Opinion ID: 725035
Heading Depth: 2
Heading Rank: 1

Heading: The Termination Settlement Proposal

Text: 19 Ellett does not contend that its March 1989 settlement proposal was a CDA claim. Rather, it argues simply that once the contracting officer reviewed the proposal and unilaterally determined that it was due a net termination settlement of $22,779.01, it was entitled, under the terms of its contract and the FAR, to appeal that determination directly to the court. 20 This argument is not enough, however, for us to conclude that the court had jurisdiction. Neither the parties nor the regulation writers can confer jurisdiction on the Court of Federal Claims. Cf. Beck v. Alabama, 447 U.S. 625, 631 n. 6, 100 S.Ct. 2382 n. 6, 2386, 65 L.Ed.2d 392 (1980); Kraft, Inc. v. United States, 85 F.3d 602, 604 (Fed.Cir.1996). Congress granted the court jurisdiction only over an appeal from a contracting officer's decision on a valid claim. Reflectone, 60 F.3d at 1575; Sharman, 2 F.3d at 1568-69. 21 Under the FAR, there are three requirements a nonroutine submission must meet to be a claim. It must be: (1) a written demand or assertion, (2) seeking as a matter of right, (3) the payment of money in a sum certain. 48 C.F.R. § 33.201 (1995); Reflectone, 60 F.3d at 1575. Ellett's contract required nothing more. A routine request for payment, on the other hand, must also be in dispute when submitted to meet the definition of a claim. 48 C.F.R. § 33.201; Reflectone, 60 F.3d at 1576. 22 Our threshold inquiry, therefore, is whether Ellett's termination settlement proposal was a routine submission. See Reflectone, 60 F.3d at 1577 ([T]he critical distinction in identifying a 'claim' is ... between routine and non-routine submissions.). In that regard, a demand for compensation for unforeseen or unintended circumstances cannot be characterized as 'routine.'  Id. (request for an equitable adjustment is anything but a 'routine request for payment' ). On the other hand, vouchers, invoices, and similar requests for payment are submitted for work done or equipment delivered by the contractor in accordance with the expected or scheduled progression of contract performance. Id. 23 Using these beacons as guides, it is difficult to conceive of a less routine demand for payment than one which is submitted when the government terminates a contract for its convenience. Such a demand, which occurs only in a fraction of government contracts is certainly less routine than a request for an equitable adjustment, several of which a contractor might submit on any one contract. Indeed, in concluding that a request for an equitable adjustment is not routine in Reflectone, we pointed to Supreme Court precedent equating a request for an equitable adjustment with an assertion of a breach of contract. That analogue is even more appropriate here, where, but for the convenience termination clause, the government's action would be a breach of contract, and it would be liable for resulting damages. See G.L. Christian and Assocs. v. United States, 160 Ct.Cl. 1, 312 F.2d 418, 423 (1963). A request for payment submitted after the government has terminated the contract during its performance is a far cry from a request submitted in accordance with the expected or scheduled progression of contract performance. 24 It is beyond serious dispute that the parties intended that Ellett construct the entire 2.7 mile logging road. Because of the unforeseen legislation, however, the government decided to invoke its right to terminate the contract. Ellett's demand for compensation arising from such circumstances can hardly be considered routine. If it were routine, like a voucher or invoice, there would be no need to negotiate. However, the FAR contemplates that only after the amount a contractor is owed because of a convenience termination is determined, whether by agreement, determination, or appeal, shall a contractor submit a voucher or invoice for that amount. 48 C.F.R. § 49.112-2(a)-(b) (1995). 25 Relying on a dictionary, the government argues that a termination settlement proposal is a routine request for payment because the FAR and the contract establish procedures for submitting one. The government is correct that routine may be defined as [i]n accordance with established procedure. The American Heritage Dictionary 1074 (2d ed. 1982). But, it is also defined as habitual; regular, and [n]ot special; ordinary, id., as well as of a commonplace or repetitious character, Webster's New Collegiate Dictionary 1001 (150th anniversary ed. 1981). Once the government terminates for convenience, the procedures used to determine a contractor's recovery could be perceived as routine, in the sense that the same ones are followed each time. However, that does not make them routine in the overall scheme of the contract and the parties' expectations. 26 The government also points to our statement in Reflectone that a routine request for payment ... is made under the contract, not outside it, 60 F.3d at 1577, in arguing that Ellett's termination settlement proposal is routine because it is a request for payment made pursuant to the convenience termination clause. That statement follows our description of nonroutine requests as those seeking compensation because of unforeseen or unintended circumstances, in contrast to routine submissions, which are made under the contract because they are made in accordance with the expected or scheduled progression of contract performance. Id. The government's interpretation falls of its own weight, however, because in Reflectone itself, the claim was submitted pursuant to the Changes clause of the contract for additional costs incurred in part from government-caused delays. See Reflectone, Inc., ASBCA No. 43081, 93-1 BCA p 25,512 at 127,054, 1992 WL 302847 (1992); see also 48 C.F.R. § 52.243-1 (1995) (Changes-Fixed Price clause). So, as a written assertion seeking, as a matter of right under the termination for convenience clause, the payment of $451,084 plus interest, costs, and attorneys fees, it met the FAR's requirements of a valid claim. 27 As we said in Reflectone, however, not every nonroutine submission constitutes a CDA claim. See 60 F.3d at 1577 n. 7. Besides meeting the FAR definition of a claim, the CDA also requires that all claims be submitted to the contracting officer for a decision. 4 41 U.S.C. § 605(a) (1994); see also 48 C.F.R. § 33.206; Bill Strong Enters., Inc. v. Shannon, 49 F.3d 1541, 1550 (Fed.Cir.1995) (submission cannot be considered a formal CDA claim since [it] did not request a final decision of the CO), overruled in part on other grounds by Reflectone, 60 F.3d at 1579 n. 10. This does not require an explicit request for a final decision; as long as what the contractor desires by its submissions is a final decision, that prong of the CDA claim test is met. Transamerica, 973 F.2d at 1576. Thus, a request for a final decision can be implied from the context of the submission. Heyl & Patterson, 986 F.2d at 483. 28 When a contractor submits a termination settlement proposal, it is for the purpose of negotiation, not for a contracting officer's decision. A settlement proposal is just that: a proposal. See 48 C.F.R. § 49.001 (1995) (a proposal for effecting settlement of a contract terminated in whole or in part, submitted by a contractor or subcontractor in the form, and supported by the data, required by this part). Indeed, it is a proposal that Ellett contractually agreed to submit in the event of a convenience termination. The parties agreed that they would try to reach a mutually agreeable settlement. If they were unable to do so, however, it was agreed, consonant with the FAR's requirements, that the contracting officer would issue a final decision, see id. §§ 52.249-2(f) (Alternate I), 49.103, 49.105(a)(4), which Ellett could appeal to the court or to the Department of Agriculture Board of Contract Appeals, id. § 52.249-2(i). Consequently, while Ellett's termination settlement proposal met the FAR's definition of a claim, at the time of submission it was not a claim because it was not submitted to the contracting officer for a decision. 29 Once negotiations reached an impasse, the proposal, by the terms of the FAR and the contract, was submitted for decision; it became a claim. In other words, in accordance with the contract's prescribed method of compensating Ellett for a convenience termination, a request that the contracting officer issue a decision in the event the parties were unable to agree on a settlement was implicit in Ellett's proposal. After ten months of fruitless negotiations, Ellett explicitly requested that the contracting officer settle its claim. This demand is tantamount to an express request for a contracting officer's decision. Hence, after the subsequent exchange of offers and counteroffers, the contracting officer settled Ellett's proposal by determination and Ellett filed suit. 30 That the termination settlement proposal would ripen into a claim requiring the contracting officer to issue a unilateral settlement determination was contemplated by the contract and the FAR. They provide explicitly that Ellett had the right to appeal the contracting officer's decision on its proposal. 48 C.F.R. § 52.249-2(i); see also id. § 49.109-7(d) (a contracting officer's settlement determination shall advise the contractor that the determination is a final decision from which the contractor may appeal under the Disputes clause). The FAR implicitly includes termination settlement proposals within the operative definition of a claim to the extent they are not favorably resolved by a contracting officer's decision. 5 31 The government responds that Ellett's termination settlement proposal was not an appealable claim for three reasons: (1) once negotiations reached an impasse, Ellett was required to submit a new claim or convert its termination settlement proposal into a claim, detailing what issues were in dispute, an act it failed to perform; (2) because the FAR prohibits the payment of interest on a settlement agreement or a settlement by determination, a settlement proposal cannot be a CDA claim; and (3) Ellett's certification was defective because it had to be but was not made after the parties' negotiations stalled. 32 On the first argument, after negotiations reached an impasse, the contracting officer issued a unilateral decision on the settlement proposal pursuant to paragraph (f) of the termination for convenience clause. 48 C.F.R. § 52.249-2(f) (Alternate I); see also id. § 49.109-7 (governing settlements by determination). Ellett points out that under section (i) of that clause, [t]he contractor shall have the right of appeal, under the Disputes clause, from any determination made by the Contracting Officer under paragraph (d) [or] (f).... Id. § 52.249-2(i). 33 The right of appeal in the Disputes clause provides that [t]he Contracting Officer's decision [on a claim] shall be final unless the Contractor appeals or files a suit as provided in the Act. Id. § 52.233-1(f). Under the Act, a contractor may appeal a contracting officer's final decision to the appropriate agency board of contract appeals, 41 U.S.C. §§ 606-607 (1994), or to the Court of Federal Claims, id. § 609(a)(1). Indeed, the FAR grants contractors a right to appeal from a contracting officer's determination on a settlement proposal. 48 C.F.R. § 52.249-2(i). It does not speak of appealing that decision back to the contracting officer by submitting a new claim, a futile act. Cf. Reflectone, 60 F.3d at 1580-83 (requiring a contractor to resubmit a demand for payment after a contracting officer has denied it is inimical to two goals of the CDA: providing for the efficient and fair resolution of contract claims). 34 Nor is there a requirement that the settlement proposal be converted into a claim. To the contrary, the FAR envisions a direct appeal of the contracting officer's determination. In the cover letter the contracting officer identified the settlement determination as the final decision of the Contracting Officer, and provided the notice of appeal rights required by the FAR to be included in a contracting officer's final decision on a claim. 48 C.F.R. § 33.211(a)(4)(v) (1995). As further evidence of Ellett's appeal rights, 48 C.F.R. § 49.109-7(g) (Decision on the contractor's appeal  (emphasis added)) instructs the contracting officer to give effect to a decision of the [Court of Federal Claims] or a board of contract appeals, when necessary, by an appropriate modification to the contract. 35 There is no merit in the government's second argument that because the FAR specifically prohibits the payment of interest on amounts due under a settlement agreement or a settlement determination, see id. § 49.112-2(d), a settlement proposal cannot be a claim because the CDA grants contractors interest on claims. See 41 U.S.C. § 611 (1994). Aside from the circularity of this reasoning, generally no interest may be awarded on a claim against the United States absent an express contractual provision or act of Congress specifically providing for the payment of interest. Fidelity Constr. Co. v. United States, 700 F.2d 1379, 1383 (Fed.Cir.1983). In light of this, section 49.112-2(d) would be unnecessary unless a termination settlement proposal were a claim under which the contractor otherwise would be entitled to CDA interest. Thus, a termination settlement proposal can be a CDA claim, albeit one the regulation writers treat disparately for interest purposes. 36 The government's final argument, that because the termination settlement proposal was not properly certified, the court lacked jurisdiction, is also unavailing. It does not argue that the substance of the preprinted certification contained on the SF 1436 was in any way deficient. Indeed, it concedes that the certification Ellett submitted with its settlement proposal contained similar language to that of the CDA. Compare 48 C.F.R. § 53.301-1436 with 41 U.S.C. § 605(c)(1). Rather, the government says that Ellett certified its settlement proposal before any dispute existed. It relies on Santa Fe Engineers to argue that once the negotiations reached an impasse, Ellett was obligated to submit a new certification. 37 We part ways with the government at its predicate: that a proper certification of the settlement proposal was a jurisdictional prerequisite. We agree that the termination settlement proposal must be certified in accordance with the CDA. Moreover, the government correctly states that at the time Ellett filed its complaint in this case, certification in accordance with the CDA was jurisdictional. See United States v. Grumman Aerospace Corp., 927 F.2d 575, 579 (Fed.Cir.1991). However, the Federal Courts Administration Act of 1992, Pub.L. No. 102-572, § 907(a)(1), 106 Stat. 4506, 4518 (1992), amended the CDA to provide that [a] defect in the certification of a claim shall not deprive a court or an agency board of contract appeals of jurisdiction over that claim; the defective certification must be corrected prior to entry of final judgment or decision. See 41 U.S.C. § 605(c)(6) (1994). This amendment is applicable to all claims filed before October 29, 1992, except for those claims which, before [that date], have been the subject of ... a suit in the United States Claims Court. Pub.L. No. 102-572, § 907(a)(2), 106 Stat. at 4518. 38 It is true that Ellett filed suit in the Court of Federal Claims prior to October 29, 1992, but the sole subject of the action then was its November 17, 1988 purported claim. The issue was whether that letter, which Ellett argues was a claim submitted separately and independently of its settlement proposal, see infra, constituted a valid claim and was properly certified. It was not until after we remanded the case and proceedings resumed that Ellett's termination settlement proposal became a subject of the suit. Consequently, because it was not until sometime after October 29th that Ellett's March 3, 1989 termination settlement proposal was put before the court, certification of the proposal was not a jurisdictional prerequisite. 39 The government recognizes that in Reflectone we overruled Santa Fe Engineers to the extent that it required a preexisting dispute for a nonroutine request for payment to constitute a CDA claim. Nevertheless, it argues that case is still good law to the extent that it held that ... when there is a routine request for payment ... the claim must be certified after the dispute arises. Of course, we have already held that a termination settlement proposal is a nonroutine request for payment, so this argument also fails. There was jurisdiction.