To Settle or Dispute?

[here_2_help]

Over on the other side of the table, I have a hard time imagining any contractor (other than the smallest) litigating $40,000. I think there would be significant hesitations over litigating $400,000.

Ten years ago, while employed at a large DOD contractor, I was told our legal department had a rule of thumb: assume $2 million in (unallowable) attorney's fees and two years to get a decision. If the matter wasn't worth the time and expense, let it go.

I would have advised the CO in this situation to call the contractor's (assumed) bluff.

 

Edited to add: Oftentimes these disputes settle between the filing of the COFD appeal and the trial. I don't have the stats but I believe settlements are a common occurrence, at least based on the number of "decisions" that announce settlement.

[Vern Edwards]

Just now, Retreadfed said:

I don't know how many times I have heard contracting officers say that once DCAA has taken a position on something, the CO cannot go against DCAA.  T

 

From Government Contract Disputes § 4:9 Contracting Officer's Independence:

 

Quote

The function of a CO in deciding disputes under or relating to a contract is a “quasi-judicial function of deciding disputes concerning questions of fact.” A contractor is “entitled to a finding by the contractually agreed officer and that a decision by someone else is a nullity.”

This function of CO independence is of importance whenever the CO is exercising discretion, as in the case of terminations for default. 

 

 

[C Culham]

14 hours ago, Vern Edwards said:

Is the CO obligated in some way to issue a final decision, deny a claim, and fight when he or she thinks they are right? Are they obligated to fight even if they think the fight would cost more than it's worth? Should COs weigh and balance the likely cost of litigation against the cost of settling when making a decision? Should they back off a final decision that they made if the contractor decides to appeal and the litigation would cost more than the settlement.

I think a CO's obligation is to settle and not fight as supported by the guiding principles already mentioned - FAR 33.204.  Added is FAR 1.602-2  "...contracting officers should be allowed wide latitude to exercise business judgment. ..."  In my personal world my business judgement is to consider associated costs of a fight or settlement, government contracting should not be any different.  Why not back off, again it is something that is done in the real world.  Outside of my government activity, and with siginifcant organizations, backing off has occurred with regard to litigation. 

My comments also highlight for me  a slight disagreement with Don's comment regarding "as a taxpayer".   Again at the personal level it seems I can always find something productive to do if I am not engaged in a fight and I would hope the same is true to some extent with regard to the $50,000 regarding a dispute, it could be spent on something worthwhile.   The $50,000 will get spent and I truly hope on something good.  I know a pie in sky as the Federal government has plenty of places besides fighting disputes to run through my tax dollars.

[Vern Edwards]

Just now, here_2_help said:

Over on the other side of the table, I have a hard time imagining any contractor (other than the smallest) litigating $40,000. I think there would be significant hesitations over litigating $400,000.

@here_2_help Your imagination needs a booster shot.

You don't need a lawyer to go to a board of contract appeals, and there is a small claims (expedited) procedure. See the ASBCA's 2023 nine-page decision, American Technical Services, iInc., ASBCA Nos. 6354 and  6355, in which the contractor sought $12,728.68 and the Government sought $36,661.93. (The government withdrew its final decision and claim and the Board declared it to be moot.)  The board denied the contractor's appeal.

It took me all of two minutes to find that online after I read your post. There are plenty of small claims.

Maybe, to borrow words from Bob Dylan, your imagination in this regard is "limited and underfed".

 

 

[Retreadfed]

Vern, I am in complete agreement with your post concerning contracting officer independence.  I have made the same point to contracting officers regarding DCAA findings, but generally to no avail.  I think IG oversight is something that is lurking in the background causing COs not to go against DCAA for fear of an adverse IG finding somewhere down the line.  Another but lesser factor is congressional deference to auditor "infallibility."  I think the overarching point is that some COs are substantially risk averse.

[Vern Edwards]

1 hour ago, Retreadfed said:

Vern, I am in complete agreement with your post concerning contracting officer independence.  I have made the same point to contracting officers regarding DCAA findings, but generally to no avail.  I think IG oversight is something that is lurking in the background causing COs not to go against DCAA for fear of an adverse IG finding somewhere down the line.  Another but lesser factor is congressional deference to auditor "infallibility."  I think the overarching point is that some COs are substantially risk averse.

I think the problem is practical. I think that most COs lack the knowledge of managerial accounting and government cost principles and cost accounting standards they would need to confidently argue with DCAA. They are offered a lot of opinions, and there are plenty of books, but even then COs lack the practical know-how they would need to be confident in their positions. And their bosses are often unwilling to resist DCAA recommendations for similaer reasons. Going with DCAA is safe. If you go against you have to be prepared to make an argument that you may not have the know-how to make.

[joel hoffman]

H2H, I worked on some large DOD Systems contracts with one of the top DOD contractors that I believe you worked for. And other Systems contracts with one of the three largest US engineering and construction contractors.

They both avoided filing claims in lieu of submitting REAs and/or less formal methods through the Partnering process. One REA from your former firm was for $63 million. We negotiated a settlement fairly expediently after the REA submission (for a fraction of that).

[here_2_help]

2 hours ago, Vern Edwards said:

@here_2_help Your imagination needs a booster shot.

You don't need a lawyer to go to a board of contract appeals, and there is a small claims (expedited) procedure. See the ASBCA's 2023 nine-page decision, American Technical Services, iInc., ASBCA Nos. 6354 and  6355, in which the contractor sought $12,728.68 and the Government sought $36,661.93. (The government withdrew its final decision and claim and the Board declared it to be moot.)  The board denied the contractor's appeal.

It took me all of two minutes to find that online after I read your post. There are plenty of small claims.

Maybe, to borrow words from Bob Dylan, your imagination in this regard is "limited and underfed".

 

 

Vern, ATS is a small engineering firm with less than 200 employees (according to LinkedIn). 

I agree there is an expedited procedure available. 

[Vern Edwards]

@here_2_help I know what ATS is. I don't see how that's relevant.

21 hours ago, here_2_help said:

I think there would be significant hesitations over litigating $400,000.

I don't agree with you. What on earth does "significant hesitations" mean? I suspect there are almost always hesitations about litigating. How much will it cost? What if we lose? And why do you bother to tell me that you agree that an expedited procedure is available? How could you not agree? The procedure is published and is common knowledge. I don't need your assurance.

In any case, what does hesitation to litigate have to do with my inquiry? Go back and read my questions. They were not about game theory.

[formerfed]

2 hours ago, Vern Edwards said:

I think the problem is practical. I think that most COs lack the knowledge of managerial accounting and government cost principles and cost accounting standards they would need to confidently argue with DCAA. They are offered a lot of opinions, and there are plenty of books, but even then COs lack the practical know-how they would need to be confident in their positions. 

My mentor as an intern encouraged me to take two cost accounting courses at the local college.  Sound advice and I thanked him 20 years later when he retired.  That helped me several times over my career in understanding audit findings and having meaningful conversations with the auditors.  Also in many instances, I had the auditors participate via telephone calls in meetings with contractors.

[Retreadfed]

On 7/1/2024 at 10:48 AM, here_2_help said:

Oftentimes these disputes settle between the filing of the COFD appeal and the trial.

Looking at the decisions at the ASBCA website, that appears to be an accurate statement.  To add to this, in my experience, matters can be settled after a claim is filed but before a COFD is issued.  Many times having a set of eyes other than those of the CO look at an issue can lead to a resolution.