AGENDA January 13, 2004 Meeting by lzg78094

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									                                  January 2004 Agenda
                         ABA Accounting, Cost & Pricing Committee

I. Informational Items

   A. Bill J. Copeland v. Ann M. Veneman, Secretary Of Agriculture, CAFC No. 03-1326,
      November 26, 2003. Court affirms the Agriculture Board of Contract Appeals (AGBCA)
      which had upheld a default termination finding that performance had been delayed and
      the delay was not excusable. Appellant had argued that the COs withholding of funds
      from progress payments for alleged Davis Bacon Act (DBA) violations was improper,
      and the cause of the delay. A Department of Labor administrative law judge had
      eventually dismissed the DBA violations and ordered that withheld funds be returned. In
      an opinion by Judge Dyk, the court finds that the determination by the CO was
      reasonable and in accordance with the DBA provisions which were incorporated within
      the contract. The court also noted that because appellant had the burden of showing that
      the delay was excusable, it also had the burden of showing that the withholding was
      excessive. As appellant met neither of these burdens, the AGBCA decision was affirmed.

   B. Dyncorp Information Systems, LLC v. US, COFC No. 01-16C, November 10, 2003.
      Summary judgment. Decision concerned language in the Contract Disputes Act of 1978
      whether in effect on the date of this contract for purposes of applicable cost accounting
      standards means date the contract was executed or the designated effective date. Issue
      was whether the regulation preventing the contractor from recovering costs on stepped-up
      assets does not apply because contracts effective date preceded effective date of CAS
      standard.

   C. Jim Phillips Contracting, Inc., IBCA Nos.44319, 3220, November 6, 2003. Dispute
      related to a Bureau of Land Management("BLM") contract. On February 10, 1999, BLM
      awarded a one-year Indefinite Delivery Indefinite Quantity (ID/IQ) contract, with four
      one-year options, to Phillips with a guaranteed minimum of $655,000 over the life of the
      contract. By the time a delayed task order was issued, the ground was already covered by
      snow. Work had not yet begun when BLM issued a winter suspension order on December
      15. A "resume work" order was issued on August 15, 2000, but Phillips refused to
      perform claiming that the option had not been exercised. BLM claimed that a letter
      exercising the option had been mailed on February 8, 2000, by regular mail. Phillips
      claimed it was never received. Phillips filed a claim, which was denied, and this appeal
      ensued. The Board follows the White v. Delta Construction decision of the Federal
      Circuit and awards damages of $75,000 plus interest in damages. The Board rejects
      BLM's argument "...that BLM had never given Phillips any indication that the option
      would not be exercised; thus, the Contractor should have assumed that BLM intended for
      the Contract term to be extended."

   D. Volume I Of GAOs Principles Of Federal Appropriations Law. The GAO will shortly
      publish Volume I of Principles of Federal Appropriations Law, third editionalso known
      as The Red Book. This publication is part of a multi-volume set intended to present a
      basic reference work covering those areas of law in which the Comptroller General
      renders decisions. [No Attachment]
E. R.F. Lusa & Sons Sheetmetal, Inc., LBCA No. 2000-CA-00002, December 15, 2003.
   Dispute involved a Department of Labor, Employment and Training Administration
   contract for the removal and replacement of two roofs in Aquadilla, Puerto Rico.
   Contract awarded to appellant for $658,000. Contract terminated for default because
   appellant was 1) handling and disposing of asbestos containing materials without
   required permits and approvals as required by the contract and was 2) unable to complete
   the project in a timely manner. The Labor Board of Contract Appeals (LBCA) upheld the
   termination for default and rejected all of the contractor's arguments for excusable delay.
   The Board also rejected the government's claim for liquidated damages, which was first
   raised in the government's brief. Writing for the Board, Judge Levin noted that although
   "..the failure of the Contracting Officer to render a written final decision assessing
   liquidated damages may deprive the Board of jurisdiction to grant the request, the manner
   in which liquidated damage issues were inserted into this appeal constitutes prejudicial
   surprise and would otherwise persuade us to stay our hand even if we were empowered to
   act."

F. Hansford T. Johnson, Acting Secretary of the Navy v. Advanced Engineering & Planning
   Corporation, Inc. D. E.D. Virginia, No. CIV.A. 03-652-A, November 17, 2003. Navy
   appeals an ASBCA decision which allowed the contractor to recover its preparation costs
   for a request for equitable adjustment (REA). Court affirms the ASBCA finding that,
   when submitted, the REA was not a claim under the Contract Disputes Act. The Court
   agreed with the ASBCA that the REA was not a claim as it had not been certified in
   accordance with FAR 33.207, but only in accordance with the requirements of DFARS
   252.243-7002, implementing 10 U.S.C. Section 2410(a). Summary excerpt provided
   below:

   Contrary to the Navy's contention, Reflectone did not overrule the portion of the Bill
   Strong decision on which the Board relied, or eliminate the CDA certification
   requirement. Reflectone [*18] merely overruled Dawco Construction, Inc. v. United
   States, 930 F.2d 872 (Fed. Cir. 1991), and its progeny, holding instead that the "FAR
   33.201 definition of 'claim' does not require a pre-existing dispute unless the submission
   is a 'routine request for payment.'" Reflectone, 60 F.3d at 1579 (emphasis in original).
   Reflectone clearly did not address the portion of FAR 33.201 that concerns certification.
   See id. at 1578 n.8 ("We do not comment on those conversion requirements or any other
   requirements, that like certification, a contractor may have to satisfy to submit a CDA
   'claim' the CO has jurisdiction to decide.") (emphasis added). For this reason,
   Reflectone's three-part test understandably makes no mention of the certification
   requirement that is also necessary for a CDA claim. n15 Id. at 1575. Since Reflectone,
   moreover, the Federal Circuit has made clear that Reflectone's three-part test is not the
   only prerequisite for a CDA claim, citing Bill Strong for the proposition that a
   "submission 'cannot be considered a formal CDA claim [if] [it] did not request a final
   decision of the [*19] CO.'" See James M. Ellett Construction Co., Inc. v. United States,
   93 F.3d 1537, 1543 (Fed. Cir. 1996); n16 see also 41 U.S.C. 605(a). Like submission to
   the CO for a final decision, the requirement that a CDA claim be certified in a particular
   manner is a statutory requirement. See 41 U.S.C. 605(c)(1); 48 C.F.R. 33.207 (regulation
   implementing statutory certification requirement). Although a defect in certification does
   not deprive the Board of jurisdiction over a claim, the Board cannot enter a final
   judgment until a defective certification is corrected. See 41 U.S.C. 605(c)(6). As noted
         earlier, the certification required for an REA differs from that required for a claim under
         the CDA. See 48 C.F.R. 243.204-70. Reflectone did not alter any of this, nor did it
         eliminate the certification requirement for a CDA claim. Thus, the Board in this case did
         not run afoul of Reflectone, nor did it improperly rely on Bill Strong to determine that
         AEPCO's September 29, 2000 REA was not a CDA claim.

II.    Regulatory Developments

      A. Federal Acquisition Regulation: Insurance And Pension Costs, Final Rule, 68 FR 69251,
         December 11, 2003. The Councils have agreed on a final rule amending the FAR to
         revise the insurance and indemnification cost principle, and the portion of the
         compensation for personal services cost principle relating to pension costs. The rule
         revises both cost principles by improving clarity and structure and removing unnecessary
         and duplicative language. Effective date: January 12, 2004.
      B. Defense Federal Acquisition Regulation Supplement: Payment Withholding, Final Rule,
         68 FR 69631, December 15, 2003. The Department of Defense has issued a final rule
         amending the DFARS to provide additional flexibility when determining the need to
         withhold payments under time-and-materials and labor-hour contracts. The rule clarifies
         that normally there should be no need to withhold payment for a contractor with a record
         of timely submittal of a release discharging the Government from all liabilities,
         obligations, and claims under a contract. Effective date: December 15, 2003.

      C. Prompt Payment Interest Rate Change, 68 FR 75317, December 30, 2003. For the period
         beginning January 1, 2004 and ending on June 30, 2004, the prompt payment interest rate
         is 4.000 per centum per annum. [No Attachment]

III. Tenth Annual Federal Procurement Institute

      A. Seminar Thursday and Friday February 26 and 27.
      B. Council Meeting Saturday February 28.
                              AGENDA March 9, 2004
                   ABA Accounting Cost & Pricing Committee Meeting

I. Informational Items

   A. Gordon R. England, Secretary Of The Navy v. The Swanson Group, Inc.Ê CAFC No. 03-
      1051, January 9, 2004.ÊÊ In a prior Contract Disputes Act (Act) proceeding the ASBCA
      converted Swanson's termination for default to a termination for convenience.Ê Swanson
      received the Boardâs decision on November 17, 1997, and on November 10, 1998, sent a
      letter requesting a one-year extension of time "to initiate the claim". The request for an
      extension was denied by the contracting officer,Ê but Swanson was told that the CO
      would consider any information submitted by Swanson while the CO was making a
      settlement determination. In a unilateral settlement determination issued on March 04,
      1999, theÊ CO awarded Swanson $12,294 in settlement costs.Ê Swansonappealed that
      decision to the Board. The Board rejected the government's argument that Swanson had
      forfeited it right to appeal by failing to submit a termination settlement proposal within
      the one-year period established by FAR 52.249-2. The Board awarded Swanson a total of
      $278,076. The Navy appeals and argues for the first time "...that because Swanson did
      not submit a claim, or a termination settlement proposal that could have ripened into a
      claim, prior to the contracting officer's settlement determination, the Act did not provide
      for an appeal of that determination." The CAFC agrees, and now reverses holding that
      the ASBCA did not have jurisdiction. Swanson's appeal "…was not authorized by the
      CDA because it was not an appeal from a contracting officer's final decision on a claim
      that Swanson had submitted. Accordingly, the Board did not have jurisdiction to
      adjudicate Swanson's appeal."

   B. Hi-Shear Technology Corporation v. US, CAFC No. 03-5077, February 2, 2004.Ê CAFC
      affirms COFC's calculation of plaintiff's damages for the government's breach of
      requirements contracts caused by negligent estimated quantities. The court rejects
      plaintiff'sÊ "so-called" reliance damages argument finding that what plaintiff is trying to
      collect its total costs under the requirement contracts. Noting that although such costs
      may be available under a termination for convenience, that was not the case here.

   C. Alaska Pulp Corporation, Inc. v. US, COFC NO. 95-153C, January 28, 2004.Ê Forest
      Service contract. Damages decision. Court had earlier held that the government had
      breached this 50-year timber sales contract when it implemented the Tongass Timber
      Reform Act. In this opinion Judge Baskir concludes that plaintiff is entitled to no
      damages and rejects all of plaintiff's damages theories, which range from several hundred
      million dollars to $8.7 billion.Ê A very interesting factual case involving post-war
      relations with Japan and this contract which was critical to Japan's production of rayon.Ê
      Although many damage theories are discussed, the undeniable element was the fact that
      plaintiff's contract was a losing contract at the time of the breach.

   D. Hat Creek Construction, Inc. AGBCA No. 2002137-1, January 8, 2004. Forest Service
      contract. Appellant appeals the denial of a Type I differing site condition claim. The
      AGBCA grants the government's motion for summary judgment finding that the contract
      had made no representations of the conditions of the riprap pit which appellant had used
         and that was the subject of the claim. All three judges wrote opinions with Judge Vergilio
         dissenting. Discussion of the elements of Type I differing site condition claims.

      E. BAE Systems Technical Services, Inc., B-293070, January 28, 2004.Ê In competition
         conducted pursuant to Office of Management and Budget Circular A-76, where in-house
         cost estimate (ãIHCEä) for performance by the government's most efficient organization
         (ãMEOä) fails to include costs for various performance work statement (ãPWSä)
         requirements, and the additional costs required for the MEO to meet all PWS
         requirements are greater than the marginal difference between the protester's evaluated
         cost and the IHCE, General Accounting Office recommends that agency award a contract
         to the protester based on its lower-cost proposal.

      F. Data Enterprises Of The Northwest, GSBCA No. 15607, February 17, 2004 (Issued under
         protective order on February 4, 2004).Ê The GSBCA finds that the government breached
         appellantâs contracts by wrongfully disclosing proprietary data delivered with
         commercial software in which the government only had restricted rights.Ê The Board
         uses a jury verdict to award damages, primarily based on lost profits.Ê The Board
         dismisses for lack of jurisdiction those portions of appellantâs claims based on copyright
         infringement and Fifth Amendment takings.

      G. Some DOD Contractors Abuse the Federal Tax System with Little Consequence, GAO
         Report 04-095, February 12, 2004.Ê DOD and IRS records showed that over 27,000
         contractors owed about $3 billion in unpaid taxes as of September 30, 2002. DOD has not
         fully implemented provisions of the Debt Collection Improvement Act of 1996 that
         would assist IRS in levying up to 15 percent of each contract payment to offset a DOD
         contractor's federal tax debt. We estimate that DOD could have collected at least $100
         million in fiscal year 2002 had it and IRS fully utilized the levy process authorized by the
         Taxpayer Relief Act of 1997. As of September 2003, DOD had collected only about
         $687,000 in part because DOD provides contractor payment information from only 1 of
         its 16 payment systems to TOP. DOD had no formal plans at the completion of our work
         to provide payment information from its other 15 payment systems to TOP.

II.    Regulatory Developments

      A. FAR Case 2000-305, Commercially Available Off-the-Shelf (COTS) Items; Proposed
         Rule, 69 FR 2447, January 15, 2004.Ê The Civilian Agency Acquisition Council and the
         Defense Acquisition Regulations Council (Councils) are soliciting comments regarding
         the implementation of section 4203 of the Clinger-Cohen Act of 1996, 41 U.S.C. 431 (the
         Act) with respect to Commercially Available Off-the-Shelf Item acquisitions.Ê The Act
         requires the Federal Acquisition Regulation (FAR) list certain provisions of law that are
         inapplicable to contracts for acquisitions of commercially available off-the-shelf items.
         The Act excludes section 15 of the Small Business Act and bid protest procedures from
         the list.Ê The list of inapplicable statutes cannot include a provision of law that provides
         for criminal or civil penalties.Ê Interested parties should submit comments in writing on
         or before March 15, 2004 to be considered in the formulation of a final rule.
      B. FAR Case 2001-021, Training And Education Cost Principle; Proposed Rule, 69 FR
         4436, January 29, 2004.Ê DOD, GSA and NASA are proposing to amend the Federal
         Acquisition Regulation ãTraining and education costsä cost principle.Ê In order to meet
      the deadline for comments of March 29, 2004, draft comments from the Committee, if
      any, should be made by March 12, 2004.ÊÊ
   C. DFARS Case 2003-D036, Cost Principles And Procedures; Proposed rule, 69 FR 8154,
      February 23, 2004.Ê DOD is proposing a rule to amend the DFARS to update text
      regarding contract cost principles.Ê This proposed rule is a result of a transformation
      initiative undertaken by DOD to dramatically change the purpose and content of the
      DFARS.Ê In order to meet the deadline for comments of April 23, 2004, draft comments
      from the Committee, if any, should be made by April 7, 2004.
   D. DFARS Case 2003-D030, Major Systems Acquisition; Proposed rule, 69 FR 8155,
      February 23, 2004.Ê DOD is proposing a rule to amend the DFARS to update text
      relating to major systems acquisition, earned value management systems, and
      cost/schedule status reporting.Ê In order to meet the deadline for comments of April 23,
      2004, draft comments from the Committee, if any, should be made by April 7, 2004.

The next meeting will be on Tuesday April 13, 2004.
                                       April 13, 2004
                       ABA Accounting Cost & Pricing Committee Agenda

I. Informational Items
      A. U.S. Representative Thomas M. Davis Holds Hearing On Iraq Reconstruction Contracts,
         March 11, 2004. House Government Reform Committee chairman Tom Davis held a
         hearing to look into coordinating contracts amid the challenges of rebuilding Iraq,
         specifically as it pertains to larger construction projects. Topics included efforts made by
         the DOD and the U.S. Agency for International Development to manage acquisition
         activities to ensure that taxpayer money is being spent effectively, and making sure that
         acquisition rules are being followed.

      B. “Focus Of New Acquisition Panel Debated”, by Jason Peckenpaugh, govexec.com,
         February 17, 2004. A soon-to-be-named panel of acquisition experts has the chance to
         fix serious shortcomings in the federal procurement system, observers say, but some fear
         the panel will pursue the agenda of federal contractors and a powerful Republican
         congressman. The acquisition panel is the creation of Rep. Tom Davis, R-Va., who
         added language establishing it to the fiscal 2004 Defense Authorization act. The panel
         will have a year to survey performance-based contracting, governmentwide contracts and
         the use of commercial acquisition practices, according to its authorizing language.
         Because of its association with Davis, most observers expect that the panel will take up
         his procurement priorities. Likely to be on the agenda: share-in-savings contracting,
         where agencies share profits generated by projects with contractors, and expanding
         commercial acquisition practices

      C. AST Anlagen-Und Sanierungstechnik GmbH, ASBCA Nos. 39576, 50802, March 4,
         2004. In a 15 year old case the ASBCA grants an appeal and converts a default
         termination to one for the convenience of the government. The Board finds that the
         contracting officer never established a valid completion date which could serve as a basis
         for a termination for default for failure to make progress. Writing for the Board, Judge
         Paul states "Even if the government had satisfied its burden in this regard, the default
         termination could not withstand strict scrutiny. From the date of contractual award until
         the date of termination, AST‟s attempts to complete the project were thwarted by a host
         of government-caused delays which were thoroughly documented by the contracting
         officer and his fellow governmental employees."

      D. Department of the Army--Modification of Remedy, B-292768.5, March 25, 2004.
         Protest costs, including attorneys‟ fees, need not be allocated between protest issue that
         was sustained and issues that were not addressed or denied in decision where all issues
         were related to the same core allegation, which was sustained; since issues not addressed
         or denied were not distinct and severable from the sustained issue, attorneys‟ fees relating
         to those issues are reimbursable.

II.       Regulatory Developments
   A. Postal Service - Purchasing and Property and Services, Proposed rule, 69 FR 13786,
      March 24, 2004. The Postal Service proposes to amend its regulations in order to
      implement the acquisition portions of its Transformation Plan (April 2000) and the
      similar recommendations of the President's Commission on the United States Postal
      Service (July 2003) as they relate to the acquisition of property and services in
      accordance with 39 U.S.C. 101, 401, 403, 404, and 410. Written comments must be
      received on or before April 23, 2004.
   B. DOD, GSA, NASA – General Provisions of Cost Principles, Final rule, 69 FR 17764,
      April 5, 2004. The Civilian Agency Acquisition Council and the Defense Acquisition
      Regulations Council have agreed on a final rule amending the FAR to revise certain
      general provisions of the cost principles pertaining to Composition of total cost;
      Determining allowability; Direct costs; and Indirect costs. The rule revises the cost
      principles by improving clarity and structure, and removing unnecessary and duplicative
      language. The revisions are intended to revise Contract cost Principles and Procedures in
      light of the evolution of GAAP, the advent of Acquisition Reform, and experience gained
      from implementation of FAR Contract Cost Principles and Procedures. The final rule
      also adds the definition of “direct cost” and revises the definition of “indirect cost” to be
      consistent with the terminology used in the cost accounting standards. Effective Date:
      May 5, 2004.
III. Privatization of Federal, State and Local Government Services

   A. Seminar Thursday and Friday April 29 and 30.
      The next meeting will be on Tuesday May 11, 2004.
                                     June 8, 2004 Agenda

I. Informational Items
   A. Rumsfeld v. General Dynamics Corp., CAFC No. 03-1209, April 29, 2004. Court
      reverses-in-part a decision by the ASBCA. 10 U.S.C. section 2324 (k) does not require
      or permit the apportionment of contractor costs associated with a proceeding among
      various claims where the proceeding is resolved through conset or compromise, and no
      such costs are allowable except as expressly provided by the settlement agreement.

   B. Indiana Michigan Power Co. v. US, COFC No. 98-486C, May 21, 2004. In 1983, the
      U.S. Department of Energy (“DOE”) executed contracts with Indiana Michigan and other
      utilities to collect spent nuclear fuel and dispose of it in a safe repository, starting in
      1998. In 1994, the DOE stated that it would not comply with the contract until 2010 at
      the earliest. Indiana Michigan sued for partial breach of contract in 1998. Judge Hodges
      held that costs incurred in anticipation of the breach are not permitted in the instance of a
      partial breach and further, that Indiana Michigan did not demonstrate that its past costs
      resulted from the breach or were incurred in anticipation of the breach. Judge Hodges
      also ruled that future damages cannot be claimed in a partial breach case.

   C. Appeals Of Lockheed Martin Corporation, Naval Electronics & Surveillance Systems –
      Surface Systems, ASBCA Nos. 53032, 54064, March 10, 2004. Court finds that in a
      termination for convenience situation, the terminated contractor has the burden of
      showing that it is entitled to payment. In cost-reimbursement contracts, it would be
      necessary for the contractor "to prove the actual cost incurred in manufacture in order to
      secure the 'plus' profit." In fixed-price contracts, however, the court allows adjustment
      upon terminating a contract to be made on the basis of estimate.

   D. B.V. Construction, Inc., ASBCA Nos. 47766, 49337, 50553, April 22, 2004. NASA
      construction contract with a small woman-owned business. ASBCA grants the appeals
      for the most part and converts a termination for default to one for convenience, vacates an
      assessment of excess procurement costs and allows a claim for damages including
      unabsorbed overhead. Citing DeVito v. United States, 413 F.2d at 1153, the opinion by
      Judge Hartman finds that NASA waived the contract‟s completion date and never
      established a new reasonable date before terminating for default. The Board also found
      appellant had been damaged as a result differing site conditions and defective
      specifications. The Board found appellant entitled to Eichleay damages for 727 days.
      Noting that appellant “... has made all three showings necessary to establish „standby‟ by
      „indirect evidence‟” ... it has made a prima facie case of entitlement and the burden of
      production shifts to NASA “to show that it was not unpractical for... [BV] to take on
      replacement work and thereby mitigate its damages ... It is well-established that NASA
      cannot rebut a prima facie showing of entitlement to Eichleay recovery by showing only
      that a contractor continued its normal operations, including the performance of
      „additional‟ contracts.”

   E. Virginia Sales Tax Increase Issue. The Virginia legislature has just increased the state
      sales tax from 4.5% to 5%. This means that the cost of contractor purchases in Virginia
      charged to overhead will increase in proportion. Fixed price and fixed price incentive
      negotiated , noncompetitive contracts with the Government include the Taxes clause at
      FAR 52.229-4, which grants a right to price increase for new or increased state and local
      taxes occurring after contract award. The courts have not decided whether this right to a
      contract price increase applies to sales taxes included in overhead purchases. During the
      California refund process in 1991-1996, the Government took the position that the clause
      applied to refunds of sales taxes charged to overhead. It would thus necessarily follow
      that the clause would apply as well to tax increases on overhead purchases. It would
      appear that the Virginia tax increase presents a suitable opportunity for a government
      contractor doing business in Virginia to test which view is correct.

   F. “Emerging Issues in Iraq Reconstruction Contracting-Audits, Investigations, and the
      Transition of Sovereignty,” The Government Contractor, May 5, 2004. This article states
      that the US “will be nation-building in Iraq for years to come, and will continue to
      outsource much of that effort. Contractors are reaping significant rewards, both financial
      and otherwise, but the risks of this participation are among the most significant that a
      company can face.” The author focuses on the rising amount of audits and investigations
      targeting Iraqi contracts, and the impending government transition on June 30 and its
      impact on security and reconstruction activities.

   G. Coalition Provisional Authority Procurement Order Number 87, May 14, 2004. This
      order establishes rules for procurement of goods, services, and construction services by
      the State of Iraq. The order establishes full, fair, and open competitive public bidding
      procedures, international standards of transparency, procurement process integrity,
      offeror‟s right to file tender protests, and tender dispute resolution mechanisms.

   H. DCAA Audit Guidance on Orders Under GSA Schedule Rates, April 9, 2004. Relying
      on FAR 52.232-7 payments under T&M and Labor Hour contracts, DCAA has
      questioned time charges under subcontracts with small businesses where a portion of the
      work was performed by a second-tier subcontractor on non-GSA rate contracts. This is
      contrary to GSA rules where the subcontractor is permitted to charge based on its
      negotiated labor rates. In some instances a significant portion of the work would be non
      profit-bearing under this interpretation by the DCAA.

   I. DCAA Audit Guidance on Employee Compensation For Contractor Employees Located
      In Foreign Countries And Performing Work Under Iraq Reconstruction Contracts, April
      12, 2004. This memo summarizes responses to a survey performed to give assistance in
      determining the reasonableness of compensation costs. FAR states that “compensation
      for each employee or job class of employees must be reasonable for the work
      performed,” and that to test reasonableness, one factor is “conformity with compensation
      practices of other firms – (i) of the same size; (ii) in the same industry; (iii) in the same
      geographic area.” The memo summarizes other firms‟ policies on hardship pay, danger
      pay allowances, sign-on bonuses, rest and relaxation allowances, assignment completion
      bonuses, and foreign service premiums for contractors in Iraq.

II. Regulatory Developments

   A. Determination of Executive Compensation Benchmark Amount; OMB 69 FR 26897,
      May 14, 2004. The Office of Management and Budget (“OMB”) published the
      maximum "benchmark" compensation amount that will be allowable under government
   contracts during contractors' FY 2004 – $432,851. This applies equally to both defense
   and civilian procurement agencies.

B. FAR Case 204-006, Gains and Losses, Proposed rule, 69 FR 29379, May 21, 2004. The
   Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council
   (“Councils”) are proposing to amend the FAR by revising the cost principle regarding
   gains and losses on disposition or impairment of depreciable property or other capital
   assets. Interested parties should submit comments in writing on or before July 20, 2004,
   to be considered in the formulation of a final rule. [Comments of the ACP Committee
   have been incorporated]

C. DOD, GSA, NASA, Payment Withholding, Proposed rule, 69 FR 29838, May 25, 2004.
   The DOD, GSA, and NASA are proposing a rule that would amend the FAR by
   removing the requirement that a contracting officer withhold 5 percent of the payments
   due under a time-and-materials or labor-hour contract, unless otherwise prescribed in the
   contract schedule.
   The next meeting will be on Tuesday, July 13, 2004.
                                     July 13, 2004
                        ABA Accounting Cost & Pricing Committee


Informational Items

   A. Marathon Oil Company and Mobil Oil Exploration & Producing Southeast, Inc. v. United
      States, CAFC No. 03-5147, June 30, 2004. The court affirms a COFC decision denying
      interest on claims by the oil companies demanding post-judgment interest on the Federal
      Circuit contract judgment. The oil companies argue that they are entitled to interest
      pursuant to 28 U.S.C. 1961(c) (2). Judge Clevenger considers the other statues
      referenced in Section 1961 and concludes that section 1961(c) (2) does not
      unambiguously waive sovereign immunity for post-judgment interest on “all” judgments
      of the Federal Circuit. Judge Prost dissents finding that there is only one plausible
      reading of 1961(c) (2) and “It is the reading that maintains that interest shall be allowed
      on all final judgments against the United States in the United States Court of Appeals for
      the Federal Circuit.”

   B. Coast-to-Coast Financial Corporation v. US, COFC No. 95-525C, June 1, 2004. Winstar
      discussion of restitution damages. “The case arises out of the acquisition from the United
      States of a defunct thrift, Old Lyons, a federally chartered mutual association,” by four
      institutions, including Coast-to-Coast Financial. “Two breaches are asserted in the
      complaint. The first is that the adoption of the Financial Institutions Reform, Recovery,
      and Enforcement Act (“FIRREA”) constituted a breach of the promise made by the
      United States at the time of acquisition of the defunct bank that supervisory goodwill
      could be used to satisfy regulatory capital requirements. The second is that there was an
      independent breach of contract resulting from the passage in 1993 of the “Guarini”
      legislation, which had the effect of eliminating part of the tax benefits upon which the
      transaction was predicated.” Two earlier decisions ruled in favor of Coast-to-Coast on
      these two breaches, but the parties “continued to operate under most terms of their
      contractual arrangement until 1998, three years after this law suit was filed.” Coast-to-
      Coast asks for the return of its initial cash investment, $42.5 million, saying that this
      money “was, in effect, left in the bank during the ten years it operated. [Lyons] would
      have been $42.5 million further in the red in 1998, in other words, but for the
      government‟s retention of CTC‟s initial investment.” Judge Bruggink rejects Coast-to-
      Coast‟s motion for summary judgment and grants the government‟s motion for summary
      judgment. Includes a discussion on contract restitution damages, citing both Mobil Oil
      Exploration v. United States and Hansen v. United States.

   C. Gentex Corporation v. US, COFC No. 03-728C, June 18, 2004 (Originally Filed Under
      Seal 6/10/04). In an earlier decision in this case, the court found that Gentex was entitled
      to recover its Bid and Proposal (B&P) costs. Genetex now requests reimbursement of the
      B&P costs, including those of its teammates, plus profits on those costs. Judge Williams
      grants the government‟s motion for summary judgment finding that “Because Plaintiff is
      not obligated to pay its 2 teammates‟ bid preparation and proposal costs and has not itself
      incurred those costs, it cannot recover them in this action. Nor can Gentex recover profit
      on its B&P effort. B&P costs are a type of reliance damages intended to reimburse an
         offeror for the costs or expenses wasted in preparing an offer which was not fairly
         considered. Profit is not an element of those costs.”

      D. National Salvage and Service Corp., ASBCA No. 53750, June 18, 2004. Navy
         requirements contract for the maintenance and repair of railway trackage. The
         government‟s estimated price for CLIN 001 was $2,323,318, and $336,248 for CLIN
         002. During a pre-award meeting the government noted that because of funding
         constraints the work on the current contract had emphasized CLIN 002 work and that
         CLIN 001 type work had been reduced. The meeting apparently did not discuss the
         reasons for the funding constraints, which had in fact been based on a decision by the
         government that it “had invested enough [and] wanted to minimize what they were going
         to put into the trackage.” No changes were made in the estimated work in the
         solicitation. Accordingly, NSSC confirmed its bid without change. The award was made
         to NSSC based on its estimated price of $2,148,338 for CLIN 0001 and $326,899 for
         CLIN 0002. At the conclusion of the contract NSSC had invoiced $362,096 for CLIN
         001 and $444,678 for CLIN 002. NSSC‟s claim for an equitable adjustment based on an
         alleged negligent estimate by the government was denied and the appeal was filed. The
         Board found that the failure of the contracting officer to base the estimate on the most
         current information available as required by FAR 16.503(a)(1), was a breach by the
         government, and sustained the appeal as to entitlement.

                                                       CLIN 001          CLIN 002

                Government‟s Estimated Price            $2,323,318         $336,248

                Estimated Prices Upon Which             $2,148,338         $326,899
                Contract Award Was Made

                Total Invoiced By NSSC                   $362,096          $444,678

II.      Regulatory Developments

      A. Department of Defense Proposed Rule Re: Payment And Billing Instructions, 69 FR
         35564, June 25, 2004. This proposed rule would amend the DFARS to improve payment
         and billing instructions in DOD contracts. “This proposed rule is a result of a
         transformation initiative undertaken by DOD to dramatically change the purpose and
         content of the DFARS.” The DFARS would be changed “to improve the efficiency and
         effectiveness of the acquisition process, while allowing the acquisition workforce the
         flexibility to innovate.” Draft comments should be submitted to the Regulatory
         Coordinating Committee by August 6, 2004.

      B. Federal Acquisition Regulation Case 2003-00-8, Proposed Rule Re: Share-In-Savings
         Contracting, 69 FR 40513, July 2, 2004. The Civilian Agency Acquisition Council and
         the Defense Acquisition Regulations Council (Councils) are proposing to amend the FAR
         to implement Section 210 of the EGovernment Act of 2002. Section 210 authorizes
         Governmentwide use of Share-in-Savings (SIS) contracts for information technology.
         SIS contracts offer an approach for encouraging industry to share creative technology
         solutions with the Government. Through a properly structured SIS contract, agencies
         may lower costs and improve service delivery without large up front investments by
   having the contractor provide the technology investment and allowing the contractor to
   share with the government in the savings achieved. Interested parties should submit
   comments in writing on or before August 31, 2004 to be considered in the formulation of
   a final rule.

C. Federal Acquisition Circular 2001-24, 69 FR 34223, June 18, 2004. This document
   summarizes the FAR rules agreed to by the Civilian Agency Acquisition Council and the
   Defense Acquisition Regulations Council in Federal Acquisition Circular 2001-24. A
   companion document, the Small Entity Compliance Guide, follows this FAC. Items
   include:

       a. Incentives for Use of Performance-Based Contracting for Services (Interim)

       b. Definitions Clause

       c. Procurement Lists

       d. Determining Official for Employment Provision Compliance Immigration and
          Nationality Act (INA)

       e. Federal Supply Schedules Services and Blanket Purchase Agreements (BPAs)

       f. Designated Countries-New European Communities Member States

       g. But American Act-Nonavailable Articles

       h. Application of Cost Principles and Procedures and Accounting for Unallowable
          Costs

       i. Gains and Losses, Maintenance and Repair Costs, and Material Costs

       j. Technical Amendments

D. DOD, GSA, NASA: Final Rule Re: Amend FAR Cost Principles, 69 FR 34241, June 18,
   2004. “The . . . Council have agreed on a final rule amending the FAR by revising FAR
   31.204, Application of Principles and Procedures, to improve the clarity and structure of
   the regulation.” Effective date: July 19, 2004.

E. DOD, GSA, NASA: Final Rule Re: Gains And Losses, Maintenance And Repair Costs,
   And Material Costs, 69 FR 34242, June 18, 2004. “The . . . Councils have agreed on a
   final rule amending the FAR by deleting the cost principle regarding maintenance and
   repair costs, and revising the cost principles regarding contingencies, material costs, and
   training and education costs. The rule revises the cost principles by improving clarity
   and structure, and removing unnecessary and duplicative language. The revisions are
   intended to amend the FAR regarding contract cost principles and procedures in light of
   the evolution of generally accepted accounting principles (GAAP), the advent of
   acquisition reform, and experience gained from implementation of the FAR regarding
   contract cost principles and procedures. Effective date: July 19, 2004.
       F. Postal Service-Establishment Of The Purchasing Manual To Replace The Procurement
          Manual; Incorporation By Reference, Final Rule, 69 FR 36018, June 28, 2004. The
          Postal Service has issued completely revised purchasing regulations, replacing the former
          U.S. Postal Service Procurement Manual with a new Postal Service Purchasing Manual.
          The Purchasing Manual focuses on using the purchasing process to further the business
          and competitive interests of the Postal Service. As such, the new Purchasing Manual
          reflects a fundamental change to Postal Service purchasing policies and procedures. This
          final rule is effective on June 28, 2004.

III.      ABA Annual Meeting in Atlanta – August 6 to 9, 2004

       A. Council Meeting Saturday, August 7
       B. Accounting Cost & Pricing committee meeting on Sunday, August 8, 2004 from 1:00 to
          2:30 PM.
                                       August 9, 2004
                           ABA Accounting Cost & Pricing Committee

I.       Guest Speaker
      A. Howard A. Rubel, Managing Director, Schwab Soundview Capital Markets on the
         Topic of “What Next Now That The Industrial Base Has Become Rationalized”
         Howard brings more than 20 years of experience following aerospace and defense and
         diversified companies to Schwab SoundView Capital Markets. He has been recognized
         by numerous publications including the Wall Street Journal for stock picking and
         earnings accuracy and has been ranked ten times by Institutional Investor magazine‟s
         All-American Analysts Survey. Most recently, he was with Goldman Sachs for nearly
         ten years, and prior to that he was with C.J. Lawrence, where he began his career in 1981.
         Howard has a BS in Accounting, magna cum laude, from Washington and Lee University
         and earned a Masters of Management from Northwestern University in 1981.
II.      Informational Items
      A. GE v. US, COFC No. 99-172C, May 27, 2004. This matter comes before the court on the
         parties‟ cross-motions for partial summary judgment. In 1993, the plaintiff, General
         Electric Company (“GE”), sold to Martin Marietta Corporation (“MMC”) GE‟s
         aerospace business units (“GE Aerospace”). These units provided airplane engines and
         related products and services to the government pursuant to various government
         contracts. Under the terms of the sale, several government contracts were transferred
         from GE to MMC . Prior to finalizing the transaction with MMC, GE entered into an
         agreement with the government regarding the treatment of “costs” arising from the sale
         and transfer of GE Aerospace to MMC (the “Advance Agreement”). The pending
         motions concerned the treatment of pension costs under the Advance Agreement. GE
         contends that the Advance Agreement addressed all issues associated with pension costs
         arising from GE‟s sale and transfer of contracts to MMC. The government contends that
         the Advance Agreement did not address all pension costs issues. The court rules for the
         government, stating the GE‟s interpretation of the Agreement is not consistent with CAS
         413.
      B. P. R. Burke Corporation v. United States, COFC, Nos. 96-232C and 96-445C, November
         25, 2003. P. R. Burke sued the government to recover cots incurred for alleged
         additional work performed for improvements to a sewage treatment facility. The
         government moved for partial summary judgment under Ct. Fed. Cl. R. 56. The
         government modified the construction to be performed under the contract and
         concomitantly refused to grant time extensions for the modifications. Genuine issues of
         material fact existed as to whether the contractor was entitled to payment for its schedule
         consultant‟s fees under the” changes” clause. The court ruled in favor of the government
         on one contract clause and with the contractor or the rest.
      C. Department of Energy – Disposition of Interest Earned On State Tax Refund Obtained
         By Contractor, B-302366, July 12, 2004. The federal government is legally entitled to a
         refund of state taxes plus interest that the state of Washington gave to Fluor Hanford, Inc.
         (FHI) for taxes that FHI paid under a contract with the Department of Energy. Because
         the department previously reimbursed FHI for those taxes, the department is entitled to
   retain and to credit to its appropriations the principal portion of the state tax refund.
   However, the department may not retain or credit to its appropriations interest amounts
   paid by the state along with refunded taxes. The interest amounts must be credited to the
   general fund of the Treasury as miscellaneous receipts, pursuant to 31 U.S.C. 3302(b).
D. Mcdonnell Douglas Corporation vs. US Air Force, USCOA, No. 02-5342, July 27, 2004.
   “Reverse” Freedom of Information Act case. Mcdonnell Douglas challenged the decision
   of the Air Force to release to Lockheed Martin Aircraft Center pricing information
   contained in the contract the Air Force awarded to McDonnell Douglas for the
   maintenance and repair of KC-10 and KDC-10 aircraft. The court affirmed the judgment
   of the district court to uphold the decision to release the Over and Above Work
   Contractor Line-items (CLINs) but reversed the judgment to approve release of option
   year prices and Vendor Pricing CLIN.
E. Career Quest, a division of Syllan Careers, Inc., B-293435.2; B-293435.3, August 2,
   2004. Protest is sustained where, under Office of Management and Budget Circular A-76
   cost comparison, record shows that in-house "most efficient organization" was
   misevaluated regarding key aspects of intended in-house staffing levels, and this could
   have affected the decision to continue to perform the requirement in-house rather than to
   contract out.Protest is sustained where, under Office of Management and Budget Circular
   A-76 cost comparison, record shows that in-house "most efficient organization" was
   misevaluated regarding key aspects of intended in-house staffing levels, and this could
   have affected the decision to continue to perform the requirement in-house rather than to
   contract out.
F. Glendale Federal Bank, FSB, v. US, CAFC No. 03-5136,, 0-5139, August 9, 2004.
   Winstar case. In this second appeal of the damages issue the CAFC affirms the COFC
   opinion by Senior Judge Smith awarding $381 million in this "wounded bank damages
   decision. In an opinion by Judge Plager, he notes “However denominated, the focus of a
   recovery based on the reliance interest is the real costs incurred for capital and services
   that the thrift would not have incurred but for the contract and its subsequent breach.
   Whether in a given case this properly includes the higher costs to a thrift of conducting its
   general business after FIRREA-the “wounded bank” claim-is a matter of proof; if too
   speculative, it can and should be denied as the burden lies with the plaintiff to establish
   its damages. In the case before us, we are unpersuaded that the trial court‟s factual
   findings and conclusions regarding reliance damages, based on the earlier record, are
   clearly erroneous; the judgment in that regard is fully consistent with the law as we
   enunciated it. The award of reliance damages in the amount of $381 million is affirmed.”
G. Public Utility District No. 1 of Snohomish County, Washington vs. Federal Emergency
   Management Agency, Court Of Appeals Ninth Circuit, No. 03-35104, July 14, 2004.
   After a series of storms, the District worked to complete utility repairs. The President
   stated that public utilities could apply for federal disaster relief grants administered by
   FEMA. The District applied for relief, and as part of its application, the District included
   a 36% “fringe benefit overhead rate” for each hour worked to capture employee fringe
   benefits. However, the 36% did not reflect actual expenses because some costs such as
   employee leave remained constant no matter how many overtime hours were worked. In
   an audit, FEMA‟s Inspector General recommended that FEMA reduce the District‟s
   amount eligible due in part to this discrepancy. The court affirmed the lower court‟s
          decision that FEMA‟s audit determinations did not violate the Administrative Procedure
          Act.
       H. Toni R Barron; Vicky J. Scheel v. Deloitte & Touche, LLP, et. al., Court Of Appeals,
          Fifth Circuit, No. 03-50507, August 11, 2004. Qui tam action asserting defendants
          knowingly submitted false claims for Medicaid reimbursement to the United States. The
          district court concluded that any action arising out of National Heritage Insurance
          Company‟s role as a Medicaid fiscal intermediary was barred by Texas‟ Eleventh
          Amendment immunity. The appeals court reverses this decision based on a six factor test
          outlined in Cozzo v. Tangipahoa Parish Council – Presidential Gov‟t.


III.      Regulatory Developments
       A. DOD Memo, “Selection Of Contractors For Subsystems And Components”, July 12,
          2004. DOD outlines general strategies for selecting subcontractors for DOD contracts to
          ensure fairness and the best value for DOD.
       B. DCMA/DCAA Joint Guidance Implementing The Teledyne Decision On CAS
          413.50(c)(12) Segment Closing Adjustments, July 23, 2004. The US Court of Federal
          Claims decision in Teledyne, Inc. v. United States, which was affirmed by the US Court
          of Appeals for the Federal Circuit, required certain exclusions when calculating the
          Government‟s share of the CAS 413 segment closing adjustment. Specifically, the
          portion of a closed segment‟s pension surplus or deficit that is attributable to pension
          costs that were allocated to contracts that predate CAS 413, as well as the portion that is
          attributable to pension costs allocated to firm-fixed price (FFP) contracts entered into
          under the original CAS 413 must be excluded from the calculation of the Government‟s
          share of the CAS 413 segment closing adjustment.
       C. DOD Proposed Rule Re: DFARS – Bonds, 69 FR 48444, August 10, 2004. Enclosed for
          potential comment by the ACP is a proposed rule that would amend the DFARS to
          update text pertaining to the use of fidelity and forgery bonds under DOD contracts.
          Draft comments should be received by September 28, 2004.
       D. DOD Proposed Rule Re: DFARS – Resolving Tax Problems, 69 FR 48445, August 10,
          2004. Enclosed for potential comment by the ACP is a proposed rule that would amend
          the DFARS to update text pertaining to the resolution of tax problems under DOD
          contracts. Draft comments should be received by September 28, 2004.
       E. Postal Service – Issue 3 of the Purchasing Manual; Incorporation by Reference, Final
          Rule, 69 FR 51364, August 19, 2004. The Postal Service announces the publication of
          Issue 3 of the Postal Service Purchasing Manual. Issue 3 supersedes pervious editions of
          the Purchasing Manual, and is incorporated by reference in the Code of Federal
          Regulations. This final rule is effective on August 19, 2004. The incorporation by
          reference of the Purchasing Manual, Issue 3 is approved by the Director of the Federal
          Register as of August 19, 2004.
       F. Department of Veterans‟ Affairs Proposed Rule Re: Audits Of States, Local
          Governments, And Non-Profit Organizations; Grants And Agreements With Institutions
          Of Higher Education, Hospitals, And Other Non-Profit Organizations, 69 FR 52334,
          August 25, 2004. Enclosed for potential comment by the ACP Committee and the
Research & Development and Intellectual Property Committee is a proposed rule that
would amend the Department of Veterans Affairs regulations to codify the provisions of
revised OMB Circular A-133. That circular provides standards for consistency and
uniformity among federal agencies for the audits of States, local governments, and non-
profit organizations expending Federal awards. Further, this document proposes to
codify the provisions of former OMB Circular A-110. Draft comments should be
received by October 8, 2004.
The next meeting will be on Tuesday, October 12, 2004.
                                      October 12, 2004
                           ABA Accounting Cost & Pricing Committee

I.       Panel Discussion of DCMA / DCAA Joint Guidance Implementing The Teledyne
         Decision On CAS 413.50(c)(12) Segment Closing Adjustments, July 23, 2004.
         Discussion Leaders
         Howard J. Stanislawski of Sidley & Austin
         Lawrence S. (“Larry”) Rabyne of the Defense Contract Management Agency

         Background:
         The US Court of Federal Claims decision in Teledyne, Inc. v. United States, which was
         affirmed by the US Court of Appeals for the Federal Circuit, required certain exclusions
         when calculating the Government‟s share of the CAS 413 segment closing adjustment.
         Specifically, the portion of a closed segment‟s pension surplus or deficit that is
         attributable to pension costs that were allocated to contracts that predate CAS 413, as
         well as the portion that is attributable to pension costs allocated to firm-fixed price (FFP)
         contracts entered into under the original CAS 413 must be excluded from the calculation
         of the Government‟s share of the CAS 413 segment closing adjustment.
         General Electric v. US, COFC No. 99-172C, May 27, 2004. In 1993, the plaintiff,
         General Electric Company (GE), sold to Martin Marietta Corporation (MMC) GE‟s
         aerospace business units (GE Aerospace). These units provided airplane engines and
         related products and services to the government pursuant to various government
         contracts. Under the terms of the sale, several government contracts were transferred
         from GE to MMC . Prior to finalizing the transaction with MMC, GE entered into an
         agreement with the government regarding the treatment of “costs” arising from the sale
         and transfer of GE Aerospace to MMC (the “Advance Agreement”). The pending
         motions concerned the treatment of pension costs under the Advance Agreement. GE
         contends that the Advance Agreement addressed all issues associated with pension costs
         arising from GE‟s sale and transfer of contracts to MMC. The government contends that
         the Advance Agreement did not address all pension costs issues. The court rules for the
         government, stating the GE‟s interpretation of the Agreement is not consistent with CAS
         413.

II.      Informational Items

      A. P. R. Burke Corporation v. United States, COFC, Nos. 96-232C and 96-445C, November
         25, 2003. P. R. Burke sued the government to recover costs incurred for alleged
         additional work performed for improvements to a sewage treatment facility. The
         government moved for partial summary judgment under Ct. Fed. Cl. R. 56. The
         government modified the construction to be performed under the contract and
         concomitantly refused to grant time extensions for the modifications. Genuine issues of
         material fact existed as to whether the contractor was entitled to payment for its schedule
         consultant’s fees under the “changes” clause. The court ruled in favor of the
         government on one contract clause and with the contractor or the rest.
B. Jackson Construction Co., Inc. v. United States, COFC No. 97-31C, September 15, 2004.
   Jackson Construction (“Jackson”) constructed a new building for the Corps of Engineers
   (“Corps”). Although Jackson completed the work within the time mandated by the
   Contract and was paid for all the changes required by the Corps, Jackson nevertheless
   submitted a claim to recover additional compensation in delay and impact damages.
   Jackson presented both an early completion delay claim and an impact claim. The Court
   ruled in favor of the government on both claims. In the early completion delay claim, the
   court ruled that Jackson did not prove the existence of compensable delay, not did it
   prove entitlement to Eichleay damages under an early completion theory. In the impact
   claim, the court ruled that Jackson did not meet its burden of proving the existence of a
   cumulative impact claim, not did it prove entitlement to damages under a total cost
   theory.

C. Department of Energy – Disposition Of Interest Earned On State Tax Refund Obtained
   By Contractor, B-302366, July 12, 2004. The federal government is legally entitled to a
   refund of state taxes plus interest that the state of Washington gave to Fluor Hanford,
   Inc. (FHI) for taxes that FHI paid under a contract with the Department of Energy.
   Because the department previously reimbursed FHI for those taxes, the department is
   entitled to retain and to credit to its appropriations the principal portion of the state tax
   refund. However, the department may not retain or credit to its appropriations interest
   amounts paid by the state along with refunded taxes. The interest amounts must be
   credited to the general fund of the Treasury as miscellaneous receipts, pursuant to 31
   U.S.C. 3302(b).

D. McDonnell Douglas Corporation vs. US Air Force, USCOA, No. 02-5342, July 27, 2004.
   McDonnell Douglas challenged the decision of the Air Force to release to Lockheed
   Martin Aircraft Center pricing information contained in the contract the Air Force
   awarded to McDonnell Douglas for the maintenance and repair of KC-10 and KDC-10
   aircraft. The court affirmed the judgment of the district court to uphold the decision to
   release the Over and Above Work Contractor Line-items (CLINs) but reversed the
   judgment to approve release of option year prices and Vendor Pricing CLIN.

E. Public Utility District No. 1 of Snohomish County, Washington vs. Federal Emergency
   Management Agency, Court Of Appeals Ninth Circuit, No. 03-35104, July 14, 2004.
   After a series of storms, the District worked to complete utility repairs. The President
   stated that public utilities could apply for federal disaster relief grants administered by
   FEMA. The District applied for relief, and as part of its application, the District included
   a 36% “fringe benefit overhead rate” for each hour worked to capture employee fringe
   benefits. However, the 36% did not reflect actual expenses because some costs such as
   employee leave remained constant no matter how many overtime hours were worked. In
   an audit, FEMA‟s Inspector General recommended that FEMA reduce the District‟s
   amount eligible due in part to this discrepancy. The court affirmed the lower court‟s
   decision that FEMA‟s audit determinations did not violate the Administrative Procedure
   Act.

F. Sanford Cohen & Associates, Inc. IBCA No. 4239, September 8, 2004. EPA contract.
   Claim for breach of a level of effort, cost reimbursement, term contract with five renewal
   options. At the time of award the contract provided that EPA “will order 119,000 direct
          labor hours for the base period which represents the Government's best estimate of the
          level of effort required to fulfill these requirements." At the time of the exercise of the
          options EPA unilaterally modified the contract to delete the above and replaced with
          language which stated "The Government's best estimate of the level of effort required to
          fulfill these requirements is [119,000 direct labor hours]." EPA ordered significantly less
          than the stated quantities in each period. Appellant claims entitlement to a fee adjustment
          based on the negligent estimates. The Board sustains the appeal. In an opinion by Chief
          Judge Steel, the Board adopts the proposal by Nash & Cibinic that makes the
          government liable for negligently prepared estimates in ID/IQ and requirements
          contracts. Although the instant contract is not such a contract the Board finds that
          appellant reasonably relied on the government's estimate and is entitled to an equitable
          adjustment for EPA's negligent estimates.

       G. Individual Development Associates, Inc., ASBCA No. 53910, September 9, 2004.
          Contract for educational services for various military schools. Appellant's proposal
          indicated that each CLIN was “...offered as an inseparable whole and cannot be divided
          in any way.” The commercial termination clause included in the contract provided that in
          the event of a termination for convenience the contractor “shall be paid a percentage of
          the contract price reflecting the percentage of the work performed prior to the notice of
          termination, plus reasonable charges...” The government terminated the contract for
          convenience and the appellant claimed it was entitled to the full price, rather than
          percentage based on the "inseparable" language of its proposal. The Board disagreed,
          finding that the appellant's interpretation would read the government's termination
          for convenience rights out of the contract.

III.      Regulatory Developments

       A. FAR Case 2003-027, Additional Commercial Contract Types, Advanced Notice Of
          Proposed Rulemaking, 69 FR 56315, September 20, 2004. The Councils are issuing this
          advance notice of proposed rulemaking (ANPR) to solicit comments that can be used to
          assist in the implementation of section 1432 of the National Defense Authorization Act
          for Fiscal Year 2004 (Public Law 108-136) in the FAR. Section 1432 amends section
          8002(d) of the Federal Acquisition Streamlining Act to expressly authorize the use of
          time-and-materials (T&M) and labor-hour (LH) contracts for the procurement of
          commercial services. Implementation of section 8002(d) will require revisions to the
          FAR to address the risks associated with T&M and LH contracting. Current policies
          were designed only to support purchases through firm-fixed price contracts and fixed-rice
          contracts with economic price adjustments. Draft comments should be received by
          November 5, 2004.

       B. FAR Case 2004-006, Accounting for Unallowable Costs, Proposed Rule, 69 FR 58014,
          September 28, 2004. The Civilian Agency Acquisition Council and the Defense
          Acquisition Regulation Council (Councils) are proposing to amend the Federal
          Acquisition Regulation (FAR) by revising language regarding accounting for
          unallowable costs. Draft comments should be received by November 15, 2004.

       C. On September 17, 2004, the Federal Register noticed an “interim rule that amends the
          DFARS to implement Section 801 of the National Defense Authorization Act for Fiscal
         Year 2004. Section 801 adds 10 U.S.C. 2382, which places restrictions on the
         consolidation of two or more requirements of a DoD department, agency, or activity into
         a single solicitation and contract, when the total value of the requirements exceeds
         $5,000,000. The objective of the rule is to ensure that decisions regarding consolidation
         of contract requirements are made with a view toward providing small business concerns
         with appropriate opportunities to participate in DoD procurements as prime contractors
         and subcontractors.” Comments are due on/before November 16, 2004.

      D. Office of Personnel Management (OPM): Proposed Rule Re: Federal Employees Group
         Life Insurance, 69 FR 59166, October 4, 2004. Proposed rule that would amend the
         Federal Employees‟ Group Insurance Regulation. Draft comments should be received by
         November 19, 2004.

      E. General Services Administration Acquisition Regulation; Acquisition Of Leasehold
         Interests In Real Property; Historic Preference, 69 FR 66938, September 16, 2004. Final
         rule amending the General Services Administration Acquisition Regulation by revising
         the provision on Historic Preference.

      F. “Selection Of Contractors For Subsystems And Components”, July 12, 2004.
         Department of Defense outlines general strategies for selecting subcontractors for
         Department of Defense (DOD) contracts to ensure fairness and the best value for DOD.
      G. Department of the Navy, Navy-Marine Corps Award Fee Guide (July 2004) has been
         issued and contains policy and procedures for awarding and administering Award Fee
         contracts.

      H. Defense Finance and Accounting Service in Columbus, Ohio, issued a memorandum on
         the subject of “Electronic submission of Payment Requests, Policy Number 03-CP-
         04.” Provides guidance for DoD FAR Supplement (DFARS) 252.232-7003 (March
         2003) covering the requirement that “all new contracts awarded October 1, 2003, or later,
         should include DFARS 252.232-7003” and, if not, those contracts should be modified to
         include it. In the absence of electronic invoices the DFARS stipulates that the parties
         must mutually agree to alternative payment method.

      I. Acting Under Secretary of Defense, Acquisition Technology and Logistics Michael
         Wynne on August 16, 2004, issued a memorandum on the subject of “Performance
         Based Logistics (PBL): Purchasing Using Performance Based Criteria.” PBL
         “performance” guidance criteria is specified in the memorandum for the areas of
         operational availability, operational reliability, cost per unit usage, logistics footprint, and
         logistics response time. Metrics are encouraged.

IV.      Terminations Decanted - ABA Section Of Public Contract Law Meeting in Napa,
         California – November 4 -6, 2004

      A. Seminar Thursday and Friday November 4 and 5, 2004.
      B. Council Meeting Saturday November 6, 2004.

         The next meeting of the Accounting Cost and Pricing committee will be on Friday,
         November 4, 2004 in Napa, California. Wine MAY be served.
                                    December 14, 2004
                          ABA Accounting Cost & Pricing Committee

I.      Informational Items
     A. Sanford Cohen & Associates, Inc. IBCA No. 4239, September 8, 2004. EPA contract.
        Claim for breach of a level of effort, cost reimbursement, term contract with five renewal
        options. At the time of award the contract provided that EPA “will order 119,000 direct
        labor hours for the base period which represents the Government's best estimate of the
        level of effort required to fulfill these requirements." At the time of the exercise of the
        options EPA unilaterally modified the contract to delete the above and replaced with
        language which stated "The Government's best estimate of the level of effort required to
        fulfill these requirements is [119,000 direct labor hours]." EPA ordered significantly less
        than the stated quantities in each period. Appellant claims entitlement to a fee adjustment
        based on the negligent estimates. The Board sustains the appeal. In an opinion by Chief
        Judge Steel, the Board adopts the proposal by Nash & Cibinic that makes the
        government liable for negligently prepared estimates in ID/IQ and requirements
        contracts. Although the instant contract is not such a contract the Board finds that
        appellant reasonably relied on the government's estimate and is entitled to an equitable
        adjustment for EPA's negligent estimates.
     B. Individual Development Associates, Inc., ASBCA No. 53910, September 9, 2004.
        Contract for educational services for various military schools. Appellant's proposal
        indicated that each CLIN was “...offered as an inseparable whole and cannot be divided
        in any way.” The commercial termination clause included in the contract provided that in
        the event of a termination for convenience the contractor “shall be paid a percentage of
        the contract price reflecting the percentage of the work performed prior to the notice of
        termination, plus reasonable charges...” The government terminated the contract for
        convenience and the appellant claimed it was entitled to the full price, rather than
        percentage based on the "inseparable" language of its proposal. The Board disagreed,
        finding that the appellant's interpretation would read the government's termination
        for convenience rights out of the contract.
     C. ABA Final Comment Letter Re: Wynne Memorandum, October 27, 2004. Patricia Witte,
        Chair of the Section of Public Contract Law, addressed a letter to Michael Wynne, Acting
        Under Secretary of Defense (Acquisition, Technology and Logistics), outlining four
        comments about Mr. Wynne‟s memorandum entitled Selection of Contractors for
        Subsystems and Components.


     D. DOD Issues “Defense Acquisition Guidebook,” October 8, 2004. Acting Under
        Secretary of Defense (Acquisition, Technology and Logistics) Michael W. Wynne,
        approved provisional release of the Defense Acquisition Guidebook. The stated “purpose
        is to provide members of the acquisition community and our industry partners with an
        interactive, on-line reference to policy and discretionary best practices (and) a
   valuable resource as you design your programs.” The Guidebook is available at
   http://akss.dau.mil/dag/
E. ABA Responds to the National Reconnaissance Office‟s Policy on “Prohibition of
   Teaming,” October 25, 2004. The ABA Public Contract Law Section sent a letter to the
   Contracts Director of the National Reconnaissance Office (NRO) on recent NRO web
   postings relative to the NRO‟s Exclusive Teaming Prohibition clause that was published
   in April 2004. “This…clause prohibits any team arrangement . . . to pursue an NRO
   procurement program where the parties further agree not to team with any competitors
   for that program. The stated concern is that the exclusive team arrangement may unduly
   limit competition.” The ABA letter reviews in detail past and current government
   policies in the area of teaming and the industry and government recognition of the
   benefits of teaming arrangements. It concludes by stating: “The (Public Contract)
   Section strongly supports efforts to protect the integrity of the acquisition process, and
   seeks to foster competition. This includes the avoidance of anticompetitive behavior.
   We believe that the issue of exclusive team arrangements and whether such
   arrangements inhibit competition have been thoroughly examined in the past, and
   the interests of the federal government would not be served by a blanket prohibition
   against exclusive team arrangements.”

F. Office of Federal Procurement Policy (OFPP) launches online Acquisition Center of
   Excellence (ACE) for Services, November 18, 2004. “The ACE for Services is an online
   central clearinghouse for public and private.” A public launching has been set for
   Thursday, November 18, 2004, from 9:00 a.m. to 12:00 p.m. at the General Services
   Administration (GSA) Auditorium, 18th & F Streets, NW, Washington, DC 20405.

G. NORTHROP GRUMMAN CORPORATION, MILITARY AIRCRAFT DIVISION v.
   US, COFC No. 06-760C, November 5, 2004. Plaintiff challenges the validity of its fixed
   price contract which was terminated for convenience. The court grants the government's
   motion to dismiss those counts which rely on the government's violation of Section 8118
   of the 1987 Defense Appropriations Act. Judge Horn finds that the decision by the Court
   of Appeals for the Federal Circuit in AMERICAN TELEPHONE AND TELEGRAPH
   COMPANY and LUCENT TECHNOLOGIES, INC. v. US, CAFC No. 01-5044 (2002) is
   controlling and binding precedent on the COFC. Although dismissing the Section 8118
   counts, Judge Horn notes that the remaining counts may provide plaintiff some relief.

H. DOD Memo to OMB Regarding Section 8014(a)(3) of 2005 Defense Appropriations Act,
   November 12, 2004. DOD voices its support for repeal of the Defense Appropriation Act
   provision that relates to employee health benefits in competitive sourcing situations.

I. PINE & TIMBER, INC. v. US, COFC No. 98-720C, November 23, 2004. Forest
   Service lumber sale contract. Damages case. Plaintiff claims attorney fees resulting from
   a contract clause which provided that when disruption or delay exceeded 30 days that the
   government would pay " ... out-of-pocket expenses incurred as a direct result of
   interruption or delay of operations under this provision. Out-of-pocket expenses do not
   include lost profits, replacement cost of timber, or any other anticipatory losses suffered
   by Purchaser." Judge Miller grants the government's motion for summary judgment on
   this claim finding that "The absence of any mention of attorneys' fees, in the context of
   the 'American Rule' and the requirement that 'waivers of sovereign immunity cannot be
         implied but must be unequivocally expressed,' Ledford, 297 F.3d at 1381, is fatal to
         Precision Pine's claim for attorneys' fees."




II.      Regulatory Developments
      A. FAR Case 2004-006, Accounting for Unallowable Costs, Proposed Rule, 69 FR 58014,
         September 28, 2004. The Civilian Agency Acquisition Council and the Defense
         Acquisition Regulation Council (Councils) are proposing to amend the Federal
         Acquisition Regulation (FAR) by revising language regarding accounting for
         unallowable costs. Draft comments should be received by November 15, 2004.

      B. General Services Administration Acquisition Regulation; Acquisition Of Leasehold
         Interests In Real Property; Historic Preference, 69 FR 66938, September 16, 2004. Final
         rule amending the General Services Administration Acquisition Regulation by revising
         the provision on Historic Preference.

      C. DFARS Case 2003-D036, Cost Principles and Procedures, Final Rule, 69 FR 63331,
         November 1, 2004. DOD has issued a final rule amending the Defense Federal
         Acquisition Regulation Supplement (DFARS) to update text pertaining to contract cost
         principles. This rule is a result of a transformation initiative undertaken by DOD to
         dramatically change the purpose and content of the DFARS. Effective date: November
         1, 2004.

      D. DOD: Final Rule re Cost Principles and Procedures, November 1, 2004. Enclosed for
         your information is a final rule that amends the Defense Federal Acquisition Regulation
         Supplement (DFARS) to update text pertaining to contract cost principles. The rule was
         published at 69 Fed. Reg. 63331 on November 1, 2004.

      E. DOD: Notice And Request For Comments Re: Contract Financing: Contractor‟s
         Request For Progress Payments, 69 FR 67899, November 22, 2004. Enclosed for
         potential comment by the ACP is a notice advising that the Defense Acquisition
         Regulations (DAR) Council is currently reviewing DOD‟s use of Standard Form (SF)
         1443, Contractor‟s Request for Progress Payments. As part of this review, the DAR
         Council would like to hear the views of interested parties on what improvements could be
         made to the form, including the instructions, for use on DOD contracts. Respondents are
         also encouraged to describe any problems they have experienced in using the form on
         DOD contracts. Draft comments should be received by December 23, 2004.

      F. Committee for Purchase from People Who are Blind or Severely Disabled: Notice of
         JWOD Regulations Amendment, 69 FR 65395, November 12, 2004. Enclosed for
         potential comment by the Accounting Cost & Pricing Committee and the Small Business
         and Socioeconomic Programs Committee is a proposed rule that would amend the
         regulations of the Committee for Purchase From People Who Are Blind or Severely
         Disabled (the "Committee") to require nonprofit agencies awarded government contracts
         under the authority of the Javits-Wagner-O'Day ("JWOD") Act, as well as central
nonprofit agencies designated by the Committee and nonprofit agencies that would like to
qualify for participation in the JWOD Program, to comply with new governance
standards. The proposed governance standards are primarily based on standards that are
common practice in nonprofit and business communities. Draft comments should be
received by December 23, 2004.

   NOTE FROM STANLEY DEES: This reg published for comment on November 12
   (69 Fed. Reg. 65395) may be an inappropriate extension of rules applicable in other
   circumstances to the non profits who support the disabled (e.g., Goodwill, etc). I
   understand it likely will be opposed by many of those organizations. I do not know
   whether there is a procurement law issue here on which the Section should comment.
   I did want you all (and any other committee that might have jurisdiction) to know that
   proposed rule may not be the benign (common practice) rule that the Committee
   describes it to be.


The next meeting of the Accounting Cost and Pricing committee will be on Tuesday,
January 11, 2005.

								
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