Metron, Inc.
Docket: ASBCA 56624, ASBCA 56751
Decision date: 2012-06-04

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeals of -­ ) 
) 
Metron, Inc. ) ASBCA Nos. 56624, 56751, 
) 56752 
Under Contract No. N00039-01-D-2202 et al. ) 
APPEARANCES FOR THE APPELLANT: Stephen D. Knight, Esq. 
Kathryn T. Muldoon, Esq. 
Smith Pachter McWhorter PLC 
Vienna, VA 
APPEARANCES FOR THE GOVERNMENT: E. Michael Chiaparas, Esq. 
DCMA Chief Trial Attorney 
Gregory T. Allen, Esq. 
Trial Attorney 
Defense Contract Management Agency 
Manassas, VA 
OPINION BY ADMINISTRATIVE JUDGE PEACOCK 
These timely appeals involve the reasonableness and allowability of executive 
compensation cost paid by Metron, Inc. (Metron or appellant) in 2004 and 2005. We 
conclude the costs were reasonable and allowable and sustain the appeals for reasons' 
detailed below. 
FINDINGS OF FACT 
A. Background 
1. The subject cost reimbursement or Time and Materials contracts were awarded 
to Metron, Inc. (appellant or Metron)by various agencies of the United States 
government. Each contract includes FAR 52.216-7, ALLOWABLE COST AND PAYMENT, 
as in effect on the date of award, which requires Metron to subnlit annual indirect rate 
cost propo~als and incurred cost submissions (referred to at times, herein, collectively as 
cost proposals). The affected contracts were entered into between 1997 and 2005. (R4, 
tabs 1 at 28, 6, attach. 1; app. supp. R4, tab 233 at G40). 
2. Metron develops solutions to command and control problems such as search, 
detection, tracking, central allocations and decision support, information processing, oral 
command and control, and advanced data fusion through· applied mathematics, physics, 
statistical analysis, and computer science. Among other things, it develops decision aids 

and simulation technology. Department of Defense agencies use Metron's teclmology 
for: tracking submarines or surface ships using passive acoustic information; missile 
defense tracking and detection; tracking and detection of terrorist activity within large 
volume transactional databases; physics-based modeling of buried mine detection' 
systems; mission planning; and force level modeling and simulation. Metron does not 
use "technology off the shelf' or existing technology (tr. 1/43). It produces computer 
software to (1) describe the solutions developed by Metron; and (2) process the data 
needed for the solutions in "real time." (Tr. 1/43-46, 56-57, 64-68, 77-78, 94-106, 
244-45; app. supp. R4, tab 201 at G 1846, 1856-83) 
3. In 2004 and 2005, Metron's primary customer base consisted of Department of 
Defense agencies (app. supp. R4, tab 201 at G 1845, 1860). The majority of the contracts 
at issue in this appeal were competitively negotiated. In connection with negotiatIon of 
Metron's R&D or Small Business Innovation Research (SBIR) contracts, the government 
typically performs a cost analysis or cost realism analysis. (Tr. 1/245-46, 2/242-43; 
app. supp. R4, tab 201 at G 1886) 
4. Metron has a flat organizational structure with few or no levels of intervening 
management between staff and executives. Its executives have technical responsibilities, 
business development responsibilities, and administrative responsibilities. (Tr. 1/139, 
2/246-48) The CEO, Chief Financial Officer (CFO), and Chief Operating Officer (COO) 
comprise the top layer. The next level down is the group level. A group consists of two 
or more divisions and is headed by a Group Manager. The third level is the divisional 
level. Each division is led by a Division Manager, supported by one or more Senior 
Engineers (now called Senior Managers). (Ex. A-6, attach. E-2) 
5. Dr. Thomas Corwin founded the firm in 1984 and'has served as Metron's 
Chairman of the Board, President, CEO, and Chief Technical Officer (CTO). He 
currently is Metron's COOlPresident and serves as Chairman of the Board. Since 
Metron's inception, Dr. Corwin has been responsible for its overall strategic direction and 
has played an integral role ingrowing Metron into an organizatiol~ of more than 100 
professionals. Dr. Corwin created and developed a large part of Metron's tracking and 
search technology. (Tr. 1/39-40) Dr. Corwin has a Bachelor of Science in Mathematics 
from Villanova University, a Master of Science in Statistics from Princeton University, 
and a PhD in Statistics from Princeton University. Before founding Metron, Dr. Corwin 
was a Vice President of Daniel H. Wagner, Associates (Wagner Associates). (Tr. 1/22-23, 
30-31; ex. A-I at 1) 
6. Dr. Lawrence D. Stone obtained a Bachelor of Science, Mathenlatics from 
Antioch College in 1964, a Master of Science, Mathematics, Purdue University, 1966, 
and a PhD, Mathematics, Purdue University, 1967. Dr. Stone is an expert in fusion and 
tracking (the science of keeping track of moving objects). He held a series of positions at 
Wagner Associates, from an associate to a senior associate to a Vice President. In 1986, 
he left Wagner Associates and joined Metron. Dr. Stone served as Metron's CEO during 
2 


2004-2009. From 1996-2003, Dr. Stone served as Metron's COO. Before that, Dr. Stone 
managed the Advanced Mathenlatics Applications Division. (Tr. 1/65,233-35; ex. A-I 
at 3) 
7. In addition to administrative and technical responsibilities, Division Managers 
have profit and loss responsibility. There is technical and fmancial cooperation among 
the divisions. Divisions may work together on proposals 'and projects. In 2004, Metron 
had two divisions:' Advanced Mathematics Applications and Operations Analysis and 
Simulation Sciences. In 2005, Metron created'the Systems & Analysis Division to 
support the business unit that Dr. Thomas Stefanick managed and developed in his role as 
a Senior Engineer. In 2005, Metron promoted Dr. Stefanick to Division Manager of the 
newly created division. Metron also pronloted Dr. Mifflin to Group Manager responsible 
for "East Coast Operation," consisting of the Advanced Mathematics and Systems & 
Analysis Divisions. (Ex. A-6, attach. E-2; tr. 1/76-77,250-52) 
8. As defined by appellarit, a business area or business unit within Metron is made 
up of one or more customers or types of problems in a technical area. A business unit is a 
"division in creation," not a profit and loss center. Senior Engineers Managers are 
responsible for '~he business units within the divisions. They are responsible for 
developing the sew business areas and building them into divisions. Division Managers 
generally conceiItrate on developing follow-on work for business units that they created 
. as Senior Managers. (Tr. 1/110-11, 249-52, 2/58, 110) Metron established the Senior 
Engineer position in 2000. Since then, the Metron Senior Engineer position has been 
included inthe Metron executive compensation plan. (App. supp. R4, tab 213; tr. 1/171) 
Metron Senior Engineers are responsible for managing multiple projects for a business 
area personally or through subordinates, as well as business development and recruiting. 
(Tr. 1/50-51, 53, 110-11) According to Dr. Corwin, the responsibilities ofMetron Senior 
Engineers are similar to those he had as a Vice President at Wagner Associates. 
Dr. Stone considers the Senior Engineer position to be equivalent to a Vice President. 
(Tr. 1/35, 50, 2/21-22, 100) 
9. Non-executive positions that perform technical work at Metron include 
Analysts, Senior Analysts, Software Analysts, and Senior Software Analysts. These 
personnel may at times function as proj ect or program managers and run proj ects 
assigned to them by a Metron executive. Metron' s growth strategy includes shifting 
people at the entry level and giving thenl a career path to participate at the highest levels 
of Metron. Metron generally does not hire individuals outside the company directly into 
executive positions. (Tr. 1/72-73, 111-12) 
10. Metron seeks to hire: (1) analysts with advanced degrees in mathematics or 
science; and (2) highly educated computer scientists. It attempts to attract and retain' 
executives with PhDs in mathematics or one ofthe hard sciences. Metron's technical 
staff consists of approximately 100 professionals. In 2005, approximately 60% ofthe 
.3 


technical staff held advanced degrees in mathematical and hard sciences. (Tr. 1/39-40, 
45,49,59-61,72-74; app. supp. R4, tab 201 at G1845, 1859, 1869, 1874-75) 
11. For most projects, the technical staff is required to hold security clearances. 
In 2005, approximately 61 % held a Top Secret or higher security clearance and 
approximately 30% held a Secret clearance. (App. supp. R4, tab 201 at G 1845) With the 
exception of the CFO position, all of Met ron's executive positions require a Top Secret 
or higher security clearance. Metron executives could not supervise projects or generate 
business without security clearances. The data needed are generally classified, as well as 
Metron's work product. Drs. Corwin and Stone and other Metron executives hold Top 
Secret/Sensitive Compartmented Information (SCI) clearances. To obtain a Top Secret 
or higher security clearance, Metron's executives must be U.S. citizens and meet other 
specific criteria. Only a limited talent pool meets Metron's criteria for executives relating 
to education, citizenship and ability to obtain and hold a Top Secret or higher security 
clearance. (Tr. 1/47-48,2/5-7,6/32-34; app. SUppa R4, tab 201 at G1845; ex. A-6 at 12) 
B. Metron's Executive Compensation Plan Generally 
12. Metron initiated an executive compensation plan dated 14 April 1995. The plan 
used the median Radford Executive Surveyor Radford Survey data to set base salary. 
(App. SUppa R4, tab 204 at M44233; tr. 1/133-37) The purpose of Metton's 1995 plan was 
"to attract and retain management employees and encourage them to strive for outstanding 
results in the operation of the company from year to year, by rewarding a limited number 
of senior management employees [who] made a significant impact on the success and 
profitability of the company" (tr. 1/135; app. SUppa R4, tab 204 at M44226). The basic 
formula of the 1995 plan (as well as later Metron executive compensation plans) provided 
for total compensation equal to base salary, plus profit based incentive compensation, plus 
goal-based incentive compensation. Using the Radford Survey, Dr. Corwin "tried to set 
base salary to be average and used incentive compensation to reward superior 
performance." (Tr. 1/133-37) 
13. Criteria for selecting a survey for a labor market analysis to determine the 
competitive value for similar j~bs in similar companies include: (1) reputation of the 
survey; (2) the degree to which the survey is representative of the particular industry; and 
(3) the degree to which a survey "truly represents the labor markets from which you hire 
people" (tr. 2/129; see also ex. A-6 at 7-8). Around 1995, Dr. Corwin performed a 
survey of Metron 's employees to identify companies with which Metron competed for 
talent and business. Dr. Corwin asked all Metron employees to identify their previous 
employers, offers they had received for other employment, and offers they had accepted. 
Dr. Corwin compared those companies to the Radford Survey participants. Dr. Corwin 
concluded that approximately 42% of Metron's competitors participated in the Radford 
Survey. (App. SUppa R4, tab 205 at M1238; see also tr. 1/142, 154) In addition, he fqund 
that the demographic breakdown (defined in terms of industry and geography) ofMetron 
competitors and Radford Survey participants is "proportionally indistinguishable. That 
4 


is, the demographic breakdown of the participants in the Radford Survey is statistically 
indistinguishable from the breakdown of Met ron competitors on the Radford survey." 
(App. supp. R4, tab 205 at M1239; see also tr. 1/141-46) 
14. Dr. Corwin submitted a memorandum to DCAA dated 15 November 1995, 
which included Metron' s justification for his proposed use of the Radford Survey to 
establish the allowability of Met ron's executive compensation during 1990-1993. In the 
15 November 1995 memorandum, Dr. Corwin concluded that the Radford Survey best 
reflected Metron's market for labor and business. The memorandum described 
Dr. Corwin's 1995 internal survey and provided a summary of the results, as well as the 
survey itself. (App. supp. R4, tab 205; tr. 1/152-60) The method outlined in Metron's 
15 November 1995 memorandum used the Radford Survey as the exclusive source for 
determing the reasonableness of Met ron's compensation. The 15 November 1995 
memorandum included Metron's draft compensation plan for 1996. The 1996 plan used 
Radford Survey data to calculate base salary and incentive compensation. The incentive 
compensation was based on the Radford Survey data and Metron's internal profit and 
revenue goals. (App. supp. R4, tab 205) Dr. Corwin performed this same analysis again 
in 1998 and 2005, with substantially the same results as those obtained from the 1995 
internal survey (tr. 1/149-50). 
15. Beginning January 1996, Metron submitted "Executive Compensation Reports" 
to the governnlent regularly (app. supp. R4, tabs 206-12). The Executive Compensation 
Report memoranda described Metron' s formula for calculating executive compensation 
using Radford Survey data for a given year and referred to the Metron reports made in 
previous years. Although the formula in the plan did not change significantly from year to 
year, the Radford Survey data used in Metron's formula changed. The goals regarding 
incentive compensation could also change. (Id.; tr. 1/162-70, 174-78) From 1995 to the 
present, Metron has paid its executives salary and bonus according to formulas 
substantially similar to the 1995 formula (app. supp. R4, tabs 205-12, 214-23; tr.1/167). 
C. Metron's 2004 and 2005 Executive Compensation 
16. Dr. Stone became CEO in 2004. He prepared the executive compensation plan 
for 2004 and 2005, at the beginning of the respective fiscal years. Dr. Stone's executive 
compensation plan for Metron' s executives was substantially similar to the plans that 
Dr. Corwin developed for 1995-2003. For 2004 and 2005, Metron's claimed compensation 
included base salary, bonus, and profit-sharing components (app. supp. R4, tabs 219-22). 
Metron does not provide long-term incentives to its executives (app. supp. R4, tab 224 
at 01550). Dr. Stone changed the parameters of the plan, however, to put greater emphasis 
on revenue goals. Dr. Stone wanted to motivate the executives to achieve 25% revenue 
growth in their unit and the plans for 2004 and 2005 included a bonus for executives whose 
units achieved 250/0 or higher revenue growth. Dr. Stone set base salary that approximated 
the average base salary figures from the 2002 Radford Survey in the under $50M revenue 
5 


range. The base salary did not change for the Metron executives for 2004 and 2005. 
(Tr.2/6-14) 
17. For 2004 and 2005, the bonus plan provided for executive bonuses above or 
below the Radford Survey average target bonus figures, depending on company revenue 
and profitability. Dr. Stone calculated total bonus for each Metron executive using a 
mathematical formula based on the sum of "revenue bonus" plus "profit bonus." 
Dr. Stone defmed "revenue bonus" and "profit bonus" by formulas. (App. supp. R4, 
tab 219; tr. 2/7-8) Metron's compensation structure provided that the two bonuses were 
interdependent. If the profit goal was not met, the revenue bonus could decrease. 
(Tr. 3/85-86) 
18. To calculate revenue bonus and profit bonus, Dr. Stone used average base 
salary and average targeted Total Cash Compensation (TCC) figures in the 2002 Radford 
Survey for each;position (tr. 2/7-8). Total Cash Compensation is equivalent to base 
salary plus short-term incentive (Le., bonus) (ex. A-6 at 6). In the Radford Survey, 
"targeted" figures are representative of what the survey participants are projecting to pay 
in a given year. "Actual" figures are representative of what actually occurred in a 
preceding year. (See tr. 3/51-52) 
19. Metron's "revenue"bonus at target" was one half the difference between the 
Radford Survey average targeted Total Cash Compensation and average base salary for a 
given position ..The other halfwas designated as "profit bonus" at target (tr. 2/7). The 
amount of revenue bonus each executive received for 2004 and 2005 was a linear 
function of the "revenue bonus at target." If the executive's unit exceeded the revenue" 
target for that unit, the executive would receive more than the "revenue bonus at target." 
Similarly, if the, unit did not achieve the revenue target, the responsible executive would 
receive less than "revenue bonus at target." (Tr.2/7-8) For 2004, the revenue target for 
Metron executives was a percent increase in revenue between 2003 and 2004. The target 
percent increase for the Advanced Mathematics Division was 13%, for the OASiS 
Division it was 20%, and for the' corporation it was 16.5% (app. supp.R4, tabs 220, 221 
at M5042; tr. 2/9). For 2005, the revenue target percent increase for all Metron 
"executives was 15% (app. supp. R4, tabs 220, 222 at M5029; tr. 2/13). 
20. For 2004 and 2005, the Metron executive bonus plan also provided that 
Metron executives could receive a "profit bonus" if the executive's unit met the profit 
goals set by the company (app. supp. R4, tabs 219, 220,221 at M5044, tab 222 
at M5029). The profit bonus for the Senior Engineers was based on the profit goals for 
the division (tr. 2/18). The profit bonus at target was roughly equivalent to the revenue 
bonus at target. As was the case for the revenue bonus at target, the profit bonus was at 
risk. If the unit managed by the executive did not achieve the profit goals set at the 
beginning of the year, the executive would receive less than the profit bonus at target. If 
the unit exceeded the pre-established profit goals, the executive could receive a profit 
bonus greater than the profit bonus at target. (Tr. 2/6-18)" 
6 
2 2" 22 L 12&2 :: 

21. In 2004 and 2005, Metron had revenues of $16.5M and $18.3M, respectively. 
Metron has undergone significant and continuous growth in revenues from 1985 to 2005. 
Between 1995 and 2005, Metron's compound annual growth rate was between 17% and 
240/0. (App. supp. R4, tab 201 at G1847) Between 2003 and 2005, Metron's revenues 
grew on average 17% annually from $13.3 million in 2003 to $18.3 million in 2005. 
From 2001 through 2005, the company had positive net income. (Tr. 1/62-63; app. supp. 
R4, tab 201 at GI892-94, tab·202 at M44155, tab 227 at G1423, tab 249 at G1764; 
ex. A-5 at 4) Metron's total revenue for its FY 04 was $16,460,930. For FY 05, its total 
revenue was $18,273,180. (App. supp. R4, tab 201 at 51, tab 202 at A-3) 
22. In the final indirect cost rate proposal for its FY 04, Metron sought 
reimbursement for the compensation paid to certain of its officers and employees in the 
following amounts: 
Chief Executive Officer Lawrence D. Stone $432,851 
Chief Operating Officer Samuel J. Brown, Jr. $365,126 
Division Senior Executive Thomas L. Mifflin $313,990 
Chief Financial Officer W. Darryl Martin $302,464 
Senior Engineer Jeff Jones $233,623 
Senior Engineer Thomas A. Stefanick $232,686 
Senior Engineer Jeff Monroe $210,108 
Senior Engineer Greg Godfrey $201,104 
Senior Engineer Michael Atamian $200,610 
(R4, tab 102 at 5; app. supp. R4, tab 225 at G 1448) 
23. In the final indirect cost rate proposal for its FY 05, Metron sought 
reimbursement for the compensation paid to certain of its officers and employees in the 
following amounts: 
Chief Executive Officer Lawrence D. Stone $404,045 
Chief Operating Officer Samuel J. Brown, Jr. $350,461 
Chief Technical Officer Thomas L. Corwin $233,469 
Director East Coast Operations Thomas L. Mifflin $318,961 
Chief Financial Officer W. Darryl Martin $274,776 
Division Senior Executive Thomas A. Stefanick $265,457 
Senior Engineer Jeff Jones $218,123 
Senior Engineer Jeff Monroe $207,179 
Senior Engineer Greg Godfrey $207,041 
Senior Engineer Michael Atamian $206,072 
(R4, tab 5 at 5; app. supp. R4, tab 250 at G 1601) 
7 

24. The following chart compares the compensation c~aimedwith the 50.th and 75th 
percentiles of the TCC reported by the Radford Survey for use in 20.0.4 and 20.0.5. The 
Radford figures do not include an allowance for pension or take into consideration a 
"range of reasonableness" as discussed below: 
Year 20.0.4 
Name Executive 
Position 
Claimed Total 
Compensation 
Radford Amount 
Under 75th 
Percentile50.
th 
75th 
Stone CEO $432,851 $376,30.0. $432,90.0. -$49 
Brown COO $365,126 $365~0.0.0. $397,60.0. -$32,474 
Mifflin DSE $313,990. $30.1,0.0.0. $375,20.0. -$61,210. 
Martin CFO $30.2,464 $222,50.0. $280.,0.0.0. 
$265,50.0. 
$22,464 
-$31,877Jones Senior Engineer $233,623 $252,30.0. 
Stefanick Senior Engineer $232,686 = $2 $265,50.0. -$32,814 
Monroe Senior Engineer $210.,10.8 $252,30.0. 
52,30.0. 
$265,50.0. -$55,392 
. Godfrey Senior Engineer $20.1,10.4 $252,30.0. $265,50.0. -$64,396 
Atamian Senior Engineer $20.0.,610. $252,30.0. $265,50.0. -$64,890. 
Total: -$320.,638 
Year 20.0.5 
Name Executive 
Position 
Claimed Total 
Compensation 
Radford Amount 
Under 75th 
Percentile50.th 75th 
Stone CEO $40.4,0.45 $40.0.,0.0.0. $499,30.0. -$95,255 
Brown COO $350.,461 $30.5,30.0. $426,10.0. -$75,639 
Mifflin Mgr East Coast 
Ops 
$318,961 $40.0.,10.0. $463,80.0. -$144,839 
Martin CFO $274,776 $252,60.0. $363,20.0. - $88,424 
Stefanick DSE $265,457 $294,10.0. $338,30.0. - $72,843 
Corwin CTO $233,469 $245,0.0.0. $350.,0.0.0. -$116,531 
Jones Senior Engineer $218,123 $256,50.0. $281,90.0. - $63,777 
Monroe Senior Engineer' $20.7,179 $256,50.0. $281,90.0. - $74,721 
Godfrey Senior Engineer $20.7,0.41 $256,50.0. $281,90.0. - $74,859 
Atamian Senior Engineer' $20.6,0.72 $256,50.0. $281,90.0. - $75,828. 
Total: -$882,716 
(App. br., Appx. D) 
D. DCAA's Audits 
25. DCAA conducted audits of Metron's final indirect cost rate proposals for its 
FY 0.4 and FY 0.5. The audit of the proposal for FY 0.4 was conducted by DCAA's 
Baltimore Branch Office; the audit for FY 0.5 was conducted by DCAA's Reston Branch 
8 

Office. For both audits, evaluations of the compensation of Metron's top-paid officers 
and employees were conducted by DCAA's Mid-Atlantic Region Compensation Team. 
(Tr. 5/8-9, 24-27; R4, tabs 5, 102)1 . 
26. For Metron's FY04, DCAA's audit report, dated August 29, 2007, questioned 
the following amounts of compensation for Metron officers and employees as 
unreasonable: 
/ 
Chief Executive Officer Lawrence D. Stone $16,387 
Chief Operating Officer Samuel J. Brown, Jr. $55,133 
Division Senior Executive Thomas L. Mifflin $103,791 
Chief Financial Officer W. Darryl Martin $73,416 
Senior Engineer Jeff Jones $85,407 
Senior Engineer Thomas A. Stefanick $84,469 
Senior Engineer Jeff Monroe $61,892 
Senior Engineer Greg Godfrey $52,888 
Senior Engineer Michael Atamian $52,394 
Total . $585,777 
(R4, tab 102) 
27. For Metron's FY05, DCAA's audit report, dated 5 December 2008, 
questioned the following amounts of compensation for Metron officers and employees as 
unreasonable: 
Chief Executive officer Lawrence D. Stone $49,354 
Chief Operating Officer Samuel J. Brown, Jr. $101,001 
Chief Technical Officer Thomas L. Gorwin $49,999 
Director East Coast Operations Thomas L. Mifflin $117,391 
Chief Financial Officer W. Darryl Martin $67,189 
Division Senior Executive Thomas A. Stefanick $68,566 
Senior Engineer Jeff Jones $44,222 
Senior Engineer Jeff Monroe $76,252 {' 
Senior Engineer Greg Godfrey $76,114 
Senior Engineer Michael Atamian $75,145 
Total $725,233 
(R4, tab 5) 
28. In performing the executive compensation reasonableness reviews of 
Metron's claimed compensation for its FY 04 and FY 05, DCAA conducted "market 
1 Because there is no substantial difference among these DCAA entities with respect to 
the costs in dispute, we refer only to DCAA hereafter. 
9 

pricing" of the positions being reviewed consisting of several steps. The first step was 
selecting compensation surveys that are appropriate for that review. The second step in 
market pricing was selecting the survey positions to be used as matches for the 
company positions being reviewed. A survey position match would be a job 
description in each of the surveys where the duties and responsibilities of the position 
being reviewed closely align with the duties and responsibilities as stated in the survey 
position. The next step was to determine the percentile of the compensation data set 
forth in the survey. DCAA used the median survey position as a starting point and an 
analysis was done to determine the fmancial performance of a company for a particular 
year. After carrying out these steps, DCAA derived a market price "total cash 
compensation," which is base salary plus short-term incentive bonus. For each position 
being reviewed, DCAA determined a market price total cash compensation using each 
of the surveys that have been selected. The values for each of the positions being 
reviewed from each of the compensation surveys utilized for total cash compensation 
were then averaged to calculate TCC for the position. Other elements of 
compensation-pension cost, for example--were market priced using specialty surveys 
for that type of compensation. As appropriate, the market priced amount for these other 
elements was added to the averaged total cash compensation. Finally, ten percent of the 
TCC plus pension amount determined for each position was added to account for a 
"range of reasonableness." DCAA policy, as set forth in the DCAA Contract Audit 
Manual (CAM), is to use a ten percent range of reason"ableness. (Tr. 5/15-24; R4, 
tabs 5, 102; CAM Ijf 6-414.4g(6) (Dec. 2009)) 
29. For both 2004 and 2005, DCAA selected the Radford Survey, the Watson 
Wyatt Data Services' Top Management Comp Calculator and Industry Report on Middle 
Management Compensation survey (Watson Wyatt), the Economic Research Institute 
(ERI) Executive Compensation Assessor survey, and the Washington Technical 
Professional Forum (WTPF) Compensation Survey Report .. The Radford, Watson Wyatt, 
and ERI surveys are national surveys. The WTPF is a regional survey oftechnology 
companies that are located in the Washington, D.C. area. DCAA used the WTPF survey 
because Metron had its headquarters in Northem Virginia, and had a large portion of its 
operations there in 2004 and 2005. For FY 05, it used the same surveys. (Tr.5/25-39; 
supp. R4, tabs 8, 12) 
30. For both the FY 04 and FY 05 reviews, DCAA selected the positions from the 
four surveys to match to the Metron positions under review. For matching the FY 04 
Metron positions to the Radford Survey, DCAA matched the Metron President/CEO, 
COO, and CFO to the Radford positions for those job titles. DCAA used what it 
determined to be 66th percentile of total cash compensation related to companies with 
under $50 nlillion in annual sales. DCAA matched the VP who was responsible for the 
Reston Federal Division to Radford's Division Senior Executive survey position at what 
it considered 41 st percentile of survey data because the division's sales were significantly 
lower than the average sales ofthe incumbents in the survey position. DCAA did not use 
the Radford Survey to match the five Senior Engineers for FY 04 because it could not 
10 


identify a Radford executive position that was an appropriate match for those jobs. 
DCAA disagreed with Metron' s matching the Senior Engineers to Radford's Strategic 
Business Unit (SBU) Executive position, particularly because it did not consider the 
Senior Engineers to be at the level of a vice president or higher, and they were not in 
charge of business units. DCAA concluded that the Senior Engineer positions were 
program or project managers operating in mid-level management positions. (Tr. 5/26, 37, 
45-56, 82-88,95-97; R4, tab 102 at 5; supp. R4, tabs 8, 19 at G001549, tab 25 at 
METRON-0000560) . 
E. Experts 
31. Christopher McGee is a partner in Mercer, the largest human resources 
consulting firm in the world (tr. 3/21). Mr. McGee has a Bachelor of Arts in Business 
Management from Catholic University. He has been in the human resources consulting 
field for over 25 years. Mr. McGee joined Mercer in 2005. He was previously employed 
by Arthur Andersen and Ernst & Young. Mr. McGee currently manages the Mercer 
Baltimore/Washington compensation practice. His practice serves a number of 
government agencies, quasi-government agencies, and government contractors. 
(Tr.3/25-35) Appellant proffered, and the board accepted, Mr. McGee as an expert in 
the areas of human capital, compensation, and executive compensation (tr. 3/35). 
Mr. McGee prepared Mercer's report reviewing Metron's 2004 and 2005 executive 
compensation costs (ex. A-6). 
32. The government offered, and the Board accepted Mr. Bruce Overton, the 
managing partner of Overton Consulting, Inc., as an expert in the field of executive 
compensation. Mr. Overton is a leading executive compensation expert and consultant. 
He is widely-published and has authored, inter alia, multiple editions of The Executive 
Compensation Answer Book, published by Aspen Law & Business, Inc. He has lectured 
and taught extensively regarding executive compensation and has served as the National 
President of the American Compensation Association. Applying the methods described 
in his report, Mr. Overton concluded that Metron's total claimed compensation for nine 
executives for its FY 04 exceeds a reasonable compensation for those positions by 
$240,000, and that Metron's total claimed compensation for ten executives for its FY 05 
exceeds a reasonable conlpensation for those positions by $217,200. These amounts 
were calculated by taking the 50th percentile average of Radford and ERI for total cash 
compensation (base salary plus bonus) for each position, adding a pension factor to the 
total cash compensation, and finally adding ten percent of that total to accommodate a 
reasonable variation of actual pay levels. The amount of reasonable compensation that 
was thus calculated for each position by Mr. Overton was then subtracted from the 
amount Metron claimed for the corresponding position to determine the amount of 
unreasonable compensation claimed for each composition. In determining the 
compensation amounts for each position in the Radford Executive Survey, Mr. Overton 
purported to use regression analysis to obtain values consistent with Metron's revenues of 
II 


$16.8 million in FY 04 and $18.3 million' in FY 05. (Tr. 2/117-20, 140-46; ex. G-12 
at 5 15) 
33. Mr. Darrell Oyer is a Certified Public Accountant. He has about 47 years of 
government contracting experience with both the government contracting and the 
accounting profession. Mr. Oyer served nearly 20 years in various capacities in DCAA. 
Mr. Oyer was the first Branch Manager of the DCAA Headquarters Cost Accounting 
Standards (CAS) Branch.· Mr. Oyer was also DCAA Assistant Regional Director in the 
Atlanta Region with responsibility for ten audit offices. Before forming his own firm in 
1991, Mr. Oyer was a partner with Deloitte & Touche, an international accounting firm, 
where he had approximately nine years of experience. The Board accepted Mr. Oyer as 
an expert in government contract accounting, government contract auditing, generally 
accepted accounting practices, atld fmancial accounting. (Tr~ 4/17-25) The government 
did riot object to Mr. Oyer's qualifications as an expert in these areas (id). The 
government also did not offer expert testimony in these areas. 
F. Primary Issues in Dispute 
34. Mr. McGee considered that the Radford Survey is representative of the 
technology industry and use of that survey alone was an "appropriate practice for Metron 
to follow" (tr. 3/39-42, 113, 6/50). Mr. McGee noted that appellant's extensive analysis 
identifying Radford as the most appropriate survey was "probably the most 
comprehensive" of any in his experience (tr. 3/173-74). 
35. Mr. Overton concurred that use of the Radford-Survey by appellant was 
appropriate, and was frequently used by similar high-tech companies, because it is "one 
of the most" representative for its industry arid is a "very, very, good survey" (ex. G-12 
at 2; tr. 2/159-60). 
36. By letter of9 May 2007, appellant provided·DCAA with a further analysis of 
the reasonableness of its 2004 executive compensation costs that attempted to address 
DCAA's methodology, in particular use ofthe ERI Survey. Appellant used the ERI 
survey because it believed it '.'had to do so in order to communicate and have a dialogue 
with DCAA" (tr. 2/33, 35). Metron's analysis showed that the ERI Survey (and the 
Radford Survey) would support payment of Metron executives between the 50th and 75th 
percentile. (App. supp. R4, tab 227 at G 1437-38) 
. 37. We find that for the positions in dispute, the most persuasive evidence in the 
record establishes that the Radford Survey provides the best information for comparison 
with salaries paid by Metron. The additional WTPF and Watson Wyatt and ERI survey 
data relied on by the government were not sufficiently comprehensive, reliable, relevant 
to Metron's-industry, and/or the job matches were not sufficiently similar and 
representative to warrant material reduction of the results obtained from use of the 
Radford Survey data alone for the disputed positions. (Tr. 2/35-36, 45, 95, 127, 130, 
12 


3/40-43,81-83,115-16,176-77; app. supp. R4, tab 227 at Gl438; ex. A-6 at 22-23, 
attach. A at 9, attach. B at 16-17; ex G-12 at 2) Because of this conclusion we need not 
make detailed findings regarding appellant's extensive criticisms ofDCAA's 
methodology pertaining to the additional surveys. 
38. For both 2004 and 2005, DCAA revised the reported Radford Survey amounts 
for TCC for the positions in dispute. These revisions were based on the fact that 
significant numbers of the Radford Survey participants who reported base salary and 
target incentives for the year did not report actual incentives for the year. For example, in 
the July 2004 Survey, 63 CFOs reported base salary but only 16 reported actual 
incentives. Therefore, DCAA made the assumption that the 47 CFOs who did not report 
actual incentives received no incentive bonuses for the year. DCAA concluded that, if 
the "Actual TCC" amounts reported by Radford only included the participants who 
received a bonus, it improperly increases the Actual TCC amounts for all reporting 
participants. Thus, in the case of the CFOs in 2004, 47 of the participants Actual TCC 
would have been improperly driven up according to DCAA's analysis. To remedy this 
perceived disconnect in the Radford data, DCAA made adjustments to the Actual TCC 
reported by Radford. The DCAA adjustment involved multiplying a fraction, consisting 
of the number of participants reporting receipt of an actual bonus (16 CFOs in the above 
example) divided by the number of employees reporting a base salary (63 CFOs), by 
what DCAA considered to be the median actual incentive bonus. In the above example 
this had the practical result of reducing the median actual bonus ($48,900) by almost 75% 
(47/63) in the CFO example to $12,419. Radford's corresponding Actual TCC amount 
was also reduced as the adjusted "average" bonus was added to base salary. (Tr.5/53, 
58-80, 136-38, 147-51, 247-~0; R4, tab 17 at G 1394, tab -19 at G 1475; app. supp. R4, 
tab 224 at G1472-73, tab 254 at G610) 
39. Both Messrs. McGee and Overton rejected the above-described DCAA 
methodology as inconsistent with "generally accepted compensation practices" 
(tr. 2/134-36, 165, 3/46-47, -145, 179-80, 6/67). The Radford Survey collects data from 
its participants, analyzes the data, and provides the results of those analyses in the fornl 
shown on the Radford Survey pages. Without the underlying data, a survey user cannot 
create a Total Cash Compens~tion figure that more accurately estimates market 
compensation practices than the percentiles shown on the survey pages. The Radford 
Survey participants are not granted access to the underlying survey data. As a result, the 
survey reader cannot know the reason a company did not report data. Other possibilities 
could explain why a company may report data for one compensation element (e.g., base 
salary) but not report data for another compensation element (e.g., bonus) including; 
(1) employee turnover; (2) compensation structure (e.g., a company may leverage cash 
compensation with stock or choose to pay base salary at a higher percentile and put less 
of compensation at risk); and (3) performance. But without access to the underlying 
Radford Survey data, this is "all conjecture." (Tr. 2/64-66, 86, 209, 3/63, 67-70, 
5/138-44) 
13 


4~. Mr. McGee further criticized DCAA's methodology as follows: 
I have never seen any compensation professional anywhere 
ever [create survey data like DCAA did]. ... Never have I seen 
anyone do this to any kind of survey data. It is not consistent 
with any generally-accepted principles, and I don't know how . 
it was even arrived at. . 
It purports to get to a level of precision that doesn't 
exist in compensation, fITst and foremost. Secondly, it 
presumes, as I said earlier, that everybody's base salary is at 
median and then adjusts after that. 
If you're going to presume, I could just as easily 
presume that. ..everybody who got a zero at bonus was at or 
above the 75th percentile in base salary. 
[T]here's too many assumptions, too nlany flawed 
judgments. It is just totally inappropriate to recalculate 
[Radford Total Cash Compensation figures]. 
(Tr. 3/179-80) 
41. Drs. Corwin and Stone also persuasively demonstrated, inter alia, "there is 
almost no dependence of compensation on revenue within revenue bins" (app. supp. R4, 
tab 234 at G 1307). The Radford Survey discontinued its regression analysis before 2004. 
Dr. Corwin plotted the regression curve that results from a 1999 Radford Survey's 
regression formula to show what the regression analysis would look like if plotted on a 
linear scale rather than logarithmic scide. Dr. Corwin found that although compensation 
may be dependent on revenue across the Radford Survey's revenue bins, there is little, if 
any, relationship between compensation and revenue within a revenue bin. (Id. at G 1319; 
tr. 1/157-59, 186-89) Mr. McGee stated that the Radford Survey creates the revenue bins 
"because they believe that the level of statistical significance is consistent within a bin, 
and it varies bin to bin, but not within a bin" (tr. 3/55). 
42. Mr. Overton's similar reductions, adjusting the Radford Survey using "best fit 
trend lines" or "regression" analyses, were also not satisfactorily supported. The analyses 
and supporting data used to develop the lines were not included in his report. 
(Tr. 2/148-49, 173) The reductions were based on the assumption that "the higher the 
magnitude of revenue accountability [even within the Radford under $50 million bin or 
range], the higher the conlpensation" (tr. 2/134). This generalized conclusion is 
unsupported by the Radford Survey. The Survey does not provide the underlying data 
points and participant responses necessary to perform an accurate analysis. Mr. Overton 
conceded that without such underlying data, it is impossible for a regression analysis to 
14 


be accurate. His assumed linear relationship between revenue and compensation 
discounts entirely the importance of other potential bases for the level of compensation, 
the varying financial, indirect cost and organizational structures, and competition for 
executive talent among companies in the under $50 million. (Tr. 2/170-74, 3/55-57, 
61-65,68,80,85,88-89,93-94,103-05) 
43. DCAA considered that the Senior Engineers, with one exception in 2005, 
were "mid-level" or project managers and not executives. In DCAA's opinion, the 
Senior Engineers were not properly matched by appellant with the Radford Survey's 
Strategic Business Unit Executive position. This conclusion was based On DCAA's 
opini~n that the Senior Engineers were not given the title of Vice President and allegedly 
were not "in charge of units" or responsible for a "distinct product line" or service. 
(Tr. 5/35-36,82-87,108,198; app. supp. R4, tabs 228,240 at GI280-81) DCAA 
considered that Metron' s Senior Engineers "probably have no sales responsibility" 
(app. supp. R4, tab 244 at G564). It also considered that Metron Senior Engineers were 
"not at a high enough level to directly impact the bottom line" and should be compared to 
the 50th percentile without regard to performance (tr. 5/248-49). 
44. DCAA conceded that "there aren't many exact fits out there" and job . 
matching often is a "judgment process" and not "clear-cut" (tr. 5/18, 131). A company's 
job can be matched to survey positions if the duties and responsibilities of the executive 
at issue are a "pretty good match, not an exact" or "seem to correlate pretty well with the 
duties and responsibilities of what is stated in the survey position" (tr. 5/18). 
45. The Radford Survey's Job Description for Strategic Business Unit Executive 
states: 
Oversees the lifecycle of a specific product or directs the 
activities of a strategic business unit within the company that 
is not an internal division. Includes planning with respect to 
the product line or business unit, engineeringIR&D, 
nlarketing and financial planning, and may also include 
nlanufacturing. Typically does not have profit and loss 
accountability . 
(App. supp. R4, tab 229 at G 1326) 
46. The Radford Survey's "Job Matching Tips" for the Strategic Business Unit 
Executives are: 
• Top executive in a unit that is not a separate division 
• Product Management/SB U has distinct product or service 
•. Incumbent has responsibility for planning, development and 
marketing, but typically not P&L. Employees with P&L 
15 

responsibility (not just expense and budget responsibility) 
typically match to Job Code 110 [Division Senior 
Executive] or Job Code 115 [Division Executive] 
• Incumbent must be at the VP level (or equivalent) or higher 
(App. supp. R4, tab 229 at G 1326) 
47. Mr. McGee considered that DCAA conducted no substantive interviews of 
any of the executives in question including the Senior Engineers and failed to understand 
Metron's needs for executive talent or how it accomplished its business mission. 
According to Mr. McGee, DCAA improperly evaluated the executive plan from a 
hindsight perspective rather than whether the plan was reasonable when established at the 
beginning of the fiscal year and ignored Metron's legal obligations to pay executives in 
accordance with the established plan. Mr. McGee 'stressed that appellant had strong 
incentives and competitive market pressures to control its executive compensation costs. 
(Tr.3/49, 118, 140, 145, 157-58, 168,185-86) 
48. I The n10st persuasive evidence in the record supports the conclusion that the 
Senior Engineers were properly n1atched by appellant with the Radford Survey's 
Strategic Business Unit (SBU) Executive position. Both Mr. McGee and Mr. Overton 
agreed that selection of the SBU executive position was reasonable (tr. 2/161, 3/42; 
ex. G-12 at 3). Contrary to DCAA's views, we find that the Senior Engineers had 
substantial senior level managerial and business development responsibilities sufficient to 
justify comparison with the SBU executive position (app. supp. R4, tab 234; tr. 1/53, 
2/22, 82, 88, 100). During the years in question, Metron did not use the title Vice 
President, but considered the Senior Engineer's responsibilities justified a conclusion that 
each was the equivalent of one (tr. 1/53, 2/22, 100). 
49. Messrs. Overton and McGee agreed that each company has discretion to 
choose the percentile of survey data it will target based on different variables, including 
the talent sought, the business objectives of the company, and the amount of pay the 
company elects to have at risk (tr. 2/178-79, 188, 3/50-51, 84, 6/53-55). They also agree 
it is reasonable for Metron to target the 50th percentile of Radford Survey Total Cash 
Compensation for any Metronjob matched to a Radford position (tr. 2/170-71, 3/40,42) 
and that Metron's actual compensation could reasonably range anywhere between the 
50th and 75th percentiles of credible competitive surveys (tr. 2/185, 3/84), 
50. Mr. McGee's Mercer analyses based on several surveys it considered apt 
concluded that appellant's executive compensation levels were reasonable. Mr. McGee 
considered that Metron should be compared to the 75th percentile of market total cash 
compensation (TCC) given "Metron's unique talent requirements, the sophisticated level 
of technical capabilities needed to execute Metron's mission and Metron's ability to 
obtain stated company performance objectives" (ex. A-6 at 6). In most cases, Mr. McGee 
found that the compensation paid by Metron to the executives in question for both 2004 
16 


and 2005 were between the 25th percentile to just under the market median. To the extent 
that the COO (in 2004) and the CFO were paid above the 75th percentile, Mercer's 
analysis found them to be well within what Mercer uses as its 15% (plus or minus) range 
of reasonableness. (Ex. A-6 at 5-9,14-18; tr. 3/105-06, 109,.155-56) 
51. Mr. McGee considered that possession of a PhD degree in the mathematic and 
scientific fields relevant to Metron's high technology projects warranted payments of a 
premium. He considered that relatively few executive jobs inc~uded in the surveys 
require such a degree and therefore, the surveys do not adequately reflect compensation 
paid by the industry for executives satisfying this educational requirement. (Ex. A-6 
at 11-12; tr. 3/82, 128-30) Similarly, Mr. McGee concluded that high level security 
clearances required for Metron's executives to perform classified government projects 
also warranted the payment of a premium to Metron executives other than the CFO 
(ex. A-6 at 12; tr. 3/102-03, 125-26). Although Mr. Overton did not consider it 
appropriate to pay such premiums (tr. 2/149-50, 152, 154), we find, based on 
Mr. McGee's extensive experience with similarly-situated government contract, high 
technology firms such as Metron, that possession of requisite advanced degrees and high 
level security clearances warrants positive consideration in establishing compensation 
levels. Mr. Overton lacked such extensive relevant experience (tr. 2/158-59,176-77, 
3/101-02). 
52. TCC data in the Radford Survey is limited to salary and short term incentive 
compensation (bonuses). Both Mr. McGee and Mr. Overton accepted DCAA's factors 
and allowances for pensions as additions to Radford's reported TCC in determining the 
reasonableness of executive compensation. (Tr. 2/142, 3/78-79) How.ever, Mr. McGee 
emphasized that he considered Metron's compensation to be reasonable without addition 
of the pension factor (ex. A-6 at 3, 25). 
53. Both DCAA and Mr. Overton based their conclusions in part on financial 
comparisons of Metron with what they considered to be "peer group" companies. 
DCAA's financial comparison concluded that Metron's executives should be placed at 
the 66th and 41 st percentile in 2004 and 2005 respectively. However, the group of 
allegedly comparable companies consisted of very large publicly-traded companies with 
materially different organizational and financial structures. We are persuaded, inter alia, 
by Mr. McGee's and Mr. Oyer's extensive criticisms of the "peer group" studies and find 
that the resulting comparisons by Mr. Overton and DCAA are misleading, unreliable and 
unreasonable. (Tr. 3/53-59, 65, 68, 72-77, 87-88, 91-92,4/38-39,41, 56, 5/108-10, 112, 
169-70,184-85,194; exs. G-12, A-5 at 4-6; app. supp. R4, tabs 227, 228) Mr. Overton 
also criticized DCAA's financial comparisons (ex. G-12 at 6; tr. 2/140). 
54. DCAA compared the Metron Division Manager position to the 25th percentile 
of the Radford Survey data instead of the median because it considered that the average 
divisional revenues of the Radford Survey participants were greater than Metron's 
divisional revenues. However, DCAA's conclusion is not based on the Radford Survey's 
17 


underlying data or instructions for its use or interpretation. Revenue size cannot be 
ascertained at any particular percentile. Messrs. McGee and Overton rejected DCAA's 
use of the 25th percentile for the Metron Division Managers because the Radford Survey 
"has provided no data on revenue size at the 25% percentile." (Ex. G-12 at 4-5; tr. 3/60­
61,5/168,247-48; app. supp. R4, tab 224 at G1474) 
55. Mr. Overton's comparable division of total Metron revenues in an attempt to 
create a lower scope of accountability of executives also lacks persuasive support. There 
is no factual basis for dividing total revenue or determining revenue responsibility for the 
various Metron executives. Accordingly, his adjustments of Radford Survey 
compensation based on his assun1ptions regarding division or business unit revenue . 
accountability for each executive, at least in the case of Metron were unpersuasive and 
refuted by Mr. McGee. (Tr. 2/182-83, 3/55; ex. A-6 at 30, attach. B at 27, ex. G-12 at 5) 
56. In or about March 2006, Metron made a voluntary one-time $950,000 
contribution to its profit-sharing plan. At the end of calendar year 2005, the $950,000 
was still included in Metron's net income. The $950,000 represented a fraction of 
Metron's 2005 pre-tax profit. Metron had an opportunity to make the profit-sharing 
contribution and receive credit against Metron's 2005 taxable income until Metron filed 
its final taxes for the year in September 2006. Metron made the voluntary contribution 
because it benefited Metron's employees and allowed the company to receive a tax credit. 
If Metron had not made the voluntary contribution, Metron would have been taxed 
roughly 40% on the $950,000. The $950,000 Profit-Sharing Contribution was in addition 
to the amounts agreed upon by Metron's Board of directors at the beginning of2005. 
(Tr. 2/207, 3/28-30) Metron did not charge the $950,000 Profit-Sharing Contribution as 
an expense to the government through its G&A rates. In Metron's governn1ent contract 
cost accounting system, Metron recognized the $950,000 Profit-Sharing Contribution as 
an unallowable cost under FAR Part 31 (tr. 1/116, 2/208). 
57. DCAA determined that the $950,000 voluntary contribution should not be 
included for purposes of assessing appellant's relative performance with its "peer group" 
for 2005. DCAA used what it considered "year-end values" that excluded the $950,000 
in certain calculations assessing Metron's financial performance. (Ex. A-5 at 7-8; 
tr. 5/108-21,258; R4, tabs 2, 5 at 9) Both Mr. Overton and Mr. Oyer agreed that use of 
these measures in the manner performed by DCAA was improper (tr. 2/140, 4/39; 
ex. A-5 at 4-6, ex. G-12 at 7). Mr. Oyer considered that DCAA's failure to adjust for 
nonrecurring transactions generally, and the voluntary contribution in dispute here 
specifically, failed to correctly reflect the actual financial performance of Metron 
year-over-year (tr. 4/25, 30-32, 38-40, 48, 53). 
58. Or. Corwin worked part-time for Metron in 2005 and was paid on an hourly 
basis only for his Metron work. Metron matched Dr. Corwin to the Chief Technical 
Officer (eTO) position in the Radford Survey even though his title was Senior Analyst. 
There is no indication prior to the hearing that the government questioned Dr. Corwin's 
18 


role as CTO. Having reviewed his continuing extensive functions and responsibilities 
within the company, we agree with Messrs. McGee and Overton and find that the CTO 
position was an appropriate match for Dr. Corwin. There is no evidence that the hours 
worked were fewer than claimed by Metron. Nor is there any indication that those hours 
were insufficient for him to adequately perform the duties of a CTO. Both compensation 
experts found that Dr. Corwin was paid below the market median for aCTO. 
(Tr. 1/38-40, 204-05, 3/45-46, 6/6-11, 13, 24, 27-28; ex. G-12 at 4, 12, ex. A-6 at16) 
G. Claims, Final Decisions and Appeals 
59. On or about 16 August 2007 DCAA issued a DCAA Form 1 questioning 
$585,777 ofMetron's claimed executive compensation for 2004 (app. supp. R4, tab 233 
at G55-61). The Form 1 incorporated the text ofDCAA's 20 July 2007 analysis (id. 
at G57-61). 
60. On 29 August 2007, DCAA issued its audit report regarding Metron'g 2004 
incurred costs (app. supp. R4, tap 233 at G30-61). On 11 September i007, the ACO, 
forwarded the audit report to Metron (app. supp. R4, tab 233). 
~ 
61. On 16 October 2008, DCAA issued a Form 1 regarding Metron's 2005 final 
indirect rates submission (R4, tab 3). The Form 1 disapproved $514,387 of the 
. compensation costs claimed by Metron in its final indirect cost rate submission for its 
FY 05 (R4, tab 3). 
62. By letter dated 30 October 2008, the ACO issued a final decision finding 
Metron's 2004 claimed executive compensation unreasonable in the amount of$585,777. 
As part of her decision, the ACO made a demand for payment in the amount of $316,997, 
the DCMA administered portion of the questioned costs. (R4, tabs 105; app. supp. 
tab 242) In her final decision, the ACO adopted DCAA's statement of the facts and 
"relied heavily" on the audit report (id; tr. 3/256-58, 265-66). 
63. Metron appealed the ACO's 30 October 2008 final decision. The appeal was 
assigned ASBCA No. 56624 (R4, tab 106). 
64. By letter dated 20 November 2008, Metron submitted a claim for costs 
disallowed by DCAA for 2004 and 2005 to ACO DeCarlo. Metron asserted its right to 
the $316,997 of executive compensation costs that the ACO had previously demanded. 
In addition, Metron requested a contracting officer's final decision that Metron's 2005 
executive compensation costs were reasonable and allowable. (R4, tab 4) 
65. On 19 February 2009, the ACO issued a second Final Decision and Demand 
for Payment. The final decision denied Metron's claim seeking $316,997 for the 
executive compensation costs that the ACO had determined to be unreasonable in her 
October 2008 final decision concerning FY 04 and for which she had demanded 
19 


repayment. TheACO found that Metron had been paid the $316,997 at issue through its 
2004 indirect billing rates, and had not repaid the government these costs in response to 
the demand issued in her previous final decision. The final decision also found that 
$725,233 of the compensation claimed by Metron for its FY05 was unreasonable under 
the criteria set forth in FAR 31.205-6(b )(2). It further found that Metron had been paid 
the unreasonable compensation, and that the DCMA-administered portion of this amount 
was $376,449. A demand for repayment of this amount was made upon Metron. (R4, 
tab 6) 
66. On 25 February 2009, Metron appealed the ACO's 19 February 2009 fmal 
decision (i) denying its claim of 20 November 2008, and (ii) asserting a demand for 
repayment of$376,449. The Board docketed the contrac~or's claim as ASBCA No. 56751 
and the government's claim as ASBCA No. 56752. These two appeals were consolidated 
with ASBCA No. 56624 on 13 May 2009. (R4, tab 7; Board's Corrected Notice, 
26 February 2009; Board's ltr., 13 May 2009) 
DECISION 
Determination of the reasonableness of executive compensation is a fact-specific 
inquiry, requiring examination, inter alia, of the specific tasks, responsibilities, 
education/training and work experience of the executives in question. Techplan Corp., 
ASBCA No. 41470 et aI., 96-2 BCA ,-r 28,426 at 141,987, 141,989; see also Information 
Systems & Networks Corp., ASBCA No. 47849, 97-2 BCA,-r 29,132. Citing Techplan, 
we recently stated in J.F. Taylor, Inc., ASBCA Nos. 56105, 56322, 12~1 BCA,-r 34,920: 
In addition to the more general definition of 
"reasonable" in FAR 31.201-3, FAR 31.205-6, 
COMPENSATION FOR PERSONAL SERVICES (finding 24), 
provided at the relevant time that compensation for personal 
services must be reasonable for the work performed and 
"must be based upon and conform to the terms and conditions 
of the contractor's established compensation plan or practice 
followed so consistently as to imply" an agreement to make 
the payment. This clause sets forth factors to consider for 
testing the reasonableness of compensation that are in 
addition to those in FAR 31.201-3. Some of the factors are 
general conformity with the compensation practices of other 
firms of the same size, other firms in the same industry, and 
firms in the same geographic area. 
Id. at 171,718. 
Although the contracts in dispute span a considerable period and involve several 
iterations of the general FAR reasonableness and executive compensation cost 
20 
j 

provisions, neither party contends that the variations in language over time materially 
impact the considerations relevant to the determination of the reasonableness ofMetron's 
executive compensation in this dispute. 
1" Reasonableness Generally 
Based on the entire record, we conclude that Metron has sustained its burden of 
proving that the 2004 and 200S executive conlpensation costs in dispute were reasonable. 
Appellant's executive compensation plan set reasonable compensation levels depending 
on achievement of pre-established management goals and internal metrics and there is no 
evidence that the plan was not consistently followed by Metron. After analyzing 
available surveys, Metron concluded that the Radford Survey best matched the company, 
among other things, in terms of size/revenue (under $SO million), industry (high 
technology), and geographic location (national). Appellant reasonably determined that it 
most accurately reflected compensation for business and executive talent paid by its 
competitors for comparison with the executive compensation paid by appellant. As 
explained herein, we do not find persuasive the government challenges to the 
reasonableness of appellant's claimed compensation costs. 
The adequacy of Metron' s compensation levels and approach was persuasively 
supported by Mr. McGee's analyses. In this case, we agree with Mr. McGee. We are 
also satisfied that appellant's use of the highly reputable Radford Survey alone best fit 
appellant's circumstances and was sufficient to establish and corroborate the 
reasonableness of the executive compensation costs paid to the executives in dispute. 
We have found that contractors are not necessarily required to use more than one 
compensation survey. Cf Techplan, 96-2 BCA 1 28,426 at 141,989; Information Systems 
& Networks, 97-2 BCA 1 29,132 at 144,941; Ralph M Parsons Co., ASBCA No. 37931 
et al., 91-1 BCA 123,648 at 118,461; Burt Associates, Inc., ASBCA No. 2S884, 82-1 
BCA 1 1S,764 at 78,012-13. Mr. Overton also considered that Metron's use of Radford 
was reasonable. 
In most cases, the 2004 and 200S executive compensation paid by Metron was 
within 10% of the Radford Survey's median Total Cash Compensation amounts for the 
positions in dispute. The record establishes that to the limited extent that Metron paid an 
executive at approximately the 7 Sth percentile of reporting companies in the Radford 
Survey, the compensation level was reasonable. Cf Techplan, 96-2 BCA 1 28,426 
at 141,989. In particular, Mr. McGee persuasively supported the reasonableness of the 
compensation amounts (even without adding the DCAAallowance for pension costs). 
Moreover, both experts and DCAA agreed that a "reasonableness range" above or below 
the level for all percentiles was a minimum of a plus or minus 10%. Cf Techplan, 
96-2 BCA 128,426 at 141,993. 
We note that while Metron offered short term incentives it did not offer long term 
incentive compensation as did many of its competitors. Radford's data includes short 
21 


term incentives (bonuses) but does not include, inter alia, allowances for pensions and 
deferred compensation. Accordingly, DCAA increased the Radford amounts to reflect 
pension costs. Appellant emphasizes that pension additions to TCC further demonstrate 
the reasonableness of Metron's compensation levels. Both Mr. McGee and Mr. Overton 
accepted DCAA's proposed pension factor. However, Mr. McGee emphasized that 
Metron's TCC was reasonable based on use of the Radford Survey alone without adding 
an amount for pension cost. Mr. McGee noted that private companies that do not offer 
long term incentive compensation commonly increased TCC to remain competitive. 
We also consider that Metron' s payment of compensation at the 50th to 75th 
percentile TCC was reasonable because of the financial and nonfinancial 
accomplishments and performance ofMetron and its executives for the years in question. 
Appellant had positive net income from 2001 through 2005 and experienced 
significant and continuous growth in revenues over the 20 years from 1985 to 2005. The 
Metron executives met or exceeded financial goals expressed in appellant's compensation 
plan. Metron' s contracts were typically competitively evaluated and awarded. In effect, 
the competitiveness of Metron's compensation was tested by the market. 
Recruitment and retention of the requisite PhD-educated executives capable of 
obtaining the necessary security clearances for the highly sophisticated sensitive and 
technical work performed by Metron also support our conclusion that the executive 
compensation in dispute here was reasonable. Although Metron does not precisely 
quantify premiums associated with clearances and education as discrete elements of its 
compensation plan, Mr. McGee considered them of significant value, prevalent in the 
high technology government contracting industry, and properly for consideration in 
assessing the overall reasonableness of Metron's executive compensation. 
2. Additional Compensation Surveys 
We have fully considered the government's contentions regarding the use of 
additional surveys to "average" in determining reasonableness. However, we have 
determined that on the facts of this case the Radford Survey data alone provides a 
sufficient foundation for proving the reasonableness of appellant's executive 
compensation. In view of this conclusion, detailed findings and further discussions of the 
parties' extensive contentions regarding the survey methodology, government 
methodology and relative quality of the additional surveys, vis a vis the Radford Survey, 
are not required. In short, the alternative surveys relied on by the government were less 
appropriate, comprehensive, technology-industry-oriented, reliable and/or persuasive 
than the Radford Survey for the positions in dispute in this case. 
Although on the facts of this case we consider that use of multiple surveys was not 
required to establish the reasonableness ofMetron's executive compensation for the 
positions in dispute, appellant compared the Radford results with ERI Survey data at 
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DCAA's insistence. In our view, the results did not significantly or, adversely call into 
question the results obtained by the Radford Survey. Applying a 10% range of 
reasonableness, Metron determined that its compensation was between the 50th and 75th 
percentile of the ERI TCC figures for 2004 and 2005. Although Mr. Overton considered 
that use of the ERI survey to "validate" the Radford results was reasonable, he viewed the 
ERI data as less germane and credible for comparison. 
3. Senior EngineerslManagers and Dr. Corwin 
We have considered the opposing views of the parties regarding the status of 
Metron's Senior EngineerslManagers as executives. Based on the facts and record in this 
appeal, we conclude that they qualify as executives and were appropriately matched by 
appellant with comparable Radford Survey executive positions. The evidence establishes 
that the Senior Engineers had greater responsibilities than acknowledged by the 
government, in particular with respect to business development. Both Mr. McGee and 
Mr. Overton agreed that the Radford Survey's Strategic Business Unit (SBU) Executive 
was an appropriate match for the Senior Engineers and reasonably used by Metron in 
evaluating their compensation. The responsibilities, importance and status of the Senior 
Engineers were illustrated by actual corporate events. Dr. Stefanick was promoted by 
Metron to a Division Manager as a result of his success as a Senior Engineer 'who 
managed and developed a business unit that grew into appellant's Systems & Analysis 
Division. On the facts of this case, we consider that the best "match," albeit not perfect, 
was Radford's SBU Executive position. 
The government contends that Dr. Corwin should have been paid as a part-time 
senior analyst in 2005 and did not serve as an .executive. We have found to the contrary 
and consider that appellant properly matched Dr. Corwin to Radford's Chief Technical 
Officer position based on his continuing extensive responsibilities and functions within 
Metron. Both Mr. Overton and Mr. McGee found that the CTO match was proper. There 
is no evidence that the part time hours worked by Dr. Corwin were inaccurate or brought 
into question his ability to properly perform CTO functions. 
4. Government Extrapolations and Adjustments of Radford Data 
Both the DCAA and Mr. Overton's adjustments of the Radford Survey results 
were deficient as described in our findings. In particular, they were both based on 
unproven, highly questionable assumptions. They were not based on analyses of actual, 
underlying data that Radford used in deriving its reported survey results. Because of the 
various flaws in the government's data and methodology and the lack of persuasiveness 
of its analyses, we are unable to make use of the analyses even if we were otherwise 
disposed to make minor reductions in the compensation paid to any of appellant's 
executives. 
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We have determined that Mr. Overton's and DCAA's interpolations and 
extrapolations based on use of "regression" tools and analyses were deficient and not 
sufficiently supported. Since Radford does not provide the underlying participant data it 
is impossible accurately to perform a regression analysis. Surveys generally, and the 
Radford Survey in particUlar, generally provide data for the 25th, 50th and 75th percentiles 
within a revenue bin. The Radford Survey does not provide data for additional 
intermediate percentiles such as the 41st and 66th percentiles used in the government's 
analyses. The accumulation and reporting of Radford results by revenue bins does not 
reasonably imply that revenue is the sole determinant of exec'!-!tive compensation within 
each bin. The use of a "regression" or similar analyses to interpolate approximate points 
on a continuum between these percentiles is fraught with problems, especially where as, 
in this case, Radford's underlying data is unavailable. Greater scientific, statistical or 
analytical certitude is not possible given this lack of data. 
Mr. Overton reduced the Radford data using "best fit trend lines" or "regression" 
analyses because in his opinion executive compensation is driven by the magnitude of 
revenue accountability. However, nothing in the Radford Survey supports his assertion 
that within each revenue bin (in this case under $50 million bin) there is a direct 
relationship between increasing revenue and increasing compensation. It is speculative to 
make any such assumption which fails to recognize the potential significance of other 
non-revenue factors that may influence compensation. Similarly, DCAA's assumptions 
based on the overriding importance of revenues are factually unjustified. In the extreme 
case, promising high technology companies may have little or no revenues in their early 
growth stages. 
In addition, we have found that the "peer group" analyses performed by both 
DCAA and Mr. Overton were based on misleading comparisons with much larger 
companies with markedly differing organizational and financial structures. The 
government contends that it used the proper measures of Metron 's financial performance 
for comparison with peer companies and this comparison reasonably placed the 
compensation levels for Metron executives at 660/0 in 2004 and 41 % for 2005. The 
difference between the two years was largely attributable to the $950,000 contribution in 
FY 05. However, we have found that the size and characteristics of the group of 
companies selected by the government to benchmark performance were not similar or 
reasonably comparable to the group of Radford Survey participants used to benchmark 
compensation. Comparing the performance of small, private, closely-held companies 
such as Metron to publicly-traded, Fortune 500 companies such as IBM was misleading 
and unfair. 
DCAA's "peer group" comparison for 2005 was also deficient to the extent that its 
financial comparisons misanalyzed the $950,000 voluntary contribution. The 
non-recurring, post-year-end contribution was clearly made for tax purposes. Among 
other things, it speaks to Metron' s financial strength and ability to sustain performance 
levels based on recurring and ongoing operations. The voluntary contribution also, of 
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course, was not claimed as an expense for government contract purposes .. Given the 
nature of the contribution, it was misleading for DCAA to make financial comparisons 
that failed to properly consider the significance of this non-recurring item. Mr. Oyer and 
Mr. Overton were in substantial agreement on this point. We will not second guess 
appellant's interpretation of its own compensation plan methodology with respect to 
treatment of the voluntary contribution as it affects achievement of pre-established profit 
and performance goals in this case. 
With respect to compensation of division executives, the government's analyses 
developed an alleged "average" of the divisional revenues of Radford Survey participants 
in the under $50 million bin. This fragmenting of total Metron revenues was based on 
perceptions of what were considered by the government to be division revenues of each 
Metron division for comparison with the alleged average Radford revenues. Noting that 
the alleged "average" divisional revenue for all participants was significantly greater than 
Metron's alleged division revenues, the government analyses considered that Metron' s 
division executives should only be compensated at the 25th percentile level. Again, the 
essential problem with these analyses is that it makes rather simplistic and highly 
questionable assumptions concerning the relation of revenues to compensation within the 
Radford under $50 million bin. The assumptions are not supported by underlying 
Radford data. DCAA conceded that it was not possible to discern revenue amounts of 
participants at any particular percentile. We have found that Metron executives also had 
cross-divisional responsibilities and that technical and financial support and collaboration 
among divisions were present. Here, we consider that total Metron revenue was the 
appropriate benchmark for assessing compensation reasonableness of the division 
executives. 
Because we have determined that the government analyses of the reasonableness 
of appellant's executive conlpensation are unpersuasive as a consequence of the 
deficiencies discussed above, individually and collectively, we need not address alleged 
additional deficiencies and issues raised by appellant challenging those analyses. 
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CONCLUSION 
F or the foregoing reasons, we conclude that appellant has sustained its burden of 
proving that the 2004 and 2005 executive compensation costs in dispute were reasonable 
and allowable. Accordingly, the appeals are sustained. 
Dated: 4 June 2012 
I concur 
... / 
~~~
~N. SEMPLE· 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
I concur 
EUNICE W. THOMAS 
Administrat~ve Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
I certify that the foregoing is a true copy of the Opinion and Decision of the 
Armed Services Board of Contract Appeals in ASBCA Nos. 56624, 56751, 56752, 
Appeals of Met ron, Inc., rendered in conformance with the Board's Charter. 
Dated: 
. CATHERINE A. STANTON 
Recorder, Armed Services 
Board of Contract Appeals 
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