United States: Significant Government Contract Litigation: A Year In Review

Although 2015 did not include as many landmark decisions as 2014 did, there were a number of important government contract claims that further developed various aspects of the Contract Disputes Act (CDA).  Below is a summary of some of the significant decisions from 2015.

Interpreting Sikorsky

Several 2015 decisions interpreted Sikorsky Aircraft Co. v. United States, 773 F.3d 1315 (Fed. Cir. 2014), a decision issued by the Federal Circuit holding that the CDA's six-year statute of limitations is not a jurisdictional bar that is subject to resolution on a motion to dismiss.  In Kellogg Brown & Root Servs., ASBCA No. 58175 (May 13, 2015), the Armed Services Board of Contract Appeals (ASBCA) held that a government claim, which had accrued more than six years before the contracting officer's assertion of the claim, was not time-barred.  Judge Scott ruled that, after Sikorsky, asserting a failure to comply with the statute of limitations is an affirmative defense and the asserting party must prove, for example, that the government knew or should have known that it was being overcharged.  Ultimately, the ASBCA held that the government's claim in Kellogg was timely because it did not accrue until 2010, which was within the six-year statute of limitations.

Two additional cases were decided under the Sikorsky interpretation of the six-year CDA statute of limitations.  See The Ryan Co., ASBCA No. 58137 (May 27, 2015); Raytheon Co., ASBCA No. 58849 (May 27, 2015).  In both cases, the ASBCA declined to convert motions to dismiss into motions for summary judgment because the "should have known" test for claim accrual "has a reasonableness component based upon what facts were reasonably knowable to the claimant," and those facts were not in the record.

The cases interpreting Sikorsky confirm that allegations of non-compliance with the CDA statute of limitation must be timely raised as an affirmative defense and that the party raising the defense bears the burden of proof.  Furthermore, the precedent affirms that challenges based on the statute of limitation will generally be considered after all of the relevant facts are in the record, not during a motion to dismiss or a motion for summary judgment.

Timeliness of Appeals

Several notable decisions issued in 2015 address the timeliness of an appeal in response to a contracting officer's denial of a claim.  Under the CDA, the relevant Board of Contract Appeals only has jurisdiction over appeals that are taken within 90 days of receipt of the contracting officer's final decision.

In Axxon Int'l, LLC, ASBCA No. 59497 et al. (Jan. 21, 2015), the ASBCA exercised jurisdiction over an appeal that was mistakenly submitted to the U.S. Army counsel within the 90-day window, rather than the ASBCA.  The ASBCA held that the mistaken submission was not fatal.  In Tessada & Assocs., ASBCA No. 59446 (Apr. 21, 2015), the ASBCA addressed a distinction concerning delivery of a notice of appeal.  A notice of appeal delivered by the U.S. Postal Service is deemed filed when it is delivered to the Postal Service with a valid address and sufficient postage.  Meanwhile, a notice of appeal sent via commercial carrier is deemed filed when it is actually received by the Board.  In Tessada, the company sent the appeal via commercial carrier, which was received by the Board one day after the ninety day appeal period.  However, Tessada also sent a copy of the appeal via the Postal Service, which was received by USPS before the 90-day appeal period expired but was delivered to the ASBCA after the 90-day period and after the appeal sent via commercial carrier was received by the ASBCA.  Given that an appeal is filed when the Postal Service receives the notice, the notice sent via Postal Service was sufficient to vest jurisdiction despite not being delivered until after the 90-day period.

Terminations for Convenience under FAR Part 12

In TriRAD Techs. Inc., ASBCA No. 58855 (Feb. 23, 2015), the ASBCA took the opportunity to clarify the non-intuitive distinction between the FAR termination clauses prescribed by FAR Part 12 (applicable to commercial items) and Part 49 (applicable to terminations for convenience under other contracts).  The government terminated TriRAD's commercial item contract for convenience, but the parties could not agree on the amount of allowable termination costs to which TriRAD was entitled.  In sustaining TriRAD's appeal for termination costs, the Board specifically pointed to the distinction between the termination provisions for commercial item contracts, found in FAR Part 12, and the standard under FAR Part 49.  Importantly, the FAR Part 12 termination provision permits recovery of a "percentage of the contract price reflecting the percentage of the work performed," whereas FAR Part 49 permits recovery for the "work delivered and accepted."

Dellow Corp., ASBCA No. 58538 (May 1, 2015) expanded on the ASBCA's consideration of which termination clause governs the determination of allowable termination costs.  The Air Force terminated a contract, and Dellow filed a claim arguing that the scope of permissible recovery under FAR 52.212-4 is expanded by DFARS 252.232-7007, which also applied to the termination.  Notably, DFARS 252.232-7007(b) permits reimbursement for "costs, profit, and estimated termination settlement costs" instead of a recovery of "a percentage of the contract price reflecting the percentage of the work performed," as stipulated in FAR 52.212-4(l).  Notwithstanding the more permissive language in the DFARS clause, the ASBCA found that, "where FAR 52.212-4(1) includes mandatory language and contemplates actual rather than estimated costs, the contract's termination for convenience clause controls entitlement to termination settlement amounts."

"Expressly Unallowable" Costs

In Raytheon Co., ASBCA No. 57576 (June 26, 2015), the ASBCA addressed expressly unallowable costs and penalties associated with such costs.  In sum, a cost claim is expressly unallowable when the government can show that a law or rule, or the relevant contract, explicitly prohibits the contractor from invoicing the cost.  An expressly unallowable cost is significant because penalties can be assessed against the contractor for invoicing the government for reimbursement of the incurred cost.

In Raytheon, the ASBCA overturned the Defense Contract Audit Agency's (DCAA) conclusion that Raytheon's bonus and incentive payments, as invoiced to the government, were expressly unallowable.  According to the ASBCA, FAR 31.205-1 does not expressly prohibit bonuses and incentive payments, even though the costs were unallowable (notably, the ASBCA agreed that certain legal costs that Raytheon passed on to the government were expressly unallowable).  The case represents a notable challenge to the DCAA's aggressive audit positions and it provides an example of another large defense contractor that successfully challenged the DCAA's positions relating to expressly unallowable costs.

In two relatively recent examples, the DCAA took an aggressive position and assessed penalties against small businesses for invoicing what the DCAA deemed to be expressly unallowable costs.  See Thomas Assoc., Inc., ASBCA No. 57795 (Oct. 4, 2012); Inframat Corp., ASBCA No. 57741 (Aug. 3, 2012).  Consistent with the Raytheon case, larger penalties assessed by DCAA for invoicing alleged expressly unallowable costs have been successfully challenged.  See General Dynamics Corp., ASBCA No. 49372 (June 10, 2002).

Certification and Claim Presentation

Horn & Assoc., Inc. v. United States, 123 Fed. Cl. 728 (2015) represents a cautionary tale for contractors filing a claim under the CDA.  Although the U.S. Court of Federal Claims (CoFC) ultimately rejected three fraud-based counterclaims raised by the government in response to a breach of contract action brought by Horn & Associates, the case reinforces the principles that contractors must present accurate claims and disclose all pertinent information related to the claim.

The contract in Horn had a contract providing contingent payments based on the amount that Horn & Associates was able to recover from third party contractors pursuant to audit and recovery efforts.  Horn filed a claim against the government asserting that Horn was owed millions of dollars under the contingent payment arrangement, prompting the government to file a counterclaim for fraud damages because, according to the government, Horn did not actually incur the charges claimed in the breach of contract action.  The CoFC rejected the government's fraud-based claims because (i) there was no evidence of intent to defraud the government; (ii) there was no evidence that the contractor knew that its certified claim was false; and (iii) there was no evidence that the claim was a false or fraudulent statement under the CDA.  The court acknowledged that there were problems with the manner in which Horn had "characterized and presented [claim information] to the government," but ultimately held that Horn did not present a claim with a reckless disregard for the truth.

Importantly, Horn's claims disclosed that Horn utilized "reconstructed records" to build time cards reflecting employees' time devoted to recovery and audit tasks under the contract, and that it did not have completely accurate time records due to the nature of the contingency-based contract.  Full disclosure of the nature of Horn's calculations supported the CoFC's justification to deny the government's fraud claims.

Horn exemplifies the importance of both doing the necessary legwork to submit an accurate claim, and including all of the details regarding claim calculation.  These two principles, when taken together, help contractors defend against government counterclaims.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.