Claims

Claims/Equitable Adjustments Overview
Disputes between the Government and prime contractors and between lower-tier subcontractors are as old as government contracting itself, and an inevitable part of the business. These disputes often involve government laws, regulations, and contract clauses that have no counterpart in commercial transactions and that require specialized knowledge of federal procurement law. Moreover, when a large government procurement goes bad, the amounts at stake can be staggering. Crowell & Moring's government contract lawyers have decades of experience involving some of the largest contractors and government programs and are experts in drafting claims, shaping entitlement theories, formulating methods of computing the amount of recovery, and processing and litigating claims.

Our Claims Preparation Approach. In the end, the most persuasive claim is one that both presents good facts in the best light and confronts and controls bad facts and law. To this end, we pursue a thorough and disciplined investigation of the facts, with substantial support from company technical, contracts, and accounting personnel. This approach described in C&M's Change Proposal Preparation Guide, is adopted by many of our major clients to educate their employees in the claims process.

Our Results. While not all claims are equally meritorious, we are confident that our approach yields better than anticipated results. We have helped our clients achieve numerous favorable claims settlements and thereby avoid litigation (which would most often be brought against a valued customer). A few of these settlements include:

Represented contractor in $12.3 million settlement payment from the Air Force for contract changes after an ADR hearing before an ASBCA neutral
Obtained a $21.5 million settlement for extra-contractual work required by the Air Force
Assisted in the preparation and presentation of several changes claims that were included in a settlement of approximately $1.4 billion
Negotiated conversion of a termination for default into a termination for convenience, with claims for defective specifications, defective government-furnished property, breach of duty to cooperate, excess inspection, and impossibility—$77 million recovered
Subcontractor claim against a prime for defects in aircraft design and specifications—$72 million recovered
Claim for anticipatory profit from the Postal Service for wrongfully terminating a contract—$50 million recovered
Claims for defective specifications and inadequate government-furnished equipment—$26 million recovered
Claim for government breach of contract—$21.5 million recovered
Claim for constructive changes and improper option exercise—$24 million recovered
Claim for inadequate and late government-furnished property and government-furnished information related to a global communications system—$10 million recovered

Claims Litigation. If we are unable to obtain a satisfactory settlement, and with a complete assessment of the litigation risk and strategy, we do not hesitate to litigate claims. As described in Disputes and Litigation, we have litigated all varieties of claims both in pursuit of equitable adjustments and defending against government demands. A few of these cases include:

Successfully litigated claims for breach of contract and constructive changes on behalf of a contractor providing telephone services at U.S. Air Force guest lodgings in Germany under a 15-year contract, resulting in a series of decisions in favor of our client. In 2004, the Board granted SUFI's request for declaratory relief, finding the Air Force in material breach of the contract. SUFI Network Servs., Inc. ASBCA No. 54503, 04-2 BCA ¶ 32,714, aff'd on recon., 04-BCA ¶ 32,788. After stopping work and having its claims denied by the Contracting Officer, SUFI appealed.. After a five-week trial, the Board granted the contractor judgment on several lost revenue and extra work claims, including lost profits. See Appeal of SUFI Network Services, Inc., ASBCA No. 55306, November 21, 2008.
The Government claimed entitlement to a refund of pension costs in connection with Unisys' sale of government contracts business units in 1995 to Loral. The Court of Federal Claims granted motions for summary judgment concerning reduction of the amount of the claim to reflect the benefit the Government received from Unisys' transfer of pension assets to the buyer. The same opinion was issued in cases involving three contractors pending before the same judge, largely on the basis of an argument made in our brief for Unisys.
Successfully argued as amicus curiae for reversal on reconsideration of an ASBCA decision holding that the inclusion of expenses related exclusively to performance of commercial contracts in an overhead pool allocable to commercial and Government contracts was a violation of the requirement in CAS 418 that indirect costs must be allocated on the basis of causal/beneficial relationships. AM General LLC, ASBCA Nos. 53610 & 54741, 07-1 B.C.A. ¶ 33,498
Successfully argued as amicus curiae that an ASBCA decision finding that the failure of a contractor to complete a "segment-closing" adjustment under CAS 413 during the same year as the closing had damaged the Government should be reversed on reconsideration. Raytheon Co., ASBCA No. 54907, 07-1 B.C.A. ¶ 33,655
Successfully argued to the Army Contract Adjustment Board that Holston Defense Corporation (HDC) should be awarded extraordinary contractual relief under Public Law 85-804 in the amount of $90 million, plus interest, for the projected costs of post-retirement benefits earned by HDC employees under a series of contracts with the United States Army. Application of Holston Defense Corporation, ACAB No. 1250, 2006 WL 4591482 (Sept. 27, 2006).
Successfully argued that a cost-reimbursement contract that was repriced because of Congressional funding changes after the contractor had made changes in its cost accounting practices was not an "affected contract" and therefore was not subject to a price adjustment reflecting the impact of the accounting changes. Lockheed Martin Corp., ASBCA No. 53822, 07-2 BCA ¶ 33,614.
Successfully argued that the Government was not entitled to a price adjustment for CAS-covered firm-fixed price contracts due to a change in accounting practice because the change did not cause the Government to incur increased costs. E-Systems, Inc., ASBCA Nos. 45771, 46409, 00-2 BCA ¶ 30,982
Viacom, Inc., Successor in Interest to Westinghouse Furniture Systems v. General Services Administration, GSBCA No. 15871, 05-2 BCA 33,080, Sept. 21, 2005. Crowell & Moring lawyers defeated GSA claims that Westinghouse Furniture Systems owed the Government more than $3.8 million in refunds for not disclosing its most favored customer discounts in negotiating a Federal Supply Schedule contract in 1984. On a dispute that lasted 15 years, and included Department of Justice fraud investigators (the fraud allegations were declined by DOJ), and after a contentious trial and briefing, the GSBCA decided that the purportedly undisclosed discounts were irrelevant to the pricing of the contract at issue and the damages sought by the Government were based on an unreasonable premise.
After Crowell & Moring represented construction clients in matters against WMATA, this government entity retained the firm in connection with the construction of Metro's Green Line. Crowell & Moring represented WMATA in litigation against Mergentime Corporation and Perini Corporation (Mergentime Corp. et al. v. McElhenny, et al.), involving contractor claims and terminations-for-default arising from such construction. The case was first tried in 1991, and decided in major part in WMATA's favor in 1993, but the judge died before deciding the entire case. The replacement judge completed the decision, but did not fulfill his record-familiarization obligations as a successor judge. As a result, the Court of Appeals reversed and vacated his decision. On remand, a new judge replaced the incapacitated second judge and ordered a new trial, which took place in 2001. In 2005, the judge issued the decision which upholds the default termination and grants our client $21 million in reprocurement costs, while limiting the contractor to only $200, 000 in delay damages.
United Technologies Corp. - Pratt & Whitney Division, ASBCA Nos. 51410, 53089, 53349, 04-1 BCA 32,556, modified on reconsideration, 05-1 BCA 32,860, aff'd 463 F.3d 1261 (Fed. Cir. 2006). Crowell & Moring lawyers defeated Air Force defective pricing claims, in the amount of $299 million, arising from the famous "Great Engine War," involving intense competition between Pratt & Whitney and General Electric from 1984-1990. The Air Force alleged that defective "cost or pricing data" submitted in 1983 increased the prices it paid. After eight weeks of trial and extensive briefing, the ASBCA decided there was defective cost or pricing data, but set-off price understatements, and denied any recovery by the Government. When the Air Force moved for reconsideration, Crowell & Moring lawyers counter moved, asking the ASBCA to reverse its conclusions on issues concerning causation and the Government's reliance on the defective data. The Board completely reversed its prior decision and found that the Government relied on "competitive forces," not cost data, mooting the Air Force motion and providing an additional ground for denying the Government's entire claim.
Emery Worldwide Airlines, Inc. v. U.S. Postal Service, 47 Fed. Cl. 461 (2000) Crowell and Moring represented a client in obtaining the court's declaration that the contract required price redetermination, ultimately leading to a $337 million reocovery in 2001.