Disputes and Claims for State Contracts in the DMV (D.C., Maryland, and Virginia) Part 3 of 3 – Virginia


This is the final post in our three-part series on state level government contract claims, and the accompanying dispute processes, in the DMV. This post discusses the claims and disputes process for government contracts in the Commonwealth of Virginia. Our previous posts discussed the claims and disputes processes in Maryland and D.C.  

In keeping with the Commonwealth’s decentralized procurement approach, and unlike Maryland and D.C., the Commonwealth does not have a Board of Contract Appeals. Consequently, a contract claim appeal typically must go to a court of law, which means the appeal will be subject to the court’s procedure (which will probably be more expensive than a Board appeal), and possible decision-making by a jury (which will not be comprised of government contracts specialists). Also, as compared to D.C. and Maryland, the Virginia Public Procurement Act (“VPPA”) loosely defines the claims process, so the contractor should keep a sharp eye on the agency-specific or local rules. Those rules could significantly alter the claims and dispute process.

With these principles in mind, the general rules are as follows.

RELEVANT LAW

The relevant statutes can be found in the VPPA, which is codified in the Virginia Code at Chapter 43 of Title 2.2 (Administration of Government).

AUTHORITY TO FORM, EXERCISE OPTIONS, MODIFY, AND TERMINATE A CONTRACT

The VPPA directly vests procurement authority in public bodies (agencies, boards, commissions, local government, etc.), and their authorized officials. See Va. Code § 2.2-4302. The authorized official who forms and administers a contract is often referred to as a Purchasing Agent.

DEFINITION OF A CLAIM

Under the VPPA, a contractual claim can be “for money or other relief[.]” Va. Code § 2.2-4363(A). Therefore, monetary, as well as some non-monetary, claims are allowed. The VPPA does not specify the elements that must be included in a writing for it to be considered a claim. See Jean Moreau & Assocs., Inc. v. Health Ctr. Comm’n for the Cnty. of Chesterfield, d/b/a Lucy Corr Village, 283 Va. 128, 136 (2012) (“[Va.] Code § 2.2-4363 does not prescribe exactly what a writing must contain to be considered a ‘claim[.]’”). However, under the VPPA’s decentralized scheme, additional procedural requirements may be found in agency-specific statutes or regulations, local ordinances, or contract terms. Regardless, the claim should include adequate information to facilitate a public official’s decision-making, including a description of the factual circumstances leading to the claim, a recitation of the relevant contract terms, and clear requests for the relief sought including a stated amount if seeking monetary relief. Generally, a claim can only be brought by a contractor that has an express contract with the agency/public body, a rule which excludes a claim by a subrogee (e.g., an insurance company), an implied-in-fact contract claim, or a claim based upon quasi-contract/quantum meruit. See XL Specialty Ins. Co. v. Commonwealth of Va., 47 Va. App. 424, 434 (2006); New Viasys Holdings, LLC, as successor to Viasys Servs., Inc. v. Va. Dep’t of Transp., 84 Va. Cir. 559, at 3 (2012). Also, a subcontractor “pass-through” or “sponsored” claim is generally not allowed, although Title 33.2 of the Virginia Code does allow a subcontractor pass-through claim for a Virginia Department of Transportation highway construction contract. See Melisa A. Roy, Esq., The Elusive Permissibility of Pass-Through Claims in Va., 64 Virginia Lawyer 30-34 (Dec. 2015); Va. Code §§ 33.2-1101-03.

CONTRACTOR CLAIM SUBMISSION
 
According to the VPPA, “written notice of the contractor’s intention to file a claim shall be given at the time of the occurrence or beginning of the work upon which the claim is based.” Va. Code § 2.2-4364(A). The claim itself can be filed with the contractor’s notice of intent, or later, as the contractor sees fit. In any event, a claim cannot be filed “later than 60 days after receipt of [contract] final payment[.]” Id. Further, a contractor should keep its eye on Virginia’s five-year statute of limitations for legal actions on written contracts, which generally applies to a contractor under a government contract. See Va. Code §  8.01-246(2); see also Burns v. Bd. of Supervisors of Stafford Cnty., 227 Va. 354, 361 (1984). The VPPA also states that “[e]ach public body shall include in its contracts a procedure for consideration of contractual claims.”  Va. Code § 2.2-4364(B). Therefore, a contractor should review the rules of the public body, which may add to the claim submission procedure. At the same time, the public body cannot impose claim procedures that essentially nullify the VPPA. See Modern Cont’l So. v. Fairfax Cnty. Water Auth., 70 Va. Cir. 172, at 17 (2006) (public body notice procedure held unenforceable because it contravened statutorily granted appeal rights).

GOVERNMENT CONSIDERATION OF THE CLAIM

Generally speaking, following receipt of the contractor’s claim, the public body has 90 days to render a written decision on the claim. See Va. Code § 2.2-4363(C)(2). The decision on the claim should be “signed by the public body’s chief administrative officer or his designee.” Id. If the agency/public body fails to issue a proper decision within 90 days of claim submission, the claim will be “deemed” denied. See id. The contractor should consult with the public body’s rules for further instruction.  

APPEAL OF THE CLAIM DECISION

Following the denial of a claim, the contractor has six months to appeal the decision, and can either go through an administrative appeal process, or proceed directly to the Circuit Court. See Va. Code § 2.2-4363(D). As an additional procedural hurdle, if the contractor’s claim is against a county, to appeal to the Circuit Court the contractor must first submit notice of the impending appeal to the clerk of the county governing body, and execute a bond (approximately $250), no later than 30 days after receiving notice of the claim denial. See Va. Code § 15.2-1246; Viking Enter., Inc. v. Cnty. of Chesterfield, 277 Va. 104, 112 (2009). Nonetheless, even with giving the county notice of the appeal, the contractor still has the full six months to file its complaint at the Circuit Court.  

Alternatively, if the contractor elects to undertake the administrative appeal process (if the public body has instituted such a process), the cognizant public body is supposed to provide a hearing in front of a “disinterested person or panel,” and not “an employee of the governmental entity[.]” Va. Code § 2.2-4365(A). Following conclusion of the administrative appeal, the contractor will then have 30 days to appeal to the Circuit Court, not the previous period of six months. See Va. Code § 2.2-4365(B). Finally, some public contracts may include terms that require a contractor to go through binding or non-binding alternative dispute resolution. Continuing the persistent theme under the VPPA, the agency-specific or local rules may have more to say on the dispute process than the VPPA itself.

CONDUCT OF THE APPEAL

To initiate an appeal at a Circuit Court, a complaint with all referenced exhibits must be filed with the clerk’s office for the Circuit Court. If monetary relief is sought, the complaint must contain an ad damnum provision, which sets a ceiling on the contractor’s recovery, unless the court later allows that provision of the complaint to be amended. If the contractor wants the appealed claim to be reviewed by a jury, the complaint must include a jury demand. Virginia court rules allow the initial discovery request to be served with the complaint. After obtaining the summons from the clerk’s office, serving papers on the public agency/public body (typically via the city or county attorney, or the Office of the Attorney General), and returning proof of service to the clerk’s office, the public agency or public body has 21 days from being served to answer the complaint, and 28 days from being served to respond to the initial discovery request. Discovery can continue while the parties file responsive pleadings. The legal proceeding will progress, and the matter brought to a bench or jury trial, as determined by the judge.          

AVAILABLE RELIEF

A Virginia Circuit Court has the power to provide both legal (e.g., monetary damages) and equitable (e.g., contract reformation or rescission) relief. However, pre-judgment interest on claims is typically not awarded. See Commonwealth of Va. v. AMEC Civil, LLC, 280 Va. 396, 426 (2010) (“[I]n the absence of a statutory or contractual waiver, the Commonwealth and its agencies have sovereign immunity from liability for pre-judgment interest on contract claims.”).

APPELLATE COURT PROCEEDING

Generally, a Circuit Court decision on a contract claim is appealed to the Court of Appeals of Virginia. However, if the procuring public body is not considered an administrative agency under Va. Code § 17.1-405, then the appeal goes directly to the Virginia Supreme Court. See, e.g., Commonwealth of Va. v. E.W. Yeats, Inc., 233 Va. 17, 19-22 (1987). To be an administrative agency under the Virginia Administrative Process Act, the public body must be a unit of the State Government, so municipal and county boards are not administrative agencies. See id.   

We thank you for following our three-part series on government contract claims and disputes in the DMV.

Click here for Part 1 of 3 - Maryland

Click here for Part 2 of 3 - D.C.
 
This blog was written by Christopher Denny and Jason Blindauer at Miles & Stockbridge. Alfred Wurglitz supervised the creation of this blog series.                         

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.