Whitepaper: The Audit World's Biggest Myths
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Whitepaper: The Audit World's Biggest Myths
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Navigate Contract Disputes With Ease 

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Contract Disputes and Litigation Support

The Federal Government contracting industry is an extremely regulated environment governed by a vast network of complex public laws, regulations and unique contract requirements. This regulated environment applies, in varying forms, to virtually all contractors doing business with the Government and at both the prime and subcontract levels. An inevitable outcome of this regulated environment is disagreements between the contracting parties. These disagreements may take various forms, arise for various reasons and be settled through either administrative or legal means. Common situations leading to contract disagreements or disputes include directed or constructive changes in the scope of work, termination by the government of the contract, differing site conditions, defective specifications, bid protests and notification to stop or delay work.

Contract Dispute Resolution & Financial Remedies

Contract disputes may be litigated under the Contract Disputes Act or addressed administratively directly with the contracting officer. A variety of standard government contract clauses exist that allow contractors mechanisms to seek remedies in resolution of disagreements or disputes. The primary objective leading to a formal contract dispute is recovery of monetary damages realized by contractors resulting from the occurrence of unforeseen situations during contract performance or the actions or inactions of other parties. Monetary damages or quantum development is where Capital Edge routinely assists contractors and outside legal counsel with the necessary accounting and financial support that is critical to the successful settlement of contract disputes or litigation.

Representative Matters

Capital Edge has an accomplished and seasoned team with a broad range of experience dealing with contract requests for equitable adjustment (REA), terminations for convenience and unique forensic or cost accounting matters. Our approach focuses on and is tailored to the specific circumstances relevant to the situation that will maximize the client’s opportunity to achieve their objectives. Contract disputes, much of the time, are unique and entail case-by-case aspects that must be considered during the process. Our professionals bring a combined diverse experience, including former government contracting officers, DCAA auditors, industry compliance executives and Big Four accounting firm practice leaders, in the Contract disputes and litigation support arena that enables Capital Edge to offer comprehensive view of the problem and provide value-added support to our clients.

We work with clients and outside counselor a domestic and international basis and across a wide range of industries, including aerospace and defense, construction, manufacturing, health care, and others. Contract disputes and litigation support matters that we frequently support involve termination for convenience, wrongful termination for default, government-directed stop or suspension of work, delay of work, change in scope of work, unabsorbed or extended overhead, and more.

Capital Edge has assisted contractors and their counsel with the following representative sample of contract disputes and litigation support matters:

  • Detailed accounting of costs incurred under a multi-year Department of Defense production contract terminated for default and contested with an administrative board of contract appeals
  • REA for cost impacts arising from suspended, then terminated, Department of Defense construction contracts involving the U.S. southern border
  • Cost impact and defense of construction contract labor classifications and prevailing wages dispute with the Department of Labor
  • REAs for construction contract disputes related to differing site conditions, constructive changes to the scope of work and government-invoiced electricity charges for work performed on a U.S. Navy base
  • REA for cost impacts arising from U.S. Army contracting officer inaction and constructive stop work
  • Forensics-based assessment of numerous contractor procurement transactions in response togovernment allegations of noncompliance with the Buy American Act
  • Cost impacts related to improper contractor billings and payments received in conjunction with an agency Mandatory Disclosure under a significant multi-year government IDIQ contract
  • Termination for convenience of U.S. Army contracts due to the collapse of the Afghanistan government

Our experienced professionals provide a variety of contract dispute litigation support assistance, including:

  • Calculation, documentation, supporting narrative and negotiation of the quantum aspects of REAs
  • Preparation of complete termination for convenience settlement proposals, including all the required Standard Forms, assessment of subcontractor settlement proposals and negotiation support with the customer
  • Day-to-day coordination and support with legal counsel
  • Direct dealings and liaison with Government officials regarding support and resolution of cost impacts, termination settlements and REAs
  • Deposition or expert witness services
  • In-house training regarding termination for convenience and contract changes and disputes

What is a CPSR?

CPSR stands for Contractor Purchasing System Review and is commonly referred to by some as a “CPSR Audit” or “CPSR Review”. In layman’s terms, a CPSR is an adequacy evaluation of a contractor’s policies, procedures and practices against certain FAR and DFARS requirements.

CPSR Meaning

Per FAR Part 44, the CPSR means a complete evaluation of a contractor’s purchasing of materials and services, subcontracting and subcontract management from requirements through completion of subcontract performance.


The DCMA CPSR Group's Mission

Although the CPSR is codified in FAR and is therefore not exclusively a DoD contractor concern, the Defense Contract Management Agency (DCMA) employs a team of dozens of CPSR procurement analysts to conduct the reviews of contractors’ purchasing systems. No other federal agency or department is comprised of such a large team of people solely dedicated to performing CPSRs. In fact, civilian agencies commonly engage the DCMA to perform reviews of contractors’ purchasing systems on their behalf.”

The DCMA has defined the Contractor Purchasing System Review (CPSR) Group’s mission – “Ensure that [Government] suppliers’ have purchasing systems in place that contribute to effective subcontract management. Effective subcontract management includes the development of, as well as performance to internal policy and procedures, public law and adequacy of cost and price analyses performed on subcontractors.”

Consistent with this mission statement, the Federal Acquisition Regulation (FAR) CPSR objective in  Subpart 44.3, Contractors’ Purchasing System Reviews, states that the “objective of a contractor purchasing system review (CPSR) is to evaluate the efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting….”

Understanding DCMA’s CPSR meaning, mission, and objective, contractors must realistically evaluate their current purchasing system. As part of this evaluation, contractors should use the primary authoritative regulations and DCMA guidance around the CPSR, including, without limitation:

DFARS 252.244-7001, Contractor Purchasing System Administration
FAR Subpart 44.3, Contractors’ Purchasing System Reviews
The FAR and DFARS clauses tested for compliance in a CPSR (e.g. FAR 52.204-10, etc.)
DCMA CPSR Policies and Procedures Checklist (commonly referred to by some as the “DCMA CPSR Audit Checklist” or “DCMA CPSR Checklist”)
DCMA CPSR Guidebook

Our experts help clients navigate the complexities of Contract Disputes and provide Litigation Support at every step. 

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Frequently Asked Questions

Here are the latest questions being asked about Contract Dispute Litigation

What is an REA in Government Contracting?
What situations may give rise to submission of an REA?

Several situations may arise during contract performance for which an REA may provide applicable relief.  Examples include – a customer-directed change to the scope of work, changes in the performance schedule (either delays or accelerations), defective specifications, differing site conditions and unreasonable or excessive customer inspection requirements.


What contractual rights do I have to submit and REA?
Various standard FAR clauses exist providing potential remedies for which contractors may submit REAs, frequently including FAR 52.242-14 (Suspension of Work), FAR 52.242-15 (Stop-Work) and FAR 52.243-X (Changes).

Can the government terminate a contract for convenience when the contractor is not at any fault?

Yes. The government has wide discretion to terminate contracts for reasons completely out of the contractor’s control. Examples include – loss of funding, change in needs or technologies, political environment, bid protest decisions and impossibility of performance.

How long do I have to submit a termination settlement proposal?

The standard FAR clauses require submission of a termination settlement proposal within one year of the effective date of the termination. Frequently, prime contractors will modify this clause and require submission from subcontractors within 6 months from the effective date of the termination.

What is a T4C and TSP?

A T4C is an acronym for ‘termination for convenience’ and TSP is ‘termination settlement proposal’.

Am I entitled to reimbursement for my unpaid costs incurred prior to the termination?
Generally, yes. The termination settlement process can be fairly extensive and is governed by FAR Part 49. A fundamental principle of the settlement process is to make the contractor whole because of the termination action and based on concepts of fairness and equity.
 What are directed and constructive changes?
A directed change is a formal (hopefully written) direction or instruction from the customer to change a contract scope of work requirement. A constructive change is an informal change to the contract scope of work for which the customer did not specifically direct or authorize.
What is quantum?
Quantum is the calculation of cost impacts or damages arising from the change in contract scope requirements experienced during performance of the contract or the termination of the contract itself. The quantum should be calculated on an as-detailed basis as possible, specific to discrete items that caused the change in contract scope, supported by accounting or project records and presented in a clear and logical manner.
How are REAs or T4Cs settled?
Quantum is the calculation of cost impacts or damages arising from the change in contract scope requirements experienced during performance of the contract or the termination of the contract itself. The quantum should be calculated on an as-detailed basis as possible, specific to discrete items that caused the change in contract scope, supported by accounting or project records and presented in a clear and logical manner.

Contractor Purchasing System Reviews (CPSR)

Why should my company remain committed to Federal purchasing system compliance?
Do you know the vast majority of requirements evaluated in a CPSR are contractual obligations imposed by specific Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) clauses expressly incorporated into your contracts?
Are you discussing the Government’s proposal evaluation/source selection factors tied to purchasing system requirements during your “go/no go” bid and Probability-of-Win (“Pwin”) meetings?

Are you subject to recurring and burdensome advance notice and consent to subcontract requirements? And are these requirements impacting timely performance and delivery and causing less than favorable past performance evaluations by your customers?

Is FAR 52.244-2 incorporated into one or more of your contracts? This clause expressly reserves the Government’s right to review your federal purchasing system.
Has the Defense Contract Audit Agency, Defense Contract Management Agency (DCMA) or other cognizant agency conducted audits or reviews of your proposals and/or other business systems? Have these agencies observed a concern during those audits and associated the concern to your purchasing system?

Do you have one or more contracts with DFARS 252.244-7001? Among other critical elements, this clause defines “significant deficiency” and requires the contracting officer to impose payment withholds if the system is disapproved.

Are You Ready For Your Next CPSR Audit?


CPSR Training


We have quite a few upcoming trainings that could benefit you and your team as you navigate the CPSR. Check out our existing events or contact us about custom training for your business today!

Meet Our Contract Dispute Litigation Experts

About Capital Edge Consulting

Capital Edge government contract consultants support Government Contractors and Federal Grant Recipients. Our consultants specialize in the regulatory compliance matters you need.

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Call Us: (855) 227-3343

Whitepaper: The Audit World's Biggest Myths
Download Now
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