Coherent Logix, Inc. ( 2016 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Coherent Logix, Inc. ) ASBCA No. 59725)
Under Contract Nos. FA8650-05-C-1825 )
W911 QX-06-C-0002 )
N00039-08-C-0092 )
FA8750-05-C-0005 )
FA9453-05-C-0029 )
W15QKN-04-C-1159)
W15QKN-06-C-0219)
W15P7T-07-C-L610 )
APPEARANCE FOR THE APPELLANT: Daniel C. Minutillo, Esq.
Minutillo, A Professional Law Corporation
San Jose, CA
APPEARANCES FOR THE GOVERNMENT: E. Michael Chiaparas, Esq.
DCMA Chief Trial Attorney
Joseph D. Keller, Esq.
Trial Attorney
Defense Contract Management Agency
Chantilly, VA
OPINION BY ADMINISTRATIVE JUDGE O'SULLIVAN ON APPELLANT'S
MOTION FOR RECONSIDERATION
Appellant Coherent Logix, Inc. (CLX) has timely moved for reconsideration of
the Board's 2 April 2015 decision denying its appeal. Coherent Logix, Inc., ASBCA
No. 59725, 15-1BCA~35,947. 1 CLX appealed the administrative contracting officer's
(ACO's) decision not to waive the penalty assessed on expressly unallowable patent legal
fees included in CLX's 2007 incurred cost submission, arguing both that the government's
claim was untimely under the Contract Disputes Act's (CDA's) six-year statute of
limitations, and that the ACO erred in declining to waive the penalty.
1
This appeal was decided under Board Rule 12.2 and shall have no value as precedent,
and in the absence of fraud, shall be final and conclusive and may not be appealed
or set aside.
Both arguments were based on CLX's assertion that patent legal fees were claimed
in its prior (2005 and 2006) incurred cost submissions, and thus the government was
aware that CLX was claiming reimbursement of patent legal fees and had approved
payment of these costs in 2005 and 2006. From this, CLX argued that the government
therefore was aware at the time CLX submitted its 2007 incurred cost submission
on 13 August 2008 that the submission contained the patent legal costs at issue and
so its claim accrued on that date, making the ACO's final decision assessing penalties,
dated 21November2014, untimely. Coherent Logix, 15-1BCA~35,947 at 175,678.
Alternatively, CLX argued that the government's awareness of and payment of the
patent legal fees in the 2005 and 2006 incurred cost submissions led CLX to believe
that the costs were allowable, rendering its inclusion of these expressly unallowable
costs in its 2007 submission "inadvertent" and thus qualifying for a penalty waiver under
FAR 42.709-5(c). Id. at 175,679. CLX did not contest either the expressly unallowable
nature of the costs at issue nor the ACO's initial assessment of the penalty. Id. at 175,677.
We found that CLX failed to establish that it claimed patent legal fees for
reimbursement in 2005 or 2006, or that the government knowingly reimbursed such
costs. Thus we could not conclude (a) that the government had reason to know at
the time CLX initially submitted its 2007 incurred cost submission that it was
claiming patent legal fees; or (b) that the government had misled CLX in any way as to
the allowability of the costs by "approving" such costs for payment in either 2005 or
2006 so as to render CLX's inclusion of the costs in its 2007 submission "inadvertent."
Coherent Logix, 15-1BCA~35,947 at 175,679-80.
Reconsideration is not intended to provide a party with the opportunity to reargue
issues that were previously raised and decided. Precision Standard, Inc., ASBCA
No. 59116, 15-1 BCA ~ 36,155 at 176,448. The moving party must show a compelling
reason why this Board should alter its decision. Id. (citing ADT Construction Group,
Inc., ASBCA No. 55358, 14-1BCA~35,508). In determining whether a party has made
such a showing, we look to whether there is newly discovered evidence, mistakes in our
findings of fact, or errors oflaw. Id. (citing JF. Taylor, Inc., ASBCA Nos. 56105,
56322, 12-2 BCA ~ 35,125; and Robinson Quality Constructors, ASBCA No. 55784,
09-2 BCA ~ 34,171).
The gist of CLX's motion is that the Board has made an error in its findings of
fact. CLX's argument may be summarized as: the Board only considered patent
legal costs that were expensed (2007) and not those that were amortized (2005-2006)
(app. mot. at 2); and, the Board erred in finding that patent legal fees were not included in
Amortization IP for purposes of CLX's 2005 and 2006 submissions (id. at 4). In support
of its contention, CLX cites to sections of the affidavits of Messrs. Gorsuch and Baggett
previously considered and cited by the Board in its decision.
2
CLX had the burden of proof on both ( 1) its affirmative defense that the
government's claim was time barred, and (2) its claim that the ACO erred in declining to
waive the penalty. We examined the affidavits and supporting documentation submitted by
CLX and we were unable to conclude that the costs at issue were claimed by CLX for
reimbursement in either the 2005 or 2006 ICE. Coherent Logix, 15-1 BCA i-135,947 at
175,679. CLX's motion for reconsideration, as stated above, attacks this factual finding.
It is important to understand, however, that even if we had been able to find that the costs
were included in the two prior years' proposals, that fact standing alone would not have
been sufficient for us to find in CLX's favor in this appeal. CLX's asserted defense to the
government's assessment of penalties rested ultimately on being able to establish that the
government knew or should have known that the patent legal fees were included in its
2007 incurred cost submission, thus beginning the claim accrual clock at the time of the
submission, or alternatively, that CLX "inadvertently" included unallowable costs in its
proposal in detrimental reliance on government conduct (acceptance of the patent legal fees
for payment in prior years) that led it to reasonably believe that the costs were allowable.
CLX did not carry its burden of proof on either of these two elements of its case.
In our original decision, we found that patent legal fees were included in CLX's
2007 incurred cost submission but that "there is nothing in the record to indicate that this
fact would have been apparent to the government from a review of the submitted
proposal, which simply listed 'Legal Fees' of $89, 196 on Schedule B." Coherent Logix,
15-1BCA,-r35,947 at 175,678. Moreover, the DCAA auditor affirmed that the general
ledger detail that would have revealed the inclusion of patent legal costs was not included
in CLX's 2007 incurred cost submission and was not provided to the government until it
was requested and received on 1August2013. Id. at 175,679.
With respect to the 2005 and 2006 incurred cost submissions, and accepting for
purposes of this decision CLX's assertion that patent legal costs were included in the
expense category of Amortization IP for both of those years, 2 we still find nothing in the
record to indicate that this fact would have been apparent to the government from the
incurred cost submissions themselves. And while CLX states that the general ledger
detail showing the patent legal fees was "available" to the DCAA auditors, the record is
devoid of any evidence that DCAA or any other representative of the government was
aware that such costs were included, let alone knowingly approved them. Thus, CLX's
alleged reliance on the government's purported "approval" of the patent legal fees for
2
CLX argues in its motion that the Board considered only the Legal Fees general
ledger account and not the Amortization IP general ledger account in its original
decision, but our decision is clear that we looked at both accounts and did not
see where CLX had included the Meyertons' legal fees in its incurred cost
submissions for either 2005 or 2006. Coherent Logix, 15-1BCA,-r35,947 at 175,678.
3
payment in 2005 and 2006 (leading it to believe that such costs were allowable in 2007)
was patently unreasonable.
Moreover, even if CLX had identified its unallowable patent legal costs in its
2005 and 2006 submissions to the government and the government had unaccountably
approved them for payment, we do not think this would allow CLX to escape the penalty
for including the costs in its 2007 submission. Congress enacted the penalty provisions
specifically to ensure that contractors, not the government, bear the burden of assuring
that their submissions for reimbursement of costs on government contracts do not
contain expressly unallowable costs. General Dynamics Corp., ASBCA No. 49372,
02-2 BCA ~ 31,888 at 157,568 (the penalty provisions of 10 U.S.C. § 2324 were a
response to Congressional concerns that there was little incentive for contractors to
eliminate unallowable costs from complex cost submissions).
CONCLUSION
For the reasons stated, CLX's motion is denied.
Dated: 25 May 2016
Administrative Judge
Armed Services Board
of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of
the Armed Services Board of Contract Appeals in ASBCA No. 59725, Appeal of
Coherent Logix, Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREYD. GARDIN
Recorder, Armed Services
Board of Contract Appeals
4