Six Essential Tips for Navigating the Contract Claims Process in Government Contracting

In celebration of the release of the 6th Edition of the Government Contracts Compliance Handbook, we are sharing six essential tips for successfully navigating the contract claims process under federal procurement regulations. Even with careful performance, disputes over scope, pricing, and contract performance can arise between contractors and the government. Understanding how to properly submit, price, and negotiate claims under the Contract Disputes Act (CDA) and Federal Acquisition Regulation (FAR) Disputes Clause is essential to maximizing recovery while avoiding compliance pitfalls. These six tips will help government contractors assert their rights effectively while minimizing legal and financial risks. 

1. Ensure Your Claim Meets the Legal Definition of a "Claim"  

Before submitting a request for additional compensation or schedule relief, contractors must ensure their submission qualifies as a valid claim under the CDA. A claim must:   

- Be a written demand seeking payment, contract interpretation, or other relief as a matter of right.   

- State a sum certain if seeking monetary relief.   

- Be submitted to the Contracting Officer (CO) for a final decision.   

- Include certification if the claim exceeds $100,000.   

Strict adherence to the requirements for a valid claim is critical, and knowing the difference between a claim and other submissions to the government can save contractors from fatal procedural challenges on appeal. Routine requests for payment, for example, usually do not qualify as claims under the CDA. On the other hand, contractors should be careful to clearly delineate other submissions from claims to avoid inadvertently forfeiting their appeal rights. Tribunals have found that a Request for Equitable Adjustment (REA), which seeks voluntary modification of contract terms under one of the contract’s remedy-granting clauses, may sometimes be treated as a claim if it otherwise meets these elements, regardless of whether the contractor calls it a claim. In such cases where the contracting officer has denied an REA, failing to timely appeal the denied “claim” can result in the contractor forfeiting recovery entirely. Properly structuring the claim from the outset ensures the contractor has recourse for appeal if the CO issues an adverse decision.   

2. Certify Claims Properly to Avoid Rejection  

For claims exceeding $100,000, the CDA requires a certification, stating that:   

1. The claim is made in good faith.  
2. Supporting data is accurate and complete to the best of the contractor’s knowledge.  
3. The amount requested accurately reflects the contract adjustment sought.  
4. The person certifying is authorized to do so.  

Failure to certify, or submitting a defective certification, can delay processing or invalidate the claim. However, defective certifications (those containing errors) can often be corrected, whereas a completely missing certification may require resubmission.   

Additionally, Department of Defense (DoD) contracts often require certification of REAs, even though REAs are not CDA claims. Contractors should ensure they understand the distinctions between the two types of certification, and provide the correct one, before submission.  This information should be provided in the contract’s clauses addressing REAs and disputes. 

3. Maintain Strong Recordkeeping to Substantiate Claims  

A well-documented claim stands the best chance of success during government review and, if necessary, litigation. Contractors should:   

- Maintain contemporaneous records of work performed, costs incurred, and changes directed by the government.   

- Document all communications with government personnel, particularly regarding scope changes and modifications.   

- Keep detailed accounting records segregating contract-related costs, especially for time and material or cost-reimbursable contracts.   

- Use cost-tracking mechanisms to allocate direct and indirect costs in compliance with Cost Accounting Standards (CAS).   

Government auditors and COs scrutinize claims for unsupported cost estimates or missing documentation. Poor recordkeeping can not only lead to denied claims, but also allegations of false claims or fraud.  Contractors should always ensure that they provide sufficient documentation to substantiate and demonstrate the accuracy of their sum certain. 

4. Choose the Right Pricing Method for Contract Adjustments  

A contractor’s pricing methodology is critical in determining whether a claim is successful or challenged. Three common methods for pricing contract claims include:   

1. Actual Cost Method (Preferred) – Uses verified direct costs incurred due to government-caused changes or delays.  
2. Modified Total Cost Method – Adjusts total cost claims by removing unrelated costs or inefficiencies caused by the contractor.  
3. Total Cost Method (Least Favored) – Subtracts the original bid estimate from total incurred costs, but is rarely accepted without strong justification.  

The actual cost method is most widely accepted and least likely to face government challenge. Contractors should avoid relying on estimates or unsupported projections, as these can raise fraud concerns and lead to audit disputes.  Contractors should remember that even if the contracting officer approves the claim, the contract will require modification to adjust the amount paid.  This may subject any adjustment resulting from a claim to further review and audit by the government in the future. 

5. Be Strategic About Claim Submission Timing  

While it may be tempting to submit a claim as soon as a dispute arises, strategic timing is key. Contractors should consider:   

- CDA Interest Accrual – Interest begins accruing from the date the CO receives a valid claim, which can provide financial leverage.   

- Government Relationship Considerations – Premature claims can damage the contractor’s relationship with the agency, reducing the likelihood of future awards.   

- Project Completion Impact – Filing claims mid-performance may create tensions that disrupt contract execution.   

- Negotiation vs. Litigation – If informal negotiations are likely to succeed, submitting an REA first may be more beneficial than immediately filing a CDA claim.   

- Consultant Costs – While costs incurred from outside consultants, including legal fees, during the negotiation of an REA may be recoverable, costs incurred in the preparation of a claim are considered litigation expenses and are generally not recoverable. 

Contractors should evaluate whether an REA or a CDA claim is the best first step and avoid unnecessary escalation when a negotiated settlement is feasible.   

6. Prepare for Appeals and Government Scrutiny

If the CO denies a claim, the contractor has two options for appeal:   

1. Boards of Contract Appeals (ASBCA or CBCA) – Requires filing a notice of appeal within 90 days of the CO’s final decision. These forums are more informal and focus on contract disputes.  
2. U.S. Court of Federal Claims (COFC) – Requires filing a lawsuit within one year of the CO’s final decision. This route involves formal litigation with DOJ attorneys defending the agency.  

Additionally, contractors must ensure accuracy in all claims submissions to avoid allegations of fraud. The government has broad enforcement powers, including:   

- False Claims Act (FCA) penalties for knowingly submitting false or inflated claims.   

- Forfeiture of claims containing misrepresentations.   

- Criminal liability for fraud in severe cases.   

Contractors should carefully review all claims with legal counsel before submission and ensure that pricing, supporting documentation, and certifications are fully accurate.   

Navigating the contract claims process requires strategic planning, strong recordkeeping, and a clear understanding of CDA requirements. By following these six essential tips, contractors can maximize claim recovery, avoid compliance pitfalls, and strengthen their position in government contracting disputes.   

These insights, drawn from the 6th Edition of the Government Contracts Compliance Handbook, reflect our firm’s commitment to helping contractors navigate complex claims and disputes. For tailored legal guidance on claim preparation, contract disputes, or government audits, our elite government contracts practice group is ready to assist.