December 4, 1996

The "In Dispute Requirement after ELLETT: A Resuscitation of the DAWCO Standards

The Government Contractor, Vol. 38, No. 46
A recent decision by the Federal Circuit inadvertently may have revived the "in dispute" requirement of Dawco Constr., Inc. v. U.S. While Reflectone, Inc. v. Davis appeared to end the "in dispute requirement, Ellett Constr., Inc. v. U.S. raises new doubts. The Ellett court held that while settlement proposals are nonroutine requests for payment, they do not ripen into claims until submitted to the contracting officer (CO). This decision may have raised more issues than it solved and resuscitated the wasteful litigation of jurisdictional issues.

In Ellett the court found that termination settlement proposals originally are submitted for the purposes of negotiation. Thus, the proposals must be considered by the CO, and ripen into claims only after the CO has issued a final decision. This holding raises several questions, such as:

1) must a contractor negotiate "to impasse" before requesting a final decision;

2) does CDA interest accrue once the settlement proposal ripens into a claim;

3) are settlement proposal preparation costs reimbursable; and

4) should contractors separate REAs and other claims from settlement proposals.

Ellett's language, which states that "ripening occurs when negotiators reach impasse," raises the first issue. The others follow from this departure from Reflectone , and highlight the troubling aspects of the Ellett decision.

In the weeks following Ellett , six cases relied upon its reasoning. At least two reached conflicting results. The "negotiation to impasse" standard is vague, offers little guidance to contractors, and should be discarded. Settlement proposals, once submitted, should be sufficient to satisfy the jurisdictional requirements for contract appeals.


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