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BACK TO BASICS: Government as a Sovereign

Monday, July 03, 2017

I can still remember sitting at the Army Judge Advocate General's (JAG) School, one of the few blue uniforms in a sea of green, to be taught the magic of government contracting.  Still jet-lagged after the flight from Tokyo to Virginia, I was pounding coffee as the professors started educating us on fundamentals. Weeks later, I emerged as a new acquisition professional. Flash forward to present day and I still marvel over the layers and nuances of our profession.


I recently started reflecting on these memories and decided to refresh myself on these fundamental concepts of government contracts. With the aim of helping others understand the foundation of the government contracting environment, I created a series of posts to be called “Back to Basics”. This first post focuses on the most fundamental and distinctive aspect of contracting with the U.S. Government – that the Government is a sovereign entity and has immunity from lawsuits.  


The Government’s “sovereign immunity” exists simply because the government is the government. In plain English, sovereign immunity means the government cannot be sued or found liable for its acts unless it waives immunity. From a contracting perspective, the concept of Sovereign Immunity is scary because one party of the contract is immune from suit. Fortunately, our government recognized the impediment to contracting and passed the Contracts Disputes Act (CDA), 41 U.S.C. §§7101–7109.  The CDA waived the government’s sovereign immunity, thus, placing the government on equal footing with the contractor, and allowing contractors to sue the government for breach of contract.


Sovereign Immunity may seem unfair on its face – and it can result in unfair outcomes on occasion. However, there are solid public policy reasons for the concept as well as numerous waivers of immunity, all of which, would be good topics for a much longer article. This post however, only discusses the waiver of sovereign immunity in relation to government contracts, and the ability of contractors to pursue damages if the government breaches a contract.  


Waivers of sovereign immunity often have strict requirements that must be met, and which establish penalties and interest. For example, the CDA establishes requirements for when the waiver is effective: (i) contractors first file a claim with the contracting officer, (ii) contractors certify the claim, and (iii) claims must be filed within six years.


Because these requirements are a condition for the waiver of sovereign immunity, the requirements must be strictly met without regard to the respective desires of the parties. Equity or fairness cannot trump the express language of the statute, and courts have denied claims even if the contractor is 100% in the right. Government policy encourages contracting officers and contractors to resolve disputes amicably through discussions, requests for equitable adjustment, or even alternative dispute resolution such as mediation. If these avenues do not resolve the dispute and, unfortunately, a formal claim is necessary, then contractors need to follow exactly the CDA requirements in FAR Subpart 33.1.  


The CDA is just one example of the government’s waiver of sovereign immunity within the government contracts environment. Other similar waivers include the Prompt Payment Act (PPA), 31 U.S.C. §3901, et seq and Equal Access to Justice Act (EAJA), 5 U.S.C. § 504; 28 U.S.C. § 2412. If the government fails to pay a contractor on time, then the PPA establishes penalties for that late payment. The EAJA is unique to small businesses and enables them to recover certain attorney’s fees if they prevail in a lawsuit against the government.


Additionally, sovereign immunity and the waiver thereof also apply to contracts with state governments and tribal governments. If you contract with either of these entities, then you will need to learn about the applicable laws waiving sovereign immunity.


Just as in so many situations, the best tool a contractor can have is knowledge of the government customer, the acquisition regulations and practices, active management of contracts, and an adequate compliance program. Over the next year, I will continue to relay these snippets of my memories of days long ago in Charlottesville, Virginia at the Army JAG School learning about government contracts and sipping my coffee.


Karri brings more than two decades of experience in government contracting and aerospace and defense industries. She started her career as a U.S. Air Force judge advocate where she supported major defense programs, base operational contracting, and international and joint war operations.  Karri gained additional breadth working in a major D.C. law firm on a variety of government contracting matters. Her extensive background in working for and with the U.S. Government (Department of Defense, U.S. Air Force, the Intelligence Community, and NASA) gives her a unique perspective, helping companies understand the underlying policies and rationale for the government position. 

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