Government Contractor? - Your sophistication may be presumed

Most everyone would like to be considered "sophisticated," but those performing federal contracts might feel otherwise. The GAOCAB recently noted in Grunley Constr. Co., Inc. v. Architect of the Capital, GAOCAB No. 2009-1, 2010 WL 2561431 (June 16, 2010) that "[u]like private contractors, government contractors who perform large contracts for the government are 'neither unsophisticated nor careless' . . . ." As a result, the Board concluded the contractor in that case should have anticipated possible project delays and charged a higher price for the work because of that. In that case, the included "no damages for delay" clause was at issue, and whether it should be enforced so as to prohibit delay claims by the contractor.  The GAOCAB concluded yes, those claims were precluded because it was a reasonable limitation on the contractor's recovery. The GAOCAB also rejected the contractor's argument that the Sovereign Acts Doctrine prohibited enforcement of the no damages for delay clause. The sophistication presumption could be applied in any number of similar instance to other contract issues, so government contractors beware!

Federal Project PLAs: House's Military Construction Bill Doesn't Preclude

Project Labor Agreements are becoming increasingly used for state and local project throughout the Country, and there's been an increasing usage for Federal projects too; particularly with the current administration. One's view of PLAs depends upon one's view of a right to work vs. union approach to business. There was a move in Congress to outlaw PLAs for federal projects as part of Congress' funding for those projects, but that effort failed and on June 13 the House passed the Military Construction and Veterans Affairs and Related Agencies Appropriations Act of 2012 (H.R. 2055) without such prohibitory language. The Associated Builders and Contractors has particularly been following this, and recently posted the article at the below link discussing this, and PLAs in general:
http://www.abc.org/Newsroom2/News_Letters/2011/Issue_24/House_Passes_Military_Construction_Bill_Without_Language_Banning_PLAs.aspx

Inducing statements: fraud or mere opinion?

In his February 22, 2011 letter opinion in Environmental Staffing Acquisition Corp. v. Beamon Enterprises, Inc., CL09-2688, 3 Cir. CL092688, Judge Melvin of Portsmouth Circuit Court concluded that a subcontractor's statement during the proposal process that the subcontractor "had exactly what you are looking for" was a matter of opinion, and not a fraudulent statement giving rise to a claim of fraud in the inducement. This case includes a detailed analysis of Virginia law on fraud, and also deals with the foundation question of the prima facie elements of fraud in the inducement, including the present intention to not act as one is representing, as opposed to just not later following through in breach of one's contract. Drafters seeking to establish a fraud in the inducement count, or defeat one, should find the opinion of interest.

Qui Tam Plaintiff Awarded $2.2M in Attorneys' Fees

After winning a $7.6M jury award, the realtor plaintiff in a Qui Tam action (U.S. ex rel. Maxwell v. Kerr-McGee Oil & Gas Corp. D. Colo., No. 04-cv-01224, 6/2/11) against the company he alleged falsely reported royalties with the government, the judge trebled the damages, and after adding statutory penalties the total award was $22.9M. The realtor plaintiff was then awarded $2.2M is attorneys' fees, plus expenses, under the False Claims Act, rejecting the defendant's arguments that the fees were disproportionate to the amount he would recover or unfairly compensated him. Of note, the court did not reduce the fee because of the reduced risk associated with the partial contingency aspect of the plaintiff's fee agreement, nor was the court troubled by the awarded fees being almost 29% of the original award (but only 9.5% of the total award as noted by the court). Lawyers will enjoy the fee calculation discussions; however, those in the industry should note the verdict amount, as well as the fee awarded, as further evidence of the teeth available through the False Claims Act.

Government Not Required to Certify Claims under CDA

In trying to avoid the government's claim against it, a contractor recently tried to argue to the Civilian Board of Contract Appeals in Navigant SatoTravel v. General Services Administration, CBCA, No. 449, 5/26/11, that the Board lacked jurisdiction because the government did not certify its claim against Navigant. The Board rejected the argument, holding that the Contract Disputes Act does not require such certification by the government.While not a surprising result, one has to like the attempted creativity to avoid obligation by the contractor. The decision has some other interesting aspects regarding burden of proof for those finding that of interest.

Proactive management: staying ahead of the curve

Most projects sail smoothly. Generally, that is the result of good business practices, cost controls, staff management, etc. Typically though the focus is on the nuts and bolts of construction, and making things go together smoothly from technological standpoints. Often overlooked is contract administration: making sure contracts are signed, insurance certificates received, and other "i"s dotted and "t"s crossed. But those little things can make or break projects. Proactive management on those little things can help avoid later contract disputes, or identify them before they fester. Like other aspects of construction, regular "lunch box" programs, check sheets, and the like are great first steps, to be followed by regular compliance and compliance checks. As they say, an ounce of prevention is worth a pound of cure.

Prejudgment interest against a surety: recoverable but from when?

Neither the Miller Act nor the Little Miller Act have specific provisions for the recovery of prejudgment interest if a claimant prevails on a bond claim. Absent contractual language in a commercial bond, it's the same result. However, case law generally holds that in such actions state law on prejudgment interest applies. Virginia statute allows for prejudment interest in the discretion of the fact finder. Considering that, the recent opinion of Judge Trenga in Attard Industr., Inc. v. United States Fire Insur. Co., No. 1:10cv121 (EDVA, Alex. Div. Nov. 9, 2010) concluded that prejudgment interest may only run against a surety from the date of demand made against the surety by the claimant. Judge Trenga concluded that date sufficiently compensates the claimant without unfairly penalizing the surety. As a result, if you are a claimant, the lesson learned is to promptly make demand upon the surety to start the prejudgment interest clock.