Government Contracting Database
Privity of Contract
The Tucker Act allows the United States Court of Federal Claims to render judgment upon any claim by or against, or dispute with, a contractor arising under section 10(a)(1) of the CDA, including a dispute concerning termination of contract. 28 U.S.C. § 1491(a)(2). Subcontractors, however, generally do not have the right to seek and collect contract damages from the government pursuant to the CDA because they usually are not in contractual privity with the government. See Demodulation, Inc. v. United States, 123 Fed. Cl. 98, 103 (2015)(citing United States v. Johnson Controls, Inc., 713 F.2d 1541, 1550 (Fed. Cir. 1983)); see also United States v. Blair, 321 U.S. 730, 737 (1944).
The government routinely uses a two-tier contracting system for its procurements. It enters into a contract with a prime contractor; the prime contractor, in turn, enters into a contract with a subcontractor. This system creates a legal buffer between the subcontractor and the government. It provides the government with a means of “administering its procurement through a single point of contact, [thereby making] the Government’s job. . . simpler and cheaper.” S. Rep. No. 1118 at 16-17 (1978), reprinted in 1978 U.S.C.C.A. N. 5235, 5250. “If direct access were allowed to all Government subcontractors, contracting officers might, without appropriate safeguards, be presented with numerous frivolous claims.” Id.
Therefore, in most cases, the subcontractor has no right of direct action against the government but must go through the prime contractor. See, e.g., Nat’l Leased Hous. Ass’n. v. United States, 32 Fed. Cl. 454, 460 (1994). There are two ways in which a subcontractor can recover indirectly from the Government. First, any subcontractor claims that are sponsored or certified by a prime contractor and are brought in the prime contractor’s name are allowed. M.K. Ferguson Co. v. United States, No. 12-57 C, 2016 WL 1551650, at *8 (Fed. Cl. Apr. 14, 2016) (citing United States v. Turner Constr. Co., 827 F.2d 1554, 1559-61 (Fed. Cir. 1987)). Second, a prime contractor can include its liability to a subcontractor in its damages against the Government. Lockheed Martin Corp. v. United States, 50 Fed. Cl. 550, 554 (2001), aff’d, 48 F. App’x 752 (Fed. Cir. 2002) (citing Pan Arctic Corp. v. United States, 8 Cl. Ct. 546, 548 (1985)).
There are a few exceptions to the general no-privity rule for subcontractors which allow a subcontractor to bring direct action against the government. The subcontractor must have entered into an explicit or implicit contract with the Government. See Blair, 321 U.S. at 737; Balboa Ins. Co. v. United States, 775 F.2d 1158, 1160-61 (Fed. Cir. 1985); Putnam Mills Corp. v. United States, 479 F.2d 1334, 1337 (Cl. Ct. 1973) (“It is clear that, unless the plaintiff can provide evidence of the existence of some type of contract between it and the United States, it cannot, as a subcontractor, recover directly from the United States for amounts owed to it by the prime.”) (citation omitted). Thus, Plaintiffs’ claim cannot be “jurisdictionally sound” unless a contract or its jurisdictional equivalent “specifically allows the monetary relief’ Plaintiffs request. Son Broad., Inc. v. United States, 42 Fed. Cl. 532, 535 (1998).
Lockheed Martin Corp. v. United States, 50 Fed. Cl. at 554-55.
Updated: July 3, 2018