Contractor Couldn’t Prove When It Submitted Incurred Cost Proposals, So It Couldn’t Assert SOL as Defense to Government Claim for Disallowed Costs; Appeal of Strategic Technology Institute, Inc., ASBCA No. 61911

Appeal of government claim seeking disallowed costs is denied. The government asserted a claim against the contractor for disallowed costs for FYs 2008 and 2009. The contractor contended it submitted the incurred cost proposals for FYs 2008 and 2009 more than six years ago, so the government’s claim was barred by the CDA’s statute of limitations. But the board found that there was no evidence that the contractor had submitted its incurred proposals before 2014. Thus, the government only learned of the incurred costs in 2014 and that is when the statute of limitations began to run. The government had filed its claim within six years of 2014, so the claim was timely. 

Background

Strategic Technology Institute (STI) had a contract with the Navy to provide engineering support. The contract was a cost-type contract administered by the Defense Contract Management Agency. The contract required STI to submit Incurred Cost Proposals to the contracting officer within six months of the end of each fiscal year. 

In 2014, while auditing STI’s Incurred Costs Proposals for FYs 2011 and 2012, the Defense Contract Audit Agency noted that it did not have cost proposals from STI for FYs 2008 and 2009. STI, believed it had submitted cost proposals for those years. Nevertheless, it provided DCAA with copies of the 2008 and 2009 proposals.

DCAA audited the 2008 and 2009 proposals and identified several issues. In 2018, DCAA issued a final decision demanding payment of over $1.1 million in disallowed costs for FYs 2008 and 2009.

STI appealed the decision to the ASBCA. STI argued that it had submitted the 2008 proposal in 2009 and the 2009 proposal in 2010. The government had not issued a final decision until 2018. Thus, STI contended, the government’s claim was barred by the CDA’s six-year statute of limitations.

Legal Analysis

• STI Couldn’t Prove that It Submitted Its Cost Proposals Before 2014 – STI alleged that it had submitted its Incurred Cost proposals in 2009 and 2010. While the evidence showed that STI had prepared its cost proposals in 2009 and 2010, there was no evidence those proposals had been submitted to the government. STI presented testimony from employees who thought the proposals had been submitted, but STI did not have mail logs or shipping receipts to confirm the submission. What’s more, the government, which maintains mail logs and electronic records systems to monitor receipts of documents, had no record of receiving STI’s 2008 and 2009 cost proposals. The statute of limitations thus did not begin to run until 2014.
• The Government Doesn’t Have a Duty to Confirm Submission – Although it couldn’t prove it submitted the cost proposals, STI argued the claim was still time-barred because the government should have known that STI had not submitted the proposals. But the board reasoned that this misconstrued the statute of limitations. The statute begins to run when the government should have known the facts that would permit it to assert its claim, which in this case was in 2014. Contrary to STI’s position, the statute does not begin to run on the due date of the Incurred Cost Proposal. 

STI is represented by James Y. Boland and Caleb E. McCallum of Venable, LLP. The government is represented by Arthur M. Taylor and Kara M. Klaas of the Defense Contract Management Agency.