H. Lawrence Garrett, Iii, Secretary of the Navy v. General Electric Company

987 F.2d 747, 38 Cont. Cas. Fed. 76,486, 1993 U.S. App. LEXIS 3049, 1993 WL 46874

• Court: Court of Appeals for the Federal Circuit
• Decided: February 24, 1993
• Docket: 92-1119
• Status: Published

Opinions

RADER, Circuit Judge.

The Department of the Navy appeals a decision of the Armed Services Board of Contract Appeals (Board). The Board held that it had jurisdiction over General Electric Company’s (GE) appeal from a nonmon-etary Navy order for work corrections. General Elec. Co., ASBCA No. 36005, 91-2 BCA 1123,958, 1991 WL 81497 (1991). Because the Contract Disputes Act of 1978 (CDA or Act), Pub.L. No. 95-563, 92 Stat. 2383 (codified as amended at 41 U.S.C. §§ 601-613 (1988 & Supp. I 1989)), permits appeal of the contracting officer’s final decision on a claim, this court affirms.

BACKGROUND

The Navy awarded GE a series of eighteen production contracts from November 1977 through March 1987. Under the contracts, GE manufactured approximately 1200 jet engines for the F/A-18A aircraft. After accepting a number of new engines, the Navy experienced several incidents of buckling in an engine component known as the after-burner liner. These failures damaged the engine and the aircraft.

Each contract contained an inspection clause from the Federal Acquisition Regulations (FAR) or from an earlier version, the Defense Acquisition Regulations (DAR). These clauses made acceptance of the engines final except for latent defects, fraud, or gross mistakes amounting to fraud. See, e.g., 48 C.F.R. § 52.246-2(k) (1991). In the event of latent defects, the contracts provided remedies such as: (1) a requirement that the contractor correct or replace the item at no increase in contract price; (2) a reduction in contract price for delays; or (3) repayment of an equitable portion of the contract price. See, e.g., id. § 52.246-2(1). Each contract also included a FAR or DAR disputes clause. The disputes clauses require the parties to resolve disputes under the Contract Disputes Act.

The Navy paid GE $1.25 million under a separate component improvement program (CIP) to investigate the cause of and suggest a solution for the engine failures. On the basis of the study, the Navy concluded that latent defects — undiscoverable at the time of acceptance — caused the engine liner failures. The Navy directed GE to replace the defective parts in those engines at no additional cost. GE refused and submitted a proposal to replace the parts at a substantial additional cost to the Navy.

After further meetings and correspondence, the contracting officer (CO) issued a final decision requiring GE to correct the problem at no additional cost to the Navy. The decision vitiated the prior acceptances under the inspection clause. The decision also required GE to return the $1.25 million in CIP funds to the Navy.

GE appealed the CO’s decision to the Board. The Board took jurisdiction based on the Navy’s assertion of post-acceptance contract rights. The Board reasoned that the Navy’s actions constituted a claim by the Government under the CDA.

DISCUSSION

This court reviews whether the Board properly asserted jurisdiction over GE’s appeal of the CO’s decision. On appeal, the Board’s legal conclusion on jurisdiction is not final or conclusive. 41 U.S.C. § 609(b) (1988).

The CDA grants the Board jurisdiction over cases arising from Government contracts for the procurement of equipment and services. 41 U.S.C. § 602(a). In particular, the Act authorizes the Board to exercise jurisdiction over appeals from a CO’s final decision on Government or contractor “claims.” Id. §§ 605(a), 607(d). GE submitted no claims to the CO on the engine defects at the time of the decision. The Act, however, provides that a contractor may appeal a Government claim to the appropriate board without submitting a claim of its own to the CO. See id. Thus, only jurisdiction over the Navy’s claims under the contract are at issue in this appeal. The Board’s jurisdiction depends on whether the Navy’s directives under the contract’s inspection clause are appealable CDA claims.

The CDA does not specifically define the term “claim.” Therefore, this court assesses whether an action amounts to a claim on the basis of “regulations implementing [the CDA], the language of the contract in dispute, and the facts of the ease.” Dawco Constr., Inc. v. United States, 930 F.2d 872, 877 (Fed.Cir.1991). The FAR, the applicable regulation, defines a claim as a “written demand ... by one of the contracting parties seeking, as a matter of right, [1] the payment of money in a sum certain, [2] the adjustment or interpretation of contract terms, or [3] other relief arising under or relating to the contract.” 48 C.F.R. § 33.201 (1991). The GE contracts contained this definition. Therefore, these regulations and the terms of GE’s contracts agree on the standard for determining the meaning of “claim” for Board jurisdiction. This court must also assess the facts of this case in assessing the sufficiency of the Navy’s claim.

The Navy directed GE to correct or replace the defective engines. Under the contract, the Navy had three options. It could have reduced the contract price or demanded repayment of an equitable portion .of the contract price. Rather than seek these monetary remedies, the Navy chose “other relief arising under ... the contract.” The Navy’s alternative to a monetary remedy — the directive to correct or replace defective engines — constitutes “other relief” within the FAR’s third category of “claims.” Thus, the regulations, GE’s contract, and the facts of this case suggest that the Navy’s choice of relief — a substitute for monetary remedies — fit within the CDA concept of “claim.” Accordingly, the Board correctly determined its jurisdiction to adjudicate this Government claim.

This court also assesses whether the Board’s decision to take jurisdiction over the Navy’s claim is in harmony with the purpose and structure of the CDA. One primary purpose of the CDA, invoked by both parties in this appeal, is to achieve parity between the jurisdiction of the United States Court of Federal Claims and the boards. The CDA has as one of its purposes the elimination of differences in the jurisdictions of the forums which decide Government contract disputes. See, e.g., S.Rep. No. 1118, 95th Cong., 2d Sess. 12 (1978) 1978 U.S.Code Cong. & Admin.News pp. 5235, 5246 (“The considerable disharmony between the administrative and judicial systems that oversee the resolution of disputes was a matter of considerable concern to the Procurement Commission.... [The CDA provides a] pragmatic answer.”). Thus, the CDA provides for appeals from a CO’s decision alternatively to either the Board or directly to the Court of Federal Claims. See 41 U.S.C. §§ 607, 609 (1988). The Act further states that the Board “is authorized to grant any relief that would be available to a litigant asserting a contract claim in the United States [Court of Federal Claims].” Id. § 607(d). Thus, the CDA creates parity between these two lines of appeal.

At the time of briefing and oral argument in this case, the jurisdiction of the Court of Federal Claims did not extend beyond monetary claims. See, e.g., United States v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1502, 23 L.Ed.2d 52 (1969); Overall Roofing & Constr. Inc. v. United States, 929 F.2d 687, 689 (Fed.Cir.1991). Thus, the Government argued that the Board’s assertion of jurisdiction over the Navy’s claim would disturb parity between the Court of Federal Claims and the Boards. In the interim, however, Congress enacted the Federal Courts Administration Act of 1992 (Courts Act), Pub.L. No. 102-572, 106 Stat. 4506.¹ This 1992 Act changed the doctrine enunciated in Overall Roofing.2 This 1992 Act expanded the jurisdiction of the Court of Federal Claims to embrace some non-monetary disputes:

The [Court of Federal Claims] shall have jurisdiction to render judgment upon any claim by or against, or dispute with, a contractor arising under section 10(a)(1) of the Contract Disputes Act of 1978, including a dispute concerning termination of a contract, rights in tangible or intangible property, compliance with cost accounting standards, and other nonmonetary disputes on which a decision of the contracting officer has been issued under section 6 of that Act.

28 U.S.C. § 1491(a)(2) (as amended by Courts Act § 907(b)(1)) (emphasis added). Thus, Congress specifically afforded the Court of Federal Claims jurisdiction over “other nonmonetary disputes on which a decision of the contracting officer has been issued” under § 605. Id. Thus, the Board’s decision to take jurisdiction over this Government claim, in light of the Court of Federal Claims’ new jurisdiction, preserves jurisdictional parity between the Court of Federal Claims and the boards.

In assessing the sufficiency of the Navy’s claim in the context of the CDA, this court also looks to other cases decided under the CDA. For instance, this court has already acknowledged that some non-monetary disputes, such as terminations for default under the CDA, give rise to Board jurisdiction. In Malone v. United States, 849 F.2d 1441 (Fed.Cir.1988), this court treated an appeal to the Board from a termination for default without monetary redress at stake as a Government claim. The court reasoned:

The government issues [the termination for default] by CO decision, and it is both adverse to the contractor and relates to the contract because it involves a determination that the contractor has failed to fulfill its contractual duties.

Id. at 1443. The Board correctly extended the rationale in Malone to cover the non-monetary substitute for monetary relief requested in this case.

Finally, because jurisdictionally limited to “final decisions]” of the Board, 28 U.S.C. § 1295(a)(10) (1988), this court also reviews the Board’s decision for finality. In reviewing appeals from the contract appeal boards, this court has declined to apply a strict finality requirement to board appeals:

The legislative history of the CDA and longstanding practice of agency boards ... counsel against applying a rigid district court concept of finality. The legislative history of the CDA indicates that Congress desired to restore, to the extent possible, the original purpose of the boards of contract appeals “to provide a swift, inexpensive method of resolving contract disputes,” S.Rep. No. 1118, 95th Cong., 2d Sess., reprinted in 1978 U.S.Code Cong. & Ad.News 5235, 5246 (S.Rep. No. 95-1118).

Dewey Elecs. Corp. v. United States, 803 F.2d 650, 655 (Fed.Cir.1986).

In Dewey, the Board issued a decision “limited to consideration of the entitlement issue.” Id. at 653. The contractor had submitted nine claims, five of which the Board found in the contractor’s favor, remanding them to the contracting officer for a determination of damages. The Board found no entitlement under the remaining four claims and the contractor appealed those claims. On appeal, the Government argued that the decision of the Board was not final as long as damages had not been resolved on the remanded claims. Despite the absence of a damages determination, this court accepted jurisdiction over the Board’s decision. Id. at 658. The Dewey court relied on the Supreme Court’s standard for finality in administrative proceedings:

[Wjhether the process of the administrative decisionmaking has reached a stage where judicial review will not disrupt the orderly process of adjudication and whether rights or obligations have been determined or legal consequences will flow from the agency action.

Id. at 654 (quoting Port of Boston Marine Terminal Ass’n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71, 91 S.Ct. 203, 209, 27 L.Ed.2d 203 (1970)).

As in Dewey, the Board .here “fully addressed all of the decisions ... of the contracting officer then on appeal to the Board.” Dewey, 803 F.2d at 658. The Board entertained and resolved GE’s appeal. Following its decision, the Board had nothing more to do. Moreover, the Board’s decision had immediate legal consequences. For these reasons, the Board’s decision was final in the sense of conferring appellate jurisdiction on this court. See Marine Terminal, 400 U.S. at 71, 91 S.Ct. at 209; Dewey, 803 F.2d at 658.³

The Board’s decision noted an acute concern over the prospect of piecemeal litigation and premature involvement in contract administration. As the Board noted, these concerns are not new. See, e.g., R. Nash & J. Cibinic, Nonmonetary Claims: One Small Step for Man, 2 The Nash & Cibinic Rep. ¶ 61 (1988) (“Although we favor such a holding [extending Malone to cover other nonmonetary disputes] it is not without a down side. It would have the potential of increasing the likelihood of litigation during contract performance and we are not sure that this is such a good idea.”). This case, however, does not raise such a specter. Following performance under the contract, the Navy revoked final acceptance and chose to pursue a nonmonetary form of relief under the contract. The Navy’s choice of remedy, after acceptance of performance, should not dictate the viability of an appeal. In his concurrence below, Chairman Williams found that the Government’s revocation of acceptance, “under the circumstances of these appeals ... exceed^] the bounds of ordinary contract administration resulting in a Government claim under the FAR.” This court agrees.

CONCLUSION

The Board’s exercise of jurisdiction over the CO’s decision regarding the Navy’s directives to correct work during contract performance was proper. In addition, the Board properly exercised jurisdiction over the claim for a refund of the CIP funds. Accordingly, the Board’s decision is

AFFIRMED.

1 . Under section 907(b)(2) of the Courts Act, the amendments made by the Act apply as follows:

The amendment ... shall be effective with respect to all actions filed before, on, or after the date of the enactment of this Act, except for those actions which, before such date of enactment, have been the subject of [a final judgment of the Claims Court or of the Federal Circuit Court of Appeals].

2 . In Overall Roofing, this court stated that the term “claim” used in the CDA "carrie[d] with it the historical limitation that it must assert a right to presently due money.” 929 F.2d at 689 (citing King, 395 U.S. at 3, 89 S.Ct. at 1502). The boards, on the other hand, could adjudicate some nonmonetary disputes. See, e.g., Malone v. United States, 849 F.2d 1441, 1445 (Fed.Cir.1988) (holding that a termination for default constituted a Government "claim”). The 1992 Courts Act, by its terms, grants the Court of Federal Claims jurisdiction over certain non-monetary claims. See, e.g., 138 Cong.Rec. S17798 (1992) (statement of Sen. Heflin) (“The amendment will restore the option of appealing any final decisions to either the Court of Federal Claims or agency board of contract appeals at [sic] was intended in the Contract Disputes Act.”).

3 . In Dewey, this court addressed the inefficiency of a rigid finality rule:

For example, in order to have reasonably expeditious resolution of entitlement through appeal, the contractor would find it necessary to seek a decision from the contracting officer on both the quantum and entitlement issues and appeal both to the board to be adjudicated at the same time. At both levels, additional burdens would be placed on the parties, as well as the adjudicatory officials, to marshal and analyze detailed cost data and financial information pertaining to damages, all of which may be unnecessary if, on appeal, the entitlement is decided adversely to the contractor.

803 F.2d at 656.