In Doubleshot, Inc., ASBCA No. 61691 (July 19, 2022), the Armed Services Board of Contract Appeals (“ASBCA”) granted the contractor’s motion for partial summary judgment, denying the Government’s claim for unallowable costs to the extent that it was based on missing or unsigned employee time cards. The ASBCA held that the contractor was not required to maintain time card records to support the allowability of labor charges beyond the retention period specified in the contractor’s cost-plus-fixed-fee contracts (including applicable time extensions).
The contracts incorporated both the Audit and Records – Negotiation clause (FAR 52.215-2) and the Allowable Cost and Payment clause (FAR 52.216-7), which grant the Government the right to examine the contractor’s records reflecting all claimed costs and reduce payments for amounts that are unallowable. Following the contractor’s delayed submission of two final indirect cost rate proposals, the Defense Contract Audit Agency (“DCAA”) did not begin auditing the proposals until eight months after the contractual obligation to maintain records had expired. DCAA then questioned the contractor’s labor costs for which there was no time card support, even though the contractor was able to demonstrate that it paid its employees. The Government’s claim and the contractor’s appeal followed.