Miscellaneous costs. The government refused reimbursement to a prime contractor for payment of its cost type subcontract for insufficient documentation of costs while the prime contractor asserted (1) the subcontractor completed its assigned work (2) the government did not question the subcontractor’s costs and (3) it actually paid the invoiced amounts. The Board held the prime contractor could not recover the subcontract costs because of insufficient cost documentation where affidavits, prime contractor audits or other probative cost records to support the costs incurred by the subcontractor were absent (Analytical Assessments Corp. ASBCA 52393). Where assets purchased were converted from dollars to turkish lira using the exchange rate in effect at the time of investment and the subsequent depreciation costs were claimed using the exchange rate in effect at the time of computing the annual depreciation costs, the Board ruled both FAR and CAS were silent on the matter and held FASB 52 "Foreign Currency Translation" requires use of historical exchange rates be used in determining depreciation costs (General Elec. Co. v. Delaney). The contractor incurred costs in connection with an expected RFP and charged them as "other indirect technical effort" covered by FAR 31.205-12, "long range planning and FAR 31.205-38, "selling costs" while the government asserted they were unallowable bid and proposal costs under FAR 205-18. The board did not rule on the costs but, instead, said the proper cost principle would be a factual question determined by the "principal primary purpose" for incurring the costs (TRW Inc. ASBCA 51172). The Board held that business entities under "collaboration agreements" where parties share benefits, investments and activities are not "subcontractors" and hence revenue share payments are not subcontract costs requiring inclusion in the indirect allocation bases (United Techs. Corp., Pratt & Whitney, ASBCA 47416).

State Income taxes. In Information Sys. & Network Corp. v. US the Court ruled the state tax paid by the sole shareholder of the contractor, a Subchapter S corporation, was an allowable and reimbursable cost of the company, rejecting the governments assertion it was unallowable since Subchapter S corporations had no tax liability. In Hercules, Inc. v. US the contractor received a refund in 1995 for a state income tax paid and claimed as a 1987 contract cost. In calculating the government’s share of the refund, the Court said the contractor should use the ratio of apportionment factors in effect in 1987 rather than 1995 since the refund is a reduction of a 1987 contract cost.

Limitation of Costs. Under a special plan applicable to defense contractors, contractors paid and recovered an insurance "deposit premium" annually where the true premium price would be established at the end of the plan. When the final settlement was established and the contractor sought to charge its cost type contract for the additional premium, the government rejected it on the grounds it exceeded the "Limitation of Cost" clause of the relevant contract. The Court held the government liable for the amount claimed because (1) the final premium was not reasonably foreseeable (2) the contractor could not avoid the escalated premium cost and (3) the CO decided to fund the overrun. The Court stated any of the three reasons stated above would be sufficient to compel the government to reimburse costs (Johnson Controls World Servs. V. US).

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