from the Chairman of your agency's oversight committee asking questions about cost control on the program and voicing concern over cost overruns.  The Chairman said the committee was concerned about contractor's buying in to the program then trying to recover their losses through contract modifications.  The Chairman has requested that the HCA and PM testify before the committee on this subject to two weeks.

Another contractor that supports the same program has just been found liable under the False Claims Act for submitting false claims to the government.  Because of the visibility of the program, this determination of liability has made national news and focused attention on all contractors supporting the program.

If any of these scenarios is present, the CO has to make the decision whether to ignore the external factors and only look at the merits of the REA or to become a bureaucrat and go into CYOA mode.

Share this post


Link to post
Share on other sites

A long standing problem between some agencies and the DCAA has ultimately been "a failure to communicate".  The auditors would usually   document in the audit report that the agency "did not provide a technical analysis".  The agency personnel complained that the auditor "didn't provide any meaningful findings".  I believe that the root cause was usually that the technical people didn't (don't) how auditors perform audits (e.g., sampling, not examining the basis of every cost) and the auditors don't  understand the technical aspects of claims/proposals.  My most meaningful DCAA audits resulted from face to face discussions over my concerns and questions regarding the proposals, which would help guide the auditor.  

Share this post


Link to post
Share on other sites
On 3/24/2017 at 4:14 PM, Vern Edwards said:

After meeting with them, the lawyer looks at the package, looks in a mirror, and asks herself: Why didn’t I take that job prosecuting litterbugs?

That's as I remember it, more or less. But it's been awhile. Maybe things have changed.

:lol::lol::lol: Refreshingly candid and accurate account. PepeTheFrog enjoyed it.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×