The U.S. Army Corps of Engineers awarded an $88 million contract for the construction of a fifty-three mile road around a tropical island in the North Pacific. During contract performance, the contractor submitted a certified claim contending that the contract clause, "Time Extensions for Unusually Severe Weather," was defective, resulting in a gross misrepresentation of the number of adverse weather days that could be anticipated during performance of the work. The contractor also contended that reliance on the defective specification led to an increase in the cost to perform the work. The certified claim included costs incurred up to the date of the claim submission and costs estimated to be incurred in the future.
The United States Court of Federal Claims found that $50 million of the contractor’s certified claim of $63.4 million was clearly fraudulent. During the trial, witnesses, including the corporate officer who certified the claim, testified that the $50 million claim "was a means to get the Government’s attention, and to show the Government what would happen if it did not approve the new compaction method that plaintiff wanted." The Court stated that this part of the certified claim was not submitted in good faith, and was not for an amount which the Plaintiff honestly believed it was entitled. Daewoo Engineering and Construction Co., LTD. v. U.S., No. 02-1914C, October 13, 2006. Accordingly, the projected additional costs based on estimates, and not yet incurred, were found to be fraudulent.
Characterizing the contractor’s submission as a "negotiating ploy," the Court stated that "using a claim to gain leverage against the United States violates the principle on which Congress enacted the Contract Disputes Act, including its efforts to prevent contractors from using the claims process to obtain higher profits. Congress called it ‘horse trading’." The Court was highly critical of the credibility of the contractor’s witnesses, and even commented that the contractor’s intent "was to obtain the contract, then profit through demands for equitable adjustments." The Court’s decision demonstrates that a contractor must be certain that the amount requested in a certified claim accurately reflects the contract adjustment for which the contractor actually believes the Government is liable. Put simply, it is not a good idea to use a claim to “get the government’s attention.”