This blog post was authored by Tom Lemmer, Steve Masiello, Tyson Bareis, and Justin Ganderson.
One trend that we’ve been following closely is the successful use of the (“CDA”) six-year statute of limitations period by contractors and the United States to dismiss claims at the inception of a lawsuit. (See our prior blog posts regarding Raytheon Company (Fed. Cl. Apr. 2, 2012), Floorpro, Inc. (Fed. Cir. May 31, 2012), and Sikorsky Aircraft Corp. (Fed. Cl. July 18, 2012).) The Armed Services Board of Contract Appeals’ (the “ASBCA”) decision in Raytheon Company, ASBCA Nos. 57578, 57679 continues this trend. Here, the Government issued a final decision against the contractor, asserting that the contractor included unallowable costs in its incurred cost submissions and indirect rate proposals. Appealing to the ASCBA, the contractor argued that these claims must be dismissed because they were time-barred under the CDA’s six-year statute of limitations period. The ASBCA agreed on many of the claims. The ASBCA determined that the Government “should have known” that many of its claims had accrued more than six years before the contracting officer issued the final decision; the ASCBA found that prior Defense Contract Audit Agency (“DCAA”) audits/reviews revealed or should have revealed the bases for the Government’s claims.
This decision is very positive for contractors because it places the Government on the clock prior to DCAA even issuing its final audit report; the claim may accrue shortly after the contractor submits its incurred costs submissions/indirect rate proposals to DCAA. This decision also demonstrates that importance of keeping good records about what notice/documentation was provided to the Government, and when it was provided. Of course, contractors must remember that these types of principles will hold equally true to contractor claims, and may pose problems for contractors. For example, based on Raytheon, the Government may argue that contractors must assert their claims for final payment within six years of submitting their incurred cost submission; otherwise, the claims will be time-barred under the CDA’s statute of limitations. Although this type of argument may be questionable – because it presumes that a contractor knew or should have known that the Government would not make final payment on the contract as of the date of the incurred cost submission – it demonstrates the types of arguments contractors may face in the future. Contractors must have processes in place to identify when a claim may accrue, and track these potential claims. Doing so will help ensure that you don’t fall victim to the CDA’s statute of limitations. Please review our client advisory for additional analysis regarding this decision, and contact us if you have any questions about its impact on your business.