They say that hindsight is 20/20. Who is they, anyway? The old proverb means that it is easy to understand something after it has already happened. In the world of construction contracts, preservation of claims made in hindsight does not always get you what you want.
In Appeal of Matcon Diamond, Inc., ASBCA No. 59637 (Feb. 20, 2020), the Armed Services Board of Contract Appeals recently denied a claim for Eichleay home office overhead delay damages because: (1) the contractor failed to show there was a critical path impact or that the Government’s actions impacted the critical path; and (2) the claim was barred because it was not presented prior to final payment. The opinion in Matcon Diamond is a good read for government contractors wanting to understand delay claims, critical path schedules, contractor delays versus Government delays, Eichleay formula for quantifying damages and understanding the difference between work stoppages and standby or idle periods of time. You can get a copy of the decision here.
As to the preservation of the contractor’s claim, the ASBCA held that the contractor submitted its claim for delay damages after receipt of final payment. The Government’s final payment defense is an affirmative defense on which the Government bears the burden of proof. Final payment does not bar a claim where the contracting officer knows that the contractor is asserting a right to additional compensation, even though a formal claim has not been filed.
Based upon the record, the Board concluded that the contractor never presented, let alone formulated, a claim for extended home office overhead. At the time the contractor submitted its final invoice (which was five months after completion), the contractor did not inform the contracting officer of its intent to seek additional compensation. Nonetheless, the contractor argued that an email sent ten days after final payment had properly and timely put the government on notice. The Board disagreed: “This email, however, does not establish that, at the time of final payment, [the government knew the contractor] was asserting a right to additional compensation.”
So what? Again, the opinion is a good refresher on delay claims and the required proof for a contractor to support its claims. But more importantly, contractors are advised to adhere to all notice provisions in the contract and applicable regulations, and especially, to submit notice of an intent to seek additional compensation before submitting a request for final payment. Given the language in the Board’s opinion, it is also likely that a mere “reservation of rights” statement will be insufficient to actually put the government on notice of a claim.