United States Court of Appeals
for the Federal Circuit
__________________________
SYSTEMS DEVELOPMENT CORPORATION,
Appellant,
v.
JOHN MCHUGH, SECRETARY OF THE ARMY,
Appellee.
__________________________
2011-1092
__________________________
Appeal from the Armed Services Board of Contract
Appeals in No. 56682, Administrative Judge Monroe E.
Freeman, Jr.
__________________________
Decided: September 26, 2011
__________________________
HOWELL R. RIGGS JR., Dick, Riggs & Miller, LLP, of
Huntsville, Alabama, argued for the appellant. Of coun-
sel was TIMOTHY P. PITTMAN.
JEFFREY A. REGNER, Trial Attorney, Civil Division,
Commercial Litigation Branch, United States Department
of Justice, of Washington, DC, argued for appellee. With
him on the brief were TONY WEST, Assistant Attorney
General, JEANNE E. DAVIDSON, Director, and BRYANT G.
SNEE, Deputy Director. Of counsel on the brief was
SYSTEMS DEVELOPMENT v. ARMY 2
ROBERT T. WU, Trial Attorney, Contract and Fiscal Law
Division, United States Army Legal Services Agency,
United States Department of the Army, Arlington, Vir-
ginia.
__________________________
Before NEWMAN, PROST, and O’MALLEY, Circuit Judges.
PROST, Circuit Judge.
This is an appeal from the Armed Services Board of
Contract Appeals (“Board”) involving Systems Develop-
ment Corporation’s (“SDC”) monetary claims stemming
from the Army’s termination of SDC’s contract for conven-
ience. On February 14, 2008, SDC submitted claims to
the Army’s contracting officer (“CO”) for: (1) termination
settlement costs, and (2) equitable adjustments arising
from alleged defective specifications, bad faith, and
breach by the Army of the duties of fair dealing and
cooperation (“equitable adjustment claim”). The CO
denied all of SDC’s claims. The termination settlement
costs claim was denied because those costs had already
been the subject of a final decision and a subsequent
appeal to the United States Court of Federal Claims. The
equitable adjustment claims were denied on the merits.
SDC appealed the CO’s decision to the Board, which
dismissed the appeal for lack of jurisdiction. Because we
agree that the Board did not have jurisdiction over the
claims, we affirm.
BACKGROUND
Effective May 9, 2000, the Army awarded SDC a
$430,000 contract for the production of twenty-four circuit
card assemblies for HAWK missile systems. Shortly
thereafter, a dispute arose between SDC and the Army
regarding alleged defects in the specifications for the
3 SYSTEMS DEVELOPMENT v. ARMY
circuit card assemblies. The parties attempted to resolve
the dispute without success.
On November 13, 2001, SDC requested that the con-
tract be terminated for convenience. 1 Thereafter, on April
29, 2003, despite the fact that the contract had not yet
been terminated, SDC submitted a termination settle-
ment proposal form seeking a net payment of $596,123.
The proposal did not include a claim for equitable adjust-
ment. Because the claim letter did not provide sufficient
information regarding “why SDC feels there has been a
constructive termination for convenience of these con-
tracts,” the CO advised SDC on June 2, 2003, that he
could not issue a final decision.
On February 17, 2004, the CO terminated the con-
tract for convenience and, on April 23, 2004, SDC submit-
ted a new termination settlement proposal for $789,058.
This proposal included $19,303 for “other costs” and
$14,316 for “expenses,” which consisted of the hours of
labor required to settle the termination. Again, the
proposal did not include any equitable adjustment claims.
By letter dated November 12, 2004, SDC offered to reduce
its termination settlement proposal to $617,641, which
included “other costs” of $15,442 and “settlement ex-
penses” in the amount of $19,316. The termination
contracting officer (“TCO”) issued a final decision award-
ing SDC $403,563 to settle the contract termination on
1 Federal Acquisition Regulation 52.249-2,
which was incorporated by reference into the contract,
provides for termination for convenience of the govern-
ment. Under this regulation, the government “may
terminate performance of work under this contract in
whole or, from time to time, in part if the Contracting
Officer determines that a termination is in the Govern-
ment’s interest.” 48 C.F.R. § 52.249-2(a) (1996).
SYSTEMS DEVELOPMENT v. ARMY 4
March 25, 2005. With respect to the claimed “other costs”
and settlement expenses, the TCO determined that cer-
tain of SDC’s proposed costs actually constituted direct
expenses for employees whose full salaries remained
charged to the overall G&A expense pool and that there
was inadequate support for the remainder. Accordingly,
the TCO denied these proposed costs and expenses to
avoid double payment.
At this point, SDC had the option of appealing the
TCO’s final decision to either the Board or the Court of
Federal Claims. Under the Contract Disputes Act
(“CDA”), a contractor may appeal a decision to an agency
board of contract appeals within ninety days of the con-
tractor’s receipt of the decision. 41 U.S.C. § 606. There-
fore, SDC had until June 23, 2005 to pursue that route.
Alternatively, the CDA provides that an action may be
filed in the Court of Federal Claims within twelve months
of the contractor’s receipt of the decision. Id. § 609. SDC
took no action within § 606’s ninety-day timeframe.
Instead, SDC filed an action in the Court of Federal
Claims on March 24, 2006—just shy of one year after the
issuance of the TCO’s final decision.
At the Court of Federal Claims, SDC sought, among
other things, $19,316 in costs and expenses. In addition,
SDC’s case at the Court of Federal Claims went beyond
appealing issues resolved in the TCO’s final decision. For
the first time, SDC also sought equitable adjustments of
almost $1.7 million consisting of $397,000 for defective
specifications; $500,000 for the Army’s alleged breach of
covenants of fair dealing and cooperation; and $750,000
for the Army’s alleged bad faith. The government moved
to dismiss, arguing that the Court of Federal Claims did
not have jurisdiction to entertain the equitable adjust-
ment claims because the claims had never been submitted
5 SYSTEMS DEVELOPMENT v. ARMY
to a CO, a prerequisite to suit in the Court of Federal
Claims or review by the Board. See Arctic Slope Native
Ass’n v. Sebelius, 583 F.3d 785, 793 (Fed. Cir. 2009). On
January 31, 2008, while the government’s motion was
pending, the parties filed a joint stipulation of dismissal
pursuant to Rule 41(a)(1)(ii) of the Rules of the Court of
Federal Claims (“RCFC”). After the stipulated dismissal
was filed, SDC took no further appeal from the TCO’s
March 25, 2005 final decision.
On February 14, 2008, SDC submitted new claims to
the Army CO. SDC again sought $19,316 in termination
costs and expenses arising out of the termination for
convenience—a cost category that had been disallowed
previously by the TCO. In addition, SDC now sought over
$7 million in equitable adjustments to the $430,000
contract for defective specifications, the Army’s alleged
breach of the duty of fair dealing and cooperation, and the
Army’s alleged bad faith. On September 15, 2008, the CO
issued a final decision denying termination settlement
costs on the grounds that the claim had already been
addressed in the TCO’s March 25, 2005 final decision and
was not reversed on appeal. Noting that “SDC faces
serious problems with regard to its ability to prove its
entitlement to and the amount of its alleged damages,”
the CO denied the equitable adjustment claims on the
merits.
SDC timely appealed the CO’s September 15, 2008
decision to the Board. The Board separately analyzed the
termination settlement costs and equitable adjustment
claims and dismissed the appeal on October 15, 2010, on
the basis that it lacked jurisdiction to entertain either
type of claim. The Board’s dismissal of the termination
settlement claim was based on SDC’s failure to appeal the
TCO’s March 25, 2005 final decision on those costs to the
SYSTEMS DEVELOPMENT v. ARMY 6
Board within the ninety-day limitation in the CDA. With
regard to the equitable adjustment claims, the Board
noted that the CDA requires a contractor to submit its
claims against the government within six years of accrual
of the claim. 41 U.S.C. § 605(a). The Board found that
SDC knew of the basis for its equitable adjustment claims
no later than November 13, 2001. Accordingly, the Board
dismissed the equitable adjustment claims because SDC
did not assert them before the six-year CDA limitations
ran.
This appeal followed. We have jurisdiction to review
the Board’s October 15, 2010 final decision under 28
U.S.C. § 1295(a)(10).
DISCUSSION
We uphold the Board’s findings of fact “unless the de-
cision is fraudulent, or arbitrary, or capricious, or so
grossly erroneous as to necessarily imply bad faith, or if
such decision is not supported by substantial evidence.”
41 U.S.C. § 609(b). We review the Board’s legal conclu-
sions, including the Board’s determination of jurisdiction,
de novo. Winter v. FloorPro, Inc., 570 F.3d 1367, 1369
(Fed. Cir. 2009). In applying a de novo review, however,
we give “careful consideration and great respect” to the
Board’s legal interpretations in light of its considerable
experience in the field of government contracts, Fruin-
Colnon Corp. v. United States, 912 F.2d 1426, 1429 (Fed.
Cir. 1990), including its experience in interpreting the
Federal Acquisition Regulation (“FAR”), Titan Corp. v.
West, 129 F.3d 1479, 1481 (Fed. Cir. 1997).
As noted, the Board dismissed SDC’s appeal in its en-
tirety for lack of jurisdiction. Because the termination
settlement costs claim and equitable adjustment claims
7 SYSTEMS DEVELOPMENT v. ARMY
implicate separate jurisdictional issues, we address each
in turn.
A
The Board dismissed SDC’s claim for termination set-
tlement costs as untimely. It noted that SDC had previ-
ously requested termination settlement costs as part of its
termination settlement proposal and that the TCO’s
March 25, 2005 settlement determination denied those
exact costs. SDC never appealed that determination to
the Board. The Board concluded that it lacked jurisdic-
tion to review costs resolved in a termination settlement
decision made more than five years earlier.
The CDA, as discussed above, permits a contractor,
following issuance of a final decision, ninety days to
appeal to the Board (41 U.S.C. § 606), or twelve months to
appeal to the Court of Federal Claims (41 U.S.C. § 609).
In order to timely appeal the TCO’s decision regarding
termination settlement costs to the Board, SDC needed to
file its appeal no later than June 23, 2005. SDC elected,
however, to wait until nearly a year later to appeal to the
Court of Federal Claims. It then voluntarily dismissed
that appeal. By that time, the ninety-day period for
appealing the March 25, 2005 decision to the Board had
long-elapsed. SDC took no further action to contest the
TCO’s resolution of its claim for termination settlement
costs until it filed the claims underlying the present
appeal in 2008. As a result, the TCO’s determination
with respect to these costs stands.
SDC’s primary argument as to why its current chal-
lenge is not foreclosed appears to rest on its contention
that the TCO lacked the authority to issue the March 25,
2005 final decision in the first place because SDC’s pro-
SYSTEMS DEVELOPMENT v. ARMY 8
posed settlement amount ($759,058) was greater than the
amount of SDC’s contract ($430,000). Under SDC’s
reasoning, a CO never has the authority to consider any
settlement proposal that is greater than the amount of
the awarded contract.
It is true that FAR 49.207 limits settlement amounts
for fixed-price contracts terminated for convenience such
as the contract at issue here. Specifically, “[t]he total
amount payable to the contractor for a settlement, before
deducting disposal or other credits and exclusive of set-
tlement costs, must not exceed the contract price less
payments otherwise made or to be made under the con-
tract.” FAR 49.207. While the FAR limits the amount
that the CO may award, the FAR does not limit the size of
the settlement proposal that may be submitted to a CO.
Here, SDC’s settlement offer of $759,058 exceeded its
contract price by 83%. Regardless, the TCO determined
that SDC was entitled to $403,563—an amount below
SDC’s $430,000 contract price. As such, the TCO clearly
had the authority to issue the March 25, 2005 final deci-
sion because the awarded settlement amount was below
the contract price.
Because its appeal to the Court of Federal Claims was
voluntarily dismissed, SDC has never successfully ap-
pealed the costs addressed in the TCO’s final decision.
SDC cannot revive the lapsed settlement cost claim by
simply resubmitting a previously resolved claim to a CO
years later. The February 14, 2008 termination settle-
ment costs claim is the same claim that SDC submitted
on April 23, 2004 and that the TCO resolved on March 25,
2005. Accordingly, we agree that the Board lacked juris-
diction over this claim.
9 SYSTEMS DEVELOPMENT v. ARMY
B
We next consider whether the Board had jurisdiction
over SDC’s claims for over $7 million in equitable adjust-
ments. The CDA states that “[e]ach claim by a contractor
against the government relating to a contract . . . shall be
submitted [to the CO] within 6 years after the accrual of
the claim.” 41 U.S.C. § 605(a). Contractor compliance
with this statutory time limit on the presentment of a
claim to a CO is a jurisdictional prerequisite for any
subsequent appeal of the CO’s decision on that claim. See
Arctic Slope, 583 F.3d at 793. Thus, in order for the
Board to have jurisdiction over the equitable adjustment
claims, they must not have accrued prior to February 14,
2002.
The Board found that SDC’s equitable adjustment
claims based on the alleged liability of the government for
defective specifications, failure to cooperate, and bad faith
accrued no later than November 13, 2001. Accordingly,
the Board concluded that it did not have jurisdiction over
those claims. On appeal, SDC argues that the equitable
adjustment claims did not ripen until settlement negotia-
tions between the TCO and SDC reached an impasse.
SDC contends that this did not occur until March 25,
2005, when the TCO entered the final decision rejecting
SDC’s settlement proposal. 2 The government counters
that such an impasse is not required for the equitable
adjustment claims to accrue.
2 Before the Board, SDC argued that the equitable
adjustment claims did not accrue until June 2, 2003 when
the CO refused to issue a decision on SDC’s April 29, 2003
settlement proposal. SDC did not argue before the Board
that “impasse” was required for the claims to accrue.
SYSTEMS DEVELOPMENT v. ARMY 10
1
Under the FAR, a claim accrues on “the date when all
events, that fix the alleged liability of either the Govern-
ment or the contractor and permit assertion of the claim,
were known or should have been known.” FAR 33.201.
All three of SDC’s equitable adjustment claims seek
damages arising out of allegedly defective specifications
contained in the May 9, 2000 contract. Claim one alleges
that the specifications were defective “at the time of
award.” Claim two alleges that the Army breached its
duty to SDC by “continuously exhorting SDC to perform”
the contract despite the defective specifications. Claim
three alleges bad faith by the Army in failing to correct
the defective specifications.
Applying FAR 33.201, the Board concluded that SDC’s
equitable adjustment claims accrued more than six years
before SDC presented them to the CO. Specifically, the
Board found that the alleged defects in the specifications
were present in the contract at the time of award in 2000.
Pointing to a letter from SDC’ s president, Virginia Gil-
christ, to the Army, the Board found that SDC actually
knew the specifications were defective no later than July
26, 2000. In that letter, Ms. Gilchrist explained that the
information provided in the specifications was “of insuffi-
cient quality to effectively manufacture” the circuit card
assemblies. The Board also found that the events giving
rise to SDC’s allegations of bad faith and failure to coop-
erate arose prior to July 2001. In particular, the Board
found that the defects in the specifications and the Army’s
failure to correct those defects led SDC and its principal
subcontractor to stop ordering parts for the contract and
to seek a termination for impossibility in July 2001. The
Board further found that SDC’s actual knowledge in 2001
of the basis for equitable adjustment claims and the fact
11 SYSTEMS DEVELOPMENT v. ARMY
that it had incurred injury as a result of the defective
specifications and the government’s failure to cure the
defects was further established by a November 13, 2001
letter. That letter stated that “SDC cannot continue to
absorb the financial impacts caused by the Government’s
failure to provide the required data” and that it had
“already expended a significant amount of time and
resources . . . attempt[ing] to come up with ‘work-arounds’
to these problems.” In view of the record, the Board
concluded that SDC’s equitable adjustment claims ac-
crued no later that November 13, 2001. We agree.
Despite knowing of the basis for its claims in 2000
and 2001, SDC made no attempt to seek equitable ad-
justments until its appeal of the TCO’s final decision to
the Court of Federal Claims. As discussed above, that
court did not have jurisdiction over the claims because
they had never been presented to a CO. Had SDC sub-
mitted the claims to a CO at that time, they would have
been timely. Instead, SDC inexplicably waited until
February 14, 2008—more than six years after accrual of
the equitable adjustment claims—to first present its
$7 million claim on the $430,000 contract to the CO.
2
SDC does not argue that the Board misapplied FAR
33.201. Rather, SDC contends that our precedent holds
that a claim does not accrue until there is an impasse in
negotiations between the contractor and the government.
SDC, however, misapprehends our precedent. Impasse is
not required for SDC’s equitable adjustment claims to
accrue.
In support of its impasse theory, SDC points to Rex
Systems, Inc. v. Cohen, 224 F.3d 1367 (Fed. Cir. 2000). In
SYSTEMS DEVELOPMENT v. ARMY 12
Rex Systems, we considered when a submission by a
contractor to a CO meets the definition of a “claim” for the
purposes of the CDA. See also James M. Ellett Constr.
Co. v. United States, 93 F.3d 1537 (Fed. Cir. 1996). We
acknowledged that not all contractor submissions to a CO
are claims. Rex Sys., 224 F.3d. at 1372 (“[A]ny non-
routine submission by a contractor meets the definition of
a claim if it is: (1) a written demand; (2) seeking as a
matter of right; (3) the payment of money in a sum cer-
tain.”). In this line of cases, we clarified that termination
settlement proposals submitted under the termination for
convenience clause of the FAR generally are not CDA
claims. Under certain circumstances, however, a termi-
nation settlement proposal may ripen into a claim. Id.
For example, as we explained in Ellett, a termination
settlement proposal may ripen into a CDA claim when the
parties’ negotiations reach an impasse. 93 F.3d at 1543-
44. Contrary to SDC’s assertion, nothing in these cases
addressed situations beyond termination settlement
proposals. Indeed, we emphasized that the FAR “antici-
pate[s] the submission of claims independently of the
termination settlement proposal.” Id. at 1548. We have
never indicated that such independently submitted claims
require an impasse.
SDC’s argument that an impasse was required for its
equitable adjustment claims to accrue misses the mark
because it is undisputed that the equitable adjustment
claims were not part of SDC’s termination settlement
proposal. Thus, these claims were not even a part of the
negotiations that led to the impasse on March 25, 2005.
Rather, SDC’s equitable adjustment claims were wholly
separate from its termination settlement proposal. Noth-
ing precluded SDC from presenting them to a CO as soon
as SDC knew of their basis as provided in the FAR. See
FAR 33.201-11.
13 SYSTEMS DEVELOPMENT v. ARMY
In sum, we conclude that the Board did not have ju-
risdiction to entertain either the termination settlement
costs claim or the equitable adjustment claims. The
termination settlement costs claim should have been
presented to the Board within ninety days of receipt of the
TCO’s decision. See 41 U.S.C. § 606. The equitable
adjustment claims were submitted to the CO outside the
six-year statute of limitations in 41 U.S.C. § 605(a).
CONCLUSION
The Board’s dismissal of SDC’s appeal for lack of ju-
risdiction is affirmed.
AFFIRMED