Summary of Amicus Brief in Support of ATK Launch Systems
On July 20, 2009, FEI’s Committee on Government Business submitted an amicus brief in support of ATK Thiokol, Inc. (now ATK Launch Systems) asking the United States Court of Appeals for the Federal Circuit to affirm the decision of the Court of Federal Claims and deny the government’s appeal.
Whether ATK properly allocated certain development costs incurred for broad business base, and which could have had a beneficial relationship to more than one contract, as Independent Research and Development (IR&D), is the focus of the dispute between ATK and the government in the case.
Federal Acquisition Regulation (FAR) Part 31, the Cost Accounting Standards (CAS) and well-established precedent dictates that the costs of a technical or development effort, such as those at issue in the instant litigation, qualify as indirect costs where such costs are not “required in the performance of a contract.” Equally important, a “direct cost” is a cost that “is identified specifically with a particular final cost objective” or “is incurred specifically for the contract,” and one that has a “clear and exclusive” relationship with a contract.
ATK incurred the costs at issue here for the commercial market, and not specifically for the Mitsubishi contract. Upon review of the contract and surrounding circumstances, these costs represent ATK’s independent efforts to establish a product line independent of the Mitsubishi contract. As the costs were not “required in the performance of a contract,” the Court or Federal Claims appropriately treated them as indirect costs, consistent with the FAR, CAS and long-standing precedent.
The government’s interpretation of “required in the performance of a contract” ignores the regulatory system created by FAR Part 31 and CAS within which the definition operates. Instead, the government argues the instant case from a strained interpretation of regulatory history and rejection of directly pertinent case precedent. The government position would force the exception to swallow the rule, turning independent research and development with no clear relationship to one particular contract into a direct cost, contrary to the regulation’s plain language defining Independent Research and Development (IR&D) as indirect costs. In short, the government would treat as a direct those costs the CAS mandates contractors to treat as indirect.
Finally, the government’s position would have severe policy implications as it (a) contradicts Congressional and DoD IR&D policy; (b) would result in contractor loss of technical data rights under the relevant contract clauses (c) would result in a requirement for up-front government funding of all technical and development efforts on government contracts, a fiscal position that the government as avoided.
Quoted from, Section I of the Proposed Brief of the Committee on Government Business of Financial Executives International as Amicus Curiae in Support of Appellee ATK Thiokol, Inc.