Narrative Opinion Summary
In this case, Lockheed Martin Corporation appealed a decision by the Armed Services Board of Contract Appeals, which denied Lockheed's claim for recovery of costs and fees related to subcontract efforts in a termination settlement for the AEGIS program with the Navy. The contract, initially undefinitized, was intended to be a cost-plus-fixed-fee (CPFF) arrangement, allowing for recovery of allowable costs plus a negotiated fee. Upon termination for convenience by the Navy, Lockheed terminated its subcontracts, and settlement proposals were submitted. The Termination Contracting Officer (TCO) rejected Lockheed's recovery claims, citing FAR 49.202 and FAR 49.305-1(a), which prohibit fee recovery for undelivered subcontractor efforts in CPFF contracts. The Board affirmed that Lockheed could not include fees for subcontractor efforts in its settlement proposals, as these were included in the gross settlement proposal. The Board also relied on DODI 7000.2 and MIL-STD-881A for evaluating delivered SDRLs, rejecting Lockheed's valuation methods. The court maintained the Board's decision, recognizing the limited judicial review scope for agency decisions and affirming that Lockheed's interpretation of 'included in' was inconsistent with FAR provisions. Lockheed's appeal for equal treatment of CPFF and fixed-price contracts was denied, and the Board's valuation methodology was upheld. The Court of Appeals for the Federal Circuit will review the final decisions. The outcome maintained the denial of Lockheed's claims, reinforcing the regulatory framework governing termination for convenience settlements under government contracts.
Legal Issues Addressed
Contractor Fee Recovery Under Cost-Plus-Fixed-Fee Contractssubscribe to see similar legal issues
Application: Lockheed's claim for fees on subcontractor work was denied because the FAR guidelines prohibit such recovery under CPFF contracts during termination settlements.
Reasoning: Lockheed acknowledges that FAR 49.305 governs the current dispute, which states that a contractor's adjusted fee should not include fees for subcontract efforts in settlement proposals.
Contract Valuation and Cost Estimation in Terminationsubscribe to see similar legal issues
Application: The Board used DODI 7000.2 and MIL-STD-881A to determine the value of delivered SDRLs, rejecting Lockheed's subjective valuation claims.
Reasoning: Furthermore, Lockheed's efforts to receive higher valuations for SDRLs than those awarded by the Board are also unsuccessful. The Board relied on DODI 7000.2 and MIL-STD-881A for valuation, which Lockheed cannot effectively dispute with subjective valuations from its officials.
Judicial Review of Agency Board Decisionssubscribe to see similar legal issues
Application: The court underscored the limited scope of review for agency board decisions, emphasizing deference to factual conclusions unless they are unsupported by substantial evidence.
Reasoning: The court's review of agency boards of contract appeals is highly limited, with factual conclusions only set aside if they are fraudulent, arbitrary, capricious, grossly erroneous, or unsupported by substantial evidence.
Termination of Contracts Under FAR 49.202 and 49.305-1(a)subscribe to see similar legal issues
Application: The court applied these FAR provisions to deny Lockheed's entitlement to fees for subcontractor efforts in settlement proposals, given the terms of the cost-type contracts.
Reasoning: The Board clarified the differences between FAR 49.202(a) and FAR 49.305-1(a) regarding profit recovery from subcontractor work, noting that FAR 49.202(a) does not allow profit for undelivered subcontractor materials or services at termination, while FAR 49.305-1(a) explicitly states that the contractor's adjusted fee cannot include allowances for subcontractor efforts in settlement proposals.