Government Contracts Facts in Dispute Regarding Causation and Cost Estimate
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Tuesday, March 19, 2019

Facts in Dispute Regarding Causation and Cost Estimate

By Government Contracts Editorial Staff

The government’s motion for summary judgment was denied by the Armed Services Board of Contract Appeals because there were material factual disputes regarding causation and damages. The appeal involved a submarine construction contract that was primarily firm-fixed-price but had some cost-reimbursement line items. The contractor claimed increased costs as a result of a new Occupational Health and Safety Administration regulation, which required the contractor and its subcontractor to post a fire watch during "hot work" in submarine assembly. The subcontractor developed its estimated cost impact by determining which of its departments had a high percentage of fire watch qualified personnel and submitted to the contractor an "Estimate of Cost Summary" setting forth its "[a]dditional costs associated with complying with the increased requirements invoked by [the OSHA regulation]."

Estimated Cost Impact. The government argued the subcontractor failed to separately track its fire watch activities and the contractor therefore failed to establish causation and provide a reliable basis for calculating damages. However, the contractor claimed increased costs measured by estimating the increase in fire watch work performed after the regulation was implemented. The increase in estimated labor hours, combined with the government’s technical advisory report and the deposition testimony of government witnesses that there was an impact on the contractor, was sufficient to create a factual issue whether the regulatory change caused a change in the subcontractor’s performance and an increase in the cost of performance. The government also argued the contractor could not use estimates to support its claim, but the contractor presented evidence it was not feasible to use actual cost data, and the contract did not contain FAR 52.246-6, which would have required the contractor to maintain actual cost data. (Electric Boat Corp., ASBCA, ¶95,691).

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