ASBCA | The Contracting Education Academy

July 20, 2017 By cs

ASBCA throws DCAA another brushback pitch

In an April 2017 decision, the Armed Services Board of Contract Appeals (ASBCA) once again rejected the position of the Defense Contract Audit Agency (DCAA) that a cost or type of cost for which allowability depends on the circumstances or Contracting Officer discretion can nonetheless be “expressly unallowable” and subject to penalties under FAR 42.709-1(a).

Although the law is clear that penalties are appropriate only when such costs are named and stated to be unallowable in a cost principle such that a counter position is unreasonable, the DCAA has continued to assert its erroneous position in its audit guidance and findings.

A contractor is subject to penalties if it includes in its indirect cost submission an indirect cost that is “expressly unallowable under a cost principle in the FAR, or an executive agency supplement to the FAR.” FAR 42.709-1(a)(1).

The ASBCA has explained the standard for whether a cost is expressly unallowable is “objective.” General Dynamics Corp., ASBCA No. 49732, 02-2 BCA ¶ 31,888, reversed on other grounds, Rumsfeld v. General Dynamics Corp., 365 F.3d 1380 (Fed. Cir. 2004). An item of cost is expressly unallowable if it is “specifically named and stated as unallowable….” Raytheon Company, ASBCA Nos. 57576, 57679, 58290, June 26, 2015. Moreover, “the Government must show that it was unreasonable under all the circumstances for a person in the contractor’s position to conclude that the costs were allowable.” General Dynamics Corp.

In twin Memoranda for Regional Directors (MRDs) dated December 18, 2014 and January 7, 2015, the DCAA provided its audit teams with guidance concerning the identification of expressly unallowable costs that contradicted these clear rules. 14-PAC-021(R); 14-PAC-022(R). Relying on an ASBCA case from the 1980s, Emerson Electric Co., ASBCA No. 30090, 87-1 BCA ¶ 19,478, November 19, 1986, the DCAA opined that “a cost can be unallowable even though the cost principle does not explicitly state that the cost is unallowable or not allowable.” 14-PAC-022(R). “[I]n situations where a cost principle does not specifically state that the applicable cost is unallowable or not allowable, the audit team will have to employ critical thinking when determining whether the cost principle identifies expressly unallowable costs” and “whether the cost principle identifies a cost or type of cost clearly enough that there cannot be a reasonable difference of opinion as to whether a questioned cost meets the criteria specified.” Id.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=601112

July 17, 2017 By cs

ASBCA issues important ruling in ‘contractor-on-the-battlefield’ dispute

Last month, the Armed Services Board of Contract Appeals (ASBCA) held that the U.S. Army breached its contractual obligation to provide physical security to its principal logistical support contractor, KBR, during the height of the Iraq War.

As a consequence, the Board found that KBR was entitled to be reimbursed for $44 million, plus interest, in costs that the Government had withheld from KBR relating to KBR’s and its subcontractors’ use of private security. A copy of the opinion is available here.

Before the Board, the Army had argued that the costs in question were unallowable because KBR’s LOGCAP III contract with the Government prohibited the use of private security. In response, KBR argued (among other things) that any violation of this prohibition had been excused by the Government’s prior material breach of its obligation to provide physical security. On the basis of an extensive documentary and testimonial record (including a month-long trial), the Board agreed with KBR, finding:

[D]espite the many and continuing failures of the government to provide the promised level of force protection to KBRS and its subcontractors . . . , the government seeks to disallow the PSC costs incurred . . . in order to accomplish [the] mission under the LOGCAP contract despite the government’s breach, and argues that its breach was not material. It is hard to imagine a contract breach more material than this one, which eviscerated the promise at the heart of the justification for the government’s claim.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2017/06/asbca-issues-important-ruling-contractor-battlefield-dispute/

January 24, 2017 By cs

ASBCA shoots down DCAA overreach on responsibility to manage subcontractors

A prime contractor is responsible for managing its subcontractors, but what exactly does that require?

In a recent decision, the answer of the Armed Services Board of Contract Appeals was: not nearly as much as DCAA claimed.

In Lockheed Martin Integrated Sys., Inc., ASBCA Nos. 59508, 59509, the Board ruled on a Government claim seeking more than $100 million from LMIS for allegedly breaching an obligation to manage subcontracts. In DCAA’s reading, this obligation was extensive and required a number of concrete actions by the prime contractor.

After auditing three LMIS contracts, DCAA questioned $103 million in subcontract costs. DCAA claimed that, for the costs to be allowable, LMIS had to provide documents showing it had: (1) reviewed subcontractor resumes to confirm personnel qualifications; (2) reviewed subcontractor timesheets to confirm the accuracy of invoiced hours; and (3) tried to obtain incurred cost submissions from its subcontractors, contacting “the Government” for “assistance” if the subcontractors refused. DCAA claimed it could find no subcontract costs allowable “[w]ithout an incurred cost submission from the subcontractor,” which was the prime contractor’s responsibility to obtain.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2017/01/asbca-shoots-dcaa-overreach-responsibility-manage-subcontractors/

November 25, 2016 By cs

Boards of Contract Appeals will prod contracting officers to issue final decisions

The Armed Services Board of Contract Appeals (ASBCA) recently demonstrated that it is willing to help government contractors who are waiting many months for a contracting officer to issue a final decision on a pending certified claim.

asbca As background, the government contract claims process is supposed to be efficient, providing for the “informal, expeditious, and inexpensive resolution of disputes,” as the Contract Disputes Act (CDA) states (see 41 U.S.C. §§ 7101-7109). But that’s easier said than done. All too often, when a contractor submits a written request for equitable adjustment (REA) or certified claim, the Contracting Officer (CO), for whatever reason, doesn’t “expeditiously” issue a final decision. Sometimes, it may seem that the government is just sitting on the claim, without giving it due consideration at all. What’s a contractor to do to spur the CO to act? This may be a touchy subject for some, but there are a few alternatives.

Some contractors elect to do nothing and wait out the CO, although this isn’t necessarily a good option. After having raised a dispute by asserting a claim, some contractors are reluctant to press for a final decision, feeling, rightly or wrongly, that demanding issuance of a decision may impact the CO’s view of the merits.

Less timid contractors realize that contract administration is a two-way street and that even Uncle Sam has a legal obligation to respond and act.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=543606

Last month, the Armed Services Board of Contract Appeals (ASBCA) held that the U.S. Army breached its contractual obligation to provide physical security to its principal logistical support contractor, KBR, during the height of the Iraq War.

A prime contractor is responsible for managing its subcontractors, but what exactly does that require?

The Armed Services Board of Contract Appeals (ASBCA) recently demonstrated that it is willing to help government contractors who are waiting many months for a contracting officer to issue a final decision on a pending certified claim.

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