Federal — Terminations & Claims

The Contract Disputes Act of 1978 (CDA), codified at 41 U.S.C. §§ 7101–7109, establishes the exclusive statutory framework for asserting and resolving claims arising under or relating to federal government contracts. Originally enacted as Public Law 95-563 in 1978 and recodified in 2011, the CDA created a uniform disputes process that replaced a patchwork of agency-specific appeal procedures and clarified the right of contractors and the government to pursue money and equitable-adjustment claims through a contracting officer's final decision, appeal to an agency board of contract appeals, or direct action in the Court of Federal Claims.

Coverage

Under FAR 33.203(a), the CDA and FAR Subpart 33.2 apply to "any express or implied contract covered by the Federal Acquisition Regulation." There are two narrow statutory exclusions: contracts with a foreign government or agency of that government, and contracts with an international organization or subsidiary body if the agency head determines that applying the CDA would not be in the public interest. Every other FAR-covered contract — fixed-price, cost-reimbursement, construction, services, supply, simplified acquisition — falls within the CDA's scope.

"Arising under" and "relating to" jurisdiction

FAR 33.203(c) confirms that the CDA applies to "all disputes with respect to contracting officer decisions on matters 'arising under' or 'relating to' a contract." A claim arising under the contract is one resolvable under a contract clause (other than the Disputes clause itself) that provides the relief sought — for example, an equitable adjustment under the Changes clause or excusable delay under the Default clause. A claim relating to the contract is one that cannot be resolved under a contract clause other than FAR 52.233-1, Disputes — for example, an allegation of breach outside the four corners of the standard clauses, or a claim for rescission or reformation based on mutual mistake. This distinction matters procedurally: FAR 52.233-1 Alternate I, prescribed for certain critical acquisitions (aircraft, spacecraft, naval vessels, missile systems, tracked combat vehicles, and related electronic systems where continued performance is vital to national security or public health), imposes a mandatory-performance obligation even for disputes relating to the contract, whereas the base clause requires performance only for disputes arising under the contract.

The Disputes clause and incorporation by reference

The CDA is incorporated into every covered contract through FAR 52.233-1, Disputes (or Alternate I). Under FAR 33.215, the contracting officer must insert this clause in all solicitations and contracts unless one of the narrow exclusions in FAR 33.203(b) applies. The clause sets out the procedural mechanics: the definition of "claim," the six-year statute of limitations (measured from accrual), the certification requirement for contractor claims exceeding $100,000, the contracting officer's decision timelines (60 days for claims of $100,000 or less if the contractor requests in writing; "reasonable time" otherwise), the contractor's appeal rights (90 days to the agency board or 12 months to the Court of Federal Claims), the obligation to continue performance pending final resolution, and the statutory interest entitlement.

What the CDA does not cover

Requests for relief under Public Law 85-804 (extraordinary contractual actions and indemnification, codified at 50 U.S.C. §§ 1431–1435) are not claims within the CDA or the Disputes clause and must be processed under FAR Subpart 50.1. However, relief formerly available only under Public Law 85-804 — legal entitlement to rescission or reformation for mutual mistake — is now within the contracting officer's authority under the CDA, so a contractor's allegation of mistake entitling it to rescission or reformation is treated as a claim under the CDA.

Boards and courts

The CDA authorizes two paths for appeal of a contracting officer's final decision. Under 41 U.S.C. § 7104(a), a contractor may appeal to the cognizant agency board of contract appeals (the Armed Services Board of Contract Appeals for DoD, the Civilian Board of Contract Appeals for civilian agencies, or ODRA for FAA) within 90 days of receipt of the decision. Alternatively, under § 7104(b)(1), the contractor may bring a direct action in the United States Court of Federal Claims under the Tucker Act within 12 months of receipt of the decision. The appeal or action proceeds de novo; the board or court is not bound by the contracting officer's findings of fact or conclusions of law. A contractor may also file suit in the Court of Federal Claims if the contracting officer fails to issue a decision within the time required by the CDA, converting the claim into a deemed denial.

Effective date and recodification

The CDA became effective March 1, 1979. The statute was recodified without substantive change from its original location at 41 U.S.C. §§ 601–613 to the current 41 U.S.C. §§ 7101–7109 by Public Law 111-350 on January 4, 2011, as part of a broader effort to reorganize Title 41. References to the old section numbers should be updated, but case law and agency guidance citing the pre-2011 numbering remain authoritative.

Source: 41 U.S.C. Chapter 71 Source: FAR Subpart 33.2 Source: FAR 52.233-1

Federal acquisition law recognizes two fundamental forms of contract termination, each governed by distinct FAR clauses with profoundly different consequences for contractors: termination for default (T4D) and termination for convenience of the Government (T4C). The choice between them determines whether the contractor faces excess reprocurement costs and reputational harm or instead receives compensation for work performed and reasonable profit.

Termination for default — contractor fault, Government remedy

Under FAR 49.101(a), termination clauses authorize contracting officers to terminate contracts for default when the contractor fails to perform. The grounds for default termination are set out in the applicable termination clause. For fixed-price supply and service contracts above the simplified acquisition threshold, FAR 52.249-8, Default (Fixed-Price Supply and Service), is the standard clause, prescribed by FAR 49.504(a)(1). That clause authorizes the Government to terminate, by written notice, in whole or in part if the contractor:

• Fails to deliver the supplies or perform the services within the time specified (including any extension);
• Fails to make progress, so as to endanger performance of the contract; or
• Fails to perform any of the other provisions of the contract.

For the second and third grounds, the contractor is entitled to a 10-day cure period (or longer if authorized in writing by the contracting officer) after receipt of the contracting officer's notice specifying the failure. The first ground—late delivery or performance—carries no mandatory cure period under FAR 52.249-8. Construction contracts use FAR 52.249-10, Default (Fixed-Price Construction), which contains similar grounds tailored to construction performance. Cost-reimbursement contracts are governed by FAR 52.249-6, Termination (Cost-Reimbursement), which includes a mandatory 10-day notice period before termination for default in all cases.

Excess reprocurement costs and other damages

The defining consequence of a default termination is contractor liability for excess costs. Under FAR 52.249-8(b), if the Government terminates for default, it may acquire supplies or services similar to those terminated "under the terms and in the manner the Contracting Officer considers appropriate," and the contractor is liable to the Government for any excess costs incurred—the difference between the original contract price and the higher price paid for the replacement contract. This liability is not capped; a contractor who is terminated for default on a \$5 million contract and whose replacement costs the Government \$7 million owes \$2 million. The contractor is also liable for any other ascertainable damages, including administrative costs, per FAR 49.402-7 and FAR Subpart 32.6, subject to the advice of legal counsel. Liquidated damages, if provided for in the contract under FAR 52.211-11 or FAR 52.211-12, are assessed in addition to excess reprocurement costs. The default termination is also reported in the Federal Awardee Performance and Integrity Information System (FAPIIS) under FAR 42.1503(h), a reputational consequence that follows the contractor and is visible to all agencies in future source-selection evaluations.

Termination for convenience — sovereign prerogative, no fault required

Termination for convenience is the Government's sovereign right to end a contract, in whole or in part, when the contracting officer determines that doing so is in the Government's interest—no contractor fault is required. Under FAR 49.101(b), the contracting officer shall terminate contracts, whether for default or convenience, "only when it is in the Government's interest." For fixed-price contracts above the simplified acquisition threshold, the standard clause is FAR 52.249-2, Termination for Convenience of the Government (Fixed-Price), prescribed by FAR 49.502(b)(1)(i). That clause states simply: "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 Government's interest."

Reasons for a convenience termination include changed mission priorities, lack of funding, consolidation or cancellation of a program, or a determination that continued performance is no longer needed. The Government need not justify its decision beyond the in-the-Government's-interest standard, and courts do not second-guess the decision on the merits (though bad faith or abuse of discretion, if proven, may be challenged).

Contractor's entitlement upon convenience termination

Upon a termination for convenience, the contractor is entitled to fair compensation for work performed and preparations made for the terminated portion, including a reasonable allowance for profit. FAR 49.201(a) provides: "A settlement should compensate the contractor fairly for the work done and the preparations made for the terminated portions of the contract, including a reasonable allowance for profit. Fair compensation is a matter of judgment and cannot be measured exactly." The contractor is not liable for excess reprocurement costs or any other damages; there is no breach. Settlement is governed by FAR Subpart 49.2 for fixed-price contracts and FAR Subpart 49.3 for cost-reimbursement contracts. The contractor must submit termination inventory schedules within 120 days and a final settlement proposal within one year (or longer if extended), and the termination contracting officer (TCO) negotiates the settlement, ideally by agreement.

Conversion of an improper default to a convenience termination

If the Government terminates for default but the contractor later establishes (through a claim under the Contract Disputes Act and appeal to the boards or the Court of Federal Claims) that it was not in default or that the failure to perform was excusable—arising out of causes beyond the contractor's control and without its fault or negligence—then the termination is treated as a termination for convenience. FAR 52.249-8(g) provides: "If, after termination, it is determined that the Contractor was not in default, or that the default was excusable, the rights and obligations of the parties shall be the same as if the termination had been issued for the convenience of the Government." This conversion eliminates the contractor's liability for excess reprocurement costs and restores the right to settlement under the convenience-termination principles. Excusable causes include, for example, unforeseeable strikes, fires, floods, epidemics, or acts of Government in its sovereign or contractual capacity that delay or prevent performance—but the contractor bears the burden of proving both that the cause was beyond its control and that it was without fault or negligence. Government-caused delay (defective specifications, late Government-furnished property, constructive changes) is a classic basis for establishing excusable delay and converting an improper default.

Policy guidance: when to terminate for default

FAR 49.401(a) requires that when a default termination is being considered, the Government "shall decide which type of termination action to take (i.e., default, convenience, or no-cost cancellation) only after review by contracting and technical personnel, and by counsel, to ensure the propriety of the proposed action." The decision is not mechanical; it requires evaluation of the facts, the strength of the Government's case, the contractor's defenses, and the equities. Courts have long characterized default termination as a harsh remedy and a drastic step, to be used only when the contractor has materially failed to perform and the Government can sustain its burden of proving both the failure and the absence of excusable cause. When the price of the undelivered balance is less than \$5,000, FAR 49.101(c) provides that the contract "should not normally be terminated for convenience but should be permitted to run to completion"—a de minimis threshold below which the administrative cost of termination usually exceeds any benefit.

Source: FAR 49.101 Source: FAR Subpart 49.4 Source: FAR 52.249-8 Source: FAR 52.249-2 Source: FAR 49.201

For contractor claims exceeding $100,000, the Contract Disputes Act imposes a certification requirement that is a jurisdictional prerequisite to a contracting officer's final decision and to any appeal to the boards or the Court of Federal Claims. Under 41 U.S.C. § 7103(b)(1), the contractor must certify four elements: (A) the claim is made in good faith; (B) the supporting data are accurate and complete to the best of the contractor's knowledge and belief; (C) the amount requested accurately reflects the contract adjustment for which the contractor believes the Government is liable; and (D) the certifier is authorized to certify the claim on behalf of the contractor. A written demand or assertion seeking payment exceeding $100,000 is not a claim under the CDA until it is certified. FAR 52.233-1(c) states this rule explicitly: "However, a written demand or written assertion by the Contractor seeking the payment of money exceeding $100,000 is not a claim under 41 U.S.C. chapter 71 until certified."

The $100,000 threshold and aggregation of increased and decreased costs

The threshold is measured by the aggregate amount of both increased and decreased costs, not the net amount. Under FAR 33.207(d), if a contractor's request results from a reduction of $75,000 and an increase of $125,000, the gross adjustment is $200,000, which exceeds the $100,000 threshold even though the net claim is only $50,000. This aggregation rule mirrors the approach used for certified cost or pricing data under FAR 15.403-4(a)(1)(iii). Claims of $100,000 or less do not require certification, though they must still meet the other CDA requirements (written, submitted to the CO, sum certain for money claims).

The prescribed certification language

FAR 33.207(c) prescribes the certification language: "I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the Contractor believes the Government is liable; and that I am duly authorized to certify the claim on behalf of the Contractor." The same language appears in the Disputes clause at FAR 52.233-1(d)(2)(iii). While exact recitation is not required, the safer practice is to use this exact statutory language. Any substantive deviation risks a finding of defective certification.

Who may execute the certification

Under 41 U.S.C. § 7103(b)(2), the certification may be executed by "an individual authorized to bind the contractor with respect to the claim." FAR 33.207(e) repeats this standard. This means someone with actual authority to commit the contractor financially—typically an officer, director, or owner. A project manager or field superintendent ordinarily lacks binding authority unless the contractor has expressly delegated that authority in a corporate resolution or power of attorney. The boards have held that the certifier need not be the same individual who signs the claim submission letter; the certification may be a separate document, but it must be signed by someone with binding authority as of the date of certification.

Defective certification vs. failure to certify — a critical distinction

FAR 33.201 defines "defective certification" as "a certificate which alters or otherwise deviates from the language in FAR 33.207(c) or which is not executed by a person authorized to bind the contractor with respect to the claim." Crucially, the definition continues: "Failure to certify shall not be deemed to be a defective certification." This distinction is jurisdictional. Under 41 U.S.C. § 7103(b)(3), "a defect in the certification of a claim does not deprive a court or an agency board of jurisdiction over the claim," and the tribunal "shall require a defective certification to be corrected" before final judgment or decision. But the complete absence of a certification when one is required—failure to certify at all—does deprive the board or court of jurisdiction, and the claim will be dismissed. The boards have consistently held that they cannot infer or piece together an implicit certification from language in the claim letter that happens to parallel some of the four statutory elements; there must be an actual certification, even if imperfect.

Contracting officer's 60-day obligation and defective certifications

When a contractor submits a claim over $100,000 without a certification or with a defective certification, the contracting officer is not obligated to render a final decision if, within 60 days after receipt of the claim, the CO notifies the contractor in writing of the reasons why any attempted certification was found to be defective. This 60-day notice requirement is found in both the statute (41 U.S.C. § 7103(b)(3)) and the Disputes clause (FAR 52.233-1(d)(2)). If the CO does not issue this notice within 60 days, the claim is deemed to have been properly submitted, and the CO's decision timeline begins to run (60 days for claims over $100,000 per § 7103(d)(2), or a reasonable time). The CO's failure to notify means the Government has waived any objection to the defect.

Correction of defects and timing

Because a defective certification does not strip jurisdiction, a contractor may cure the defect at any time before the board or court enters final judgment or decision—even years after the original claim submission and well into litigation. FAR 33.208(c) provides that, with regard to claims having defective certifications, interest is paid from the date the contracting officer initially receives the claim (or October 29, 1992, whichever is later), so the contractor does not lose its interest accrual by having submitted a defective certification rather than a proper one from the outset. However, if a contractor has provided a proper certificate prior to October 29, 1992 (after an earlier defective certificate), interest runs from the date of the proper certificate. In practice, contractors should cure any certification defect as soon as the CO or the Government raises it, to avoid motion practice and delay.

Failure to certify and the six-year statute of limitations

A contractor's failure to include any certification when submitting a claim over $100,000 can become fatal if the six-year statute of limitations under 41 U.S.C. § 7103(a)(3) has run by the time the contractor realizes the omission. Because the submission is not a claim under the CDA until certified, the contracting officer has no duty to issue a final decision, the contractor cannot appeal, and the boards/COFC lack jurisdiction. If more than six years have elapsed from the accrual of the claim, a late certification submitted for the first time is barred by the statute of limitations. In contrast, a defective certification submitted within the limitations period can be corrected even after six years have passed, because the claim was at least submitted in attempted compliance with the CDA.

Certification does not apply to issues in controversy

FAR 33.207(b) and FAR 52.233-1(d)(2)(ii) clarify that the certification requirement does not apply to "issues in controversy that have not been submitted as all or part of a claim." FAR 33.201 defines "issue in controversy" as "a material disagreement between the Government and the contractor that (1) may result in a claim or (2) is all or part of an existing claim." A request for equitable adjustment (REA) or a request for information that has not yet crystallized into a sum-certain demand is not a claim and therefore does not require certification. But if the contractor later converts that REA into a certified claim (by providing a sum certain and certifying), the six-year limitations period is measured from accrual, not from the date of certification or conversion.

Fraud and misrepresentation — statutory liability

The certification subjects the contractor to statutory liability for misrepresentation or fraud. Under 41 U.S.C. § 7103(c)(2), if a contractor is unable to support any part of its claim and that inability is attributable to a misrepresentation of fact or fraud by the contractor, the contractor is liable to the Government for an amount equal to the unsupported part of the claim plus all of the Government's costs attributable to reviewing that unsupported part. This liability must be asserted within six years of the commission of the misrepresentation or fraud. The statute separately provides at § 7103(c)(1) that the CDA does not authorize an agency head to settle, compromise, pay, or otherwise adjust any claim involving fraud. FAR 33.209 directs contracting officers to refer suspected fraudulent claims to the agency official responsible for investigating fraud (typically the Inspector General or the agency suspension and debarment official).

Source: 41 U.S.C. § 7103 Source: FAR 33.207 Source: FAR 52.233-1 Source: FAR 33.201 Source: FAR 33.208

The Contracting Officer's Final Decision (COFD) is the procedural linchpin of the Contract Disputes Act framework. Under 41 U.S.C. § 7103(a)(1), each contractor claim against the Government must be submitted to the contracting officer for a decision, and under § 7103(a)(3), each Government claim against the contractor must be the subject of a written decision by the contracting officer. The COFD is the jurisdictional prerequisite to appeal: a contractor cannot appeal to the boards or the Court of Federal Claims until it has received (or constructively received through deemed denial) a final decision. The decision itself triggers the appeal deadlines — 90 days to the cognizant agency board or 12 months to the Court of Federal Claims under 41 U.S.C. § 7104 — and it is final and conclusive unless timely appealed.

Mandatory content requirements under FAR 33.211

FAR 33.211(a)(4) prescribes six elements that the contracting officer's written decision shall include:

1. A description of the claim or dispute — enough detail for both parties and a reviewing tribunal to understand what is at issue.

1. A reference to the pertinent contract terms — the clauses, specifications, or statement-of-work provisions that govern the dispute.

1. A statement of the factual areas of agreement and disagreement — not merely a recitation of positions, but an analysis showing where the parties' facts converge and diverge.

1. A statement of the contracting officer's decision, with supporting rationale — the outcome (granted, denied, or partially granted) and the reasoning. Under 41 U.S.C. § 7103(d)(2), specific findings of fact are not required, and if made, they are not binding in any subsequent proceeding before the boards or the Court of Federal Claims (the appeal is de novo). Nevertheless, a reasoned explanation is mandatory.

1. Paragraphs substantially as follows (the appeal-rights notice):

> This is the final decision of the Contracting Officer. You may appeal this decision to the agency board of contract appeals. If you decide to appeal, you must, within 90 days from the date you receive this decision, mail or otherwise furnish written notice to the agency board of contract appeals and provide a copy to the Contracting Officer from whose decision this appeal is taken. The notice shall indicate that an appeal is intended, reference this decision, and identify the contract by number.

The notice must also inform the contractor of the alternative right to bring an action in the Court of Federal Claims within 12 months of receipt (except for maritime contracts covered by 41 U.S.C. § 7102(d)), and it should inform the contractor of the board's small-claims and expedited procedures where available (for claims of $50,000 or less, or $150,000 or less for small businesses, under the small-claims procedure; $100,000 or less under the expedited procedure). Agency supplements tailor this language to identify the correct board (ASBCA for DoD, CBCA for most civilian agencies, ODRA for FAA).

1. A demand for payment prepared in accordance with FAR 32.604 and 32.605 in all cases where the decision results in a finding that the contractor is indebted to the Government.

Under FAR 33.211(b), the contracting officer shall furnish a copy of the decision to the contractor by certified mail, return receipt requested, or by any other method that provides evidence of receipt. This applies to decisions on claims initiated by or against the contractor.

Timing requirements — the 60-day rule and its permutations

The CDA and FAR impose strict timing obligations on the contracting officer, and the contractor's rights turn on whether those obligations are met.

For claims of $100,000 or less: Under 41 U.S.C. § 7103(d)(1) and FAR 33.211(c)(1), the contracting officer shall issue a decision within 60 days after receiving a written request from the contractor that a decision be rendered within that period. If the contractor does not make such a request, the decision must be issued within a reasonable time after receipt of the claim, taking into account the factors in FAR 33.211(d) (size and complexity of the claim, adequacy of the information provided by the contractor).

For claims over $100,000: Under 41 U.S.C. § 7103(d)(2) and FAR 33.211(c)(2), the contracting officer shall, within 60 days of receipt of a submitted certified claim over $100,000, either (A) issue the decision, or (B) notify the contractor, within those 60 days, of the time within which the decision will be made. The second option—setting a decision date—gives the contracting officer breathing room for complex claims, but that promised date is binding. If the contracting officer misses the self-imposed deadline, the contractor may treat the failure as a deemed denial and appeal. There is no statutory provision for a second extension; the boards have held that "there is no language in the CDA providing the government with the right to a second extension."

General reasonableness standard: FAR 33.211(d) provides that the contracting officer shall issue a decision within a reasonable time, in accordance with agency regulations, taking into account the size and complexity of the claim and the adequacy of information in support of the claim provided by the contractor. This backstop applies when the contractor has not invoked the 60-day mandatory deadline (for small claims) and when the CO has not promised a specific decision date (for large claims).

Undue delay and tribunal intervention: Under 41 U.S.C. § 7103(d)(4) and FAR 33.211(f), in the event of undue delay by the contracting officer in rendering a decision on a claim, the contractor may request the tribunal concerned (the agency board or the Court of Federal Claims) to direct the contracting officer to issue a decision in a specified time period determined by the tribunal. This is an equitable remedy available when the contracting officer has let a claim languish beyond any reasonable period.

Deemed denial — failure to decide within the required time

Under 41 U.S.C. § 7103(d)(5) and FAR 33.211(g), any failure of the contracting officer to issue a decision within the required time periods (the 60-day deadline for small claims when requested, the 60-day notice-or-decision deadline for large claims, or the promised decision date once set) is deemed to be a decision by the contracting officer denying the claim and authorizes the contractor to file an appeal or suit on the claim as otherwise provided in the CDA. The deemed-denial rule is a safety valve: it prevents the Government from running out the clock by simply refusing to decide. A contractor faced with a deemed denial has two options: (1) appeal the deemed denial immediately to the board (within 90 days of when the decision was required, though in practice the appeal deadline does not begin to run on a deemed denial until the contractor elects to treat the silence as a denial) or to the COFC (within 12 months); or (2) continue to wait and request that the tribunal direct the contracting officer to issue an actual decision. The tribunal may, at its option, stay the proceedings of the appeal or action to obtain a decision by the contracting officer, per § 7103(d)(5).

Finality and the appeal window

Under 41 U.S.C. § 7103(g) and FAR 52.233-1(f), the contracting officer's decision on a claim is final and conclusive and is not subject to review by any forum, tribunal, or Federal Government agency, unless an appeal or action is timely commenced as authorized by the CDA. This finality is absolute if the contractor does not appeal within 90 days (to the board) or file suit within 12 months (in the COFC). Miss those deadlines and the decision becomes unreviewable—no court or board may entertain the claim, no matter how meritorious, and the contractor has no further recourse under the CDA. (The boards and the COFC treat these deadlines as jurisdictional; equitable tolling is extremely narrow and available only in exceptional circumstances involving affirmative Government misconduct.)

The finality principle also means that the contracting officer's decision stands as the Government's final position unless and until reversed by the board or court on appeal. The decision is binding on the agency; a successor contracting officer or agency head cannot unilaterally revise or rescind a final decision once the appeal period has started running, except in narrow circumstances where doing so moots all issues in controversy. The boards have held that a contracting officer may reconsider, withdraw, or rescind a final decision before the expiration of the appeal period, but once the contractor has appealed and the board or court has acquired jurisdiction, the contracting officer cannot divest that tribunal of jurisdiction by rescinding the decision unless the rescission moots all of the claims before the tribunal.

Defective-decision doctrine and prejudice

Not every failure to comply with the FAR 33.211(a)(4) content requirements renders a decision invalid. The boards and the Court of Federal Claims apply a prejudice test: if the contractor is able to make an informed choice as to whether, and in what forum, to pursue an appeal despite the technical deficiency in the decision, the decision is treated as valid and the appeal deadlines run from the date the contractor received it. Common deficiencies that have been excused (when the contractor was not prejudiced) include omission of the small-claims procedure language, failure to cite specific contract clauses, or truncated reasoning. In contrast, if a purported decision fails to state clearly that it is the "final decision" or omits the appeal-rights paragraph entirely, and the contractor reasonably does not understand that the document is the final decision triggering appeal deadlines, the boards have found no valid decision and no running of the appeal clock. The analysis is fact-intensive and turns on whether the contractor's ability to perfect a timely appeal was impaired.

Government claims and contracting-officer decisions

The CDA requires a written decision by the contracting officer for Government claims as well. Under 41 U.S.C. § 7103(a)(3) and FAR 52.233-1(d)(1), a claim by the Government against the contractor shall be subject to a written decision by the contracting officer. The same appeal rights apply: the contractor may appeal a Government claim to the board or COFC within the same time windows (90 days / 12 months). Government claims are not subject to certification (only contractor claims over $100,000 require certification), but they are subject to the six-year statute of limitations under § 7103(a)(4)(A), unless the claim is based on contractor fraud, in which case the six-year bar does not apply per § 7103(a)(4)(B). When a contracting officer issues a decision asserting a Government claim—for example, demanding repayment of an alleged overpayment or assessing liquidated damages—the decision must meet the same FAR 33.211(a)(4) content requirements, and the contractor's failure to appeal within 90 days or 12 months renders the decision final and conclusive.

Source: 41 U.S.C. § 7103 Source: FAR 33.211 Source: FAR 52.233-1

The excusable-delay doctrine is the principal substantive defense a contractor may assert when challenging a termination for default. Under the Default clauses in FAR 52.249-8 (fixed-price supply and service), FAR 52.249-10 (fixed-price construction), and the Excusable Delays clause in FAR 52.249-14 (cost-reimbursement and time-and-material contracts), a contractor is not liable for excess reprocurement costs—and a default termination is converted to a termination for convenience—if the contractor establishes that its failure to perform arose from causes beyond the control and without the fault or negligence of the Contractor. This is the foundational three-prong test, and all three elements must be met. The burden of proof rests on the contractor asserting the defense.

The statutory examples — illustrative, not exhaustive

FAR 52.249-8(c) states: "Except for defaults of subcontractors at any tier, the Contractor shall not be liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contractor." The clause then lists nine examples of such causes:

1. Acts of God or of the public enemy,
2. Acts of the Government in either its sovereign or contractual capacity,
3. Fires,
4. Floods,
5. Epidemics,
6. Quarantine restrictions,
7. Strikes,
8. Freight embargoes, and
9. Unusually severe weather.

The same nine examples appear in FAR 52.249-10(b)(1) for construction and in FAR 52.249-14(a) for cost-reimbursement contracts. These examples are illustrative—the clauses use the phrase "Examples of such causes include"—not a closed list, but they set the standard: the excusing event must be extraordinary, objectively verifiable, and genuinely beyond the contractor's control.

The three-prong test in each instance

FAR 52.249-8(c) and its parallels make clear that the enumerated examples are not self-executing. The clause states: "In each instance, the failure to perform must be beyond the control and without the fault or negligence of the Contractor." This language imposes three conjunctive requirements:

• Beyond the control of the contractor — the cause must be external to the contractor's business operations and decisions. A contractor's own cash-flow problems, labor-management disputes within its own workforce, or failure to order materials in time are within the contractor's control and are not excusable.

• Without the fault of the contractor — the contractor must not have caused or contributed to the occurrence of the delay. If the contractor's prior breach (for example, failure to submit shop drawings on time) set in motion a chain of events that led to the delay, the delay is not excusable.

• Without the negligence of the contractor — the contractor must have exercised reasonable care and taken reasonable steps to avoid or mitigate the delay. Negligence in planning, scheduling, or resource allocation defeats the defense even if the precipitating cause was external.

All three elements must be satisfied. If the contractor was at fault or negligent, or if the cause was within the contractor's control, the delay is not excusable under the clause.

Acts of Government in sovereign or contractual capacity

The second listed example—acts of the Government in either its sovereign or contractual capacity—is a frequently invoked basis for excusable delay. Sovereign acts are legislative or regulatory actions that apply broadly and are not specific to the contract (for example, a new environmental regulation that halts all construction in a region, or a public-health order imposing quarantine restrictions). Contractual acts are acts or omissions by the Government in its role as the other contracting party — defective specifications, late issuance of Government-furnished property or data, constructive changes, unreasonable inspection delays, or stop-work orders. Both categories can give rise to excusable delay under FAR 52.249-8(c) and its parallels. Whether the delay is also compensable (entitling the contractor to an equitable adjustment for increased costs, not merely a time extension) depends on whether another clause in the contract—such as the Changes clause, the Suspension of Work clause, or the Differing Site Conditions clause—provides a basis for cost recovery. The excusable-delay language in the Default clauses excuses the contractor from liability for excess reprocurement costs and from liquidated damages, but it does not by itself create an entitlement to payment of delay costs.

Subcontractor defaults — the special rule of FAR 52.249-8(d)

FAR 52.249-8(c) expressly excludes "defaults of subcontractors at any tier" from the general excusable-delay rule. A prime contractor is ordinarily responsible for its subcontractors' failures. However, FAR 52.249-8(d) creates a limited exception:

> If the failure to perform is caused by the default of a subcontractor at any tier, and if the cause of the failure was beyond the control of both the Contractor and subcontractor, and without the fault or negligence of either, the Contractor shall not be deemed to be in default, unless— > (1) The subcontracted supplies or services were obtainable from other sources; > (2) The Contracting Officer ordered the Contractor in writing to purchase these supplies or services from the other source; and > (3) The Contractor failed to comply reasonably with this order.

The practical effect: a subcontractor's failure due to an excusable cause (fire, flood, epidemic affecting the subcontractor's workforce) is excusable to the prime contractor, unless substitute supplies or services were reasonably available from other sources and the contracting officer directed the prime in writing to procure from the alternate source and the prime unreasonably failed to comply. If all three conditions are met, the prime's delay becomes inexcusable. The same language appears in FAR 52.249-10(b)(1) for construction and in FAR 52.249-14(b) for cost-reimbursement contracts, with minor variations.

Notice obligations — the 10-day rule in construction contracts

For construction contracts under FAR 52.249-10, paragraph (b)(2) imposes a strict notice requirement:

> The Contractor shall, within 10 days from the beginning of any delay (unless extended in writing by the Contracting Officer), notify the Contracting Officer in writing of the causes of delay. If in the judgment of the Contracting Officer, the facts justify it, the time for completing the work shall be extended by modification to the contract.

Failure to provide this written notice within 10 days from the beginning of the delay can forfeit the contractor's right to a time extension, even if the delay was otherwise excusable. The 10-day notice requirement is a condition precedent to the contracting officer's obligation to consider extending the contract schedule.

Supply and service contracts under FAR 52.249-8 do not contain an explicit 10-day notice rule in the clause text. Cost-reimbursement contracts under FAR 52.249-14(c) provide: "Upon request of the Contractor, the Contracting Officer shall ascertain the facts and extent of the failure. If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised, subject to the rights of the Government under the termination clause of this contract." The clause does not specify a deadline for the contractor's request, but timely written notice is sound practice and enables the contracting officer to verify the facts contemporaneously.

Conversion of an improper default to a convenience termination

If the contractor later establishes—through a claim, an appeal to the boards, or an action in the Court of Federal Claims—that it was not in default or that the default was excusable, FAR 52.249-8(g) provides the remedy:

> If, after termination, it is determined that the Contractor was not in default, or that the default was excusable, the rights and obligations of the parties shall be the same as if the termination had been issued for the convenience of the Government.

This conversion eliminates the contractor's liability for excess reprocurement costs and restores the contractor's entitlement to settlement under the convenience-termination principles in FAR Subpart 49.2 (for fixed-price contracts) or FAR Subpart 49.3 (for cost-reimbursement contracts). The contractor is compensated fairly for work performed and preparations made for the terminated portion, including a reasonable allowance for profit, and is not liable for any damages. The same conversion language appears in FAR 52.249-10(d) for construction and in FAR 52.249-6(h) (the Termination (Cost-Reimbursement) clause) for cost-reimbursement contracts.

Policy guidance — when a default is excusable

FAR Subpart 49.4 provides the regulatory framework for default terminations. Under FAR 49.402(a), "If the contractor can establish, or it is otherwise determined that the contractor was not in default or that the failure to perform is excusable; i.e., arose out of causes beyond the control and without the fault or negligence of the contractor, the default clauses prescribed in 49.503 and located at 52.249 provide that a termination for default will be considered to have been a termination for the convenience of the Government, and the rights and obligations of the parties governed accordingly." This reiterates the conversion rule and makes clear that the excusable-delay standard is binary: either the failure was beyond the contractor's control and without its fault or negligence, in which case the termination is treated as a T4C, or it was not, in which case the default stands.

FAR 49.401(a) directs that when a default termination is being considered, the Government "shall decide which type of termination action to take (i.e., default, convenience, or no-cost cancellation) only after review by contracting and technical personnel, and by counsel, to ensure the propriety of the proposed action." This review is intended to assess whether the contractor has an excusable-delay defense before the Government commits to a default termination. The decision is not mechanical; it requires evaluation of the facts, the strength of the Government's case, and the contractor's defenses.

Source: FAR 52.249-8 Source: FAR 52.249-10 Source: FAR 52.249-14 Source: FAR Subpart 49.4

Once a contractor receives a contracting officer's final decision on a claim—or the contracting officer fails to issue a decision within the required time, creating a deemed denial—the contractor faces a critical procedural fork: appeal to an agency board of contract appeals within 90 days, or file a direct action in the United States Court of Federal Claims within 12 months. Under 41 U.S.C. § 7104, this choice is the contractor's alone, and it is irrevocable once made. The Government has no parallel election; the appeal (if any) runs to the United States Court of Appeals for the Federal Circuit regardless of which forum decided the case below.

The two forums and their statutory deadlines

Under 41 U.S.C. § 7104(a), a contractor may appeal a contracting officer's decision to an agency board of contract appeals within 90 days from the date of receipt of the decision. The 90-day deadline is jurisdictional; the boards have consistently held they lack authority to extend it or apply equitable tolling except in the narrowest circumstances involving affirmative Government misconduct.

Alternatively, under § 7104(b)(1), the contractor may bring a direct action on the claim in the United States Court of Federal Claims (COFC), "notwithstanding any contract provision, regulation, or rule of law to the contrary." The filing deadline for the COFC is 12 months from the date of receipt of the contracting officer's decision, per § 7104(b)(3). This 12-month window is also jurisdictional. The contractor cannot contract away the right to choose either forum; any contract clause attempting to do so is void under the statute's express override language.

De novo review in both forums

Appeals to the boards and actions in the COFC both proceed de novo under § 7104(b)(4). The board or court is not bound by the contracting officer's findings of fact or conclusions of law. The contracting officer's decision is treated as one piece of documentary evidence in the record, not as a determination entitled to deference. This de novo standard applies equally to both contractor appeals and Government claims; if the contracting officer asserts a Government claim (for example, demanding repayment or assessing excess reprocurement costs after a default termination), the contractor may appeal that decision to the board or the COFC within the same time windows, and the tribunal decides the Government's entitlement from scratch.

Which board? Jurisdiction by agency

The "agency board of contract appeals" to which a contractor appeals depends on the contracting agency. Under 41 U.S.C. § 7105(a) and (b), agency boards are established by agency heads; under § 7105(c), the boards have jurisdiction over appeals from decisions of contracting officers of that agency. FAR 33.203(c) confirms that the CDA and FAR Subpart 33.2 apply to disputes with respect to contracting officer decisions on matters "arising under" or "relating to" a contract, and the boards authorized under the CDA have authority to decide these appeals.

There are currently three primary boards:

• Armed Services Board of Contract Appeals (ASBCA) — hears appeals from the Department of Defense (including all military departments and defense agencies), the National Aeronautics and Space Administration (NASA), and, when specified, the Central Intelligence Agency.

• Civilian Board of Contract Appeals (CBCA) — hears appeals from most civilian executive-branch agencies (established in 2007 by consolidating more than a dozen pre-existing agency boards).

• Postal Service Board of Contract Appeals (PSBCA) — hears appeals from the United States Postal Service and the Postal Regulatory Commission.

A contractor must file the notice of appeal with the correct board. Filing with the wrong board is a jurisdictional defect that cannot be cured if the correct board's 90-day deadline has expired.

Tennessee Valley Authority exception

Contractors with TVA contracts are excluded from both the board-appeal path and the general COFC path. Under 41 U.S.C. § 7104(b)(2), an action against the Tennessee Valley Authority may be brought only in a United States district court under 28 U.S.C. § 1337, within 12 months of receipt of the contracting officer's decision.

Maritime contracts

FAR 33.211(a)(4)(v) and § 7104(b) note an exception for maritime contracts. Under 41 U.S.C. § 7102(d), the CDA does not apply to a contract with a foreign government or agency of that foreign government, or to an international organization or subsidiary body thereof if the agency head determines that applying the CDA would not be in the public interest, or to certain maritime contracts subject to the Suits in Admiralty Act or the Public Vessels Act. For maritime contracts within those exceptions, alternative dispute-resolution paths apply.

Irrevocable election

The contractor's choice of forum is binding once made. A contractor who files a notice of appeal with a board cannot later dismiss that appeal and refile in the COFC if the 12-month COFC deadline has passed. Conversely, a contractor who files in the COFC cannot abandon that action and appeal to a board if the 90-day board deadline has expired. The boards and the COFC have consistently held that the contractor's first filing perfects jurisdiction in that tribunal and extinguishes the alternative path if its deadline has lapsed.

Notice of appeal to a board

Under FAR 33.211(a)(4)(v), the contracting officer's decision must inform the contractor: "You may appeal this decision to the agency board of contract appeals. If you decide to appeal, you must, within 90 days from the date you receive this decision, mail or otherwise furnish written notice to the agency board of contract appeals and provide a copy to the Contracting Officer from whose decision this appeal is taken. The notice shall indicate that an appeal is intended, reference this decision, and identify the contract by number."

The notice of appeal need not be lengthy or state detailed grounds; it must identify the contract, reference the decision, and indicate that an appeal is intended. The boards' rules (not part of the FAR but promulgated under 41 U.S.C. § 7105(e)) prescribe additional procedural steps—filing a complaint, assembling an administrative file, discovery, hearing or decision on the record—but the jurisdictional act is the timely filing of the notice.

Complaint filing in the Court of Federal Claims

An action in the COFC is initiated by filing a complaint under the Rules of the Court of Federal Claims, which largely track the Federal Rules of Civil Procedure. The complaint must include a statement of the claim, the jurisdictional basis (citing 41 U.S.C. § 7104 and the Tucker Act, 28 U.S.C. § 1491), and a demand for judgment. The 12-month deadline under § 7104(b)(3) runs from the date the contractor receives the contracting officer's decision.

Small-claims and accelerated procedures at the boards

FAR 33.211(a)(4)(v) requires the contracting officer's decision to inform the contractor of two optional expedited procedures available at the boards:

1. Small-claims procedure for claims of $50,000 or less, or $150,000 or less for small business concerns (as defined in the Small Business Act and regulations under that Act).

1. Accelerated procedure for claims of $100,000 or less.

Both procedures are the contractor's option; the Government cannot compel their use. The boards' rules (promulgated under § 7105(e)) prescribe the details—generally, faster decision timelines, streamlined procedures, and (in the case of small claims) non-precedential decisions that are not appealable to the Federal Circuit. FAR 33.211(a)(4)(v) does not spell out these consequences; it refers the contractor to the board's rules for the specifics.

Deemed denial and the running of appeal deadlines

Under 41 U.S.C. § 7103(d)(5) and FAR 33.211(g), any failure of the contracting officer to issue a decision within the required time periods is deemed to be a decision by the contracting officer denying the claim and authorizes the contractor to file an appeal or suit on the claim. The contractor may elect to treat the silence as a denial and file immediately, or may continue to wait for an actual decision. Once the contractor files an appeal or action based on a deemed denial, the board or court acquires jurisdiction.

Appeal to the Federal Circuit

Under 41 U.S.C. § 7107(a), either the contractor or the Government may appeal a board decision to the United States Court of Appeals for the Federal Circuit. The appeal must be filed within 120 days of the date the board's decision is issued. For COFC judgments, the appeal to the Federal Circuit follows the standard appellate rules under 28 U.S.C. § 1295(a)(3) (granting the Federal Circuit exclusive jurisdiction over appeals from final decisions of the Court of Federal Claims). Because both forums feed into the same appellate court, the choice between board and COFC does not affect which law ultimately governs—the Federal Circuit's precedent binds both the boards and the COFC.

Board judge qualifications

Under 41 U.S.C. § 7105(b)(4), each member of an agency board must be a lawyer (member of the bar of a court of a state or the District of Columbia) and must have at least five years of experience in public contract law. This expertise requirement distinguishes board judges from COFC judges, who are Article III generalists appointed without a statutory public-contract-law prerequisite. The five-year requirement applies to appointments made on or after January 1, 2006; members serving before that date were grandfathered under prior law.

Source: 41 U.S.C. § 7104 Source: 41 U.S.C. § 7105 Source: 41 U.S.C. § 7107 Source: FAR 33.211 Source: FAR Subpart 33.2

A Request for Equitable Adjustment (REA) is the procedural mechanism by which a contractor seeks compensation or time relief for increased costs caused by Government action—typically a change order, suspension of work, or any other event triggering an adjustment clause in the contract—before the dispute escalates into a formal claim under the Contract Disputes Act. Although REAs are referenced throughout the FAR and are a daily feature of federal contract administration, the FAR does not define the term. REAs are distinct from CDA claims in procedure, timing, and allowable-cost treatment, and a contractor's choice between submitting an REA and converting to a claim has significant practical and financial consequences.

Contractual basis — the Changes clause and related adjustment clauses

The most common statutory basis for an REA is the Changes clause. Under FAR 52.243-1, Changes—Fixed-Price (the base clause for fixed-price supply and service contracts), paragraph (a) authorizes the contracting officer at any time, by written order and without notice to the sureties, to make changes within the general scope of the contract in drawings, designs, or specifications (when supplies are to be specially manufactured for the Government), method of shipment or packing, and place of delivery. Paragraph (b) states: "If any such change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under this contract, whether or not changed by the order, the Contracting Officer shall make an equitable adjustment in the contract price, the delivery schedule, or both, and shall modify the contract."

FAR 52.243-1(c) imposes a strict timing obligation: "The Contractor must assert its right to an adjustment under this clause within 30 days from the date of receipt of the written order. However, if the Contracting Officer decides that the facts justify it, the Contracting Officer may receive and act upon a proposal submitted before final payment of the contract." This 30-day assertion window is not jurisdictional—the clause explicitly gives the contracting officer discretion to accept a late proposal—but it shifts the burden to the contractor to explain the delay and persuade the contracting officer to exercise that discretion.

Other adjustment clauses in the FAR follow similar patterns: a Government act (or omission) that increases contractor cost triggers an entitlement to an equitable adjustment, subject to a notice or assertion deadline. Examples include the Suspension of Work clause (FAR 52.242-14), the Stop-Work Order clause (FAR 52.242-15), the Differing Site Conditions clause for construction (FAR 52.236-2), and the Government Property clause (FAR 52.245-1).

What an REA is and what it is not — the critical distinction from a CDA claim

An REA is a request for the contracting officer to exercise the authority, conferred by the applicable clause, to grant an equitable adjustment. It is not a jurisdictional prerequisite to appeal and does not trigger the CDA procedural machinery. The distinguishing features are:

1. No express or implicit request for a contracting officer's final decision (COFD). An REA does not ask the contracting officer to issue a final decision under FAR 52.233-1 or 41 U.S.C. § 7103. If the contractor requests a COFD—or if the submission otherwise meets the definition of "claim" in FAR 52.233-1(c)—the submission is treated as a claim regardless of the label the contractor attaches.

1. No CDA certification requirement (with a narrow DoD-specific exception: DFARS 252.243-7002 imposes a separate certification requirement for DoD contractor REAs over the simplified acquisition threshold, distinct from the CDA claim certification in FAR 33.207).

1. Remains within contract administration, not CDA litigation. The contracting officer has no obligation to issue a decision within a fixed time period, there is no deemed-denial rule, and the contractor cannot appeal the contracting officer's denial (or silence) to the boards or the Court of Federal Claims unless the REA is first converted into a claim.

The Federal Circuit has made clear that substance controls over form. A submission styled as an "REA" may be treated as a CDA claim if it possesses the necessary attributes of a claim under FAR 52.233-1(c): a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. Whether a document is an REA or a claim turns on its content—whether it asserts a right to relief (claim) or requests the contracting officer's discretionary exercise of adjustment authority (REA)—and whether it expressly or implicitly requests a final decision.

Why contractors submit REAs before converting to claims

Practitioners favor REAs over immediate claim submission for several reasons rooted in the FAR cost principles and the procedural dynamics of contract administration:

Allowable professional fees. Under FAR 31.205-33, professional and consultant service costs—including the costs of legal services, accounting, and expert consultants—are allowable when the services are of a type that facilitate contract performance or contract administration. The costs of preparing, submitting, and negotiating an REA are treated as contract administration costs and are allowable (and thus recoverable in a negotiated settlement or, if the matter later becomes a claim, as part of the claim quantum). In sharp contrast, FAR 31.205-47(f)(1) states that costs incurred in connection with "defense against Federal Government claims or appeals or the prosecution of claims or appeals against the Federal Government" are unallowable. The unallowability rule applies to the costs of prosecuting a CDA claim—the legal, accounting, and consultant fees spent preparing the certified claim submission, the contracting officer's final decision briefing, and the appeal to the boards or the Court of Federal Claims. This cost asymmetry creates a strong economic incentive to resolve matters at the REA stage, before the contractor is forced to invoke the Disputes clause.

Less adversarial posture. An REA is negotiation; it preserves the working relationship with the contracting officer and program office. A formal CDA claim, by contrast, triggers the procedural machinery (the 90-day/12-month appeal windows, the deemed-denial rule, de novo review at the boards or COFC) and signals that the matter is in dispute and may proceed to litigation.

Flexibility in negotiation. The informal nature of REAs allows the parties to explore settlement without rigid procedural deadlines. The contracting officer may negotiate adjustments in phases, agree to partial settlements, or adjust the contract incrementally while the contractor continues performance. Once a claim is submitted and a COFD is issued, the contractor's appeal rights begin to run and the matter is on a litigation track.

Definitization under FAR 43.204 — memorializing the agreed adjustment

Once the contracting officer and contractor agree on the amount of the equitable adjustment, the adjustment is memorialized in a bilateral supplemental agreement (a contract modification on Standard Form 30). FAR 43.204(a) explains the documentation flow: "When change orders are not forward priced, they require two documents: the change order and a supplemental agreement reflecting the resulting equitable adjustment in contract terms. If an equitable adjustment in the contract price or delivery terms or both can be agreed upon in advance, only a supplemental agreement need be issued."

FAR 43.204(b)(1)(i) directs that "Contracting officers shall negotiate equitable adjustments resulting from change orders in the shortest practicable time." The definitization of an equitable adjustment begins upon receipt of an adequate change order definitization proposal by the contracting officer and ends upon the contracting officer's execution of a contractual action to definitize the change order, per FAR 43.204(b)(1)(ii). Agencies must record and maintain data regarding the time required to definitize equitable adjustments associated with change orders for construction.

FAR 43.204(c) addresses finality: "To avoid subsequent controversies that may result from a supplemental agreement containing an equitable adjustment as the result of a change order, the contracting officer should—(1) Ensure that all elements of the equitable adjustment have been presented and resolved; and (2) Include, in the supplemental agreement, a release similar to the following: 'In consideration of the modification(s) agreed to herein as complete equitable adjustments for the Contractor's [describe] "proposal(s) for adjustment," the Contractor hereby releases the Government from any and all liability under this contract for further equitable adjustments attributable to such facts or circumstances giving rise to the "proposal(s) for adjustment."'" This release is intended to preclude the contractor from asserting additional claims arising from the same change order; contractors should not sign a release until they are certain that all costs allocable to the change order have been captured, because the release bars future recovery.

Converting an REA into a claim

If a contractor submits an REA and the contracting officer does not respond favorably (or does not respond at all), the contractor may convert the REA into a claim by:

1. Providing a sum certain (if the REA did not already state one);
2. Certifying the claim if it exceeds $100,000, using the language prescribed in FAR 33.207(c);
3. Explicitly requesting that the contracting officer issue a final decision under FAR 52.233-1; and
4. Resubmitting (or amending) the document to the contracting officer.

Once the submission meets the definition of "claim" in FAR 52.233-1(c) and requests a final decision, it is a claim under the CDA, and the contracting officer's decision timeline obligations under 41 U.S.C. § 7103(d) begin. For claims of $100,000 or less, the contracting officer shall issue a decision within 60 days if the contractor requests in writing that a decision be rendered within that period; otherwise, within a reasonable time. For claims over $100,000, the contracting officer shall, within 60 days of receipt of the certified claim, either issue the decision or notify the contractor of the time within which the decision will be made.

Relationship to the CDA statute of limitations

An REA is not a claim under the CDA and does not stop the running of the six-year statute of limitations. Under 41 U.S.C. § 7103(a)(3), each claim by the contractor against the Government relating to a contract and each claim by the Government against the contractor relating to a contract shall be submitted within six years after the accrual of the claim. The limitations period runs from accrual—when all events that fix the Government's or contractor's liability have occurred—not from the date the contractor submits an REA or the date the parties reach impasse. A contractor who pursues an REA for an extended period must be mindful of the limitations clock. If the six-year period expires before the contractor converts the REA into a certified claim and submits it to the contracting officer, the claim is time-barred.

Mandatory performance during negotiation and after claim submission

FAR 52.243-1(e) states: "Failure to agree to any adjustment shall be a dispute under the Disputes clause. However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed." This mandatory-performance obligation runs throughout the REA negotiation phase and, under FAR 52.233-1(i), continues after claim submission: "Pending final decision of a claim, unless otherwise authorized by the Contracting Officer in writing, the Contractor shall proceed diligently with performance of the contract and in accordance with the Contracting Officer's decision." The contractor cannot stop work while the REA is pending or while a claim is under appeal unless the contracting officer authorizes a suspension in writing.

Source: FAR 52.243-1 Source: FAR 43.204 Source: FAR 52.233-1 Source: FAR 33.207 Source: FAR 31.205-33 Source: FAR 31.205-47

The Contract Disputes Act imposes a six-year statute of limitations on all claims, whether asserted by the contractor or by the Government. Under 41 U.S.C. § 7103(a)(4)(A), "each claim by a contractor against the Federal Government relating to a contract and each claim by the Federal Government against a contractor relating to a contract shall be submitted within 6 years after the accrual of the claim." This limitations period applies only to contracts awarded on or after October 1, 1995, the effective date of the Federal Acquisition Streamlining Act of 1994 (FASA), which first imposed the statute of limitations. Contracts awarded before that date carry no limitations period under the CDA, though they may be subject to the six-year Tucker Act limitations period in the Court of Federal Claims. The six-year bar is jurisdictional: it is a condition on the Government's waiver of sovereign immunity, and neither the boards nor the Court of Federal Claims may hear a claim submitted after the six-year period has run, no matter how meritorious.

Accrual — when the limitations clock starts

The FAR defines "accrual of a claim" at FAR 33.201 as "the date when all events, that fix the alleged liability of either the Government or the contractor and permit assertion of the claim, were known or should have been known. For liability to be fixed, some injury must have occurred. However, monetary damages need not have been incurred." This is a two-part test. First, all events that fix liability must have occurred — the injury, the breach, the Government act or omission that triggers the contractor's entitlement (or the contractor's default that triggers the Government's claim). Second, those events must have been known, or in the exercise of reasonable diligence should have been known, to the claimant. The accrual standard is objective: actual knowledge by the contracting officer or the contractor is not required. If the claimant had access to the facts and should have discovered them through reasonable diligence, the claim accrues.

The boards and the Court of Federal Claims have applied this standard to mean that a claim accrues when the claimant knows, or reasonably should know, both the existence of a potential claim and the facts that would allow assertion of the claim. Accrual does not wait for the claimant to ascertain the full extent of monetary damages or to complete a detailed cost analysis. Once the injury has occurred and the events fixing liability are known or should have been known, the clock starts running, even if the precise quantum of damages remains uncertain. The Federal Circuit and the boards have consistently held that uncertainty about the dollar amount does not delay accrual; the claimant need only know enough to assert the claim, not enough to prove it conclusively.

Accrual of Government claims — the "known or should have been known" standard in practice

For Government claims, the question is when the Government knew or should have known the facts giving rise to liability. This is measured by the Government's constructive knowledge, not merely the personal knowledge of a particular contracting officer or auditor. If a Defense Contract Audit Agency (DCAA) audit report issued in Year 1 identifies an alleged unallowable cost, but the contracting officer does not assert a claim until Year 8, the question is when the events fixing liability were known or should have been known by the Government, not when the contracting officer decided to pursue the claim. The boards have held that the limitations period runs from the earlier date — when the audit or other record put the Government on notice of the alleged violation and its cost impact — not from the date the contracting officer finally asserted the claim. Delay in issuing a final decision or in deciding whether to pursue a claim does not extend the six-year period.

The same principle applies to Government claims for excess reprocurement costs following a default termination. The claim accrues when the Government knows or should have known the facts fixing the excess-cost liability: the contractor's default, the termination, the completion of the reprocurement, and the cost differential. If the reprocurement contract is not completed until Year 4, but the final cost (and thus the excess amount) is known or ascertainable at that time, the six-year clock begins in Year 4, not in some later year when the contracting officer decides to demand payment.

Accrual of contractor claims — examples across claim types

For contractor claims arising from a Changes clause equitable adjustment, accrual typically occurs when the contractor knows or should have known that the Government has directed a change and that the change will cause increased cost or delay. The limitations period does not wait for the Government to deny an REA or for the contractor to finish quantifying every hour of delay impact. Once the contractor knows that a change order has been issued, that the change is not within the original scope, and that it will cause cost or schedule impact, the claim has accrued. The contractor may continue to refine its cost analysis and may submit an REA long after accrual, but the six-year deadline runs from accrual, not from the date of submission or the date the parties reach impasse.

For claims arising from defective specifications or differing site conditions (in construction contracts), the claim accrues when the contractor encounters the condition, recognizes (or should have recognized) the defect or the difference, and understands that it will cause increased cost or delay. Accrual does not require the Government to acknowledge the defect or to agree that relief is due; it requires only that the contractor have the facts necessary to assert a claim.

For termination-for-convenience claims, the contractor's claim for settlement costs accrues on the effective date of the termination notice. The contractor knows at that point that the contract has been terminated, that it is entitled to submit a settlement proposal under FAR Subpart 49.2 or 49.3, and that it will incur termination settlement costs. The six-year period runs from the termination date (or from the date the contractor knew or should have known the costs would not be reimbursed), not from the date the contractor submits its final termination settlement proposal or from the date the parties complete negotiations.

The fraud exception — Government claims only

Under 41 U.S.C. § 7103(a)(4)(B), the six-year limitations period "does not apply to a claim by the Federal Government against a contractor that is based on a claim by the contractor involving fraud." This exception is narrow. It applies only to Government claims, not contractor claims. (A contractor's claim alleging that the Government defrauded the contractor is still subject to the six-year bar.) The exception applies when the Government's claim is based on a contractor claim — for example, a cost reimbursement or equitable adjustment — that involved fraud. The paradigmatic case is a contractor's certified claim inflated by fraudulent cost data; the Government may assert a claim to recover the overpayment at any time, without regard to the six-year limitation, because the contractor's underlying claim involved fraud. The boards and the Court of Federal Claims have read "involving fraud" to require that fraud be an element of the Government's claim, not merely present in the background facts. If the Government is asserting a claim for breach of contract or recovery of unallowable costs on a theory that does not depend on proving fraud, the six-year limitation applies even if the contractor's conduct was fraudulent.

FAR 33.206(b) repeats this exception: "The contracting officer shall issue a written decision on any Government claim initiated against a contractor within 6 years after accrual of the claim, unless the contracting parties agreed to a shorter time period. The 6-year period shall not apply to contracts awarded prior to October 1, 1995, or to a Government claim based on a contractor claim involving fraud."

Contracts awarded before October 1, 1995

FAR 33.206(a) and (b) make clear that the six-year statute of limitations does not apply to contracts awarded before October 1, 1995. For those contracts, there is no CDA-imposed time bar on either contractor or Government claims. However, a contractor bringing an action in the Court of Federal Claims on a pre-October 1995 contract is still subject to the six-year limitations period of the Tucker Act, 28 U.S.C. § 2501, which provides that every claim against the United States founded upon a contract shall be barred unless the petition is filed within six years after the claim first accrues. The Tucker Act period also runs from accrual, measured by the same "all events fixing liability" standard. Appeals to the boards on pre-1995 contracts are not subject to the Tucker Act bar (because the boards are not Article III courts), but as a practical matter nearly all such contracts have long since been completed and closed.

The jurisdictional nature of the CDA statute of limitations — no equitable tolling

The six-year CDA limitations period is jurisdictional, not a mere affirmative defense. It is a condition on the Government's waiver of sovereign immunity under the CDA. The Supreme Court and the Federal Circuit have long held that limitations periods conditioning a waiver of sovereign immunity are strictly construed and may not be extended by equitable tolling except in the most extraordinary circumstances involving affirmative Government misconduct. In the CDA context, this means that if a contractor submits a claim more than six years after accrual, the boards and the Court of Federal Claims lack subject-matter jurisdiction over the claim, and the claim will be dismissed regardless of its merits. The same rule applies to Government claims: if the contracting officer issues a final decision asserting a Government claim more than six years after accrual, and the fraud exception does not apply, the contractor may move to dismiss for lack of jurisdiction.

The Federal Circuit has recognized extremely narrow exceptions for equitable tolling in cases where the Government has actively concealed facts or affirmatively misled the contractor in a way that prevented timely filing. Mere failure by the Government to respond promptly to an REA, or delay in issuing a contracting officer's final decision, does not toll the statute. Settlement negotiations do not suspend the running of the limitations period. A contractor engaged in prolonged settlement discussion must either reach agreement or submit a certified claim (and if necessary appeal a deemed denial) before the six-year period expires, or the claim is lost.

Submission within six years — what counts

Under the CDA, a contractor's claim must be "submitted" to the contracting officer within six years of accrual. For contractor claims of $100,000 or less, submission is straightforward: a written demand meeting the definition of "claim" in FAR 52.233-1(c) (a sum certain, a request for relief as a matter of right, and a request for a final decision) is submitted when received by the contracting officer. For contractor claims over $100,000, however, the submission is not complete — and the claim does not stop the running of the statute of limitations — until the contractor has provided the certification required by 41 U.S.C. § 7103(b)(1) and FAR 33.207. An uncertified submission exceeding $100,000 is not a claim under the CDA and does not satisfy the six-year filing deadline. If the contractor submits an uncertified demand in Year 5 and does not certify it until Year 7, and the claim accrued in Year 1, the claim is time-barred because it was not submitted (as a claim) within six years of accrual. This trap has caught many contractors who believed that submitting an REA or an uncertified demand would preserve their rights; it does not.

For Government claims, "submitted" means the issuance of a contracting officer's final decision asserting the claim. The Government satisfies the six-year deadline by issuing the final decision within six years of accrual, even if the decision is not physically received by the contractor until slightly later (the statute runs from issuance, and FAR 33.211 requires the decision to be mailed or furnished by a method that provides evidence of receipt, but the key act is issuance within the six-year window).

Interaction with the appeal deadlines

The six-year statute of limitations is independent of the CDA's appeal deadlines (90 days to the boards, 12 months to the Court of Federal Claims). A contractor who submits a timely claim (within six years of accrual) but then fails to appeal the contracting officer's final decision within 90 days or 12 months loses the right to appeal, even though the underlying claim was timely. Conversely, a contractor who appeals within 90 days or 12 months but whose claim was submitted more than six years after accrual will have the appeal dismissed for lack of jurisdiction on statute-of-limitations grounds. Both the submission deadline and the appeal deadlines are independently jurisdictional and must both be met.

Practical consequences — plan early, submit timely

The six-year statute of limitations creates an absolute deadline that is unforgiving of even brief delays. Contractors pursuing equitable adjustments through REAs or engaged in settlement negotiations must track accrual dates rigorously. When a claim accrues, the contractor has a hard six-year window to submit a certified claim (if over $100,000) or a written claim (if $100,000 or less). If settlement has not been reached by Year 5, prudent practice is to convert the REA into a certified claim, submit it to the contracting officer, and — if no timely favorable decision is forthcoming — appeal, thereby preserving jurisdiction. The same discipline applies to Government claims: agencies and contracting officers must issue final decisions on Government claims within six years of accrual or lose the ability to recover, unless the fraud exception applies.

Source: 41 U.S.C. § 7103(a)(4) Source: FAR 33.201 Source: FAR 33.206

Once the Government has issued a termination-for-convenience notice under FAR 52.249-2 (or one of the short-form or specialized convenience-termination clauses), the contractor must navigate a tightly structured settlement process governed by FAR Subpart 49.2. This process determines how the contractor will be compensated for work performed and preparations made for the terminated portion, including a reasonable allowance for profit. The settlement is negotiated with the Termination Contracting Officer (TCO), a role that may or may not be the same individual who administered the pre-termination contract, and is memorialized in a settlement agreement—a bilateral supplemental agreement that closes out the terminated portion of the contract. The contractor's compliance with the procedural timelines and submission requirements under FAR Subpart 49.2 is critical; failure to submit the final settlement proposal within the one-year deadline (unless extended) forfeits the right to appeal any subsequent denial of the claim.

The one-year submission deadline and the TCO

Under FAR 49.206-1(a), subject to the provisions of the termination clause, the contractor should promptly submit to the TCO a settlement proposal for the amount claimed because of the termination. The final settlement proposal must be submitted within one year from the effective date of the termination, unless the period is extended by the TCO. This one-year deadline is not jurisdictional in the same manner as the CDA statute of limitations, but it carries severe consequences: FAR 52.249-2(j) states that the contractor "shall have the right of appeal, under the Disputes clause, from any determination made by the Contracting Officer under paragraph (e), (g), or (l) of this clause, except that if the Contractor failed to submit the termination settlement proposal or request for equitable adjustment within the time provided in paragraph (e) or (l), respectively, and failed to request a time extension, there is no right of appeal." A contractor who misses the one-year deadline without securing an extension in writing from the TCO therefore loses the right to appeal any subsequent adverse decision by the TCO, converting the settlement determination into an unreviewable administrative act.

The TCO is the contracting officer designated to negotiate and execute the termination settlement. Under FAR 2.101, the TCO may or may not be the same individual who was the contracting officer prior to termination; agencies often designate specialists in termination settlement to serve as TCOs. The contractor must address all termination settlement submissions to the TCO, not to the original program contracting officer (unless they are the same person).

Two settlement bases: inventory basis vs. total-cost basis

FAR 49.206-2 prescribes two permissible bases for settlement proposals: the inventory basis (preferred) and the total-cost basis. Settlement proposals may not be submitted on any other basis without the prior approval of the chief of the contracting or contract administration office.

Inventory basis (FAR 49.206-2(a)) — the preferred method. Under this basis, the contractor proposes only costs allocable to the terminated portion of the contract, and the settlement proposal must itemize separately: (i) metals, raw materials, purchased parts, work in process, finished parts, components, dies, jigs, fixtures, and tooling, at purchase or manufacturing cost; (ii) charges such as engineering costs, initial costs, and general administrative costs; (iii) costs of settlements with subcontractors for work terminated; (iv) settlement expenses (accounting, legal, clerical, and other expenses reasonably necessary for preparation of the settlement proposal and termination of subcontracts); and (v) other proper charges. An allowance for profit under FAR 49.202 (or adjustment for loss under FAR 49.203(b)) is then added to complete the gross settlement proposal. All unliquidated advance and progress payments and all disposal and other credits known when the proposal is submitted must then be deducted. The inventory basis is also appropriate for partial terminations of construction or related professional-services contracts.

Total-cost basis (FAR 49.206-2(b)) — used less frequently, primarily when the contractor's cost-accounting system does not permit clean allocation of costs to the terminated work. When the total-cost basis is used under a complete termination, the contractor must itemize all costs incurred under the contract up to the effective date of termination. The costs of settlements with subcontractors and applicable settlement expenses must also be added. An allowance for profit (FAR 49.202) or adjustment for loss (FAR 49.203(c)) must be made. The contract price for all end items delivered or to be delivered and accepted must be deducted. All unliquidated advance and progress payments and disposal and other credits known when the proposal is submitted must also be deducted. When the total-cost basis is used under a partial termination, the settlement proposal shall not be submitted until completion of the continued portion of the contract, and the settlement proposal must be prepared as in the complete-termination case except that all costs incurred to the date of completion of the continued portion must be included. This timing rule prevents the contractor from inflating settlement costs by attributing to the terminated portion costs that properly belong to the continued work; the total-cost allocation is performed only after the contractor's actual cost experience on the entire contract (terminated and continued portions) is known.

FAR 49.206-2(b) also prescribes specific Standard Form adjustments when the total-cost basis is used in supply contracts that include components for which progress payments based on costs have been made: the contractor must omit Line 10 ("Deduct-Finished Product Invoiced or to be Invoiced") from Section II of SF 1436 (Settlement Proposal (Total Cost Basis)) and reduce the gross settlement amount by the total of all progress and other payments.

Required forms and supporting data

Settlement proposals must be on the forms prescribed in FAR 49.602 unless the forms are inadequate for a particular contract. Under FAR 49.206-1(c), settlement proposals must be in reasonable detail supported by adequate accounting data. Actual, standard (appropriately adjusted), or average costs may be used in preparing settlement proposals if they are determined under generally recognized accounting principles consistently followed by the contractor. When actual, standard, or average costs are not reasonably available, estimated costs may be used if the method of arriving at the estimates is approved by the TCO. Contractors are not required to maintain unduly elaborate cost accounting systems merely because their contracts may subsequently be terminated.

The standard forms are:

• SF 1436, Settlement Proposal (Inventory Basis) — used when the settlement is on the inventory basis.
• SF 1436, Settlement Proposal (Total Cost Basis) — a different variant of the same form number, used for total-cost submissions.
• SF 1438, Settlement Proposal (Short Form) — under FAR 49.206-1(d), the contractor may use this short form when the total proposal is less than $10,000, unless otherwise instructed by the TCO. Settlement proposals that would normally be consolidated (for example, those based on a series of separate orders for the same item under one contract) should be consolidated and not divided to bring them below $10,000 for the purpose of using the short form.
• SF 1439, Schedule of Accounting Information — under FAR 49.206-1(e), this schedule must be submitted for each termination under a contract for which a settlement proposal is submitted, except when SF 1438 is used. Although several interim proposals may be submitted, SF 1439 need be submitted only once unless, subsequent to filing the original form, major changes occur in the information submitted.

The forms are available through the GSA Forms Library and are referenced in FAR Subpart 53.2. TCOs may prescribe supplemental schedules or certifications, and FAR 52.249-2(e) authorizes the contracting officer to prescribe the form and certification for the final settlement proposal.

Profit allowance under FAR 49.202

Under FAR 49.202(a), the TCO shall allow profit on preparations made and work done by the contractor for the terminated portion of the contract but not on the settlement expenses. Anticipatory profits (profit the contractor would have earned on work not yet performed or prepared for) and consequential damages (such as lost opportunity costs or damages to the contractor's reputation) are not allowed, though FAR 49.108-5 permits limited recovery of anticipated profit on the terminated portion of subcontracts in certain circumstances. Profit for the contractor's efforts in settling subcontractor proposals is not based on the dollar amount of the subcontract settlement agreements; instead, the contractor's efforts are considered in determining the overall rate of profit allowed the contractor. Profit shall not be allowed the contractor for material or services that, as of the effective date of termination, have not been delivered by a subcontractor, regardless of the percentage of completion. The TCO may use any reasonable method to arrive at a fair profit, per FAR 49.202(a).

If it appears that the contractor would have sustained a loss on the entire contract had it been completed, the contracting officer shall allow no profit under the settlement and shall reduce the settlement to reflect the indicated rate of loss. This loss-contract adjustment is prescribed in FAR 49.203 and in FAR 52.249-2(g). The loss adjustment applies the same ratio of loss the contractor would have sustained on the whole contract to the settlement amount.

Ceiling on settlement amount under FAR 49.207

FAR 49.207 imposes an absolute ceiling: the total amount payable to the contractor for a settlement, before deducting disposal or other credits and exclusive of settlement costs, must not exceed the contract price less payments otherwise made or to be made under the contract. This ceiling applies regardless of the contractor's actual incurred cost. If the contractor's termination settlement claim, before credits and exclusive of settlement expenses, would exceed the remaining unpaid contract price, the settlement is capped at the contract price. This prevents a contractor from recovering more in settlement than it could have earned through full performance.

Interim proposals and partial payments

Under FAR 49.206-1(b), the settlement proposal must cover all cost elements including settlements with subcontractors and any proposed profit. With the consent of the TCO, proposals may be filed in successive steps covering separate portions of the contractor's costs. Such interim proposals shall include all costs of a particular type, except as the TCO may authorize otherwise. Interim proposals allow the contractor to obtain partial settlement and payment while continuing to work through complex subcontractor settlements or to complete cost accounting for particular cost pools.

If the contract authorizes partial payments on settlement proposals before final settlement (many T4C clauses do), the prime contractor may request them on the form prescribed in FAR 49.602-4 at any time after submission of interim or final settlement proposals, per FAR 49.112-1(a). The Government will process applications for partial payments promptly. A subcontractor must submit its application through the prime contractor, which attaches its own invoice and recommendations. Partial payments to a subcontractor are made only through the prime and only after the prime has submitted its interim or final settlement proposal. Except for undelivered acceptable finished products, partial payments are not made for profit or fee claimed under the terminated portion of the contract. The TCO considers the diligence of the contractor in settling with subcontractors and in preparing its own settlement proposal when deciding on the extent of partial payments.

Audit and review of settlement proposals

Under FAR 49.111(a), the TCO shall refer each prime contractor settlement proposal valued at or above the threshold for obtaining certified cost or pricing data to the appropriate audit agency (typically DCAA for DoD contracts, or the cognizant civilian-agency audit function for civilian contracts) for review and recommendations. The threshold for obtaining certified cost or pricing data is $2.5 million per FAR 15.403-4(a)(1) as adjusted for inflation for prime contracts awarded on or after July 1, 2018. For prime contracts awarded before July 1, 2018, the threshold remains $950,000. For Department of Defense contracts entered into after June 30, 2026, section 1804(c) of the FY2026 National Defense Authorization Act (Public Law 119-60, enacted December 18, 2025) raises the threshold to $10 million. The TCO may submit settlement proposals below the applicable threshold to the audit agency at the TCO's discretion. Referrals indicate any specific information or data the TCO considers relevant and include facts and circumstances that will assist the audit agency. The audit agency develops requested information and may make any further accounting reviews it considers appropriate. After its review, the audit agency submits written comments and recommendations to the TCO. When a formal examination of settlement proposals valued under the threshold is not warranted, the TCO will perform or have performed a desk review and include a written summary of the review in the case file.

FAR 49.107(c) notes that when the amount of a termination settlement agreement, or a partial termination settlement agreement plus the estimate to complete the continued portion of the contract, exceeds the certified-cost-or-pricing-data threshold in FAR 15.403-4, the contractor is obligated to furnish accurate, complete, and current cost or pricing data and to certify to that effect in accordance with FAR 15.403-4(a)(1). This certification obligation is distinct from the CDA claim certification in FAR 33.207; it is the certification prescribed in FAR Table 15-2, Certificate of Current Cost or Pricing Data, and is required when the settlement amount crosses the threshold.

Settlement agreement — the bilateral contract modification

Once the TCO and contractor have agreed on the settlement amount and terms, the settlement is memorialized in a settlement agreement, defined at FAR 49.001 as a contract modification settling all or a severable portion of a settlement proposal. The settlement agreement is executed on Standard Form 30, Amendment of Solicitation/Modification of Contract, and becomes part of the contract file. Under FAR 49.109-1, the settlement agreement should include appropriate covenants by the contractor in favor of the Government and such other provisions as are necessary to define the rights and obligations of the parties and to protect the Government's interests. FAR 49.109-5 permits reservations in the settlement agreement when certain matters remain unsettled (for example, a reservation as to final price for completed articles whose final price has not yet been determined).

FAR 43.204(c) recommends that, to avoid subsequent controversies, the TCO include in the supplemental agreement a release similar to the following: "In consideration of the modification(s) agreed to herein as complete equitable adjustments for the Contractor's [describe] 'proposal(s) for adjustment,' the Contractor hereby releases the Government from any and all liability under this contract for further equitable adjustments attributable to such facts or circumstances giving rise to the 'proposal(s) for adjustment.'" The release precludes the contractor from asserting additional claims arising from the same termination; contractors should ensure that all costs allocable to the terminated portion have been captured before signing a release, because the release bars future recovery.

Settlement by determination when agreement cannot be reached

If the TCO and contractor cannot agree on the amount of settlement, the TCO may issue a settlement by determination under FAR 49.109-7. This is a unilateral decision by the TCO fixing the settlement amount, and it is treated as a contracting officer's final decision under the Disputes clause. The contractor may appeal the determination to the agency board of contract appeals (within 90 days) or to the Court of Federal Claims (within 12 months) under the same CDA appeal procedures applicable to any other contracting officer final decision. However, the appeal right is lost if the contractor failed to submit the termination settlement proposal within the one-year deadline (or any TCO-granted extension) per FAR 52.249-2(j).

Relationship to the CDA — settlement proposals are "claims" under the False Claims Act

FAR 49.001 defines "settlement proposal" as a proposal for effecting settlement of a contract terminated in whole or in part, submitted by a contractor or subcontractor in the form, and supported by the data, required by FAR Part 49. The definition continues: "A settlement proposal is included within the generic meaning of the word 'claim' under false claims acts (see 18 U.S.C. 287 and 31 U.S.C. 3729)." This cross-reference is critical: although a termination settlement proposal submitted under FAR Subpart 49.2 within the one-year deadline is not treated as a CDA "claim" requiring certification under FAR 33.207 (it is a negotiation under the termination clause, not a dispute under FAR 52.233-1), it is a claim for purposes of civil and criminal false-claims liability. A contractor who knowingly submits a false or inflated settlement proposal is subject to civil liability under the False Claims Act (treble damages plus civil penalties) and to criminal prosecution under 18 U.S.C. 287 (false claims presented to a department or agency of the United States). This dual status—not a CDA claim for certification purposes, but a "claim" for fraud-liability purposes—shapes the standard of care contractors must apply when preparing termination settlement proposals.

Source: FAR Subpart 49.2 Source: FAR 49.206-1 Source: FAR 49.206-2 Source: FAR 49.202 Source: FAR 52.249-2 Source: FAR 15.403-4

When the Government issues a termination-for-default notice that stands—the contractor does not successfully prove the delay was excusable, and the termination is not converted to a termination for convenience—the contractor faces two distinct categories of financial liability: excess repurchase costs and other damages. Both are authorized by the Default clauses in FAR Part 52 and are addressed procedurally in FAR Subpart 49.4. Unlike a termination for convenience, which compensates the contractor fairly for work performed, a default termination shifts the financial risk of reprocurement and delay entirely to the contractor.

Repurchase obligation and reasonableness standard

Under FAR 49.402-6(a), when the supplies or services are still required after termination, the contracting officer shall repurchase the same or similar supplies or services against the contractor's account as soon as practicable. The contracting officer shall repurchase at as reasonable a price as practicable, considering the quality and delivery requirements. This duty to repurchase arises only when the Government still needs the supplies or services; if the requirement has lapsed, the contracting officer need not repurchase. The contracting officer may repurchase a quantity in excess of the undelivered quantity terminated for default when the excess quantity is needed, but excess cost may not be charged against the defaulting contractor for more than the undelivered quantity terminated for default (including variations in quantity permitted by the terminated contract). This caps the contractor's exposure: if the original contract called for 100 units and the contractor delivered 30 before default, the repurchase may cover 70 units (or more if needed), but the contractor is liable for excess costs only on the 70 units actually terminated.

Generally, the contracting officer will decide whether or not to repurchase before issuing the termination notice—the agency's plan to repurchase (or not) is a factor in deciding whether to proceed with a default termination at all. If the repurchase is for a quantity not over the undelivered quantity terminated, FAR 49.402-6(b) provides that the Default clause authorizes the contracting officer to use any terms and acquisition method the contracting officer considers suitable. The contracting officer has broad discretion to reprocure via competitive bidding, sole-source negotiation, an existing GSA schedule, or any other mechanism authorized by the FAR.

Calculation of excess costs—the written demand under FAR 49.402-6(c)

Once the repurchase contract is complete and final payment has been made, the contracting officer calculates and demands the excess cost. FAR 49.402-6(c) states: "If repurchase is made at a price over the price of the supplies or services terminated, the contracting officer shall, after completion and final payment of the repurchase contract, make written demand on the contractor for the total amount of the excess, giving consideration to any increases or decreases in other costs such as transportation, discounts, etc." The excess-cost calculation is not a simple arithmetic difference between the terminated contract price and the repurchase contract price. The contracting officer must adjust for cost deltas—if the repurchase contract included freight that the original contract did not, or vice versa, that difference must be factored in. If the original contract entitled the contractor to a prompt-payment discount and the repurchase contract did not, the contracting officer may adjust for that. The aim is to isolate the cost increase that resulted from the contractor's default, not from changes in contract structure or delivery terms.

The demand is made in writing and constitutes a Government claim. Under FAR 49.402-6(c), if the contractor fails to make payment, the contracting officer shall follow the procedures in FAR Subpart 32.6 for collecting contract debts due the Government. FAR Subpart 32.6 authorizes offset against amounts otherwise due the contractor, demand letters, interest accrual under the Debt Collection Act and the Prompt Payment Act interest rate, and referral to the Department of Treasury or Department of Justice for collection. The contractor may dispute the excess-cost claim by filing a claim under the Contract Disputes Act; the contracting officer's demand (or a formal final decision asserting the Government claim) is appealable to the agency board or the Court of Federal Claims.

Excess costs are not capped by the contract price

Unlike termination-for-convenience settlement amounts, which are capped by FAR 49.207 at the remaining unpaid contract price, excess repurchase costs are not capped by the original contract price. If the original contract price for the terminated work was $1 million and the repurchase cost $2 million, the contractor is liable for the full $1 million excess (subject to adjustments for transportation, discount, and other deltas). The contractor's liability is capped only by the terminated quantity—if the contractor delivered part of the contract before termination, it is not liable for excess costs on that delivered (and accepted) portion.

Under FAR 49.402-2(a), the Government is not liable for the contractor's costs on undelivered work and is entitled to the repayment of advance and progress payments, if any, applicable to that work. The Government may also elect, under the Default clause, to require the contractor to transfer title and deliver to the Government completed supplies and manufacturing materials, as directed by the contracting officer. The contracting officer must first ascertain that the Government does not already have title under some other provision of the contract (for example, under the Government Property clause or under a cost-reimbursement contract's title clause) before using the Default clause as the basis to acquire completed supplies or materials.

Liquidated damages—cumulative with excess costs

Excess repurchase costs are not the contractor's only financial exposure. FAR 49.402-7(a) addresses liquidated damages: "If the contracting officer terminates a contract for default or follows a course of action instead of termination for default (see FAR 49.402-4), the contracting officer promptly must assess and demand any liquidated damages to which the Government is entitled under the contract." Liquidated damages are pre-agreed per-day (or per-unit) damages assessed for late delivery or late performance, typically provided for by the Liquidated Damages—Supplies, Services, or Research and Development clause (FAR 52.211-11) or the Liquidated Damages—Construction clause (FAR 52.211-12). Under FAR 49.402-7(a), liquidated damages under FAR 52.211-11 are in addition to any excess repurchase costs. The two categories are cumulative. A contractor who is 60 days late, is then terminated for default, and whose repurchase costs the Government an extra $500,000 owes both the $500,000 excess cost and 60 days of liquidated damages (from the delivery date to the termination date) at the contract rate.

Other ascertainable damages—administrative costs and legal advice requirement

FAR 49.402-7(b) addresses the third category of damages: "If the Government has suffered any other ascertainable damages, including administrative costs, as a result of the contractor's default, the contracting officer must, on the basis of legal advice, take appropriate action as prescribed in FAR Subpart 32.6 to assert the Government's demand for the damages." This provision permits the Government to recover administrative costs—salaries and overhead for Government personnel who handled the reprocurement, travel, re-inspection, and other costs that would not have been incurred but for the default—but only on the basis of legal advice. The contracting officer may not unilaterally assert administrative-cost damages without first consulting agency counsel. The requirement for legal advice reflects the complexity and potential for dispute: the Government must show that the costs were a direct result of the contractor's default, were not costs the Government would have incurred in any event, and are legally recoverable.

The phrase "other ascertainable damages" is not further defined in the FAR, but it has been interpreted by the boards and the Court of Federal Claims to include only damages that are readily calculable and directly traceable to the contractor's default. Speculative damages, anticipated future costs not yet incurred, and general overhead not specifically tied to the reprocurement are not "ascertainable" and are not recoverable. The Government bears the burden of proving both the fact and the amount of the damages.

No excess-cost liability for cost-reimbursement contracts

FAR 49.403(c) carves out a critical exception: cost-reimbursement contracts do not contain any provision for recovery of excess repurchase costs after termination for default. Under FAR 52.249-6, Termination (Cost-Reimbursement), the Government may terminate a cost-reimbursement contract for default after giving the contractor a mandatory 10-day notice, but the settlement follows the convenience-termination principles in FAR Subpart 49.3 with two key differences: (1) the costs of preparing the contractor's settlement proposal are not allowable, and (2) the contractor is reimbursed for allowable costs and an appropriate reduction is made in the total fee, if any. The contractor is not liable for excess repurchase costs. The Government's remedy for poor performance on a cost-reimbursement contract is limited to fee reduction, withholding of profit, and (in egregious cases) suspension and debarment; the financial risk of cost growth on the reprocurement is borne by the Government, not the contractor. FAR 49.403(c) notes the single exception to the no-excess-cost rule: paragraph (g) of the Inspection of Supplies—Cost-Reimbursement clause (FAR 52.246-3) authorizes the Government to require the contractor to replace or correct defective supplies at the contractor's expense, a limited form of excess-cost liability in the narrow case of nonconforming deliveries.

Settlement of amounts due for delivered work—no automatic forfeiture

Even when a contract is terminated for default, the contractor may be entitled to payment for supplies or services that were delivered before the termination and accepted by the Government. FAR 49.402-2(a) confirms that the Government is not liable for the contractor's costs on undelivered work, but it does not forfeit payment for work the Government accepted. Under FAR 52.249-8(b) (the Default clause for fixed-price supply and service contracts), if the Government does not terminate the contractor's right to proceed with the work, the contractor is entitled to the contract price for accepted supplies or services, less any setoff for excess repurchase costs, liquidated damages, and other damages due the Government. The contracting officer may withhold from the amount otherwise due to the contractor any amount the contracting officer determines necessary to protect the Government's interest, but only if the other remedies in FAR 49.402-2(d)(1)–(3) (demanding payment, withholding progress payments, or collecting against bonds or guarantees) cannot be accomplished or are considered inadequate. This withholding authority is a protective measure, not a penalty; the contractor retains the right to challenge the amount withheld through a claim under the Disputes clause.

Source: FAR 49.402-6 Source: FAR 49.402-7 Source: FAR 49.402-2 Source: FAR 49.403 Source: FAR 52.249-8

The Contract Disputes Act guarantees that a contractor who prevails on a claim — whether through a favorable contracting officer's final decision, a settlement, or a board or court decision — is entitled to statutory interest on the amount found due. Under 41 U.S.C. § 7109(a)(1), interest on an amount found due a contractor on a claim shall be paid to the contractor for the period beginning with the date the contracting officer receives the contractor's claim, pursuant to § 7103(a), until the date of payment of the claim. This interest entitlement is mandatory, not discretionary, and it compensates the contractor for the time value of money during the delay between submission of the claim and receipt of payment. The interest runs automatically by operation of statute; no contractual provision is required, though FAR 52.233-1, Disputes, includes implementing language reminding the contractor of the statutory right.

Start of the interest period — receipt of the claim by the contracting officer

Interest begins to accrue on the date the contracting officer receives the contractor's claim. Receipt is measured by actual delivery to the contracting officer (or the contracting officer's office), not by the date the contractor mails or transmits the claim. For claims of $100,000 or less, the claim is received when the contracting officer has in hand a written demand or assertion meeting the definition of "claim" in FAR 52.233-1(c) — a written demand or written assertion by the contractor seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. For claims over $100,000, however, the submission is not complete — and interest does not begin to accrue — until the contractor has provided the certification required by 41 U.S.C. § 7103(b)(1) and FAR 33.207. An uncertified demand exceeding $100,000 is not a "claim" within the meaning of the CDA and does not trigger the interest clock.

This receipt-date rule is significant because it means that interest does not run from the date the contractor incurs the costs giving rise to the claim, or from the date the claim accrues for statute-of-limitations purposes, or from the date the contractor first notifies the contracting officer of a dispute. Interest runs only from the formal submission of a claim — a sum-certain demand seeking relief as a matter of right, certified if over $100,000, and addressed to the contracting officer. Requests for equitable adjustment (REAs) that do not meet the definition of "claim" do not trigger statutory interest, even if they put the contracting officer on notice of the contractor's position and the quantum sought.

End of the interest period — date of payment

Interest runs until the date of payment of the claim. Under FAR 32.904(c)(2), this is the date on which a payment is made by the designated payment office, which is normally the date of the check or electronic funds transfer. If the Government partially pays a claim, interest ceases to accrue on the paid portion as of the payment date; interest continues to accrue on any unpaid balance. If the contractor prevails on appeal and a board or the Court of Federal Claims enters judgment, interest runs until the date the judgment is paid, which for COFC judgments is governed by 31 U.S.C. § 1304 (the Judgment Fund) and typically occurs within a few weeks of the clerk's certification of the judgment to the Department of the Treasury.

The defective-certification rule — subsection (a)(2) protects the contractor

The CDA includes a critical protection for contractors who submit claims over $100,000 with defective certifications. Under 41 U.S.C. § 7109(a)(2), on a claim for which the certification under § 7103(b)(1) is found to be defective, any interest due shall be paid for the period beginning with the date the contracting officer initially receives the contractor's claim until the date of payment of the claim. This means the contractor does not lose interest accrual time by having submitted a defective certification rather than a proper one from the outset. FAR 33.208(c) implements this rule: "With regard to claims having defective certifications, interest shall be paid from the date the contracting officer initially receives the contractor's claim, or October 29, 1992, whichever is later." (October 29, 1992, is the effective date of the statutory interest provision as amended by the Federal Courts Administration Act of 1992, Public Law 102-572.)

The distinction between a defective certification and a failure to certify is critical, and it is addressed in detail in the existing section on claim certification (see FAR 33.201). A defective certification — one that alters or deviates from the prescribed language in FAR 33.207(c), or that is executed by a person not authorized to bind the contractor — does not deprive the boards or the Court of Federal Claims of jurisdiction, and it may be corrected at any time before final judgment or decision. The contractor who submits a defective certification preserves the early interest-accrual date (the date the CO first received the submission). In contrast, a complete failure to certify when certification is required means the submission is not a "claim" at all under the CDA, and no interest accrues until a proper certification is provided — which, if submitted years later, may forfeit substantial interest.

The statutory rate — six-month Treasury specification tied to five-year commercial loans

Under 41 U.S.C. § 7109(b), interest shall accrue and be paid at a rate which the Secretary of the Treasury shall specify as applicable for each successive six-month period. The rate is determined by the Secretary of the Treasury taking into consideration current private commercial rates of interest for new loans maturing in approximately five years. The statute does not prescribe a fixed rate or a fixed formula; it delegates to the Secretary the authority to set rates semi-annually based on the five-year commercial-loan benchmark.

In practice, the Department of the Treasury publishes CDA interest rates semi-annually (for the periods January 1 – June 30 and July 1 – December 31) and makes them available on the Treasury Fiscal Service website. These rates are also referenced in agency guidance and in the boards' and the Court of Federal Claims' standard-form judgments. The rates typically track movements in the broader interest-rate environment; during periods of rising rates, CDA interest rates step up every six months, and during periods of falling rates, they step down. Contractors calculating interest on claims that span multiple six-month periods must apply the applicable rate for each period — CDA interest is simple interest, not compound, and the rate changes mid-stream as Treasury updates its specification.

Unlike the Prompt Payment Act interest rate (which uses the Treasury Tax and Loan account rate and is published in the Federal Register), the CDA rate is specifically tied to the five-year commercial-loan benchmark and is administered under the authority delegated by 41 U.S.C. § 7109(b). The two rates are not the same, though in many periods they are close.

Interest is mandatory when an amount is "found due" the contractor

The language "an amount found due a contractor on a claim" in § 7109(a)(1) means interest is payable only when the contractor is entitled to payment — either because the contracting officer's final decision grants the claim, because the parties settle and agree on the amount due, or because a board or court awards the contractor money. If the claim is denied in full by a final decision and the contractor does not appeal (or appeals and loses), no amount is found due and no interest is payable. Interest does not accrue on a denied claim that becomes final and conclusive.

When a claim is partially granted, interest accrues only on the amount found due. If a contractor submits a claim for $500,000, and the contracting officer's final decision (or a board decision on appeal) grants $300,000 and denies $200,000, interest runs on the $300,000 from the date the CO received the claim until the date the $300,000 is paid. The denied $200,000 carries no interest.

Settlement agreements may, and often do, specify whether interest is included in the settlement amount or whether the contractor waives interest as part of the compromise. If the settlement agreement is silent, the general rule under § 7109(a)(1) is that interest is due on the settled amount from the date the CO received the claim until the date of payment, unless the parties' intent to exclude interest is clear from the circumstances.

Interest on Government claims

Section 7109 of Title 41 addresses only interest on amounts found due to the contractor. There is no parallel CDA provision granting the contractor interest on amounts the Government is required to refund when a Government claim is reduced or reversed on appeal. However, the Government is entitled to interest on amounts owed by the contractor to the Government under the Interest clause, FAR 52.232-17, which is prescribed by FAR 32.611 and inserted in most contracts above the simplified acquisition threshold. That clause provides that all amounts that become payable by the contractor to the Government under the contract shall bear simple interest from the date due until paid, unless paid within 30 days of becoming due. The interest rate under FAR 52.232-17 is also set by the Secretary of the Treasury, but it is not necessarily identical to the CDA contractor-claim interest rate; the clause references the rate applicable to debts owed to the United States.

The asymmetry is intentional: the CDA interest entitlement is a one-way ratchet favoring the contractor as compensation for the Government's delay in paying valid claims. The Government's interest on debts is addressed separately under FAR Subpart 32.6 (Contract Debts) and the Debt Collection Act, not under the CDA.

Effective date and applicability

The CDA interest provision in its current form became effective on October 29, 1992, per Public Law 102-572, which amended the original CDA statute to clarify the accrual date and codify the defective-certification rule. For claims received by the contracting officer before October 29, 1992, interest accrues from October 29, 1992 (if the claim was still pending and unpaid as of that date), not from the earlier receipt date. This grandfathering rule is implemented in FAR 33.208(c). Claims arising under contracts awarded before the effective date of the CDA (March 1, 1979) are not covered by the CDA interest provisions unless the contract was later modified to incorporate the Disputes clause.

No interest on settlement expenses or on interest itself

Interest under § 7109 is paid on the principal amount found due — the contract adjustment, the equitable adjustment, the claim quantum. It does not accrue on settlement expenses (the allowable costs of preparing the claim and supporting the settlement proposal, which are part of the claim quantum itself if included in the contractor's demand). The statute does not authorize compound interest; if a contractor is awarded $100,000 on a claim and the Government delays payment, interest accrues on the $100,000 at the statutory rate, but interest does not accrue on the accruing interest (no compounding). Simple interest only.

Relationship to settlement proposals under FAR Subpart 49.2

Termination settlement proposals submitted under FAR Subpart 49.2 (for convenience terminations) are a special category. Such proposals are not "claims" requiring CDA certification (they are negotiated settlements under the termination clause, not disputes), and FAR 49.001 confirms they are not subject to the CDA interest provisions unless and until the contractor converts an impasse into a claim under the Disputes clause. If a contractor submits a termination settlement proposal, the parties negotiate, and they reach agreement and execute a settlement agreement, the settlement amount includes profit (if allowable under FAR 49.202) but does not automatically include CDA interest unless the parties expressly agree to it or unless the contractor has converted the matter into a claim and the settlement is memorialized as a contracting officer's final decision or a board-approved settlement. In practice, termination settlement agreements often include language stating that the amount paid is in full satisfaction of all claims, including interest.

Source: 41 U.S.C. § 7109 Source: FAR 33.208 Source: FAR 52.233-1

Before the Government may terminate a contract for default, it must ordinarily provide the contractor with an opportunity to show cause why the termination should not proceed. Under FAR 49.402-3(e)(1), if termination for default appears appropriate, the contracting officer should, if practicable, notify the contractor in writing of the possibility of the termination. This notice—the show-cause notice—calls the contractor's attention to the contractual liabilities if the contract is terminated for default and requests the contractor to show cause why the contract should not be terminated for default. The notice may further state that failure of the contractor to present an explanation may be taken as an admission that no valid explanation exists.

The show-cause notice is distinct from the cure notice, which is prescribed in FAR 49.607(a) and is mandatory under the Default clause when the contracting officer proposes to terminate for default before the delivery date for failure to make progress or for failure to perform other contract provisions (the second and third grounds in FAR 52.249-8). A cure notice gives the contractor a minimum 10-day period (or longer if the contracting officer considers it reasonably necessary) to cure the condition endangering performance. A show-cause notice, by contrast, is used when the time for cure has already passed—when the delivery date has expired, when the contractor has failed to cure the conditions specified in a prior cure notice, or when late delivery has already occurred. The FAR does not mandate the show-cause notice in the way it mandates a cure notice; instead, FAR 49.402-3(e)(1) states the contracting officer "should, if practicable," issue the show-cause notice. Nevertheless, best practice and GAO and board precedent strongly favor issuing the notice whenever time permits, because it provides the contractor a final opportunity to present excusable-delay defenses and it creates a clean administrative record for any subsequent appeal.

When is a show-cause notice used?

Under FAR 49.607(b), the show-cause notice is the appropriate form of delinquency notice "if the time remaining in the contract delivery schedule is not sufficient to permit a realistic 'cure' period of 10 days or more." The notice should be sent immediately upon expiration of the delivery period. Typical scenarios include:

• Late delivery or performance after the deadline has passed. Under FAR 49.402-3(c), subdivision (a)(1)(i) of the Default clause (FAR 52.249-8) covers situations when the contractor has defaulted by failure to make delivery of the supplies or to perform the services within the specified time. In these situations, no notice of failure or of the possibility of termination for default is required to be sent to the contractor before the actual notice of termination—but FAR 49.402-3(e)(1) nonetheless directs the contracting officer to issue a show-cause notice if practicable. The contracting officer retains the legal right to terminate immediately upon late delivery, but the show-cause notice affords procedural fairness and allows the contractor to present excusable-delay evidence.

• Failure to cure conditions specified in a prior cure notice. If the contractor received a cure notice under FAR 49.607(a) and the 10-day (or longer) cure period has expired without the contractor correcting the endangering condition, the contracting officer may issue a show-cause notice before proceeding to termination. FAR 49.607(b) contemplates this progression: the show-cause notice may reference the contractor's failure "to cure the conditions endangering performance under Contract No. ___ as described to you in the Government's letter of ___ (date)."

• Performance already past the point where cure is feasible. When the contractor's progress has fallen so far behind that even a 10-day cure period would not permit realistic catch-up before the delivery date, the contracting officer skips the cure notice and proceeds directly to a show-cause notice.

Mandatory content of the show-cause notice under FAR 49.607(b)

FAR 49.607(b) provides a suggested format for the show-cause notice. The key elements are:

1. Statement of the contractor's failure. The notice must specify what the contractor failed to do—either "perform Contract No. ___ within the time required by its terms," or "cure the conditions endangering performance under Contract No. ___ as described to you in the Government's letter of ___ (date)."

1. Notice that the Government is considering termination for default. The notice must inform the contractor that "the Government is considering terminating the contract under the provisions for default of this contract."

1. Reference to the excusable-delay standard. The notice states: "Pending a final decision in this matter, it will be necessary to determine whether your failure to perform arose from causes beyond your control and without fault or negligence on your part." This language tracks the three-prong excusable-delay test in the Default clause and signals to the contractor that the burden is on the contractor to establish an excusable-delay defense.

1. Opportunity to respond within 10 days. The notice gives the contractor an opportunity to present, in writing, any facts bearing on the question to the contracting officer, within 10 days after receipt of the notice. The notice warns: "Your failure to present any excuses within this time may be considered as an admission that none exist."

1. Warning of contractual liabilities. The notice states: "Your attention is invited to the respective rights of the Contractor and the Government and the liabilities that may be invoked if a decision is made to terminate for default." This encompasses excess reprocurement costs under FAR 52.249-8(b), liquidated damages (if applicable), and reporting to FAPIIS.

1. No waiver of Government rights. The notice includes a reservation-of-rights clause: "Any assistance given to you on this contract or any acceptance by the Government of delinquent goods or services will be solely for the purpose of mitigating damages, and it is not the intention of the Government to condone any delinquency or to waive any rights the Government has under the contract." This protects the Government from a contractor's later argument that continued Government acceptance of late performance or provision of assistance constituted a waiver of the right to terminate for default.

Prior approval requirement

Under FAR 49.402-3(b), the administrative contracting officer (ACO) shall not issue a show-cause notice (or a cure notice) without the prior approval of the contracting office, which should be obtained by the most expeditious means. This approval requirement ensures that the decision to move toward a default termination is made at the program level with full awareness of the contract history, the urgency of the requirement, and the availability of alternative sources. In practice, the ACO (if delegated post-award administration duties) must coordinate with the procuring contracting officer (PCO) before issuing the show-cause notice.

Consultation with counsel and small-business specialist

FAR 49.402-3(a) (incorporating FAR 49.401(a)) requires that when a default termination is being considered, the Government shall decide which type of termination action to take—default, convenience, or no-cost cancellation—only after review by contracting and technical personnel, and by counsel, to ensure the propriety of the proposed action. This tripartite review (contracting, technical, legal) must be completed before the show-cause notice is issued. The review addresses whether the contractor has in fact failed to perform, whether the failure is material, whether the contractor has an excusable-delay defense, and whether the Government's interests are better served by default termination, convenience termination, or some alternative remedy under FAR 49.402-4 (such as proceeding without termination and assessing excess costs later).

If the contractor is a small business firm, FAR 49.402-3(d)(4) requires the contracting officer to immediately provide a copy of any show-cause notice to the contracting office's small business specialist and to the Small Business Administration (SBA) Area Office nearest the contractor. The contracting officer should, whenever practicable, consult with the small business specialist before proceeding with a default termination. This consultation requirement gives the SBA an opportunity to offer technical or financial assistance to the small business contractor and to advocate on the contractor's behalf if the SBA believes the default termination is premature or that the contractor can cure the deficiency with assistance.

Contractor's response — what to include

The contractor's response to a show-cause notice is the contractor's last opportunity to avoid a default termination. The response should address each of the elements the contracting officer must evaluate under FAR 49.402-3(f):

• Excusable delay. If the contractor's failure to perform arose from causes beyond its control and without its fault or negligence (the three-prong test in FAR 52.249-8(c)), the contractor must present the facts supporting each prong. This includes identifying the specific cause (e.g., fire, flood, epidemic, act of Government, strike, freight embargo, unusually severe weather) and demonstrating that the contractor was neither at fault nor negligent and that the cause was truly beyond the contractor's control.

• Steps taken to mitigate or cure. Even if the contractor cannot establish a complete excusable-delay defense, the contractor should describe any steps taken or proposed to be taken to cure the deficiency or to mitigate damages. This shows good faith and may persuade the contracting officer to allow additional time or to terminate for convenience rather than for default.

• Government acts or omissions contributing to delay. If the contractor's delay was caused or exacerbated by Government-furnished property arriving late, defective specifications, constructive changes, or unreasonable inspection delays, the contractor should identify those acts and argue that the delay is excusable (and possibly compensable) under the applicable adjustment clause.

• Why default termination is not in the Government's interest. The contractor should address the factors the contracting officer must consider under FAR 49.402-3(f): the availability of the supplies or services from other sources, the urgency of the need and the time required to obtain them from other sources as compared with the time the contractor could deliver, the essentiality of the contractor in the Government's acquisition program, and the effect of a default termination on the contractor's financial viability and on other Government contracts. If reprocurement will cost more or take longer than allowing the contractor to complete the work, the contractor should make that case.

The response should be detailed, factual, and supported by contemporaneous records. Conclusory statements ("We experienced unforeseen delays") without supporting documentation are easily dismissed. The contracting officer is not obligated to accept the contractor's explanation, but a well-documented response may shift the contracting officer's evaluation from default to convenience or to one of the alternatives in FAR 49.402-4.

The 10-day response period is not jurisdictional

Unlike the 90-day and 12-month CDA appeal deadlines, the 10-day period for responding to a show-cause notice is not jurisdictional. The contracting officer retains discretion to accept a late response or to grant an extension if the contractor requests one before the period expires. However, the FAR 49.607(b) language ("Your failure to present any excuses within this time may be considered as an admission that none exist") creates a strong presumption against the contractor if no timely response is submitted. A contractor who needs more time should request an extension in writing before the 10-day period expires, explaining why additional time is necessary and when the response will be submitted.

Effect of the contractor's response — the contracting officer's decision

After receiving and evaluating the contractor's response (or after the 10-day period expires without a response), the contracting officer must decide whether to proceed with a default termination. FAR 49.402-3(f) prescribes the factors the contracting officer shall consider:

1. The terms of the contract and applicable laws and regulations.
2. The specific failure of the contractor and the excuses for the failure.
3. The availability of the supplies or services from other sources.
4. The urgency of the need for the supplies or services and the period of time required to obtain them from other sources, as compared with the time delivery could be obtained from the delinquent contractor.
5. The degree of essentiality of the contractor in the Government acquisition program and the effect of a termination for default upon the contractor's capability as a supplier under other contracts.
6. The effect of a termination for default on the ability of the contractor to liquidate guaranteed loans, advance payments, or progress payments.
7. Any other pertinent facts and circumstances.

The decision is discretionary; the contracting officer may, even when the contractor has in fact defaulted, elect to terminate for convenience, to allow additional time, or to take no termination action at all if the Government's interest is better served by continued performance. Courts and the boards have long held that the Government's decision to terminate for default will be upheld on appeal only if the Government establishes (1) that the contractor in fact failed to perform, and (2) that the failure was not excusable. If the contractor's response to the show-cause notice persuades the contracting officer that the delay was excusable, or that default termination would be wasteful or contrary to the Government's interest, the contracting officer may instead terminate for convenience under FAR 52.249-2 or pursue one of the alternatives in FAR 49.402-4.

Progression to the notice of termination

If, after compliance with the procedures in FAR 49.402-3(a) through (f)—including review by contracting, technical, and legal personnel; issuance of the show-cause notice (if practicable); evaluation of the contractor's response; and consultation with the small-business specialist (if applicable)—the contracting officer determines that a termination for default is proper, the contracting officer shall issue a notice of termination under FAR 49.402-3(g). This notice is the formal instrument that effects the termination. It must state the contract number, the reasons for the termination, the effective date, the items or services to be terminated, the contractor's continuing obligations (including delivery of completed supplies and manufacturing materials if the Government elects to require them), and the contractor's appeal rights under the Disputes clause.

The show-cause notice itself does not terminate the contract. It is a procedural step—a request for information and an opportunity to be heard. Only the notice of termination, issued in accordance with FAR 49.402-3(g) and complying with the content requirements of the Default clause, effects the termination and triggers the contractor's liability for excess reprocurement costs and other damages.

Source: FAR 49.402-3 Source: FAR 49.607

The Contract Disputes Act creates a symmetrical framework: just as contractors may assert claims against the Government, the Government may assert claims against contractors, and both categories of claim are subject to the same procedural safeguards — written decision by the contracting officer, appeal to the boards or the Court of Federal Claims, de novo review, and (for the Government) the same six-year statute of limitations. Under 41 U.S.C. § 7103(a)(3), each claim by the Federal Government against a contractor relating to a contract shall be the subject of a written decision by the contracting officer. This written-decision requirement is the jurisdictional linchpin: the Government cannot bypass the CDA by simply sending a demand letter or withholding payment; it must issue a formal contracting officer's final decision that triggers the contractor's appeal rights. The contractor may then appeal the decision to the agency board within 90 days or to the Court of Federal Claims within 12 months, just as the contractor may appeal the denial of its own claims.

What constitutes a Government claim

FAR 2.101 defines "claim" as "a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract." This definition applies equally to contractor claims and Government claims. The distinguishing feature of a Government claim is that it is a demand by the Government against the contractor — not a routine invoice, not a unilateral deduction, and not an informational notice. Common examples of Government claims include:

• Recovery of overpayments — demands for repayment of progress payments, advance payments, or invoice payments that exceeded amounts due, whether caused by contractor error, Government error, or subsequent audit disallowance of costs.

• Recovery of unallowable costs — demands for reimbursement (or offset) when a post-award audit (typically by DCAA) determines that costs claimed and reimbursed under a cost-reimbursement contract were unallowable under FAR Part 31.

• Excess repurchase costs after default termination — the contracting officer's demand, following a termination for default and completion of the repurchase, that the contractor pay the difference between the terminated contract price and the higher repurchase cost, as authorized by FAR 52.249-8(b) and addressed in FAR 49.402-6.

• Liquidated damages — assessment of per-diem damages for late delivery or late performance under FAR 52.211-11 (supply and service contracts) or FAR 52.211-12 (construction).

• Patent indemnity — demands under the Patent Indemnity clause (FAR 52.227-3) that the contractor indemnify the Government for infringement claims arising from the contractor's supplies or performance.

• Breach-of-warranty claims — demands for replacement, repair, or cost recovery when delivered supplies fail to meet warranty obligations under FAR 52.246-17 through FAR 52.246-21.

• Defective pricing under the Truth in Negotiations Act — recovery of amounts by which the contract price was increased because the contractor furnished cost or pricing data that were not accurate, complete, and current as of the date of price agreement, under FAR 52.215-10 and FAR 52.215-11.

Not every Government demand is a "claim" requiring a contracting officer's final decision. Routine contract administration actions — such as a payment office's correction of an invoice arithmetic error before payment, a contracting officer's rejection of a deliverable as nonconforming (which does not demand money but simply withholds acceptance), or a notice of intent to assess liquidated damages (which is not yet a final demand) — are not claims. The line turns on whether the Government is asserting, as a matter of right, an entitlement to payment or other relief. If the Government is making a demand that the contractor disputes (or is likely to dispute), and the demand arises under or relates to the contract, the demand is a claim and requires a written decision.

No certification requirement for Government claims

Unlike contractor claims exceeding $100,000, which must be certified under 41 U.S.C. § 7103(b)(1) and FAR 33.207, Government claims are not subject to any certification requirement. The CDA imposes certification only on contractor claims. The contracting officer asserting a Government claim need not certify the accuracy of the supporting data, the good faith of the claim, or personal authorization to assert the claim. The absence of a certification requirement reflects the Government's institutional accountability mechanisms (audit, legal review, and the False Claims Act's qui tam provisions when the Government is a victim of contractor fraud, not a claimant). However, FAR 49.402-7(b) imposes a narrow procedural safeguard for one category of Government claim: when the contracting officer proposes to assert "other ascertainable damages" (administrative costs, legal costs, or damages beyond excess repurchase costs and liquidated damages) following a default termination, the contracting officer must take action "on the basis of legal advice" — the contracting officer may not unilaterally assert such damages without first consulting agency counsel.

The six-year statute of limitations applies to Government claims

Under 41 U.S.C. § 7103(a)(4)(A), each claim by the Federal Government against a contractor relating to a contract shall be submitted within six years after the accrual of the claim. FAR 33.206(b) implements this rule: "The contracting officer shall issue a written decision on any Government claim initiated against a contractor within 6 years after accrual of the claim, unless the contracting parties agreed to a shorter time period." The same accrual standard applies to Government claims as to contractor claims: accrual occurs on the date when all events that fix the alleged liability of the contractor were known or should have been known to the Government. FAR 33.201 defines accrual as "the date when all events, that fix the alleged liability of either the Government or the contractor and permit assertion of the claim, were known or should have been known. For liability to be fixed, some injury must have occurred. However, monetary damages need not have been incurred."

The "known or should have been known" standard is objective and is measured by the Government's constructive knowledge, not merely the personal knowledge of a particular contracting officer or auditor. If a DCAA audit report in Year 1 identifies an alleged unallowable cost, the claim accrues in Year 1 (or when the facts supporting the audit conclusion were known), not in Year 7 when the contracting officer finally decides to issue a demand. The boards and the Court of Federal Claims have held that the Government cannot extend the limitations period by delaying the issuance of a final decision; the six-year clock runs from accrual, and if the contracting officer issues a decision more than six years after accrual, the contractor may move to dismiss for lack of jurisdiction.

The fraud exception — unlimited time for fraud-based Government claims

Under 41 U.S.C. § 7103(a)(4)(B), the six-year statute of limitations "does not apply to a claim by the Federal Government against a contractor that is based on a claim by the contractor involving fraud." This exception is narrow and applies only when the Government's claim is predicated on a contractor claim that involved fraud. The paradigmatic case is a contractor's certified claim inflated by fraudulent cost data; the Government may assert a claim to recover the overpayment at any time, without regard to the six-year bar. The exception does not apply to all contractor fraud — only to fraud in connection with a contractor claim. If the contractor defrauded the Government through false invoices or defective pricing submissions that were not part of a contractor "claim" as defined by the CDA, the six-year statute of limitations applies to the Government's recovery claim unless the contract was awarded before October 1, 1995 (contracts awarded before that date are not subject to the CDA statute of limitations).

FAR 33.206(b) repeats the fraud exception: "The 6-year period shall not apply to contracts awarded prior to October 1, 1995, or to a Government claim based on a contractor claim involving fraud." Importantly, under 41 U.S.C. § 7103(c)(1), the CDA does not authorize an agency head to settle, compromise, pay, or otherwise adjust any claim involving fraud — this prohibition applies to both contractor and Government claims. If fraud is alleged, the claim must proceed through the CDA dispute-resolution process (issuance of a final decision, appeal, adjudication) or be referred to the Department of Justice for settlement authority; the contracting officer and agency head lack authority to settle fraud claims administratively.

Procedural requirements — the contracting officer's final decision on a Government claim

When the Government asserts a claim against the contractor, the contracting officer must issue a written decision meeting the same content requirements prescribed in FAR 33.211(a)(4) for contractor claims. The decision must include:

1. A description of the claim or dispute;
2. A reference to the pertinent contract terms;
3. A statement of the factual areas of agreement and disagreement;
4. A statement of the contracting officer's decision, with supporting rationale;
5. The appeal-rights notice informing the contractor of the right to appeal to the agency board (within 90 days) or to the Court of Federal Claims (within 12 months), and the availability of small-claims and accelerated procedures where applicable; and
6. A demand for payment prepared in accordance with FAR 32.604 and FAR 32.605 in all cases where the decision results in a finding that the contractor is indebted to the Government.

Under FAR 33.211(b), the contracting officer shall furnish a copy of the decision to the contractor by certified mail, return receipt requested, or by any other method that provides evidence of receipt. This requirement applies to decisions on claims "initiated by or against the contractor" — the same delivery standard applies regardless of which party asserted the claim.

There is no statutory deadline for the contracting officer to issue a decision on a Government claim, in contrast to the mandatory 60-day deadlines (or notice-of-extension) for contractor claims under 41 U.S.C. § 7103(d). The statute is silent on timing for Government claims, and FAR 33.206(b) imposes only the six-year outer limit (the decision must be issued within six years of accrual). The contracting officer has discretion as to when, within the six-year window, to assert the claim, though agency policy and FAR 33.206(b) presume that claims will be asserted reasonably promptly once the facts supporting liability are known. A contractor faced with prolonged delay may invoke alternative dispute resolution under FAR 33.214 or may request that the contracting officer issue a decision to clarify the Government's position, but the contractor has no statutory mechanism to compel the contracting officer to issue a decision on a Government claim (unlike the deemed-denial rule that applies when a contracting officer fails to decide a contractor claim within the required time).

The contractor's right to appeal — symmetrical with contractor-claim appeals

Once the contractor receives a contracting officer's final decision asserting a Government claim, the contractor has the same appeal rights as a contractor whose own claim has been denied. Under 41 U.S.C. § 7104(a), the contractor may appeal the decision to the agency board of contract appeals within 90 days from the date of receipt of the decision. Alternatively, under § 7104(b)(1), the contractor may bring a direct action in the United States Court of Federal Claims within 12 months of receipt. The contractor's choice of forum is irrevocable once made (if the contractor appeals to the board and the 12-month COFC deadline passes, the contractor cannot later dismiss the board appeal and refile in the COFC). Both deadlines are jurisdictional.

The appeal proceeds de novo under § 7104(b)(4). The board or court is not bound by the contracting officer's findings of fact or conclusions of law. The Government bears the burden of proving its claim — the existence of the contractual or statutory basis for liability, the amount of damages, and any other elements necessary to sustain the claim. The contractor may assert any defense available under the contract or applicable law, including accord and satisfaction, waiver, estoppel, payment, statute of limitations, failure of consideration, or any substantive defense to the underlying claim (for example, that the costs were allowable, that the delay was excusable, that the supplies met the warranty, or that the pricing data were accurate and current).

If the contractor prevails on appeal — the board or court finds that the Government's claim is not supported by the evidence or is legally defective — the contractor owes nothing. If the Government prevails in whole or in part, the contractor is liable for the amount found due, plus interest under the Interest clause (FAR 52.232-17) or other applicable contract provision from the date due. The contractor does not receive interest if a Government claim is reduced or reversed on appeal; the CDA interest provision in 41 U.S.C. § 7109 runs only in favor of contractors on amounts found due to the contractor, not in favor of contractors on amounts the Government is ordered to refund.

Distinguishing a Government claim from a demand letter or offset

Not every communication from a contracting officer demanding payment is a "claim" under the CDA. The boards and the Court of Federal Claims have held that the key distinction is whether the demand (1) is a written assertion seeking, as a matter of right, payment or other relief, and (2) is final — the contracting officer's definitive position, not a preliminary inquiry or a notice of intent. A DCAA audit report transmitted to the contractor with a cover letter stating "we are reviewing these findings" is not a claim. A contracting officer's letter stating "the audit report indicates $500,000 in questioned costs; please show cause why these costs should not be disallowed" is not a claim — it is a show-cause notice inviting the contractor's response. A contracting officer's final decision, issued after reviewing the contractor's response, stating "I have determined that $400,000 of costs are unallowable under FAR 31.205-46, and I demand repayment" is a claim.

Similarly, a contracting officer's unilateral offset of amounts due the contractor — withholding $100,000 from an invoice payment to recover an alleged overpayment — is not automatically a "claim" requiring a final decision. Under FAR 32.610-1, the contracting officer may collect contract debts by offsetting the debt against any payment due the contractor, but if the contractor disputes the debt, the contracting officer must issue a final decision on the Government claim asserting the debt. The contractor may then appeal. The offset itself is an interim self-help remedy; the underlying liability is resolved through the CDA process if the contractor challenges it.

FAR Subpart 32.6, Contract Debts, provides the administrative framework for the Government's collection of debts (including demands, interest accrual under the Debt Collection Act, and referral to Treasury or Justice for collection), but it does not displace the CDA. If the debt arises under or relates to the contract and the contractor disputes liability, the contracting officer must issue a CDA final decision, and the contractor may appeal.

Examples of Government claims in practice

Unallowable-cost claims post-audit. After contract closeout, DCAA audits the contractor's final indirect cost rate proposal and issues a report questioning $2 million in general and administrative (G&A) expenses as unallowable under FAR 31.205-1 (public relations), FAR 31.205-14 (entertainment), and FAR 31.205-47 (costs of legal proceedings). The contracting officer reviews the audit report and the contractor's written response, consults agency counsel, and issues a final decision determining that $1.8 million of the questioned costs are unallowable and demanding repayment. The contractor appeals to the ASBCA within 90 days. The appeal proceeds de novo, and the board examines whether each category of cost was allocable, reasonable, and allowable under the cited FAR cost principles. If the board sustains the contracting officer's decision, the contractor owes $1.8 million plus interest under FAR 52.232-17 from the date the costs were initially paid. If the board reverses, the contractor owes nothing.

Defective-pricing claim. A contracting officer receives a post-award DCAA audit alleging that the contractor failed to disclose accurate, complete, and current cost or pricing data during negotiations for a sole-source contract modification, in violation of the Truth in Negotiations Act and FAR 52.215-10, Price Reduction for Defective Certified Cost or Pricing Data. The audit concludes that the contract price is overstated by $5 million. The contracting officer issues a final decision asserting a defective-pricing claim for $5 million plus interest. The contractor appeals to the COFC, arguing that the data in question were not cost or pricing data within the meaning of FAR 15.401, or that the data were disclosed, or that the Government had equal or superior knowledge of the data and thus cannot claim reliance. The COFC conducts a de novo trial and determines the facts. If the Government proves defective pricing, the contractor must pay the price reduction; if the contractor's defenses succeed, the claim is denied.

Excess-cost claim after default termination. The Government terminates a fixed-price construction contract for default after the contractor abandons the site. The Government reprocures the work at a cost $3 million higher than the balance remaining on the terminated contract. The contracting officer, following the procedures in FAR 49.402-6, completes the repurchase, adjusts for transportation and other cost differentials, and issues a final decision demanding $3 million in excess repurchase costs under FAR 52.249-10(c). The contractor appeals to the ASBCA, asserting that the termination for default was improper because the failure to perform was excusable under the Differing Site Conditions clause and the Government's defective specifications. If the board finds that the delay was excusable, the termination is converted to a termination for convenience under FAR 52.249-10(d), the contractor owes no excess costs, and the contractor is instead entitled to settlement under FAR Subpart 49.2. If the board finds the default was not excusable, the $3 million excess-cost claim stands.

No deemed denial for Government claims

Unlike contractor claims, for which the CDA imposes deemed-denial consequences when the contracting officer fails to issue a timely decision (41 U.S.C. § 7103(d)(5) and FAR 33.211(g)), there is no deemed-assertion or deemed-approval mechanism for Government claims. If the Government does not assert a claim within six years of accrual, the claim is time-barred and the contractor may raise the statute-of-limitations defense if the Government later attempts to assert it. The contractor cannot compel the contracting officer to issue a decision on a latent Government claim; the contractor's remedy is to wait out the six-year limitations period, after which the potential claim is extinguished.

Source: 41 U.S.C. § 7103 Source: FAR 33.206 Source: FAR 33.211 Source: FAR 52.233-1

Alternative Dispute Resolution (ADR) provides contracting officers and contractors a voluntary, flexible framework for resolving claims and issues in controversy without formal litigation at the boards or the Court of Federal Claims. Under FAR 33.214(a), the objective of using ADR procedures is to increase the opportunity for relatively inexpensive and expeditious resolution of issues in controversy. ADR may be used at any stage—before a claim is submitted, after a claim is filed but before a contracting officer's final decision, or even after a final decision is issued and while an appeal is pending—so long as the essential elements are met and the contracting officer has authority to resolve the issue. The statutory foundation is the Administrative Dispute Resolution Act of 1996 (ADRA), 5 U.S.C. §§ 571–584, which authorizes and encourages federal agencies to use mediation, conciliation, arbitration, and other techniques for the prompt and informal resolution of disputes. FAR 33.203(d) expressly confirms that contracting officers are authorized to use ADR procedures to resolve claims in accordance with agency policies and FAR 33.214.

Essential elements — the four-part test

FAR 33.214(a) prescribes four essential elements that must be present for ADR to proceed:

1. Existence of an issue in controversy — a material disagreement between the Government and the contractor. The issue may be one that has already ripened into a formal CDA claim, or it may be an REA or a disagreement not yet memorialized in a claim submission. FAR 33.201 defines "issue in controversy" as "a material disagreement between the Government and the contractor that (1) may result in a claim or (2) is all or part of an existing claim."

1. A voluntary election by both parties to participate in the ADR process — ADR is never mandatory unless the parties have contractually agreed in advance to mandatory ADR in the contract itself (and even then, such agreements must respect the CDA appeal rights, which cannot be waived). Under 5 U.S.C. § 572(a), an agency may use a dispute resolution proceeding for the resolution of an issue in controversy that relates to an administrative program if the parties agree to such proceeding. Consent may be obtained before or after an issue in controversy arises.

1. An agreement on alternative procedures and terms to be used in lieu of formal litigation — the parties must affirmatively select the ADR method (mediation, arbitration, fact-finding, minitrial, or a hybrid) and agree on the procedural ground rules, the timeline, the selection of a neutral, and the form of any settlement or resolution that results. The FAR does not prescribe a single ADR format; FAR 33.201 defines "alternative dispute resolution (ADR)" broadly as "any type of procedure or combination of procedures voluntarily used to resolve issues in controversy," including (but not limited to) conciliation, facilitation, mediation, fact-finding, minitrials, arbitration, and use of ombudsmen.

1. Participation in the process by officials of both parties who have the authority to resolve the issue in controversy — the contractor must send a representative with actual settlement authority (an officer, owner, or delegate authorized to bind the contractor), and the Government must ensure that the contracting officer or another official with resolution authority participates. Negotiators without binding authority may participate, but the ADR session must include decision-makers empowered to commit their respective organizations.

If any of these four elements is absent, the process is not ADR within the meaning of FAR 33.214, and the contracting officer retains full discretion to decline participation.

When ADR may be used — timing flexibility and preservation of appeal rights

FAR 33.214(c) provides that ADR procedures may be used at any time that the contracting officer has authority to resolve the issue in controversy. This timing rule is expansive. The contracting officer may propose (or accept a contractor's proposal for) ADR during the REA negotiation stage, after a certified claim has been submitted but before the contracting officer has issued a final decision, or even after the final decision has issued and an appeal has been filed at the boards or the COFC. If a claim has been submitted, ADR procedures may be applied to all or a portion of the claim—the parties may agree, for example, to mediate the quantum of damages while litigating liability, or to submit a discrete legal issue to a neutral fact-finder while reserving other issues for the contracting officer's decision or for the board.

Critically, FAR 33.214(c) clarifies that when ADR procedures are used subsequent to the issuance of a contracting officer's final decision, their use does not alter any of the time limitations or procedural requirements for filing an appeal of the contracting officer's final decision. This means the contractor's 90-day deadline to appeal to the agency board and 12-month deadline to file in the Court of Federal Claims continue to run during ADR. The contractor does not forfeit appeal rights by agreeing to ADR; the contractor may participate in ADR while simultaneously filing a protective notice of appeal (or suspending the appeal by agreement with the Government) to preserve jurisdiction. The boards' rules typically allow the parties to request a suspension of proceedings to pursue ADR; the board retains jurisdiction but holds the appeal in abeyance while the parties attempt settlement. If ADR is unsuccessful, the appeal resumes.

The same timing rule applies at the pre-claim stage. ADR does not stop the running of the six-year statute of limitations under 41 U.S.C. § 7103(a)(4). A contractor engaged in ADR for a potential claim must ensure that, if settlement is not reached, a certified claim (if over $100,000) is submitted to the contracting officer within six years of accrual. The ADR process is voluntary and non-binding (unless the parties agree to binding arbitration), so it does not create new procedural rights or suspend existing CDA deadlines.

Right to request ADR — and the contracting officer's obligation to explain rejection

Either party may request ADR at any time. FAR 33.214(b) imposes an asymmetric transparency obligation depending on which party declines. If the contracting officer rejects a contractor's request for ADR proceedings, the contracting officer shall provide the contractor a written explanation citing one or more of the conditions in 5 U.S.C. § 572(b) or such other specific reasons that ADR procedures are inappropriate for the resolution of the dispute. This is a mandatory written-response requirement; the contracting officer may not simply ignore or orally decline the contractor's ADR request.

Section 572(b) of Title 5 lists eight circumstances in which an agency should consider not using ADR:

• A definitive or authoritative resolution of the matter is needed for precedential value, and such a proceeding is not likely to be accepted generally as an authoritative precedent;
• The matter involves or may bear upon significant questions of Government policy that require additional procedures before a final resolution may be made, and such a proceeding would not likely serve to develop a recommended policy for the agency;
• Maintaining established policies is of special importance, so that variations among individual decisions are not increased and such a proceeding would not likely reach consistent results among individual decisions;
• The matter significantly affects persons or organizations who are not parties to the proceeding;
• A full public record of the proceeding is important, and a dispute resolution proceeding cannot provide such a record;
• The agency must maintain continuing jurisdiction over the matter with authority to alter the disposition of the matter in the light of changed circumstances, and a dispute resolution proceeding would interfere with the agency's fulfilling that requirement;
• The matter involves a question of law or policy that is the subject of an ongoing rulemaking or policy development proceeding, and the proceeding would not likely assist in the development of a recommended policy for the agency; or
• The matter involves a significant question of Government policy, and the proceeding would not likely assist in the development of a recommended policy for the agency.

If the contracting officer determines that none of the § 572(b) conditions applies but nonetheless concludes that ADR is inappropriate for "other specific reasons," the contracting officer must articulate those reasons in writing. Common practical reasons include the imminence of the statute of limitations, the contractor's history of bad-faith negotiation, or the need for immediate resolution through a final decision to allow the contractor to appeal a genuinely disputed legal question.

If a contractor rejects a request of an agency for ADR proceedings, FAR 33.214(b) requires the contractor to inform the agency in writing of the contractor's specific reasons for rejecting the request. This is a lighter obligation than the contracting officer's duty (the contractor need not cite statutory conditions), but it creates a record and may bear on later settlement discussions or on the tribunal's assessment of the parties' good faith if the matter proceeds to litigation.

ADR methods — mediation, arbitration, fact-finding, and hybrids

The FAR does not mandate a particular ADR format. FAR 33.201's definition lists six illustrative methods:

• Conciliation — informal negotiation facilitated by a neutral third party who assists communication but does not propose solutions.
• Facilitation — a neutral helps structure the negotiation process and ensures that both parties are heard, but does not evaluate the merits.
• Mediation — the most common ADR method in federal acquisition. A neutral mediator (often an experienced attorney, a retired judge, or a technical expert) meets with the parties, hears each side's case, identifies common ground, and proposes settlement terms. The mediator has no binding authority; the parties retain control over whether to settle. Mediation is confidential; statements made during mediation are generally not admissible in subsequent litigation.
• Fact-finding — the neutral investigates disputed facts (for example, the cause of a delay, the cost impact of a change order, or the contractor's compliance with a specification) and issues a non-binding report. The report may be used to focus further settlement discussions or to narrow the issues for litigation.
• Minitrials — structured presentations by each side to a panel that includes senior officials from both parties and sometimes a neutral advisor. After the presentations, the senior officials negotiate directly, informed by the neutral's evaluation. The process mimics trial but is non-binding and confidential.
• Arbitration — a neutral arbitrator hears evidence and issues a binding decision. Arbitration under the ADRA is consensual; both parties must agree in advance to be bound by the arbitrator's award. Binding arbitration in the federal-contracts context is rare because agencies are cautious about delegating final decision authority to a private arbitrator, but it is permitted if both parties consent.

Agencies may also use ombudsmen (neutral officials who receive and investigate complaints and facilitate informal resolution) or any combination of the above methods. The key is that the method is voluntary and agreed upon by the parties.

Neutrals and conflicts of interest

Under 5 U.S.C. § 573(a), a neutral may be a permanent or temporary officer or employee of the Federal Government or any other individual who is acceptable to the parties to a dispute resolution proceeding. Section 573(a) further provides: "A neutral shall have no official, financial, or personal conflict of interest with respect to the issues in controversy, unless such interest is fully disclosed in writing to all parties and all parties agree that the neutral may serve." This conflict-of-interest standard is mandatory. If a proposed neutral has worked on the contract in question, has a financial stake in the outcome, or has a personal relationship with a party, that interest must be disclosed and waived by both parties before the neutral may serve.

Federal employees—including other contracting officers, attorneys from the agency's Office of General Counsel, or technical experts from other program offices—may serve as neutrals if they meet the conflict-of-interest standard and are acceptable to both parties. External neutrals (private mediators, retired judges, or neutrals from organizations such as JAMS or the American Arbitration Association) may also be engaged, typically at the parties' shared expense. The boards (ASBCA, CBCA) maintain rosters of ADR-qualified neutrals and offer formal ADR programs for appeals pending before them; the parties may request a board judge to mediate (under the boards' ADR rules, the mediating judge will not decide the case if mediation fails) or may select a private neutral.

Confidentiality and admissibility

ADR communications are generally confidential. Under 5 U.S.C. § 574, a dispute resolution communication—defined as any oral or written communication prepared for the purposes of a dispute resolution proceeding, including any memoranda, notes, or work product of the neutral or the parties—is confidential and may not be disclosed by the parties or the neutral. Section 574 creates narrow exceptions: disclosure is permitted when all parties and the neutral consent, when required by statute, when necessary to prevent a manifest injustice, when necessary to help establish a violation of law, or when the communication is otherwise subject to disclosure under the Freedom of Information Act or other law. This confidentiality protection encourages candor and promotes settlement; parties may make offers and concessions during ADR without fear that those offers will be used against them in litigation if ADR fails.

However, confidentiality under § 574 does not shield the outcome of a successful ADR process. If the parties settle through ADR, the settlement agreement itself is a public record (or, in the case of a settlement agreement incorporated into a bilateral contract modification, becomes part of the contract file). Only the communications and proposals exchanged during the ADR process remain confidential.

Settlement authority and execution

If ADR results in settlement, the settlement must be memorialized in a written agreement signed by officials with authority to bind their respective organizations. For the contractor, this is typically an officer or owner; for the Government, it is the contracting officer (or the agency head or designee if the settlement exceeds the contracting officer's warrant authority). The settlement agreement may take the form of a bilateral supplemental agreement on Standard Form 30 if it modifies the contract, or it may be a standalone settlement and release agreement if it resolves a claim without changing the contract price or terms. If a certified claim has been submitted and a contracting officer's final decision has been issued, the settlement agreement should specify that it supersedes the final decision and that the contractor waives any right to appeal (or, if an appeal has been filed, that the appeal will be dismissed with prejudice). This avoids any later argument that the contractor preserved appeal rights.

If ADR does not result in settlement, the dispute returns to the procedural posture it occupied before ADR began. If a claim was submitted before ADR and the contracting officer has not yet issued a final decision, the contracting officer must still issue a final decision (subject to the timing requirements of 41 U.S.C. § 7103(d)) within a reasonable time after ADR concludes. If a final decision had already been issued and an appeal filed, the appeal resumes at the board or the COFC. The fact that the parties attempted ADR and did not settle is not admissible in the subsequent proceeding (though the boards and the COFC often view good-faith participation in ADR favorably when assessing costs or attorney's fees under the Equal Access to Justice Act).

No waiver of CDA rights

FAR 33.214 does not—and legally cannot—require a contractor to waive CDA appeal rights as a condition of participating in ADR. The CDA's appeal rights (90 days to the boards, 12 months to the COFC) are statutory entitlements that cannot be eliminated by contract or by agency regulation. A contract clause purporting to make ADR mandatory and to strip appeal rights would be void to the extent it conflicts with 41 U.S.C. § 7104. However, the parties may agree to suspend or stay an appeal while ADR is ongoing, and they may agree that if ADR is successful, the settlement will include a waiver of appeal rights (which is enforceable because it is a voluntary settlement, not a condition precedent to access to the forum). Some agency supplements (for example, the Defense Logistics Agency's DLAD) include solicitation provisions encouraging the contractor to agree in advance to attempt ADR before filing an appeal, but those provisions are hortatory and do not bind the contractor if it later declines.

Practical considerations — cost, speed, and the preservation of working relationships

ADR's primary advantage over formal CDA litigation is speed and cost. A mediation session or fact-finding engagement can often resolve (or substantially narrow) a dispute in weeks or months, whereas an appeal to the boards typically takes one to three years from docket to decision, and a COFC trial can take even longer. ADR also preserves the working relationship between the contractor and the contracting officer; litigation is inherently adversarial, but ADR allows the parties to collaborate on a solution that meets both organizations' interests. For contractors performing multiple contracts with the same agency, or for long-term programs where the contractor and the Government must continue to work together during the dispute, ADR avoids the reputational and relational costs of litigation.

However, ADR is not a panacea. If the dispute turns on a pure question of law—for example, the interpretation of a FAR clause or the applicability of a cost-allowability rule under FAR Part 31—ADR may not add value, because the legal question will ultimately be resolved by reference to controlling precedent, not by compromise. Similarly, if the parties' positions are far apart and neither side has an economic incentive to settle, ADR may simply delay resolution without producing agreement. The contracting officer and the contractor must candidly assess whether the dispute is amenable to negotiated resolution before investing time and resources in ADR.

Agency ADR policies and points of contact

FAR 33.214 directs contracting officers to use ADR "in accordance with agency policies." Agencies have implemented the ADRA through internal policies, supplements to the FAR, and designated ADR coordinators or specialists. For example, the Department of Defense has issued policy at DFARS Subpart 233.2 and through service-specific supplements; the Department of Energy maintains an ADR guide at DEAR Subpart 933.2; and the Civilian Board of Contract Appeals publishes ADR procedures in its Rules (48 C.F.R. Part 6101.54). Contracting officers considering ADR should consult their agency's ADR coordinator, the Office of General Counsel, and (if an appeal has been filed) the board's ADR rules and the assigned board judge.

The Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA) both maintain formal ADR programs. ASBCA Rule 17 and CBCA Rule 17 provide for ADR procedures, including mediation by a board judge or by an outside neutral. The parties may request ADR at any time during the appeal, and the board will typically suspend the briefing and hearing schedule to allow ADR to proceed. If ADR is unsuccessful, the case resumes before a different board judge (the ADR judge does not decide the merits). The boards report high success rates for mediation—over 70% of mediations result in settlement—reflecting the value of a neutral's evaluation and the parties' desire to avoid the cost and uncertainty of a hearing.

Source: FAR 33.214 Source: FAR 33.201 Source: FAR 33.203 Source: 5 U.S.C. § 572 Source: 5 U.S.C. § 573 Source: 5 U.S.C. § 574

The Contract Disputes Act and FAR Subpart 33.2 hinge on a single definitional gate: whether a contractor's or Government's submission constitutes a "claim." This determination is jurisdictional — a submission that does not meet the definition of "claim" does not trigger the contracting officer's obligation to issue a final decision, does not start the CDA interest clock, and cannot be appealed to the boards or the Court of Federal Claims. Under FAR 2.101 and FAR 52.233-1(c), "Claim" means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract. This definition applies symmetrically to both contractor claims and Government claims, though the procedural overlays differ (contractor claims over $100,000 require certification under 41 U.S.C. § 7103(b)(1) and FAR 33.207; Government claims do not). A contractor's request for equitable adjustment (REA) or a letter expressing dissatisfaction with a contracting officer's action may look and feel like a claim, but it is not a CDA claim — and does not trigger any CDA procedural rights or obligations — unless it meets each element of the definition.

The threshold elements

A submission is a "claim" under the CDA if it satisfies these elements:

• Written. Under 41 U.S.C. § 7103(a)(2), each claim by a contractor against the Federal Government relating to a contract shall be in writing. Oral demands, telephone calls, or in-person statements are not claims. "Written" includes electronically transmitted documents (email, PDF attachments, letters transmitted via agency portals) if they bear a signature or verifiable identifier. FAR 2.101 defines "signature" or "signed" to mean the discrete, verifiable symbol or process attached to or logically associated with a document and executed or adopted by a person with the intent to sign the document.

• Demand or assertion by one of the contracting parties. The submission must affirmatively assert an entitlement, not merely request consideration or provide information. A contractor's letter stating "we are entitled to an equitable adjustment of $250,000 and demand that the contracting officer grant this relief" is a demand. A letter stating "we estimate our additional costs at $250,000 and request the opportunity to discuss an equitable resolution" is not — it is an informational submission or an REA. The same definition applies to Government claims: the contracting officer's written decision demanding repayment of an overpayment, assessing liquidated damages, or asserting excess repurchase costs after a default termination is a Government claim if it meets the definition.

• Seeking relief "as a matter of right." This is the core distinction between a claim and an REA. An REA requests the contracting officer to exercise discretionary authority under an adjustment clause (the Changes clause, FAR 52.243-1; the Suspension of Work clause, FAR 52.242-14; the Differing Site Conditions clause, FAR 52.236-2) to grant an equitable adjustment. The contractor is asking; the contracting officer retains discretion. A claim asserts that the contractor is legally entitled to the relief under a contract clause, the contract terms, or the law. The "as a matter of right" element does not require the contractor to prove entitlement at the submission stage; it requires that the contractor assert entitlement, not request a discretionary grant.

• Sum certain for money claims, or adjustment/interpretation of contract terms, or other relief. For money claims, the contractor must state a specific dollar amount. A claim seeking "at least $500,000" or "$400,000 to $600,000, subject to refinement" has traditionally been held not to satisfy the sum-certain requirement, though the boards and the Court of Federal Claims treat the consequences and curability of defective sum-certain statements as an evolving area. For non-monetary claims — requests to interpret contract terms or for other equitable relief — the contractor must describe the relief sought with enough clarity that the contracting officer can render a decision.

• Arising under or relating to the contract. The claim must have a nexus to the contract at issue. A claim "arising under" the contract is one founded on a contract clause that provides the substantive basis for relief (an equitable adjustment under the Changes clause, excusable delay under the Default clause). A claim "relating to" the contract is one that does not fit within a standard clause but nonetheless arises from the contractual relationship (rescission or reformation for mutual mistake, breach of the implied duty of good faith and fair dealing). FAR 33.203(c) confirms that the CDA and FAR Subpart 33.2 apply to disputes with respect to contracting officer decisions on matters "arising under" or "relating to" a contract.

The invoice/voucher exception — routine payment requests

FAR 52.233-1(c) provides: "A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim under 41 U.S.C chapter 71." The ordinary course of contract payment — the contractor submits an invoice, the Government pays — does not trigger the CDA. The invoice becomes a claim only if "it is disputed either as to liability or amount or is not acted upon in a reasonable time." Once disputed or ignored, "the submission may be converted to a claim under 41 U.S.C chapter 71, by complying with the submission and certification requirements of this clause." The contractor must resubmit (or amend) the voucher as a formal claim — stating a sum certain, asserting entitlement as a matter of right, and (if over $100,000) certifying under FAR 33.207. The date the contracting officer receives the converted claim is the date from which CDA interest begins to accrue under 41 U.S.C. § 7109(a)(1), not the date of the original invoice.

The certification overlay for contractor claims over $100,000

FAR 52.233-1(c) states: "However, a written demand or written assertion by the Contractor seeking the payment of money exceeding $100,000 is not a claim under 41 U.S.C chapter 71 until certified." This means a contractor submission that otherwise meets the definition — written, demand, as a matter of right, sum certain over $100,000, arising under or relating to the contract — is not a claim for CDA purposes until the contractor provides the certification required by 41 U.S.C. § 7103(b)(1) and FAR 33.207(c). An uncertified demand for $150,000 does not trigger the contracting officer's decision timeline, does not start the CDA interest clock, and cannot be appealed. The certification must state (per FAR 33.207(c)): "I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the Contractor believes the Government is liable; and that I am duly authorized to certify the claim on behalf of the Contractor." This requirement does not apply to contractor claims of $100,000 or less, and it does not apply to Government claims at any dollar level.

Issues in controversy vs. claims — the pre-claim negotiation space

FAR 33.201 defines "issue in controversy" as "a material disagreement between the Government and the contractor that (1) may result in a claim or (2) is all or part of an existing claim." An issue in controversy is the pre-claim state: the parties disagree and are negotiating, but neither has yet submitted a claim meeting the definition in FAR 52.233-1(c). Issues in controversy do not trigger CDA procedures. The contracting officer has no obligation to issue a final decision, the contractor cannot appeal, and CDA interest does not accrue. However, the contractor retains the right to convert an issue in controversy into a claim at any time by submitting a demand that meets the definition and requesting a contracting officer's final decision. FAR 52.233-1(d)(2)(ii) clarifies that the CDA certification requirement does not apply to issues in controversy that have not been submitted as all or part of a claim, preserving the contractor's ability to engage in REA negotiations without invoking the Disputes clause.

Government claims — symmetric definition, different procedures

The definition of "claim" applies equally to Government claims. A Government claim must be a written demand or assertion seeking relief as a matter of right, with a sum certain (if a money claim), and arising under or relating to the contract. However, Government claims are not subject to the certification requirement. Under 41 U.S.C. § 7103(a)(3) and FAR 52.233-1(d)(1), each claim by the Federal Government against a contractor relating to a contract shall be the subject of a written decision by the contracting officer. The contracting officer's written decision asserting the Government claim (demanding repayment, assessing damages, asserting excess costs) is both the claim and the final decision, and it triggers the contractor's 90-day appeal right to the agency board or 12-month filing deadline in the Court of Federal Claims under 41 U.S.C. § 7104.

Source: FAR 52.233-1 Source: FAR 2.101 Source: 41 U.S.C. § 7103 Source: FAR 33.201 Source: FAR 33.207