                 ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                       )
                                                   )
Alion Science and Technology Corporation  )               ASBCA No. 58992
                                          )
Under Contract No. DAAB07-03-D-C213 et al.)

APPEARANCES FOR THE APPELLANT:                            Terry L. Elling, Esq.
                                                          Georgina C. Shepard, Esq.
                                                           Holland & Knight LLP
                                                           McLean, VA

APPEARANCES FOR THE GOVERNMENT:                           E. Michael Chiaparas, Esq.
                                                           DCMA Chief Trial Attorney
                                                          Gregory T. Allen, Esq.
                                                           Trial Attorney
                                                           Defense Contract Management Agency
                                                           Chantilly, VA

                 OPINION BY ADMINISTRATIVE JUDGE MELNICK
               ON APPELLANT'S MOTION FOR SUMMARY JUDGMENT

         Alion Science and Technology Corporation (Alion) appeals from the Defense
Contract Management Agency (DCMA) administrative contracting officer's (ACO's)
21August2013 final decision asserting a $338,921 claim seeking penalties for the
alleged inclusion of expressly unallowable costs in Alion's final indirect cost rate
proposal for fiscal year (FY) 2005. Our jurisdiction to entertain this appeal arises from
the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109. Alion moves for
summary judgment arguing that the government's claim was asserted more than six years
after it accrued and is therefore time-barred under the CDA, 41 U.S.C. § 7103(a)(4)(A).
The government opposes the motion.

        STATEMENT OF FACTS (SOF) FOR THE PURPOSES OF THE MOTION

        1. During the relevant period, Alion had multiple contracts with the government
(see, e.g., R4, tabs 14, 17, 18, 21, 29, 31, 33, 34). 1 Alion's contracts incorporated
numerous Federal Acquisition Regulation (FAR) clauses by reference, including
FAR 52.216-7, ALLOWABLE COST AND PAYMENT (DEC 2002); and FAR 52.242-3,
PENALTIES FOR UNALLOWABLE COSTS (MAY 2001) (see R4, tab 18 at 138-39, tab 21

1
    The Rule 4 file also contains numerous contracts between the government and other
         contractors. The relevance of these contracts to the current appeal is unclear.
at 150-52, tab 29 at 180-81, tab 33 at 193-94). 2 The Allowable Cost and Payment clause
provided, in pertinent part:

                        (d) Final indirect cost rates. ( 1) Final annual indirect
                cost rates and the appropriate bases shall be established in
                accordance with Subpart 42.7 of the Federal Acquisition
                Regulation (FAR) in effect for the period covered by the
                indirect cost rate proposal.

                        (2)(i) The Contractor shall submit an adequate final
                indirect cost rate proposal to the Contracting Officer (or
                cognizant Federal agency official) and auditor within the
                6-month period following the expiration of each of its fiscal
                years. Reasonable extensions, for exceptional circumstances
                only, may be requested in writing by the Contractor and
                granted in writing by the Contracting Officer. The Contractor
                shall support its proposal with adequate supporting data.

                        (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.

The Penalties for Unallowable Costs clause provided, in pertinent part:

                        (b) Contractors which include unallowable indirect
                costs in a [final indirect cost rate] proposal may be subject to
                penalties. The penalties are prescribed in 10 U.S.C. 2324 or
                41 U.S.C. 256, as applicable, which is implemented in
                Section 42.709 of the Federal Acquisition Regulation (FAR).

                       (c) The Contractor shall not include in any [final
                indirect cost rate] proposal any cost that is unallowable, as
                defined in Subpart 2.1 of the FAR, or an executive agency
                supplement to the FAR.

                      (d) If the Contracting Officer determines that a cost
                submitted by the Contractor in its [final indirect cost rate]

2
    Some of Alion's contracts only incorporated one of the two clauses (see R4, tabs 14, 17,
        31, 34). The parties, however, do not dispute the applicability of either clause to
        this appeal.

                                                2
                proposal is expressly unallowable under a cost principle in the
                FAR, or an executive agency supplement to the FAR, that
                defines the allowability of specific selected costs, the
                Contractor shall be assessed a penalty ....



                       (f) Determinations under paragraphs (d) and (e) of this
                clause are final decisions within the meaning of the Contract
                Disputes Act of 1978 ....

       2. Alion submitted its final indirect cost rate proposal for FY 2005 electronically
as a Microsoft Excel spreadsheet file on 31 March 2006 (gov't resp., Havican decl.
~~ 2-3; supp. R4, tab 57). Alion's submission included a summary page, Schedules A
through E, 3 and supporting Schedules 1through26 (supp. R4, tab 57). The summary
page identified Alion's proposed final indirect cost rates by cost pool and business
segment, including the amount of costs and the allocation base for each cost pool, and
referenced the corresponding schedules (id. at 494 ).

         3. Schedules A through E provided further detail regarding the calculation of the
proposed rates. For instance, Schedule A (Engineering Overhead) and Schedule B
(General and Administrative Expense (G&A)) identified the amount of costs and the
allocation bases for the respective cost pools by category, both in total and by business
segment, and further referenced the supporting schedules (supp. R4, tab 57 at 495-96).
The supporting schedules provided an additional breakdown of costs by type. For
example, Schedule 14, relating to G&A costs, specified costs by job number and account
title, listed the recorded amount for each job number, and further identified the amount of
costs for each job number by business segment (id. at 522-26). Both the schedules and
supporting schedules included columns in which Alion made adjustments to the total
amounts for unallowable costs and other adjustments, which were reflected in an
"Allocable Amount" column (supp. R4, tab 57).

        4. Alion's electronic submission also included additional spreadsheets that
corresponded to the various supporting schedules. These additional spreadsheets allowed
for the identification of specific costs within Alion's final indirect cost rate proposal. For
example, within Schedule 14, the entry for job number 90035003001000000 lists a recorded
amount of $718,967 (supp. R4, tab 57 at 522). The corresponding entry in the spreadsheet
titled "Sch 14 Table" lists a grand total amount of $718,967 .05. Double-clicking this cell
opens a new spreadsheet containing approximately 7 50 individual items of cost with

3   Alion's 31 March 2006 submission identifies these documents as Exhibits A through E.
         In their motion papers, the parties refer to these documents as "schedules." We
         refer to the documents as "schedules" to maintain consistency.

                                              3
accompanying information, including the amount of the cost, the date incurred, a general
description of the cost, and various accounting data. (Supp. R4, tab 57, native format
documents 4)

         5. Alion asserts that it accounted for salary related costs (SRC) using standard
cost rates established at the beginning of the fiscal year. To account for the difference
between the standard cost rates and its actual costs, Alion maintains that it utilized a
variance account. (App. mot., Parr dep. at 19, 29, ex. 1 (Parr decl.) ii 3) Schedule 14 of
Alion's FY 2005 final indirect cost rate proposal contained an entry for job number
98035900002000000, "YEAR END SRC EXPENSE VARIANCE," with a recorded
amount of $419,749 (supp. R4, tab 57 at 524). Double-clicking on the corresponding
entry in the Sch 14 Table spreadsheet reveals that this amount consists of various
adjustments. However, with the exception of a transaction related to Hurricane Katrina
disaster relief, the specific costs that are the bases for the adjustments are not identified.
(Supp. R4, tab 57, native format documents) The government contends that this variance
account was the only item regarding Ali on' s SRC costs in Ali on' s March 2006
submission, and that this variance account does not provide detailed information
concerning the specific nature of the costs included in the variance (gov't resp., Havican
decl. ii 8).

        6. On 13 November 2006, the Defense Contract Audit Agency (DCAA) notified
Alion by email that DCAA could not begin its audit of Alion's FY 2005 final indirect
cost rate proposal because Alion failed to provide Schedule H-1 (government
participation in indirect expense pools) and Schedule L (reconciliation of total payroll to
total labor distribution) (supp. R4, tab 59).

      7. Ali on submitted Schedules H through K on or about 7 September 2007 (compl.
and answer ii 18; gov't resp., Havican decl. ii 7).

        8. DCAA notified Alion by letter dated 7 January 2008 that it considered Alion's
FY 2005 final indirect cost rate proposal inadequate. DCAA's letter noted, in relevant
part, the following inadequacies:

                •   The Summary of Claimed Indirect Expense Rates does not
                    include SRC. If SRC is claimed by the contractor, than
                    [sic] it should be included as a rate in the official indirect
                    rate submission.
                •   Schedule H, Contract Direct Costs and Indirect Costs
                    Claimed and Not Claimed - Claimed costs are not

4
    The Board allowed the parties to submit certain documents in their original electronic
         format because elements of these documents are both material and cannot be
         captured in hard copy.

                                                4
                   presented in the same level of detail as used for billing
                   purposes (i.e. delivery or task order). Indirect costs are
                   not separately shown for each final indirect rate. Costs in
                   excess of contract ceilings are not identified as "not
                   claimed" on a separate line.

(Supp. R4, tab 62 at 561)

      9. Alion resubmitted, inter alia, Schedule Hon 8 February 2008 (compl. and
answer~ 18; gov't resp., Havican decl. ~ 7).


       10. Alion provided DCAA with a Microsoft Access database with the filename
"FY 2005 JAMIS DATA" (JAMIS database) on 21January2008. Alion provided a
revised JAMIS database to DCAA on 20 February 2008. (Gov't resp., Diaz decl. ~~ 5-6;
supp. R4, tabs 63, 71) The JAMIS database included three tables that provided
transactional information for tens of thousands of cost transactions (supp. R4, tab 72,
native format documents). The government asserts that it was not until the submission of
the JAMIS database that the government was able to identify the Engineering Overhead
and G&A costs (other than SRC costs) at issue as expressly unallowable (gov't resp.,
Diaz decl. ~ 5).

      11. Alion submitted an SRC proposal on or about 20 February 2008 (gov't resp.,
Havican decl. ~ 8; supp. R4, tab 70). Alion provided additional information regarding its
SRC costs to DCAA in June 2008 (supp. R4, tabs 73-77).

         12. DCAA issued an audit report dated 19 April 2012 regarding Alion's FY 2005
final indirect cost rate proposal (R4, tab 38). DCAA questioned numerous cost elements
within Alion's Engineering Overhead and G&A cost pools and recommended penalties
(id. at 213, 218-20, 229-32, 248).

        13. The DCMA ACO issued a final decision dated 21August2013 asserting a
$338,921 claim for penalties against Alion, pursuant to FAR 52.242-3, for the alleged
inclusion of expressly unallowable costs in its FY 2005 final indirect cost rate proposal.
The ACO determined that Alion had included nine categories of expressly unallowable
costs; notes 1 through 4 involved engineering overhead costs, notes 5 and 6 addressed
SRC costs, and notes 7 through 9 concerned non-SRC G&A costs. The ACO determined
that the government's claim was not barred by the statute of limitations because Alion's
original submission of its final indirect cost rate proposal did not include Schedule H. 5
(R4, tab 54)


5   The ACO also considered the government's claim timely because Alion's original
         submission was not certified by the proper official in accordance with

                                              5
        14. Alion filed a timely appeal, which the Board docketed as ASBCA No. 58992.

       15. On 28 May 2014, DCAA Supervisory Auditor Arelis Diaz stated in a
declaration that:

               8. Schedule Hof the FY 2005 Proposal, which was not
               provided in a complete form until February 8, 2008, was
               required for DCAA to identify what indirect costs are
               allocated to auditable Government contracts .... These are the
               contracts included in the calculation of the Auditable Dollar
               Volume ("ADV"). The ADV is significant because it is
               directly proportional to the materiality of the contractor's
               costs and the risk inherent to those costs ....



               10. Schedule Hand Schedule H-1 are necessary for a
               determination of the materiality of the proposed indirect rates.
               This is a necessary step in the auditing process. Schedule H-1
               demonstrates the extent that flexibly-priced contracts
               participate in the absorption of indirect expenses.
               Government participation is used to determine the materiality
               of the proposed indirect rates, and is the basis for the
               auditor's determination as to which indirect cost pools should
               be subjected to detailed transaction testing.

(Gov't resp., Diaz decl. iii! 8, 10)

                                         DECISION

        Ali on moves for summary judgment on the basis that the government's claim is
time-barred under the CDA. The CDA requires that "each claim by the Federal
Government against a contractor relating to a contract shall be submitted within 6 years
after the accrual of the claim." 41 U.S.C. § 7103(a)(4)(A). A party's failure to submit a
claim within the six-year limitations period is an affirmative defense to the claim.
Kellogg Brown & Root Servs., Inc., ASBCA No. 58175, 15-1 BCA ii 35,988 at 175,825.
As the proponent of its affirmative defense, Ali on bears the burden of proving that the
government's claim for penalties was untimely. See id.; Brunswick Bank & Trust Co. v.
United States, 707 F.2d 1355, 1360 (Fed. Cir. 1983).

       FAR 52.242-4. The government has not advanced this argument in response to
       Alion's motion.

                                              6
       Summary judgment is properly granted only where there is no genuine issue of
material fact and the movant is entitled to judgment as a matter of law. Mingus
Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Am. Gen.
Trading & Contracting, WLL, ASBCA No. 56758, 12-1BCA~34,905 at 171,635. A
material fact is one which may make a difference in the outcome of the case. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the burden of
establishing both the absence of disputed material facts and that it is entitled to judgment
as a matter oflaw. Dongbuk R&U Eng'g Co., ASBCA No. 58300, 13 BCA ~ 35,389
at 173,637. If the moving party makes the requisite showing, the burden shifts to the
nonmovant to show that there is a genuine, material factual issue for trial. BAE Sys. San
Francisco Ship Repair, ASBCA No. 58810, 14-1 BCA ~ 35,667 at 174,588; Teledyne
Brown Eng'g, Inc., ASBCA No. 58636, 14-1BCA~35,495 at 173,998.

        The ACO asserted the claim for penalties against Alion by final decision dated
21August2013 (SOF ~ 13). To be untimely, the government's claim must have accrued
prior to 21 August 2007. A claim accrues "when all events, that fix the alleged liability
of either the Government or the contractor and permit assertion of the claim, were known
or should have been known." FAR 33.201. The events fixing liability should have been
known when they occurred unless they were either concealed or inherently unknowable
at the time. Raytheon Missile Sys., ASBCA No. 58011, 13 BCA ~ 35,241 at 173,017.
Only facts that could not reasonably be known by the claimant postpone claim accrual.
United States v. Commodities Export Co., 972 F.2d 1266, 1272 (Fed. Cir. 1992).

        In determining when the alleged liability is fixed, we begin by examining the legal
basis of the claim. Gray Personnel, Inc., ASBCA No. 54652, 06-2 BCA ~ 33,378
at 165,475. Pursuant to 10 U.S.C. § 2324(b), a head of an agency shall assess a penalty,
including interest, if he "determines that a cost submitted by a contractor in its proposal
for settlement [of indirect costs incurred] is expressly unallowable under a [FAR] cost
principle." The FAR delegates this responsibility to the cognizant contracting officer,
FAR 42.709-2(a)(l), and directs him to assess a penalty "when the submitted cost is
expressly unallowable under a cost principle in the FAR." FAR 42.709-3(a). The
Penalties for Unallowable Costs clause in Alion's contracts provides that the contractor
shall be assessed a penalty if "the Contracting Officer determines that a cost submitted by
the Contractor in its [final indirect cost rate] proposal is expressly unallowable"
(SOF ~ 1). These provisions establish that liability for penalties is fixed when a
contractor submits a final indirect cost rate proposal containing expressly unallowable
indirect costs.

        As stated in her final decision, the ACO asserted a claim for penalties due to the
alleged inclusion of expressly unallowable costs in Alion's final indirect cost rate
proposal for FY 2005 (SOF ~ 13). The parties do not dispute that Alion submitted its
final indirect cost proposal for FY 2005 on 31 March 2006 (SOF ~ 2). The question


                                              7
before the Board, therefore, is whether it was reasonably knowable from the 31 March
2006 submission that Alion's final indirect cost rate proposal included the specific costs
that the government alleges are expressly unallowable. See Laguna Constr. Co., ASBCA
No. 58569, 14-1BCAif35,618 at 174,459 ("should have been known" test for claim
accrual turns upon what facts were reasonably knowable to the claimant).

       The government argues that it required detailed transaction information to
determine whether Alion's final indirect cost rate proposal contained expressly
unallowable costs (gov't resp. at 26). The government argues that it did not have the
detailed transaction data required to determine the unallowability of Alion's costs with
respect to the SRC cost elements until Alion submitted its salary related cost proposal on
20 February 2008, nor with respect to the remaining cost elements until Alion submitted
the JAMIS database in January 2008 (id. at 27-28). Alternatively, the government
contends that its claim did not accrue until Alion submitted adequate Schedules H and
H-1 on 8 February 2008 (id. at 28-30). Alion maintains that its 31 March 2006
submission provided transaction-level detail for its claimed costs, triggering the accrual
of the government's claim even though the submission did not include supporting data
(app. mot. at 14-16, 18-19).

        We conclude that Alion has failed to meet its summary judgment burden. Alion
has established that data provided in the supporting schedules and corresponding
spreadsheets in its 31 March 2006 submission contained information regarding some
individual costs in its proposal (SOF ifif 3-4). However, with regard to Alion's SRC costs
in particular, the government has presented evidence that the SRC variance account did
not identify the specific cost transactions forming the bases of the adjustments made
therein (SOF if 5). Respecting Alion's other costs, Alion has failed to identify within its
31 March 2006 proposal the specific costs at issue in this appeal. Viewing the record in
the light most favorable to the government as the nonmoving party, as we must on
summary judgment, Computer Sciences Corp., ASBCA No. 56175, 11-1BCAif34,631
at 170,645, there is a genuine issue of material fact as to whether the 31 March 2006 final
indirect cost rate proposal included the alleged expressly unallowable costs at issue in
this appeal.




                                             8
                                      CONCLUSION

       Alion's motion for summary judgment is denied.

       Dated: 10 November 2015



                                                MARK A. MELNICK
                                                Administrative Judge
                                                Armed Services Board
                                                of Contract Appeals



 I concur

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Administrative Judge                            Administrative Judge
Acting Chairman                                 Vice Chairman
Armed Services Board                            Armed Services Board
of Contract Appeals                             of Contract Appeals


      I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 58992, Appeal of Alion
Science and Technology Corporation, rendered in conformance with the Board's Charter.

       Dated:


                                                JEFFREY D. GARDIN
                                                Recorder, Armed Services
                                                Board of Contract Appeals




                                            9
