Significant Government Delays and DFAS Payment Issues

[FederalContractorOBE]

Good afternoon,

We have a IDIQ Task Order Award which has multiple CPFF CLINS on the contract.  Something happened with Modification #5 where the interface between P^2 (Air Force Contracting System) / EDA / WAWF (iRAPT) broken.  Something to do with .XML file scripts.  The end result is that the contract CLINS and funding was wiped from our iRAPT view.  We have been manually entering invoices since May.  Once we enter the invoice in the system and the Program Manager approves in the invoice, it goes to iRAPT as approved; however, it cannot get paid without daily intervention from our finance team with DFAS and still it takes over 120 days to get paid.  We have not been paid for work since July. 

As a small business we are quickly approaching the end of our ability to make payroll for this project.  It is ~185 FTEs.  We have had significant (almost daily) conversations and written communications with the contracting office and program office; escalating through the SBA Liaison up to the Deputy Director and Commander of the Unit; however, the system is still broken.  The division chief has spoken to DISA (system owner for iRAPT/EDA) with little movement towards a solution.  We understand it is not specifically the program office or contracting office; they have approved the invoice; the issue lies in the systems (P^2/EDA/iRAPT).  However, the net result is the same.  We cannot continue to incurred costs without cash flow improving.  

Question(s) to the board:

1. Any recommendations or courses of actions?  We are at our wits ends.

2. We want to provide a Stop Work notice to the USG (if you do not pay within 10 days, we cannot show up to work any longer).  This certainly will not be popular; however, we are about at this point.  Does anyone have experience with a  similar situation?  

[Guest PepeTheFrog]

Be careful with option 2. This is a common and reasonable (for the private sector) suggestions, but there is a problem with applying it to federal contracts. If you threaten to stop work, you can be terminated for default under the theory that you provided notice of anticipatory breach. That's jargon for "The government can ruin your reputation by saying you broke the contract, based on the fact that you threatened to stop work." 

[Guest Vern Edwards]

4 hours ago, FederalContractorOBE said:

We have a IDIQ Task Order Award which has multiple CPFF CLINS on the contract.  Something happened with Modification #5 where the interface between P^2 (Air Force Contracting System) / EDA / WAWF (iRAPT) broken.  Something to do with .XML file scripts.  The end result is that the contract CLINS and funding was wiped from our iRAPT view.  We have been manually entering invoices since May.  Once we enter the invoice in the system and the Program Manager approves in the invoice, it goes to iRAPT as approved; however, it cannot get paid without daily intervention from our finance team with DFAS and still it takes over 120 days to get paid.  We have not been paid for work since July. 

DO NOT threaten to quit working.

If you want to be hardcore, do this:

1. Submit a claim (see the definition in the Disputes clause in your contract) to the contracting officer demanding immediate payment of each and every invoice on the day that the payment is late pursuant to the prompt payment terms in the contract. A demand for payment of a late payment is not a routine request for payment.

2. In addition, submit a claim for the extra cost you incur to do all the extra work you described in the paragraph above.

Those would be hard-nosed courses of action. It will piss them off and they will sputter and squawk, but it will be well within your contractual rights. It will get their attention and send a message that you won't stand for being abused. You can always be a good guy and back off once you've gotten their attention and they have fixed the problem.

Many contractors have come to Wifcon whining about mistreatment at the hands of the government. Well, you have rights. If you decide not to exercise them, don't whine. Take it and dry up. Patience should have its limits. People without knowledge and guts get what they deserve. Absolutely nothing.

I have pasted in, below, an article I wrote in 2010 for a publication called The Nash & Cibinic Report. The article is entitled, "Reluctance to Submit Claims: Good Customer Relations or Self Sacrifice?" Here it is. Read it.

24 NO. 6 Nash & Cibinic Rep. ¶ 29

Nash & Cibinic Report

June 2010

Contractor Claims

RELUCTANCE TO SUBMIT CLAIMS: Good Customer Relations Or Self-Sacrifice?

by Vernon J. Edwards

Bernard Cap Co., ASBCA 56679, 10-1 BCA ¶ 34387, tells the story of a contractor that could not get paid by the Defense Finance and Administrative Service (DFAS) and would not submit a claim. Beginning in August 1996, the Defense Logistics Agency awarded the company a series of four indefinite-delivery, indefinite-quantity contracts for men’s garrison caps, each with a base year and four option years. The contracts included the “Prompt Payment” clause at Federal Acquisition Regulation 52.232-25. The contractor delivered acceptable products on time and in each instance submitted DD Form 250, “Material Inspection and Receiving Report,” to DFAS Columbus for payment. The contractor was paid for some deliveries, but not others, and was at one point holding on to more than $600,000 in late accounts receivable. Followups, pleas, and congressional inquiries yielded some of the amounts due, but not all.

The board’s decision recounts some of this sad story as it relates to one of the four contracts:

Quote

11. By memorandum to Ms. Ann E. Beecroft, DSCP-CRDC, dated 21 December 1999, appellant advised: “We have been trying to collect past due money on contracts from DFAS [Defense Finance and Accounting Service] through our [Administrative Contracting Officer] and DCMC-Orlando for the past year. . . . [W]e are talking about $600,000 of accounts receivable that are PAST DUE--some going back years and most past due over 90 days.”

12. By memorandum to Mr. Lawrence Bogus/DCMC-Orlando, dated 21 January 2000, appellant advised of its open accounts receivable. Appellant stated: “You will note that the vast majority of these are very, very past due. Promises from DFAS have not been kept and we are not getting enough oxygen to keep breathing.” Appellant did not submit a claim to the contracting officer (CO) for overdue amounts at or around this time.

13. A memorandum to DFAS regarding open DD 250s was also sent to DFAS on 10 March 2000. A similar memorandum was sent to DCMC-Orlando on 14 March 2000.

14. In late 2001 and early 2002, appellant met with DFAS to address accounts past due. Thereafter, many outstanding invoices were paid but many remained unpaid, including a number of invoices under Contract 0339. Appellant did not submit a claim to the CO at this time.

15. By letter to DFAS dated 4 June 2003, appellant reiterated its demands for full payment of its unpaid invoices. Appellant stated: “We have been government contractors since the 1930’s and with all the technology that has been added to the accounting area at DFAS we cannot understand why we still have to wait, wait, and wait some more--all the time sending repeated evidence of shipment. HELP!!!!”

16. Several years went by, and appellant had not received full payment for units accepted by the government under its contracts. Appellant did not file a claim with the CO. Rather, by letter to DFAS dated 11 September 2006, appellant wrote of its “extreme frustration” in not getting paid. Insofar as pertinent, appellant stated: “please know that from 1996-1999 we are owed $32,630 and from 2000-2005 we have $409,008 that is unpaid.”

17. Throughout 2006/2007, appellant resubmitted copies of DD 250s to DFAS, matched available shipping documents and proof of delivery and some payments “did occasionally trickle in.” However, significant amounts remained outstanding under Contract 0339 and other contracts, including Contract Nos. SPO100-97-D-1017, SPO100-99-D-0310 and SPO100-00-D-0313 which are the subject of these appeals. Appellant did not file a claim with the CO.

18. Rather, appellant next sought the assistance of Congressman Mario Diaz-Balart. By letter dated 11 October 2007, appellant advised Congressman Diaz-Balart that appellant had many delinquent invoices with DFAS, in the amount of $350,000. Congressman Diaz-Balart wrote a letter to DFAS, and DFAS replied that it was reviewing the matter.

19. Some additional funds were provided by DFAS to appellant at or around this time, but according to appellant, the due and owing balance was still approximately $200,000. DFAS made no further payments on Contract 0339.

20. By email dated 14 March 2008, DFAS advised appellant: “The old contracts have been reconciled to the best of our ability and the documents to include payment histories are being shipped to you. At this time, we cannot pay anything additional on the old contracts.”

21. Appellant, however, continued to press its case with DFAS. By email dated 24 September 2008, DFAS advised appellant: “DFAS paid what was obligated in the system. If more items were shipped then that would have to be taken up with DLA. . . . We cannot continue to use resources to review the same payments” (Weinstein decl., ex. Q). At this point, it became clear to appellant that “no one in the Government would work on the payment resolution any further [and] we turned the matter of the payments due under Contract 0339 to our counsel.”

The contractor’s frustration is palpable. At no time did the Government dispute its liability for any payment. The contractor followed up, called everyone that it knew, persuaded and wheedled, called in its chips for past favors, and complained to its congressman. The contractor did everything it could, except submit claims. From time to time the Government belatedly paid some money, but not all that it owed.

Finally, in 2008, after DFAS said that it would no longer try to figure out what had happened, the contractor submitted the first of four claims, one for each contract, demanding payment of a total of $205,078.04. The Contracting Officer did not render a decision on any of the claims, so the contractor appealed to the board based on deemed denial. The board held that a claim had accrued on each invoice on the date that the Government was late in making payment under the Prompt Payment Act. It dismissed the four appeals because all of the claims had been filed more than six years after accrual and thus were time barred under the Contract Disputes Act, 41 USCA § 605(a).

When Does A Claim Accrue On A Routine Request For Payment?

The contractor’s attorney argued equitable estoppel and equitable tolling, arguments given short shrift by the board in reference to one of the four contracts:

Quote

By appellant’s own account--which the government does not dispute for purposes of the motion to dismiss--appellant made shipments and tendered proper invoices for accepted goods under this contract on or about 30 December 1996; 24 September 1997; 18 March 1998; 24 September 1998; 3 December 1998; 17 December 1998; 28 January 1999 and 29 December 1999 (SOF ¶¶ 3-10), for which the government failed to pay in full within 30 days as required by the contract (SOF ¶ 2). Hence, appellant’s claims for these unpaid invoices accrued, respectively, on or about 30 January 1997; 24 October 1997; 18 April 1998; 24 October 1998; 3 January 1999; 17 January 1999; 28 February 1999; and 29 January 2000. At that point, all events fixing liability for these unpaid invoices were or should have been known, . See also Oceanic Steamship Co. v. United States, 165 Ct. Cl. 217, 225 (1964) (claim against the United States, based upon a contract obligation to pay, accrues on the date when payment becomes due and is wrongfully withheld). Clearly, appellant’s claim letter to the CO for these unpaid amounts, dated 14 November 2008, was submitted more than six years from the date of the accrual of these claims. We believe they are all time barred under the CDA.

Appellant suggests that DFAS’ general assurances that it would review and/or seek to reconcile the payment records served to equitably toll the running of the limitations period, or equitably estopped the government from relying upon the same. We do not agree. For appellant to prove equitable estoppel against the government, it must adduce facts showing some affirmative government misconduct. Frazer v. United States, 288 F.3d 1347, 1354 (Fed. Cir. 2002); Zacharin v. United States, 213 F.3d 1366, 1371 (Fed. Cir. 2000). Appellant asserts no such facts here.

As for equitable tolling, federal courts have extended such dispensation only sparingly and under limited circumstances. Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 96 (1990) ( e.g., claimant filed timely defective pleading; claimant induced or tricked by adversary, allowing deadline to pass). Former Employees of Sunoco Products Co. v. Chao, 372 F.3d 1291, 1299 (Fed. Cir. 2004); Frazer, 288 F.3d at 1354 (lateness attributable, in part, to some misleading government action). Appellant presents no such equitable basis to support the tolling of the limitation period of the statute. Rather, the record shows a claimant that failed to exercise due diligence in preserving and protecting its legal rights under the contract. As stated by the Federal Circuit in Esso Standard Oil Co. (PR) v. United States, 559 F.3d 1297, 1305 (Fed. Cir. 2009):

The Supreme Court has warned that “[o]ne who fails to act diligently cannot invoke equitable principles to excuse that lack of diligence,” Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 151, 104 S. Ct. 1723, 80 L.Ed.2d 196 (1984), and “the principles of equitable tolling . . . do not extend to what is at best a garden variety claim of excusable neglect,” Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 96, 111 S. Ct. 453, 112 L.Ed.2d 435 (1990).

We have reviewed the cases cited by appellant but they are factually and legally distinguishable.

Thus, according to the board, a claim accrues against a routine request for payment the moment that it is late, even though a routine request for payment cannot be the basis for a claim until it is disputed as to liability or amount or is not acted upon in a reasonable time.

The Contract Disputes Act does not define “accrual of a claim.” FAR 33.201 defines it as follows:

Quote

Accrual of a claim means the date when all events, that fix the alleged liability of either the Government or the contractor and permit assertion of the claim, were known or should have been known. For liability to be fixed, some injury must have occurred. However, monetary damages need not have been incurred.

The lone case cited by the board, Oceanic Steamship Co. v. United States, 165 Ct. Cl. 217 (1964), predates the current definition of “claim” in FAR 2.101 and in the “Disputes clause at FAR 52.233-1, paragraph (c), which states that a routine request for payment cannot be the basis for a claim “until disputed either as to liability or amount or is not acted upon in a reasonable time.” In this case, the requests for payment were not disputed. Were they “not acted upon in a reasonable time” when they were not paid by the 30th day after submission, even though the Government worked with the contractor to resolve the issues and periodically made payments after contractor inquiries? At some point, clearly, the delays in payment were unreasonable. But does one day of late payment constitute an unreasonable delay?

In DOD Contracts, Inc., ASBCA 47509, 95-2 CPD ¶ 27641, and S-Tron, ASBCA 45890, 94-3 BCA ¶ 26957, the board held that a routine request was not acted upon in a reasonable time when it was unpaid without explanation after five and one-half months. In Mauldin Dorfmeier Const., Inc., GSBCA 11068, 94-1 BCA ¶ 26277, the board held 41 days was not unreasonable. We think that a persuasive argument can be made that a claim does not necessarily accrue on a routine request for payment the very moment that the Government is late in making the payment under the Prompt Payment Act, especially when the Government works with the contractor to resolve the problem.

Customer Relations And Reluctance To File Claims

Nevertheless, the contractor in Bernard Cap waited 11 years to file its first claim on the first late payment. Why did it wait so long? According to the board, it could have converted each invoice to a claim on the very day that payment was late. It appears that most would have been for less than $100,000, and the contractor could have sought a decision in 60 days. A one-page letter would have sufficed. There are three possibilities: (1) the contractor was ignorant (possible), (2) the contractor did not want its claim preparation costs to be unallowable pursuant to FAR 31.205-47 (possible, but unlikely), and (3) the contractor thought that filing a claim would have endangered its relationship with its customer. Bingo.

COs are notorious for reacting badly to claims, even considering them to be tantamount to “suing the customer,” although a claim is nothing but a formal assertion or demand that need not lead to litigation. In some cases, agencies have considered the submission of claims to constitute poor past performance, see, e.g., OneSource Energy Services, Inc., Comp. Gen. Dec. B-283445, 2000 CPD ¶ 109, 42 GC ¶ 297 (agency improperly downgraded offeror’s past performance due to its legitimate exercise or its contractual rights); Nova Group, Inc., Comp. Gen. Dec. B-282947, 99-2 CPD ¶ 56), 41 GC ¶ 422 (agency improperly downgraded past performance based on claim submissions). Concern about such CO attitudes prompted an April 1, 2002 memorandum from the Administrator of the Office of Federal Procurement Policy warning against negative past performance assessments based on a contractor’s history of filing claims, 44 GC ¶ 138. In a followup memo dated December 16, 2002, the Director of Defense Procurement said:

I emphasize that acquisition personnel, especially source selection officials, shall not: (1) downgrade contractors’ past performance evaluations for availing themselves of their rights by filing protests and claims or for deciding not to use [alternative dispute resolution]; or (2) rate contractors more positively on past performance evaluations for refraining from filing protests and claims or for agreeing to use ADR.

See also our discussions in Postscript: Past Performance Evaluations, 14 N&CR ¶ 30, and in Customer Relations: Valid Procurement Tool, Means for Extortion, or Open Door to Cronyism?, 10 N&CR ¶ 37. Policy notwithstanding, many contractors believe, we think rightfully so, that the legitimate exercise or their rights under the “Disputes” clause can result in poor customer relations and diminished prospects for future business.

Excessive concern about customer relations, however, can result in self-sacrifice. While good relations are important, we believe that contractors should firmly insist upon their contractual rights, especially the right to get paid on time. There are going to be times when the only way to move a leaden bureaucracy is to assert yourself formally in writing. We think that contractors should take a firm, formal, arm’s-length, businesslike approach to all aspects of the deal. They should comply strictly with all contract terms and insist that the Government do the same. They should know their obligations and fulfill them. They should know their rights and insist upon them. When a contractor thinks that the Government owes it something, it should ask for it in writing. If the contractor does not get favorable action or a reasonable rejection within a reasonable period of time, it should submit a claim in accordance with the contract “Disputes” clause and FAR Subpart 33.2. The CO should receive and resolve claims professionally and not respond with irritation, anger, or hostility. If the CO does not make a decision within the deadlines set by the “Disputes” clause, the contractor should hire an attorney and appeal to a board of contract appeals or to the U.S. Court of Federal Claims, unless it is willing to let the Government keep what it honestly believes it is rightfully owed. VJE

© 2010 Thomson Reuters

24 NO. 6 NASHCIBINIC ¶ 29

End of Document

© 2017 Thomson Reuters. No claim to original U.S. Government Works.

[Retreadfed]

Is the contract subject to the SCA?  If it is, are you able to make the required wage and fringe benefit payments?