In a government appeal, the US Circuit Court of Appeals confirmed that the Air Force is not entitled to a $300 million price reduction under a multibillion dollar jet engine contract because the Air Force failed to show it relied on UTech’s alleged defective cost or pricing data when it determined price reasonableness.  In confirming the Appeals Board denial of the government’s Truth in Negotiations Act Claim (TINA), the Court rejected the Air Force’s contention that it was not required to show “detrimental reliance” (i.e. it relied on the defective data to its detriment) but only to establish the contract price was calculated using defective data.  The Board had ruled that in an earlier ruling it had improperly focused on the contractor’s initial price proposal rather than on its best and final offer (BAFO) pricing and that the Air Force had not relied upon or even reviewed the allegedly defective pricing data in UTech’s BAFO pricing.  The Court ruled that TINA, Section 2306(f) provided that defective cost or pricing data increases a contract price only if the government relies on the defective data to its detriment in agreeing to a price (Wynne v United Technologies corp. Fed. Cir. No. 05-1393).

AM General asked the Appeals Board to reconsider its decision that certain of the company’s accounting practices were inconsistent with CAS 418 by submitting an affidavit prepared by “an expert in cost accounting” and especially on CAS 418.  The Board struck down the affidavit saying the interpretation of CAS is an issue of law on which the Board should not receive expert views and that the delay in presenting the affidavit would harm the government and could escalate into an “extensive relitigation” of the issue.  In its earlier decision, the board concluded that AM General, which manufactures both High Mobility Multipurpse Wheeled Vehicles (HMMWVs) for the Army and similar vehicles sold commercial under the name Hummer violated CAS 418 by including all manufacturing overhead for both vehicles in a single cost pool and allocating it to each unit produced.  Though AM General conducted the majority of its production for both vehicles at a single plant, the commercial Hummers were finished in another building as they came off the production line and the cost of this additional building was 11 percent of the total manufacturing expense.  The Board concluded this added costs should be segregated and charged to the commercial program only (AM General LLC, ASBCA No. 53610, government’s motion to strike granted).

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