Free Memorandum - District Court of Federal Claims - federal


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Case 1:00-cv-00129-FMA

Document 87

Filed 07/01/2005

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ELECTRONICALLY FILED ON JULY 1, 2005 IN THE UNITED STATES COURT OF FEDERAL CLAIMS

LOCKHEED MARTIN CORPORATION, ) ) Plaintiff, ) ) v. ) ) UNITED STATES OF AMERICA, ) ) Defendant. )

No. 00-129C (Judge Allegra)

PLAINTIFF'S MEMORANDUM IDENTIFYING AND SUMMARIZING A DECISION INTERPRETING THE LANGUAGE IN CAS 9903.306(B) In Astronautics Corporation of America, ASBCA No. 49691, 1999 ASBCA LEXIS 71, the Armed Services Board of Contract Appeals ("ASBCA") interpreted FAR 30.306(b). CAS Reg. 9903.306(b) and FAR 30.306(b) are identical, except the CAS Reg. changed "his" to "its" in the first sentence. A copy of the decision is attached hereto as Exhibit A. In Astronautics, the contractor had estimated the costs and negotiated the fixed prices on the basis of a cost allocation methodology that complied with CAS and the contractor's CAS disclosure statement. 1999 ASBCA LEXIS 71, *2-3. During performance the contractor changed its allocation methodology to one that failed to comply with CAS, and the noncompliance resulted in allocations of greater cost to fixed price and cost type contracts. Id. at *3-5. The contractor agreed to an adjustment of its cost type contracts, and the Government sought an adjustment under 306(b) to the contractor's fixed price contracts. Id. at *4-10. The reason for creating 306(b) and its administrative interpretations are outlined in the decision. Id. at *17-22. The Board looked to DOD Working Group Item 76-4 which, in turn, looked to DOD guidance on "Increased Costs Paid Under CAS-Covered Contracts." Id. at *2022. Working Group Item 76-4 provided:

Case 1:00-cv-00129-FMA

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Guidance Increased costs to the Government under firm fixed price contracts should be considered to exist when the costs allocated to the contracts are less than would have been allocated if the method of allocation had not been changed. Id. at *21-22. The Board also looked to the CAS Preamble accompanying the original promulgation of the 306(b) language that stated: Preamble M, Para. 2 explains the need for a remedy when the contractor has adopted practices during contract performance `that reduced his cost allocations below the allocation determined during the estimating process.' According to this reasoning, had the Government been aware of this new method of cost allocation at the time of price negotiation prior to award, it would have relied upon the reduced cost allocation to obtain a better contract price. Accordingly, a contract price adjustment precludes the contractor from obtaining any contract price advantage as a result of any CAS noncompliance during contract performance. Id. at *27-28. The Board held the contractor's noncompliance in Astronautics "did not reduce cost allocations during the performance of any of its fixed priced CAS-covered prime contracts" and, therefore, the Government was not entitled to an adjustment of those fixed price contracts under 306(b). Id. at *28. Respectfully submitted, s/Clarence T. Kipps _________________________________ Clarence T. Kipps, Jr., Esq. MILLER & CHEVALIER Chartered 655 15th Street, N.W., Suite 900 Washington, D.C. 20005 Tel: (202) 626-5800 Fax: (202) 628-0858 Attorney of Record Lockheed Martin Corporation

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Case 1:00-cv-00129-FMA

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Of Counsel: Angela B. Styles, Esq. Kimberly R. Heifetz, Esq. MILLER & CHEVALIER Chartered 655 15th Street, N.W., Suite 900 Washington, D.C. 20005 Tel: (202) 626-5800 Fax: (202) 628-0858 David M. Christenson, Esq. LOCKHEED MARTIN CORPORATION 6801 Rockledge Drive Bethesda, Maryland 20817 Tel: (301) 897-6127 Fax: (301) 897-6333 Dated: July 1, 2005

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