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Contractors that use a fiscal year ending 12/31 submit their annual cost submissions in June of the following year.  For 2010 incurred cost submissions (ICS) submitted in June 2011, many contractors may receive affirmative claims from the Government seeking to disallow some or all of those incurred costs, because the Government has a 6-year statute of limitations to bring such claims (i.e., June 2017).  Due to DCAA’s audit backlog, COs may receive Audit Reports right around the SOL deadline, and issue Final Decisions in order to avoid missing that deadline.  Contractors that do receive Final Decisions disallowing costs should be aware of the 90 day limit to appeal the Final Decision, whether they intend to negotiate or litigate.

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The Prompt Payment Act requires the government to pay an interest penalty when it fails to make a payment by the required payment date. But, for CDA statute of limitations purposes, when does that penalty claim accrue?   This issue was addressed in the recent Public Warehousing Co. (May 2, 2016) decision, where the Board held the SOL on a contractor’s claim for interest penalties under the PPA does not accrue until the government actually makes the underlying payment.  Rejecting the government’s argument that the interest claim should accrue as soon as government fails to make the underlying payment, the Board held that “the events that fix the government’s alleged liability and allow a claim for interest penalties to be asserted do not occur until the government pays the underlying invoice without paying the interest penalty due.”

 

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The Contract Disputes Act, 41 U.S.C. §§ 7101-7109, sets forth certain prerequisites for the exercise of jurisdiction over claims. Among these prerequisites is a six-year statute of limitations, which is applicable to Government and contractor claims alike. With few exceptions, claims submitted more than six years after “accrual” are not valid and cognizable under the CDA.

The obvious question is, when does the clock start – i.e., when does a claim “accrue”? Although the CDA does not define the term accrual, the ASBCA and Court of Federal Claims rely on the FAR 33.201 definition, which describes accrual as “the date when all events, which fix the alleged liability of either the Government or the contractor and permit the assertion of the claim, were known or should have been known.” As you may have guessed by the phrase “known or should have known,” determining when a claim accrues can raise a number of subjective and factual questions (for example, who must know? And when “should” that person have known?). Over the past several years, there have been a number of SOL decisions attempting to clarify this standard in the context of contractor and Government claims (see previous discussions here, here, here, here, here, and here). Continue Reading Applicable Statute of Limitations for CAS Violations Comes into Focus