November 17, 2014
Recently, in Combat Support Associates, ASBCA Nos. 58945, 58946, 2014 WL 5563724 (Oct. 22, 2014), the ASBCA issued yet another decision regarding the application of the Contract Disputes Act’s (“CDA”) six-year statute of limitations to issues arising out of an incurred cost submission (“ICS”). The decision introduces uncertainty into this area. Thus, even though we view the decision as wrong, contractors should expect that the government will aggressively use this decision, unless reversed, to resurrect what should be stale claims. A copy of the decision can be found here.
In this case, the ASBCA held that a government claim did not accrue upon receipt of the applicable ICS but instead accrued upon the contractor’s submission of supporting data for the relevant questioned costs. The Board reasoned that only upon receipt of the supporting data did the government have reason to know of its claims.
The government has six years from the date of claim accrual to assert a claim against a contractor. 41 U.S.C. § 7103(a). Under the FAR, a claim accrues on “the date when all events, that fix the alleged liability of either the Government or the contractor and permit assertion of the claim, where known or should have been known.” FAR § 33.201. The Court of Federal Claims and Boards of Contract Appeals are jurisdictionally barred from hearing disputes arising from claims that are asserted more than six years after the date of accrual.
Historically, the government has asserted that submission of an ICS alone does not cause a claim to accrue and claims were timely where there were pending DCAA audits. Recent case law, particularly at the ASBCA, however, has established that these arguments are without merit and, in most instances, the CDA’s six-year statute of limitations begins to run upon the contractor’s submission of invoices for direct costs or an adequate ICS for indirect costs.
In Combat Support Associates, the government contended that it had no knowledge and no reason to know whether certain costs that were included in the contractor’s ICS were allowable until the contractor “provided the detailed information (adequate supporting data) showing the costs were allowable . . . .” The ASBCA agreed, ignoring longstanding case law regarding the “should have been known” standard; it held that even where the contractor submitted an adequate ICS that satisfied all ICS requirements, the government did not know or have reason to know of claims related to costs contained in that ICS.
Again, we believe this decision is wrong. If it is to stand and is not successfully appealed, however, contractors should expect DCAA to argue that, in effect, it can sit on its hands, delay in conducting an audit (and in requesting supporting documentation as part of that audit), and still have a valid claim long after the statute of limitations has run. Under the decision, DCAA would be able to do nothing and essentially toll the statute of limitations by failing to do its job.
In response to this decision, we recommend that contractors consider whether there are any specific important or problematic costs included in their ICSs and, if so, provide the government with relevant, otherwise not required, supporting data upon the submission of the ICS. This action would likely preclude a future, successful government argument under the Combat Support Associates decision.