Federal Circuit Clarifies Path of MASP/FSS Contract Appeals

The Court of Appeals for the Federal Circuit affirmed the dismissal of a claim for termination fees because the dispute involved interpretation of General Services Administration multiple award schedule contract provisions, which the ordering agency contracting officer lacked authority to decide. The contractor sought early termination fees for the government’s failure to fully exercise the last option year of a delivery order to lease copier equipment. The contractor appealed the ordering CO’s deemed denial of its claim to the Armed Services Board of Contract Appeals, which raised the issue of its jurisdiction and determined the key issue of the appeal was the applicability of the schedule contract’s termination for convenience provisions, not performance under the DO ( 12-1 BCA ¶34,903). The board dismissed the appeal for lack of jurisdiction because the ordering CO lacked authority to resolve the dispute.

Bright-Line Rule

The Federal Circuit noted FAR 8.406-6 on its face does not authorize ordering COs to issue decisions interpreting the schedule contract. FAR 8.406-6 (a)(1)(i) allows ordering COs to “[i]ssue final decisions on disputes arising from performance of the order,” but this authority is expressly restricted by paragraph (b), which requires all “[d]isputes pertaining to the terms and conditions of schedule contracts” to be referred to the schedule CO. In addition, FAR 8.406-6 (a)(1)(ii) allows the ordering CO to refer disputes pertaining to the performance of the order to the scheduling CO, which prevents inefficient bifurcation of mixed disputes. The court concluded the Federal Acquisition Regulation “creates a bright-line rule—all disputes requiring interpretation of the schedule contract go to the schedule CO, even if those disputes also require interpretation of the order, or involve issues of performance under the order.” A bright-line rule “maintains a clear, predictable allocation of jurisdiction between agency contracting offices and GSA” and “jurisdictional clarity” among the boards. Here, the dispute turned on whether the government’s partial exercise of the option year was a premature discontinuance as defined by the schedule contract, which had to be decided by the GSA CO. Time remained under the Contract Disputes Act’s six-year statute of limitations for the contractor to timely resubmit its claim to the GSA CO.

Dissent

In dissent, Circuit Judge Plager acknowledged that FAR 8.406-6 lends itself to competing interpretations but contended the interpretation favored by the majority was “hardly dictated” by the terms of the disputed provision. Critical of the majority’s regulatory construction, the dissent claimed the dispute resolution procedure adopted by the majority failed to establish a “bright-line” test. The dissent favored a rule that would give the ordering CO initial responsibility to decide the claim, unless it is necessary to invoke the special expertise of the schedule CO to construe the schedule contract provisions. ( Sharp Electronics Corp. v. McHugh, CA-FC, 57 CCF ¶80,009)