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2 min read

REA Claims from Joint Ventures: Lessons from BCC-ZAAZTC

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Joint ventures can lead to complex contractual arrangements and potential disputes over authority and claim submissions. In this blog post, we delve into a case involving a joint venture between BCC and ZAAZTC, known as B-U-Z, tasked with a contract for the United States Army Corps of Engineers. We will analyze the key arguments, rulings, and implications of this case.

Background

BCC and ZAAZTC established a joint venture, known as B-U-Z, to carry out a contract with the United States Army Corps of Engineers. According to the terms of the joint venture agreement, Mr. Ahmad Tariq Barakzai was authorized to sign the contract on behalf of the joint venture. However, during the course of the project, B-U-Z encountered site conditions that differed from what the government had represented. This discrepancy led to delays in completing the contract and increased costs.

In response to these challenges, ZAAZTC submitted a request for equitable adjustment (REA) to the contracting officer (CO). The REA sought $4 million to cover the expenses associated with the differing site conditions and the delayed approval of design submittals. Unfortunately, the CO denied the REA due to a lack of substantiation.

Following the denial, BCC's president informed the CO that ZAAZTC did not have the authority to submit claims on behalf of the joint venture. Despite this, ZAAZTC proceeded to submit a new REA, which, once again, was denied by the CO.

BCC Challenges ZAAZTC's Claim Authority

The dispute arose between BCC and ZAAZTC when BCC's president challenged ZAAZTC's authority to submit claims on behalf of the joint venture. BCC argues that ZAAZTC did not possess the necessary authority, while ZAAZTC believes that the facts of this case align with a previous case (Rosinka) where the board permitted a claim to be made by one of the joint venturers. However, the administrative judge determined that the Rosinka case does not serve as binding precedent and that the facts in the current case differ significantly.

Furthermore, the judge concluded that even if both companies had the right to pursue a claim, the withdrawal of the Request for Equitable Adjustment (REA) by Mr. Barakzai would hold legal weight. Accordingly, the judge determined that the settlement between BCC and ZAAZTC did not retroactively authorize Mr. Southerland, a claims consultant who submitted an REA on behalf of the joint venture, to proceed with the claims.

Legal Arguments and Final Ruling

The government argued that the appeal should be dismissed since ZAAZTC, rather than the joint venture, submitted the claim without proper authority. ZAAZTC, in turn, argued that they were unaware of the obligation to include notice of their rights under the Contract Disputes Act in the REA. However, the judge dismissed both arguments, citing the absence of binding precedent from a previous case and the untimeliness of the new claim.

Ultimately, the administrative judge handling the case ruled that the board lacked jurisdiction to consider the claim as it was not submitted by someone authorized to represent the joint venture. Additionally, even if the claim had been submitted by the joint venture, it would have been dismissed due to not meeting the statutory requirement of filing an appeal within 90 days.

Read more about the Contract Disputes Act.

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