In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 06-1237

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

T&W EDMIER CORP.,

Defendant-Appellant.

____________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 05 C 3079—Harry D. Leinenweber, Judge.

____________

ARGUED SEPTEMBER 8, 2006—DECIDED OCTOBER 10, 2006

____________

Before CUDAHY, EASTERBROOK, and MANION, Circuit

Judges.

EASTERBROOK, Circuit Judge. After T&W Edmier Corp.

completed its work on a reservoir in Deerfield, Illinois, it

asked the Army Corps of Engineers for $32 million in

addition to the agreed price of $11 million. It asserted that

the extra $32 million was justified by the expense of

removing hazardous materials. When the parties could

not reach an agreement, Edmier initiated a formal proceeding under the Contract Disputes Act of 1978, 41 U.S.C.

§§ 601-13. A contracting officer, who took evidence and

made an initial decision, see 41 U.S.C. §605(a), concluded

that Edmier was entitled to about $3.5 million on top of
2 No. 06-1237

what it had received (the $11 million plus some supplemental payments to which the Corps agreed). The Corps paid in

full. Edmier was not satisfied, however, and asked the

Armed Services Board of Contract Appeals for more. After

plenary consideration, the Board decided that Edmier is

entitled to only $1.9 million. 2003 ASBCA LEXIS 122 (Dec.

11, 2003). The United States asked Edmier to return the

excess $1.6 million and, when it refused, filed this collection

proceeding.

Edmier’s initial position in the district court was that the

Board had awarded it $1.9 million in addition to the

contracting officer’s award of $3.5 million, so that the

United States was the debtor rather than the creditor. Even

a quick review of the opinion shows, however, that the

Board reckoned from scratch, not from the contract price

plus agreed supplements plus the contracting officer’s

addition. So Edmier moved to a fallback: that the

suit should be dismissed for lack of subject-matter jurisdiction. The United States had invoked 28 U.S.C. §1345,

which reads: “Except as otherwise provided by Act of

Congress, the district courts shall have original jurisdiction

of all civil actions, suits or proceedings commenced by the

United States, or by any agency or officer thereof expressly

authorized to sue by Act of Congress.” According to Edmier,

the Contract Disputes Act “otherwise provides” by requiring

the United States, as well as any private contractor, to

submit disputes to a contracting officer and the appropriate

appellate board. The United States was the respondent

rather than the petitioner in the proceedings already held

and therefore, Edmier maintained, must start over with its

own petition to a contracting officer. The district court

disagreed and entered judgment in the United States’ favor

for $1.7 million (the overpayment plus interest). 2005 U.S.

Dist. LEXIS 28831 (N.D. Ill. Nov. 16, 2005).

What Edmier’s argument has to do with subject-matter

jurisdiction is a mystery. The Contract Disputes Act
No. 06-1237 3

scarcely mentions the jurisdiction of the Article III courts.

It permits (and sometimes requires) contractors to file their

suits in the Court of Federal Claims, see 41 U.S.C. §609(a),

but does not say where or when the United States may sue.

It therefore does not “otherwise provide” anything about

jurisdiction within the meaning of §1345. Cf. Breuer v. Jim’s

Concrete of Brevard, Inc., 538 U.S. 691 (2003).

Edmier maintains that the United States failed to

exhaust administrative remedies created by the Contract

Disputes Act. Exhaustion may be a condition to suit (or

to success in court) but is rarely a limit on subject-matter

jurisdiction. See, e.g., Mathews v. Eldridge, 424 U.S. 319,

328 (1976); Weinberger v. Salfi, 422 U.S. 749, 766-67 (1975);

Abdelqadar v. Gonzales, 413 F.3d 668, 670-71 (7th Cir.

2005). As the Supreme Court has explained frequently,

there is a difference between case-processing rules and

limits on jurisdiction. See Eberhart v. United States, 126 S.

Ct. 403 (2005); Scarborough v. Principi, 541 U.S. 401

(2004); Kontrick v. Ryan, 540 U.S. 443 (2004). To say that

Congress has authorized the federal courts to decide a class

of disputes is to say that subject-matter jurisdiction is

present. Congress has authorized the judiciary to entertain

debt-recovery suits by the United States. See 28 U.S.C.

§1331, §1345. A plaintiff’s failure to take required prelitigation steps may lead to defeat in court, but it is not a

defect in the tribunal’s adjudicatory competence. (To put

this otherwise, failure to exhaust administrative remedies

may be waived or forfeited, while an absence of subjectmatter jurisdiction may not.)

Let us consider, then, the right question: Does the

Contract Disputes Act require the United States to file its

own administrative claim in order to recover an overpayment that ensues from a decision by the Board that the

United States owes less than the contracting officer

awarded? No, it does not. The Act does not require the

United States to file an administrative claim in any situa-
4 No. 06-1237

tion, as far as we can make out. What is required when the

government seeks a payment from the contractor is not an

independent claim, but a decision. Here is the pertinent

text, the first two sentences of §605(a): “All claims by a

contractor against the government relating to a contract

shall be in writing and shall be submitted to the contracting

officer for a decision. All claims by the government against

a contractor relating to a contract shall be the subject of a

decision by the contracting officer.” So the contractor must

submit a claim, but when the government seeks a recovery

it is enough that the issue “shall be the subject of a decision

by the contracting officer.”

The difference in language is not hard to appreciate. The

contractor files a claim, which leads to a “decision”; if that

“decision” is in the government’s favor, no further claim is

required. Why would one be? The goal of an exhaustion

requirement is to ensure that a dispute receives full

administrative consideration. The agency finds essential

facts and may facilitate compromise, avoiding the need

for litigation. Once the administrative decision has been

made, and the parties ask a court for review, it matters not

which party initiated the administrative proceeding. It

could matter if the statute made the administrative

appeal a ratchet: the Board could increase, but never

reduce, the contracting officer’s award. Then the only

way to determine whether the contracting officer’s decision was too high (and, if so, how much too high) would

be to initiate a separate proceeding. That would entail

wasted motion, however, compared with an approach that

allows the administrative appeal to adjust the contracting officer’s award in either direction. Because the Contract

Disputes Act allows the appellate board to make an independent decision and decrease as well as increase the

award, there is no reason to rerun the process before the

United States may collect any net balance in its favor.
No. 06-1237 5

The sort of dispute that these parties are having arose

only because the United States paid the contracting officer’s

award without waiting for the outcome of Edmier’s administrative appeal. If we were to accept Edmier’s position in this

litigation, one logical response by the Executive Branch

would be to refuse to pay until the administrative process

had run its course—for then there would never be a need to

file another administrative proceeding in order to recoup

the difference. (A new administrative claim would mean

delay in collection, and from the government’s perspective

a year’s delay in trying to collect from many small and

thinly capitalized contractors is the same thing as allowing

the money to evaporate. The contractor will be judgment

proof.) Inducing the government to defer payment would not

assist contractors, however; many a small firm has liquidity

problems and cannot wait another year or two to be paid.

The approach exemplified here—pay at once whatever the

contracting officer awards, and settle up promptly after the

Board makes a final decision—is favorable to contractors in

the main. The Contract Disputes Act does not compel the

United States to act otherwise.

AFFIRMED

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—10-10-06