By: John J.P. Krol Published: July 2016

Federal Contracts, the Boards of Contract Appeals, and Federal Liability under Integrated Design and Construction Contracts

Those of you who work regularly at West Point, at Picatinny Arsenal, or for the General Services Administration know that most federal agencies employ informal in-house procedures to resolve contract disputes.  But what if those in-house procedures fail, and that the contractor must proceed against a federal agency?  What is the route for dispute resolution? 

In order to litigate a federal government contract claim, the contractor must proceed either in the United States Court for Federal Claims in Washington, D.C. or in one of the many Boards of Contract Appeals, such as, the Armed Services Board of Contract Appeals, the General Services Board of Contract Appeals, or the Civilian Board of Contract Appeals.  The advantage of appearing before Boards of Contract Appeals is that the trials are held in the general locale of the project.  The judges come to you.

These Boards of Contract Appeals, although administrative in nature, are not as favorable to the government agency as their status as a fellow government agency may suggest. One such case where the contractor prevailed in front of a Board of Contract Appeals was Kiewit-Turner, a Joint Venture v. Department of Veterans Affairs, which involved the construction of a Veteran Affairs (VA) medical center campus in Colorado.  The VA had awarded a contract for preconstruction services to Kiewit-Turner, a Joint Venture (KT) with an option for performance of construction services.  However, the design was already 50% complete when the VA hired KT.  All funding decisions had been made and the VA had established construction costs at $582 million.  At the 65% design phase, KT advised the VA that construction would cost $664 million.

The Board found that the VA knew that the design was over budget by approximately $200 million.  It found in addition that the VA failed to control its design team, failed to process change orders, failed to make timely payments, and drove up the costs of construction.  The Board found that under these circumstances, KT was entitled to stop work. The Board cited an engineer’s description of the VA team as the “least effective and most dysfunctional [VA] staff on any project that [he] had ever seen.”

Following the Board’s decision, the VA found additional funding to cover more than $150 million in delinquent payments to KT.  KT has resumed construction work on the project on a cost-reimbursable basis.

Prevailing on any claim, before a court or before a Board of Contract Appeals, requires properly documenting that claim and presenting it in such a manner as to show entitlement under the contract. You should contact your construction counsel as soon as you believe that you may have an issue so as to be able to sufficiently document your claim during the project, and so that you can have it properly presented afterwards.

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