Prime Contractor Can Sponsor Subcontractor’s Claim to Government

Let’s say you’re a subcontractor to a prime contractor, which holds a construction contract with the Government. And you run into problems which need to be solved by submitting a claim to the contracting officer. But, as the subcontractor, you don’t have a contractual relationship (privity of contract, in legal speak) with the Government. Can you still submit the claim?

As a procedural matter, the answer is yes–under certain conditions. In fact, the ASBCA confirmed this in a recent case, where it denied the Government’s motion to dismiss on the grounds that the claim actually belonged to a subcontractor. SBH Servs. & Core Constr, JV II, ASBCA No. 61714 (Jan. 27, 2020).

In that case, the prime contractor held a contract to build the Barkley Elementary School at Fort Campbell, KY, the home of Screaming Eagles 101st Airborne Division. At some point, the prime contractor submitted a claim on the subcontractor’s behalf. After reviewing the documentary evidence, ASBCA found that the certified claim had been perfected by the prime contractor, as required by the Contract Disputes Act.

The Government asked ASBCA to dismiss the appeal because the claimant was a subcontractor, not the prime contractor. In its opinion, ASBCA recited some important law that allows a prime contractor to sponsor a subcontractor’s claim, if the prime contractor certifies the claim to the Government:

• “It is well settled that a subcontractor may prosecute its claims only through, and with the consent and cooperation of the prime.”
• “A prime contract frequently permits its subcontractor to prosecute claims in the prime contractor’s name if it is perceived that the subcontractors have more at stake in a claim and are therefore willing to work harder on its enforcement. Subcontractors may also be the only ones in full possession of the facts.”
• “When a prime contractor sponsors the [claim] of its subcontractor, the prime contractor must itself certify the claim.”

Applying this law, ASBCA found that although the claim had been prepared by the subcontractor’s attorney, it had been submitted in the prime contractor’s name and on the prime contractor’s letterhead; it had also been signed by the prime contractor’s project manager. On these facts, the ASBCA found that the subcontractor “properly brought its claim through and with the consent of [the prime contractor], and in [the prime contractor’s] name.” And it also found that the prime contractor properly sponsored the subcontractor’s appeal to ASBCA.

The Government also invoked the Severin doctrine (named after a 1943 Supreme Court case) which holds that a prime contractor cannot sponsor a subcontractor’s claim against the Government unless the prime contractor would be liable for the subcontractor’s damages. ASBCA held that an argument based on the Severin doctrine should be decided on the case’s merits–not on a procedural motion to dismiss. Thus, it denied the Government’s motion to dismiss altogether.

Bottom line, it’s important to remember that a subcontractor alone cannot bring a Contract Disputes Act claim against the Government. But if the claim is sponsored by prime contractor (meaning brought in the prime contractor’s name and is certified by the prime contractor), then a subcontractor claim can proceed. Of course, bear in mind, that the pass-through only works if the prime contractor would ultimately be liable for the subcontractor’s damages.

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