ARMED SERVICES BOARD OF CONTRACT APPEALS MPR Associates ...

1 ARMED SERVICES BOARD OF CONTRACT APPEALS Appeal of -- ) ) MPR Associates , Inc. ) ASBCA No. 54689 ) Under CONTRACT Nos. N00024-91-C-2106 ) N61533-94-D-0049 ) N00014-97-C-2049 ) N00173-98-C-2018 ) APPEARANCE FOR THE APPELLANT: Mr.

2 Douglas M. Chapin Principal Officer APPEARANCES FOR THE GOVERNMENT: E. Michael Chiaparas, Esq. Acting Chief Trial Attorney Sharon K. Parr, Esq. Trial Attorney Defense CONTRACT Management Agency Manassas, VA OPINION BY ADMINISTRATIVE JUDGE KETCHEN UNDER RULE MPR Associates , Inc. (MPR or appellant) APPEALS from a government claim under FAR (b)(3). The government seeks reimbursement of allegedly unallowable lease rental costs in the amount of $85,981 for fiscal years (FYs) 1996-98 for MPR s lease of space in a building owned by 320 King Street LLC (320 King LLC) that has the same owners as MPR.

3 Appellant elected an accelerated proceeding pursuant to Rule The parties elected to have the appeal decided on the record pursuant to Rule 11. We sustain the appeal. FINDINGS OF FACT 1. The government awarded to MPR four cost reimbursable contracts for the purpose of providing engineering SERVICES : CONTRACT No. N00024-91-C-2106, dated 14 December 1990 ( CONTRACT 2106); CONTRACT No. N61533-94-D-0049, dated 9 September 1994 ( CONTRACT 0049); CONTRACT No. N00014-97-C-2049, dated 31 July 1997 ( CONTRACT 2049); and CONTRACT No.

4 N00173-98-C-2018, dated 7 May 1998 ( CONTRACT 2018). The contracting officer assigned CONTRACT administration for each CONTRACT to the Defense CONTRACT Management Agency (DCMA) (or a predecessor organization of DCMA). These contracts incorporated by reference, inter alia, FAR , ALLOWABLE COST 2 AND PAYMENT (APR 1984, JUL 1991, FEB 1997, APR 1998, respectively). This clause applies FAR Part 31 CONTRACT COST PRINCIPLES AND PROCEDURES to MPR s contracts by reference. (R4, tabs 1-4) MPR s fiscal year is the same as the calendar year.

5 2. The FAR , ALLOWABLE COST AND PAYMENT (APR 1998) clause provides, in pertinent part, as follows: (a) Invoicing. The Government shall make payments to the Contractor when requested as work progresses .. in amounts determined to be allowable by the Contracting Officer in accordance with Subpart of the Federal Acquisition Regulation (FAR) in effect on the date of this CONTRACT and the terms of this CONTRACT .. (b) Reimbursing costs.. (3) Notwithstanding the audit and adjustment of invoices or vouchers under paragraph (g) below, allowable indirect costs under this CONTRACT shall be obtained by applying indirect cost rates established in accordance with paragraph (d) below.

6 (d) Final indirect cost rates. (1) Final annual indirect cost rates and the appropriate bases shall be established in accordance with Subpart of the Federal Acquisition Regulation (FAR) in effect for the period covered by the indirect cost rate proposal. (2)(i) .. (ii) The proposed rates shall be based on the Contractor s actual cost experience for that period. The appropriate Government representative and the Contractor shall establish the final indirect cost rates as promptly as practical after receipt of the Contractor s proposal.

7 (3) The Contractor and the appropriate Government representative shall execute a written understanding setting 3 forth the final indirect cost rates. The understanding shall specify (i) the agreed-upon final annual indirect cost rates.. The understanding is incorporated into this CONTRACT upon execution.. (5) Failure by the parties to agree on a final annual indirect cost rate shall be a dispute within the meaning of the Disputes clause. Prior versions of the language quoted above were identical except for subparagraph numbering.

8 3. FAR , Final indirect cost rates, as in effect from 3 March 1997 through 1998, provides: (a) Final indirect cost rates shall be established on the basis of -- (1) Contracting Officer determination procedure (see ) or (2) Auditor determination procedure (see ). Prior versions of FAR were essentially the same. 4. FAR , Contracting officer determination procedure, as in effect from 24 April 1998 through 1998, provides in pertinent part: (b) Procedures. (1) In accordance with the Allowable Cost and Payment clause at 48 CFR or , the contractor shall submit to the contracting officer.

9 And to the cognizant auditor a final indirect cost rate proposal.. (3) The contracting officer .. shall head the Government negotiating team, which includes the cognizant auditor and technical or functional personnel as required.. 4 (4) The Government negotiating team shall develop a negotiation position. Pursuant to 10 2324(f) and 41 256(f), the contracting officer shall (i) Not resolve any questioned costs until obtaining (A) Adequate documentation on the costs; and (B) The CONTRACT auditor s opinion on the allowability of the costs.

10 (5) The cognizant contracting officer shall (i) Conduct negotiations; (ii) Prepare a written indirect cost rate agreement conforming to the requirements of the contracts; (iii) Prepare, sign, and place in the contractor general file (see (c)(3)) a negotiation memorandum covering (A) the disposition of significant matters in the advisory audit report; (B) reconciliation of all costs questioned, with identification of items and amounts allowed or disallowed in the final settlement as well as the disposition of period costing or allocability issues; (C) reasons why any recommendations of the auditor or other government advisors were not followed; and (D) identification of cost or pricing data submitted during the negotiations and relied upon in reaching a settlement.