I.       Informational Items

A.     General Motors v. U.S., SCUS No. 03-165, October 31, 2003.Ê Washington Legal Foundation files amicus brief in support of petition for certiorari.Ê Excerpt: ãIn this case, the Federal Circuit erred by misconstruing one of the most important regulations governing the allocation of costs for the pensions of federal contractorsâ employees.Ê In saddling contractors with that portion of the cost of underfunded pensions that is attributable to fixed-price contracts when a division or plant is closed, the Federal Circuit engrafted an illogical limitation on an otherwise unambiguous regulation.Ê . . . [The Federal Circuit erred] by holding that the applicable regulation does not require the adjustment of pension costs attributable to fixed-price contracts when a segment is closed.ä

B.     Lee Brownlee, Acting Secretary Of The Army v. Dyncorp, CAFC No. 02-1601, November 13, 2003.Ê Case involves costs for defending criminal proceedings brought by the government where an employee, but not the contractor, was convicted.Ê Court reverses and remands to the ASBCA.Ê The ASBCA had awarded as allowable contract costs a part of the contractorâs legal fees incurred in defending against criminal charges brought by the United States.Ê The Board held that the provision of FAR 31.205-47(b) was invalid as contrary to statute.Ê FAR 31.205-47(b) made unallowable costs defending a criminal proceeding brought by the US if the result was a conviction.Ê The court holds otherwise, finding that the regulation properly implements the statute by defining contractor to include an employee and is accorded deference under Chevron.

C.     Renda Marine v. U.S., COFC No. 02-306C, August 29, 2003.Ê Case involves a Corps of Engineers contract discovery dispute.Ê Judge Hewitt orders the Corps to provide, at its own expense, email back-up tapes and access to the Contracting Officerâs computer hard drive.Ê In violation of the requirement to preserve evidence, the Contracting Officer routinely deleted emails after reading them.Ê Plaintiff argued for sanctions on the basis that such deletion constituted unlawful spoliation of evidence.Ê Judge Hewitt did not find for plaintiff on the spoliation issue, but did find that the Contracting Officerâs deletion of emails was not in accord with the requirement to preserve evidence for litigation.Ê

D.     Williams Alaska Petroleum Inc., And Williams Energy Marketing And Trading v. U.S., COFC No. 02-705C, October 1, 2003.Ê Defense Energy Support Center jet fuel case.Ê Case involves a Economic Price Adjustments clause: 48 C.F.R.  16.203 authorizes the use of economic price adjustment clauses that adopt market-based price indexes to provide for adjustments in a contractorâs established prices. The authority to rely on such clauses is additionally conferred by legally obtained deviations from the Federal Acquisition Regulations.

E.      Navajo Refining Company, L.P., And Montana Refining Co. v. U.S., COFC No. 02-1220C, October 27, 2003.Ê Defense Energy Support Center jet fuel case involving economic price adjustments with results similar to the majority of these cases.Ê The decision acknowledges the different result in the recent Williams case, but does not discuss that case.Ê Judge Hewitt reaches the following conclusion:Ê ãFor the foregoing reasons, defendantâs motion for partial summary judgment is DENIED with respect to:Ê (1) whether the EPA clauses used in plaintiffsâ contracts were illegal; (2) whether the FAR deviations permit use of the EPA clauses in the plaintiffsâ contracts; (3) whether plaintiffs are entitled to recover under a quantum valebant theory; and (4) whether plaintiffs have waived their claims of illegality.Ê Plaintiffsâ cross-motion for partial summary judgment is GRANTED with respect to:Ê (1) whether their contract prices were illegal; (2) whether the Far deviations were valid; and (3) whether they are entitled to recover under a quantum valebant theory.Ê Plaintiffsâ cross-motion for partial summary judgment is DENIED with respect to the application of the judicial estoppel doctrine.ä

F.      Hermes Consolidated, Inc., d/b/a Wyoming Refining Company v. U.S., COFC No. 02-1460C, November 3, 2003.Ê Defense Energy Support Center (ãDESCä) jet fuel case.Ê Judge Block grants the governmentâs motion for summary judgment finding that plaintiff had waived its breach of contract claim by failing for years to protest allegedly unlawful contract clauses.Ê However, noting that there are 22 similar cases pending in the COFC and the substantial difference of opinion in the Court of Federal Claims concerning both the legality of the authorization of the EPA-PMM (ãPetroleum Marketing Monthlyä) clauses and the appropriateness of the doctrine of waiver Judge Block grants leave for either party to appeal this decision for interlocutory review.Ê The court certified the following questions for interlocutory appeal under 28 U.S.C. 1292(d)(2):Ê ã(1) Was DESCâs promulgation of the economic price adjustment clauses indexed to the PMM unauthorized?Ê (2) May defendant assert the defense of waiver to bar Wyoming from pursuing a remedy for DESCâs unauthorized fuel prices?ä

G.     Lockheed Martin Corp., Naval Electronics & Surveillance Systems-Surface Systems, ASBCA No. 53032, October 15, 2003.Ê Lockheed martin, the ãleader companyä on a Navy contract to qualify a second source team to compete and supply the AEGIS AN/SPY-1 radar system antenna and transmitter, is entitled to an $86 million gross settlement on the convenience termination of that contract, but cannot recover fee on subcontract effort on the uncompleted portion of the contract.

 

II.    CAS Board Developments

A.     Employee Stock Ownership Plans (ESOP). See comments submitted by our committee. Cost Accounting Standards Board (CASB), Office of Federal Procurement Policy, invites public comments on proposed amendments to the Cost Accounting Standards (CAS), ãCost accounting standard for composition and measurement of pension costä, and ãAccounting for the cost of deferred compensationä. Proposed amendments address recognition of the costs of Employee Stock Ownership Plans (ESOPs) under Government cost-based contracts and subcontracts issues. Proposed amendments provide criteria for measuring costs of ESOPs and clarify that accounting for the costs of ESOPs will be covered by the provisions of ãAccounting for the cost of deferred compensationä, not by any other Standard. Comments are due on or before November 18, 2003.Ê See August 20, 2003, Federal Register.Ê

 

III. Regulatory Developments

A.     Defense Federal Acquisition Regulation Supplement; Unique Item Identification and Valuation, 68 FR 58631, October 10, 2003.Ê DOD published rule that amended the Defense Federal Acquisition Regulation Supplement (DFARS) to add policy on item identification and valuation that will apply to solicitations issued on or after January 1, 2004.

 

B.     DFARS Case 2001-D013, Provisional Award Fee Payments, 68 FR 64561, November 14, 2003.Ê DOD has issued a final rule amending the DFARS to address the use of provisional award fee payments under cost-plus-award-fee contracts.Ê The rule provides for successfully performing contractors to receive a portion of award fees within an evaluation period prior to a final evaluation for that period.Ê Effective date:Ê January 13, 2004.

 

C.     DFARS Case 2002-D003, Competition Requirements For Purchases From A Required Source, 68 FR 64559, November 14, 2003.Ê DOD has issued a final rule amending the DFARS to implement section 811 of the National Defense Authorization Act for Fiscal Year 2002 and section 819 of the National Defense Authorization Act for Fiscal Year 2003.Ê Sections 811 and 819 address requirements for conducting market research before purchasing a product listed in the Federal Prison Industries (FPI) catalog, and for use of competitive procedures if an FPI product is found to be noncomparable to products available from the private sector.Ê Section 819 also addresses limitation on an inmate workerâs access to information and on use of FPI as a subcontractor.Ê Effective date:Ê December 15, 2003.

 

 

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.Ê The guidance primarily affects the planning of internal control, incurred cost, and financial capability audits, and is effective immediately.Ê Related changes to the DCAAâs Contract Audit Manual and Audit Planning and Performance System will be included in the January 2004 updates of those documents.

 

 

The next meeting will be on Tuesday December 16, 2003.