Opinion ID: 566465
Heading Depth: 2
Heading Rank: 2

Heading: Applicability of the DCA and DAR Provisions

Text: 18 Turning now to the merits of the issue decided by the ASBCA, the DCA was enacted on October 25, 1982, to facilitate substantially improved collection procedures in the federal government. S.Rep. No. 378, 97th Cong., 2d Sess., reprinted in 1982 U.S.Code Cong. & Admin.News 3377, 3377. 1 DAR Appendix E, Part 6 similarly regulates the ascertainment and collection by the Government of certain contractual debts. 2 19 As noted above, in Fairchild I (clarified by Fairchild II ) the ASBCA held that the DCA and DAR provisions did not apply to the Government's withholding of progress payments after its unilateral price reduction. The ASBCA reasoned that no debt had been established, as the amount to be withheld was to come from funds yet to be paid appellant under ... the agreement which involved the alleged defective pricing. 85-2 BCA (CCH) p 18,047 at 90,600. The ASBCA noted that 20 a debt does not arise until there is a sum of money or other obligation owed by the purported debtor to his creditor.... Since funds in an amount attributable to the alleged defective pricing data had not been paid to appellant, there was no debt or obligation owed by appellant to be administratively offset [as provided for by the DCA]. 21 Likewise, the provisions of DAR Appendix E, Part 6, have no application to this situation.... The examples of such indebtedness [covered by the DAR provisions] provided at DAR App. E-601 all cover situations where the debtor owes the Government money. Such is not the case here.... 22 .... 23 Had the Government [already paid the full amount], it would be in a position where it would have to seek recovery of overpayments by requesting return of the funds or administrative offset against money payable to appellant. Under those circumstances, the [DCA and DAR provisions] would apply. 24 85-2 BCA (CCH) p 18,047 at 90,600. 25 The Claims Court has decided the same issue in a similar context in the same way. In Avco Corp. v. United States, 10 Cl.Ct. 665, 667 (1986), the Claims Court concluded that [t]he kind of debts targeted by the [DCA] are not intra-contractual disputes like [the one at bar].... The court determined that the DCA does not apply when payment otherwise due on a contract is withheld by the government because of allegedly inadequate performance of the same contract. Adequate performance [of the contract] was at least an implied condition precedent to defendant's obligation to pay, although the extent of defendant's right to withhold ... remains to be seen. So there was no debt to trigger the [DCA] and no administrative offset as contemplated by that Act. Avco, 10 Cl.Ct. at 667. The court cited with approval the holding in Fairchild I, in which the withheld intra-contractual payment was under an express price reduction clause. 26 We find the reasoning of the Claims Court and the ASBCA persuasive. Debt as used in the DCA and DAR provisions contemplates an existing liability by the contractor, rather than a denial of further liability by the Government within an on-going contract. Analogous to the situation in Avco, one can consider Allied's continued entitlement to the progress payments an implied condition precedent to the Government's obligation to continue making those payments. There was no debt to trigger the DCA or DAR provisions and no administrative offset as contemplated by those provisions. 27 To otherwise construe the provisions would yield strange results. For example, DCA provisions 31 U.S.C. §§ 3711(a)(1) and 3716(a) require a head of an agency to try to collect a claim before administrative offset is allowed. Assume a situation similar to the instant case, but one in which the progress payments are found to have been at the appropriate level to date, even though the total contract price has been reduced. The Government now seeks to suspend or reduce future progress payments to account for the reduction in total price. There would not really be any claim or debt for the Government to try to collect. As to the later-withheld progress payments, the Government simply would not pay the contractor as much as originally calculated. This cannot reasonably be regarded as a debt covered by the DCA. To do so would force the Government to create a debt owed by the contractor simply because the contract price is reduced. This cannot be the result intended by the DCA. 28 This result--in essence the maintenance of an artificially created debt--is basically what Allied asks from this court. We do not believe that that is what the statutes require. The DCA and DAR provisions do not mandate that during ongoing transactions concerning a single contract, progress overpayments become unavailable for credit on behalf of the Government. We agree with the analyses of the ASBCA and the Claims Court in Fairchild and Avco. The DCA and DAR provisions are clearly meant to facilitate and guide collection of existing debts, not to artificially and unnecessarily create or maintain them. As the ASBCA pointed out, the Government's action here is not the collection of a debt as contemplated by the provisions. 3