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  • Question

    Can you provide a sample letter to the KTR to withdraw his claim pending successful resolution via negotiations?


    Answer

    Unfortunately, DAU does not have any sample letters to share.  Each agency and contracting organization have their own sample letters and templates unless DoD or the FAR mandates a specific format to be used.  Without knowing any of the contract specifics, I can only make some assumptions about your contract.  There's no question that claims are time-sensitive (e.g. FAR claims procedures have mandatory timelines and there's the potential for interest to accrue on claims).  However, I'm not so sure you need to get the contractor to withdraw their claim or convert it to a request for equitable adjustment (REA) in order to negotiate it especially if the Government thinks they can resolve it quickly.  Let's take for instance if the contractor had submitted this as an REA rather than a claim.  Although the FAR doesn't put specific time limits on negotiating REAs, the contracting officer is still expected to be diligent and expeditious in resolving it.  This principle was established in the Reflectone Case. The decision was based on a Contracting Officer ignoring a contractor’s REA so objectionably that the system now says, “If it looks, smells, and feels like a claim, treat it like a claim.”  In other words, contracting personnel have the duty to settle all issues arising in construction contracting fairly, equitably, and QUICKLY as can be done.  DOD looks to contracting personnel to resolve issues, if at all possible, at our level.

    Another important point to remember is that the Government and the contractor can choose to negotiate the claim at any time as if it were an REA or to use alternative disputes resolution even after it goes to court.  If the claim can be settled by mutual agreement, then a Contracting Officer Final Decision on the claim as required by FAR 33.211 may not be necessary either.  Really the only advantage I can see (if there is one) to getting the contractor to agree to converting their claim to an REA might be the cost associated with the claim, but even that may not be very significant unless both parties are digging their heals in for a long fight.  The costs of preparing a claim and the prosecution of a claim are unallowable, but interest on any amount owed the contractor will accrue from the date submitted until the date of payment.  With an REA, the cost of preparing the REA including legal and accounting fees as well as negotiation expenses are allowable but interest is not.  However, once again if the claim is resolved quickly then the cost should hopefully be minimized either way. 

    Bottom line: The KO can request that the contractor withdraw their claim or request they convert it to an REA, and the contractor may be willing to do that but doesn't have to comply.  They would probably be more willing to accommodate the request if we have a good relationship with the contractor and they trust the Government will resolve it promptly and treat them fairly.  Communicating with the contractor and taking immediate steps to resolve the dispute in a fair and equitable manner should go a long way in building that trust.  The parties can decide to negotiate the dispute at any point regardless of whether or not the contractor has submitted it as a claim or REA or even after it's already gone to court.  The type of cost paid are different based on whether the dispute is handled as a claim or REA, but the goal should be to keep cost to a minimum by resolving the matter as expeditiously as possible.  The contractor has the burden of proof and is required to submit either actual cost data or estimated cost with detailed substantiating data in support of their claim.  Finally, it is highly recommended that you contact your local Contracting Officer and acquisition legal counsel for any sample letters and their advice on the best way to move forward.

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