Government Contracts Disputes Regarding Allowable Costs Precluded Summary Judgment
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Wednesday, January 13, 2021

Disputes Regarding Allowable Costs Precluded Summary Judgment

By Government Contracts Editorial Staff

Cross-motions for summary judgment in appeals from government claims were denied by the Armed Services Board of Contract Appeals because there were disputed facts regarding whether the contractor’s indirect cost proposals included unallowable costs. The dispute involved several cost-plus Small Business Innovation Research contracts. The Defense Contract Management Agency issued contracting officer final decisions asserting claims for the contractor’s inclusion of expressly unallowable costs, including marketing and patent legal expenses, in ICPs for two fiscal years. The contractor alleged the claims were barred by the Contract Disputes Act’s six-year statute of limitations (41 USC 7103(a)(4)(A)). The government countered its claims were timely because it asserted them within six years of the date it knew or should have known of the claims, and it was entitled to judgment as a matter of law because the claimed costs were expressly unallowable.

Accrual of Claims. According to the contractor, the claims accrued on the dates it submitted its ICPs for the 2007 and 2009 cost years. The two final decisions were issued more than six years after the date the contractor submitted its ICPs, but the government argued the decisions were issued within six years of the claims’ accrual dates. The FY 2007 and 2009 ICPs did not provide any financial, accounting, or other records or documents with specific information regarding the marketing, legal fees, or travel expenses included in the G&A schedules. Prior to May 2011 and May 2016, respectively, the government did not possess information relating to the contractor’s FY 2007 and 2009 ICPs from which it could have known the disputed costs claimed in the ICPs were unallowable. However, the contractor disputed that the government did not possess information from which it should have known costs claimed in the ICPs were unallowable, contending that, when it received the ICPs, the government had access to the contractor’s accounting system and could verify the contractor was billing the government for the claimed costs.

Allowability. The board concluded there was a genuine issue of material fact as to whether the ICPs contained sufficient data for the government to know of the claims asserted in the appeals. As to the government’s motion, the government failed to present any evidence showing the disputed costs were expressly unallowable. In particular, the government did not show that the claimed patent legal costs were not required by the contracts at issue. Because the government did not develop facts on the issue of allowability of the disputed costs, summary judgment was not appropriate. (Advanced Technologies Group, Inc., ASBCA, ¶96,177)

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