Can a Contracting Officer Foreclose a Contractor’s Appeal by Withdrawing its Final Decision?

A contracting officer’s unfavorable final decision is not the end of the road for a federal contractor’s claim for additional time and/or money on a federal project. Rather, a final decision is a mandatory prerequisite to pursuing relief through an appeal at the Boards of Contract Appeals or the U.S. Court of Federal Claims, based on the current provisions of the Contract Disputes Act of 1978. But what happens to a contractor’s appeal if the contracting officer later rescinds her or his final decision?

This question was among those the Armed Services Board of Contract Appeals (“ASBCA”) recently considered in Mountain Movers/Ainsworth-Benning, LLC. This case concerned a U.S. Army Corps of Engineers task order to Mountain Movers/Ainsworth-Benning, a joint venture, for repairs to the Fort Peck Dam in Montana. In December 2014, only two months after the award, the contractor was terminated for default for failing to obtain the required bonds. The contractor explained this was because one of the venturing partners was experiencing financial issues. Following some factually disputed communications, the Government withdrew its default termination, and the contractor began work in January 2015.

Several years later, the contractor filed a claim for additional time and money for its work on the project. On August 26, 2019, the contracting officer issued a final decision, finding partial merit to the claim. The contractor timely appealed to the ASBCA on September 3, 2019. On October 29, 2019, the contracting officer issued a new final decision purporting to rescind the prior final decision on suspicion of fraudulent misrepresentations relating to the 2014 termination for default. 

In response, the Government moved to dismiss the contractor’s appeal, arguing in part that once the contracting officer rescinded the August 26 decision, there was no valid decision or deemed denial upon which the Board could assert jurisdiction. The Board disagreed, finding that once the Board was vested with jurisdiction over a matter – the date upon which a notice of appeal is filed – the “contracting officer cannot divest it of jurisdiction by his or her unilateral action.” The Board discussed the jurisdictional issues of fraud at length. In short, the CDA jurisdictional prohibition applies to alleged fraud relating to a claim, not to a general belief that there was fraud somewhere in the contract. If fraud in the claim is alleged by the federal government, then that claim is handled by the Justice Department, and it is handled in the federal district courts.

This case underscores the importance of timing in the claims context. The contractor’s appeal survived here because the contractor filed its notice of appeal before the contracting officer’s attempted withdrawal of its initial final decision. A very different outcome may have occurred had jurisdiction not vested with the Board by the time the initial final decision was withdrawn. This case illustrates the benefit of a prompt decision to appeal (not to await the 90 days allowed for Board appeals or the one year for the Court of Federal Claims), although there are other considerations that may lead to a need for delay before appealing.