Under a cost-reimbursement, plus incentive fee contract with the Department of Energy, the Contractor agreed to build a Mixed Oxide FuelFabrication Facility near Aiken, South Carolina. The purpose of the project was to convert weapons-grade plutonium into fuel rods for use in commercial nuclear powerplants.
In denying one of the Contractor’s certified claims, the Government summarily clawed back $21.6 million of incentive fees previously paid to the Contractor. The Contractor argued that the Government could not do this before the contract performance was complete. The Court agreed with the Contractor and ordered return of the entire sum by the Government to the Contractor.
The Court saw the Government’s claw-back attempt as “baseless retaliation” and implied failure by the contracting officer to review the claim in good faith. “A contracting officer’s review of certified claims submitted in good faith is not intended to be a negotiating game where the agency may deny meritorious claims to gain leverage over the contractor,” like prematurely demanding the immediate refund of incentive fees.
Trust, but Verify
Rely at your own risk upon a Contracting Officer’s statements when statutes or contract provisions may conflict.
Payment for Verbal Changes When a Writing was “Required”
Even if your agreement can only be modified by a writing, you may still have a good argument to be paid for extra work.
Pirates and Arbitration
How does a pirate solve a dispute (besides walking the plank)?
Bases Covered?
Contractors, will your current insurance policy cover “your work” as a joint venture partner? The typical answer is NO.
Two Paths at the Same Time to the Same Place
“Two roads diverged in a wood, and . . .” the Prime Contractor had to take both roads at the same time to the same place.
Rules, Which Rules?
Good Idea: Include a choice of law clause in your contract to promote consistency and predictability (while reducing potential costs and risk).
Government Liability for Third-Party Delays
Generally, the Government is not responsible for delays caused by third parties, even other contractors at its own project site, unless the Government affirmatively indicates the site will be ready and available.
Keep a Pass-Thru Claim Burning, Don’t Extinguish Liability
Prime contractors, have you ever submitted a subcontractor’s claim to a public owner? Subcontractors, have you ever wanted to submit a claim against the government, but you had no contract with government?
When You Can’t Recover from a Third-Party (The Economic Loss Doctrine)
Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer.
