When Govt. Failure to Issue Final Decision on Certified Claim Is a Deemed Denial
Government Contracts Newsletter
A recent decision from the United States Court of Federal Claims (COFC) sets forth the standard for when the government’s failure to make a decision on a certified claim will be considered a deemed denial. In Rudolph and Sletten, Inc. v. U.S., the COFC clarified the Contract Disputes Act (CDA) timing requirement for the government to issue a decision on a certified claim.
In Rudolph and Sletten, the contractor, Rudolph and Sletten (R&S), submitted a certified claim seeking a time extension and additional costs related to a contract for the construction of the Southwest Fisheries Science Center Replacement Headquarters and Laboratory in La Jolla, California. R&S originally submitted its certified claim on August 20, 2013. On October 21, 2013, the contracting officer advised R&S that, given the complexity of the claim, he would need additional time to issue a decision and advised that a decision would be made within nine months. R&S then requested that the contracting officer provide an explanation or work plan detailing the reason for the nine-month extension. The contracting officer provided R&S the explanation and stated that a decision would be made by July 15, 2014. On July 8, 2014, however, the contracting officer informed R&S that he would not reach a final decision on R&S’s first claim by July 15, 2014 as originally estimated, and that, instead, a final decision would be forthcoming on March 15, 2015. R&S then filed an action in the COFC on July 23, 2014. The government sought to dismiss the case before the COFC on the basis that the court lacked jurisdiction to hear the case, because no final decision had been issued by the contracting officer as required by the CDA. R&S argued that the contracting officer’s failure to issue a decision within the required time constituted a deemed denial.
In order for the COFC to have subject-matter jurisdiction to hear a dispute under the CDA, the plaintiff must meet two prerequisites: (1) submit a proper claim to the relevant contracting officer, which must be properly certified if the amount requested is above $100,000 and (2) obtain a final decision on that claim. 41 U.S.C. § 7103(a). Under the CDA, a contractor may obtain either an actual or a deemed final decision on the claim. The CDA provides that the contracting officer must, within 60 days of receipt of a certified claim, “(A) issue a decision; or (B) notify the contractor of the time within which a decision will be issued.” 41 U.S.C. § 7103(f)(2). If the contracting officer denies the claim within the required time, the claim is actually denied. If the contracting officer fails to issue a decision within the required time, the decision is considered a deemed denial. The question before the COFC was “whether the government’s failure to issue a decision by the original deadline constituted a deemed denial of R&S’s claim under the CDA.” Rudolph and Sletten, at *3.
The COFC looked to the plain language of the CDA and found that the CDA “requires that the contracting officer either make a decision within 60 days, or set a firm deadline for issuing a final decision within 60 days of receiving a claim.” Id. at *4 (emphasis added). The court further found that “[a]lthough the contracting officer did seek to extend the deadline again before the first extension expired, no language in the CDA provides the government with the right to a second extension.” Id. The court thus held that R&S could treat the contracting officer’s failure to issue a decision within the extension period a deemed denial of its claim. Id. at *5.
As an alternative to dismissal of the case, however, the government argued that the court should stay the case and remand to the contracting officer for a final decision. When COFC possesses jurisdiction over a claim based on a deemed denial, it has the discretion to retrocede authority to the contracting officer. Id. In Rudolph and Sletten, the court determined that a stay would promote judicial economy and benefit both parties. Accordingly, the court stayed the case pending a final decision from the contracting officer.
The court’s decision in Rudolph and Sletten will serve as an important resource for contractors. The rule is now clear that the government must issue a final decision on a certified claim within the time frame required by the CDA—either within 60 days of submission of the claim or within any firm and reasoned time extension. The government cannot indefinitely seek time extensions, and, if it does, the contractor may consider the government’s failure to respond a deemed denial and proceed with its case. However, as the court also made clear in Rudolph and Sletten, the court has the discretion to stay a case and remand to the contracting officer for a final decision. In Rudolph and Sletten, this served to essentially provide the government with an additional time extension. In effect, then, it is unclear whether the court’s decision in Rudolph and Sletten will actually help contractors move forward with their claims in the face of government delay.