Government Defenses of Defective Certification and the Severin Doctrine not a Silver Bullet
Construction and Procurement Newsletter Q1 2014
Recently, in Group Health Inc. v. Dep’t of Health & Human Services, the Civilian Board of Contract Appeals (CBCA) issued a noteworthy decision on defective Contract Disputes Act (CDA) certification issues and the so-called Severin doctrine. The CBCA’s decision in Group Health is noteworthy because it demonstrates that the frequently raised government defenses of defective certification and the Severin doctrine will not necessarily bar contractor claims.
The appeal at issue was filed by Group Health Incorporated (“Group Health”) on behalf of its subcontractor, Douglas Consulting & Computer Services, Inc. (“Douglas”), from a denial by the Contracting Officer of a claim arising out of the termination of Group Health’s contract with the government and the resulting termination of the subcontract between Group Health and Douglas. Shortly after the appeal was filed, the government moved to dismiss the appeal for lack of subject matter jurisdiction.
The government’s motion raised issues as to the merits of the underlying claim, arguing that factual assertions in the claim were “at odds” with Group Health’s certification of the claim, that Group Health failed to set forth a “separate analysis” of Douglas’s claim, and that there were “disparities” between the positions taken by Group Health and Douglas as to whether certain costs were allowable. In addition, the government asserted that Group Health was not liable to Douglas for Douglas’s claimed costs and, therefore, the claim was barred by the Severin doctrine (the Severin doctrine provides that prime contractors cannot sue the government on behalf of one of their subcontractors to recover monies due to the subcontractor unless the prime contractor is itself liable to the subcontractor).
After considering the parties’ arguments, the CBCA found that, while the government “may have concerns about the merits of the underlying claim, [Group Health’s] certification [was] compliant with the CDA and its appeal of the certified claim confers jurisdiction on th[e] Board.” The CBCA further stated that “[c]oncerns as to the merits of the claim do not divest the Board of jurisdiction and must be resolved during the appeal process.” With respect to the government’s Severin doctrine challenge, the CBCA found that the government failed to meet its burden to establish the existence of an iron-clad release or contract provision immunizing Group Health from any liability to Douglas. Accordingly, the CBCA denied the government’s motion in full.
Group Health demonstrates that the CBCA will not allow defective certification or the Severin doctrine, both defenses frequently asserted by the government, to bar contractor claims without substantiation.