December 17, 2015
Recently, in Alion Science & Tech. Corp., ASBCA No. 58992 (Nov. 10, 2015), the ASBCA issued yet another decision undermining a contractor's ability to successfully raise a Contract Disputes Act (CDA) statute of limitations defense for issues arising out of an incurred cost submission. After years of establishing precedent that a government claim begins to accrue when the government should have known about the facts underlying a claim, the ASBCA continues to disregard its previous holdings by incorrectly applying what appears to be approaching an actual knowledge standard.
Under the should have known standard, claim accrual was only suspended where the injury was actively concealed or inherently unknowable, and claim accrual was not suspended until the government performed an audit or other financial analysis to determine the amount of its damages. In Alion and other recent decisions, the ASBCA has abruptly changed course regarding the applicable standard for claim accrual. Due to this change, the government now may argue that a claim does not begin to accrue until it begins an audit of the costs in question and/or contractors provide the specific detailed data that the government subsequently alleges supports the government claim.
In Alion, the contractor sought summary judgment that the government's claim was time barred because it submitted its final indirect cost rate proposal more than six years prior to its ACO issuing the final decision. The final decision asserted a government claim for penalties on indirect costs included in the contractor's final indirect cost rate proposal. The decision was on summary judgment, rather than a motion to dismiss because, as we discussed here, following the Federal Circuit’s ruling that the statute of limitations is not a CDA jurisdictional limitation, the ASBCA subsequently held that the statute of limitations is an affirmative defense, rather than a jurisdictional question.
The ASBCA held that disputed material facts precluded summary judgment essentially because the contractor could not establish that the government possessed actual knowledge of the specific facts supporting its penalties claim. The ASBCA based its decision on the contractor’s inability to demonstrate that the government received from the contractor specific cost transaction data relating to the costs that were the subject of the government's penalties claim more than six years prior to the date that the government issued the final decision.
This decision is concerning as it reaches a similar conclusion to the conclusions that the Board reached in Combat Support Associates, ASBCA Nos. 58945, 58946 (Oct. 22, 2014), which we discussed in this alert, and in Coherent Logix, Inc., ASBCA No. 59725 (April 2, 2015). The Combat Support Associates and Coherent Logix, Inc. decisions essentially held that the government’s actual knowledge of the specific facts underlying the government’s claim was required for the claim to accrue under the CDA statute of limitations. The decisions also highlight the ASBCA's recent unwillingness to find that the government should have known of its claim when the underlying facts of the claim are reasonably available to the government through a reasonably diligent audit process and not actively concealed by the contractor or inherently unknowable. The Alion decision appears to affirm the Board's findings in Combat Support Associates and Coherent Logix, Inc. and will result in more stale government claims relating to costs that should be, under the should have known standard, barred by the statute of limitations.
For contractors seeking to defend themselves against stale government claims, Alion represents yet another step down a troubling path of cases undermining effectiveness and certainty of the CDA’s statute of limitations. Accordingly, as we have previously advised clients, to start the clock on the statute of limitations, contractors should submit as much data as is possible, as early as is possible, in the cost submission process. This data should include specific cost transaction data for all costs and particularly for costs that the contractor anticipates that the government may question. This action will help to preclude a future successful government argument under the Alion decision.