The government asserted claims against the contractor in 2018. The contractor argued the claims accrued in June 2011, so they were barred by the CDA’s six-year statute of limitations. The parties had entered tolling agreements in 2017 to suspend the statute of limitations for several months. Those agreements became effective exactly six years from the date of a 2011 audit, which was the basis of the government’s claims. The contractor argued the tolling agreements were an admission by the government that the claims accrued in 2011. The board didn’t agree. The agreements implied the claims accrued in 2011, but they also explicitly stated that they could not serve as an admission as to the running of the statute of limitations.
Appeals of Beechcraft Defense Company, LLC; Textron Aviation, Inc., and Textron Aviation Defense, LLC, ASBCA Nos. 61743, 61744, 61745
Background
Hawker Beechcraft Corporation had several government contracts. In June 2011, the Defense Contract Audit Agency (DCAA) issued three audit reports asserting Beechcraft’s non-compliance with various Cost Accounting Standards (CAS). DCAA alleged Beechcraft misallocated training costs, included severance and research costs in the wrong cost bases, and improperly expensed capital restructuring costs.
Later, DCMA asked Beechcraft to provide general dollar magnitude proposals assessing the impact of the CAS non-compliance. Beechcraft submitted the impact analyses in April and May of 2015. DCAA audited the analyses and determined non-compliance had an almost $3 million cost impact.
But the government did not immediately assert a claim. Instead, in March 2017, nearly six years after the 2011 audit, Beechcraft and DCMA entered tolling agreements. Under the agreement, DCMA agreed to not issue a final decision on the amounts due before June 10, 2017. In exchange for this forbearance, Beechcraft agreed that the six months between June 10, 2017 and December 7, 2017, would be excluded from the statute of limitations period.
The tolling period expired. DCMA issued final decisions in 2018, asserting claims against Beechcraft (and/or its successor companies). Beechcraft appealed to the ASBCA. Beechcraft moved for summary judgment, alleging DCMA’s claims were barred by the CDA’s six-year statute of limitations.
Analysis
CAS Administration Clause
A claim by the government must be asserted within six years of accrual. Beechcraft argued the government’s claims accrued 2011 when DCAA first issued its audit report. So, DCMA’s claims, which weren’t asserted until 2018, were untimely. DCMA, however, noted that Beechcraft’s contracts had contained an CAS Administration clause, which required the company to submit dollar magnitude proposal after the discovery of noncompliance. Beechcraft had not submitted dollar magnitude proposals until 2015. Thus, DCMA’ maintains, its claims were timely.
The board found that nothing in the CAS Administration clause stated that the clause suspended the accrual period for a claim. The clause was not a pre-claim procedure that had to be completed before the government could issue a decision. The government could have issued a claim before Beechcraft submitted its magnitude proposals. The board declined to find that the government’s claim accrued in 2015.
Tolling Agreements
Beechcraft alleged the tolling agreements were effectively an admission by the government that it claims accrued in 2011. In fact, the tolling agreements had suspended the statute of limitations on the six-year anniversary of the 2011 audits.
The board was not fully convinced. The agreements implied the claims accrued in 2011. But the agreements also explicitly provided that they “did not constitute an admission or acknowledgement of any fact [or] conclusion of law [related to] any statute of limitations or similar defense concerning the timeliness of asserting a claim.”
2011 Audit
Although the board found that DCMA’s claims did not accrue in 2015, the board also declined to find that they accrued in 2011. The record included some evidence that DCMA had sufficient information in 2011 to assert a claim. But it also looked like the government was missing some of Beechcraft’s unaudited data in 2011. Because it was unclear what information the government possessed in 2011, the board was unwilling to grant Beechcraft summary judgment.
The appellants are represented by James J. McCullough, Michael J. Anstett, and Anayansi Rodriguez of Fried, Frank, Harris, Shriver & Jacobson LLP. The government is represented by Samuel W. Morris and Debra E. Berg of the Defense Contract Management Agency.
–Case summary by Craig LaChance, Senior Editor
