How To Prepare a Federal Government Construction Claim

Request for Equitable Adjustment and Construction Claims (Part 1)

By Kay Kendall

In the last article, “That’s Not In the Contract, Do I Still Have To Do It?” we discussed Requests for Equitable Adjustment (REAs) and Certified Claims.

The Federal Acquisition Register (FAR) provides government contracting guidelines for the government and contractors, including standard clauses for changes, differing site conditions, suspensions and terminations.  The FAR also provides detailed cost principles for costs that are allowable and allocable to government contracts.

Documentation, Documentation, Documentation!

Let’s take a quick sidebar into contract administration.  In this age of email and text messaging, it may seem convenient at the moment to send informal texts and emails for short communications, but when trying to piece events back together for documentation of REAs or Claims, often the communications are lost or difficult to find.

Many times those short communications make sense at the time because a phone call or a face-to-face conversation took place immediately before, but six months or a year later, they are unintelligible.  Therefore, contractors should establish an organized method for tracking communications and documentation for each project.

Letters should be assigned serial numbers and include the serial number and the purpose of the letter in its subject or reference line.  Request for Information (RFI) logs should be used to track RFI submissions and responses.  Other useful tracking systems should be established for common documents transmitted to and from the government.

Formal Notification

Now back to the REA/Claim preparation.  One very important step is to make sure that formal notification is given to the government if a change (directed or constructive) or even a delay/suspension/stop work order has occurred and that the contractor reserves its right to submit a REA or Claim.  Once the notification is made, the government can remedy the situation, provide some sort of direction or just be notified that the contractor reserved its right.

Executive Summary

When preparing the REA or Claim, it is always good to start with an Executive Summary.  It should briefly discuss the contract, the reason for the REA or Claim, how the issue arose and how it impacted the contractor.  It should also include a summary of the costs included in the REA or Claim.

If a Certified Claim is being submitted, then the claim certification should be included.  The certification language should match exactly that of the Disputes Clause of the contract and be signed by someone duly authorized to sign on behalf of the contractor.

Every REA and Claim should include these three basic elements: legal basis for the Claim, causation and damages.

Legal Basis of Claim

In order to present the REA or Claim, the legal basis must be established.  The contractor must make sure that it has not waived its legal basis for the REA or Claim.  Extreme caution should be taken not to waive the rights to the REA or Claim by signing other contract modifications that include blanket waivers of all prior issues.  Another thing to watch out for is signing contract modifications for time extensions that waive time extensions for previous events.

The legal basis of the REA or Claim should be identified.  If there was a change directed by the government or a constructive change, then the Changes Clause of the contract would apply and should be listed as a contract clause relevant to the REA or Claim.  There are other contract clauses that entitle a contractor to an equitable adjustment, such as the Suspension Clause, Stop Work Order Clause and the Differing Site Conditions Clause, to name a few.

Claim Causation

After identifying the legal basis, the causation needs to be established – the contractor needs to be able to connect the dots and show how the government’s actions (or inaction) were responsible for the cost and/or time impact.

Damage Calculation

Next, the contractor needs to accurately quantify the cost impact.  In the event that a change is directed to the contract to add an element of work, if the contractor can track those costs in the job cost report by creating a job cost code specifically for costs related to the change, this will help make the quantification process easier.

Sometimes it isn’t that simple, though.  In the event of a change that increases the quantity of an existing work item, and not necessarily at an identifiable point in time, it is hard to identify how much labor was spent on increasing the quantity.

An example would be an electrical change to a project.  Let’s say each room in an office building had three electrical outlets shown on the plans, and before the work is performed a change is issued stating that now some rooms will have five, some seven and some two.  It is not possible to track the actual cost for performing the changed work because it is co-mingled with the original work.  In situations like this, estimates must be used.

More discussion on pricing the government REA and Certified Claim will be provided in the next article.

Kay Kendall is currently president of Kendall-Dinielli Consulting providing consulting services to government and commercial clients.  She has extensive experience in preparing requests for equitable adjustment proposals and claims for government construction contractors.  She has also consulted Contractors with DCAA audits and resolving audit disputes. You can visit Kendall-Dinielli Consulting at www.kendall-dinielli.com.

Vince – the blogger Reality Bite:   As I have said many times before one of the keys to successfully completing construction contracts is through documentation, documentation and more documentation.

You should approach each contract with a litigious mindset, i.e. hope for the best but plan for the worse.  This mindset should be common practice for all personnel who work on any component of a project.

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