MOTION TO AMEND DENIED: July 10, 1992 GSBCA 11368 COMPUTER NETWORK SYSTEMS, INCORPORATED, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Carl L. Vacketta and Richard P. Rector of Pettit & Martin, Washington, DC, and Barbara Spencer Lamade of Computer Network Systems, Incorporated, Arlington, VA, counsel for Appellant. John E. Cornell, Michael D. Tully, and Margaret A. Dillenburg, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. WILLIAMS, Board Judge. This matter comes before the Board on respondent's motion for leave to amend its answer to raise what it terms are affirmative defenses but what appellant contends is a wholly separate defective cost and pricing data claim. In its complaint, appellant seeks $208,213.49, representing monies owed by the Government due to appellant's miscalculation of a surcharge for usage of certain software and resultant billing errors under a multiple award schedule (MASC). This appeal was brought under the rubric of a deemed denial after the contracting officer failed to issue a final decision in response to appellant's claim. The proposed amendment to the answer comes only two weeks before the hearing even though the Government knew the facts underlying the amendment as early as the fall of 1990. Appellant has vigorously opposed the amendment arguing that the Board would lack jurisdiction over the proposed amendment because the allegations amount to a Government claim for which there has been no contracting officer's final decision. Appellant also claims prejudice due to the Government's delay in raising the amendment. As explained below, we deny the motion for leave to amend, finding that the Board lacks jurisdiction over the amendment, which we construe to be a Government claim. Moreover, even if one were to deem the amendment to be a defense or if the jurisdictional defect could be cured, the Government has offered no justification for its delay, the amendment would prejudice appellant by injecting a wholly new issue into the case on the eve of trial, and the Government will not be prejudiced since it retains the right to pursue its claim in a separate proceeding. Background On September 3, 1991, Computer Network Systems, Inc. (CNSI) filed an appeal in connection with the contracting officer's failure to issue a final decision in response to CNSI's claim of May 15, 1991. In its claim, CNSI sought $208,213.49, which represented the unpaid balance of surcharge costs for Government usage of PILOT software under a MASC. In its initial answer, filed on October 3, 1991, respondent claimed that the PILOT surcharge should have been twenty percent, not the fifty percent appellant claimed. Respondent averred that its "acceptance of the 50% software surcharge in the [1988] MASC was based on CNSI's representation that it did not discount from the 50% surcharge. Respondent avers that CNSI provided other government users with a 20% surcharge and that the [GSA, ADP Systems Procurement Branch (KECT)] should have been offered a 20% surcharge." Answer B9. By order dated October 8, 1991, the Board granted respondent's request to amend the answer to change a reference in paragraph B9, there being no objection. By order dated October 29, 1991, the Board scheduled the hearing for July 13-16, 1992, and established June 30, 1992, as the discovery cutoff. On December 2, 1991, respondent requested an enlargement of time in which to respond to appellant's discovery requests, which the Board granted on December 5, 1991. By order dated January 13, 1992, the Board, despite appellant's objection, granted respondent an additional enlargement of time within which to respond to appellant's discovery requests. On June 8, 1992, new additional counsel for appellant entered an appearance. On June 11, 1992, the Board convened a telephonic conference to discuss scheduling in light of appellant's new counsel. Although appellant remained ready for trial, respondent requested an extension because it had been unable to file written discovery requests until June 2, making appellant's responses due after the discovery cutoff on June 30. Over appellant's strenuous objection, the Board granted respondent's request, but expedited the due date for appellant's responses to the discovery to permit sufficient time for depositions. The Board did not grant a continuance of the July 13 hearing date. Order (June 12, 1992). On June 26, 1992, approximately two weeks before trial, respondent filed a motion for leave to amend its answer. Respondent's sole grounds were stated as follows: Pursuant to Board Rule of Procedure 7(f)(1), the Board may permit parties to amend their pleadings on "conditions fair to both parties." In this case, the evidence supports affirmative defenses relating to Appellant's failure to disclose certain pertinent information when negotiating the 1988 Multiple Award Schedule Contract ("MASC"). Based upon this evidence, Respondent seeks to amend its answer to include the appropriate affirmative defenses, as set forth in the concurrently filed proposed Amendment to Respondent's Answer. Respondent's Motion for Leave to Amend Its Answer at 1. The proposed amendment states: FIRST AFFIRMATIVE DEFENSE (Duty to Disclose) Pursuant to the terms of the solicitation, Appellant had a duty to disclose, during negotiations for the 1988 MASC, that it was charging the Government a 20% surcharge on PILOT. Appellant failed to do so, thereby influencing GSA into erroneously accepting that a 50% surcharge was the best price that Appellant was offering to anyone. Appellant's claim is premised upon the negotiated 50% surcharge rate, however this rate was awarded only because Appellant failed to furnish complete, accurate and current pricing data. Had the 20% surcharge rate been disclosed, the Government would have negotiated Appellant's contract on that basis. Because of this failure to disclose the services provided earlier at the 20% surcharge rate, Appellant is not entitled to the 50% surcharge rate which was erroneously awarded, and Appellant's claim must be denied. SECOND AFFIRMATIVE DEFENSE (Violation of Truth in Negotiations Act) Appellant violated the terms of the Truth in Negotiations Act ("TINA"), 10 U.S.C. section 2306, which required Appellant to submit cost and pricing date [sic] and certify that such data was accurate, complete and current, prior to the award of the 1988 MASC. Appellant violated TINA by failing to disclose the existence of the 20% surcharge, which was a fact that a prudent buyer would reasonably expect to affect price negotiations significantly. Appellant's claim is premised upon the negotiated 50% surcharge rate, however this rate was awarded only because Appellant failed to furnish complete, accurate and current pricing data. Had the 20% surcharge rate been disclosed, the Government would have negotiated Appellant's contract on that basis. Because of this failure to disclose the services provided earlier at the 20% surcharge rate, Appellant is not entitled to the 50% surcharge rate which was erroneously awarded, and Appellant's claim must be denied. Respondent's Amendment to Answer at 1-3. Appellant opposed the motion, arguing that: (1) the Board lacks jurisdiction over the defective cost and pricing data allegations because they were never the subject of a contracting officer's final decision and (2) assuming arguendo the Board has jurisdiction over the defective cost and pricing data claims, their addition to the case at this late date would prejudice appellant. Appellant's Opposition to Respondent's Motion for Leave to Amend Its Answer. On July 1 and 2, the Board heard oral argument on the motion for leave to amend. The parties agreed that there are different contracting officers, different contracts, and different branches of GSA involved in the pending appeal and the proposed amendment. Amended Conference Memorandum (July 8, 1992). The Government offered no explanation for the failure to raise the "affirmative defenses" earlier and did not dispute that the facts underlying the amendment were known when the original answer was filed. Nor did the Government dispute that the contracting officer had testified that the Government had considered raising these defective cost and pricing data allegations as early as the fall of 1990. Id. Government counsel also stated that the Office of Inspector General (IG) had declined to perform an audit pertinent to the defective pricing allegations. Id. Although appellant was aware that the IG was investigating five issues, none of them involved defective cost and pricing data. Government counsel contended that any jurisdictional deficiency in its proposed amendment could be cured by the immediate issuance of a contracting officer's final decision, and that it would be in the interest of justice to permit respondent to assert its affirmative defenses and avoid a duplicative separate proceeding. Id. Appellant's counsel represented that were the Government to issue a final decision including defective pricing allegations, it would elect to appeal that decision to the Claims Court, not this Board. Id. By letter dated July 8, 1992, counsel for respondent advised the Board: This letter is to advise you that GSA has decided to issue a final decision which relates to this case. The final decision will deny CNSI's certified claim in the amount of $208,213.49, modify the contract price pursuant to 48 C.F.R. 52.215-22, and request repayment for overpayments made by GSA to CNSI under Contract No. GSOOK88AFS1220 and the letter agreement under the 1985 MASC. I anticipate that the final decision will be issued sometime next week. The hearing in this appeal was scheduled to commence Monday of the next week, i.e., on July 13, 1992. Discussion Our rules provide that leave to amend may be granted on conditions fair to both parties. Rule 7(f). Here, the Government has requested to amend its answer on the eve of trial to inject a wholly new issue and has offered no justification for its delay. Because the new issue is in essence a defective pricing claim which has never been the subject of a contracting officer's final decision, the Board presently lacks jurisdiction over the claim. Under the Contract Disputes Act, 41 U.S.C. 605(a)(1988) ("[a]ll claims by the government against a contractor . . . shall be the subject of a decision by the contracting officer"). Government counterclaims against a contractor must be subject to a contracting officer's decision before the Government may assert them in the Claims Court. Joseph Morton Co. v. United States, 757 F.2d 1273, 1281 (Fed. Cir. 1985). Respondent seeks to avert this jurisdictional obstacle by arguing that because the amendment raises only "affirmative defenses," is not characterized as a claim, and does not seek a sum certain or any money judgment, it is not a "claim." By simply denominating its defective pricing allegation a "defense," and not demanding a sum certain, respondent cannot change its character. A "claim" is defined in the Federal Acquisition Regulation (FAR) as "a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract." 48 C.F.R. 33.201 (1991). Because the Government's defective pricing allegation specifically seeks the "adjustment" of the 1988 MASC terms from a fifty percent surcharge for PILOT software usage to a twenty percent surcharge, the Government is asserting a claim within the FAR definition. In Placeway Construction Corp. v. United States, 18 Cl. Ct. 159, 164 (1989), aff'd in part, vacated in part, 920 F.2d 903 (Fed. Cir. 1990), the Claims Court, applying the FAR definition of "claim," held that the Government's assertion of its right to set off was tantamount to seeking "the adjustment of contract terms" and was thus equivalent to the assertion of a Government claim within the meaning of the FAR.[foot #] 1 The court stated: The court's conclusion is further supported by case law, which views the Government's right of set off as a government claim. . . . Unless the amount of set off has been determined as part of a final decision by the CO, however, this court is without jurisdiction to entertain plaintiff's action to recover the withheld amount of the contract in issue. Id. at 164-65 (citations omitted); see also Mutual Maintenance Co., GSBCA 7496, 85-2 BCA 18,098, at 90,856 ("The [CDA] encompasses two sorts of claims: claims by contractors against the Government, and claims by the Government against contractors. Both sorts of claims are to be subjected first to a determination by a contracting officer before an appeal to an agency board or a suit in the United States Claims Court may be commenced.") As this Board has recognized: "[w]ithout [a final decision by a contracting officer], there is not a valid claim by the Government that can be adjudicated." Diamond Envelope Corp., GSBCA 10752, 91-3 BCA 24,138, at 120,791; accord International Telephone & Telegraph Corporation/Electro-Optical Products Division, ASBCA 27802, 83-2 BCA 16,773, at 83,390 ("We should state that we cannot recall, and respondent has not cited, a case where in the face of appellant's opposition we have taken jurisdiction of a Government claim that was not the subject of a contracting officer's decision."). Respondent further appears to suggest that any jurisdictional deficiency could be cured by the immediate issuance of a final decision by a contracting officer. ----------- FOOTNOTE BEGINS --------- [foot #] 1 The Federal Circuit agreed that the set off asserted was a Government claim. 920 F.2d at 907. ----------- FOOTNOTE ENDS ----------- In fact, respondent has notified the Board that the contracting officer decided to issue a final decision both denying appellant's claim and stating the Government's defective pricing claim in a sum certain, and that it would likely issue such decision during the week of trial. Aside from the undue delay in endeavoring to assert its claim in this appeal, the issuance of a contracting officer's final decision does not automatically endow this Board with jurisdiction over the Government's claim. Appellant has not yet appealed that decision in this or any other forum. Nor will it have by next week. Appellant has ninety days to appeal to the Board and one year to appeal to the Claims Court. 41 U.S.C. 606, 609(a)(3) (1988). Appellant has indicated it would object to a defective pricing claim being heard in this forum, preferring the United States Claims Court. In addition to the jurisdictional obstacle, both practical concerns and policy considerations militate against permitting the amendment here. The proposed amendment would inject a new, complex issue and necessitate further discovery and delay trial, all to appellant's prejudice without any justification for respondent's delay. Conference Memorandum (July 8, 1992). As one District Court has recognized: "Unexcused delay, coupled with the probability that the addition of new claims would lead to a new wave of discovery, is . . . an adequate basis for denying leave to amend." Preferred Meal Systems v. Save More Foods, Inc., 129 F.R.D. 11, 13 (D.D.C. 1990), citing Richardson Greenshields Sec. v. Mui-Hin Lau, 113 F.R.D. 608, 611-12 (S.D.N.Y. 1986); see also Tenneco Resins, Inc. v. Reeves Bros. Inc., 752 F.2d 630, 634 (Fed. Cir. 1985) ("A litigant's failure to assert a claim as soon as he could have is properly a factor to be considered in deciding whether to grant leave to amend.") (citations omitted). The Government's failure to assert its defective pricing allegations until the eve of trial when it knew of its claim almost two years ago and when the Government retains the right to raise that claim in the future is strong reason to deny an amendment which could radically alter this proceeding. We, thus, deny leave to amend. Decision Respondent's June 26, 1992, motion for leave to amend its answer and respondent's motion to compel are DENIED, confirming the Board's oral rulings on July 8, 1992. _____________________________ MARY ELLEN COSTER WILLIAMS Board Judge