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Thelen Reid Brown Raysman & Steiner LLP
The
Navy awarded a contract to U.S. General, Inc. (USG) for
demolition of a timber pier and construction of a new pier
supported by concrete piles at Point Loma Naval Station
in San Diego. During construction, USG sought an equitable
adjustment for several instances when concrete pile locations
were changed. The Navy refused to grant the adjustments.
USG submitted a differing site conditions claim, which the
Navy's Contracting Officer denied. USG appealed to the Armed
Services Board of Contract Appeals. ASBCA denied USG's differing
site conditions claim but held that USG was entitled to
an equitable adjustment under the contract's "Changes"
clause for the net amount of $4,287. The Navy requested
that USG submit an invoice and release of claims in order
to receive payment for the award. USG refused in order to
preserve its right to pursue other claims.
The
contract incorporated standard Federal Acquisition Regulations
clauses, including the "Payments Under Fixed-Price
Construction Contract" clause (FAR 52.232-5, April
1989). The clause provides, in part, that the government
shall pay the amount due the contractor after the contractor
provides a release of all claims. (The contractor may except
claims in stated amounts from the release.)
After
contract completion, USG forwarded an invoice for the full
amount remaining, $9,400. USG's appeal of its differing
site condition claim still was pending. The Navy rejected
USG's invoice because the final release of claims was missing.
USG resubmitted the invoice but with a changed dollar amount.
As explained in its cover letter, USG billed for 99.99 percent
($9,000) of the final amount, leaving $400 in the contract
to "keep it open" until USG's claims were settled.
The Navy did not pay this revised invoice. Five months later,
USG again submitted a revised invoice for $9,000, leaving
$400 to keep the contract open. Again, the Navy failed to
pay. In a recorded telephone conversation, the Navy stated
that it did not pay the invoice, even as revised, because
USG refused to sign a release.
By
letter, USG submitted a claim to the Navy to recover the
$4,287 ASBCA award and the $9,000 revised invoice. The Contracting
Officer's decision affirmed that the ASBCA award would not
be paid without an invoice, but determined that the $9,000
revised invoice was proper and should have been paid. USG
appealed the Contracting Officer's decision.
The
ASBCA held that an invoice was not required for payment
of a board award. It was not necessary for the Navy to lump
the award with final payment, so no release was required
before payment of the award.
ASBCA
also held that the USG invoice for $9,000, revised to leave
$400 to keep the contract open, was not a request for final
payment and, accordingly, no release was required before
payment of the invoice. The Navy should have paid the invoice
as a progress invoice. In re U.S. General, Inc.,
ASBCA No. 52,041, 00-1 BCA 30,850 (ASBCA 2000).
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-369-7229 or at pwberning@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2002 Thelen Reid Brown Raysman & Steiner LLP
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