ASBCA 60776

ARMED SERVICES BOARD OF CONTRACT APPEALS Appeal of-- ) ) Falmouth Scientific, Inc. ) ASBCA No. 60776 ) Under Contract No. N00039-06-C-0060 ) APPEARANCE FOR THE APPELLANT: Bernice A. Pasternak, Esq. Innovation 140 Consulting, LLC Wakefield, MA APPEARANCES FOR THE GOVERNMENT: Arthur M. Taylor, Esq. DCMA Chief Trial Attorney Peter M. Casey, Esq. Trial Attorney Defense Contract Management Agency Boston, MA MAJORITY OPINION BY ADMINISTRATIVE JUDGE PROUTY In this matter, appellant, Falmouth Scientific, Inc. (Falmouth) challenges the application of indirect cost rates to which it and the government bilaterally agreed. We consider a series of motions for summary judgment. We grant summary judgment to the government upon the bilateral contract modification, as it requests, 1 and deny a Falmouth's cross-motion,2 which is largely based upon fundamentally flawed understanding of the government's claim accrual, which is relatively straightforward. Somewhat more problematic is a different government motion for suinmary- . judgment (which was filed before the motion which we grant, thus we refer to it as the government's first motion for summary judgment3) which is premised upon a promissory note that Falmouth signed after initiating this litigation. To the government and Judges Kinner and Mcllmail, the promissory note, which was executed as part of a standard agreement between Falmouth and the government to 1 The government's motion for summary judgment based upon the bilateral rate agreements is referred herein as the government's "second motion for summary judgment," or "gov't second mot." because it was the second motion for summary judgment submitted by the government in this appeal. This filing also includes its opposition to appellant's cross-motion for summary judgment. 2 "App. compl. and mot." refers to appellant's cross-motion for surrim.ary judgment, which is confusingly combined with its complaint. 3 Also referenced as "gov't first mot." permit the government to recoup the overpayment of indirect costs through an installment plan, constitutes a settlement of the dispute, mooting the appeal before us (see gov't first mot.). It was, however, intended as no such thing by either party.· Moreover, execution of the promissory note while pursuing the appeal is consistent with longstanding law that allows contractors to challenge government contracting directions with which they have already complied. Thus, we deny the government's first motion for summary judgment, which permits us to consider and grant its second. STATEMENT OF FACTS FOR PURPOSES OF THE MOTIONS I. The Contract The United States Navy Space and Naval Warfare Systems Command (the government) awarded the above-captioned contract (the contract) to Falmouth, pursuant to the Small Business Innovation Research program on August 31, 2006 (R4, tab 1 at 1-2). The contract included the standard Disputes Clause, found in Federal Acquisition Regulation (FAR) 52.233-1 (JUL 2002) (R4, tab 1 at 15). The Defense Contract Management Agency (DCMA) managed the contract on behalf of the government. Falmouth and its subcontractors apparently successfully conducted the research and technical work of the contract from 2007 until completion in 2011 (Vander Schel aff. 112, 74; app. compl. and mot. 1 14). The contract was primarily a cost-reimbursement contract, and included the . standard clause from the FAR, which governed payment for incurred costs (see R4, tab 1 at 10, 15 (incorporating FAR clause 52.216-7, ALLOWABLE COST AND PAYMENT (DEC 2002), into the contract). As a consequence of its being a cost-reimbursement contract, the government essentially agreed to pay Falmouth based upon both the direct and indirect costs that it incurred in performance. As we have described at length in prior decisions, in cost contracts, the contractor invoices an estimated amount for indirect costs (whatwould generally be understood to be overhead) and gets paid that amount (with some exceptions) by the government as it performs the contract, so long as the contracting officer (CO) is generally satisfied that the estimates appear appropriate.