Contractor Not Required to Provide Cost Information for Its Parent Organization; Mission Support Alliance, LLC v. Department of Energy, CBCA 6476, 6811

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Appeal of a decision denying costs incurred by the contractor’s parent organizations is granted. The contractor had a cost-reimbursement contract that allowed it to recover costs incurred by its parent organizations. The agency denied years-worth of the contractor’s parent costs, because the contractor had not provided audit information on the parents. The board found that the agency improperly denied the costs. Neither regulations nor the contract itself required the contractor to provide the cost information the agency sought.

Mission Support Alliance, LLC (MSA)had a contract with the Department of Energy (DOE) to provide infrastructure support to the Hanford Site, a decommissioned nuclear production complex. The contract had a performance-based cost-plus-fee structure. The contract entitled MSA, a joint venture, to seek reimbursement for costs incurred by its parent organizations. To obtain reimbursement for parent organization’s costs, MSA had to submit a Parent Organization Support Plan (PSOP) to DOE.

From 2013 to 2018, MSA submitted PSOPs to recover the costs for services provided by its parent organizations. But when MSA submitted its 2018 PSOP, DOE asked the company to provide payroll information on the parent companies and to explain what audit steps it had taken to ensure that costs billed to the parents were defensible. While MSA and DOE discussed how to handle this request, DOE issued a decision disallowing millions in parent costs over the previous years. MSA appealed the decision to the CBCA.

On appeal, MSA argued that it had no obligation to provide the parent cost information that DOE requested. DOE, on the other hand, argued that a variety of regulations and contract provisions required MSA to provide this information.

The board found that the regulations DOE cited did not support its position. Those regulations required MSA to maintain cost records to support its invoice and to make those records available to the agency. But they did not make the parent costs allowable or unallowable as a matter of law. What’s more some of the cited regulations only applied to subcontractors, and the board was not convinced that MSA’s parents were subcontractors.

Another cited by DOE was a cost principle limiting the profits on sales or transfers between divisions of a company or affiliates under the control of the contractor. The board, however, found this regulation inapplicable because MSA, the contractor, did not control its parents.

Finally, DOE argued that it was entitled to parent cost information under the parent cost reimbursement clause. But the board found that this clause did not require the contractor to provide audit information for its parents. Indeed, the board reasoned that if DOE had intended to require MSA to submit audit info for its parents, this would have been the place to include the requirement. The clause, however, did not expressly list such a requirement, and the board declined to infer it.

MSA is represented by Marisa M. Bavand and Allison L. Murphy of Groff Murphy PLLC. The government is represented by Paul R. Davis and Andrew J. Unsicker of the Department of Energy.

CBCA-Mission Support Alliance