ASBCA 61583

,,". ARMED SERVICES BOARD OF CONTRACT APPEALS '-' Appeal of -- ) ) Energy Matter Conversion Corporation ) ASBCA No. 61583 ) Under Contract No. N68936-09-C-0125 ) APPEARANCE FOR THE APPELLANT: Dr. Jaeyoung Park President APPEARANCES FOR THE GOVERNMENT: Arthur M. Taylor, Esq. DCMA Chief Trial Attorney Stephen M. Wilson, Esq. Defense Contract Management Agency Carson, CA OPINION BY ADMINISTRATIVE JUDGE SWEET ON THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT The government has moved for summary judgment. It argues that it is entitled () to judgment as a matter of law on the claims of pro se appellant Energy Matter Conversion Corporation (EMC2) that the government improperly imposed a penalty because EMC2 included expressly unallowable legal costs in its cost proposals, and EMC2 is not entitled to a waiver of that penalty. EMC2 argues that the legal costs are not expressly unallowable, and that it is entitled to a waiver. Forthe reasons discussed below, the motion is granted. STATEMENT OF FACTS {SOF) FOR PURPOSES OF THE MOTION 1. Beginning in 2006, the U.S. Department of Justice (DOJ) investigated EMC2 for potential mischarges, in violation of the False Claims Act, 31 U.S.C. §§ 3729-3733 related to a different contract than the one subject to this appeal (app. supp. R4, tab 12). The DOJ sought $556,745.83 (app. supp. R4, tab 13 at 9). 2. On September 11, 2009, the Department of the Navy (Navy) awarded Contract No. N68936-09-C-0125 (0125 contract) to EMC2. The 0125 contract was a cost-plus-fixed-fee contract. (R4, tab 1) The 0125 contract included Federal Acquisition Regulation (FAR) clause 52 .216-7, ALLOW ABLE COST AND PAYMENT (DEC 2002), which incorporated FAR Part 31, Contract Cost Principles and Procedures (id. at 22). The 0125 contract also included FAR clause 52.242-3, PENALTIES FOR UN ALLOW ABLE COSTS (MAY 2001) (id. at 21 ). (j  3. On December 10, 2012, the Navy Acquisition Integrity Office (AIO) issued a show cause letter regarding questionable costs EMC2 charged to the Navy in fiscal year (FY) 2000 through FY 2005 related to different contracts than the one subject to this appeal (app. supp. R4, tab 1 at 1-2). 1 Among the questionable costs was the salary of Cortine McGowen. According to the show cause letter, Ms. McGowen told investigators that she worked as a housekeeper at the residence of EM C2 's prior owners, instead of at EMC2's offices. (Id. at 4) The show cause letter expressly stated that "[t]his evidence of cost mischarging indicates a serious lack of business integrity that may warrant the debarment ofEMC[2] from Government contracting pursuant to FAR 9.4" (id. at 2). 4. By letter dated January 7, 2013, EMC2 disputed the assertion that the costs for Ms. McGowen's salary were not allowable (app. supp. R4, tab 2 at 2). 5. In 2013, EMC2 resolved the DOJ and AIO investigations (collectively, investigations) by refunding the Navy $249,850.90. The compromise did not expressly provide that the costs incurred in connection with the investigations were allowable. (Compl. ,i 3(c); app. supp. R4, tabs 14-15) 6. EMC2 submitted Final Indirect Cost Rate Proposals (FICRPs) for FY 2010 and 2011 related to the 0125 contract (2010/2011 FICRPs). The 2010/2011 FICRPs are not in the Rule 4 file. EMC2 alleges that the 2010/2011 FICRPs included as 0 ' allowable costs legal costs EMC2 incurred in connection with the investigations (legal costs). (Compl. ,i l(c)) 7. On June 30, 2016, EMC2 submitted FICRPs for FY 2012 and FY 2013 (2012/2013 FICRPs). The 2012/2013 FICRPs included as allowable costs over $10,000 oflegal costs. (R4, tab 4 at 94, 108-09, 116) 8. The Defense Contract Audit Agency (DCAA) audited the 2010/2011 FICRPs (2010/2011 audit), allegedly between January 10, 2017 and January 24, 2017. The final audit report for the 2010/2011 audit is not in the Rule 4 file.