Tuesday, December 3, 2013

Entitlement vs Quantum

Entitlement and Quantum sound like a couple of prize fighters or characters out of an Avengers movie. But they're not. Entitlement and Quantum relate to claims against the Government (or claims against any party for that matter, but this is a Government contracting blog, after all).

If you ever submit a request for equitable adjustment (REA) or a claim under the Contract Disputes Act, there are two things you have to prove. First you have to convince the Government that you are entitled to compensation or damages and secondly, if you are entitled, you need to come to some meeting of the minds as to how much the damages. These concepts are called "entitlement" and "quantum".

Entitlement relates to whether the contract has been impaired by Government action or inaction and therefore has a right to monetary adjustment. Entitlement is a legal question.

Quantum, on the other hand is the amount of the monetary adjustment, assuming that the contractor's assertion of entitlement is proven valid.

REAs and claims are almost always going to be audited. The contract auditor is responsible for quantum issues and is discouraged from opining about entitlement issues. In reviewing quantum, the auditor will typically evaluate:

  • Whether the amount proposed or claimed was incurred or estimated.
  • Whether the contractor has source documents that establish that it incurred the costs at issue.
  • Whether the costs submitted have been correctly allocated or charged to the contract or claim.
  • Whether the costs submitted are allowable, pursuant to FAR 31.205 costs principles and contract terms.
Auditors, while performing the above audit steps, may gain some insight into entitlement issues as they go about their work evaluating quantum. Meaningful observations regarding the question of the contractor's entitlement to recover delay damages will be reported.

Contractors who feel that they have a claim against the Government over some contract issue almost always come out better when they have legal assistance. Legal assistance is expensive but sometimes you get what you pay for. By relying on professional expertise, contractors can get back to doing what they are good at - managing contracts.

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