ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of -- ) 
) 
Raytheon Company, ) 
Space & Airborne Systems ) 
) 
Under Contract No. F04701-03-C-0008 et al. ) 
APPEARANCES FOR THE APPELLANT: 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 58068 
Paul E. Pompeo, Esq. 
Stuart W. Turner, Esq. 
Arnold & Porter LLP 
Washington, DC 
E. Michael Chiaparas, Esq. 
DCMA Chief Trial Attorney 
Arthur M. Taylor, Esq. 
Deputy Chief Trial Attorney 
Defense Contract Management Agency 
Chantilly, VA 
OPINION BY ADMINISTRATIVE JUDGE O'CONNELL 
PURSUANT TO BOARD RULE 11 
This is the last of several consolidated appeals in which appellant, Raytheon 
Company, Space & Airborne Systems, challenges government claims seeking to 
recover increased costs arising from Raytheon's unilateral cost accounting changes. 
In Raytheon Company, Space & Airborne Systems, ASBCA No. 57801 et al., 13 BCA 
if 35,319 (Raytheon I), we dismissed as untimely the government claims docketed as 
ASBCA Nos. 57802, 57804 and 57833. In Raytheon Company, Space & Airborne 
Systems, ASBCA No. 57801 et al., 15-1 BCA if 36,024(Raytheon11) we granted 
summary judgment in favor of Raytheon in ASBCA No. 57801. We also granted 
partial summary judgment to Raytheon and partial summary judgment to the 
government in ASBCA No. 57803. The parties subsequently settled the remaining 
issues in that appeal and we dismissed it with prejudice. 
In the instant appeal (ASBCA No. 58068), we granted partial summary 
judgment to Raytheon and partial summary judgment to the government. Specifically, 
we granted summary judgment in favor of Raytheon with respect to contracts entered 
into prior to 8 April 2005; we granted summary judgment to the government with 
respect to the validity of FAR 30.606(a)(3); we granted summary judgment to the 
government with respect to the desirability of the changes; we granted summary 
judgment to Raytheon with respect to the "double counting" issue; we denied the 

cross-motions with respect to the materiality of the changes; and we granted summary 
judgment in favor of the government that any interest paid should be compound. 
Raytheon II, 15-1 BCA ii 36,024 at 175,962. 
The parties have filed cross-motions for summary judgment, requesting that the 
Board revisit the issue of the materiality of the changes. The parties also agreed that 
the Board should decide this appeal on the record under Rule 11 if we find that there 
are material facts in dispute. Because we find that there is a material fact in dispute 
concerning the contracting officer's consideration of the materiality criteria contained 
in 48 C.F.R. § 9903.305, we decide this appeal under Rule 11. 
FINDINGS OF FACT 
1. On 1November2007, Raytheon submitted Revision 15 to its Cost 
Accounting Standards (CAS) Disclosure Statement (see FAR 52.230-2) to a divisional 
administrative contracting officer (contracting officer) at the Defense Contract 
Management Agency (DCMA) (R4, tab 20). This revision contained three cost 
accounting practice changes that: 1) [RED ACTED RED ACTED RED AC 
TED RED ACTED]; 2) [RED ACTED RED ACTED RED ACTED 
REDACTEDREDACTED REDACTED REDACTED REDAC 
TED] 3) [RED ACTED RED ACTED RED ACTED RED ACTED 
RED ACTED RED ACTED RE]. The revision went into effect on 1 January 
2008. (Id. at 215) 
2. Over two years later, on 26 February 2010, Raytheon submitted a general 
dollar magnitude analysis (see FAR 52.230-6) for the three changes for calendar years 
2008 to 2011 (R4, tab 27). Raytheon calculated that the [RED ACTED] change 
caused a $251,500 decrease to flexibly-priced contracts and an increase of $195,200 
to fixed-price contracts during the four-year period (id. at 318). The other two 
changes had the opposite effect. Raytheon calculated that the [REDACTED] change 
caused an increase of $47,800 to flexibly-priced contracts and a decrease of $41,600 to 
fixed-price contracts (id. at 319). It calculated that the [RED AC TED] change 
caused an increase of $36,000 to flexibly-priced contracts and a decrease of $17 ,400 to 
fixed-price contracts (id. at 320). 
3. On 4 October 2010, the Defense Contract Audit Agency (DCAA) issued a 
final report (R4, tab 28). DCAA calculated a cost impact of $142,800 to the 
government by adding the increases on flexibly-priced contracts to the decreases on 
fixed-price contracts contained in Raytheon's GDM for the [RED ACTED] and 
[REDACTED] changes ($47,800 + $41,600 + $36,000 + $17,400 = $142,800) (id. at 
323); see Raytheon II, 15-1 BCA ii 36,024 at 175,960-61. DCAA recognized that the 
[REDACTED] change resulted in decreased costs to the government of $446,700 
($251,500 + $195,200). However, it stated that "[t]here is no requirement for any 
2 

adjustment related to this unilateral accounting practice change since adjustments are 
only made if changes result in increased costs to the Government." (Id.) 
4. On 15 March 2012, the contracting officer issued a final decision 
determining that Raytheon owed the government $172,362.94 as a result of the 
Revision 15 changes (R4, tab 55 at 426). This amount consisted of the $142,800 
calculated by DCAA, plus compound interest of $29,562.94 calculated from 1 January 
2008 to the date of the final decision (id.). The contracting officer sought to recover 
the money from Contract No. F A8650-04-C-l 706 (the contract), which had an 
effective date of 30 December 2004 (id. at 429). The contract incorporated 
FAR 52.230-2, COST ACCOUNTING STANDARDS (APR 1998); and FAR 52.230-6, 
ADMINISTRATION OF COST ACCOUNTING STANDARDS (Nov 1999) (ex. G-9 at 17). 
5. In her final decision, the contracting officer noted that Raytheon had 
requested that she determine that the changes were immaterial (R4, tab 55 at 427). 
The contracting officer did not specifically state in her decision whether the changes 
were material, but the parties agree that she determined that the [RED ACTED] 
and [REDACTED] changes were material because they resulted in increased costs to 
the government (app. mot., SUMF iii! 55-56; gov't resp. to SUMF iii! 55-56). 
6. In Raytheon II, we declined to enter summary judgment in favor of either 
party on the materiality issue based on our conclusion that the contracting officer's 
final decision overstated the impact of the accounting changes. We reserved judgment 
until we had heard from the pertinent witnesses at trial and had received additional 
briefing from the parties. Raytheon II, 15-1 BCA if 36,024 at 175,960. 
7. The parties filed a joint status report on 27 October 2015 in which they 
informed the Board that they had discussed and reviewed a draft affidavit from the 
contracting officer, Blanca Jimenez, and had agreed that the affidavit and the existing 
record provide a sufficient factual basis to allow the parties to present their positions 
on the materiality issue. The parties proposed a briefing schedule for the following 
two issues: 
1. Whether the Contracting Officer erred in determining 
that the cost impact from Revision 15 is material under 
48 CFR 9903.305 when that determination is based solely 
upon an increased cost to the Government. 
2. If so, whether this error rendered the Government's 
claim either invalid or improper. 
8. In an affidavit dated 24 November 2015, Ms. Jimenez testified that she 
considered the materiality criteria in 48 C.F .R. § 9903 .305 before issuing her final 
3 

decision but had based her materiality determination solely upon the increased costs to 
the government. She testified that, as a result of our decision in Raytheon II, the cost 
impact of the [REDACTED] and [RED ACTED] cost accounting practice 
changes had been reduced from $142,800 to $56,146 (not including interest). The 
revised total included $32,026 attributable to the [REDACTED] change and $24,120 
from the [RED ACTED] change. She testified that "[t]he CAS statute requires 
a contractor to agree to a price adjustment with interest for any increased costs to the 
Government resulting from a cost accounting practice change. Both the $32,026 and 
the $24, 120 are increased costs to the Government resulting from these two cost 
accounting practice changes." She stated that "the absolute dollar amount of the cost 
increases to the Government is relatively small" but these amounts "are still increased 
costs to the Government." She testified that she had applied the same materiality 
analysis as at the time of her final decision and had concluded that "[t]he other stated 
criteria [in 9903.305] are not applicable to this situation." (R4, tab 56, iJ 8) She did 
not, however, explain why she considered those criteria to be inapplicable. 
9. Raytheon disputes the contracting officer's assertion that she considered the 
materiality criteria in section 9903.305 (app. resp. at 2-3). It points to its deposition of 
Ms. Jimenez on 4 December 2013 (app. mot., ex. A). In the testimony that Raytheon 
cites, Ms. Jimenez appears to indicate that she focused on the mere fact that there was 
an increased cost: 
Q. Why was it material? 
A. Because it is very impossible to make - okay. 
First of all, it is the taxpayers' money. Any - any cost 
impact to the government, I will request any company to 
pay back any cost increase.... It is not my money; it is the 
taxpayers' money. And my position is to protect the 
government's interest. 
(App. mot., ex. A at 35) In response to a follow-up question, Ms. Jimenez hedged 
slightly, testifying that it would be "unreasonable" to conclude that a $10 cost increase 
was material (id.). 
10. Counsel for Raytheon provided Ms. Jimenez a copy of section 9903.305, 
and asked whether she considered the materiality criteria 
in this regulation. She gave a 
non-responsive answer in which she appeared to challenge section 9903.305(e), which 
allows a contracting officer to consider the cumulative impact of individually material 
items: 
Q .... Did your materiality determination consider 
these criteria in 9903.305? 
4 

A. Well, in here it said cumulative impact, and it 
should not be cumulative, it should be - like I said, every 
accounting change should be considered separate and 
distinctive, and I consider every accounting practice 
separate .... 
(App. mot., ex. A at 37-38) 
later: 
11. Counsel for Raytheon asked essentially the same question again a moment 
Q .... And I'm asking whether you considered this 
criteria or any of these criteria when you determined that ---
A. I read it and I still - I still - my final 
determination was that it was an increased cost to the 
government. 
Q. And therefore, it was material? 
A. Therefore it was material, yes. 
(App. mot., ex. A at 38-39) 
12. In its motion, the government alleges that Ms. Jimenez considered the 
criteria in section 9903.305 and relies on her affidavit (gov't mot.,~~ 5, 8). Raytheon 
disputes this assertion, relying on her deposition testimony (app. resp. at 2-3). We find 
this dispute to be material because, as discussed below, one of the factors we consider 
in determining whether the contracting officer abused her discretion is compliance 
with applicable regulations. 
13. Based upon our review of the record, including the contracting officer's 
final decision, and the deposition and affidavit of Ms. Jimenez, we find that 
Ms. Jimenez determined that the amount at issue was material based solely upon the 
dollar value, and that she did not properly consider the other factors in section 
9903.305. During her deposition, Ms. Jimenez had ample opportunity to explain how 
she had conducted her analysis and why she had concluded that the 
amount at issue 
was material. We conclude from this testimony that her analysis never progressed 
beyond the dollar amount, because she viewed the recovery of increased costs as 
necessary to protect the interest of the taxpayers. While we recognize that Ms. 
Jimenez, when shown a copy of section 9903.305, testified that she had read it, we do 
not view reading the regulation to be the same thing as a fair consideration of the 
factors contained in that regulation. 
5 

DECISION 
I. The Contract(s), Statute, FAR, and CAS Rules 
This appeal requires us to once again unravel the complexities presented by the 
four-headed monster of FAR-mandated contract clauses; the CAS statute, 41 U.S.C. 
§§ 1501-1506; CAS rules and regulations; and FAR subpart 30.6. We begin with a 
brief description of each of these. 
A. Contract Clauses 
The contract incorporated the clauses at FAR 52.230-2 (APR 1998), which, in 
turn, incorporated by reference the CAS Board Rules and Regulations at 48 C.F .R. 
part 9903, and FAR 52.230-6 (Nov 1999) (finding 4). These clauses have a number of 
provisions relevant to this dispute. 
FAR 52.230-2(a)(l) requires a contractor to submit a "Disclosure Statement" 
that identifies the contractor's cost accounting practices as required by 48 C.F.R. 
§ 9903.202-1 through§ 9903.202-5. It provides that the practices disclosed for the 
contract should be the same as the practices currently disclosed and applied on all 
other contracts being performed by the contractor and that contain a CAS clause. 
FAR 52.230-2(a)(2) provides that ifthe contractor changes its cost accounting 
practices, it must amend its disclosure statement. This provision thus required 
Raytheon to submit the revision to its disclosure statement that initiated this dispute 
(finding 1). This subparagraph also provides that "[i]fthe contract price or cost 
allowance of this contract is affected by such changes, adjustment shall be made in 
accordance with subparagraph (a)(4) or (a)(5) of this clause, as appropriate." 
For the voluntary unilateral changes at issue in this appeal, the contract adjustment 
requirements are contained in FAR 52.230-2(a)(4)(ii). (FAR 52.230-2(a)(4)(i) 
governs changes required by the government and (a)(5) governs failure to comply 
with a CAS or accounting practice, and are not applicable to the changes at issue.) 
FAR 52.230-2(a)(4)(ii) requires the contractor to negotiate with the contracting officer 
the terms and conditions under which a change may be made to a cost accounting 
practice but specifies that "no agreement may be made under this provision that will 
increase costs paid by the United States." FAR 52.230-2(b) provides that ifthe parties 
fail to agree on the amount of a cost adjustment, such failure will constitute a dispute 
under the CDA. (Similarly, the CAS statute provides that a failure to agree on a contract 
price adjustment is a dispute under the CDA. 41 U.S.C. § 1503(a).) 
FAR 52.230-6(a) requires the contractor to submit to the contracting officer a 
description of any cost accounting practice change, the total potential impact of the 
change on contracts containing a CAS clause, and a general dollar 
magnitude of the 
6 

change. For voluntary changes such as those at issue here, FAR 52.230-6(a)(2) 
requires the contractor to submit these materials not less than 60 days before the 
effective date of the proposed change, or such other date as the parties agree upon. In 
this appeal, Raytheon did not submit the general dollar magnitude until more than two 
years after the effective date of the changes (finding 2). 
Neither FAR 52.230-2 nor 52.230-6 specifically provides that the contracting 
officer may only attempt to recover money from the contractor if the amount is 
"material." However, 52.230-6(b) provides, somewhat obliquely, that after a 
contracting officer determination of materiality, the contractor must submit a cost 
impact proposal in sufficient detail to permit evaluation, determination, and 
negotiation of the cost impact upon each CAS-covered contract and subcontract. No 
such cost impact proposal appears in the record here. This contract clause does not 
describe the actions the contracting officer should take if he or she determines that the 
change is immaterial. Nor does it explain how the materiality provision in 52.230-6(b) 
should be applied in light of the direction in 52.230-2(a)(ii) that "no agreement may be 
made under this provision that will increase costs paid by the United States." 
B. The CAS Statute 
The CAS statute is generally described in our opinion in Raytheon II, 15-1 
BCA ii 36,024 at 175,950, 175,954. This statute authorized the CAS Board to issue 
regulations and specifically directed the CAS Board to require contractors "as a 
condition of contracting with the Federal Government to-- ... (2) agree to a contract 
price adjustment, with interest, for any increased costs paid to the contractor or 
subcontractor by the Federal Government because of a change in the contractor's or 
subcontractor's cost accounting practices." 41 U.S.C. § 1502(f). Thus, the statute 
contains a clear prohibition against the government paying "any increased 
costs" as a 
result of the contractor's changes in its cost accounting practices. The direction in 
FAR 52.230-2(a)(ii) that "no agreement may be made under this provision that will 
increase costs paid by the United States" is in harmony with the statutory bar. 
C. CAS Board Rules and Regulations 
The CAS Board followed the congressional direction in 41 U.S.C. § 1502(f) 
and issued the regulation at 48 C.F.R. § 9903.201-4, Contract Clauses (2007). At 
section 9903.201-4(a), it requires a contracting officer to insert the Cost Accounting 
Standards clause specified in 9903.201-4(a)(2), which is the same or very similar to the 
clause incorporated in the contract through FAR 52.230-2. Like FAR 52.230-2(a)(4)(ii), 
section 9903.201-4(a)(2)(A)(4)(ii) requires the contractor to negotiate with the 
contracting officer the terms and conditions under which a change may be made to a 
cost accounting practice and contains the limitation that "no agreement may be made 
under this provision that will increase costs paid by the United States." 
7 

In addition, the CAS Board has also issued the regulation at 48 C.F.R. § 9903.306, 
Interpretations (2007). This regulation expands on the contract language specified at 
FAR 52.230-2(a)(4)(ii) and the CAS regulation at§ 9903.201-4(a)(2)(A)(4)(ii). Section 
9903.306 provides: 
In determining amounts of increased costs in the 
clauses at 9903.201-4(a), Cost Accounting Standards ... the 
following considerations apply: 
( d) The contractor and the contracting officer may 
enter into an agreement as contemplated by subdivision 
(a)(4)(ii) of the Cost Accounting Standards clause at 
9903.201-4(a), covering a change in practice proposed by 
the Government or the contractor for all of the contractor's 
contracts for which the contracting officer is responsible, 
provided that the agreement does not permit any increase 
in the cost paid by the Government. [Emphasis added] 
The CAS Board has issued 19 cost accounting standards that are codified at 
48 C.F.R. §§ 9904.401 to 9904.420 (2007) (CAS 419 does not exist). Materiality is an 
important concept in these standards. As the CAS Board has stated, "[ m ]ateriality 
must be considered in applying the Cost Accounting Standards because, as a practical 
matter, the cost of an accounting application should not exceed its benefit." Cost 
Accounting Standards Board; Statement of Objectives, Policies and Concepts (May 
1992), 57 Fed. Reg. 31036-01 (13 July 1992). For example, CAS 404 entitled 
"Capitalization of Tangible Assets" requires contractors to establish and adhere to 
policies with respect to capitalization of tangible assets. 48 C.F.R. § 9904.404-10. 
Among other things, it provides that costs necessary to prepare an asset for use, 
including initial inspection and testing, must be capitalized when they are material in 
amount. 48 C.F.R. § 9904.404-50(a)(2). Similarly, in a recent case involving 
CAS 418, Allocation of Direct and Indirect Costs, the Court of Appeals for the Federal 
Circuit considered whether a contractor's materiel cost pool was governed by 
CAS 418-50(d) or (e). The court of appeals held that the test for determining the 
correct provision was whether the pool includes a material amount of the costs of 
management or supervision. Sikorsky Aircraft Corp. v. United States, 773 F .3d 1315, 
1322 (Fed. Cir. 2014). 
Due to the significance that materiality plays in the cost accounting standards, 
the CAS Board has issued a regulation at 48 C.F.R. § 9903.305 (2007) that identifies 
the factors that should be considered when determining whether costs are material or 
immaterial. Because 
Raytheon relies heavily on this regulation, we quote it at length: 
8 

In determining whether amounts of cost are material or 
immaterial, the following criteria shall be considered 
where appropriate; no one criterion is necessarily 
determinative: 
(a) The absolute dollar amount involved. The larger the 
dollar amount, the more likely that it will be material. 
(b) The amount of contract cost compared with the amount 
under consideration. The larger the proportion of the 
amount under consideration to contract cost, the more 
likely it is to be material. 
( c) The relationship between a cost item and a cost 
objective. Direct cost items, especially if the amounts are 
themselves part of a base for allocation of indirect costs, 
will normally have more impact than the same amount of 
indirect costs. 
( d) The impact on Government funding. Changes in 
accounting treatment will have more impact if they 
influence the distribution of costs between Government 
and non-Government cost objectives than if all cost 
objectives have Government financial support. 
( e) The cumulative impact of individually immaterial 
items. It is appropriate to consider whether such impacts: 
(1) Tend to offset one another, or 
(2) Tend to be in the same direction and hence to 
accumulate into a material amount. 
( t) The cost of administrative processing of the price 
adjustment modification shall be considered. If the cost to 
process exceeds the amount to be recovered, it is less likely 
the amount will be material. 
48 C.F.R. § 9903.305. 
The phrasing of section 9903 .305 indicates that application of the criteria are 
mandatory ("the following criteria shall be considered"), at least where they are 
"appropriate." That being said, it is not entirely clear that the CAS Board intended 
9 

this regulation be applied to increased costs arising from voluntary cost accounting 
changes. As we observed above, the CAS Board has issued regulations that govern 
voluntary accounting changes, 48 C.F.R. § 9903.201-4, Contract Clauses, and 
§ 9903.306, Interpretations. Notably, the CAS Board did not insert a materiality test 
into these regulations. 
D. The FAR 
The FAR Councils have issued regulations at FAR Subpart 30.6 governing 
CAS Administration. These regulations specify the steps that the "cognizant federal 
agency official" (who, in this case, is the contracting officer (app. mot., ex. A at 59)) 
must follow when a contractor makes a voluntary change in its cost accounting 
practices. They require a contracting officer to promptly evaluate a contractor's 
general dollar magnitude proposal and to conclude the cost impact process with no 
contract adjustments if he or she determines that the cost impact is immaterial. 
FAR 30.604(t); FAR 30.602(c)(l). 
In addition, FAR 30.602(a) provides that in determining materiality, the 
contracting officer "shall use the criteria in 48 CFR 9903.305." 1 This section requires 
the contracting officer to document her rationale if she determines that the cost impact 
is immaterial. FAR 30.602(c)(2). By contrast, ifthe contracting officer determines 
that the impact is material, it merely provides that this determination must "be based 
on adequate documentation." FAR 30.602(b)(2). 
II. Analysis of the Contracting Officer's Actions 
The contract provided that Raytheon could "propose[]" changes to its cost 
accounting practices, FAR 52.230-6, and provided that it must "negotiate" the terms 
and conditions of the change with the contracting officer, FAR 52.230-2(a)(4)(ii). 
As part of Raytheon's proposed change, it was supposed to submit, among other 
things, a general dollar magnitude of the change 60 days before the effective date. 
FAR 52.230-6(a). Raytheon did not submit the general dollar magnitude for more 
than two years after the changes went into effect (finding 2). From reviewing the 
record, rather than a "proposal" followed by a "negotiation", it appears that Raytheon 
more or less presented the government with afait accompli. The government, 
however, has not contended that Raytheon's failure to comply with the contract 
constituted a breach. Rather, counsel for the government stated during oral argument 
that these events are the norm and that DCMA more or less accepts them (tr. 1/26-27). 
1 Prior to April 2005, this regulation required the contracting officer to use section 
9903.305 in determining materiality, but provided that he or she "may forego" 
adjusting contracts if the amount is immaterial. 
10 

One issue that remained open after Raytheon II is whether it was proper for the 
FAR Councils to require a materiality analysis in light of the clear statutory language 
barring payment of any increased costs. Raytheon II, 15-1BCAiJ36,014 at 175,959-60. 
But the government has not contended that the regulations are inconsistent with the 
statute and therefore illegal. Accordingly, we will not analyze an argument that the 
government has not raised and will assume that FAR 30.602 and 30.604 were binding 
on the contracting officer. 
FAR 30.602 provides that the use of the criteria in 48 CFR § 9903.305 is 
mandatory ("shall use"). Similarly, section 9903.305 is also phrased in mandatory 
language ("the following criteria shall be considered"). To be sure, the contracting 
officer possesses a great deal of discretion because the criteria are to be considered 
"where 
appropriate" and "no one criterion is necessarily determinative." Because "no 
one criterion is necessarily determinative" it follows that one criterion could, in fact, be 
determinative. Thus, a contracting officer presumably could consider all of these factors 
and determine that the amount of the cost impact so outweighs all the other factors that it 
alone is determinative. That is not what happened in this appeal, however. 
The contracting officer failed to consider the factors in section 9903.305, other 
than the dollar value of the cost impact (finding 13). We do not agree with the 
contracting officer that the other criteria are inapplicable. We will discuss two of them 
to illustrate. First, section 9903 .305(b) requires consideration of the "amount of 
contract cost compared with the amount under consideration." The parties appear to 
agree that this would require a comparison of the amount that the government is 
seeking to recover versus the total value of the contracts impacted by the change (app. 
mot. at 12-13; gov't mot. at 18). While both the original impact amount, $142,800, 
and even the reduced amount of $56, 146 appear to be significant amounts of money, 
they pale in comparison to the vastness of the relationship between Raytheon and the 
government. 
Both parties have provided us with information that defines this relationship. 
Raytheon has informed us that its contract base (total contract costs before general 
and administrative costs are included) for each year from 2004 to 2007 was in excess 
of $3 billion, meaning that the cost impact will be an increase of less than 0.005% 
(app. mot. at 13, 15). Similarly, the government has informed us that the accounting 
changes "impact hundreds if not thousands of contracts" (gov't mot. at 18). Assuming 
for the moment that the changes impacted 1,000 contracts, the cost impact was an 
average of about $142 per contract using the base amount in the contracting officer's 
final decision (see finding 4). Further, because this amount was spread over four 
years, the impact may have been as low as $36 per contract, per year. 
In its motion, the government concedes that the value of these contracts is large 
when compared to the amount of money at issue in this appeal (gov't mot. at 18). 
11 

However, it contends that the contracting officer "correctly concluded that this 
criterion was inapplicable to her materiality analysis since this appeal involves the 
repayment of a debt to the Government resulting from the increased costs and not the 
direct impact upon any one particular contract" (id.). But the government does not cite 
to anything in the record in support of this statement. The contracting officer did not 
state this in her deposition or her affidavit. Moreover, there is nothing in the 
regulations that indicates that the government should be excused from the obligation to 
consider materiality if the "debt" is spread out over many contracts as it is here. 
Second, section 9903.305(t) requires the contracting officer to consider the cost 
of administrative processing of the price adjustment modification. There is nothing in 
the record that identifies the amount of the government's administrative costs, nor is 
there anything that specifies how such costs are calculated. Because this work 
involves actions by not only contracting personnel but also attorneys, auditors and 
their respective supervisors, there is reason to conclude that the costs involved would 
be substantial. It seems possible to us that a contracting officer who balanced the 
administrative costs with the small annual cost per contract might conclude that the 
costs were not material. It is also entirely possible that the contracting officer would 
have concluded that they were material had she considered this factor. 
In reviewing discretionary determinations by a contracting officer, the Federal 
Circuit has held that it is appropriate to consider: ( 1) evidence of whether the 
government official acted with subjective bad faith; (2) whether the official had a 
reasonable, contract-related basis for her decision; (3) the amount of discretion given 
to the official; and ( 4) whether the official violated a statute or regulation. Campbell 
Plastics Engineering & Mfg., Inc. v. Brownlee, 389 F.3d 1243, 1250 (Fed. Cir. 2004) 
(citing McDonnell Douglas Corp. v. United States, 182 F.3d 1319, 1326 (Fed. Cir. 
1999)). 
There is no evidence in the record of bad faith by the contracting officer. 
However, we consider the third and fourth prongs of the test to be the most applicable. 
The contracting officer violated the requirements of FAR 30.602 by failing to consider 
the criteria in 48 C.F.R. § 9903.305 in determining whether the amounts at issue were 
material. While section 9903.305 provides the contracting officer with discretion in 
determining the criteria that are relevant and the weight to be given to them, this 
discretion does not extend to simply disregarding them. 
Accordingly, we conclude that the contracting officer abused her discretion in 
failing to analyze the materiality of the cost impacts at issue. Because the government 
has failed to demonstrate that this error was harmless, the government cannot recover 
the cost increase. 
12 

This appeal is sustained. 
Dated: 9 August 2016 
I concur 
MARK N. STEMPLER 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
CONCLUSION 
MICHAEL N. O'CONNELL 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
I concur 
RICHARD SHACKLEFORD 
Administrative 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 No. 58068, Appeal of 
Raytheon Company, Space & Airborne Systems, rendered in conformance with the 
Board's Charter. 
Dated: 
13 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals