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7 min read

Resolving Contract Disputes: Expert Insights and Strategies


Expert Insights and Strategies for Contract Disputes Act:

- Understand the Contract Disputes Act (CDA) that governs government contract disputes.
- Engage with the contracting officer responsible for the contract.
- Thoroughly review all contract documents and gather evidence.
- Follow the claims process outlined in the CDA and comply with certification requirements.
- Seek legal advice if needed, especially for complex disputes.
- Consider alternative dispute resolution (ADR) methods like mediation or arbitration.
- Maintain clear and transparent communication with all parties involved.
- Document all interactions and keep detailed records.
- Explore early resolution and mitigation strategies to avoid prolonged disputes.
- Consult experts in government contracting for tailored insights.


Derian, Inc., a construction contractor, finds itself entangled in an ongoing dispute with the government over their contract with the U.S. Army Corps of Engineers (USACE). They are currently in the process of appealing the government's decision, which involves the deletion of certain contract work and the imposition of liquidated damages on them. This case holds significant weight as it revolves around a construction contract that Derian was awarded on April 2, 2019.

At the center of this dispute are key individuals who play pivotal roles in shaping the outcome of the case. Mark Jensen, the President of Derian, Inc., leads the charge for the company, tirelessly working towards a favorable resolution. On the government's side, Michael P. Goodman holds the position of Engineer Chief Trial Attorney for the USACE, while Theresa L. Hampson is the Engineer Trial Attorney. These individuals bring their expertise and perspectives to the table, making for a complex and compelling legal battle.

The contract itself is specifically focused on the construction of oil-water separator systems and the installation of new turbine pit sump pumps. This project encompasses two Contract Line Items (CLINs), each with its own set of responsibilities and deliverables. The contract includes specific deadlines that Derian must adhere to, with all on-site installation work required to be completed by December 20, 2019. Furthermore, system commissioning, the final phase of the project, must be finished by January 19, 2020.

The Federal Acquisition Regulation (FAR)

To ensure transparency and consistency in government contracts, the agreement incorporates relevant clauses from the Federal Acquisition Regulation (FAR). One such clause is FAR 52.249-2, ALT I, which deals with termination for the convenience of the government. This clause sets the parameters for how the government can terminate the contract if it deems it necessary. Another significant clause incorporated into the contract is FAR 52.211-12, which addresses the issue of liquidated damages in construction projects. This clause dictates the consequences and penalties that may be imposed on the contractor in the event of delays or other contractual breaches.

As the appeal process unfolds, both parties will present their arguments, relying on legal expertise, factual evidence, and nuanced interpretation of the contract terms. The outcome of this case has the potential to not only impact Derian, Inc., but also set precedent for future disputes involving contract work and government entities. With so much at stake, the importance of a fair and just resolution becomes even more pronounced.

A Quality Control Plan and Activity Hazard Analysis (AHA) Reports

Derian, a contractor involved in a construction project, was not only responsible for submitting a quality control plan and Activity Hazard Analysis (AHA) reports, but also for conducting preparatory meetings before commencing work on each Definable Feature of Work (DFOW). This shows the contractor's commitment to ensuring compliance with project requirements and maintaining a safe working environment.

During the project, Derian proactively informed the government about the need for potential modifications to the pump foundation plates. The fact that the government accepted these proposed modifications demonstrates the contractor's attentiveness to detail and proactive approach to problem-solving. By addressing potential issues early on, Derian was able to prevent any further complications and ensure a smoother project execution.

However, during the course of the project, an unforeseen event occurred—a power outage on July 23, 2019. It is worth noting that the cause of this outage could not be definitively attributed to any particular party. This shows that sometimes, despite meticulous planning and adherence to protocols, external factors can impact the progress of a project and cause delays beyond anyone's control.

A Stop Work Directive to Derian

In response to concerns over possible quality deficiencies, the government issued a stop work directive to Derian. This step, while understandably precautionary, can still put a strain on the contractor's resources and reputation. Nonetheless, Derian promptly addressed the government's concerns and submitted a revised quality control plan. By doing so, they demonstrated their commitment to resolving any issues and maintaining a high standard of work. Consequently, the government authorized Derian to resume work, acknowledging the contractor's diligence and responsiveness.

Later in the project, the government identified a leakage issue and deemed it necessary to find a design solution. This resulted in the issuance of a contract modification that required the installation of Variable Frequency Drives (VFDs). Derian, understandably, expressed concerns about the impact this would have on their schedule. These concerns were raised when the government requested limitations on Derian's activities until the new design solution was completed. Such limitations can introduce complexities and potentially affect the overall project timeline.

The Importance of Effective Communication and Collaboration

These series of events highlight the importance of effective communication and collaboration between the contractor and the government in contract disputes. Both parties must maintain open lines of communication, promptly address concerns, and work towards mutually agreed-upon solutions. The Contract Disputes Act provides a framework for resolving disputes arising from government contracts, emphasizing the need for fair and equitable decisions in such cases. By adhering to the principles outlined in the Act, both contractors and the government can navigate contract disputes more effectively and maintain a positive working relationship.

Following the partial termination of the contract by the government, specific sections of the turbine pits were removed from Derian's scope of work. In response to this termination, the government requested Derian to submit a plan and schedule for completing the remaining work. However, Derian raised a dispute regarding the contract completion date, asserting that they were not afforded the opportunity to finish the final unit installation.

Derian Prepared a "Final Cost Settlement" Document

During the course of negotiations, the government informed Derian about the possibility of incurring liquidated damages. In light of this, Derian prepared a "Final Cost Settlement" document, wherein they requested an adjustment of $61,935 to the contract price. Subsequently, Derian was advised to submit a request for equitable adjustment (REA), which they promptly did, seeking a contract price adjustment of $111,394. Responding to each of Derian's 11 claims, the government eventually issued a modification that raised the contract price.

After carefully considering all the claims and counterclaims put forth by both parties, the government issued a definitive final decision addressing each one. As a result of this decision, Derian was awarded an additional $26,391 in costs. Furthermore, the government factored in a credit for the terminated work. However, Derian contested the government's application of liquidated damages, leading them to file an appeal against the government's final decision with the Board.

The Appeal

In their appeal, Derian made it clear that they were standing their ground and pressing forward with their claim for four out of the eleven increased cost claims. This demonstrates their determination to fight for what they believed they are entitled to. Not only that, but they also took issue with the government's liquidated damages assessment and sought termination settlement costs. This indicates their commitment to pursuing a fair resolution and ensuring that all aspects of their case are thoroughly examined.

Throughout the document, various critical points were addressed in great detail. The termination and changes clauses of the contract were carefully scrutinized, with emphasis on how they impacted the proceedings. This demonstrates the thoroughness with which Derian approached their case, leaving no stone unturned. Additionally, the determination of the final contract price was analyzed, shedding light on the factors that influenced the calculation and the potential implications for both parties involved.

Equitable adjustment: The Importance of Fairness in Resolving Disputes

Equitable adjustment emerged as a significant focal point, showcasing the importance of fairness in resolving disputes. The burden of proof was discussed, highlighting the vital role it played in determining the validity and credibility of each party's claims. This underscores the necessity of presenting compelling evidence and arguments to support one's position.

An intriguing aspect addressed in the document relates to the use of current estimates rather than relying solely on the original proposal prices. This brings attention to the need for adapting to changing circumstances and evaluating costs based on the most up-to-date information available. By recognizing this principle, Derian demonstrated their commitment to fairness and accuracy in assessing the financial implications of the contract.

Commissioning of Pumps in the Turbine Pits.

One key disagreement between Derian and the government revolved around the government's estimate for the "Commissioning of Pumps in the Turbine Pits." Derian argued that the estimate provided by the government was overstated, while the government countered with the assertion that Derian's figure was understated. The Board, after careful consideration, found the government's argument compelling, displaying their impartiality and commitment to a fair resolution.

Furthermore, Derian's claims for increased costs resulting from a power outage and the government's failure to grant safe clearance were ultimately denied by the Board. This outcome reinforces the importance of substantiating claims and providing compelling evidence to support them. While Derian's arguments may have been valid, the Board's decision highlights the necessity of meeting the burden of proof and presenting a strong case.

The Termination for Convenience Settlement Clause

The document also delved into the allowance of costs under the termination for convenience settlement clause. It reflected Derian's desire for an offset of costs incurred during discussions with the government, illustrating their determination to recover expenses that they believe should be reimbursed. The Board's determination that the claimed hours and costs were allocable and reasonable demonstrates their commitment to fairness in assessing the settlement. However, the disallowance of costs lacking supporting documentation emphasizes the need for diligent record-keeping and documentation throughout the contract process.

Additionally, the Board found that Derian had not provided adequate documentation for all their CREM subcontractor costs. This emphasizes the importance of attention to detail and thoroughness in preparing and presenting a case. It underscores the necessity of ensuring that all relevant documentation is provided to support each claim, as incomplete or insufficient records can affect the credibility and success of a party's arguments.

The Board has Categorized Derian's Claims into Four Main Categories

In this content, we delve into the details of a contract dispute involving Derian and the government. The Board has categorized Derian's claims into four main categories: electrical subcontractor costs, labor and vendor costs, stainless-steel components, and pump plates. While some of Derian's claims are denied, the Board recognizes that Derian is entitled to increased costs for the modifications made to the pump plates.

Derian is seeking $10,735 for additional labor and material costs related to the split pump plates. The government accepts two invoices from Starman Metal Fabricators but challenges the overall amount claimed by Derian. However, Derian has not provided sufficient evidence to substantiate their claim for increased labor costs caused by the split pump plates. On the other hand, the government is asserting a claim for liquidated damages amounting to $42,720, which Derian disputes.

In the case of liquidated damages, it is the government's responsibility to prove that Derian failed to meet the contract completion date. However, the original completion date became irrelevant when a design defect was discovered by the government. Furthermore, the government has not established a new contract completion date for the remaining work. As a result, Derian is deemed entitled to an additional payment of $114,776.30 on the contract, along with interest under the Contract Disputes Act (CDA).


In conclusion, the document under scrutiny provides a comprehensive examination of contract dispute resolution, shedding light on its complexities and intricacies. Through a meticulous analysis of the efforts exerted by both Derian and the government, it becomes increasingly evident that the contract disputes act serves as a crucial mechanism to safeguard fairness and justice within government contracting. By delving into the various layers of this process, the document underscores the significance of attention to detail, contractual interpretation, and unwavering dedication in achieving a just resolution. Ultimately, the contract disputes act stands as a pillar of reliability and ensures that contractual disputes are addressed in a manner that upholds the principles of equity and integrity in the realm of government contracting.


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