(Editor’s Note.  The following demonstrates the need to identify potential government caused actions that tend to increase the costs of a contract, not only to substantiate claims, but also to maximize recovery of termination settlements.  The documentation of increased costs raises the ceiling of potential recovery because the settlement cannot exceed the contract price plus changes and government caused changes can mitigate assertions of loss adjustments.)

The contract to supply 1,171 guidance sections and related services was plagued by substantial change orders, many related to defects in the government’s data package, and rather than continue to pay for increased costs the government terminated the contract for convenience.  DCAA issued a report indicating Raytheon would have lost money had it completed the contract so the government reduced the termination proposal by adjusting it for the anticipated losses.  Citing M.E. Brown (ASBCE 40043) that ruled the FAR’s loss adjustment requirement does not apply if the government substantially contributed to the increased costs and it is not possible to segregate that loss from the contractor’s loss, the Board sided with Raytheon.  The Board ruled the significant changes caused by the defective data package resulted in the government substantially causing the increased costs and hence the lost adjustment was inappropriate (Raytheon Co. ASBCA 51652).

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