Raytheon Company v. United States
2014 U.S. App. LEXIS 6218
| Fed. Cir. | 2014Background
- Raytheon sold AIS, Optical, and Aerospace segments; pension plans tied to these segments were retained, creating deficits Raytheon sought to recover from Government.
- CAS 412 and 413 govern pension costs and segment closing adjustments, with 413 addressing deficits/surpluses and allocations between Government and contractor.
- FAR 31.205-6(j) imposes a timely funding requirement for pension costs, but its applicability to segment closing adjustments (CAS 413) is disputed.
- Contracting officer denied recovery, concluding segment closings were unallowable under timely funding; Raytheon sued in Court of Federal Claims, succeeding on most points.
- Trial court awarded Raytheon about $59.21 million for AIS and Aerospace deficits; Optical segment deficit issue and cross-appeal related to data allocation methods remained unresolved; Government appealed, Raytheon cross-appealed Optical allocation result.
- Court holds: (i) segment closing adjustments are not subject to FAR timely funding; (ii) Government bears burden to show CAS noncompliance; (iii) equitable adjustment claims under FAR 52.230-2 require a CDA final decision; (iv) CAS 413-50(c)(5) requires uniform allocation method across a segment; Optical mixed-method approach improper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are segment closing adjustments pension costs subject to FAR timely funding? | Raytheon: not ordinary pension costs; CAS 413 adjustments are distinct. | Government: segment closings trigger timely funding. | No; segment closings are not subject to timely funding. |
| Who bears the burden to prove CAS 413 compliance? | Raytheon contends Government bears burden. | Government contends Raytheon bears burden. | Government bears burden to prove noncompliance with CAS 413. |
| Can the Government pursue an equitable adjustment under the CAS clause for pre-1995 contributions without a CDA final decision? | N/A (Government sought equitable adjustment). | N/A | No; equitable adjustment claim requires a CDA final decision and is outside scope of segment closing adjustment. |
| Did Raytheon properly allocate the Optical segment assets using CAS 413-50(c)(5)? | Raytheon used data-driven (i) and (ii) methods to allocate across groups. | Trial court required uniform method across entire segment; mixing methods improper. | CAS 413-50(c)(5) requires the same allocation method across the entire segment; mix not permitted. |
Key Cases Cited
- Allegheny Teledyne, Inc. v. United States, 316 F.3d 1366 (Fed. Cir. 2003) (segment closing adjustments treated differently; CAS exclusivity on allocability)
- Allen Gates v. Raytheon Co., 584 F.3d 1062 (Fed. Cir. 2009) (interprets CAS 413 and segment closings within the CAS framework)
- Gen. Elec. Co., Aerospace Grp. v. United States, 929 F.2d 679 (Fed. Cir. 1991) (allocability and CAS vs FAR framework)
- Boeing N. Am., Inc. v. Roche, 298 F.3d 1274 (Fed. Cir. 2002) (CAS governs allocation/measurement; FAR governs allowability)
- Sikorsky Aircraft Corp. v. United States, 110 Fed. Cl. 210 (2013) (government bears burden in CAS noncompliance challenges)
- Scott Timber Co. v. United States, 333 F.3d 1358 (Fed. Cir. 2003) (jurisdictional CDA final decision prerequisite)