Motorola, Inc. v. Togo D. West, Secretary of the Army
Docket: 97-1098
Court: Court of Appeals for the Federal Circuit; October 16, 1997; Federal Appellate Court
Aydin Corporation, through Motorola, Inc., appeals a decision from the Armed Services Board of Contract Appeals that partially denied its appeal regarding a contracting officer's final decision. The court affirms the Board's ruling, stating that the Government's claim is not barred by any statute of limitations and that Aydin Corporation failed to comply with submission requirements under the Truth in Negotiations Act (TINA).
Motorola, the prime contractor, entered into a contract with the U.S. Army Communications and Electronics Command (CECOM) in 1984, aiming to modify the contract to include subsystems from Aydin. Aydin submitted a proposal in 1985, claiming that its indirect and burden rates were proprietary and not disclosable to Motorola, which included a undisclosed "facilities capital charge."
In 1986, the Defense Contract Audit Agency (DCAA) audited Aydin's proposal but did not identify the facilities capital charge. Aydin later issued internal directives to exclude this charge from government contracts. Despite multiple requests from Motorola for a DCAA audit, a CECOM contract specialist mistakenly canceled these requests, and CECOM provided Motorola with Aydin's G.A. rate based on a verbal confirmation from DCAA. This led to a negotiated subcontract with Aydin that would have been different had Motorola known about the facilities capital charge.
In April 1987, Aydin's president certified the accuracy of cost data, but during an April 1988 audit, Aydin did not adequately explain the facilities capital charge, making it impossible for auditors to assess its derivation.
On September 30, 1991, the Defense Contract Audit Agency (DCAA) issued an audit report recommending a price reduction of $933,787 based on a 24% G&A rate instead of 45%, disallowing Aydin's facilities capital charge. After adjusting the baseline to April 3, 1987, the contracting officer finalized a price reduction of $784,219 on August 5, 1993. This decision was later amended on April 10, 1995, leading Aydin to appeal to the Board on June 19, 1995. The Board found that Aydin's submission contained an unallowable and undisclosed facilities capital charge, which the Government relied upon to its detriment.
The legal framework for the appeal is governed by 41 U.S.C. § 609(b), under the Contract Disputes Act (CDA), which states that agency board decisions on factual questions are conclusive unless found fraudulent or grossly erroneous, while legal interpretations receive careful consideration by the court. Aydin argues that the Government's claim is barred by either the six-year statute of limitations in 28 U.S.C. § 2415(a) or the six-year limit introduced by the Federal Acquisition Streamlining Act of 1994 (FASA). Both parties agree that the claim accrued on April 3, 1987, but differ on the final decision's timing. The court established that any claim was time-barred under either statute.
The court clarified that § 2415(a) applies only to actions for money damages brought by the United States, which does not include CDA claims arising from administrative decisions. Consequently, the court ruled § 2415 is inapplicable to Government claims under the CDA. Regarding the FASA statute of limitations, a dispute exists over its retroactive application to contracts awarded before FASA's enactment, with the Government contending it does not apply retroactively, while Aydin argues it does. FASA amended the CDA to require that all claims related to contracts be submitted within six years of accrual.
FASA (Federal Acquisition Streamlining Act) did not include the six-year statute of limitations in the immediate applicability provisions upon its enactment. Consequently, its implementation was contingent on subsequent regulations as outlined in section 10002 of FASA. In September 1995, the Office of Federal Procurement Policy (OFPP) established a Federal Acquisition Regulation (FAR) stating that contracting officers must issue written decisions on government claims within six years of the claim's accrual, applicable only to contracts awarded after October 1, 1995. This regulation explicitly denied retroactive application of the six-year limit to contracts awarded prior to that date.
FASA's section 2351(2) indicates that if existing contracts specified a shorter claim submission period, that period must be followed, suggesting that FASA's statute of limitations cannot extend existing shorter limits. While FASA allows for potential retroactive application, it restricts OFPP from enlarging limitations on contracts governed by shorter existing statutes. Ultimately, OFPP opted for a prospective application of the six-year limit, ensuring no conflicts with existing contracts.
This court upheld the Board's decision not to apply the six-year statute of limitations to the government’s claim, and as a result, did not need to evaluate the government's alternative arguments regarding retroactive application. Additionally, under the Truth in Negotiations Act (TINA), which allows the government to reduce contract prices based on overstated costs and mandates disclosure requirements, the Board found that Aydin failed to meet TINA's disclosure criteria.
Under TINA, subcontractors typically provide cost data to their general contractors during subcontract negotiations. Aydin, as a competitor of Motorola, failed to submit its cost data to Motorola but instead provided it to the DCAA. Motorola requested an audit of Aydin’s cost data, which Aydin claims fulfilled Motorola's obligation to submit the data. However, FAR 15.804-1(a) stipulates that cost or pricing data must be submitted specifically in writing. FAR 15.804-6(d) distinguishes between actual submission of cost data and merely making documents available without specific identification, asserting that the latter does not fulfill the submission requirement. Aydin’s action of referencing a DCAA audit to support its indirect costs did not meet the FAR submission criteria. Therefore, both Aydin and Motorola needed to properly submit the cost data before relying on the DCAA audit. Merely providing access to records without identifying specific cost information does not satisfy the requirement for reasonable access by the contracting officer, as established in Lockheed Aircraft Corp. v. United States. Ultimately, Aydin did not submit its cost data to either the Government or Motorola, leading the court to affirm the Board's conclusion that Aydin's submission was insufficient under TINA. The court also ruled that the Government's claim is not barred by a statute of limitations and affirmed that Motorola did not meet its submission obligations. Each party will bear its own costs. The decision is affirmed.
