Contract Disputes Act litigation

Army Lawyer, Jan, 2006 by Ralph J. Tremaglio, III

Proposal to Combine Boards of Contract Appeal

The on-going discussion about potentially combining the boards of contract appeals continues. (274) The boards of contract appeals would be combined to form two Boards of Contract Appeals: the Civilian Board of Contract Appeals and the Defense Board of Contract Appeals. (275) A main point of contention for those opposing the consolidation is the elimination of a forum for cases that are not specifically covered by the CDA. (276)

Additionally, this proposal contemplates rating the judges. (277) The Boards of Contract Appeals (BCA) Bar Association wants the government to slow this runaway train. (278) The BCA Bar Association recommends the creation of a "Blue Ribbon Panel" that would invite the views of the procurement community and preserve the role of the BCAs in CDA disputes as well as in non-CDA dispute resolution, such as Native American self-determination contracts and non-appropriated fund contracts. (279)

The Senior Executives Association (SEA) also opposes the bill. (280) It does not believe the bill will streamline the repetitive functions of the BCAs. The SEA also seized on the fact that the bill, as passed in HR 1815, would eliminate jurisdiction over non-CDA cases as well as contracts issued by the Iraq Coalition Provisional Authority and certain NATO contracts. The SEA letter also questioned the rating of judges. (281) As the letter points out, the House bill does not specifically authorize rating the judges, but provides "for authority for 'regulations' to be promulgated and envisions reductions in force through the use of performance appraisals." (282) It is uncertain what the ratings would be based upon. As the letter also points out, setting performance for pay standards would impact the impartiality of the boards that now exists. (283)

NAFI Jurisdiction or Not, Part I

The debate concerning the jurisdiction over Nonappropriated Funds Instrumentalities (NAFI) contracts continues to make our yearly review. You may recall Pacrim Pizza Co. v. Pirie, (284) where the CAFC decided it did not have jurisdiction to decide the dispute involving a NAFI contract. (285) This year's NAFI contract dispute (really from Summer 2004) comes from the COFC. In Sodexho Marriott Management, Inc. (hereinafter "Marriott"), the COFC ruled that the non-appropriated funds doctrine bars the COFC from having jurisdiction over Marriot's claim. (286)

On 14 September 1999, prior to the Pacrim Pizza decision, Marriott filed a complaint to the COFC alleging the Marine Corps Recruit Depot Morale, Welfare and Recreation Center ("MWR") breached its contract or, in the alternative, took the fixtures that Marriott installed in the building without just compensation. (287) The dispute arose out of a MWR food service contract with Marriott for services on Parris Island, South Carolina. (288)

In 1996, the parties bilaterally terminated the contract. (289) In 1998, Marriott filed a certified claim for $127,576.15, for the cost of the installing fixtures in the food court building. (290) On 21 February 2001, the Court granted the government's motion dismissing the plaintiff's claim. (291) The following year, in 2002, the CAFC decided Pacrim Pizza, (292) ruling that while the CAFC had jurisdiction over appeals from agency boards of contract appeals when the CDA applied, the CDA limited the court's jurisdiction to NAFI contracts of the Armed Forces Exchanges. (293) Under Pacrim Pizza, the Federal Circuit determined that a local MWR entity with supervision and contracting structures separate and distinct from an exchange is not a covered activity which excluded the MWR entity from the CDA. (294)

Ultimately, as Joe Buck (295) would say, Marriott struck out looking. The COFC reminded Marriott that the Supreme Court overruled and replaced the Chevron rule with a strict rule requiring retroactive application. (296) Now, all civil cases are open to direct review, regardless of whether the events predate or postdate the announcement of a rule. (297)

Next, Marriott argued that CAFC erroneously decided Pacrim Pizza because the court did not have an adequate factual record showing the nature of the MWR and the Marine Corps community services. (298) The court determined that the nonappropriated funds doctrine bars it from exercising jurisdiction and, based upon the findings in the controlling case of Pacrim Pizza, the Court of Federal Claims must apply that standard retroactively. (299)

The court granted the government's motion dismissing the plaintiff's case. (300) It appeared the debate over NAFI jurisdiction was settled, the CDA did not apply, and the federal courts did not have jurisdiction to decide disputes involving a NAFI contract unless the dispute arose out of an exchange contract. But wait, it is not over!

Jurisdiction over NAFIs ... Parties Can Agree to Give Boards Jurisdiction, Part II

In the category of "watch out what you ask for you might just get it," a NAFI contract before the Department of Transportation Board of Contracting Appeals (DOTBCA) had a different result concerning the jurisdictional issue. The DOTBCA ruled that it could resolve a dispute arising out of a NAFI contract due to the specific agreement by the parties that the Board would resolve disputes. (301) The contract erroneously included the Disputes Clause stating that the CDA applied. (302)