Pratt & Whitney Rocketdyne, Inc.
Docket: ASBCA 58307
Decision date: 2013-11-01

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of--
Pratt & Whitney Rocketdyne, Inc. 
Under Contract No. NAS8-01140 et al. 
APPEARANCE FOR THE APPELLANT: 
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APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 58307 
Terry L. Albertson, Esq. 
Crowell & Moring LLP 
Washington DC 
E. Michael Chiaparas, Esq. 
DCMA Chief Trial Attorney 
Charles W. Goeke, Esq. 
Senior Trial Attorney 
Defense Contract Management Agency 
Philadelphia, P A 
OPINION BY ADMINISTRATIVE JUDGE SCOTT 
ON APPELLANT'S MOTION TO DISMISS WITHOUT PREJUDICE UNDER 
BOARD RULE 30 OR TO SUSPEND PROCEEDINGS 
This dispute principally involves the allowability of indirect environmental 
remediation costs. Pratt & Whitney Rocketdyne, Inc. (PWR) timely appealed under the 
Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109, from the final decision of the 
Defense Contract Management Agency's (DCMA's) divisional administrative contracting 
officer (DACO), which determined that 2005 discontinued operations costs, in the 
amount of$11,474,252, were unallowable. The final decision asserted a government 
claim for repayment but was modified to withdraw that demand when it was 
determined 
that the government had not paid PWR the disputed costs. Subsequent to its appeal, 
appellant filed a request for equitable adjustment (REA), apparently in the amount of 
about $40 million, with a National Aeronautics and Space Administration (NASA) 
procurement CO (PCO). To allow for the ultimate resolution of matters together at the 
agencies or Board, appellant moves to dismiss the instant appeal without prejudice 
pursuant to Board Rule 30 or, in the alternative, for a one-year suspension of proceedings. 
The government opposes the motion. For the reasons stated below, we deny the motion 
to dismiss but suspend the appeal proceedings until 1 November 2013. 

STATEMENT OF FACTS FOR PURPOSES OF THE MOTION 1 
SSME Contract and Novation Agreement 
Effective 1 January 2002 the George C. Marshall Space Flight Center, NASA, 
entered into the captioned Contract No. NAS8-01140 with The Boeing Company, 
Rocketdyne Propulsion and Power, known as the Space Shuttle Main Engine (SSME) 
contract (R4, tab 1; mot. at 3; gov't resp. at 1 ). The contract value was about $1 billion 
(app. reply at 2 n.1). 
United Technologies Corporation (UTC) purchased Rocketdyne from The Boeing 
Company in August 2005 and made Rocketdyne part of the UTC Pratt & Whitney line of 
business, creating PWR, a wholly-owned subsidiary ofUTC. The Boeing Company, 
PWR and the government executed 
a novation agreement, effective 2 August 2005, 
whereby the government recognized PWR as the successor party to Rocketdyne' s 
government contracts listed in the agreement. (Gov't resp., ex. G-1 at first page; mot. at 
1) The novation agreement provided: · 
(7) [The Boeing Company] and [PWR] agree that the 
Government is not obligated to pay or reimburse either of 
them for, or otherwise give effect to, any costs, taxes, or other 
expenses, or any related increases, directly or indirectly 
arising out of or resulting from the transfer or this Agreement, 
other than those that the Government in the absence of this 
transfer or Agreement would have been obligated to pay or 
reimburse under the terms of the contracts. 
(Gov't resp., ex. G-1 at second page) 
Discontinued Operations Costs 
According to appellant, since UTC 's purchase of Rocketdyne, UTC has allocated 
to PWR certain discontinued operations costs of UTC' s former Chemical Systems 
Division (CSD) 
business unit. CSD's principal location had been in San Jose, California. 
For many years it had developed and produced space propulsion products there, primarily 
for the government. After a decline in business and an explosion at the site in 2003, UTC 
and the government agreed that the CSD facility should be closed. Before and since the 
1 The government contends that the "basic facts are undisputed" (gov't resp. at 1 ). Due 
to the limited record currently before us, for purposes of deciding appellant's 
motion, when we do not have a document on point, we accept the facts recited by 
the parties in their motion papers. 
2 

closing, California State environmental authorities have directed UTC to remove from the 
site potentially hazardous substances used during the decades of site operation. Appellant 
asserts that, pursuant to a 1997 advance agreement, the government had agreed that 
80 percent of remediation costs at the CSD site would be allowable and CSD had agreed 
that it would not seek recovery of the remaining 20 percent. (Mot. at 1-2) 
Appellant states that: 
The costs of complying with the California 
environmental requirements have been substantial and are 
continuing. Since the closure of the CSD facility, the costs 
have been charged in accordance with UTC' s disclosed and 
established practices as "discontinued operations" costs. 
Under those practices, a portion of discontinued operations 
costs, including the CSD costs, have been allocated to PWR 
since its acquisition by UTC. There was initially 
disagreement between UTC and the Government about how 
the CSD discontinued operations costs should be allocated 
and about whether they were allowable. Those disagreements 
were resolved and the costs are currently being charged on 
new contracts awarded to PWR since the acquisition. 
(Mot. at 2; see also app. reply at 3) 
Contract Modification and CSD Cost Re-Opener Provision 
According to appellant, negotiated SSME contract Modification No. 097, signed in 
July 2007, added 
new work in the amount of about $1.4 billion. Appellant states that it 
had sought a new contract for the additional work, due to the significant increase in value 
and scope, but NASA had preferred to amend the existing contract for administrative 
reasons. Appellant contends that a new contract would not have been subject to the 
novation agreement's prohibition against the government's paying increased costs 
resulting from the UTC acquisition. As it developed, PWR proposed costs for the 
modification that included CSD discontinued operations costs. At the time, those costs 
were not included in approved forward pricing rates because allocability and allowability 
issues on PWR contracts had not been resolved. NASA declined to include the costs in 
the modification's price. The parties eventually agreed to include in the modification a 
"re-opener" clause, said in the DACO's final decision to have been effective as of 1 April 
2006. (R4, tabs 2, 6 at 2; mot. at 3-4; app. reply at 2 n.1) The clause provides: 
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H.23 [CSDJ COST RE-OPENER 
The parties recognize that the Forward Pricing Rate 
Agreement (FPRA) dated AprilS, 2007 does not include cost 
associated with the shutdown of the [CSD]. Further, the 
negotiated contract value does not include such costs. Should 
these costs be deemed allowable and allocable, the parties 
agree to negotiate an equitable adjustment to the contract 
when an FPRA has been approved that includes the 
discontinued operations costs. The negotiation of this item 
shall be excluded from any limitations in the "Contract 
Changes" clause of this contract and the number of labor 
hours shall remain as originally negotiated. 
(Gov't resp., ex. G-2) 
DACO's Decisions 
On 8 June 2012 DACO Safwat K. El Masry ofDCMA issued a final decision and 
demand for payment to PWR under the SSME contract and all other affected contracts. 
The SSME contract is the one mainly affected by the decision. The decision related to 
what the DACO described as unallowable legacy CSD costs claimed by PWR in its 
calendar year (CY) 2005 home office overhead cost proposal. The DACO determined 
that 
$10,092,330 in CSD discontinued operations costs subject to the 2 August 2005 novation 
agreement, the majority ofwhich were environmental costs, and $1,381,922 in CSD 
discontinued operations costs allocated to contracts that were not subject to the agreement, 
were not allowable, for various reasons. He concluded that the re-opener clause did not 
apply by its terms, because no determination of allowability and allocability had been 
made, and that the clause did not apply to fiscal year (FY) 2005 overhead costs in any 
event. 2 The DACO declared that PWR had been overpaid pursuant to interim billing rates 
and was indebted to the government in the amount of$11,474,252. (R4, tab 6) PWR 
asserted, and DCAA verified, that PWR had not been paid the $11,474,252 amount 
demanded in the DACO's final decision and, by letter to PWR dated 31 August 2012, the 
DACO 
rescinded only the portion of his final decision that had demanded repayment 
(R4, tab 7). PWR timely appealed to the Board on 5 September 2012. 
Appellant contends that the DACO issued his final decision not because the parties 
were failing to progress in their routine negotiation ofFY 2005 indirect costs, but due to 
DCMA's CDA statute of limitation concerns about advancing the government's 
2 The DACO's initial decision refers both to CY 2005 and FY 2005 costs; his modified 
decision refers to CY 2005 costs; and appellant refers to FY 2005 costs. 
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disallowance contentions. Appellant adds that the decision and appeal also had the effect 
of calling to its attention the need to resolve the re-opener issue. (Mot. at 6) 
Subsequent Proceedings 
On 27 November 2012, pursuant to the re-opener provision added to the contract 
in 
July 2007, appellant submitted its REA to NASA's PCO under the SSME contract. 
Appellant contends that the total price adjustment due under the SSME 
contract is over 
$40 million. It asserts that, if the matter has not been resolved by July 2013, it will 
submit a CDA claim by then to avoid any statute of limitations issues of its own. (Mot. at 
4; app. reply at 3 n.2, at 4) 
On 30 November 2012 the Board received appellant's motion to dismiss its appeal 
without prejudice pursuant to Board Rule 30 or, in the alternative, to stay proceedings, 
preferably for one year. Briefing was complete on 22 January 2013. 
DISCUSSION 
Board Rule 30 provides: 
The Board may suspend the proceedings by agreement 
of counsel for settlement discussions, or for good cause 
shown. In certain cases, appeals docketed before the Board 
are required to be placed in a suspense status and the Board is 
unable to proceed with disposition thereof for reasons not 
within the control of the Board. Where the suspension has 
continued, or may continue, for an inordinate length of time, 
the Board may, in its discretion, dismiss such appeals from its 
docket without prejudice to their restoration when the cause 
of suspension has been removed. Unless either party or the 
Board acts within three years to reinstate any appeal 
dismissed without prejudice, the dismissal shall be deemed to 
be with prejudice. 
As is apparent from the face of the Rule, a Rule 30 dismissal without prejudice or 
suspension of proceedings is discretionary with the Board. Texas Engineering Solutions, 
ASBCA No. 53669 eta!., 04-1 BCA ~ 32,550; see also Readiness Management Support, 
L.C., ASBCA No. 55880, 07-2 BCA ~ 33,719. 
Although the DACO's final decision raises several issues, appellant identifies 
three of particular significance to it. One is whether the terms of the novation agreement, 
which it describes as prohibiting the recovery on novated contracts of "increased costs" 
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that result from the novation, limit the allowability of its CSD costs (mot. at 2). Appellant 
contends that 
Rocketdyne was receiving an allocation of discontinued operations costs 
from Boeing prior to the sale to UTC and, because the UTC cost allocation received by 
PWR does not exceed the Boeing allocation, there are no "increased costs" to disallow 
(id.). Secondly, the parties disagree about the scope of the 1997 advance agreement and 
the meaning of its term "remediation cost" (mot. at 3). Appellant states that "[n]either of 
those issues alone would require dismissal of the appeal" (id.). The third major issue, 
upon which appellant largely bases its dismissal motion, concerns its potential entitlement 
to substantial sums under the re-opener clause. 
Appellant further contends in its motion that, because its REA involves over $40 
million, it is likely that the PCO will seek an audit, which will require time. Additionally, 
the parties' disagreement about the meaning of the 1997 advance agreement will 
potentially affect SSME contract re-opener issues. Appellant urges that a Rule 30 
dismissal will promote judicial economy by allowing the parties to attempt to settle their 
issues, or at least by giving 
appellant time to bring its potential claim under the re-opener 
clause before the Board for consideration with the government's cost contentions. In the 
latter event, the Board would have jurisdiction to assess both the DACO's cost 
disallowances and whatever decision the PCO might issue on appellant's related cost 
claim. In the alternative, appellant suggests a one-year suspension of proceedings. 
The government opposes appellant's motion and contends that the appeal presents 
a threshold issue of interpretation of the novation agreement that must be resolved before 
it can consider appellant's REA. The government states that an adjustment of over $40 
million would require an extensive audit and negotiations before an agreement could 
be 
reached. It asserts that entering into this process without first resolving the question of 
the novation agreement's prohibition against increased costs would waste the parties' 
time and resources, noting, in particular, that the re-opener clause pertains only to 
allowable costs. 
Appellant replies that the meaning and import of the re-opener provision will be 
key to resolving the parties' dispute and that the authority to decide the clause's meaning 
allegedly rests with the NASA CO responsible for the SSME contract, not with DCMA's 
DACO. It asserts that all relevant issues need to be resolved in the same proceeding, with 
all relevant parties. Appellant now states that resolution of its REA should not be 
time-consuming because the re-opener language issues are narrow and there is no dispute 
about the amount of the CSD costs, which have been the subject of considerable scrutiny 
and DCAA audit (reply at 5 n.4). Appellant expects a denial or deemed denial of its 
anticipated CDA claim sometime in the fall of 2013. 
Upon review of the circumstances as presented to us at this early stage of the 
appeal, the Board concludes that dismissal is not appropriate. Rule 30's factors 
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warranting dismissal are not present. However, appellant has shown good cause for a 
reasonable suspension in the interests of judicial economy and potentially to foster 
settlement. The government's CSD cost disallowance and appellant's REA concerning 
CSD costs are closely connected. It makes best sense to resolve the issues together. If 
the parties do not settle, and appellant's REA and claim are denied, appellant expects that 
its likely appeal will occur in the fall and that it will be consolidated with the current 
appeal. 
Accordingly, proceedings in this appeal are suspended until 1 November 2013. 
This does not preclude appellant from moving in the interim, if it has filed its 
contemplated second appeal, for consolidation of that appeal with the instant appeal. By 
1 November 2013, or upon resolution of their disputes, if earlier, the parties are to submit 
a joint written status report to the Board. 
DECISION 
Appellant's motion for a dismissal of its appeal without prejudice pursuant to 
Board Rule 30 is denied. Appellant's alternative motion for a suspension of proceedings 
is granted to the extent stated. 
Dated: 4 March 20 13 
I concur 
~/#: MARK N. STEMPLER 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
7 
ministrative Judge 
Armed Services Board 
of Contract Appeals 
I concur 

I certifY that the foregoing is a true copy of the Opinion and Decision of the Armed 
Services Board of Contract Appeals in ASBCA No. 58307, Appeal of Pratt & Whitney 
Rocketdyne, Inc., rendered in conformance with the Board's Charter. 
Dated: 
8 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals