As contractors begin to resume performance from stop-work orders or other delays brought by the shutdown, it’s important to know what kind of contractual relief is available. This article will focus on the main differences between a claim and a request for equitable adjustment (REA).
Claim and REA criteria:
We’ll start with what FAR 2 requires for a demand for relief to be a claim (with some commentary):
- It must be in writing: It doesn’t have to be a certified letter. An e-mail can suffice, as can a fax.
- It must ask for something: It doesn’t have to be money. It can be for a change to the contract terms or even an interpretation of them. Requests for payment over $100K requires certification by the requester in order for it to “count” as a claim, though. If it is for an amount of money, the amount must be stated (called a “sum certain” in FAR 2).
- It can’t be “routine”: An invoice or voucher that complies with the terms and conditions of the contract for an agreed amount that would be sent to the Government at a normal time or instance would not meet the criteria. However, if the request was previously submitted as a routine invoice and the Government did not act on it in a reasonable time, then it may very well become a claim.
REAs are, simply, non-routine requests for payment or changes/interpretation that do not meet FAR 2’s definition of a claim. These usually stem from a change made by the Government that neither party disputes, like a change of scope.
Interpretation and Adjudication by the CO
Contracting Officers are required to review any request for payment or adjustment against the FAR’s criteria for a claim before adjudicating that request. A request submitted as an REA may, for example, be converted into a claim if the CO determines that it meets the definition of a claim and will treat it by those standards. They may also convert a claim to an REA. The standard of proof is enshrined in the FAR, and the CO will compare what they received with that definition before doing anything else. Some REAs are claims, and the CO has to “check” to make sure. If the REA has the elements of a claim, a CO is going to process it as one and issue a final decision in accordance with FAR 52.233-1, Disputes.
Why does this happen? There are some good reasons for this. The main reason is because there is not a “book answer” distinction outside the FAR 2 definition. Some contractors may want to avoid perception of friction by submitting that request as an REA, even though what they’re asking for meets every element of a claim. They may also do this because they assume what they are asking for will be rejected by the CO, and “skip” to a claim. So, the CO will perform that evaluation themselves and act accordingly.
Positive Steps for Payment: Recommendations for Contractors
As a CO, here are some things that helped me process a request from one of my industry partners more quickly:
- A brief timeline of the circumstances relating to the request. As a CO, it helped to be reminded as to “how we got here”. This becomes more important as the time passes between when the situation happened and when you file your request/claim.
- Specifically what changes you are looking for. Is it a change to payment terms, for example, from x days to y? If it’s money, to what contract line item and why?
Finally, if you’re seeing a theme in my posts here about communication, there’s a reason for this. Like all other issues in contract administration, communication is king! If there is something happening that would require either an REA or claim, it’s helpful for both parties to talk about it before proceeding. In most cases, a CO can go through what’s being requested and help chart the right path. This can reduce time and effort for everyone involved.
