Each year, hundreds of billions of dollars worth of work is performed for the federal government under cost-reimbursement contracts under which the government reimburses contractors for their allowable incurred costs. Contractors are, however, only reimbursed if those costs are reasonable, allowable and allocable pursuant to applicable provisions of the Federal Acquisition Regulation (FAR).

The FAR guidance on cost accounting is set out in the Cost Principles (FAR Part 31) and the Cost Accounting Standards (CAS) (FAR Part 30 and FAR Appendix) governing, respectively, the allowability and allocability of costs. Compliance with these principles and standards is critical if contractors are to obtain prompt reimbursement. Noncompliance can give rise not only to difficulties in receiving payment, but also to government demands for return of monies already paid, administrative fines and penalties and, in some cases, exposure to punitive proceedings under the Civil False Claims Act and/or criminal prosecution.

Powell Goldstein's Government Contracts group works with contractors to ensure that their contract practices and procedures comply with the Cost Principles and the CAS. We also provide legal advice, counsel and representation in connection with agency audits and administrative proceedings that can include voluntary disclosures, civil and criminal fraud investigations and litigation of cost issues before boards of contract appeals and federal courts of appropriate jurisdiction.

Representative Matters: 

• Assisted government contractors and worked with expert accounting counsel to establish and negotiate provisional rates for payment under cost-reimbursement contracts. We have also assisted contractors with award disputes.
• Represented government contractors with regard to the requirements of the Truth In Negotiation Act, including provision of advice and counsel on requirements for submission and certification of cost or pricing data and establishment of procedures for compliance with the requirements of the Act and implementing regulations
• Advised clients on a variety of FAR cost principles relating to "allowability" factors: indirect costs, cost allocation, advance agreements, and ceilings; IR&D and B&P costs; lobbying costs; compensation and personnel costs, including specifically, reasonableness, government salary caps, pension costs (including CAS 413) and severance pay; employee morale; training and education; cost of money and interest; termination costs; and professional services vs. litigation
• Counseled government contractors on specific cost reimbursement and contracting requirements, including Limitation of Costs and Limitation of Funds clauses and related notice requirements regarding incurred/estimated cost
• Assisted contractors in the establishment of procedures for management of government cost audits, including development of an audit liaison function to assure contractor control of the audit process and ability to respond timely to requests by DCAA and other government auditors without unnecessary and inappropriate disclosure of corporate information
• Represented clients before the DCAA, DCAS and all of the DOD Departments regarding audits, investigations and cost accounting disputes
• Represented several major Medicare contractors in disputes arising from audit of their cost-reimbursement contracts and in termination proceedings including resolution of government claims in excess of $40 million
• Served as Regional Trial Counsel for the Defense Contract Administration Service and the Defense Contract Audit Agency with responsibilities including coordination with DCAA department heads in performance of complex audits of Fortune 100 defense contractors
• Litigated contract disputes involving cost allocability issues before the Board of Contract Appeals and the U.S. Court of Federal Claims