Sikorsky Aircraft Corporation v. United States
2014 U.S. App. LEXIS 23189
| Fed. Cir. | 2014Background
- Sikorsky had both government and commercial contracts (1999–2005); its government contracts were subject to Cost Accounting Standards (CAS), specifically CAS 418 governing allocation of indirect costs.
- Sikorsky accumulated materiel overhead (purchasing and materiel-handling/logistics) in an indirect pool and, from 1999–2005, allocated that pool to contracts using a direct labor base rather than a direct materiel base.
- Sikorsky used a labor base to avoid distortion caused by government-furnished materiel (GFM) that increased overhead but did not appear in direct materiel costs for government contracts.
- The contracting officer issued a 2008 final decision finding CAS 418 noncompliance for 1999–2005 (material in 2003) and asserting about $65M principal plus interest; Sikorsky appealed to the Court of Federal Claims.
- The Claims Court held the government failed to prove CAS 418 noncompliance (applying CAS 418-50(e)) and entered judgment for Sikorsky; the government appealed to the Federal Circuit.
Issues
| Issue | Plaintiff's Argument (Government) | Defendant's Argument (Sikorsky) | Held |
|---|---|---|---|
| Whether the CDA six-year limitations period is jurisdictional and must be decided before the merits | §7103 six-year bar is jurisdictional; should be decided first | §7103 is non-jurisdictional; statute-of-limitations is an affirmative defense | §7103 is non-jurisdictional under Supreme Court precedent (Auburn Regional); court need not decide limitations because merits decided for Sikorsky |
| Whether Sikorsky’s materiel overhead pool is governed by CAS 418-50(d) (management/supervision pools) or 418-50(e) (other indirect/service pools) | Pool is an "overhead pool" falling under 418-50(d); government relied on history/preamble and unpublished materials to support | Pool lacks a material amount of management/supervision costs and hence falls under 418-50(e); allocation base may be surrogate measuring resource consumption | CAS text controls; applicability depends on whether cost of management/supervision is a material part of the pool; 418-50(e) governs here |
| How to measure “material amount” of management/supervision costs for provision choice | Materiality should be measured by whether pool contains all related management/supervision costs (government’s proposed comparator) | Materiality is measured by the portion of the pool comprised by management/supervision costs (pool-relative standard) | Materiality is pool-relative; management/supervision costs here were not a material part of the pool (court affirmed Claims Court finding) |
| Whether allocation by direct labor (Sikorsky’s method) violated CAS 418(e)’s proportionality/surrogate requirement | Direct materiel base (or different surrogate) required; direct labor improperly allocated materiel overhead to commercial contracts | Direct labor is an appropriate surrogate that reasonably measures resource consumption given GFM distortion and historical correlation | Under 418-50(e) an "appropriate measure of resource consumption" is required; government failed to prove Sikorsky’s direct labor base was inappropriate; judgment for Sikorsky affirmed |
Key Cases Cited
- Raytheon Co. v. United States, 747 F.3d 1341 (Fed. Cir.) (standards for de novo review of CAS legal questions and burden on government)
- Rumsfeld v. United Techs. Corp., 315 F.3d 1361 (Fed. Cir.) (CAS interpretation must rely on public authorities; avoid unpublished agency history)
- Sebelius v. Auburn Reg'l Med. Ctr., 133 S. Ct. 817 (2013) (filing deadlines are not jurisdictional absent clear congressional statement)
- John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008) (example of a statute-of-limitations treated as jurisdictional by stare decisis)
- Henderson v. Shinseki, 131 S. Ct. 1197 (2011) (distinguishing jurisdictional rules from claim-processing rules)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (requires clear statement for a rule to be jurisdictional)
- Motorola, Inc. v. West, 125 F.3d 1470 (Fed. Cir.) (treating accrual and contracting officer decision timing under CDA)