I.        Panel Discussion of Rumsfeld v. United Technologies Corp., Pratt & Whitney, 315 F.3d 1361 (Fed. Cir. 2003).

A.     Discussion Leaders

1.      Panel Moderator John Farenish, General Counsel of the Defense Contract Audit Agency

2.      Clarence Kipps of Miller & Chevalier Chartered

3.      Paul Mitchell of the DCAA

4.      Stephen Knight of Smith Pachter McWhorter & Allen PLC

B.     Issues to be discussed include the following

1.      How shall the Government, contractors, the Court of Federal Claims and Boards deal with this decision in the real world.  Expert testimony is frequently needed in contract cases, especially those involving the allowability and allocability of costs.  The holding in UTC that the expert testimony in that case is irrelevant and should have been excluded in deciding whether the revenue payments for parts were costs for purposes of CAS 410, 418, and 420 is now binding precedent on the trial tribunals. How should the parties and trial tribunals deal with this holding? 

2.      The court's failure to recognize that it overturned fact findings by the ASBCA without even discussing the "no substantial evidence" standard.  Specifically, the court overturned the board's findings on title passage, which were predicated on GAAP principles relating to requirements for what constitutes an asset.

3.      The court's determination that revenue should be part of the allocation bases for indirect costs.  This would appear to contradict the CAS Board's decision years ago to use only cost.  Of course, this issue gets back to the heart of the case -- what is "cost" for CAS purposes?

4.      The court's apparent requirement for affirmative misconduct by the government as a prerequisite for finding estoppel against the government.

II.     Informational Items

A. General Motors v. U.S., SCUS No. 03-165, October 31, 2003. Supreme Court denies petition for certiorari. [No Attachment]

 

B.     Bill J. Copeland v. Ann M. Veneman, Secretary Of Agriculture, CAFC No. 03-1326, November 26, 2003. Court affirms the AGBCA which had upheld a default termination finding that performance had been delayed and the delay was not excusable. Appellant had argued that the COs withholding of funds from progress payments for alleged Davis Bacon Act violations was improper, and the cause of the delay. A DOL administrative law judge had eventually dismissed the DBA violations and ordered that withheld funds be returned. In an opinion by Judge Dyk, the court finds that the determination by the CO was reasonable and in accordance with the DBA provisions which were incorporated within the contract. The court also noted that because appellant had the burden of showing that the delay was excusable, it also had the burden of showing that the withholding was excessive. As appellant met neither of these burdens, the AGBCA decision was affirmed.

C.     Dyncorp Information Systems, LLC v. US, COFC No. 01-16C, November 10, 2003. Summary judgment. Decision concerned language in the Contract Disputes Act of 1978 whether in effect on the date of this contract for purposes of applicable cost accounting standards means date contract executed or designated effective date. Issue was whether regulation preventing contractor from recovering costs on stepped-up assets does not apply because contracts effective date preceded effective date of CAS standard.

D.     Jim Phillips Contracting, Inc., IBCA Nos.44319, 3220, November 6, 2003. Bureau of Land Management("BLM") contract. On February 10, 1999, BLM awarded a one-year ID/IQ contract, with four one-year options, to Phillips with a guaranteed minimum of $655,000 over the life of the contract. By the time a delayed task order was issued, the ground was already covered by snow. Work had not yet begun when BLM issued a winter suspension order on December 15. A "resume work" order was issued on August 15, 2000, but Phillips refused to perform claiming that the option had not been exercised. BLM claimed that a letter exercising the option had been mailed on February 8, 2000, by regular mail. Phillips claimed it was never received. Phillips filed a claim, which was denied, and this appeal ensued. The Board follows the White v. Delta Construction decision of the Federal Circuit and awards damages of $75,000 plus interest in damages. The Board rejects BLM's argument "...that BLM had never given Phillips any indication that the option would not be exercised; thus, the Contractor should have assumed that BLM intended for the Contract term to be extended."

E. Volume I Of GAOs Principles Of Federal Appropriations Law. The GAO will shortly publish Volume I of Principles of Federal Appropriations Law, third editionalso known as The Red Book. This publication is part of a multi-volume set intended to present a basic reference work covering those areas of law in which the Comptroller General renders decisions. [No Attachment]

III.   Regulatory Developments

A.     FAR Case 2001-018, Applicability of the Cost Principles and Penalties for Unallowable Costs, Proposed Rule, 68 FR 66987, November 28, 2003. The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) are proposing to amend the FAR to remove the requirement to apply cost principles and procedures when pricing a contract if cost or pricing data are not obtained, and to increase the contract dollar threshold for assessing a penalty if the contractor includes expressly unallowable costs in its claim for reimbursement. The ACP Committee is asked to submit draft comments, if any, by January 12, 2004 to ensure they are submitted by the January 27, 2004 deadline to be considered in the formulation of a final rule.

B.     Federal Acquisition Regulation: Reimbursement Of Relocation Costs On A Lump-Sum Basis, Proposed Rule, 68 FR 69264, December 11, 2003. The Councils are proposing to amend the FAR to revise the relocation cost principle to expand the use of reimbursement on a lump-sum basis to certain types of employee relocation costs. The ACP Committee is asked to submit draft comments, if any, by January 12, 2004 to ensure they are submitted by the January 27, 2004 deadline to be considered in the formulation of a final rule.

C.     Federal Acquisition Regulation: Depreciation Cost Principle, Final Rule, 68 FR 69246, December 11, 2003. The Councils have agreed on a final rule amending the FAR to revise the depreciation cost principle to improve clarity and structure, and remove unnecessary and duplicative language. Effective date: January 12, 2004.

D.     Federal Acquisition Regulation: Insurance And Pension Costs, Final Rule, 68 FR 69251, December 11, 2003. The Councils have agreed on a final rule amending the FAR to revise the insurance and indemnification cost principle, and the portion of the compensation for personal services cost principle relating to pension costs. The rule revises both cost principles by improving clarity and structure and removing unnecessary and duplicative language. Effective date: January 12, 2004.

E. Department of Homeland Security Acquisition Regulation, Interim Rule, 68 FR 67867, December 4, 2003. The Department of Homeland Security (DHS) is issuing an interim rule to establish the Department of Homeland Security Acquisition Regulation (HSAR). The HSAR is intended as regulatory guidance. The HSAR reflects recent changes to the FAR and it establishes and encourages participation in the DHS Mentor-Protg Program. This interim rule is effective on December 4, 2003. Comments must reach the DHS, Office of the Chief Procurement Officer, Acquisition Policy on or before January 5, 2004, to be considered in the formation of the final rule. Comments on collection of information sent to the OMB must reach OMB on or before January 5, 2004.

 

F. Department of Energy Acquisition Regulation-Conditional Payment of Fee, Profit, and Other Incentives, Interim Final Rule, 68 FR 68771, December 10, 2003. The DOE publishes interim final amendments to its Acquisition Regulation setting forth policies for reductions for fee or other amounts payable to DOE prime contractors because of contractor performance failures related to safeguarding of classified information and to adequate protection of environment, health and safety, including the health and safety of workers, at contractor operated sites. This rule is effective January 9, 2004. Written comments on specified portions of this interim final rule implementing section 234C of the Atomic Energy Act must be received by January 26, 2004.

 

IV.  Sarbanes-Oxley

A.     Defense Contract Audit Agency (DCAA) Releases Audit Guidance On Final SEC Rulings Relating To Sections 204, 302, 404, 406, and 407 of Sarbanes-Oxley, October 8, 2003. Article by Karen Manos enclosed: [I]t is well worth establishing audit access policies and educating the employees who regularly interact with DCAA auditors about the risks inherent in granting overly broad audit access and the importance of consistently following the companys access policies.

 

 

The next meeting will be on Tuesday January 13, 2004.