Photo of Nicole Owren-WiestPhoto of Skye MathiesonPhoto of Alexandra Barbee-GarrettPhoto of Catherine Shames

In L3 Technologies, Inc., ASBCA Nos. 61811, et al. (Mar. 1, 2021), the Armed Services Board of Contract Appeals (Board) granted the Government’s motion to dismiss the appeal, over the contractor’s objection, following the Contracting Officer’s (CO) unequivocal withdrawal of its cost disallowance claims. The contractor argued that its case was not moot despite the withdrawal of the CO’s final decision (COFD) asserting the claims because an exception to the mootness doctrine applied: the claims were “capable of repetition, yet evading review.” The claims followed a “repetitive cycle of DCAA Audits challenging costs, DCMA COFDs demanding repayment of the challenged costs, L3’s ASBCA appeals and DCMA’s dismissal without reaching merits.” The majority of the Board rejected the contractor’s argument. But in a 23-page dissent, Judge Clarke (who wrote the original decision) explained why the exception should have been applied here, noting that the majority decision “subjects L3 (and other contractors) to the unfortunate chain of events discussed [in the decision] until DCAA and DCMA resolve whatever their differences are.”

The appeals at issue were the latest in a long string of appeals of similar Government claims stretching back to 2006, all of which relied on DCAA audits that challenged many of the same types of costs for the same reasons and were based (at least in part) on DCAA’s purported use of “statistical sampling,” and all of which were eventually withdrawn by the CO. As recounted by the dissent, from 2006 through 2018, DCAA conducted audits challenging the costs, DCMA issued COFDs implementing the DCAA audits and demanding repayment of the challenged costs, L3 appealed the COFDs to the Board, and DCMA would either withdraw the COFDs or the parties would settle for a nuisance amount resulting in dismissal of the appeals with prejudice.

Following discovery and the exchange of expert reports regarding DCAA’s application of purported “statistical sampling techniques” to extrapolate the results “across the board for that cost,”—techniques that L3 challenged as fundamentally flawed—DCAA made changes to its sampling program, aspects of which DCAA stated did not reflect a justifiable methodology. The CO subsequently issued a letter unequivocally withdrawing the COFDs for the subject appeals and representing that “the Government does not intend to reassert the costs at issue in those disputes.” The Government’s motion to dismiss the appeals as moot followed, and L3 opposed the motion on the basis that issues presented remain live. Specifically, L3 argued, there is a “continuing dispute over the correct interpretation of various FAR sections related to L3’s questioned costs and DCAA’s use of purported ‘statistical’ sampling to extrapolate questioned costs—which remain live despite the withdrawal of the COFDs.” L3 argued that the dispute was not moot because DCAA’s audit technique was both common and inaccurate, and had already caused the contractor to incur years of non-reimbursable litigation costs arising out of previous audits. Moreover, DCAA’s continued use of a flawed sampling methodology would result in similar Government claims without relief.

Although the majority was unpersuaded and granted the Government’s motion, the dissent concluded from his review of the caselaw, including the Board’s decision in Combat Support Associates, ASBCA No. 58945, 16-1 BCA ¶ 36288, that there is “no impediment to the Board’s reliance on the mootness exception in the right circumstances. If there was ever the ‘right circumstance,’ this is it.” As such, the dissenting judge would have allowed the moot case to continue, giving both parties the chance to present their positions to the Board on the merits. Unfortunately for L3 and other contractors seemingly caught between DCAA and DCMA, we’ll have to wait for the next “right circumstance.”

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Nicole Owren-Wiest Nicole Owren-Wiest

Nicole Owren-Wiest is a partner and member of the Steering Committee of Crowell & Moring’s Government Contracts Group in the firm’s Washington, D.C. office. Nicole is nationally ranked by Chambers USA in Government Contracts and a recognized leader in two of the most…

Nicole Owren-Wiest is a partner and member of the Steering Committee of Crowell & Moring’s Government Contracts Group in the firm’s Washington, D.C. office. Nicole is nationally ranked by Chambers USA in Government Contracts and a recognized leader in two of the most complex areas in government contracting: accounting, cost, and pricing, and intellectual property/data rights. With over 20 years’ experience, Nicole has a broad counseling and dispute-resolution practice and leads the Group’s cost accounting practice, which focuses on helping clients navigate the government’s complex cost and pricing rules, including the FAR Part 31 cost principles, the Cost Accounting Standards (CAS), and Truth in Negotiations Act/Truthful Cost or Pricing Data (defective pricing).

Photo of Skye Mathieson Skye Mathieson

Skye Mathieson is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. He works with and advises clients from diverse industries on a wide array of matters, including contract performance disputes (CDA claims and equitable adjustments), cost allowability…

Skye Mathieson is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. He works with and advises clients from diverse industries on a wide array of matters, including contract performance disputes (CDA claims and equitable adjustments), cost allowability issues, defective pricing, fiscal law questions, prime-sub disputes, bid protests, internal investigations, and responding to DCAA audits. Prior to joining Crowell & Moring, Skye spent several years as a trial attorney at the procurement litigation division of the Air Force Headquarters for Legal Operations, where he pioneered the seminal “Laguna Defense” that is now widely raised and litigated at the Boards of Contract Appeals.

Photo of Alexandra Barbee-Garrett Alexandra Barbee-Garrett

Alexandra Barbee-Garrett is an associate in Crowell & Moring’s Washington, D.C. office, where she practices in the Government Contracts Group.

Alex represents government contractors in both litigation and counseling matters. Her practice includes bid protests before the Government Accountability Office (GAO), the U.S.

Alexandra Barbee-Garrett is an associate in Crowell & Moring’s Washington, D.C. office, where she practices in the Government Contracts Group.

Alex represents government contractors in both litigation and counseling matters. Her practice includes bid protests before the Government Accountability Office (GAO), the U.S. Court of Federal Claims, and the U.S. Court of Appeals for the Federal Circuit. Alex’s practice also focuses on federal regulatory compliance, mandatory disclosures to the government, contract disputes under the Contract Disputes Act (CDA), prime-sub disputes, and False Claims Act and internal investigations.

Prior to joining Crowell & Moring, Alex was a law clerk to Judge Richard A. Hertling of the U.S. Court of Federal Claims and a government contracts associate at another large law firm. Alex graduated honors from The George Washington University Law School, where she was an articles editor of The Public Contract Law Journal. Alex won the 2015 Government Contracts Moot Court Competition and served as chair for the 2016 competition. Prior to law school, Alex worked as a health care legislative assistant for Rep. Rick Larsen (WA) in the U.S. House of Representatives. She received her B.A. in international studies and anthropology from the University of Washington.

Photo of Catherine Shames Catherine Shames

Catherine O. Shames is an associate in the Washington, D.C. office of Crowell & Moring, where she is a member of the firm’s Government Contracts Group.

Catherine’s government contracts practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), prime-sub disputes, transactional…

Catherine O. Shames is an associate in the Washington, D.C. office of Crowell & Moring, where she is a member of the firm’s Government Contracts Group.

Catherine’s government contracts practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), prime-sub disputes, transactional due diligence, internal investigations, and disclosures under the Mandatory Disclosure Rule. She also assists contractors with cost allowability issues and responding to DCAA audits.