759 F.2d 1 (Fed. Cir. 1985), 84-1385, S.E.R., Jobs for Progress, Inc. v. United States

Docket Nº:Appeal No. 84-1385.
Citation:759 F.2d 1
Party Name:S.E.R., JOBS FOR PROGRESS, INC., Appellant, v. UNITED STATES, Appellee.
Case Date:March 28, 1985
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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759 F.2d 1 (Fed. Cir. 1985)




Appeal No. 84-1385.

United States Court of Appeals, Federal Circuit

March 28, 1985

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Eduardo Pena, Jr., Pena, Aponte & Ortiz-Daliot, Washington, D.C., for appellant.

R. Anthony McCann, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., for appellee. With him on the brief were Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director and Thomas W. Petersen, Asst. Director, Washington, D.C.

Before KASHIWA, Circuit Judge, COWEN, Senior Circuit Judge, and SMITH, Circuit Judge.

COWEN, Senior Circuit Judge.

S.E.R., Jobs for Progress, Inc. (SER) appeals from a decision of the Department of Labor Board of Contract Appeals (Board), which in part denied an SER appeal of a 1981 decision by a contracting officer of the Department of Labor (DOL) disallowing certain costs incurred under a 1972-73 contract. For the reasons to be set forth, we hold that this court has jurisdiction and we reverse the Board's decision and remand the case to it.


In 1972, DOL and SER entered into a cost reimbursement contract for manpower training services, effective from September 16, 1972 to September 15, 1973. The contract incorporated DOL's General Provisions (GP) for cost reimbursement contracts. GP 4 provided for prepayment by the Government to the contractor of the costs of contract performance and for recoupment by the Government of any overpayments or otherwise disallowed costs found on audit. Three contract modifications lowered the overall contract price from $18 million to $16.2 million, and extended the term of the contract until October 15, 1973.

The contract was audited by DOL shortly after its termination. A final audit report for the prime contract was issued in January 1975, and other final audit reports pertaining to certain subcontracts were issued at about the same time, questioning a total of $711,991 in costs assessed to the Government. Negotiations between DOL and SER over these proposed disallowances ensued. According to SER, these negotiations resulted in a settlement in April 1975 by a repayment of $7,060.13 by SER to the Government.

After these negotiations were concluded, nothing was heard by SER from DOL with respect to the contract until July 9, 1981 (more than 6 years later), when the contracting officer issued an initial determination, based on the 1975 audit reports, that SER owed $688,412 in disallowed costs. In the interim (in November 1979), SER had moved its national office from Los Angeles to Dallas and had destroyed records of various contracts, including the instant contract, which the employees of SER believed had been settled or otherwise resolved.

Approximately 1 month after the contracting officer issued his initial determination, he released his final decision, disallowing costs of $688,412 and requesting that SER repay that amount to the Government within 30 days. Pursuant to the standard Disputes clause of the contract, SER appealed to the Board, requesting that it order DOL to cease collection actions and/or administrative sanctions, and that it invalidate the final determination of the contracting officer, along with the Department's

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requests for payment of disallowed costs. After a hearing, in a decision rendered in August 1983, the Board reduced the amount of disallowed costs to $345,382. On reconsideration, the amount was further reduced to $331,714.75, but the Board denied SER's appeal in all other respects. SER's timely appeal to this court followed.


The Government contends that this court lacks jurisdiction over SER's appeal. Citing North American Corp. v. United States, 706 F.2d 1212, 1213 (Fed.Cir.1983), the Government argues that the Contract Disputes Act of 1978 (Act), 41 U.S.C. Sec. 601, et seq., is not applicable to SER's claim. That decision is inapposite, because there the contractor's claim was pending before a board of contract appeals on March 1, 1979, when the Act became effective. Here, the contractor's claim was initiated after the effective date of the Act.

Under section 16 of the Act, claims based on a contract executed prior to the effective date of the Act but initiated thereafter are subject to the Act only if the contractor elects to proceed thereunder. 41 U.S.C. Sec. 601 note (Supp. V. 1981). SER failed to make such an election in the original proceeding before the Board. However, in its motion for reconsideration, SER elected to proceed under that Act and requested the Board to hold that it applied to the contract. The Board denied the request on the ground that SER had not given the Board or the Government reasonable notice that an election to proceed under the Contract Disputes Act was intended. At the same time, the Board stated that SER's position as to the applicability of the Act and the Board's rejection of that position was "not seen by the Board as affecting any material right" of SER. Citing two cases from our predecessor court, the Court of Claims, the Government contends in this appeal that SER's election before the Board came too late. See Santa Fe Engineers, Inc. v. United States, 677 F.2d 876, 878, 230 Ct.Cl. 512 (1982); Tuttle/White Constructors, Inc. v. United States, 656 F.2d 644, 646-49, 228 Ct.Cl. 354 (1981).

We do not think the Government's theory is supported either by section 16 of the Act or the case law cited. As Tuttle/White recognizes, "the Contract Disputes Act does not set forth a specific time period within which an election to proceed under that act must be made, nor does the act prescribe the manner in which such election must be made." 656 F.2d at 647. Moreover, contrary to the Government's contention, Tuttle/White and Santa Fe do not, in all circumstances, prohibit contractors of pre-1979 contracts from electing to proceed under the Act if they had not made this election during the initial proceeding before the Board. They merely hold that contractors who are notified of their appeal rights under the Act by the contracting officer cannot change avenues of appeal once they make a "conscious and unwaivering election" to follow a particular route. Id. at 648; see also Santa Fe, 677 F.2d at 878.

In the instant case, the contracting officer did not notify SER that it had any right to elect to appeal under the Contract Disputes Act. The decision of the contracting officer stated only that SER had the right to appeal to the Board within 30 days under the Disputes clause of the contract and DOL regulations, and SER appealed in accordance with this advice. This action by SER cannot be considered a "knowing election" under the Act. See Santa Fe, 677 F.2d at 878. When the contractor's action in initially proceeding under the disputes clause was not such a "knowing election," our predecessor court has permitted a contractor to change its avenue of appeal thereafter. See National Electric Coil v. United States, 227 Ct.Cl. 595 (1981).

Absent a knowing election by the contractor, the Government must show that such a late election "would result in prejudice or would violate the...

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