In ECC Int’l Constructors Inc. v. Army, No. 2021-2323 (Fed. Cir. Aug. 22, 2023), the Court of Appeals for the Federal Circuit overturned longstanding precedent by holding that the requirement to state a “sum certain” in a claim submitted under the Contract Disputes Act (CDA) is not a jurisdictional requirement. The Court based its decision on recent Supreme Court guidance to “treat a procedural requirement as jurisdictional only if Congress ‘clearly states’ that it is.” The Court parsed the CDA and found that Congress never used the words “sum certain,” evidencing that Congress did not intend the requirement to be jurisdictional. This is important because jurisdictional requirements can be raised at any time—even years after the claim was filed and a full hearing on the merits was held—and result in dismissal of the case. The Court explained that the “sum certain” is “nonetheless a mandatory rule that claimants must follow.”
If At First You Don’t Succeed: Contractor Successfully Challenges Disallowed IR&D and Compensation Costs
In Voxtel, Inc., ASBCA No. 60129 (March 9, 2023), the Armed Services Board of Contract Appeals (ASBCA) issued a decision that presents a primer on the resolution of indirect cost rate disputes. The ASBCA granted the contractor’s appeal in part, finding that its claimed executive compensation and independent research and development (IR&D) costs were allowable, but that certain rental costs related to the “fit-up” of a leased facility were unallowable.
The Defense Contract Audit Agency (DCAA) performed “adequacy” and “nomenclature” reviews of Voxtel’s indirect cost rate proposals (or incurred cost proposals, “ICPs”) for fiscal years 2007 to 2009, but did not conduct audits. The Contracting Officer (CO) then issued a final decision unilaterally setting indirect rates and finding that the ICPs included unallowable executive compensation, IR&D, and rental costs. The contractor appealed.
Third Time’s A Charm: Government Must Reimburse Triple Canopy for Afghan Taxes
In Triple Canopy, Inc., ASBCA Nos. 61415, et al. (March 23, 2023), the Armed Services Board of Contract Appeals (ASBCA) resolved a long-running dispute in favor of the contractor over reimbursement of fees imposed by the Afghan government on large security firms operating in the country. The ASBCA found the fees were akin to after-imposed taxes, reimbursable by the U.S. government, and not penalties for illegal conduct.
Triple Canopy had six fixed-price contracts with the U.S. Department of Defense (DoD) to provide private security services to military bases in Afghanistan. These contracts, awarded between March 2009 and September 2010, required Triple Canopy to comply with local laws. The contracts also included FAR 52.229-6, Taxes-Foreign Fixed Price Contracts, which states that the contract price shall be increased by the amount of any after-imposed tax the contractor is required to pay. In March 2011, the Afghan government issued a directive limiting the number of employees of any private security company to 500, imposing a fee for each employee over the cap. Triple Canopy was assessed a fee in March 2011, with the right to appeal, and that same month, the DoD issued a memo to the Afghan government requesting that Triple Canopy be exempted from the 500-employee limit. Triple Canopy appealed the assessment, which the Afghan government reduced, and Triple Canopy paid the reduced amount in July 2011. Triple Canopy submitted claims to the Contracting Officer (CO) for reimbursement of the fees, and then appealed to the ASBCA on the basis of the CO’s deemed denials. The ASBCA initially found Triple Canopy’s claims were barred by the Contract Dispute Act’s six-year statute of limitations and denied the appeals, which the Federal Circuit reversed and remanded in Triple Canopy, Inc. v. Sec’y of Air Force, 14 F.4th 1332 (Fed. Cir. 2021).
Continue Reading Third Time’s A Charm: Government Must Reimburse Triple Canopy for Afghan Taxes
DFARS Final Rule Authorizes ACO to Negotiate and Settle Direct Costs Questioned in Incurred Cost Audits
On March 22, 2023, the Department of Defense (DoD) issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to allow a procuring contracting officer (PCO) to delegate the authority to the contract administration office (CAO) to negotiate and settle direct costs questioned in an indirect cost rate proposal audit. After the delegation
March Madness: Government Goes for a Slam Dunk and Misses in CAS Dispute
In General Atomics Aeronautical Systems, Inc., ASBCA Nos. 61633, 61731 (Feb. 8, 2023), released March 14, 2023, the Armed Services Board of Contract Appeals (ASBCA) considered, but declined to answer, the existential question of whether intracompany lease payments are “costs.” The ASBCA denied the Government’s motion for summary judgment, finding that material facts about the
Fastest 5 Minutes Special Edition: New DOD Rules
This special edition of the Fastest 5 Minutes podcast covers new rules issued last week by the Department of Defense that implement various requirements of recent National Defense Authorization Acts, including a new rule that imposes additional requirements for contractors to provide cost or pricing data to the government, and is hosted by Peter Eyre
Contractors Take Note: DoD Issues Two Final Contract Cost and Pricing Rules
On October 28, 2022, the Department of Defense (DoD) amended the Defense Federal Acquisition Regulation Supplement (DFARS) by issuing two final rules related to contract cost and pricing. Specifically:
- Requiring Data Other Than Certified Cost or Pricing Data – DoD issued a final rule to implement a section of the Fiscal Year (FY) 2020 National
Too Late: Government’s Failure to Timely Audit Did Not Extend the Contractor’s Document Retention Obligations
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.
When is the Price of a Fixed-Price Contract Not Fixed?
In Tolliver Group, Inc. v. United States (Aug. 17, 2022), the Court of Federal Claims (“COFC”) granted the contractor’s request for summary judgment, awarding $195,890 in legal fees the contractor incurred to successfully defend against a False Claims Act suit brought by a whistleblower. The court held that the cost principles in Federal Acquisition Regulation (“FAR”) Subpart 31.2 applied to the contractor’s fixed-price task order, and the contractor’s legal fees were allowable and payable under the contract. This is the second time that the COFC addressed the contractor’s entitlement to legal fees, having previously held that the contractor could recover a portion of them under the Spearin doctrine (which we reported on here). The Federal Circuit later vacated that award on jurisdictional grounds (reported on here) and remanded the case to the COFC.
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Just the (Same) Facts, Ma’am: ASBCA has Jurisdiction to Hear Contractor’s Different Theories of Recovery Based on the Same Set of Operative Facts
In ECC Int’l, LLC, ASBCA No. 60167 (Jan. 25, 2022), the Armed Services Board of Contract Appeals (“Board”) held that it had jurisdiction to hear a contractor’s alternate theories of recovery that arose from the same operative facts and sought the same relief requested in its claim. The contractor initially filed a certified claim for