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Arnold & Porter Scores Two Impactful CAS and FAR Rulings for Raytheon

August 27, 2015

WASHINGTON, DC, August 27, 2015 -- The Armed Services Board of Contract Appeals (ASBCA) recently issued a decision in favor of Arnold & Porter client Raytheon Company involving the application of critical regulations defining an "expressly unallowable cost" for purposes of penalties under the Federal Acquisition Regulations and compliance with Cost Accounting Standard 405. Arnold & Porter successfully disputed the government's expansive interpretation of the rules and monetary claims involving certain bonus and incentive compensation that the government alleged was expressly unallowable under a variety of cost principles, including those for advertising, lobbying and organization costs. According to the Board, none of these cost principles specifically named and stated bonus and incentive compensation as unallowable, and that general language such as "costs of" or "in connection with" did not qualify to meet the very restrictive definition of an "expressly unallowable cost."

Just six weeks earlier, the firm also successfully helped Raytheon overturn a longstanding government practice that had the effect of doubling its recovery on cost impacts under the CAS. That earlier case similarly addressed issues unresolved in a recent Boeing decision and the validity of a 2005 regulation that changed 40 years of accepted practice. Both decisions are precedential and, therefore, can be expected to have a significant impact on the government and industry.

Arnold & Porter's legal team for Raytheon is led by Paul Pompeo and includes Stuart Turner on one matter and, Lauren Schlanger on the other. The most recent case is cited as Raytheon Company, ASBCA Nos. 57576, 57679, 58290, __ BCA ¶ __ dated June 26, 2015, but not released until late July. The earlier case is cited as Raytheon Company, Space & Airborne Systems, ASBCA Nos. 57801, 57803, 58068, 15-1 BCA ¶ 36024 dated May 7, 2015, but not released until late June 2015. Each of these is a follow on case to decisions in 2013, wherein the ASBCA ruled in Raytheon’s favor regarding the application of the statute of limitations, which eliminated substantial portions of the governments claims in both cases, and which established precedential case law. Raytheon Co., ASBCA Nos. 57576, 57679, 13 BCA ¶ 35209 and Raytheon Co., Space & Airborne Sys., ASBCA Nos 57801 et al., 13 BCA ¶ 35319.

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