Government Contracts, Investigations & International Trade Blog : Government Contracts Lawyer & Attorney : Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest.

By: John W. Chierichella
 

CAS 402 has long provided that B&P costs incurred pursuant to a specific requirement of an existing contract may be distinguished from B&P generally and treated as direct costs of the requiring contract. As CAS 402-61 states:

The circumstances are different because the costs of preparing proposals specifically required by the provisions of an existing contract relate only to that contract while other proposal costs relate to all work of the contractor.

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By David S. Gallacher

Those familiar with Government contracting know at least a little bit about the elusive and fickle regulatory requirements for Independent Research and Development (“IR&D” or “IRAD”) costs. IR&D is a means by which the U.S. Government supports a Contractor’s independent R&D efforts. By reimbursing a Contractor’s independent R&D costs, the Government long has hoped to advance the state of the art without stifling a contractor’s innovation under the weight of a federal bureaucracy, while simultaneously banking on the fact that the U.S. Government also will benefit from the technology advancements. But two recent developments may change the essential nature of IR&D, making it less “independent” and more “dependent” on Government rights and oversight. To quote Bob Dylan – “the times they are a changin’.” 
 

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By: John W. Chierichella and W. Bruce Shirk

We previously noted DCAA’s hasty implementation of the Court of Appeals for the Federal Circuit’s (“CAFC’s”) decision in Gates v. Raytheon Co., 584 F.3d 1062 (Fed. Cir. 2009), requiring daily compounding of interest on adjustments made to rectify Cost Accounting Standards (“CAS”) noncompliances. DCAA Implements Federal Circuit Decision Requiring Interest Compounded Daily on Adjustments for CAS Noncompliances (June 14, 2010). We say “hasty” because – while noting that its holding was required by Canadian Fur Trappers v. United States, 884 F.2d 563 (Fed. Cir. 1989) – the panel expressed reservations regarding that decision’s validity, commenting that appellee’s (Raytheon’s) arguments “may support the proposition that Canadian Fur Trappers was erroneously decided.” Not surprisingly, Raytheon accepted this implicit invitation to petition for rehearing en banc, and that petition is currently pending. Nonetheless, the FAR Councils are now rushing to mimic DCAA by proposing in equally hasty fashion to extend the holding to overpayments under the Truth in Negotiations Act (“TINA”). 75 Fed. Reg. 57719-57721 (Sept. 22, 2010).
 

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By W. Bruce Shirk

Albert Einstein supposedly said that “the most powerful force in the world is compound interest.” Whether or not the great man actually said that, DCAA is now prepared to show contractors just how powerful compounding can be.
 

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By Anne B. Perry

A controversy with a more than 35 year life has finally been addressed by the US Court of Appeals for the Federal Circuit – and in a pro-contractor fashion. In its March 19, 2010 decision in ATK Thiokol, Inc. vs. United States, Fed. Cir. No. 2009-5036 (3/19/10), the Court of Appeals, in affirming the Court of Federal Claims decision from 2005, determined that research and development costs not specifically required by a contract may be treated as Independent Research and Development ("IR&D") under FAR 31.205-18. While this might seem a fairly unremarkable holding, and one consistent with reason, sound procurement policy, and a harmonious reading of the relevant regulations, the Government has for years taken the contrary view that costs of implicitly required development cannot be treated as IR&D. And, as a result, those contractors who treated such costs as IR&D have been treated to cost disallowances, citations for CAS non-compliance, and even accusations of fraud.
 

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