Thursday, May 19, 2016

Statute of Limitations and "Sum Certain"

Most readers of this blog are aware of the Contract Disputes Act's six-year statute of limitations that begins from the accrual of a claim. The six-year statute of limitations became a big issue a few years back when contract auditors began auditing incurred cost submissions that had been piling up on their desks for more than six years. Although the auditors tried to get cute with their definition of "accrual of a claim", the efforts were feeble and they soon gave up trying to audit incurred cost submissions that were older than six years.

In a recent decision handed down by the U.S. Court of Appeals for the Federal Circuit, the court considered the concept of "sum certain". Claims against the Government must be for a "sum certain" and until the "sum certain" is known, the statute of limitations does not begin.

In 2001, the Army awarded KBR a cost-plus-award-fee contract for construction and operations of dining facilities in Iraq. On July 31, 2003, KBR terminated one of its subcontractors on the job for default. Later the termination for default was converted to a termination for convenience in September 2003. In January 2005, KBR and its subcontractor reached an initial settlement for costs under the contract for $17.4 million and an agreement to pay additional costs as supported by the subcontractor.

Ultimately, the claim made its way to the ASBCA (Armed Services Board of Contract Appeals) who dismissed KRB's case finding that the dispute fell outside of the Contract Disputes Act's six-year statute of limitation. KBR filed its claim in May 2012 and the ASBCA ruled that the claim accrued either in September 2003 when the termination for convenience was issued or January 2005 when KBR reached its initial settlement with the subcontractor. Either date would have made the claim late.

The Federal Circuit however ruled that the ASBCA erred by finding the claim accrued before KBR could state the claimed amount in a "sum certain". The Federal Circuit found that the claim did not actually accrue until August 2006 when the subcontractor billed KBR for all outstanding costs in dispute. In January 2005, KBR did not have the exact amount for those additional amounts. It didn't have the final amount until more than a year later. KBR could not actually submit a claim to the Government in either 2003 or 2005 because claims must be presented in a "sum certain".

The Federal Circuit set the date for a "sum certain" at August 2006 which also happened to be withing the six-year statute of limitations and remanded the case back to the ASBCA for a decision on the merits of KBR's claim.

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