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CO's Decision Was a Proper Assertion of Defective Pricing Claim

A contractor's motion to dismiss the government's defective pricing counterclaim was denied by the Court of Federal Claims because the contracting officer's final decision complied with the requirements of the Contract Disputes Act and Federal Acquisition Regulation. The dispute arose from a contract to provide generators for a missile defense system. The contractor acquired the generators from a subcontractor that was paid in German Marks. Because the contractor obtained a more favorable exchange rate on the open market than identified in the contract, it received a significant profit from the transaction. The Defense Contract Audit Agency then conducted a post-award audit, which determined the contractor overstated its subcontractor costs by failing to disclose the impact of its actual incurred exchange rates on proposed subcontractor costs. According to DCAA, the contractor had an obligation to disclose its actual exchange rate data to the government. The CO subsequently issued a final decision demanding payment for excess profits resulting from the contractor's defective pricing. The contractor filed a complaint challenging the CO's decision, and the government filed its counterclaim, which sought recovery of the contractor's profits and accrued interest. The contractor moved to dismiss the counterclaim for lack of jurisdiction, arguing the CO's decision failed to comply with the requirements set forth at 41 USC 605(a) of the CDA and applicable FAR provisions, particularly FAR 33.211.
Decision Complied

The CDA states in pertinent part that a final decision must "state the reasons for the decision reached," while the FAR 33.211 provision in effect at the time stated a CO's decision must include "[a] statement of the factual areas of agreement and disagreement and ... [a] statement of the [CO]'s decision, with supporting rationale." Here, the CO's decision complied with the CDA's requirements for a valid final decision. The decision plainly identified the basis of the defective pricing claim and by its terms represented the CO's final decision on liability. The basis of the decision was laid out with specificity in the DCAA audit report, which the CO referenced in her decision. Consequently, the fundamental elements of the dispute were laid out in the audit report, which sufficiently supported the CO's decision to seek payment of the windfall profits. Also, the CO was aware of the contractor's objections when she prepared the decision. Similarly, the CO's decision was valid under FAR 33.211. The audit report provided the contractor with the factual context of the defective pricing dispute and demonstrated the claim centered on whether the contractor had an obligation to inform the government of the financial benefit it received from fluctuations in the exchange rate. Moreover, the contractor failed to present any evidence to question the propriety of the CO's actions. (Saudi Logistics and Technical Support v. U.S., FedCl, 53 CCF 79,072)

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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