So What's Reasonable: the Shutdown and Unpaid Invoices
“After all, the Government pays it bills (generally).”
An exasperated contractor contacted me recently about a stack of invoices that were, to say the least, stale. One might even say moldy. Emails went unanswered; calls weren’t returned. After a time, the Contracting Officer came up for air. With a tone that would make Igor proud, the Contracting Officer said “Invoices? What invoices?” Oh, just the ones that the CO had acknowledged weeks before. So, after taking a deep breath, the contractor sent them to the CO who promised to look at them.
Then came the shutdown. You probably won’t be surprised that the invoices still haven’t been paid. And, it should come as no surprise that more stale invoices have joined the heap. What to do? While one might be entitled to Prompt Payment Act interest, the accrual of interest provides precious little leverage to spur action. Pretty much the only remedy you have is to pursue a claim.
That’s exactly what a contractor did (or at least that’s what he thought he was doing) in the case of U.S. Army Tactical Supply, CBCA 5989, et al. (Dec. 12, 2018). The Kuwait-based contractor submitted five appeals to the Civilian Board of Contract Appeals (CBCA) based on the Department of State’s failure to pay for a number of deliveries. The CBCA dismissed the appeals for lack of jurisdiction due to the fact that the contractor had failed to submit a claim to the contracting officer. In doing so, the Board simply applied the well-settled principle that the Contract Disputes Act requires the submission of claims to a contracting officer for final decision before an appeal can be presented to and adjudicated by the Board. In other words, this was not a particularly remarkable decision.
Although unremarkable for its ultimate decision, the fact that the case involved unpaid invoices begs the question of whether the contractor had a claim to pursue. In reaching its decision, the Board recited the definition of a claim under the Federal Acquisition Regulation:
Claim means a written demand or written assertion by one of the contracting parties seeking, as a mater, of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.... A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim. The submission may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.
48 C.F.R. § 2.101(b) (FAR § 2.101(b)). Although the Board quoted the definition, the Board’s ruling did not require a finding as to whether the contractor’s demands for payment would have qualified as claims under this definition. Had the invoices not been acted upon in reasonable time?
What you may ask is a reasonable time? In Mauldin Dorfmeier Const., Inc., GSBCA No. 11068, 94-1 B.C.A. (CCH) ¶ 26277 (July 30, 1993), the General Services Board of Contract Appeals held that the passage of 41 days after the submission of invoices was an insufficient amount of time to be unreasonable. In so holding, the Board cited the CDA’s provision of 60 days for a contracting officer to issue a final decision could “serve[] as a guideline for deciding whether a contracting officer in responding to a request for payment which does not constitute a claim.” Id. (citation omitted). On the other end of this continuum, the ASBCA has held that the passage of four to nine months following the submission of an invoice constituted a failure to act upon an invoice “in a reasonable time.” See Appeals of -- Campus Mgmt. Corp., ASBCA No. 59924, 17-1 B.C.A. (CCH) ¶ 36727 (Apr. 20, 2017) (holding that the passage of more than four months was unreasonable); see also Appeal of Dod Contracts, Inc., ASBCA No. 47509, 95-2 B.C.A. (CCH) ¶ 27641 (Apr. 21, 1995) (five and one half monrths); and Appeal of S-Tron, ASBCA No. 45890, 94-3 BCA ¶ 26957, 1994 WL 226329 *6 (1994) (six months).
Thus, in the ordinary course of Government business, my view is that a contractor probably should not submit a claim until at least 60 days have passed since the submission of an undisputed invoice. From there, the time-frame is uncertain, although one could plausibly argue that the passage of at least four months is plainly unreasonable.
However, we are not in the midst of the ordinary course of Government business. The shutdown has turned ordinary procedures on their head and there surely is an unknowable backlog of “routine requests” for payment that are backlogged. On one hand, our humble government servants have had an untenable circumstance foisted upon them by the standoff over the wall. However, the 35-day-long shutdown hiatus should not provide an excuse for the passage of more than an extra month for the processing of invoices.
Now that the government has reopened, I suggest contractors take quick action to ascertain the status of pending invoices. You never know, we might find ourselves stuck in the same quagmire come February 15.