Government Contracts Monitor

Getting Before the Board of Contract Appeals – Jurisdiction by Agreement?

July 25, 2014

In the recent case, Patriot Pride Jewelry, LLC, ASBCA No. 58953 (June 9, 2014), the Armed Service Board of Contract Appeals found that jurisdiction can come from the parties’ agreement, even if the Contract Disputes Act (CDA) would not ordinarily apply.

Patriot Pride Jewelry, LLC and the Army & Air Force Exchange Service (AAFES) entered into an AAFES Retail Agreement under which AAFES was to offer Patriot Pride’s products to its customers. While not required to do so, AAFES also elected to offer Patriot Pride’s products online. Two years into the relationship, AAFES discontinued its online offering of these products. However, AAFES did not terminate the Agreement and continued to make Patriot Pride’s products available to exchange patrons. Patriot Pride claimed AAFES had an obligation to advertise its products in the AAFES online catalog, apparently for the entire term of the Agreement. Accordingly, when AAFES ended its online offering, Patriot Pride submitted a claim for the “remaining value of the contract." AAFES denied the claim and this appeal followed. The interesting and surprising aspect of this case is that it was decided by a Board of Contract Appeals under the Contract Disputes Act (CDA) claims process. Why is this surprising? Because AAFES is a Non-Appropriated Funds Instrumentality (NAFI) to which CDA jurisdiction normally does not extend. How did this happen?

Here, the hook for Board jurisdiction is found in the "DISPUTES" clause of the Agreement between Patriot Pride and AAFES, which states in relevant part:

a. Each contract resulting from, or referencing, this Agreement is subject to the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613). Except as provided in the Act, all disputes arising under or relating to this contract shall be resolved under this clause.

…

f. The contracting officer will mail, or otherwise furnish, a written decision in response to a contractor claim within the time periods specified by law. Such decision will be final and conclusive unless:

( 1) Within 90 calendar days from the date of contractor's receipt of the final decision, the contractor appeals the decision to the Armed Services Board of Contract Appeals (ASBCA) ....

Despite this clause, the government argued that the Board of Contract Appeals lacked jurisdiction to resolve the claim. Specifically, the government argued that the Board's jurisdiction is dependent on whether the Agreement qualifies as a CDA "procurement" contract, noting that AAFES is a NAFI and that “no traditional ‘buyer-seller’ relationship exists between AAFES and appellant through which goods or services are transferred to the government.” In short, according to the government, there is “no acquisition by AAFES of property or services within the meaning and coverage of the CDA” and, therefore, the Board lacks jurisdiction to hear Patriot Pride’s claim.

The Board acknowledged that to the extent jurisdiction exists, it is not derived from the CDA. But the Board’s analysis did not end there. It determined that the Disputes clause in the Agreement “provides an independent basis for jurisdiction.” In other words, although the Agreement incorrectly references the CDA, it nonetheless, by doing so “unequivocally grants the Board authority to decide ‘all disputes arising under or relating to’ the Agreement without limitation.” Thus, by virtue of the parties' agreement reflected in the clause, the Board found it had jurisdiction to decide the dispute.

Lindsay Simmons is the attorney responsible for the content of this article.

Attorneys

Lindsay Simmons