Invalid Warranty Claims

David Morrill said:

I believe that after verification that the warranty provision does not apply, that this would be a basis for an REA.

I'm not sure about this -- is there text in your contract that would create this entitlement?

But if your contract includes a disputes clause, that clause may give you an entitlement to file a dispute or claim against the agency.

The warranty provision is the standard one for construction, FAR 52.246-21 and does have the disputes cllause.  Further, the roof has been accepted.

I don't think the clause at FAR 52.246-21 provides an REA entitlement to the contractor for "invalid warranty claims." 

However, the clause does allow for warranty claims after acceptance -- indeed, that's the purpose of a warranty.

Just saw this thread. The Warranty of Construction Clause establishes rights - and corresponding responsibilities - surviving final acceptance.**

When the government “asserts that the contractor has breached a warranty, it assumes the burden of proving all elements of its claim”, quoting Globe Corp, ASBCA 45131, 93-3 BCA at 25,968 and other cases.

The government must prove, among other things, that “furnishing the defective material or workmanship was the responsibility of the contractor” and that “it [government] did not cause or contribute to the failure or defects.” -  citing Joseph Penner, GSBCA 4647, 80-2 BCA at 14,064.

**From the Fourth Edition of Nash and Cibinic’s Administration of Government Contracts, Chapter 9 Inspection , Acceptance and Warranties, see under III Post Acceptance Rights, B. Warranties, Notice and Burden of Proof, b. Government’s Burden of Proof.

There is a half page paragraph, citing cases where the government failed to fulfill its burden of proof.

The warranty rights and burden of proof survive final acceptance, thus the contractor should be able to submit a claim pursuant to an improper warranty call by the government

David, from your post, it appears that your firm clearly established (proved)  that the cause of the leaks wasn’t related to your work or workmanship.

David, did this answer your question?

This was not an uncommon experience during my experience, where the installation would fail to prove that a problem was a valid warranty issue.

On 10/27/2023 at 8:42 AM, David Morrill said:

I believe that after verification that the warranty provision does not apply, that this would be a basis for an REA.  However, is there a better practice to follow?

Upon notification, first ask them if they have verified that:

joel hoffman said:

furnishing the defective material or workmanship was the responsibility of the contractor” and that “it [the government] did not cause or contribute to the failure or defects.”

On 11/1/2023 at 5:30 AM, bob7947 said:

This topic is now subject to Rule 17.

Unless the OP responds to Joel's post, this topic will be locked on 11/3/23.

Thanks, Bob. Sometimes original posters don’t realize that respondents often spend considerable time researching sources for answers (even when we know the answer) and time in formulating responses. It would be nice to at least know if we answered the OP’s question or not or if they found an answer elsewhere.

The basis of my answer is that the Warranty of Construction clause is definitely applicable to an invalid warranty call and to the contractor’s right to submit a claim or REA. The rights and responsibilities of both parties under the warranty clause survive final acceptance and payment.

The contractor should ask the government whether they have investigated and determined that the contractor’s workmanship or materials are defective and that the government didn’t cause or contribute to any failure or defects.

Here, the government could and should have at least cleaned and inspected the suspected area and leak source before making a warranty call.

If a home owner makes a warranty call or even a service call, they should expect to pay at least service call fee or more, if the cause isn’t a material or workmanship failure. That’s common business practice - “that’s life”.

Edit add: interpreting contracts is similar to interpreting the Bible. One can’t always interpret contract clauses or Bible passages literally- there are often extrinsic contexts.

I apologize - I was unaware of rule 17.  I went back and looked at the case law that you posted, Joel, and it confirmed what my position was.

In short, it was confirmed that the reported leaking had nothing to do with the roof membrane installed, but it took many hours to identify the actual source.   The client agreed with the evidence we provided.  As we had to mobilize a crew to the site, there are costs that we may consider submitting as an REA.   Your case law supported that position.  As for if we submit an REA or not, it will come down to the final cost of the site visit and customer relations.  If the cost is minor, we may just eat it.   

Thank you all again.

David Morrill said:

we may consider submitting as an REA

Just a suggestion for consideration.   You may in fact want to consider a claim (FAR subpart 33.2) rather than a REA.  Discussion with legal counsel will help you pick the appropriate terminology and process if you decide to pursue reimbursement for the costs of your efforts.

C Culham said:

Just a suggestion for consideration.   You may in fact want to consider a claim (FAR subpart 33.2) rather than a REA.  Discussion with legal counsel will help you pick the appropriate terminology and process if you decide to pursue reimbursement for the costs of your efforts.

When a contractor is sensitive to customer relations, as David alluded to, they will often prefer to submit an REA rather than a claim, which is handled as a dispute. Especially for a relatively small amount of money.

A claim, involves much more effort and formal processes than an REA. On one of our Chemical Weapons Disposal Plant systems contracts, our systems contractor submitted a $163 million REA on long standing issues rather a claim. And no, they didn’t insist on payment of interest as a  defacto claim. 

In fact, this wasn’t uncommon with many of our medium and large contractors.

Joel,

If the OP wants to submit a REA, and you are encouraging that approach, what contract clause will allow for an equitable adjustment in this circumstance?  I am not aware of any clause that will entitle the contractor to an equitable adjustment with these facts.  I'm thinking that a claim is the right step since OP is seeking "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."

YES, if there is a clause that gives OP an entitlement to an equitable adjustment, REA all the way -- but what is the REA clause that OP can cite?

ji20874 said:

Joel,

If the OP wants to submit a REA, and you are encouraging that approach, what contract clause will allow for an equitable adjustment in this circumstance?

Because the root cause was a defect in the work of other contractors, was not discovered until after the project was complete, and verified by Government personnel, I would use FAR 52.236-2 - differing site conditions.   But the point about a claim vs an REA is a valid one and will ultimately be driven by the facts, including the timeline, contract status, and how material the claim/rea would be.

David, If you were to submit a REA to me under FAR 52.236-2, Differing Site Conditions, for the facts described in the OP, I would be duty-bound to reject it -- in my opinion, that clause does not give a contractor an entitlement to a REA under those facts.  As I mentioned in my first comment, I still recommend you look at the Disputes clause in your contract -- no one else in this thread has mentioned any other clause that would give you an entitlement to a REA.

joel hoffman said:

When a contractor is sensitive to customer relations, as David alluded to, they will often prefer to submit an REA rather than a claim, which is handled as a dispute. Especially for a relatively small amount of money.

A claim, involves much more effort and formal processes than an REA. On one of our Chemical Weapons Disposal Plant systems contracts, our systems contractor submitted a $163 million REA on long standing issues rather a claim. And no, they didn’t insist on payment of interest as a  defacto claim. 

In fact, this wasn’t uncommon with many of our medium and large contractors.

A claim pursuant to FAR 52.233-1 or with regard to the Dispute paragraph of FAR 52.212-4 provides remedy to either party of the contract.   The action allowed by the clause should not be construed by anyone to be other than a clause that provides for a remedy just like those clauses that provide for an equitable adjustment in contract.   To imply or otherwise say so is hogwash.  Prefer as they may, not handling a matter as a written demand or written assertion when a close look a the contract provides no other clause for a remedy a contractor puts themselves at a disadvantage and I would not encourage a contractor to do so.

David can do as he wishes but use of REA and promote same in the context of this thread, in my view, is not  viable nor appropriate advice.

Oh, a request for an equitable adjustment is likely viable here. We used to pay for REA’s like this situation, when our customers would call back a contractor for an improper warranty call. There was no point in arguing. The contractor would be right and entitled to compensation.

David can submit a claim or an REA. Either one is a written assertion and will likely eventually result in entitlement and payment.

The dollar value is low. I understand why he doesn’t want to make a big deal out of it.

ji20874 said:

Joel,

If the OP wants to submit a REA, and you are encouraging that approach, what contract clause will allow for an equitable adjustment in this circumstance?  I am not aware of any clause that will entitle the contractor to an equitable adjustment with these facts.  I'm thinking that a claim is the right step since OP is seeking "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."

YES, if there is a clause that gives OP an entitlement to an equitable adjustment, REA all the way -- but what is the REA clause that OP can cite?

Under the Inspection of Construction Clause at FAR 52.246-12, paragraph i, “Acceptance shall be final and conclusive except for latent defects, fraud, gross mistakes amounting to fraud , or the governments rights under any warranty or guarantee.”

The government breached its rights under the warranty clause at 52.246-21.  It directed the contractor to return to the job site, causing it to incur additional costs to come, carefully inspect and determine the cause and location of the leak and that it wasn’t due to the contractor’s material and workmanship. It was entirely independent of the roof work- leaks in another building system. Thus government failed to meet its legal burden of proof after final acceptance that there was a failure of the contractor’s contractually required material or workmanship, causing the leak.

I believe that this breech would allow a contractor to exercise its rights under the contract, in lieu of a breech of contract claim.

In this case, it appears that the government hadn’t inspected the roof because David’s crew had to clean the area to determine where the leak emanated from (rereading the description in the initial post).

In essence, I believe that the government directed additional work under the warranty clause that wasn’t required. Thus it could be considered a change to the contract requirements under the Changes Clause, entitling the contractor to an equitable adjustment.

Note that I tried but was unsuccessful in researching the paragraph long referenced case law where the government couldn’t prove that the material or workmanship was faulty under the Warranty clauses in the Fourth Edition of Nash and Cibinic’s Administration of Government Contracts. I no longer have access to the old BCA books or to Westlaw, etc. Those cases should describe what the contractor’s rights for redress were.

As a reminder, I’m not a lawyer or a paralegal. David can consult one.

In a referenced case that I reviewed, the contractor did submit a claim for an equitable adjustment under paragraph i of the inspection of construction clause (asserting that acceptance was complete and final when government didn’t prove that the contractor’s material and workmanship was cause of the problems). However, the government reasonably proved that the failures and additional expenses were the result of failures in material and workmanship.

In David’s case, there were likely minor costs but aggravating and resulted in diversion of time and resources from other work. Under a breach of contract action, these could be recoverable but would require litigation.

David’s question primarily concerns what to do in future situations where this occurs. 

My advice was to react to the governments warranty call direction in the future by asking them to show or prove  that the problem, I.e., failure- damage, etc. was the result of the contractor’s material or workmanship and that the government didn’t cause the problem. This would include asking them whether they made any physical inspection to try to determine the source or possible cause of the problem or condition.

.

I would add that the government asserted that acceptance was not final under 52.243-12, pursuant to its rights under the warranty of construction clause at 52.243-21. Thius all remedies available under the contract should be available.

Davids defense under the contract terms could be a breech of the Warranty clause resulting in a government directed change to the work..

joel hoffman said:

The government breached its rights under the warranty clause at 52.246-21.

joel hoffman said:

Davids defense under the contract terms could be a breech of the Warranty clause or a government directed change to the work..

Based on your premise the contractor therefore has  a "claim" not a REA.   FAR 52.233-4, which I might add is hopefully in the contract as prescribed by the FAR.

C Culham said:

Based on your premise the contractor therefore has  a "claim" not a REA.   FAR 52.233-4, which I might add is hopefully in the contract as prescribed by the FAR.

Im saying that the contractor could assert a constructive change order under the Changes Clause. The contractor can request an equitable adjustment without resorting to filing a Claim under the Disputes Clause.

I’m assuming that the government would agree in such an instance. If it doesn’t, then the contractor can file a claim under the Disputes clause or pursue a breech of contract action.

deleted. Pushed the quote button by accident.

I thought about the clause at FAR 52.243-4, Changes, but I don't think it fits the facts here because--

• para. (b) requires a notice from the contractor to the contracting officer stating that the contractor regards the warranty call as a change order (and OP made no mention of having given notice);
• para. (d) limits any equitable adjustment to costs incurred within 20 days before the notice (and OP did not mention any timelines); and 
• para. (f) prohibits any equitable adjustment after final payment (and I am assuming that final payment has already occurred).

So I'm still thinking there is no contract clause that will provide an entitlement to an equitable adjustment for OP, and I still recommend for David to look at the Disputes clause in his contract.

I disagree with characterizations that REAs are for nice people and claims are for mean people -- that mindset is too simple-minded for professional dialogue.

joel hoffman said:

Im saying that the contractor could assert a constructive change order under the Changes Clause.

No sir.   The Government asserted a "claim" pursuant to the warranty clause.  For sake of discussion I will believe David that the government was wrong to assert such a claim.   Therefore the government can not prove its claim and owes David money.  As promoted by the FAR at 33.2 "the Government’s policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer’s level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim."  If the government denies said money to David, David then has the ability to assert a claim against the government for the money.

Not spot on but I encourage a read of the following.  Make it easy on yourself....fast forward to page 56 and after a read there fast forward to page 86.

https://www.cbca.gov/files/decisions/2019/ZISCHKAU_12-19-19_2953, 2954, 2955, 3596, 4175, 4377, 5006__SUFFOLK_CONSTRUCTION_COMPANY,_INC. (Decision).pdf

C Culham said:

No sir.   The Government asserted a "claim" pursuant to the warranty clause.  For sake of discussion I will believe David that the government was wrong to assert such a claim.   Therefore the government can not prove its claim and owes David money.  As promoted by the FAR at 33.2 "the Government’s policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer’s level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim."  If the government denies said money to David, David then has the ability to assert a claim against the government for the money.

Not spot on but I encourage a read of the following.  Make it easy on yourself....fast forward to page 56 and after a read there fast forward to page 86.

https://www.cbca.gov/files/decisions/2019/ZISCHKAU_12-19-19_2953, 2954, 2955, 3596, 4175, 4377, 5006__SUFFOLK_CONSTRUCTION_COMPANY,_INC. (Decision).pdf

The fact pattern is close to the case quoted above - I have directed our personnel to gather the information needed for ownership determination if we intend to seek a remedy or not, and then proceed accordingly.  The materiality and final review of the facts (and evidence) will determine our approach.   We will use the CDA approach.

A great thank you all!!!

C Culham said:

The Government asserted a "claim" pursuant to the warranty clause.  For sake of discussion I will believe David that the government was wrong to assert such a claim.   Therefore the government can not prove its claim and owes David money.   If the government denies said money to David, David then has the ability to assert a claim against the government for the money.

For the government to deny David the money he is owed, it seems that David would have to request payment of the money since I doubt the government will just say our bad in regard to the call and pay some sum of money without a request for payment and some evidence of the amount due.  What would be the nature of this request, e.g., REA, claim, or something else?

Retreadfed said:

What would be the nature of this request, e.g., REA, claim, or something else?

What do think it should be?

Carl’s example is a claim because the parties disputed whether or not the contractor was responsible, so the contractor had to claim reimbursement and establish that the contractor wasn’t responsible for the damage repair.

Here the government apparently agrees that the contractor’s material and workmanship had nothing to do with the leaks. The governments direction to inspect? and repair the leak was, in effect, a constructive change because the warranty of construction clause wasn’t enforceable for the situation. The government’s own building system failed and the government apparently agrees.

The contractor can simply comply with changes clause, notifying the government that it considers the direction to … a constructive change (see paragraph (b) of the Changes Clause) because it wasn’t responsible for the leak or responsible for the costs to ….(describe what efforts and expense were involved) , and request an equitable adjustment to the contract price.

There should be absolutely no need to handle the matter under the Disputes clause and process. The contractor would have to file a claim and request a contracting officer’s decision and on and on, etc.

See paragraph (h) of the Inspection of Construction clause at 52.246-12 for a similar remedy when the government orders the contractor to tear out in-place work prior to acceptance in order to determine whether hidden materials and workmanship meets the contract requirements - and it is found not to be defective. An equitable adjustment is provided for.

Why wouldn’t an equitable adjustment be provided for post acceptance directed additional work that wasn’t the responsibility of the contractor?

C Culham said:

What do think it should be?

Carl, in your earlier post, you brought up what David's options could be if the government did not pay him for the costs incurred in responding to the government's erroneous claim.  However, you omitted a discussion of how David could put the government on notice that he was expecting to be paid those costs.  I'm just asking you to complete your analysis of David's problem.  I'm not taking any position on whether he could submit an REA, a claim or anything else.

According to the scenario, The government knows or should know that the contractor’s material and workmanship are not defective. The government also knows that its HVAC system caused the ceiling or roof leaks. It also knows that it can’t prove that there was a defect in David’s work or that its own system didn’t cause the leak. Thus there was no basis for requiring the contractor to come back and do what it did.

It’s not a valid government warranty “claim” (improper term) or call. It’s not called that in the clause or FAR warranty discussion and prescription.

The Corps of Engineers policy is to avoid “claims” if there are other means to resolve issues. A claim is generally a legal action, while issues such as this can hopefully be resolved administratively. If it can’t, it can be elevated into a formal claim.

joel hoffman said:

CRl’s example is a claim because the parties disputed whether or not the contractor was responsible,

I believe  you have missed salient quotes in the case.   Example:  "We conclude that GSA has failed to prove the elements of its warranty claim." and "Regarding the second element of the warranty claim..."

This said David has provided his response to the full discussion regarding his original post and feels he has a path forward.

Retreadfed said:

Carl, in your earlier post, you brought up what David's options could be if the government did not pay him for the costs incurred in responding to the government's erroneous claim.  However, you omitted a discussion of how David could put the government on notice that he was expecting to be paid those costs.  I'm just asking you to complete your analysis of David's problem.  I'm not taking any position on whether he could submit an REA, a claim or anything else.

First I appreciate your acknowledgement of my earlier post.  Your clarification is not quite on point.   I provided a suggestion for consideration.   The thread flowed from there as @joel hoffman wanted to call into question my suggestion.  I then provided additional thoughts as to why a claim might be the option.   Now I am going to be specific to your question acknowledging that David seems to have found a path forward.

By the very wording of the OP a 'claim" against the warranty clause was made.   Such word usage seems consistent with case law.   As such I beleive David would be best served by perfecting a request for money via a claim pursuant to the Disputes clause of the contract.   Why?   The government claimed against him did they not?  Based on the very limited info the government did not do due diligence prior to making the claim, suggesting that an REA would recieve the hand wringing that the government must of been doing and that this discussion has immersed itself in.   Moving directly to a perfected claim puts the rock in the CO's pocket to either solve the problem at his/her level or make a formal decision.  And as acknowledged in this discussion there is a question as to which clause would be the basis for an REA.    All said a claim is a solid path that protects David and his request for money with a gut feeling that he would most likely get to a claim anyways. 

To the point that  a "claim" sets a poor stage of cooperation I have already stated my view but for the good of the order and noting additionally that the government in fact started the claim ball rolling by demanding effort under the warranty clause I offer this.   Here is what I would do when I asked for the money - Dear Contracting Officer - I am submitting this claim pursuant to the Disputes Clause not infereing that an adversary relationship exists but to afford the company of its rights in reaching a mutual agreement at your level based on your claim against the warranty of contract XXXXX. 

I think we all know that the simple use of REA that the government is not going to roll over and say here is your money.  The discussion seems to imply it will and that is wrong minded in my view.     A claim highlights that the contractor means business and wants the CO to take the matter seriously. Neither good nor bad but a right afforded by the contract.

I will acknowledge there is debate in the world of Federal contracting as to what constitutes an REA and a claim and what is the best route and that was my basis for my first post in this thread.   Cornered by continued discussion I will stand by the above in this case based on the facts, albeit limited, that the request should be in the form of a claim.

joel hoffman said:

warranty “claim” (improper term)

 Reference? Is not the government making a claim against breach of warranty?  What I will term common law views it as such.

C Culham said:

Reference? Is not the government making a claim against breach of warranty?  What I will term common law views it as such.

Don’t know. Usually the govt or govt using agency calls the contractor and follows up in writing to come out and fix something. I never had a KO submit a claim under the warranty, unless the contractor refused to return. If it is a govt claim, it has no merit here.

David can respond with an REA , documenting the factual situation and requesting an equitable adjustment. He doesn’t have to submit a claim at that point. The parties can negotiate a settlement…

If the govt doesn’t agree that it is responsible or that David is entitled to an equitable adjustment, if it is a govt claim, the KO would issue a Decision, wouldn’t they? The. David could appeal…

If not a govt claim and govt disagrees over paying, David can elevate it to a claim and the KO would have to issue a Decision, then the appeal, etc. etc.

As a claim, lots of expense for both parties over a relatively small amount of money…

joel hoffman said:

Don’t know.

I do not see the use of "claim" when requesting correction effort under a warranty as improper.    The FAR at 2.101 does define "claim" yet the FAR also provides that (emphasis added) "A word or a term, defined in this section, has the same meaning throughout this regulation (48 CFR chapter 1), unless- (1) The context in which the word or term is used clearly requires a different meaning;..."   In research "warranty claim" appears to be a often used term when the discussion is with regard to warranties.   In researching I did stumble into use of AI and found this - https://www.genieai.co/define/warranty-claim#:~:text=Warranty Claim means a claim for the repair or replacement,the provisions of a clause.

joel hoffman said:

David can respond with an REA

I understand yet there is another approach that I suggested.  Again David can choose his course.

For the good of the order.....if it does not link automatically simply cut and paste into a browser.

What's in a name: REA versus claim - WIFCON.com

Consistent with Professor Nash’s position with respect to the distinctions between an REA and a claim, it makes little sense to submit a claim for an issue such as this if the government agrees that the warranty call was invalid and agrees that David’s firm is entitled to an equitable adjustment similar to a pre-acceptance invasive inspection situation.

For a contractor claim, David would have to request a contracting officer’s decision. See FAR 33.2, 41 USC Chapter 7, and the disputes clause of the contract.

If this was a government “claim”, the contracting officer must make a KO Decision. A KO would be a fool to make a KO decision at the time of a warranty call, especially one that turns out NOT to be a valid warranty matter.  It would seem clear here that the government never inspected the roof and didn’t know the source of the leaks.

Thats all an unnecessary waste of time and effort and won’t foster good will on either party’s part.

”33.204 Policy.

The Government’s policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer’s level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim…”

Im done trying to reason with Carl. I hope David can understand that there are more satisfactory methods to achieve what he is asking for than submitting a claim, which would require a request for a KO decision on a matter that probably isn’t in dispute.

And I doubt that the government has initiated a claim, which would have necessarily required a KO final decision.

joel hoffman said:

Thats all a waste of time and effort and won’t foster good will on either party’s part.

”33.204 Policy.

The Government’s policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer’s level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim…”

The best point made in this entire thread.  The paper Carl linked shows even differing positions by Vern Edwards and Ralph Nash.  Why not take the path that’s quicker, easier, and less costly to both parties? A claim resolution at many agencies generally involves extensive legal involvement and research, lengthy administrative reviews, and high level approvals.  On the other hand, a REA might be settled solely at the contracting officer level.

formerfed said:

The best point made in this entire thread.  The paper Carl linked shows even differing positions by Vern Edwards and Ralph Nash.  Why not take the path that’s quicker, easier, and less costly to both parties? A claim resolution at many agencies generally involves extensive legal involvement and research, lengthy administrative reviews, and high level approvals.  On the other hand, a REA might be settled solely at the contracting officer level.

Thanks, formerfed. I’ve been trying to make those points.

joel hoffman said:

Im done trying to reason with Carl.

formerfed said:

The best point made in this entire thread.

In the most professional manner that I can muster at this very moment, based on the last comments of both of you it is clear that you have little respect for my points and do not attempt to read and interpret them for what they are....informed dialog.   The most glaring example is the below quote which I posted to this thread on on Friday November 3 at 7:57am.   Respectfully each of you should read with understanding not bias full discussions and move away from I used to do it this way.   I too am done trying to reason with either of you.  READ gentlemen, READ!

"As promoted by the FAR at 33.2 "the Government’s policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer’s level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim." "

Carl, you misinterpreted my comment.  I have the upmost respect for your points on this and all threads.  I know you throughly research topics before posting.  There are two approaches here and neither is blatantly wrong.  You have carefully stated the merits of each.

formerfed said:

Carl, you misinterpreted my comment.

I apologize for the mis-read.  I was amazed that it was the best point made now, but it was not when made a few days ago.  Thank you!