Does the Government CARE? The ASBCA Believes It Should

Under its contract with the Air Force, Aviation Training and Consulting LLC ("ATC") "operates, maintains, supports, and upgrades the Air Force's training systems (or trainers) for B-52 bombers." As did many responsible government contractors affected by a once-in-a-century global health crisis, ATC incurred over half of a million dollars in unanticipated, increased costs to keep its contract workforce in a ready state during the pandemic. Section 3610 of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act explicitly recognizes a contractor's potential entitlement to recover such increased costs, subject to the Contracting Officer's discretion. Accordingly, ATC submitted a contract claim for reimbursement of its increased costs as contemplated by the Act.

The Contracting Officer denied the claim. On appeal to the Armed Services Board of Contract Appeals ("ASBCA"), the Air Force took the relatively aggressive position that ATC's claim should be dismissed because the Board lacks jurisdiction to make an award under Section 3610. The government based its argument on another statute, Public Law 85-804, which deals with the government's indemnification obligations to contractors that incur claims, losses, or damages involving contracts that carry risks relating to "unusually hazardous or nuclear" work (think catastrophic risks under a contract that insurance could not possibly cover, like a missile going astray causing civilian casualties). Notably, prior to its passage, Congress made clear that Public Law 85-804 was excluded from the operation of the Contract Disputes Act ("CDA") and, therefore, for at least the last 42 years, the courts and boards like the ASBCA have declined jurisdiction to entertain appeals from contracting officer final decisions denying requests for relief under Public Law 85-804.

Unlike Public Law 85-804, Congress did not express an intent to exclude the CARES Act from CDA coverage. This, however, did not stop the Air Force from moving to dismiss ATC's complaint, arguing that the CARES Act should be interpreted like Public Law 85-804, and that the ASBCA does not have jurisdiction to consider ATC's CARES Act claim.

Judge McIlmail disagreed: "Here, we are shown no legislative history indicating that Congress similarly intended to exclude Section 3610 of the CARES Act from the operation of the CDA" and, therefore, "we find jurisdiction to entertain appellant's appeal." Interestingly, Judge McIlmail also clarified that the Board's jurisdiction extends to ATC's "contention that the government's 'withholding of Section 3610 funds from [appellant] was deliberate and motivated by arbitrary and abusive considerations.'"

Takeaways

We have at least two important takeaways here:

1) the courts and boards have jurisdiction under the CDA to entertain claims by contractors under the CARES Act, and

2) based on Judge McIlmail's parting remark, the courts and boards appear ready to consider whether contracting officers have exercised reasonable discretion in considering CARES Act claims. Contractors with CARES Act claims can take some comfort in this decision.

We will keep watching this case as it progresses. In the meantime, we welcome your questions and comments.