Court Opinion

ID: 4506929
Source: CourtListenerOpinion
Date Created: 2020-02-12 19:00:07.577033+00
Date Added: 2024-06-11T15:43:13.776329
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                            )
                                        )
SBH Services & CORE Construction, JV II )             ASBCANo. 61714
                                        )
Under Contract No. W912QR-14-C-0001     )

APPEARANCES FOR THE APPELLANT:                        Ms. Sharon Athas Cote
                                                       Managing Partner

                                                      Derrick Haddox, Esq.
                                                       Swanson, Martin & Bell, LLP
                                                       Chicago, IL

APPEARANCES FOR THE GOVERNMENT:                       Michael P. Goodman, Esq.
                                                       Engineer Chief Trial Attorney
                                                      R. Lauren Homer, Esq.
                                                       Engineer Trial Attorney
                                                       U.S. Army Engineer District, Louisville

         OPINION BY ADMINISTRATIVE JUDGE SHACKLEFORD ON
   THE GOVERNMENT'S MOTION TO DISMISS FOR LACK OF JURISDICTION

        The government moves to dismiss this appeal for lack of subject matter
jurisdiction, alleging that appellant failed to properly certify its claim in accordance with
the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109. The government also asserts
that the underlying claim was brought as a pass-through claim by a second-tier
subcontractor that lacks privity with the government. For the reasons set forth below, the
government's motion is denied.

         STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

         1. On November 27, 2013, the United States Army Corps of Engineers (government)
 awarded Contract No. W912QR-14-C-0001 to SBH Services & CORE Construction, JV II
. (SBH or appellant) for the construction of Barkley Elementary School, Fort Campbell, KY at
 a base price of $38,670,097.00, with the opportunity for future options to be awarded at a
 later date (R4, tab 2 at 6).

       2. SBH executed a subcontract agreement with MPS Geothermal (MPS) on May 21,
2014, for the furnishing of all labor, materials, equipment, and other necessary construction
services required for a complete "turnkey" construction of Barkley Elementary School at
Fort Campbell, KY (R4, tab 11 at 3370).
       3. Sometime thereafter, MPS entered into a subcontract with Jackson & Sons
Drilling & Pump, Inc. (Jackson or second-tier subcontractor) (compl. il 11; answer i-111).

        4. By serial letter S-0089, dated December 5, 2016, 1 SBH submitted to the
government a request for equitable adjustment (REA) for "Geothermal Different [sic]
Site Conditions" in the total amount of $1,899,636.00 and for a 63-day time extension.
The total amount sought included amounts for MPS, Byrd Survey, Charles Dewesee
Construction, S&:ME and SBH. (R4, tab 446 at 4939-40) Included as part of the REA
transmitted with S-0089 was a two-page letter from Jackson, the second-tier
subcontractor, addressed to the contracting officer (CO) and purporting to be a claim for
its portion of the REA ($1,008,547.49). That letter was dated November 4, 2016 and was
submitted and certified by James D. Jackson, President of second-tier subcontractor
Jackson. While that certification included all of the assertions required for a claim
certification under the CDA, 41 U.S.C. § 7103 (b), including that he was "authorized to
certify the claim on behalf of the Contractor," he also made clear that he signed in his
capacity as President of Jackson & Sons Drilling & Pump, Inc. (Id. at 4942-43)

      5. By letter dated December 15, 2016, the CO requested clarification on whether
SBH's December 5, 2016 letter was an REA, or whether appellant was seeking "a Final
Contracting Officer's Decision in accordance with 41 U.S.C. § 7103" (R4, tab 447).

        6. By letter dated December 22, 2016 to the Louisville, KY District Corps office, and
not to Fort Campbell as other correspondence was addressed, SBH seemed to affirm that the
December 5, 2016 package submission "was meant to be a REA" (R4, tab 448). Later, a
letter dated April 4, 2017 advised that the December 5, 2016 correspondence was intended
for another REA, not the one for Geothermal differing site conditions (R4, tab 450).
Because it was not addressed to Fort Campbell, but to another Corps office, we find that the
December 5, 2016 letter was, in fact, meant for a separate REA.

       7. By serial letter S-0095, dated March 10, 2017, SBH stated:

             This letter is sent in reference to SBH I CORE letter S-0095[ 2]
             and documentation submitted with that letter, which USACE
             acknowledged they were in receipt on January 4th, 2017. We
             want to bring to your attention that all the documentation

1
  Serial letter S-0089 is undated; however, the government asserts it received a package
       containing S-0089 that was dated December 5, 2016 (R4, tab 447). Appellant
       does not contest this date.
2
  Appellant twice incorrectly referenced S-0095. The correct letter of reference is S-0089,
     v which included the documentation SBH asserts was submitted as a claim. Appellant
       corrects this error in S-0098. (R4, tab 450)

                                            2
                turned in with S-0095 was submitted as a Claim, and not as
                an REA.

(R4, tab 449)

      8. By serial letter S-0098, dated April 4, 2017, and headed: "Subject Matter:
Claim for Geothermal Different [sic] Site Conditions", SBH stated:

                This letter is sent to provide clarification about Different [sic]
                Site Conditions for Geothermal which was submitted as a
                Claim under SBH \ CORE letter S-0089, and USACE
                acknowledged that they were in receipt of the letter and
                package on January 4th, 2017. The Claim was put together
                by the attorney representing Jackson Geothermal (2nd tier
                subcontractor) to SBH I CORE. The claimant has certified
                the Claim and it was included in the packet submitted under
                S-0089. All the documentation supporting this Geothermal
                Claim were submitted under SBH I CORE letters S-0089 and
                S-0095.

(R4, tab 450 at 5173) Serial letter S-0098 was on SBH letterhead, included a CDA claim
certification making all of the required assertions, and was certified by Saravanan Sathya,
the SBH Project Manager (id) . .We find as fact that the claim was perfected upon
submission of the Project Manager's CDA certification on April 4, 2017.

        9. On April 24, 2018, the CO issued a final decision (COFD). The CO notified
SBH that for the purposes of this decision, he would treat serial letters S-0089 and S-0095
as a "claim." (R4, tab 1 at 1)

       10. The COFD stated that SBH had shown some entitlement warranting some sort
of compensation for differing site conditions, but no additional time. However, the CO
ultimately concluded that, although some merit to the claim was found, the government
was "unable to fix an amount for a contract modification and must leave that for further
negotiation and/or adjudication." (Id. at 5)

       11. By letter dated July 20, 2018, appellant timely filed a notice of appeal to the
Board, which the Board docketed as ASBCANo. 61714.

                                          DECISION

       The government contends that the Board lacks jurisdiction over this appeal because
appellant failed to properly certify its claim in accordance with the CDA (gov't mot. at 1).
The government's motion asserts that serial letter S-0098 fell short of the necessary

                                                3.
requirements to convert appellant's REA into a claim in two different aspects:
                                                                                      .   '

1) appellant named Jackson as the claimant; and 2) appellant discussed two different
matters in the claim but failed to clarify which issue was being certified ( id. at 10-11).
Additionally, the government contends that SBH's claim is a "pass-through claim" from a
subcontractor that lacks privity with the government (id. at 1). Firstly, Jackson is not the
only subcontractor with a claim; moreover, the prime contractor, SBH, also has a part of
the claim. Secondly, we were not confused by the discussion of two matters in S-0098;
appellant made it clear that the other matter was not relevant, thus the certification clearly
only applied to the differing site conditions claim on behalf of :MPS, other subcontractors
and the prime. That claim was perfected on April 4, 2017 when the prime contractor
submitted a proper CDA certification (SOF , 8).

        The cornerstone of the Board's jurisdiction over a contractor claim lies in the
contractor's submission of a proper claim to the CO for a decision. Air Services, Inc.,
ASBCA No. 59843, 15-1, 36,146 at 176,424 (citing Puget Sound Environmental Corp.,
ASBCA Nos. 58827, 58828, 14-1 BCA, 35,585 at 174,371). The CDA does not define
the term "claim," however, the Federal Acquisition Regulation (FAR) defines a "claim"
as "a written demand or written assertion by one of the contracting parties seeking, as a
matter of right, the payment of money in a sum certain, the adjustment or interpretation
of contract terms, or other relief arising under or relating to the contract." FAR 2.101.
Any purported claim that exceeds $100,000 must be certified in accordance with
41 U.S.C. § 7103(b) or it will not qualify as a CDA claim. FAR2.101. The Board
decides if a contractor's submission is a CDA claim on a "case-by-case" basis, applying a
common sense analysis. Air Services, 15-1 'ti 36,146 at 176,424 (citing CCIE & Co.,
ASBCA Nos. 58355, 59008, 14-1 BCA, 35,700 at 174,816; Precision Standard, Inc.,
ASBCA No. 55865, 11-1 BCA, 34,669 at 170,787). The Board has found that the
sufficiency of a claim may be detennined based on the totality of the correspondence
between the parties. Air Services, 15-1, 36,146 at 176,424 (citing Lael Al Sahab & Co.,
ASBCA Nos. 58344, 59009, 15-1 BCA, 35,809 at 175,129; Vibration & Sound
Solutions Ltd., ASBCA No. 56240, 09-2 BCA, 34,257 at 169,270).

        The government makes numerous arguments as to why appellant's claim was not
properly certified in accordance with the CDA (gov't mot. at 9-18), ultimately concluding
that as a result, no valid claim exists and the Board must dismiss the appeal (gov't mot.
at 9). As noted, we found otherwise and the claim was, in fact, properly certified on
April 4, 2017 (SOF, 8).

      The CDA, at 41 U.S.C. § 7103(b)(l), requires that contractor claims submitted for
more than $100,000 shall contain the following certification:

             a) the claim is made in good faith;
             b) the supporting data are accurate and complete to the best of
             the contractor's knowledge and belief;

                                             4
              c) the amount requested accurately reflects the contract
              adjustment for which the contractor believes the Federal
              Government is liable~ and
              d) the certifier is authorized to certify the claim on behalf of
              the contractor.

A defective certification does not deprive the Board of jurisdiction over the claim but the
Board must require correction of the certification prior to entry of a final decision, 41
U.S.C. § 7103(b)(3). FAR 33.201 defines a "defective certification" as "a certificate
which alters or otherwise deviates from the language in 33.207(c) or which is not
executed by a person authorized to bind the contractor with respect to the claim. Failure
to certify shall not be deemed to be a defective certification."

        The government's reference to Eurostyle Inc., ASBCA No. 45934, 94-1 BCA
126,458 misses the mark (gov't mot. at 9). In Eurostyle Inc., the contractor submitted a
certified claim for a time extension but did not include any monetary claim for damages,
making a certification for that claim irrelevant as the later demand for money was beyond
the scope of the appeal. 94-1 BCA 126,458 at 131,654-55. In this appeal, appellant's
monetary claim in the amount of $1,899,636.00 was submitted to the CO along with a
proper CDA claim certification (SOF 1 8). Therefore, the Board concludes that a valid
claim under the CDA exists.

        The government argues that appellant was required to provide a new written notice
to the CO in order to convert its REA into a claim in conformity with FAR 2.101 (gov't
mot. at 10). We disagree. FAR 2.101 states that "[a] voucher, invoice, or other routine
request for payment that is not in dispute when submitted is not a claim. The submission
may be converted to a claim, by written notice to the contracting officer as provided in
33.206(a) .... " Appellant informed the government that it intended its REA submission
to be treated as a claim, and also provided the necessary CDA claim certification
(SOF 117-8). The Board views appellant's submission as conforming to FAR 2.101.

       The government contends that the Board cannot find appellant's REA is a
defective claim that can be corrected, but the government relies on authority that is not
binding upon the Board when citing to Agility Def & Gov 't Servs. v. United States, l 03
Fed. Cl. 366, 369 (2012) (gov't mot. at 10). Moreover, the facts in the instant case are
distinguishable from those of Agility. Here, SBH provided all four certification
statements required of a claim under the CDA (SOF 1 8).

       The government also argues that the claim in serial letter S-0098 names
second-tier subcontractor Jackson as the claimant, and due to Jackson being named the
claimant, the certification provided in appellant's claim bears no weight (gov't mot.
at 10-11 ). Appellant counters by noting the common practice for prime contractors to

                                              5
sponsor a subcontractor's claim, and in some cases allowing the subcontractor's counsel
to prosecute claims in the name of the prime (app. resp. at 9).

          It is well settled that a subcontractor '"may prosecute its claims only through, and
  with the consent and cooperation of, the prime .... "' Marine Contractors, Inc., ASBCA
 No. 54017, 03-1BCA132,240 at 159,425 (quoting Erickson Air Crane Co. of
  Washington, Inc. v. United States, 731 F.2d 810, 814 (Fed. Cir. 1984)). A prime
  contractor 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." Erickson, 731 F.2d at 813. When a
 prime contractor sponsors the appeal of its subcontractor, the prime contractor "must
  itself' certify the claim. Doyon Properties-American, JV, ASBCA No. 55842, 08-1 BCA
 133,752 at 167,082 (citing St. Paul Fire and Marine Insurance Co., ASBCA No. 53228,
  02-2 BCA 132,025; Continental Maritime of San Diego, Inc., ASBCA No. 36733, 89-1
 BCA 121,249; Raymond Kaiser Engineers, Inc./Kaiser Steel Corp., JV, ASBCA
 No. 34133, 87-3 BCA 120,140).

       The claim was prepared by the attorney representing Jackson through and in SBH' s
name (SOF 18). Appellant's serial letters S-0089, S-0095, and S-0098 were submitted on
appellant's letterhead and signed by appellant's project manager (SOF 114, 7-8). 3 The
Board notes that the claim certification submitted by Jackson in S-0089 was invalid, since
Jackson was a second-tier subcontractor not in privity with the government, but this was
cured by S-0098, which contained a proper CDA claim certification by appellant
(SOF ,r 4, 8). We find that Jackson properly brought its claim through and with the consent
of SBH, and in SBH's name. We also find that SBH properly sponsored Jackson's appeal.

        The government contends that appellant discussed two matters in serial letter S-0098,
and it was unclear as to which matter was being certified. Due to this lack of clarity, the
government argues that appellant failed to convert its REA to a CDA claim. (Gov't mot.
at 11) We disagree. Appellant clearly stated in S-0098 that the "Different [sic] Site
Conditions for Geothermal" in S-0089 were submitted as a claim. Appellant further stated
that all of the supporting documentation submitted under S-0089 and S-0095 were
submitted as a claim. SBH concluded S-0098 with a proper CDA claim certification.
(SOF 8; app. resp. at 11) The government's argument here is unfounded and entirely based
on opinion, without any legal authority to support its assertions. The Board has found no
confusion that would warrant the complete disregard of appellant's proper CDA claim
certification.

3
    At no point does the government contend appellant's project manager was not duly
         authorized to certify the claim on behalf of the appellant.

                                              6
       Lastly, based on the Severin doctrine (Severin), the government asserts that
appellant is barred from bringing forth a claim (gov't mot. at 11 ). In Severin, the court
held that a prime contractor is precluded from sponsoring a subcontractor's claim against
the government if the prime contractor is not liable for the subcontractor's damages.
Severin v. United States, 99 Ct. Cl. 435, 442-44 (1943). The government bears the burden
of proof in showing that Severin applies. See E.R. Mitchell Construction Co. v. Danzig,
175 F.3d 1369, 1370 (Fed. Cir. 1999) (citation omitted). However, an argument based on
Severin should be decided on the merits of the case. To issue a dismissal in a motion to
dismiss for lack of jurisdiction "on Severin grounds is unwarranted." BearingPoint, Inc.,
ASBCA No. 55354, 08-2 BCA ,r 33,890 at 167,732.

      We find that appellant properly certified its claim in accordance with the CDA and
the Board has jurisdiction over this appeal.

                                    CONCLUSION

      The government's motion to dismiss for lack of jurisdiction is denied.

      Dated: January 27, 2020

                                                 RICHARD SHACKLEFORD
                                                 Administrative Judge
                                                 Acting Chairman
                                                 Armed Services Board
                                                 of Contract Appeals

                                                 I concur

Administrative Judge                                ministrative Judge
Vice Chairman                                    Armed Services Board
Anned Services Board                             of Contract Appeals
of Contract Appeals ·

                                           7
       I certify that the foregoing is a true copy of the Opinion and Decision of the Armed
Services Board of Contract Appeals in ASBCA No. 61714, Appeal of SBH Services &
CORE Construction, JV II, rendered in conformance with the Board's Charter.

      Dated:

                                                 PAULLA K. GATES-LEWIS
                                                 Recorder, Armed Services
                                                 Board of Contract Appeals

                                            8