By: Edward T. DeLisle & Maria L. Panichelli
Many contractors know that there is a six-year statute of limitations on claims brought under the Contract Disputes Act (“CDA”) and Section 33.206 of the Federal Acquisition Regulations (“FAR”). However, most contractors incorrectly assume that for claims pertaining to delay, or acceleration, the six-year statutory period begins to run only upon project completion or at some point in close proximity to completion, when the contractor is able to more accurately quantify its loss. This assumption is incorrect and can have severe consequences: once the limitations period expires, a claim is forever waived. As such, it is critically important to accurately assess the time at which the six year limitations period begins to run.
Pursuant to the CDA and the FAR, a claim must be submitted to the Contracting Officer within six years of the date upon which that claim “accrues.” Accrual occurs when all events that fix liability are known, or should be known, by the contractor. For liability to be fixed, an injury, or some type of impact or harm, must have occurred. However, monetary damages need not have been incurred, or do not have to be known, for accrual of a claim to take place (See FAR § 33.201). As such, events that result in delay, or acceleration, are likely to occur well before project completion, especially on large, complex projects and, even though the extent of the harm may not be known at that time, a “claim” has been born. To most contractors, this is rather counterintuitive — it seems almost nonsensical to require a contractor to pursue, or even certify, a claim before a project is complete and the full range of excess costs are known. While this might be true, courts and agency review boards regularly rule against contractors who wait too long to assert a claim and attempt to make such an argument. (E.g. In Re Robinson Quality Constructors, ASBCA No. 55784, 09-1 B.C.A. (CCH) ¶ 34048 (Jan. 6, 2009)).
Contractors have attempted to argue that the six-year limitations period should be “equitably tolled” based on government misconduct. Equitable tolling essentially means that the limitations period stops running based upon issues of fairness. Historically, these arguments have been premised on the notion that the clock should stop ticking if a litigant can establish: (1) that he had been pursuing his rights diligently; and (2) that some extraordinary circumstance stood in his way that was not his fault. (E.g. Arctic Slope Native Association, Ltd. v. Sebelius, 583 F.3d 785, 798 (Fed Cir. 2009); Menominee Indian Tribe of Wisconsin v. United States, 2012 WL 192815 (D.D.C. 2012)). However, in a recent opinion, the United States Court of Appeals for the Federal Circuit held that 28 U.S.C. § 2501 (the statutory provision defining the CDA’s limitations period) creates an absolute bar of any claim submitted beyond 6 years, if that claim is pursued in the United States Court of Federal Claims (“CFC”), thereby eliminating the equitable tolling argument in that forum. FloorPro, Inc. v. United States, 2012 WL 1948997 (May 31, 2012). While other opinions suggest that the CDA’s statute of limitations might, nonetheless, be subject to equitable tolling if the contractor’s claim is pursed before an agency or board of contract appeals (see, e.g. Arctic Slope, supra), the CFC is often viewed as a more favorable forum. Therefore, contractors should, if at all possible, avoid triggering the limitations bar, which would preclude adjudication of their claim before the CFC. This can only be accomplished if the contractor acts promptly and accurately determines when liability was “fixed.”
Accurately assessing when a party’s liability becomes “fixed” in relation to a claim can involve a complicated analysis, and is very fact-specific. Accordingly, contractors should track any increased costs as they are incurred, and seek professional advice as soon as it appears that there is a basis for a claim, regardless of when the project may attain completion.
Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.