In federal government contracting, contractors seeking adjustments to contract terms or compensation due to unforeseen issues, such as delays or cost overruns, have two primary avenues: submitting a Request for Equitable Adjustment (REA) or filing a claim under the Contract Disputes Act (CDA). While both mechanisms aim to address disputes, they differ in formality, process, and legal implications. The Zafer Construction Company v. United States case (Federal Circuit, 2022) provides critical guidance on these distinctions and clarifies when an REA may be treated as a CDA claim. This article explores the differences between an REA and a CDA claim, drawing on Zafer to illustrate when an REA can satisfy the requirements of a claim in the context of federal contracts.
Understanding REAs and CDA Claims
Request for Equitable Adjustment (REA)
An REA is an informal request submitted to a contracting officer seeking an equitable adjustment to the contract price or schedule, typically due to changes in contract conditions, delays, or differing site conditions. REAs are rooted in contract administration and are designed to facilitate negotiation and resolution without triggering the formal dispute resolution process under the CDA. Key characteristics of an REA include:
- Informality: REAs are not subject to the strict procedural requirements of CDA claims, such as mandatory certification for claims over $100,000.
- Negotiation Tool: REAs allow contractors and the government to discuss and resolve issues collaboratively, often resulting in a change order that avoids litigation.
- No Statutory Time Limits: Unlike CDA claims, REAs are not bound by the six-year statute of limitations for submission or the 60-day requirement for a contracting officer’s decision, providing flexibility for negotiations.
However, prolonged negotiations without resolution can delay a contractor’s ability to pursue formal remedies, potentially risking the CDA’s statute of limitations.
CDA Claim
A CDA claim, governed by the Contract Disputes Act (41 U.S.C. §§ 7101–7109), is a formal written demand or assertion by a contractor seeking relief as a matter of right, such as payment of a specific sum, adjustment of contract terms, or other relief arising under or relating to the contract. The Federal Acquisition Regulation (FAR) 52.233-1 defines a claim as a written demand that includes a sum certain and, for claims exceeding $100,000, a certification attesting to the claim’s good faith and accuracy. Key features include:
- Formality: Claims must meet specific requirements, including an explicit or implicit request for a Contracting Officer’s Final Decision (COFD) and, for claims over $100,000, certification.
- Statutory Deadlines: Claims must be submitted within six years of accrual, and the contracting officer must issue a decision within 60 days (or provide a timeline for claims over $100,000). Failure to issue a decision may be treated as a “deemed denial,” allowing an appeal.
- Appeal Process: If the contractor disagrees with the COFD, they may appeal to an agency Board of Contract Appeals (BCA) within 90 days or file suit in the U.S. Court of Federal Claims within 12 months.
CDA claims initiate a formal dispute resolution process, which can lead to litigation if negotiations fail.
The Zafer Case: When an REA Becomes a Claim
The Zafer Construction Company v. United States case (Federal Circuit, 2022) provides a pivotal example of how an REA can be treated as a CDA claim, highlighting the objective criteria that determine this classification. In Zafer, the contractor submitted an REA seeking $6.7 million for additional costs incurred during a federal construction project. After four and a half years of unsuccessful negotiations, the contractor converted the REA into a certified CDA claim. The contracting officer denied the claim as untimely, arguing that it was filed more than six years after the claim’s accrual. The Court of Federal Claims agreed, finding that the original REA did not qualify as a claim. The Federal Circuit reversed this decision, holding that the REA met the objective indicia of a CDA claim, making it timely.
The Federal Circuit’s analysis in Zafer focused on three key criteria for determining whether an REA qualifies as a CDA claim:
- FAR Definition of a Claim: The REA must meet the FAR’s definition of a claim, which requires a written demand seeking, as a matter of right, payment of a sum certain, adjustment of contract terms, or other relief arising under or relating to the contract. In Zafer, the parties agreed that the REA satisfied this definition, as it clearly outlined the basis and amount of the requested adjustment.
- Certification Requirements: For claims over $100,000, the FAR requires certification stating that the claim is made in good faith, the supporting data are accurate, the amount requested reflects the adjustment for which the contractor believes the government is liable, and the certifier is authorized to act on the contractor’s behalf. Zafer’s REA included a certification that met these stringent requirements, which was a critical factor in the court’s decision.
- Request for a Final Decision: A claim must include a clear and unequivocal request for a COFD. The Federal Circuit emphasized that this “request requirement” is evaluated objectively, based on the document’s content, not the contractor’s subjective intent. In Zafer, the REA provided adequate notice of the basis and amount of the claim and implicitly sought a final decision, satisfying this criterion.
The court clarified that an REA can constitute a claim if it contains these elements, regardless of how it is labeled. This ruling underscores that the classification of a submission as an REA or a claim depends on its substance, not its title.
Distinctions and Strategic Considerations
The Zafer case highlights the nuanced differences between REAs and CDA claims and the strategic considerations contractors must weigh:
- Procedural Flexibility vs. Formality: REAs offer a less rigid process, allowing contractors to negotiate without triggering the CDA’s strict timelines. As Zafer demonstrates, an REA that meets the criteria of a claim may be treated as such, potentially starting the clock for CDA deadlines.
- Certification Risks: REAs typically do not require certification unless seeking compensation exceeding the simplified acquisition threshold from a Department of Defense agency. Including a CDA-compliant certification, as in Zafer, can increase the likelihood of an REA being treated as a claim.
- Timing and Deadlines: The CDA imposes a six-year statute of limitations for claims, which begins when the claim accrues (i.e., when all events fixing liability are known or should have been known, per FAR 33.201). Zafer illustrates that an REA meeting claim criteria can satisfy this deadline, but contractors must monitor negotiation timelines to avoid missing the window to convert an REA into a formal claim if negotiations fail.
- Negotiation vs. Litigation: REAs are negotiation tools that can lead to change orders, avoiding the adversarial nature of CDA claims. Zafer warns that contractors should not rely on endless negotiations, as delays may jeopardize their ability to pursue formal remedies. If a contracting officer appears unwilling to issue a change order, contractors should consider promptly converting the REA into a certified claim to preserve their rights.
Practical Implications for Contractors
The Zafer decision offers valuable lessons for contractors navigating disputes in federal contracts:
- Draft Carefully: When submitting an REA, contractors should draft it carefully to avoid it being mistaken for a CDA claim. This means avoiding elements like CDA-claim certification, a request for a Contracting Officer’s Final Decision, and language that could be interpreted as seeking relief as a matter of right. So doing preserves the REA’s role as a negotiation tool and avoids triggering CDA deadlines prematurely. Conversely, when submitting a CDA claim, contractors must ensure it meets all legal requirements, including a clear sum certain, proper certification for claims over $100,000, and an unequivocal request for a final decision, to avoid procedural challenges.
- Monitor Deadlines: Contractors must track the six-year statute of limitations for CDA claims, especially during extended REA negotiations. Legal counsel can help assess when to convert an REA into a claim to avoid timeliness issues, as seen in Zafer.
- Document Thoroughly: Both REAs and claims require clear documentation of the dispute’s basis and costs. In Zafer, the REA’s detailed submission and certification were critical to its recognition as a claim.
- Seek Legal Guidance: The complexity of distinguishing between REAs and claims, as highlighted by Zafer, underscores the importance of consulting experienced government contracts counsel. Legal advice can guide contractors in choosing the appropriate remedy and avoiding procedural pitfalls.
Conclusion
In federal government contracting, REAs and CDA claims serve distinct purposes: REAs facilitate informal negotiation, while CDA claims initiate a formal dispute resolution process with strict procedural requirements. The Zafer Construction Company v. United States case clarifies that an REA can be treated as a CDA claim if it meets the FAR’s definition of a claim, includes proper certification (for claims over $100,000), and requests a final decision. Contractors must carefully draft REAs, monitor CDA deadlines, and strategize to balance negotiation flexibility with the need to preserve formal remedies. By understanding these distinctions and learning from Zafer, contractors can better navigate disputes and protect their rights under federal contracts.
For assistance with REAs, CDA claims, or other federal procurement challenges, contact Pannier Law, P.C. at (310) 971-5093 or visit www.pannierlaw.com.
Disclaimer: * This article is provided for information purposes only. It does not constitute legal advice. It is not intended to form an attorney-client relationship. Any legal advice should be sought from an attorney. Consult a qualified attorney for advice specific to your situation. *
About the Author: William Pannier is the founder of Pannier Law, with over 20 years’ experience as a Government Contracts attorney.