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November 28, 2019 By cs

Federal Circuit issues controversial decision involving expressly unallowable costs

In its second significant cost allowability decision of the year, the Federal Circuit held that salaries associated with lobbying activities are expressly unallowable under Federal Acquisition Regulation (FAR) 31.205-22.

Although the decision is limited to salary costs associated with lobbying activities, its rationale creates uncertainty for other types of costs subject to a FAR Part 31 Cost Principle that uses similar “associated with” language. Contractors should anticipate closer scrutiny from auditors, who may feel emboldened by the Federal Circuit’s decision to characterize costs as expressly unallowable. The decision may also have implications for compliance with Cost Accounting Standard 405.

Although many types of cost may be generally unallowable, a smaller subset of costs are expressly unallowable. An expressly unallowable costs is “a particular item or type of cost which, under the express provisions of an applicable law, regulation, or contract, is specifically named and stated to be unallowable.”  Contractors are subject to penalty if they submit to the government any expressly unallowable cost.  Congress made clear that the penalty was intended for limited circumstances where the regulations explicitly prohibit inclusion of a type of cost; providing alcohol as an example.

FAR 31.205-22(a) provides that costs “associated with” a list of lobbying and political activities are unallowable.  FAR 31.205-22 does not specifically name and state salary, or any other type of cost; it merely states “associated with.” The narrow question presented to the Federal Circuit was whether salary costs of employees engaging in such lobbying activity qualify as expressly unallowable costs.

Keep reading this article at: http://www.mondaq.com/unitedstates/x/860020/

Filed Under: Government Contracting News Tagged With: audit, cost accounting, Cost Accounting Standard, cost principles, DCAA, FAR, Federal Circuit Court, lobbying, salary costs, unallowable costs

December 2, 2016 By AMK

Energy Dept. contractors agree to pay $125 million to settle false claims charges

The Department of Justice (DOJ) has announced a settlement in the amount of $125 million to resolve allegations against four contractors under the False Claims Act.

energy-deptBechtel National Inc., Bechtel Corp., URS Corp. (predecessor in interest to AECOM Global II LLC) and URS Energy and Construction Inc. (now known as AECOM Energy and Construction Inc.) were charged with making false statements and claims to the Department of Energy (DOE).   Specifically, the contractors were cited for supplying deficient nuclear quality materials, services, and testing at the Waste Treatment Plant (WTP) at DOE’s Hanford Site near Richland, Washington.

The settlement also resolves allegations that Bechtel National Inc. and Bechtel Corp. improperly used federal contract funds to pay for a comprehensive, multi-year lobbying campaign of Congress and other federal officials for continued funding at the WTP.

“The money allocated by Congress for the Waste Treatment Plant is intended to fund the Department of Energy’s important mission to clean up the contaminated Hanford nuclear site, and this mission is undermined if funds are wasted on goods or services that are not nuclear compliant or to further lobbying activities,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This settlement demonstrates that the Justice Department will work to ensure that public funds are used for the important purposes for which they are intended.”

Between 2002 and 2016, DOE paid billions of dollars to the cited contractors to design and build the WTP, which is to be used to treat dangerous radioactive wastes that are currently stored at DOE’s Hanford Site.  The contract required materials, testing and services to meet certain nuclear quality standards.  The DOJ alleged that the defendants violated the False Claims Act by charging the government the cost of complying with these standards when they failed to do so.

  • In particular, it was alleged that the defendants improperly billed the government for materials and services from vendors that did not meet quality control requirements, for piping and waste vessels that did not meet quality standards and for testing from vendors who did not have compliant quality programs.
  • In addition, Bechtel National Inc. and Bechtel Corp. were charged with improperly claiming and receiving government funding for lobbying activities in violation of the Byrd Amendment, and applicable contractual and regulatory requirements, all of which prohibit the use of federal funds for lobbying activities.

Justice Dept. sealThe allegations resolved by the settlement were initially brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by three individuals — Gary Brunson, Donna Busche, and Walter Tamosaitis — who worked on the WTP project.  The False Claims Act permits private parties to sue on behalf of the United States when they believe that a party has submitted false claims for government funds, and to receive a share of any recovery.  The Act also permits the government to intervene in such a lawsuit, as it did in part in this case.  The whistleblowers’ reward has not yet been determined.

This matter was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Eastern District of Washington, the DOE Office of the Inspector General and the FBI.

The claims asserted against defendants are allegations only, and there has been no determination of liability.  The case is United States ex rel. Brunson, Busche, and Tamosaitis v. Bechtel National, Inc., Bechtel Corp., URS Corp., and URS Energy & Construction, Inc., Case No. 2:13-cv-05013-EFS (E.D. Wash.).

Source: https://www.justice.gov/opa/pr/united-states-settles-lawsuit-against-energy-department-contractors-knowingly-mischarging

Filed Under: Government Contracting News Tagged With: abuse, DOE, DOJ, Energy Dept., false claims, False Claims Act, FBI. fraud, IG, Justice Dept., lobbying, overbilling, qui tam, whistleblower, WTP

August 31, 2015 By AMK

Lockheed pays $4.8M to settle illegal lobbying claim

Sandia Corp. and parent company Lockheed Martin, which operate the federally-funded Sandia National Laboratories, agreed to pay $4.8 million to settle claims that the company used taxpayer money to lobby congress to extend its contract to manage the research facility in violation of federal law.

Sandia National LaboratoriesThe Department of Justice opened an investigation earlier this year after an inspector general report showed the company used federal funds to stand up an in-house lobbying team to develop a strategy to extend the management contract for the facility at Kirtland Air Force Base in Albuquerque, New Mexico, after it was set to expire in 2012.

Documents obtained by the IG revealed a strategy to influence congressmen and federal officials — including then-Energy Secretary Steven Chu. While these lobbying efforts were not explicitly illegal, laws and regulations prohibit the use of federal funds for such purposes.

Keep reading this article at: http://www.federaltimes.com/story/government/management/oversight/2015/08/24/lockheed-sandia-lobbying/32262165/

Read in-depth information at:  http://archive.federaltimes.com/article/20141112/ACQ/311120012/Report-Sandia-violated-rules-lobbying-contract-extensions

Filed Under: Government Contracting News Tagged With: DOJ, Energy Dept., IG, Justice Dept., Kirtland Air Force Base, lobbying, Lockheed Martin, Sandia National Laboratories

August 9, 2013 By AMK

The drone that wouldn’t die: How a Defense contractor bested the Pentagon

With large budget cuts looming in the next decade, top Air Force officials knew last year they needed to halt spending on some large and expensive programs. So they looked for a candidate that was underperforming, had busted its budget, and wasn’t vital to immediate combat needs.

They soon settled on the production line for a $223 million aircraft with the wingspan of a tanker but no pilot in the cockpit, built to fly for a little over a day over vast terrain while sending imagery and other data back to military commanders on the ground. Given the ambitious name “Global Hawk,” the aircraft had cost far more than expected, and was plagued by recurrent operating flaws and maintenance troubles.

“The Block 30 [version of Global Hawk] is not operationally effective,” the Pentagon’s top testing official had declared in a blunt May 2011 report about the drones being assembled by Northrop Grumman in Palmdale, Calif.

Canceling the purchase of new Global Hawks and putting recently-built planes in long-term storage would save $2.5 billion over five years, the service projected. And the drone’s military missions could be picked up by an Air Force stalwart, the U-2 spy plane, which had room for more sensors and could fly higher.

But what happened next was an object lesson in the power of a defense contractor to trump the Pentagon’s own attempts to set the nation’s military spending priorities amid a tough fiscal climate.

Keep reading this article at: http://www.theatlantic.com/politics/archive/2013/07/the-drone-that-wouldnt-die-how-a-defense-contractor-bested-the-pentagon/277807/ 

Filed Under: Government Contracting News Tagged With: budget cuts, campaign contributions, concurrent acquisition, DoD, lobbying, political contributions, political influence, politics, product development

October 15, 2012 By AMK

Defense acquisition not just realm of program managers

Large defense programs claim any number of stakeholders, including the services’ program managers and their counterparts in the defense industry.

But other key players — such as congressional staff and lobbyists — also have some skin in the game.

Understanding their role in the defense acquisition process was the focus of a special forum hosted by the Defense Acquisition University Alumni Association last week.

Bill Bahnmaier, the president of the association, told In Depth with Francis Rose the way the roles interrelate is often obscured because there’s rarely a “direct link” between them.

The program manager for a particular acquisition program usually deals with the vendor through its respective program manager — not the company’s lobbyists.

Keep reading this article at: http://www.federalnewsradio.com/399/3070301/Defense-acquisition-not-just-realm-of-program-managers.

Filed Under: Government Contracting News Tagged With: acquisition workforce, DAU, defense contractors, industrial base, lobbying, program management

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