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Federal Circuit: No CDA Jurisdiction over Subcontractor Appeal

The Armed Services Board of Contract Appeals lacked jurisdiction over a subcontractor's appeal, the Court of Appeals for the Federal Circuit held, because there is no exception to the Contract Disputes Act's privity requirement for subcontractors that are third-party beneficiaries of a government contract. When the prime contractor advised the government it could not pay the subcontractor for completed floor coating work, the government and the prime modified the prime contract to specify the government would issue a two-party check payable to both the subcontractor and the prime. Notwithstanding the modification, the government did not issue a two-party check. On appeal from the deemed denial of the subcontractor's direct claim for payment, the government moved to dismiss, contending the subcontractor was not a "contractor" within the meaning of the CDA, and the board therefore lacked jurisdiction over the appeal. Relying on the Federal Circuit's decision in D&H Distributing Co. v. U.S. (41 CCF ¶77,017), the board denied the motion, ruling the subcontractor was an intended third-party beneficiary of the modification and could file a claim (04-1 BCA ¶32,571). The board subsequently granted summary judgment in favor of the subcontractor (07-2 BCA ¶33,615).
Privity Required
Reviewing the jurisdictional determination de novo, the Federal Circuit vacated the board's decision and remanded with instructions to dismiss the appeal, concluding the subcontractor was not a "contractor" within the meaning of the CDA. The CDA applies only to "contractors," which are defined as those "party to a [g]overnment contract other than the [g]overnment" (41 USC 601(4)). Under the strict statutory interpretation required for sovereign immunity waivers, the CDA does not permit appeals by anyone who is not in privity of contract with the government. "This includes subcontractors that are third-party beneficiaries of the prime contract." The board's reliance on D & H was "misplaced." Although the case is factually similar, it differed "in one critical respect:" the subcontractor there invoked the Court of Federal Claims' jurisdiction under the Tucker Act, not CDA jurisdiction. D & H did not interpret or apply the CDA provision allowing only "contractors" to appeal to boards of contract appeals. Moreover, Tucker Act jurisdiction, which covers "any claim against the United States founded ... upon any express or implied contract," is broader than CDA jurisdiction, and its privity requirement is separate and distinct from the CDA's. (Winter v. Floorpro, Inc., CA-FC, 53 CCF ¶79,125)

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )

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