Good Enough For Government Work – Court of Federal Claims Rejects Government’s FCA Challenge To Contractor’s Estimates

In Grand Acadian v. United States, — Fed. Cl. –, 2012 WL 1882831 (May 23, 2012), the government filed its usual trio of fraud-related counterclaims against the plaintiff contractor, Grand Acadian, Inc., pursuant to the FCA, the Forfeiture of Fraudulent Claims Act, and the fraud provision of the Contract Disputes Act (CDA). Grand Acadian’s suit against the government arose from a cancelled construction project on property the government had leased from Grand Acadian to serve as a location for emergency housing for victims of Hurricanes Katrina and Rita. Following the government’s termination of the lease, Grand Acadian submitted an approximately $2.8 million settlement proposal to the government. When the parties failed to reach an agreement, Grand Acadian submitted two certified CDA claims to the contracting officer – seeking $5.7 million in an initial claim and $5.75 million in a second, revised claim – for alleged necessary repairs and restoration of the property. Grand Acadian provided no supporting documentation for its first claim; similarly, the revised claim contained no explanation regarding why Grand Acadian’s certified claim cost to replace soil was twice as high as the cost in the settlement proposal.

The government’s fraud counterclaims were based primarily on alleged misrepresentations of material fact in Grand Acadian’s CDA claims concerning the pre-lease conditions of the property. With respect to each of the alleged misrepresentations, the Court of Federal Claims (COFC) held that the government failed to “supply proof sufficient to carry the government’s evidentiary burden.” For example, with respect to the pre-lease condition of the property’s trees, the court credited the testimony of the contractor’s president, who had “estimated – but did not count – the number of trees standing” on the property in question. The COFC agreed with the plaintiff that the company’s estimate “even if inaccurate – was not unreasonable.” Although the COFC entered judgment for the government on Grand Acadian’s claims, the COFC also rejected all of the government’s counterclaims, explaining that “the government has not carried its burden to establish the requisite mental state” with regard to the plaintiff’s CDA claims. This case demonstrates that while a contractor certainly can get into trouble for submitting baseless “estimates” – see, e.g., Daewoo Engineering and Const. Co., Ltd. v. United States, 557 F.3d 1332 (Fed. Cir. 2009) –the COFC will hold the government to its burden of proof, so that contractors need not fear utilizing reasonable, good faith estimates to calculate claimed damages.