[00:00:01] Speaker 04:
The next case is Strategic Technology Institute versus Secretary of Defense.

[00:00:06] Speaker 04:
Mr. Boland, when you're ready.

[00:00:10] Speaker 04:
Actually, can you give government counsel money?

[00:00:14] Speaker 04:
I may place the court.

[00:00:20] Speaker 01:
James Boland for the Appellant Strategic Technology Institute.

[00:00:24] Speaker 01:
And I've reserved four minutes for rebuttal.

[00:00:26] Speaker 01:
DCMA's claim, in this case, accrued when STI failed to submit its incurred or indirect cost rate proposal.

[00:00:35] Speaker 01:
The contract required that proposal by a date certain, six months after the end of its fiscal year.

[00:00:41] Speaker 01:
That was a condition on the government's willingness to pay provisional billing rates and cost type contracts and government contracting.

[00:00:49] Speaker 01:
The government will pay

[00:00:50] Speaker 01:
these temporary rates.

[00:00:52] Speaker 01:
They're based on anticipated costs.

[00:00:54] Speaker 01:
The condition for that agreement and to pay monthly bills to a contractor is that the contractor would then submit a proposal and justify those costs.

[00:01:03] Speaker 04:
There's no dispute, I think, that if the government had written to you and said you need to submit these proposals or submit these supporting costs that were lowering your rate or reducing it to zero, they could have done that, right?

[00:01:17] Speaker 04:
That's right.

[00:01:18] Speaker 04:
But that's not the action that's at issue here.

[00:01:21] Speaker 04:
The actions at issue here is separately, much later you provided support, even though it was late, that they audited and found insufficient.

[00:01:31] Speaker 04:
Why aren't those two distinct acts?

[00:01:36] Speaker 01:
The reason is that as soon as STI failed to submit the documentation, they didn't justify any cost.

[00:01:44] Speaker 04:
So at that point, because- Sure, the government had a right to do something, but where in the FAR provision or the contract that it said the government has to do something?

[00:01:54] Speaker 01:
The government does not have to act immediately, but the statute of limitations says that they have to act within six years.

[00:02:00] Speaker 04:
If they want to- Disallowable.

[00:02:03] Speaker 04:
No, no, no, let me finish my thought.

[00:02:04] Speaker 04:
If they want to take the action that they're allowed to here, which is unilaterally set the rates,

[00:02:10] Speaker 04:
They didn't do that.

[00:02:12] Speaker 04:
If they had done that past the statute of limitations, you'd be right.

[00:02:15] Speaker 04:
They'd be barred.

[00:02:17] Speaker 04:
But what they did was wait for you to submit the supporting documentation, no matter how late, and then audit it and determine it was insufficient.

[00:02:26] Speaker 04:
What's wrong with that?

[00:02:27] Speaker 04:
There are two distinct harms.

[00:02:31] Speaker 01:
Well, I would I would I don't know if I would agree with that I think I think that this wasn't a matter of We're not appealing that the claim is not an adequacy of the of the cost proposal.

[00:02:42] Speaker 04:
It's its disallowance of cost It's right because you agree that you're supporting documents were inadequate

[00:02:49] Speaker 04:
That's what we have on appeal.

[00:02:52] Speaker 04:
We haven't contested that.

[00:02:53] Speaker 01:
That's right.

[00:02:54] Speaker 01:
That's right.

[00:02:54] Speaker 01:
But the government's claim is disallowing costs.

[00:02:57] Speaker 01:
And that claim, in our position, is that claim accrued, at first accrued, when STI did not justify any costs.

[00:03:06] Speaker 01:
Because the government could have disallowed everything.

[00:03:09] Speaker 01:
The government knew that it was injured at that point.

[00:03:11] Speaker 04:
Let me ask you this.

[00:03:14] Speaker 04:
the end result of your argument.

[00:03:16] Speaker 04:
If a contractor violates its contractual duty to submit supporting costs on time and waits until six years have passed and submits insufficient documentation, then the government can never recover overpaid costs.

[00:03:32] Speaker 01:
I might caveat that with maybe if there's fraud.

[00:03:34] Speaker 01:
But no, I would agree.

[00:03:35] Speaker 01:
I agree with that.

[00:03:36] Speaker 01:
If the government sleeps on its rights for six years and takes no action, that's what the statute of limitations is for.

[00:03:43] Speaker 04:
Doesn't it?

[00:03:44] Speaker 04:
I mean, I know you disagree, but it seems to me like there is two distinct rights at issue here.

[00:03:48] Speaker 04:
One is the right of the government, when you fail to submit anything, to unilaterally impose a rate or a zero rate.

[00:03:55] Speaker 04:
And one is the right of the government to audit your supporting documentation and adjust it to what should be the right thing.

[00:04:03] Speaker 04:
Let me just ask it this way, because I know you disagree with that.

[00:04:06] Speaker 04:
But if those are two distinct legal acts and two distinct legal rights of the government, and the latter

[00:04:11] Speaker 04:
Starts the statute of limitations again, then we infer right?

[00:04:16] Speaker 04:
If that's correct and then yes, but of course we disagree with that And I think and I think when you when you look at the case law and what your support for that once you once you fail to produce documents that the government start clock starts ticking for everything including auditing documents that haven't even been submitted yet and

[00:04:36] Speaker 01:
Because the government's claim here is not the insufficiency of STI's documentation.

[00:04:44] Speaker 01:
The claim is that STI did not justify their costs.

[00:04:48] Speaker 01:
And it's the contractor's affirmative burden to justify costs.

[00:04:52] Speaker 01:
So if the contractor does not act, the government's injured.

[00:04:54] Speaker 01:
At that point, the government has the right under the far end of the contract to disallow everything.

[00:04:59] Speaker 01:
They have the right to unilaterally set rates.

[00:05:01] Speaker 01:
In fact, GCMA's own manual says they're to do that.

[00:05:06] Speaker 01:
Ask for the proposal.

[00:05:08] Speaker 01:
If you don't receive the proposal, ask for it.

[00:05:10] Speaker 04:
So again, I mean, the gist of your argument is if the contractor doesn't submit its documents on time, then somehow there's an affirmative obligation of the government to go after the contractor even without sufficient documentation.

[00:05:24] Speaker 04:
Yes.

[00:05:24] Speaker 04:
Where in the far does it say that, where the contract?

[00:05:28] Speaker 01:
I don't know if it says that in the FAR.

[00:05:30] Speaker 01:
It's the statute of limitations.

[00:05:32] Speaker 01:
Where besides the statute of limitations?

[00:05:34] Speaker 04:
I don't see the statute of limitations as by itself imposing this kind of mandatory obligation on the government when you breach this document clause.

[00:05:45] Speaker 04:
There's nothing in that clause that suggests the government has a mandatory obligation to reduce your rates to zero or whatever it thinks appropriate.

[00:05:52] Speaker 04:
It says they may, right?

[00:05:54] Speaker 04:
Or whatever the language is.

[00:05:56] Speaker 01:
Right.

[00:05:56] Speaker 01:
But I don't think the FAR or contract also tells the government what time they have to submit for any garden variety breach of contract.

[00:06:06] Speaker 01:
I mean, the FAR doesn't have a provision that says that.

[00:06:08] Speaker 01:
But the statute of limitations is not dependent on some other regulation that requires affirmative conduct.

[00:06:15] Speaker 01:
No, no.

[00:06:15] Speaker 04:
I get this.

[00:06:15] Speaker 04:
But we're not talking about a violation

[00:06:19] Speaker 04:
the duty to submit the documents.

[00:06:22] Speaker 04:
I agree, if the government had just tried to use the remedies under that, that you hadn't submitted anything at all, they'd be out.

[00:06:28] Speaker 04:
But once you submitted it, they have an independent right to audit them, right?

[00:06:33] Speaker 04:
And that's in other parts of the contract.

[00:06:35] Speaker 04:
And so if you violate that by submitting insufficient documentation, why isn't that a different cause of action?

[00:06:44] Speaker 01:
Because the cause of action, or ultimately, the claim that's that issue that's appealed is not a claim for inadequate documentation.

[00:06:51] Speaker 01:
It's a claim disallowing costs that were billed years ago.

[00:06:54] Speaker 04:
Well, you want to generalize it up to a very high level.

[00:06:56] Speaker 04:
You could do that for anything.

[00:06:57] Speaker 04:
You could just say, well, the claim is a breach of contract, and we breached the contract here.

[00:07:01] Speaker 04:
But another part of the contract that was breached later doesn't start a new cause of action.

[00:07:08] Speaker 04:
Well, I mean, you take that out to the nth degree, and it's ludicrous, right?

[00:07:11] Speaker 04:
So we still have to look at whether these are two separate causes of action.

[00:07:15] Speaker 04:
And one is, you know, your failure to submit document allows them to unilaterally set rates.

[00:07:21] Speaker 04:
And one is, when you fail to submit adequate documentation, they're allowed to set the proper rates based on what they think your documentation supports.

[00:07:31] Speaker 04:
If I see those two things different, I know you see those two things as the same thing.

[00:07:34] Speaker 04:
I don't.

[00:07:35] Speaker 04:
If they're different because one is about

[00:07:39] Speaker 04:
claim allowance, and one is about a breach of a provision to provide documents, then there's two separate causes of action.

[00:07:48] Speaker 01:
Respectfully, we disagree.

[00:07:51] Speaker 04:
I just wanted to get that clear, because you have a lot of interesting legal arguments about claim accrual and all that kind of stuff on whether the knowledge rule applies.

[00:08:00] Speaker 04:
If we see these as two distinct causes of action, none of that really matters, right?

[00:08:04] Speaker 04:
Because the second claim about proper documentation

[00:08:08] Speaker 04:
is within the six-year set of limitations under any accrual rule?

[00:08:12] Speaker 01:
I would concede that that would be the case.

[00:08:15] Speaker 01:
But of course, we do not characterize this as a, it's not a breach of contract claim.

[00:08:20] Speaker 01:
It's a claim for disallowance of cost.

[00:08:22] Speaker 00:
What is your best record site for what you contend the claim is?

[00:08:26] Speaker 00:
Is there some place in the record I could look at and see what you contend the claim is?

[00:08:32] Speaker 01:
I'll have to, I don't have that handy, but it is,

[00:08:38] Speaker 01:
I don't have that.

[00:08:39] Speaker 00:
Maybe when you get back up.

[00:08:41] Speaker 03:
Inceptionally, though, would it be the contracting officer's notice to you?

[00:08:46] Speaker 03:
Yes.

[00:08:46] Speaker 03:
That's what it would be?

[00:08:47] Speaker 01:
It's the November 30, 2018 claim by the contracting officer disallowing costs.

[00:08:55] Speaker 03:
Because I've had a hard time with trying to figure out what the claim is here and trying to figure out how we decide what the claim is.

[00:09:06] Speaker 03:
Would we just go back to that document to understand what the claim is?

[00:09:10] Speaker 03:
Or is there some legal analysis that you would undertake?

[00:09:12] Speaker 03:
Because there's no complaint here that we do, right?

[00:09:16] Speaker 01:
Right, right.

[00:09:16] Speaker 01:
Because under the Contract Disputes Act, the government, when the government's the claimant, the contract officer issues a final decision declaring money owed back to the government.

[00:09:25] Speaker 01:
It's a monetary claim.

[00:09:27] Speaker 00:
So is it JA1107?

[00:09:29] Speaker 00:
Is that what you're saying is the correct description of the claim in your opinion?

[00:09:37] Speaker 01:
I think that's right.

[00:09:44] Speaker 01:
Yes.

[00:09:46] Speaker 01:
Yes, that is the claim letter at 1107.

[00:09:49] Speaker 03:
And what is there in that claim letter?

[00:09:53] Speaker 03:
that indicates that it's a claim for something that could have been presented back in 2009, 2010.

[00:10:01] Speaker 03:
I don't think there's any reference to the ICPs.

[00:10:07] Speaker 03:
It just seems to be we've audited what you just recently gave us, doesn't even complain that it's so late, and just says here's our analysis of what you gave us.

[00:10:18] Speaker 01:
But this claim is the government unilaterally establishing STIs indirect rates, which, again, under the FAR, they had the right to do.

[00:10:25] Speaker 01:
On July 1 of 2009, they had the right to do that.

[00:10:29] Speaker 03:
How do we conclude it's unilateral?

[00:10:32] Speaker 03:
It's clearly in response to your submission, is it not?

[00:10:35] Speaker 04:
It's an adjustment, not a unilateral.

[00:10:39] Speaker 04:
establishment.

[00:10:40] Speaker 01:
There was no mutual agreement here on JA1107.

[00:10:43] Speaker 04:
Well, there doesn't have to be a mutual agreement.

[00:10:46] Speaker 04:
But you have proposed rates that were based upon documentation.

[00:10:50] Speaker 04:
You submitted that documentation.

[00:10:52] Speaker 04:
The government rejected some of it and said, we're adjusting the rates.

[00:10:57] Speaker 04:
This is a rate adjustment, not a breach of failure to provide documentation.

[00:11:03] Speaker 04:
I'm just a little confused by your whole argument here.

[00:11:08] Speaker 01:
When a contractor bills an indirect rate, let's say the provisional rate is 50 percent, and the government says, you know, okay, they look at the documentation and they say, we're going to set it at 45 percent, and that difference, that five percent, that's the claim, that's the monetary claim, that's the amount that they're disallowing here.

[00:11:25] Speaker 01:
Yeah, they didn't get the documentation here.

[00:11:27] Speaker 01:
Right, but they don't need it.

[00:11:29] Speaker 04:
They don't need it, but they can wait for it.

[00:11:32] Speaker 04:
You're saying they can't wait for it.

[00:11:35] Speaker 04:
Once you've reached the contract by not providing the documentation, their time period starts running.

[00:11:42] Speaker 04:
They can't wait for you to supply actual supporting evidence.

[00:11:46] Speaker 04:
This is a dramatic, remarkable rule for contract administration for the hundreds of thousands of government contracts across the country with busy contracting officers and things like that.

[00:11:57] Speaker 04:
If somehow they have to set up a ticker system to say, oh, well, they were supposed to give us this on this day.

[00:12:02] Speaker 04:
If we don't get it, then we need to do something.

[00:12:05] Speaker 04:
Otherwise, we're going to be lost out.

[00:12:07] Speaker 04:
I mean, again, you acknowledge, I think, that if you hadn't submitted these and you'd submitted

[00:12:12] Speaker 04:
Documents seven years later that showed you clearly weren't entitled to almost anything that the taxpayer would be still stuck, right?

[00:12:21] Speaker 01:
Yeah, that's that's right, but but but under that under that snare like a pretty remarkable argument But I would I would argue that the reason that the outline you just you just described is remarkable that there's no limiting principle I mean why would it conquer the limiting principle is once you submit documentation that

[00:12:37] Speaker 04:
The government has six years to audit it and determine whether it supports it or not.

[00:12:41] Speaker 04:
If the government awaited more than six years after you submitted the documentation, then yes, it doesn't have the right to bring up that anymore.

[00:12:50] Speaker 04:
But again, if we determine, and I'm sorry, I'm taking away into your bottle, I restore most of it.

[00:12:55] Speaker 04:
But if we see these as two different things, I don't see what the, your point about the endless delay doesn't really hold out.

[00:13:02] Speaker 04:
If we see these as two distinct acts, both of them have a six year statute of limitations, right?

[00:13:08] Speaker 01:
Right.

[00:13:09] Speaker 01:
But I would say that a contractor has no... Why would a contractor ever comply?

[00:13:14] Speaker 01:
I mean, a contractor would hold that indefinitely.

[00:13:15] Speaker 01:
There's no... The government can't force the contractor to produce documentation.

[00:13:19] Speaker 04:
Well, no.

[00:13:20] Speaker 04:
And then the government would pay you whatever rates you would ask for in the beginning of the contract.

[00:13:24] Speaker 04:
And maybe they're right and maybe they're not.

[00:13:26] Speaker 04:
That's the government's choice.

[00:13:27] Speaker 04:
But once you submit documentation, why can't they audit it?

[00:13:31] Speaker 01:
They can audit it.

[00:13:33] Speaker 01:
And I just want to be clear.

[00:13:34] Speaker 01:
In this case, DCAA audited it in time.

[00:13:36] Speaker 04:
And DCAA basically... Yeah, but that argument doesn't get you anywhere.

[00:13:38] Speaker 04:
Because again, if they're allowed to wait for the documentation, then they're within the six years here.

[00:13:45] Speaker 03:
Correct.

[00:13:46] Speaker 03:
Can I come back to you seem to... You've acknowledged the claim is where Judge Cunningham pointed you to.

[00:13:53] Speaker 03:
It's the letter from the contracting officer.

[00:13:55] Speaker 03:
You seem to want us to find that that was nonetheless

[00:13:59] Speaker 03:
a unilateral determination by the government.

[00:14:03] Speaker 03:
How would we assess?

[00:14:04] Speaker 03:
Do you have some authority for why we would view that as unilateral as opposed to perhaps a rate adjustment?

[00:14:11] Speaker 01:
I would say that they're the same thing.

[00:14:15] Speaker 01:
It's a unilateral rate adjustment.

[00:14:18] Speaker 01:
It's effectuated by adjusting the rates and unilaterally setting the rates.

[00:14:22] Speaker 04:
How does the text of that document even suggest that?

[00:14:24] Speaker 04:
The document doesn't say, you failed to submit these documents, so we're going to establish the rates as x. It just goes through and looks at the documents it did submit and say, some of this is overstated.

[00:14:36] Speaker 04:
We're reducing your rates.

[00:14:38] Speaker 04:
Again, two different things.

[00:14:40] Speaker 01:
Right, right.

[00:14:40] Speaker 01:
But ultimately, the problem is there's an obligation to, when did the government should have known of a claim?

[00:14:47] Speaker 01:
Where's the reasonable diligence?

[00:14:49] Speaker 01:
And that's a major part of this appeal, is that the government slept on their rights.

[00:14:53] Speaker 01:
They did nothing.

[00:14:54] Speaker 01:
And I think the idea of this waiting around 20, 30 years.

[00:14:56] Speaker 01:
I think we have that argument, too.

[00:14:59] Speaker 04:
Thanks.

[00:14:59] Speaker 04:
I'll restore all your rebuttal.

[00:15:00] Speaker 04:
We have a lot of questions.

[00:15:01] Speaker 04:
Let's hear from the government.

[00:15:04] Speaker 02:
Thank you, Your Honor.

[00:15:05] Speaker 02:
Please, the court.

[00:15:06] Speaker 02:
This court should affirm the board's decision rejecting SCI statute of limitations argument.

[00:15:12] Speaker 02:
Because as the board concluded, the government neither knew nor should have known of its claim more than six years before it issued the contracting officer's final decision.

[00:15:20] Speaker 00:
Council, do you agree Appendix 1107 presents the claim?

[00:15:24] Speaker 02:
I'm sorry, Your Honor?

[00:15:25] Speaker 00:
Do you agree that Appendix page 1107 presents the government's claim?

[00:15:30] Speaker 02:
I'm sorry, Your Honor.

[00:15:31] Speaker 02:
Do I agree that?

[00:15:32] Speaker 00:
Can you open up your appendix to page 1107 and tell me whether or not you agree with what opposing counsel said that that presents your claim?

[00:15:41] Speaker 02:
Yes, the contracting officer's final decision represents the government's claim.

[00:15:47] Speaker 02:
Yes.

[00:15:48] Speaker 03:
So when could you have first brought that claim?

[00:15:51] Speaker 02:
Well, Your Honor, because that claim is entirely based off of the government's audit of STI's indirect cost proposal, ICP for short, and that ICP was submitted in July 2014, the government could not have brought that claim until after it conducted the audit of that document.

[00:16:13] Speaker 03:
Was there some claim you could have brought back in 2009, 2010, the day after they failed to timely submit the ICPs?

[00:16:23] Speaker 02:
Possibly, Your Honor, maybe.

[00:16:24] Speaker 02:
That's unclear, I think, from the fact.

[00:16:27] Speaker 03:
Why do you say maybe?

[00:16:28] Speaker 03:
There's, I think, a clear contractual provision that required them to submit it within six months of the end of their fiscal year.

[00:16:35] Speaker 02:
And I think what Your Honor is getting to is, I think, what's at the heart of maybe some of the dispute here and what you were exploring with SGI's counsel.

[00:16:45] Speaker 02:
And that is that there are two distinct types of claims here, as Your Honor has recognized.

[00:16:49] Speaker 02:
The first is,

[00:16:51] Speaker 02:
which I think SCIS counsel may be arguing for more.

[00:16:56] Speaker 02:
And that is a failure to submit an ICP or documentation at all.

[00:17:01] Speaker 04:
And the government has a right to remedy that after six months, right?

[00:17:06] Speaker 02:
Correct, Your Honor.

[00:17:08] Speaker 02:
Assuming that under the facts of this case, it's unclear as to whether or not the government knew or should have known that the ICPs were due at that date.

[00:17:18] Speaker 04:
But that's a difficulty.

[00:17:20] Speaker 04:
You're not going to get very far with that argument.

[00:17:21] Speaker 04:
you know, they had a contractual obligation to do that.

[00:17:24] Speaker 04:
You have a contracting officer, and probably a contracting officer is representing a monitor in this, so they should know that the things weren't submitted on time.

[00:17:32] Speaker 04:
But the question is, what action could you have taken if that happened?

[00:17:39] Speaker 02:
Under the FAR, I think as Your Honor has recognized, it's within the government's, the government may set unilateral rates if that happens.

[00:17:49] Speaker 02:
But here we have an intervening event of the submission of the ICPs in July of 2014.

[00:17:55] Speaker 02:
And once STI submitted those, its ICPs in July of 2014, the government has a right to audit those and make determinations as to allowability of costs,

[00:18:05] Speaker 02:
and do the things that the government does when it audits an ITP.

[00:18:09] Speaker 04:
Let me ask you hypothetically if a contractor doesn't submit

[00:18:14] Speaker 04:
the supporting cost.

[00:18:16] Speaker 04:
And the government doesn't catch it for over six years, and then you try to unilaterally set the rates.

[00:18:22] Speaker 04:
Would you agree that the government would be barred then, assuming no fraud and everything?

[00:18:26] Speaker 02:
I agree with you that that's a closer call.

[00:18:29] Speaker 02:
I think, like anything else, the facts of each case come into play.

[00:18:33] Speaker 02:
I don't know if there's necessarily a bright line rule.

[00:18:36] Speaker 02:
that would apply there.

[00:18:37] Speaker 02:
I think that under the far definition of claim approval, I think there would still need to be a factual analysis.

[00:18:43] Speaker 04:
Let's just assume the government should have known, once they didn't submit them, that they had preached the contract.

[00:18:50] Speaker 04:
And you waited over six years to address that breach.

[00:18:53] Speaker 02:
You'd be out, right?

[00:18:57] Speaker 02:
Right.

[00:18:58] Speaker 02:
Well, I think that, again, I agree with that hypothetical that if there was a determination by the board or the court that the government should have known that the ICP should have been submitted by a certain date and they weren't, I think that probably begins the accrual of that claim.

[00:19:17] Speaker 04:
And if the contractor submits supporting documentation whenever and the government waits more than six years to audit it,

[00:19:26] Speaker 04:
And again, assuming you should have known that these documents had been submitted, you'd be out on the kind of claim adjustment based upon those documents as well, right?

[00:19:36] Speaker 02:
Again, Your Honor, I don't think there's a bright line rule and facts come into play.

[00:19:41] Speaker 02:
And I understand, Your Honor.

[00:19:42] Speaker 04:
On behalf of the government, I'm just asking hypotheticals.

[00:19:45] Speaker 04:
If they submitted these supporting documents,

[00:19:48] Speaker 04:
and you had taken more than six years to issue a final decision saying these don't support your stuff, you'd be out.

[00:19:54] Speaker 02:
I'm not trying to argue it.

[00:19:57] Speaker 02:
But if it was determined that, based on the ICP itself, that the government should have known that certain costs weren't allowable, et cetera, et cetera, then yes.

[00:20:06] Speaker 02:
And I think that the board cases recognize that, that the factual circumstances can vary and impact

[00:20:16] Speaker 02:
when the claim of parole begins.

[00:20:19] Speaker 04:
But here, the contracting officer's decision is within six years of them submitting the support documentation.

[00:20:26] Speaker 02:
That's correct, Your Honor.

[00:20:28] Speaker 02:
And that, in sum, Your Honor, is why the government's claim was brought within the statute of limitations.

[00:20:36] Speaker 03:
How do we assess what you contend is a material difference in the claim that was brought in the contracting officer's letter?

[00:20:46] Speaker 03:
and the claim that I think you've conceded the government could have brought on the day that the ICPs were not filed when they were on time.

[00:20:54] Speaker 03:
Well, you know, I disagree that we've conceded that in that I think that there's still a factual analysis that... So you don't concede that you could have unilaterally set the rates on the day after they didn't submit the ICPs?

[00:21:09] Speaker 02:
Well, I think that based on the... I still think that there would be required a factual analysis as to whether or not

[00:21:18] Speaker 03:
the government knew or should have known that the ICPs... Could you have conducted an audit as soon as the day after the ICPs were untimely?

[00:21:27] Speaker 03:
Did you have the right to do that?

[00:21:28] Speaker 02:
I think the FAR provides the government, I think it's a general right to audit a contractor's

[00:21:36] Speaker 03:
documentation yes all right so come back to my other question if we have to reach the question of whether the claim presented in that appendix site the contracting officer's letter is different than the claim you could have brought

[00:21:52] Speaker 03:
years earlier when the ICPs were untimely.

[00:21:56] Speaker 03:
How do we go about analyzing whether they're different?

[00:21:58] Speaker 02:
Is it whether it's unilateral or whether it's rate adjustment or what do we... I think the board went through in its opinion and went through and analyzed the costs that the government was questioning and I think the board did a pretty good job of laying out that

[00:22:17] Speaker 02:
the government's claim was based on an audit of the ICP.

[00:22:28] Speaker 03:
But it was ultimately to recover costs that the government should not have paid, which is something that potentially could have been determined years earlier when the ICPs were not running.

[00:22:41] Speaker 02:
And I know that STI focuses on that.

[00:22:44] Speaker 02:
I think that's, in part, confusing a remedy with what the claim is.

[00:22:49] Speaker 02:
The claim here is for it

[00:22:52] Speaker 02:
is based on an audit of documentation.

[00:22:57] Speaker 02:
And the government did not have that documentation.

[00:22:59] Speaker 03:
All right.

[00:23:00] Speaker 03:
Well then, Judge Hughes, I think, correctly pointed out some of the scary implications of STI's position.

[00:23:06] Speaker 03:
But I'm nervous about the implications of your position.

[00:23:09] Speaker 03:
The way STI writes it is that if we were to affirm your view makes the government a completely passive actor in the face of a contractor's breach,

[00:23:20] Speaker 03:
preventing the government from asserting its claims unless and until the contractor decides to act against its own interests by untimely filing these ICPs if the government never asked for.

[00:23:30] Speaker 03:
Aren't they right?

[00:23:33] Speaker 02:
Well, I think this is a unique situation, first of all, Your Honor, in that because STI was

[00:23:43] Speaker 02:
My understanding is because STI was new to the DCMA system, it wasn't part of their contract.

[00:23:55] Speaker 03:
I doubt it's unique given the large number of government contractors there are.

[00:24:00] Speaker 03:
Maybe it's rare.

[00:24:01] Speaker 03:
But it seems like if we were to affirm the board, we've created a roadmap for contractors to just silently not give the government the documents that it needs and hope that the government overlooks it.

[00:24:13] Speaker 03:
And then they have no incentive whatsoever to come forward with those documents because they're giving the government a claim that otherwise the statute is run on.

[00:24:21] Speaker 02:
Your Honor, I agree that theoretically that could happen.

[00:24:26] Speaker 02:
Practically speaking, I don't think it's that likely to happen.

[00:24:31] Speaker 02:
For the most part, based on the systems that the government has in place, these types of deadlines are caught and accounted for.

[00:24:43] Speaker 02:
And as a practical matter, the government and contractors, again, as a general matter, usually work together in terms of when contractors need extensions on these deadlines, they work with the government in procuring those extensions.

[00:25:00] Speaker 02:
And even when they missed those extensions, for example, just factually the double shot case that before the ASPCA that we cite in our briefs, in that case the contractor requested two extensions which were granted and then still blew the deadline.

[00:25:18] Speaker 02:
And in that case, the government made a demand for the ICP and it was submitted.

[00:25:25] Speaker 04:
hypothetical your honor that I mean I mean the government has doesn't have to wait for the supporting data right if it's late they have a right system that do unilateral rates at least within the six-year statute of limitations correct if they if they realize that the documentation is late so they can make it demands it contractors parade of portables is kind of tempered by that you at least have some ability do you have any other

[00:25:55] Speaker 04:
abilities to address Deficient performance on a contract other than just auditing the rates or setting rates if they breach the contract It with respect to failure to submit that relevant document or I'm sorry adequate documentation your honor I mean isn't that grounds for all kinds of

[00:26:15] Speaker 04:
you know, pure notices and defaults and stuff like that if they're not complying with contractual.

[00:26:20] Speaker 02:
Exactly, and that's exactly what I was going to get to.

[00:26:22] Speaker 02:
And I think that's the remedy that, you know, the government obviously has the ability to

[00:26:30] Speaker 02:
to issue a show of cause notice, telling the contractor that it's in risk of breach of the failure to submit an ICP.

[00:26:37] Speaker 02:
And if the contractor declines to issue an ICP, then the government could pursue a breach of contract claim against the contractor.

[00:26:46] Speaker 03:
Can I make sure I understand your answer to Judge Hughes?

[00:26:49] Speaker 03:
The government could unilaterally accept the rates on the day after the ICP is untimely, or it could not?

[00:26:56] Speaker 02:
Well, Your Honor, I think that's

[00:26:59] Speaker 02:
I think that's certainly what STI is, I think that's what their argument is.

[00:27:05] Speaker 03:
I think that's what you just conceded to Judge Hughes.

[00:27:07] Speaker 03:
That's why I want to make sure I understand.

[00:27:08] Speaker 02:
As a practical matter, I don't think that's what the government.

[00:27:16] Speaker 04:
Can you just divorce yourself from the facts of this case?

[00:27:19] Speaker 04:
Does the FAR allow you

[00:27:21] Speaker 04:
once they fail to meet their deadline to submit these supporting costs, assuming you knew or should have known, don't get hung up on that, can the government unilaterally set the rates?

[00:27:32] Speaker 02:
I think the FAR provides, Your Honor, that if a contractor fails to or refuses to submit supporting documentation to support its costs, that the government has the right, the ability, but it's not required, to set unilateral rates.

[00:27:47] Speaker 04:
That's a long yes, then.

[00:27:50] Speaker 02:
Yes.

[00:27:50] Speaker 02:
Yes, Your Honor.

[00:27:51] Speaker 02:
I believe that's what the FAR provides.

[00:27:52] Speaker 04:
Your position is that they can, but they don't have to.

[00:27:54] Speaker 02:
Correct.

[00:27:54] Speaker 02:
They can, but they don't have to.

[00:27:56] Speaker 00:
So if we agree that the applicable claim was the 2014 claim, do you agree you don't have to reach the issue of the validity of the regulation?

[00:28:05] Speaker 02:
Yes, Your Honor.

[00:28:08] Speaker 02:
Yes.

[00:28:09] Speaker 03:
Can I ask you about the validity of the regulation in case we do reach it?

[00:28:13] Speaker 03:
Under the Supreme Court's analysis and wrote Kiske and some of the other cases that are cited, hasn't the Supreme Court given us guidance that we should not be writing discovery rules into statutes of limitations that clearly do not have them there?

[00:28:32] Speaker 03:
At least Congress didn't write them into the statute of limitations.

[00:28:35] Speaker 02:
Not necessarily.

[00:28:37] Speaker 02:
Obviously, here we have a regulation in the FAR that defines what a corral means.

[00:28:43] Speaker 03:
Right.

[00:28:44] Speaker 03:
Congress didn't put a discovery rule into the statute of limitations when they amended the CDA, correct?

[00:28:51] Speaker 02:
Correct.

[00:28:51] Speaker 02:
Congress didn't define what a corral meant in the CDA.

[00:28:55] Speaker 03:
And so why isn't that an unambiguous statute

[00:29:00] Speaker 03:
Congress knew how to put exceptions to the six-year limitation in.

[00:29:05] Speaker 03:
They have one there for fraud.

[00:29:07] Speaker 03:
They don't have one in what we call the discovery rule.

[00:29:10] Speaker 03:
So isn't it wrong for the FAR Council to write that in and for us to bless that?

[00:29:18] Speaker 02:
No, I don't think that's the case, Your Honor.

[00:29:20] Speaker 02:
First and foremost, I think that

[00:29:24] Speaker 02:
decades of precedent from this court.

[00:29:29] Speaker 03:
There's not a single case, or if there is, please tell me, where the validity of that discovery role part of the definition of accrual from afar has been challenged or questioned in this court.

[00:29:42] Speaker 03:
We don't have any binding decision on that, do we?

[00:29:44] Speaker 02:
It's not clear from the case law, Your Honor, that that specific question has ever been posed to the court.

[00:29:49] Speaker 02:
But I think what is clear is, going back almost, well, 30 plus years, that the court has found that precedent elaborates that whether and when a CDA claim accrues is determined in accordance with the FAR, the conditions of the contract, and the facts of the particular case.

[00:30:09] Speaker 02:
And I don't think that the cases that SCI sites, Rotiski, and Gabelli, and Menemonee Indian tribe

[00:30:23] Speaker 02:
affect that.

[00:30:24] Speaker 02:
Those cases are in different contexts, with different statutes, with different language.

[00:30:30] Speaker 02:
Rotitsky, specifically, their Congress specifically worded the statute of limitations to run within one year from the date on which the violation occurs.

[00:30:47] Speaker 02:
So there, they were very specific as to the time period in which a claim had to be brought.

[00:30:53] Speaker 02:
They stayed away from the language of accrual itself.

[00:31:00] Speaker 02:
I don't think that there's any there.

[00:31:01] Speaker 04:
Thank you.

[00:31:02] Speaker 04:
I think we have that argument.

[00:31:03] Speaker 04:
You have passed your time.

[00:31:05] Speaker 02:
OK.

[00:31:05] Speaker 02:
Thank you, Ryan.

[00:31:12] Speaker 01:
Thank you, Your Honor.

[00:31:13] Speaker 01:
I'd like to first just turn the Court's attention to JA 1110 and also back to 1107.

[00:31:20] Speaker 01:
In both places, the claim references the contracting officer, I am disallowing certain indirect costs and unilaterally establishing the rates as follows.

[00:31:29] Speaker 01:
The first page of the claim references unilaterally establishing STI's final indirect rates.

[00:31:34] Speaker 01:
That is exactly what the government had the power to do.

[00:31:38] Speaker 01:
July 1 of the two years that issue here.

[00:31:41] Speaker 01:
And even though the FAR didn't say he had to, the case law that we've discussed, if the government knows it has an injury... I get that language, but there's two different things here.

[00:31:54] Speaker 04:
Like, what you say the government could have done when it established unilateral rates would have just been to look at the rates and say, well, we're going to cut them by 25% or 50% or whatever.

[00:32:04] Speaker 04:
not cut them by specific amounts based upon your documentation.

[00:32:08] Speaker 04:
That wasn't available to them after you failed to submit, right?

[00:32:13] Speaker 01:
Right, right.

[00:32:14] Speaker 01:
The exact numbers in here would not have been available, but I think, and this is an important point, this gets into the case law where, just because you don't know the details, the details come out in discovery.

[00:32:24] Speaker 01:
I mean, a claimant can bring an action.

[00:32:26] Speaker 01:
They know they're injured.

[00:32:27] Speaker 01:
If there's a breach, you know there's been an injury.

[00:32:30] Speaker 01:
The claim has arisen.

[00:32:32] Speaker 01:
It's accrued.

[00:32:34] Speaker 01:
The actual amount changes in litigation.

[00:32:37] Speaker 01:
I would compare that to sort of a traditional litigation case where, OK, the government maybe could not have come up with this exact same chart here of the exact numbers because they didn't have information from them.

[00:32:48] Speaker 04:
In fact, it would have been impossible for them because you didn't submit them the information that allowed them to audit it.

[00:32:53] Speaker 01:
Right.

[00:32:54] Speaker 01:
Well, I mean, they could have guessed.

[00:32:56] Speaker 01:
But right.

[00:32:56] Speaker 04:
I mean, you want to focus in on the words about unilateral.

[00:32:59] Speaker 04:
But what they're doing is you establish your indirect rates in your contract.

[00:33:06] Speaker 04:
And you have the proposals and whatever.

[00:33:08] Speaker 04:
And then after you submit that information, they are adjusting that based upon your information.

[00:33:14] Speaker 04:
You don't get a, you know, there's not any further negotiations.

[00:33:18] Speaker 04:
So it's unilateral in that sense.

[00:33:20] Speaker 04:
But you've submitted information that allows adjustment.

[00:33:24] Speaker 04:
But it's not just unilaterally submitting them without any information, which is what they would have done without the information.

[00:33:32] Speaker 01:
Right.

[00:33:33] Speaker 01:
But I don't believe that the submission of the proposal is an intervening event that somehow resets the statute of limitations.

[00:33:40] Speaker 01:
I mean, the government has an injury.

[00:33:42] Speaker 01:
If a claim accrues and exists here, the government could bring their claim.

[00:33:45] Speaker 01:
It doesn't reset five years later when they email STIs and say, hey, we don't see a copy of your proposal, which

[00:33:52] Speaker 01:
had been prepared, and they emailed it back in right away.

[00:33:56] Speaker 01:
That leads to this situation where STI is getting a claim 10 years, 11 years after these costs were incurred.

[00:34:04] Speaker 01:
I think an important point in the record, the ACO, the Administrative Contracting Officer.

[00:34:09] Speaker 04:
But the claimant, the final decision itself is within six years of when you submitted these costs.

[00:34:16] Speaker 01:
That's right.

[00:34:16] Speaker 04:
I mean, if you wanted a quicker decision on your rate proposal, you could have submitted the costs on time.

[00:34:22] Speaker 01:
Right.

[00:34:22] Speaker 01:
And we obviously didn't appeal that part of the decision.

[00:34:25] Speaker 04:
Right.

[00:34:27] Speaker 04:
You're saying that the government had the ability to hurry this along, but you did too.

[00:34:32] Speaker 01:
Right.

[00:34:34] Speaker 01:
And I understand that we didn't appeal the factual termination, but we presented evidence that SCI did submit them, and the board disagreed.

[00:34:42] Speaker 01:
But I think it's important that the administrative contracting officer testified that DCMA would know

[00:34:50] Speaker 01:
that the proposal was due on July 1.

[00:34:52] Speaker 01:
They would know whether it was submitted.

[00:34:54] Speaker 01:
And I don't see how any of the existing case law that suggests that claimants cannot sleep on their rights, that the government has to do nothing.

[00:35:02] Speaker 01:
Because right now, in this record, the government did nothing for five years.

[00:35:06] Speaker 01:
Can you come back to the parade of horribles?

[00:35:08] Speaker 03:
I'm trying to understand how likely it is.

[00:35:11] Speaker 03:
I express the concern to government counsel that if we affirm

[00:35:16] Speaker 03:
Contractors will now have an incentive or clear path not to comply with their contracts and provide the documents to be audited Is is there any basis in reality for that concern or is there not?

[00:35:28] Speaker 01:
Yes, and I know you also sort of you sort of had a follow-up question on that point as well that I think I think

[00:35:34] Speaker 04:
Do you realistically think government contractors that want to bid on repeated contracts and be qualified for repeated contracts are going to intentionally sandbag to get inflated overhead costs?

[00:35:47] Speaker 04:
I mean, it's going to come out in performance evaluations.

[00:35:49] Speaker 04:
They're going to get defaulted.

[00:35:50] Speaker 04:
They have a lot of incentives not to do that, don't they?

[00:35:54] Speaker 01:
Right.

[00:35:54] Speaker 01:
But I want to be clear.

[00:35:55] Speaker 01:
The reason we made that point was it was to counter the government's argument that the claim could not be submitted.

[00:36:03] Speaker 01:
I mean, in other words, the issue is they've taken the position that the government was not permitted to bring their claim until we acted.

[00:36:12] Speaker 01:
That's sort of what we're challenging.

[00:36:13] Speaker 01:
We're saying that.

[00:36:13] Speaker 04:
Well, I think the government, that's not quite what they're saying.

[00:36:16] Speaker 04:
They're saying that they can't bring a claim upon the audited cost until you submit the cost, which obviously makes sense, because if you haven't submitted the supporting documents, they can't do the audit and bring that claim.

[00:36:28] Speaker 04:
I think they acknowledged, maybe reluctantly, that they had

[00:36:32] Speaker 04:
a remedy before you submitted those things, but those are two different things.

[00:36:36] Speaker 04:
Or if we see them as two different things, then they're two different structural limitations.

[00:36:40] Speaker 01:
Yeah, and if I may just sort of take another... Yeah, but quickly, I didn't mean to go back into that.

[00:36:46] Speaker 01:
We understand your position.

[00:36:47] Speaker 01:
Okay.

[00:36:48] Speaker 01:
Do you have anything else?

[00:36:49] Speaker 01:
I just wanted to... To be on your extra time.

[00:36:51] Speaker 01:
Just to wrap up, the board, there was no consideration of the should have known.

[00:36:55] Speaker 01:
They applied a Brightline rule, and we requested the court reverse that.

[00:36:59] Speaker 01:
Thank you.

[00:37:01] Speaker 01:
Thank you.

[00:37:03] Speaker 04:
This is started.