A-T Solutions, Inc., ASBCA No. 59338

Background

The Army awarded A-T Solutions, Inc. (ATS) a competitive cost-plus-fixed-fee (CPFF) contract (W91CRB-09-C-0043) in 2009 to provide JATAC IED training services and materials; ATS’s proposal expressly stated it would price commercial training materials at its catalog prices.
ATS historically manufactured and sold the training aids commercially through a Mission Support (Logistics & Production) division and provided training through a separate Training (Warfighter) division; before 2009 ATS used Peachtree accounting and then moved to Deltek Costpoint in 2009.
After award ATS invoiced and was paid for training materials at catalog prices until DCAA audited and questioned material billings in 2010, concluding ATS was billing at catalog price rather than at cost and identifying accounting deficiencies.
DCAA recommended suspension of reimbursement; ATS implemented corrective actions and later DCMA found ATS’s accounting system adequate; ATS continued to seek payment for the difference between catalog price and reimbursed material cost.
ATS submitted a certified claim (~$8.7M as of Jan 2014) seeking recovery of commercial catalog prices for materials; the contracting officer denied the claim citing FAR 52.216-7 (Allowable Cost and Payment) and finding FAR 31.205-26(e) inapplicable because transfers were recorded at cost and accounting was inadequate.
The ASBCA sustained ATS’s appeal on entitlement, holding ATS satisfied FAR 31.205-26(e): interdivisional transfers qualified and were recorded at price; the appeal was returned for quantum determination.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether ATS can recover commercial catalog prices for training materials under the CPFF contract	ATS: Government accepted its proposal pricing and paid catalog prices; alternatively FAR 31.205-26(e) permits billing at price for interdivisional transfers	Government: CPFF contract requires reimbursement at allowable cost (FAR Part 31.2); only exception is FAR 31.205-26(e), which ATS does not satisfy	Held: ATS entitled to recover catalog prices under FAR 31.205-26(e); Board did not reach contract-interpretation argument
Whether ATS’s interdivisional transfers qualify as transfers under FAR 31.205-26(e) (vs. mere physical/pass-through)	ATS: Transfers occurred between Mission Support and Training divisions with business purpose and were handled identically to external sales	Government: Transfers lacked economic substance and were mere pass-throughs; Peachtree records showed no division-level transfers	Held: Government failed to show transfers lacked substance; Board found transfers occurred within meaning of FAR 31.205-26(e)
Whether ATS had an established practice of pricing interorganizational transfers at other than cost (FAR 31.205-26(e)(1))	ATS: Historical practice (pre- and post-2009) was to record transfers at catalog price; Costpoint records and revenue summaries support this	Government: DCAA audit concluded transfers were recorded at cost; ATS failed to prove established practice	Held: ATS provided credible evidence (witnesses, revenue summaries, expert review) that transfers were recorded at price; government did not meet its burden
Whether transfers were recorded at price (FAR 31.205-26(e) requirement)	ATS: Costpoint subsidiary records and Peachtree-era records show Logistics & Production recorded revenue at catalog price for internal transfers	Government: Accounting entries and DCAA findings show transfers recorded at cost	Held: Board credited ATS’s evidence that transfers were recorded at price; government failed to prove otherwise

Key Cases Cited

Pacific Gas & Electric Co. v. United States, 838 F.3d 1341 (Fed. Cir. 2016) (recognizing that a middleman transaction may be valid even if title passes directly from supplier to end-customer)
Rumsfeld v. United Technologies Corp., 315 F.3d 1361 (Fed. Cir. 2003) (simultaneous transactions can transfer title and support contractor accounting treatment)