In Lockheed Martin Aeronautics Co. v. Secretary of the Air Force, the U.S. Court of Appeals for the Federal Circuit affirmed the dismissal of Lockheed Martin's appeals relating to two unilateral price determinations under undefinitized contract actions (UCAs). The court held that the pricing decisions were not government claims subject to direct appeal under the Contract Disputes Act (CDA).
To expedite urgent work, the U.S. government sometimes uses UCAs, allowing contractors to begin performance before reaching agreement on final contract terms and price. These agreements contain definitization clauses allowing Contracting Officers (COs) to determine a reasonable price if the parties cannot reach agreement by a set date.
In 2015 and 2016, the Air Force entered into UCAs with Lockheed Martin for upgrades to F-16 aircraft for foreign military sales. When price negotiations failed, the COs unilaterally definitized both contracts, assigning prices of approximately $1 billion.
Lockheed Martin appealed directly to the Armed Services Board of Contract Appeals (ASBCA), arguing that the unilateral definitizations were unreasonable and constituted government claims that could be appealed without submitting a certified contractor claim. The ASBCA dismissed the appeals for lack of jurisdiction.
Under the CDA, a contractor may appeal a government claim directly to the ASBCA, but contractor claims require submission of a certified claim to the CO first. Lockheed Martin maintained that the COs' pricing decisions were adverse final decisions amounting to government claims. It cited definitization clauses in the contracts that permitted unilateral pricing determinations "subject to Contractor appeal."
The Federal Circuit disagreed, affirming the ASBCA's decision. The court found that the COs' actions followed the process specified in the contract and did not involve any demand for relief or assertion of entitlement against the contractor. It emphasized that the COs' decisions did not seek payment, damages, or nonmonetary relief, but simply established contract prices as permitted under the definitization clauses.
The court distinguished the case from prior decisions where COs sought remedies or imposed penalties, such as default terminations or demands to correct defects. In contrast, the definitization here involved no assertion of breach or demand for compensation.
The court also clarified that the phrase "subject to Contractor appeal" did not transform the pricing decision into a government claim. Instead, it merely preserved the contractor's right to challenge the reasonableness of the pricing through a properly submitted contractor claim.
Ultimately, because Lockheed Martin had not submitted a certified claim to the COs before appealing to the ASBCA, the appeals lacked jurisdiction under the CDA.
Understanding how pricing disputes and claim classifications affect contract appeals is essential for federal contractors. Our attorneys at Whitcomb, Selinsky, PC assist businesses with navigating contract clauses, submitting certified claims, and resolving disputes arising from unilateral pricing decisions or definitization actions.