Narrative Opinion Summary
This case involves an appeal by the United States government against Martin Marietta Corporation regarding the allocation and allowability of general and administrative (G.A.) expenses under federal contracts. The Armed Services Board of Contract Appeals (ASBCA) had previously ruled in favor of Martin Marietta, finding a conflict between the Defense Acquisition Regulation (DAR) 15-203(c) and Cost Accounting Standard (CAS) 410, which led to the allowance of G.A. expenses that the government sought to disallow. The United States Court of Appeals for the Federal Circuit, however, reversed this decision. The court held that DAR 15-203(c) is an allowability provision, not an allocability provision, and does not conflict with CAS 410. The DAR permits the government to disallow portions of G.A. expenses associated with unallowable costs, aligning with the CAS's goals for consistent cost allocation. The decision effectively grants the government the authority to deny reimbursement for a portion of Martin Marietta's G.A. expenses, maintaining the DAR's role in determining the allowability of costs post-allocation. This ruling underscores the importance of reconciling agency-specific regulations with overarching standards set by the CAS.
Legal Issues Addressed
Allocation of General and Administrative (G.A.) Expensessubscribe to see similar legal issues
Application: CAS 410 mandates that G.A. expenses be allocated to final cost objectives based on their beneficial or causal relationship, which the court upheld as not conflicting with DAR 15-203(c).
Reasoning: CAS 410 establishes criteria for allocating general and administrative (G.A.) expenses to final cost objectives based on their beneficial or causal relationship.
Allowability of Costs Under Defense Acquisition Regulationsubscribe to see similar legal issues
Application: The court confirmed that DAR 15-203(c) allows procuring agencies to disallow portions of G.A. expenses related to unallowable costs, maintaining its role as an allowability rule.
Reasoning: DAR 15-203(c) states that all items in an indirect cost base should share indirect costs proportionately, regardless of their allowability.
Conflict Between Defense Acquisition Regulation and Cost Accounting Standardssubscribe to see similar legal issues
Application: The court determined that DAR 15-203(c) serves as an allowability provision, not conflicting with CAS 410, as it pertains to the allowability of costs rather than their allocability.
Reasoning: The Court, however, interpreted DAR 15-203(c) as an allowability provision rather than an allocability provision, concluding that there was no inherent conflict between the two regulations.
Jurisdiction and Standard of Review in Contract Disputessubscribe to see similar legal issues
Application: The court exercised jurisdiction over the appeal under 28 U.S.C. § 1295(b), applying an independent legal review standard to the ASBCA's interpretations.
Reasoning: The court has jurisdiction over the appeal per 28 U.S.C. § 1295(b) (1988), and the standard of review follows the CDA, with ASBCA interpretations of the relevant regulations being subject to independent legal review.
Role of Cost Accounting Standards in Federal Contractingsubscribe to see similar legal issues
Application: The court emphasized that CAS aims for consistent cost measurement and allocation across federal contracts, thus overriding conflicting agency-specific regulations like DAR.
Reasoning: The background context indicates that CAS aims for consistent cost measurement and allocation across federal contracts, with specific criteria that costs must benefit or be caused by the respective cost objectives to be allocated properly.