Generally, the government has immunity from being sued with some exceptions grounded in statute or case law. Having a contract with the federal government is one such exception, and an interrelated exception falls under the Severin doctrine. The Severin doctrine (based on a case which announced the rule in federal procurement) allows a prime contractor, who has contractual privity with the government, to sue the government for damages incurred by one of its subcontractors due to the fault of the government. A prerequisite to this doctrine is that the prime contractor has already paid the subcontractor its damages or remains liable for such reimbursement in the future. If either prerequisite is met, the prime contractor can attempt to pass through the claims of the subcontractor to the government.
An example of the application of the Severin doctrine is found in JAAAT Technical Services, LLC, before the Armed Services Board of Contract Appeals (“ASBCA”). There, the prime contractor had a $15,315,185contract with the government for the design and construction of a facility addition at Fort Gordon, Georgia. A dispute arose, and the prime contractor submitted an equitable adjustment claim in the amount of $3,215,346, which included a pass-through claim of the prime contractor’s subcontractor. This claim was denied by the contracting-officer and the prime contractor appealed.
On appeal, the government moved to dismiss, or in the alternative, for summary disposition before trial, on the grounds that the subcontractor’s pass-through claim violated the Severin doctrine. The ASBCA denied the government’s motion for summary judgment holding that the equitable adjustment pass-through claim was not barred under the Severin doctrine because the changes clause in the prime contract provided a remedy.
As this case demonstrates, the Severin doctrine is an avenue around the government’s general immunity allowing the subcontractor’s pass-through claims brought by the prime contractor to be paid by the government. It is critical for prime contractors and subcontractors to define, address and preserve subcontractor pass-through claims related to the Severin doctrine in their contracts or settlement agreements when the government is the owner. Without doing so, the government may avoid paying legitimate claims that, in turn, prime contractors may be on the hook for, or it may leave subcontractors with a remedy only against the prime’s surety.