Surety Bond Quarterly - Fall 2017 - 11

DIMA SOBKO/SHUTTERSTOCK.COM

Quarterly (available at www.nxtbook.
com/naylor/SBPQ/SBPQ0117/index.
php?startid=32). The key features of
the process relating to timeliness are
summarized below.
When a change is directed, the
contractor needs to segregate the
costs of the change from the base
contract work. This is best done by
establishing cost codes to collect the
costs of the extra or changed work.
The potential for a dispute over quantum is decreased when a cost code
is established at the beginning of the
change. Further, if the matter goes
to litigation, the damages collected
in a cost code are more difficult for
the government to challenge. In contrast, there is almost always a dispute
over quantum if a cost code is not

established. Resolution of the amount
must be based on estimates, and the
contractor inevitably is forced to compromise and take less than its claim.
The change order needs to be
priced, submitted, negotiated and
finalized aggressively and timely.
Without a change order and a contract modification, there will be no
payment. Equally as important, the
longer the change order languishes,
the more memories fade and the
harder it is to settle the change and
obtain full compensation.
If the contractor believes a verbal or
written order constitutes a "constructive change" or there is a suspension
of work or differing site condition, the
contractor needs to provide timely
written notice and expeditiously follow it with an REA. Each clause has
separate notice requirements with
which the contractor should comply.
While the notice requirements generally are not strictly enforced, the
contractor should not subject itself to
the lack of notice argument. The government may deny the claim based
on a lack of notice, which can delay
the resolution of the matter, cost the
contractor time and money making
the argument, and possibly result in
a reduced recovery.
The notice should be short and
straightforward and should not be
argumentative or aggressive. There
is no reason to start a fight with the
government. Give the government
the facts and the basis for the contractor's assertion that there has
been a change.
The contract clauses have timeliness requirements for submitting the
REA setting out damages. However,
the provisions are even less likely to
be enforced than the notice provision. This does not mean that the REA
should be delayed. The matter cannot
be settled and payment obtained until
the REA is submitted and settled, so
the contractor should present the REA
to the government as quickly as it can.
However, it also is important that the
REA contains the necessary facts and
supporting documentation to justify
the REA. The contractor should not
sacrifice a quality REA for speed.

The contractor has the right to
recover third-party costs, including
attorneys' and consultants' fees (that
is, scheduling consultants and cost
consultants) to prepare the REA. These
costs, however, cannot be recovered
if the contractor is pursuing an actual
claim against the government. Thus,
the time to seek professional help
with a matter that may later turn into
a dispute and a resulting claim is in
the REA preparation phase. This help
will also make it more likely that the
contractor will recover the maximum
amount allowable on its REA.
Interest does not run on an REA, but
commences on filing a proper claim.
As a result, the contractor does not
want wait too long before converting
its REA into a claim. However, the contractor is faced with a delicate decision:
the relationship with the government
often changes when a formal claim is
filed, and unreimbursable legal fees
may start to be incurred. If the contractor believes that it can negotiate
a settlement with the government, it
may be better not to convert the REA
into a claim, but to continue to actively
negotiate and work with the government on resolution of the matter. On
the other hand, the government can
drag out the decision on an REA for a
long time, and submission of a claim
may be necessary to obtain a resolution of the matter.
The REA is converted into a claim
by adding a certification and making
sure the submission meets the other
requirements of a claim. After submission, the Contracting Officer then
has sixty days to issue a final decision
or request additional time to respond
to a proper claim. Once a Contracting
Officer issues a final decision, the
contractor has ninety days to file an
appeal with the Board of Contract
Appeals or one year to file an appeal
with the Court of Federal Claims.
The time limits for appeal are strictly
enforced. An appeal from either the
Board or Court is to the Court of
Appeals for the Federal Circuit.
As noted previously, the contractor
cannot recover legal or other costs in
pursuing its claim. The one exception is where the contractor is a small

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

11


https://www.nxtbook.com http://WWW.NASBP.ORG

Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2017

NASBP Upcoming Meetings & Events
2017–2018 Executive Committee
From the CEO: Advice for the Advisor!
How Can Construction Contractors Expedite Payment on Federal Contracts?
The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Bond Agency Owners: The Hardest Part is Letting Go
New Software Selection and Implementation is not a Weekend Project
Is Canada Soon to Have Its Version of the Miller Act?
2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - Intro
Surety Bond Quarterly - Fall 2017 - cover1
Surety Bond Quarterly - Fall 2017 - cover2
Surety Bond Quarterly - Fall 2017 - 3
Surety Bond Quarterly - Fall 2017 - 4
Surety Bond Quarterly - Fall 2017 - 5
Surety Bond Quarterly - Fall 2017 - 6
Surety Bond Quarterly - Fall 2017 - 2017–2018 Executive Committee
Surety Bond Quarterly - Fall 2017 - 8
Surety Bond Quarterly - Fall 2017 - From the CEO: Advice for the Advisor!
Surety Bond Quarterly - Fall 2017 - How Can Construction Contractors Expedite Payment on Federal Contracts?
Surety Bond Quarterly - Fall 2017 - 11
Surety Bond Quarterly - Fall 2017 - 12
Surety Bond Quarterly - Fall 2017 - 13
Surety Bond Quarterly - Fall 2017 - The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Surety Bond Quarterly - Fall 2017 - 15
Surety Bond Quarterly - Fall 2017 - 16
Surety Bond Quarterly - Fall 2017 - 17
Surety Bond Quarterly - Fall 2017 - Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Surety Bond Quarterly - Fall 2017 - 19
Surety Bond Quarterly - Fall 2017 - 20
Surety Bond Quarterly - Fall 2017 - Bond Agency Owners: The Hardest Part is Letting Go
Surety Bond Quarterly - Fall 2017 - 22
Surety Bond Quarterly - Fall 2017 - 23
Surety Bond Quarterly - Fall 2017 - 24
Surety Bond Quarterly - Fall 2017 - 25
Surety Bond Quarterly - Fall 2017 - New Software Selection and Implementation is not a Weekend Project
Surety Bond Quarterly - Fall 2017 - 27
Surety Bond Quarterly - Fall 2017 - 28
Surety Bond Quarterly - Fall 2017 - 29
Surety Bond Quarterly - Fall 2017 - Is Canada Soon to Have Its Version of the Miller Act?
Surety Bond Quarterly - Fall 2017 - 31
Surety Bond Quarterly - Fall 2017 - 32
Surety Bond Quarterly - Fall 2017 - 2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - 34
Surety Bond Quarterly - Fall 2017 - 35
Surety Bond Quarterly - Fall 2017 - 36
Surety Bond Quarterly - Fall 2017 - 37
Surety Bond Quarterly - Fall 2017 - 38
Surety Bond Quarterly - Fall 2017 - 39
Surety Bond Quarterly - Fall 2017 - 40
Surety Bond Quarterly - Fall 2017 - 41
Surety Bond Quarterly - Fall 2017 - 42
Surety Bond Quarterly - Fall 2017 - 43
Surety Bond Quarterly - Fall 2017 - 44
Surety Bond Quarterly - Fall 2017 - 45
Surety Bond Quarterly - Fall 2017 - 46
Surety Bond Quarterly - Fall 2017 - cover3
Surety Bond Quarterly - Fall 2017 - cover4
https://www.nxtbook.com/naylor/SBPQ/SBPQ0118
https://www.nxtbook.com/naylor/SBPQ/SBPQ0417
https://www.nxtbook.com/naylor/SBPQ/SBPQ0317
https://www.nxtbook.com/naylor/SBPQ/SBPQ0217
https://www.nxtbook.com/naylor/SBPQ/SBPQ0117
https://www.nxtbook.com/naylor/SBPQ/SBPQ0416
https://www.nxtbook.com/naylor/SBPQ/SBPQ0316
https://www.nxtbook.com/naylor/SBPQ/SBPQ0216
https://www.nxtbook.com/naylor/SBPQ/SBPQ0116
https://www.nxtbook.com/naylor/SBPQ/SBPQ0415
https://www.nxtbook.com/naylor/SBPQ/SBPQ0315
https://www.nxtbook.com/naylor/SBPQ/SBPQ0215
https://www.nxtbook.com/naylor/SBPQ/SBPQ0115
https://www.nxtbook.com/naylor/SBPQ/SBPQ0414
https://www.nxtbook.com/naylor/SBPQ/SBPQ0314
https://www.nxtbook.com/naylor/SBPQ/SBPQ0214
https://www.nxtbookmedia.com