June 22, 2015
The Armed Services Board of Contract Appeals (Board) recently issued another decision that will make it more difficult for contractors to defend against government cost claims under the Contract Disputes Act’s (CDA) six-year statute of limitations (SOL). As we have reported (see ASBCA Suggests Actual Government Knowledge May Be Required to Trigger Statute of Limitations for Cost Claims; Federal Circuit Panel States CDA Statute of Limitations Is Not Jurisdictional and Upholds Certain CAS Principles), despite clear precedent that a government claim accrues when the government “should have known” the facts giving rise to the claim, recent Board decisions require something closer to actual knowledge for contractors to establish that a government claim is time barred. The Board’s recent decision in Raytheon Co., ASBCA No. 58849 (May 27, 2015) takes this reasoning a step further, holding that there is a "reasonableness component" to when the government should have known of its claim, and that summary judgment is not ordinarily appropriate when reasonableness is at issue. This case will make it challenging for contractors to obtain early dismissal on SOL grounds and may require contractors to proceed to a merits hearing in order to defend against a claim based on the SOL.
Raytheon Co. involved the accounting treatment of certain 401(k) forfeitures, which the Defense Contract Management Agency (DCMA) claimed violated Cost Accounting Standards (CAS) 403 and 415. Raytheon moved to dismiss the appeal for lack of jurisdiction, arguing that the government’s claim was time barred by the CDA because the government’s claim accrued more than six years before the government asserted its claim. Without considering any facts regarding when the government's claim accrued, the Board issued a cursory decision denying Raytheon’s motion, holding that “[s]ummary judgment is not normally appropriate” to decide whether the government asserted its claim within the CDA’s statute of limitations because “reasonableness and subjective knowledge are facts at issue.”
As a result of this decision, more government claims—even obviously time barred claims—will proceed beyond summary judgment to discovery and a hearing. This will waste time and money for contractors and the government who will now be forced to conduct discovery, additional motions practice and, potentially, hearings, on stale claims.
Contractors should also note, however, that this analysis can cut both ways. On the same day that Raytheon Co. was decided, the same panel of the Board decided The Ryan Co., ASBCA No. 58137 (May 27, 2015) in favor of a contractor. There, the Board held—using the same reasoning and case law as it did in Raytheon Co.—that summary judgment was inappropriate for resolving a government SOL argument against a contractor.
We still believe these decisions misread the relevant FAR provision and the case law because “the events fixing liability should have been known when they occurred unless they can be reasonably found to have been either concealed or inherently unknowable at that time.” Laguna Construction Co., ASBCA No. 58569, 14-1 BCA ¶ 35,618 (May 29, 2014) (quoting Raytheon Missile Systems, ASBCA No. 58011, 13 BCA ¶ 35,241 (Jan. 28, 2013)) (internal quotation marks omitted). Contractors should not need to demonstrate that the government had specific, subjective knowledge of the information underlying its claim, either because of direct contractor disclosure or government audit, nor should contractors be required to demonstrate that the government understood the significance of the information. See Rosales v. United States, 89 Fed. Cl. 565, 587 (Oct. 7, 2009) (“Claim accrual…may be suspended only where the injury is actively concealed or inherently unknowable…. There is otherwise no traditional requirement of notice, in order for a claim to accrue, or for the limitations period to run.”) (internal citation omitted). See also Raytheon Missile Systems, 13 BCA ¶ 35,241 (“Accrual of a contracting party's claim is not suspended until it performs an audit or other financial analysis to determine the amount of its damages.”). Accordingly, government access to the information is sufficient to trigger the SOL. Stay tuned for further developments in this fast moving area of the law.