ASBCA Allows Subcontractors’ Pandemic-Related Claims to Move Forward

On December 20, 2023, the Armed Services Board of Contract Appeals (Board) denied the government’s motion to dismiss a prime contractor’s pandemic-related claims filed on behalf of its subcontractors.  The Board rejected the government’s arguments that the claims failed to state any claims for relief that could be granted, were barred by the affirmative defense of sovereign acts, and failed to provide separate sums certain for purported sub-claims.   

The government awarded the design and construction contract in 2019.  After the COVID-19 pandemic began in 2020, the contractor alleged that its subcontractors faced a number of impacts, such as government-ordered changes to the method and manner of the work, restricted access to the worksite, excessive price increases, and supply chain issues.  The contractor also alleged that the government did not act in good faith by directing the contractor “to proceed with the Project as if the Project were immune to the pandemic’s impacts,” instead of collaborating to address them.  On behalf of its subcontractors, the prime contractor submitted certified claims seeking equitable adjustments to the contract and for breach of the duty of good faith and fair dealing, which the contracting officer denied.

On appeal, the Board held that the contractor raised sufficient allegations of constructive change, constructive suspension of work, and breach of the implied duties, explaining that the government may breach the implied duties through acts or omissions that “are inconsistent with the contract’s purpose and deprive the other party of the contemplated value,” quoting the Federal Circuit’s decision in Metcalf Const. Co. v. United States, 742 F.3d 984, 990 (Fed. Cir. 2014).  Here, the contractor’s allegation that the government declined to cooperate with the contractor to address pandemic-related impacts to the work and schedule was sufficient for its claim to move forward.  The Board also declined to agree with the government, without further examination, that the government’s sovereign acts doctrine defense barred the contractor’s claims.  Finally, the Board held that it was too early to resolve whether certain claims were sub-claims requiring a separate sum certain.

This decision reminds contractors of the elements required to establish entitlement to relief for constructive changes, constructive suspension of work, and breach of the implied duties of good faith and fair dealing, and it highlights the importance of a thorough claim and a well-pled complaint.  It is also a reminder that pandemic-related claims are not conclusively barred by the sovereign acts doctrine, as we discussed here.  And although the sum certain requirement is no longer jurisdictional, as the Federal Circuit recently held in ECC International Constructors, LLC v. Secretary of the Army (Fed. Cir. No. 21-2323), a lack of a sum certain continues to be a basis upon which parties can seek to dismiss claims for failure to state a claim.