DOCUMENT FOR PUBLIC RELEASE                                                                                           
The decision issued on the date below is subject to an ASBCA Protective Order.          
This version has been approved for public release. 
 
ARMED SERVICES BOARD OF CONTRACT APPEALS 
 
Appeals of - )  
 )  
IAP Worldwide Services, Inc. ) ASBCA Nos. 62638, 63879 
 )  
Under Contract No. W912D1-05-D-0011 et al. )  
   
APPEARANCES FOR THE APPELLANT: J. Alex Ward, Esq. 
R. Locke Bell, Esq. 
Caitlin A. Crujido, Esq. 
    Morrison & Foerster LLP 
    Washington, DC 
 
APPEARANCES FOR THE GOVERNMENT: Samuel W. Morris, Esq. 
    DCMA Chief Trial Attorney 
 Amelia R. Lister-Sobotkin, Esq. 
Adrianne L. Goins, Esq. 
    Trial Attorneys 
    Defense Contract Management Agency 
    Chantilly, VA 
   
OPINION BY ADMINISTRATIVE JUDGE EYESTER 
ON CROSS MOTIONS FOR SUMMARY JUDGMENT 
 
The issue in this appeal is how to treat legal costs appellant IAP Worldwide 
Services, Inc. (IAP) incurred defending lawsuits arising out of its agreement with a 
former local sponsor for business operations in Kuwait.  IAP contends the legal 
defense costs are allowable litigation costs and can therefore be included in IAP’s 
incurred cost proposals.  The Defense Contract Management Agency (DCMA) 
contends these costs are expressly unallowable pursuant to Federal Acquisition 
Regulation (FAR) 31.205-47(f)(5), because they were costs incurred in connection 
with the defense or prosecution of a lawsuit or appeal concerning an IAP joint venture 
(or other similar type arrangement). 
 
The parties have filed cross motions for summary judgment.  Based on the 
following, we grant DCMA’s motion and conclude the costs are expressly 
unallowable. 
  

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The decision issued on the date below is subject to an ASBCA Protective Order.          
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2 
STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION 
 
The Agreement with Mr. Al Ghanem1 
 
1.  IAP has supported the U.S. military in the Middle East for several years (JSF 
¶ 1).  As relevant here, the United States and its allies invaded Iraq on March 19, 2003.  
(JSF ¶ 3) 
 
2.  Just prior to this, on February 10, 2003, IAP entered into an agreement titled 
“Joint Venture Contract” (JVC) with Mr. Adel Y. Al Ghanem, of Kuwait (JSF ¶ 4).  
The preamble, which is the “essence of the JVC,” explains that:   
 
[Mr. Al Ghanem] has extensive expertise and [is] capable 
of providing local business, administrative and logistical 
support and having [a] business reputation renowned in 
Kuwait. . . . [IAP] has expertise in providing and fulfilling 
the various suppl[y] needs of [the] US [A]rmy, in addition 
to their previous well-known works with the US Army 
around the world. . . .   
 
(R4, tab 1 at 1-2)
2 
 
3.  The agreement iterated that IAP and Mr. Al Ghanem “agreed to establish a 
Joint Venture Company, with limited liability, to undertake various supply, support 
and services needs in particular of the US Army or others in Kuwait & Iraq” (JSF ¶ 4).  
As described in the preamble, Mr. Al Ghanem was to provide “any possible local 
administrative legal and logistical support to the JVC” (JSF ¶ 6; R4, tab 1 at 2).  IAP 
was “responsible for the company’s management, professionally, administratively and 
technically” (JSF ¶ 7).  In addition, IAP, via its U.S. office, was to support the 
operations and meet the U.S. Army’s requirements for staff and travel within the 
United States and other countries (R4, tab 1 at 2). 
 
4.  Ownership of the joint venture company was “split equally between the two 
parties” on a ratio of 51/49, with 51 percent to Mr. Al Ghanem and 49 percent to IAP 
(JSF ¶ 4).  All contracts were to be issued in IAP’s name (JSF ¶ 8).  This was not 
meant to “jeopardize” Mr. Al Ghanem’s profit (R4, tab 1 at 3). 
 
5.  In addition, all payments from the U.S. Government were to be paid to IAP 
 
1 The parties used the spelling Al Ghanem and noted that alternative spellings included 
Al Ghanim and Al-Ghanim (Joint Stipulation of Facts (JSF) ¶ 4 n.1). 
2 Rule 4 references are to the Bates-stamped page numbers.  

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3 
“and thereafter credited to the JVC” (JSF ¶ 9).  Specifically, the agreement required 
“[p]rofits accrued to the JVC [] be disbursed upon receipt of payment from each 
contract minus 10% which will be deposited in the account of the JVC” which was to 
be established (R4, tab 1 at 3; JSF ¶ 9).  The remaining profits were to be disbursed to 
IAP and Mr. Al Ghanem “upon receipt of payment from each contract” (JSF ¶ 9).  As 
noted, since IAP was to provide management support, it was to receive 5 percent “from 
the net profit towards such support and costs related to [the] JVC Business” (JSF ¶ 7).  
Both IAP and Mr. Al Ghanem would be reimbursed for their operational expenses as 
well as any money advanced by a party (JSF ¶ 9; R4, tab 1 at 2).  The operational 
expenses were to be charged to the joint venture prior to the disbursement of any 
profits (R4, tab 1 at 3).  The agreement was silent as to the sharing of losses (JSF ¶ 10). 
 
6.  According to the agreement, Kuwaiti law governed “any disputes that may 
arise relating to this contract and the Kuwaiti court only are competent” (JSF ¶ 11). 
 
7.  On May 2, 2004, IAP and Mr. Al Ghanem amended their agreement (JSF 
¶ 13).  The amendment removed and replaced the paragraph stating IAP would receive 
5 percent net profits for the support and costs of the joint venture.  The new paragraph 
explained that IAP would receive 5 percent of all costs of the joint venture as a general 
administration (G&A) fee for reimbursement of support and costs related to the joint 
venture’s contracts.  (R4, tab 2 at 5) 
 
8.  The amendment also added a paragraph to provide that IAP would be paid a 
“management fee” for contracts performed in Kuwait (JSF ¶ 14).  From February 10, 
2003 through March 31, 2004, IAP was to receive a management fee of 5 percent and 
thereafter, a fee of 20 percent (R4, tab 2 at 5). 
 
9.  The amendment changed the paragraph on profits, as well.  It required IAP 
pay the distributions of net profits within 30 days of IAP’s receipt of payment, and that 
IAP place 10 percent of each distribution into the joint venture’s account.  At the end 
of each year, funds in the joint venture account exceeding the amount required under 
Kuwaiti law were to be distributed as net profit.  The joint venture account was 
controlled, or to be controlled, by both parties.  (R4, tab 2 at 6) 
 
10.  The amendment did not change the ownership structure of the joint venture 
(see R4, tab 2 at 6).  It clarified that Mr. Al Ghanem received 51 percent of the joint 
venture’s net profit and IAP received 49 percent.  However, as noted above, IAP still 
received the G&A and management fees.  In sum, the amendment defined net profits 
“as gross profit less the [G&A] Fee and Management Fee, which were to be paid to 
IAP.”  (JSF ¶ 15) 
 
11.  Further, per the amendment, IAP was to provide Mr. Al Ghanem 
supplemental schedules that were part of the audited financial statements of the joint 

DOCUMENT FOR PUBLIC RELEASE                                                                                           
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4 
venture, and unaudited financial statements (R4, tab 2 at 6).  The amendment also 
clarified that all the contracts of the joint venture issued in IAP’s name included those 
to provide supplies, support and services for the U.S. Army “or others in Kuwait and 
Iraq” (id. at 5).  It also included those performed “directly or indirectly” by IAP (id. 
at 6). 
 
12.  The amendment required “[a]ny and all amendments or modifications to 
the [Joint Venture] Contract . . . be in writing and signed by both parties” (JSF ¶ 16).  
The amendment also added a new paragraph, stating as follows and in relevant part:   
 
The parties undertake to execute appropriate amendments 
to the Memorandum of Association of the limited liability 
company (Joint Venture Company) in terms of the draft 
attached herewith.  The parties shall sign the amendments 
to the Memorandum of Association in the presence of the 
Notary Public within two (2) months of the date of this 
amendment.  This amendment and the Joint Venture 
Contract dated February 10, 2003, constitutes the entire 
agreement between the parties.  In the case of [] any 
discrepancy between [] the Joint Venture Contract as 
hereby amended and the Memorandum of Association of 
the limited liability company, the provisions of the Joint 
Venture Contract as amended hereby shall prevail and be 
binding upon the parties. 
 
(R4, tab 2 at 7)  IAP and Mr. Al Ghanem did not execute any other amendments or 
modifications to the agreement (JSF ¶ 17).  There is no copy of the Memorandum of 
Association of the limited liability company in the record. 
 
IAP Contracts 
 
13.  The record includes examples of IAP contracts performed in Kuwait.  For 
example, under its “Heavy Lift” contract (Contract No. W912D1-05-D-0011), issued 
on April 15, 2005, IAP transported supplies and equipment from Kuwait to Iraq for the 
U.S. Army.  Pursuant to its Air Force Contract Augmentation Program (AFCAP) 
contract (Contract No. F08637-02-D-6999), IAP performed construction, operations, 
and maintenance services in Kuwait for the U.S. Air Force.  (JSF ¶ 1)  The 
representative delivery order for the AFCAP contract included a cost plus award fee 
contract line item number and the allowable cost and payment clause, FAR 52.216-7 
(R4, tab 38 at 1130, 1175). 
 
14.  At least some of IAP’s contracts incorporated FAR clause 52.236-7, 

DOCUMENT FOR PUBLIC RELEASE                                                                                           
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5 
Permits and Responsibilities.  FAR 52.236-7 states, in part:   
 
The Contractor shall, without additional expense to the 
Government, be responsible for obtaining any necessary 
licenses and permits, and for complying with any Federal, 
State, and municipal laws, codes, and regulations 
applicable to the performance of the work. 
 
(JSF ¶ 2; R4, tab 3 at 102)  Likewise, the AFCAP order included a “Host Nation 
Requirements” clause stating IAP would be responsible for obtaining all necessary 
licenses, permits, visas and complying with laws, codes and regulations of the host 
country (R4, tab 38 at 1191). 
 
15.  And IAP’s Heavy Lift contract included the following requirement:   
 
2.4 Scope:  The contractor will provide the leasing/rental of 
heavy lift equipment for movement of equipment, cargo 
and personnel within the theater of operations, up to 1000 
kilometers from Camp Arifjan.  All vehicles, associated 
equipment and services provided shall be safely operable; 
shall meet the intended functions and operations of like 
new conditions; and be in accordance with this [performance 
work statement], the contract and local laws and regulations. 
 
(JSF ¶ 2; R4, tab 3 at 69)  The contract also required IAP to have an established site 
for conducting operations and dispatching trucks located within 60 kilometers from 
Camp Arifjan (R4, tab 3 at 72).  The contract included Defense Federal Acquisition 
Regulation Supplement (DFARS) 252.233-7001, CHOICE OF LAW (OVERSEAS) 
(JUNE 1997), which explained that the “contract shall be construed and interpreted in 
accordance with the substantive laws of the United States of America” (R4, tab 3 
at 107). 
 
The End of JVC and the New Agreement 
 
16.  On September 30, 2005, IAP sent a letter titled “Notice of Termination for 
Joint Venture Contract” to Mr. Al Ghanem (JSF ¶ 18).  The letter stated that it “serves 
as an official notice to you that IAP Worldwide Services is hereby terminating the 
Contract effective September 30, 2005” (JSF ¶ 18).  Further, the letter stated IAP’s 
position that it “is not a shareholder in any entity that is owned by” Mr. Al Ghanem or 
any of his companies (app. supp. R4, tab 34). 
 
17.  IAP provided a proposed “Transition and Termination Agreement” to 
Mr. Al Ghanem, but it was never executed by the parties (JSF ¶ 18).  According to the 

DOCUMENT FOR PUBLIC RELEASE                                                                                           
The decision issued on the date below is subject to an ASBCA Protective Order.          
This version has been approved for public release. 
 
6 
unexecuted agreement, the JVC identified in the parties’ signed agreement “never 
formed.”  The unexecuted agreement contained a provision that Mr. Al Ghanem 
would, for a maximum of 90 days after termination:  continue to sponsor the 
residence/visit visas and work permits for IAP’s employees; keep the registration of 
IAP’s leased and purchased vehicles valid; keep the leases and utilities for IAP’s 
office space and IAP employees’ housing in its name; and keep IAP’s bank account 
with the National Bank of Kuwait in Kuwait in its name and refrain from using it in 
any manner.  Further, with respect to the bank account, IAP wanted Mr. Al Ghanem to 
allow IAP to withdraw all of its money and then change the name of the account 
holder to delete any reference to the term IAP.  (App. supp. R4, tab 41 at A-05)  IAP 
also wanted Mr. Al Ghanem to change the name of the company he had formed with 
Mr. Ahmad A. Al Ghanem, which was called “Al Ghanim IAP General Trading/Adel 
Al Ghanim & Partner Ltd,” to delete the reference to IAP (id. at A-07). 
 
18.  IAP then entered into an agreement on October 1, 2005, with Abdulredha 
A. Khoursheed to serve as IAP’s local sponsor in Kuwait (JSF ¶ 19).  Pursuant to the 
agreement, Mr. Khoursheed would act as IAP’s service agent in Kuwait and would 
receive remuneration based on a varying percentage, ranging from two percent to one-
half of a percent, of gross revenues for cost plus contracts awarded to IAP in Kuwait 
(JSF ¶ 19).  The agreement was titled a “Service Agency Agreement” (R4, tab 4 
at 110).  In the agreement, Mr. Khoursheed was referred to as an agent or service 
agent, appointed by IAP to provide certain services (R4, tab 4 at 110). 
 
19.  Pursuant to the agreement, IAP would pay Mr. Khoursheed a percentage of 
gross revenues based on the type and value of the contract (e.g., 2 percent of gross 
revenues of cost plus contract valued up to $100 million) (R4, tab 4 at 111).  The 
agreement explains that Mr. Khoursheed is an independent contractor and not an 
employee of IAP and could not bind IAP or act for it (R4, tab 4 at 120).  The parties 
extended the agreement via an amendment dated October 1, 2007 (R4, tab 10). 
 
IAP Litigation 
 
20.  Meanwhile, on March 26, 2006, Mr. Al Ghanem initiated litigation in the 
Kuwait Court of First Instance against IAP alleging breach of contract (referred to by 
the parties as the Kuwait Litigation) (JSF ¶ 20).  Throughout that litigation, IAP 
argued that IAP and Mr. Al Ghanem “agreed to establish a company with limited 
liability for a joint venture,” but disputed that such company was ever formed between 
the parties (JSF ¶ 20). 
 
21.  On November 16, 2016, the Kuwait Court of First Instance found in favor 
of Mr. Al Ghanem and issued a judgment against IAP (JSF ¶ 21).  According to the 
translated Kuwait judgment, Mr. Al Ghanem stated he had created a limited liability 

DOCUMENT FOR PUBLIC RELEASE                                                                                           
The decision issued on the date below is subject to an ASBCA Protective Order.          
This version has been approved for public release. 
 
7 
company with his son.3  IAP wished to replace Mr. Al Ghanem’s son in the limited 
liability company as set forth in the amendment to the JVC.  However, IAP did not 
officially record/notarize the contract dated 05/02/2004 with the Real Estate 
Registration and Notarization Department, which inferred IAP wished to withdraw 
from the joint venture agreement.  (R4, tab 12 at 180) 
 
22.  The Kuwaiti judgment explained that under Kuwaiti law, a company “is a 
contract under which two persons or more undertake to contribute in a financial 
enterprise either through funds or work to share the generated profit or loss” (R4, 
tab 12 at 184).  The court also stated that pursuant to Kuwaiti law a “joint venture is a 
commercial partnership formed between two person or [more] without being a 
corporate body” but the partners have recourse against each other regarding the 
partnership business (R4, tab 12 at 185).  The court found the JVC was evidence the 
parties “agreed to form a joint venture partnership” despite IAP’s arguments that the 
parties had only conducted negotiations.  As the parties never actually formed a 
separate limited liability company, the court relied on the “joint venture partnership 
agreement.”  (R4, tab 12 at 186) 
 
23.  IAP and Mr. Al Ghanem both appealed to the Kuwait Court of Appeal 
(JSF ¶ 22).  On March 22, 2017, the Kuwait Court of Appeal found IAP liable to 
Mr. Al Ghanem in the amount of $78,779,449 U.S. dollars, plus reasonable expenses, 
attorney fees, and post-judgment interest (JSF ¶ 22).  The appellate court explained 
further its law on commercial companies, notably, that a joint venture is a commercial 
partnership between two or more persons that does not have legal personality and is 
not valid in regard to third parties (R4, tab 12 at 224).  However, the partners have 
recourse against each other per the terms of their agreement.  Further, the court noted 
that if the agreement does not provide for how losses are distributed, “such losses will 
be divided according to the agreed upon percentage in terms of profits.”  (Id. at 225) 
 
24.  On January 24, 2018, Mr. Al Ghanem initiated proceedings in state court in 
Florida for recognition of the Kuwaiti judgment (referred to by the parties as the 
Florida Litigation) (JSF ¶ 23).  In its pleadings, IAP noted that it had collaborated with 
Mr. Al Ghanem for almost 2.5 years, for which he “was duly compensated” (R4, 
tab 19 at 484).  The Florida court concluded the Kuwait Judgment should be 
recognized (gov’t reply, ex. A).  IAP has now defended itself in legal proceedings 
 
3 There are two versions of the Kuwaiti court’s rulings in the Rule 4 file.  We 
understand the variations in terminology are due to the translations.  We 
reference the version utilized by the parties. 

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8 
brought by Mr. Al Ghanem in both Kuwait and the United States (JSF ¶ 24).4 
 
IAP’s Consolidated Financial Reports 
 
25.  In 2017, IAP provided its consolidated financial report to DCMA (R4, 
tab 13 at 303).  IAP explained its various government contracts, noting those that were 
typically cost plus (R4, tab 13 at 312).  Upon review of the report, in November 2017, 
DCMA stated the legal costs with Mr. Al Ghanem were unallowable pursuant to 
FAR 31.205-47(f)(5), because they were costs incurred in connection with the defense 
or prosecution of a lawsuit or appeal concerning an IAP joint venture.  As a result, 
DCMA adjusted IAP’s pool costs for provisional billing rates.  (Id. at 300)  Earlier, in 
2012, IAP had also classified such costs as unallowable but later reclassified them as 
allowable (R4, tab 14 at 338). 
 
26.  On February 7, 2018, the Defense Contract Audit Agency (DCAA) advised 
the contracting officer that it considered the Kuwait litigation costs expressly 
unallowable pursuant to FAR 31.205-47(f)(5)(i).  Specifically, DCAA concluded the 
agreement between IAP and Mr. Al Ghanem was a joint venture arrangement because 
there was a shared interest as opposed to a services or sponsorship agreement.  (R4, 
tab 17 at 349) 
 
27.  Notwithstanding DCAA’s advice, on August 15, 2018, the contracting 
officer informed IAP that its legal costs related to the Al Ghanem litigation were “not 
expressly unallowable,” and if included in IAP’s certified cost proposals, would be 
“subject to normal audit procedures for reasonableness and allocability” (JSF ¶ 25). 
 
28.  On October 22, 2018, DCMA informed IAP that its “position has changed 
based upon additional information received during a meeting with” IAP executives.  
The government further stated that “since the parties operated under the terms of Joint 
Venture Contract (the Contract) as if a Joint Venture had been formed, and no other 
formal agreement was signed between the parties, litigation costs associated with this 
Contract are expressly unallowable under . . . FAR 31.205-47(f)(5)(i).”  (JSF ¶ 26; R4, 
tab 25 at 910)  On November 9, 2018, the contracting officer concurred with DCMA’s 
conclusions and also noted that any potential settlement costs were expressly 
unallowable (R4, tab 26).  DCMA repeated its position in a subsequent letter on 
April 16, 2019, asserting the legal costs are expressly unallowable because they are 
“directly tied to” the termination of IAP’s agreement with Mr. Al Ghanem (JSF ¶ 27). 
 
 
4 IAP and Mr. Al Ghanem were also involved in litigation in the U.S. District Court for 
the Southern District of New York.  IAP’s claims in these consolidated appeals 
do not include claims for legal costs arising from that litigation.  (JSF ¶ 24 n.2) 

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The decision issued on the date below is subject to an ASBCA Protective Order.          
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9 
The Claims and Contracting Officer Final Decisions (COFDs) 
 
29.  On November 19, 2019, IAP submitted a certified claim to the contracting 
officer for two related claims:  (1) payment of $4,610,092 in legal defense costs IAP 
incurred in Fiscal Years (FYs) 2016-2019, and (2) “for contract interpretation finding 
that payments pursuant to IAP’s potential settlement with Al Ghanem will be 
allowable” (JSF ¶ 28).5  IAP attached a declaration of Mr. Terry DeRosa, former 
Chief Executive Officer of IAP Worldwide Services, Inc., dated November 19, 2019, 
to its claim.  The declaration was made under penalty of perjury.  (JSF ¶ 29)  It 
primarily addresses IAP’s selection of counsel and handling of the litigation (R4, 
tab 38 at 1467-71). 
 
30.  According to the claim, the costs for the litigation are reasonable, allocable 
to IAP’s government contracts as G&A costs necessary to its overall operation, 
consistent with the Cost Accounting Standards (CAS), and not unallowable under its 
contracts or FAR subpart 31.2.  IAP wanted these amounts included in its G&A for 
FYs 2016-2019.  (R4, tab 32 at 942)  IAP disputed that it formed a joint venture with 
Mr. Al Ghanem arguing it only adopted Kuwaiti nomenclature when titling the 
agreement “Joint Venture Contract” (id. at 943). 
 
31.  IAP argued the costs were reasonable because it had to defend itself in 
lengthy Kuwaiti and United States proceedings and conducted research before 
selecting counsel, ensuring it negotiated favorable terms with counsel and experts (R4, 
tab 32 at 946).  IAP argued the costs were not unallowable pursuant to 
FAR 31.205-47(f), because the agreement with Mr. Al Ghanem was not a joint venture 
agreement or similar arrangement as there were no provisions for joint control or 
shared losses as required for a joint venture under U.S. law (id. at 948).  IAP also 
argued that it never formed an entity to act on its behalf as the prime contractor as the 
agreement stated only IAP would be the contracting party (id. at 949). 
 
32.  IAP also argued the agreement does not evidence a teaming arrangement as 
no new entity was formed to act as a potential prime contract.  According to IAP, there 
was no prime/subcontractor relationship formed either as Mr. Al Ghanem was hired to 
assist with multiple contracts and not on one particular government contract.  
Similarly, IAP argues the agreement does not evidence a “similar arrangement of 
shared interest,” which it believes is a term that should be narrowly construed.  (R4, 
tab 32 at 950) 
 
33.  Finally, IAP argued its costs incurred are allowable because, pursuant to 
 
5 Pursuant to a May 14, 2024 Order, based on the parties’ joint stipulation, the second 
claim issue was dismissed.  As such, we will not discuss the issue in detail in 
the decision. 

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10 
FAR 31.205-47(f), they were incurred as a result of the compliance with specific terms 
and conditions of the contract.  Therefore, assuming arguendo the agreement was a 
joint venture agreement, this exception would apply.  According to IAP, its 
government contracts required it comply with Kuwaiti law to perform the work and 
this required IAP operate through a local agent, in this case Mr. Al Ghanem.  (R4, 
tab 32 at 951)  Specifically, IAP’s contracts included FAR 52.236-7, which required 
IAP obtain any necessary licenses and permits; and some included requirements to 
comply with local license and permit requirements, labor laws, taxes and immigration 
requirements, environmental rules, bond and insurance requirements, etc. (id. 
at 951-52).  Further, IAP contended that Kuwaiti law required IAP engage a local 
agent to operate in Kuwait (R4, tab 32 at 952 quoting Article 23 of Kuwaiti 
Commercial Law (Law No. 15 of 1960, as amended by Law No. 68 of 1980)) (id. 
at 952). 
 
34.  The contracting officer issued a final decision on those claims on May 18, 
2020 (the first COFD).  The first COFD denied IAP’s claim for legal defense costs as 
unallowable pursuant to FAR 31.205-47(f)(5)(i) because the costs were incurred in 
connection with litigation arising from an agreement or contract that constitutes a joint 
venture or similar arrangement of shared interest.  The first COFD also found the costs 
unreasonable and therefore unallowable pursuant to FAR 31.201-3 and FAR 31.201-2, 
because “IAP’s decision to enter into the JV Contract with Al Ghanem on unfavorable 
terms – and then to breach that contract – was not the conduct of a prudent business and 
does not reflect generally accepted sound business practices.”  (JSF ¶ 30)
6  On 
August 12, 2020, IAP filed a notice of appeal with the Board concerning this COFD, 
which we docketed as ASBCA No. 62638. 
 
35.  IAP’s costs related to the Florida Litigation continued through FY 2023 
(JSF ¶ 31).  IAP submitted another certified claim on January 30, 2024, for payment of 
$8,408,395.82 in legal defense costs incurred in FYs 2020-23.  This represents IAP’s 
calculation of the allocation to IAP’s cost-type contracts of IAP’s total legal defense 
costs for the Kuwait and Florida Litigations in FYs 2020-23, which amounted to 
$12,357,732.  (JSF ¶ 32)  The claim included the same legal basis as the prior one for 
such costs (R4, tab 38 at 995-1006).  IAP attached the same declaration of 
Mr. Terry DeRosa, former Chief Executive Officer of IAP Worldwide Services, Inc., 
dated November 19, 2019, and made under penalty of perjury, to its claim (JSF ¶ 33). 
 
36.  On March 12, 2024, the contracting officer issued a final decision (the 
second COFD) disallowing IAP’s claim for payment for legal defense costs IAP 
 
6 The first COFD also explained that IAP’s request for a final decision regarding a 
potential settlement with Mr. Al Ghanem was not a valid claim because the costs 
had not been incurred and IAP had not presented a certified claim for a sum 
certain (JSF ¶ 30). 

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11 
incurred in FYs 2020-23 defending itself in the Kuwait and Florida litigation arising 
out of its agreement with Mr. Al Ghanem.  The second COFD denied IAP’s claim for 
legal defense costs as unallowable pursuant to FAR 31.205-47, and unreasonable and 
therefore unallowable pursuant to FAR 31.201-2 and FAR 31.201-3.  (JSF ¶ 34) 
 
37.  Specifically, in the second COFD, the contracting officer noted that “[t]he 
JV Contract states that IAP and Al Ghanem intended to form a Joint Venture Company 
that would be jointly owned, and to share profits from IAP’s contracts,” and concluded 
that “IAP clearly did form an agreement with Al Ghanem to establish a separate 
company that was jointly owned and operated for their mutual benefit.”  The 
contracting officer concluded that IAP’s legal costs are unallowable because “the JV 
Contract constitutes a joint venture under FAR 31.205-47(f)(5) or, alternatively, a 
similar arrangement of shared interest.”  The contracting officer also again concluded 
that the costs were unreasonable and therefore unallowable pursuant to FAR 31.201-2 
and FAR 31.201-3, because “IAP’s decision to enter into the JV Contract with Al 
Ghanem on unfavorable terms – and then to breach that contract – was not the conduct 
of a prudent business and does not reflect generally accepted sound business 
practices.”  (JSF ¶ 35)
7 
 
38.  On April 18, 2024, IAP filed an appeal with the Board concerning the 
second COFD.  The Board docketed the appeal as ASBCA No. 63879 and 
consolidated it with ASBCA No. 62638.  See April 23, 2024 Notice of Docketing. 
 
DECISION 
 
Summary judgment is appropriate when there is no genuine issue of material 
fact and the moving party is entitled to judgment as a matter of law.  Anderson v. 
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).  When considering cross-motions 
for summary judgment, we “evaluate each motion on its own merits, taking care in 
each instance to view the evidence in favor of the non-moving party.”  Almanza v. 
United States, 935 F.3d 1332, 1337 (Fed. Cir. 2019) (citing Anderson, 477 U.S. 
at 255).  However, “[t]he Government has the burden of proof in establishing the 
unallowability (by operation of specific contract provision or regulation) of a cost.”  
Lockheed Martin Western Dev. Lab’ys, ASBCA No. 51452, 02-1 BCA ¶ 31,803 
at 157,102 (citations omitted). 
 
The issues presented here are interpretation of the pertinent regulation 
(FAR 31.205-47(f)) and the JVC.  Interpretation of a regulation is a question of law 
appropriate for resolution by summary judgment.  BAE Sys. Info., ASBCA No. 44832, 
 
7 The government did not seek penalties because IAP excluded the costs at issue here 
from its incurred costs submissions and has sought reimbursement via these 
claims and appeals (gov’t mot. at 7 n.4). 

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01-2 BCA ¶ 31,495 at 155,522 (citing Perry v. Martin Marietta Corp., 47 F.3d 1134, 
1137 (Fed. Cir. 1995); Riverside Research Inst. v. United States, 860 F.2d 420, 422 
(Fed. Cir. 1988)).  Likewise, contract interpretation is a question of law that is 
generally amenable to summary judgment.  Varilease Tech. Grp., Inc. v. United States, 
289 F.3d 795, 798 (Fed. Cir. 2002) (citations omitted). 
 
FAR 31.205-47(f), Joint Ventures, Teaming Arrangements and  
other Similar Arrangements 
 
FAR 31.204(a), explains that “[c]osts are allowable to the extent they are 
reasonable, allocable, and determined to be allowable under 31.201, 31.202, 31.203, 
and 31.205.”  FAR 31.205-47, Costs Related to Legal and Other Proceedings, explains 
that certain of these costs are either allowable or unallowable.  Pertinent here, 
FAR 31.205-47(f), states that the following costs are “unallowable if incurred in 
connection with the following:   
 
(5) Costs of legal, accounting, and consultant services and 
directly associated costs incurred in connection with the 
defense or prosecution of lawsuits or appeals between 
contractors or subcontractors arising from either—  
 
(i) An agreement or contract concerning a teaming 
arrangement, a joint venture, or similar arrangement of 
shared interest; or  
 
(ii) Dual sourcing, coproduction, or similar programs, are 
unallowable, except when—  
 
(A) Incurred as a result of compliance with specific terms 
and conditions of the contract or subcontract or written 
instructions from the contracting officer; or  
 
(B) When agreed to in writing by the contracting officer. 
 
FAR 31.001, defines an expressly unallowable cost as a “particular item or type of cost 
which, under the express provisions of an applicable law, regulation, or contract, is 
specifically named and stated to be unallowable.”  Accordingly, FAR 31.205-47(f)(5), 
sets forth specific costs that are expressly unallowable.  See Raytheon Co. v. Sec’y of 
Def., 940 F.3d 1310, 1313 (Fed. Cir. 2019). 
 
Thus, the issue presented by the parties is whether IAP’s legal costs are 
expressly unallowable pursuant to FAR 31.205-47(f)(5), and therefore IAP cannot 

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include them in its incurred cost proposals.8  Specifically, the parties have asked us to 
decide whether the litigation between IAP and Mr. Al Ghanem arises from “[a]n 
agreement or contract concerning a teaming arrangement, a joint venture, or similar 
arrangement of shared interest.”  See FAR 31.205-47(f)(5)(i). 
 
IAP argues the costs are allowable because its agreement with Mr. Al Ghanem 
is not a joint venture, teaming agreement or other similar arrangement.  IAP contends 
that, based on the legislative and regulatory history of this FAR subsection (which we 
discuss later), litigation costs concerning joint ventures and similar arrangements are 
unallowable because these types of business dealings between government contractors 
are made to improve each contractor’s competitive position with no benefit to the 
government (i.e., the sole benefit is to the contractors) (app. mot. at 5-6 citing to 
Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d 1030 (9th Cir. 1983)).  IAP 
argues, as one would expect, that this case is different.  According to IAP, its 
agreement with Mr. Al Ghanem did not involve a “true joint venture;” rather, it is 
merely a U.S. contractor engaging a local vendor to comply with host nation laws in 
support of a contract and U.S. military operations abroad (app. mot. at 7). 
 
DCMA counters IAP’s arguments regarding the history of this regulation, 
noting there is nothing indicating it is limited to certain types of joint ventures.  In fact, 
DCMA avers the regulation is broadly written as it includes the all-encompassing 
clause “or similar arrangement of shared interest.”  (Gov’t reply at 11-12) 
 
IAP also argues the agreement did not create a joint venture because it did not 
provide for joint control or joint right of control over a formed entity (app. mot. at 8-9, 
citing Aries Marine Corp., ASBCA No. 37826, 90-1 BCA ¶ 22,484; Cooper-Macdonald, 
Inc. v. United States, 559 F.2d 575, 588 (1977); app. reply at 9).  According to IAP, as 
the parties never formed a separate legal entity, there could be no joint right of control 
(app. mot. at 9 quoting Defense Contract Audit Agency, Selected Area of Cost 
Guidebook:  FAR 31.205, Cost Principles (DCAA Guidebook) at 37-1 (2014); see also 
app. reply at 7).  In response, DCMA highlights that the relevant FAR subsection 
provides that litigation costs arising from an agreement “concerning” a joint venture (or 
other arrangement of shared interest) are unallowable (gov’t mot. at 19-20 quoting 
FAR 31.205-47(f)(5)(i)).  Thus, DCMA contends the litigation arises from an agreement 
concerning the joint venture, whether or not one was formally established (gov’t mot. 
at 19-20). 
 
 
8 Neither party argues that the costs may have been unallowable, but not expressly so.  
In the circumstances here, where we ultimately find that the FAR included a 
positive proscription against the costs incurred, we need not address whether 
the costs are merely unallowable. 

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IAP further contends that there was also no joint control, or meaningful control, 
because IAP was vested with sole management responsibility and Mr. Al Ghanem, in 
comparison, only provided local support (app. reply at 8-9).  As support, IAP argues 
that all government contracts were in IAP’s name and the government paid all contract 
money to only IAP (app. mot. at 9).  DCMA argues that the agreement expressly 
provides for joint control as each party was responsible for and controlled certain 
aspects of the joint venture (gov’t mot. at 18-19).  In this regard, DCMA contends that 
as Mr. Al Ghanem had to secure visas and right to work documents, he must have 
dealt with Kuwaiti authorities on behalf of the joint venture, which evidences joint 
control (gov’t reply at 7-8). 
 
In addition, IAP argues the agreement here is not a joint venture agreement 
because while it may have allowed for profit sharing, it did not include any provisions 
for the sharing of losses, which is an essential element of a “joint” venture (app. mot. 
at 10-11; app. reply at 7).  DCMA argues there is no requirement that joint venture 
parties share in any losses and even if there was one, Mr. Al Ghanem had to advance 
some costs and his time, which he would have lost had the joint venture not been 
profitable (gov’t mot. at 17-18; gov’t reply at 7).  DCMA relies on the holding from 
the Florida court, which noted Mr. Al Ghanem “purportedly” provided the joint 
venture with funds and credits, among other things (gov’t reply at 7 quoting ex. A 
at 4). 
 
DCMA primarily contends the agreement here is a joint venture pursuant to 
U.S. law because:  (1) the name of the agreement is “Joint Venture Contract;” (2) the 
parties combined their efforts (IAP’s expertise in government contracts and 
Mr. Al Ghanem’s expertise in local laws) to undertake the business venture of 
supporting the U.S. Army and others in Kuwait and Iraq; and (3) both parties pooled 
their resources and advanced money to support the business and then shared in the 
profit (gov’t mot. at 15-17).  DCMA contends it does not matter the contracts were all 
in IAP’s name because IAP was supposed to credit the joint venture with the profits 
(id. at 17). 
 
DCMA also argues that as the joint venture was governed by Kuwaiti law, and 
the Kuwaiti courts found the parties formed a joint venture, this Board must give 
preclusive effect to that foreign judgment (gov’t mot. at 21-22, 24-25; gov’t reply 
at 17-18).  IAP argues that Kuwaiti law was to only govern disputes between the 
parties, not a dispute regarding the cost principles of the FAR (app. reply at 12).  
Similarly, IAP argues there is no issue preclusion because the issues litigated in the 
Kuwaiti courts are not the same issues litigated here; namely, the Kuwaiti court 
litigated whether the parties formed a joint venture under Kuwaiti law and not whether 
a joint venture existed for purposes of FAR 31.205-47(f)(5) (id. at 11-12). 
 

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For similar reasons, IAP contends the agreement was not a teaming 
arrangement or other similar arrangement of shared interest (app. mot. at 12-13; app. 
reply at 15-17).  IAP argues that it never combined resources or bid on government 
contracts together (app. mot. at 13; app. reply at 16).  DCMA argues that IAP and 
Mr. Al Ghanem are two private contractors that pooled their resources to work on a 
project, which neither would have been able to undertake on their own (gov’t mot. 
at 27; gov’t reply at 14). 
 
Finally, IAP argues that even if the Board deemed the parties to have formed a 
separate legal entity, the agreement stated IAP was entirely responsible for the 
company’s management and Mr. Al Ghanem only provided local administrative legal 
and logistics support (app. mot. at 9).  At most, IAP contends its relationship with 
Mr. Al Ghanem was more akin to a subcontractor and legal costs for allowing a claim 
by a subcontractor (id. at 10 (citations omitted)). 
 
When interpreting a regulation, statute, or contract, we read it as a whole and 
generally give its words their normal or usual meanings.  Gulf Pac. Contracting, LLC, 
ASBCA No. 61434, 21-1 BCA ¶ 37,928 at 184,206 (citing Tesoro Hawaii Corp. v. 
United States, 405 F.3d 1339, 1346 (Fed. Cir. 2005); Lockheed Corp. v. Widnall, 113 
F.3d 1225, 1227-28 (Fed. Cir. 1997) (plain language and “ordinary meaning”)).  As 
both parties note, the FAR does not include a definition of joint venture.  We have 
therefore looked to other sources for guidance as to its normal or usual meaning. 
 
Both parties reference the DCAA Guidebook, which expands upon the Contract 
Audit Manual to address specific areas of FAR 31.2 cost principles.  See 
https://www.dcaa.mil/Guidance/Selected-Area-of-Cost-Guidebook/ (last visited 
January 28, 2026).  At the onset, we note the guidebook is not binding on us, and is 
certainly not dispositive to our decision today.  Nevertheless, we address it here 
because it is raised by both parties and demonstrates that our conclusion is generally 
consistent with agency practice.  Chapter 41 of the guidebook generally iterates the 
FAR with respect to the allowability of litigation costs involving a joint venture, 
teaming arrangement or other similar agreement.  DCAA Guidebook at 41-4.  
Chapter 37, however, specifically addresses types of joint ventures and teaming 
arrangements.  It explains that as the FAR does not address joint ventures as a party to 
a procurement under a Government contract, “[i]t is therefore necessary to understand 
the purpose for and characteristics of a joint venture when reviewing the venture in 
terms of the FAR, specifically the FAR cost principles on allowable costs.”  Id. 
at 37-8.  Thus, we understand this chapter relates more to how the cost principles 
apply to a joint venture awarded and performing a contract, but find it nonetheless 
useful here. 
 
As pertinent, Chapter 37 of the Guidebook states that joint ventures are “owned 
and operated by two or more businesses or individuals as a separate entity (not a 

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subsidiary) for the mutual benefit of the members of the group.”  DCAA Guidebook 
at 37-2.  However, the guidebook also recognizes unincorporated joint ventures, which 
can be partnerships or teaming arrangements between two or more corporations and 
have:  (1) few or no employees; (2) little or no assets or separate facilities; (3) no 
separate financial statements; and (4) little or no G&A, or material handling expenses.  
Id.  Further, the guidebook explains that each joint venture investor participates either 
directly or indirectly in the overall management (i.e., acts as more than just passive 
investors) and one investor does not have majority voting interest.  Id.  “Joint ventures 
possess the characteristics of joint control” which is defined as “joint property, joint 
liability for losses and expenses, and joint participation in profits.”  Id. at 37-2, 37-12.  
Notably, the guidebook also defines a partnership as “two or more entities (persons) 
[that] combine capital and/or services to carry on a business for profit” and is 
considered “a group of separate persons rather than as a single entity.”  Id. at 37-3. 
 
There is also case law discussing joint ventures and the Board itself has 
previously, in a different context, defined a joint venture.  In Worleyparsons Int’l, Inc., 
we stated that “[a] joint venture is an association of partners established by contract to 
carry out a single business activity for joint profit.  It is essentially a partnership 
created for a limited purpose.”  Worleyparsons Int’l, Inc., ASBCA No. 57930, 14-1 
BCA ¶ 35,482 at 173,959 (citing Sadelmi Joint Venture v. Dalton, 5 F.3d 510, 513 
(Fed. Cir. 1993)).  Generally, each member of the joint venture can act for and bind the 
enterprise, unless the agreement states otherwise, and the “[j]oint venturers may 
allocate the tasks of the venture.”  Sadelmi Joint Venture, 5 F.3d at 513. 
 
“Typically, a joint venture has an independent existence from its partners.”  
Worleyparsons Int’l, Inc., 14-1 BCA ¶ 35,482 at 173,959 (citing Pine Prods. Corp. v. 
United States, 945 F.2d 1555, 1560 (Fed. Cir. 1991)).  Such agreements, therefore, are 
“governed by the law applicable to partnerships, rather than corporations.”  Edward 
Hayes, As Liquidator of Base Operation Servs. GmbH, ASBCA Nos. 59829, 59907, 
17-1 BCA ¶ 36,677 at 178,597 (citing Pine Prods. Corp., 945 F.2d at 1560 (holding 
that general principles of partnership law are applicable to joint ventures); see also 
American Export Grp. Int’l Servs., Inc./Zublin Delaware, Inc., A Joint Venture, 
ASBCA No. 42616, 93-1 BCA ¶ 25,373 at 126,364 (holding that nature of a joint 
venture is similar to a traditional partnership). 
 
Now that we have a framework of a joint venture, we next review the 
agreement at issue here.  “Contract interpretation begins with the language of the 
written agreement.”  NVT Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. 
Cir. 2004); see also C. Sanchez & Son, Inc. v. United States, 6 F.3d 1539, 1543 (Fed. 
Cir. 1993) (“A contract is read in accordance with its express terms and the plain 
meaning thereof”).  The plain language of the agreement between IAP and 
Mr. Al Ghanem evidences it was a joint venture agreement. 
 

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The agreement created a separate entity, a partnership, with an independent 
existence from its venturers (not a subsidiary) that was owned and operated by two or 
more businesses/individuals for the mutual benefit of the members (SOF ¶¶ 2-5).  
Although there may have been an intent at one point for the parties to form an actual 
limited liability company (SOF ¶¶ 12, 21-22), the failure to do so does not  negate the 
existence of the partnership.  The entity created was governed by the agreement, aptly 
titled “Joint Venture Contract” (SOF ¶ 2). 
 
In addition, the joint venture’s purpose was to carry out a single business 
activity for joint profit:  performance of contracts in Kuwait (SOF ¶¶ 2-3, 7, 9).  As 
such, both IAP and Mr. Al Ghanem participated either directly or indirectly in the 
overall management and were more than just passive investors.  Specifically, the JVC 
outlined the roles of each--IAP to contract with the U.S. government, and 
Mr. Al Ghanem to provide local support (SOF ¶¶ 2-3, 17). 
 
Further, both parties shared in the profits and were to be reimbursed for 
operational expenses and advanced monies (SOF ¶¶ 5, 9-10).  In fact, Mr. Al Ghanem 
was compensated for his duties (SOF ¶ 24).  And although the awarded government 
contracts would be in IAP’s name, this did not jeopardize Mr. Al Ghanem from 
receiving profits from those contracts (SOF ¶ 4).  While IAP was the managing 
venturer and received a management fee, the agreement also stated that any joint 
venture account would be controlled by both parties and required all amendments and 
modifications to be in writing and signed by both parties (SOF ¶¶ 5, 8-10, 12, 17-18).  
This evidences joint control. 
 
We note that this conclusion is consistent with the Kuwait courts’ rulings; we 
also note that Kuwaiti law governed any disputes relating to the agreement (SOF ¶ 6).  
As discussed, the Kuwait courts explained that a joint venture is a commercial 
partnership, no corporate body is required, but the partners still have recourse against 
each other based upon the terms and conditions of the “joint venture partnership 
agreement” (SOF ¶¶ 22-23). 
 
With respect to IAP’s argument that the agreement lacks a statement on the 
sharing of losses, we similarly conclude that upon review of both U.S. and Kuwaiti 
law, the answer is the same.  The general rule is that the right to share profits and 
losses is an essential element of a joint venture.  48A C.J.S. Joint Ventures § 14.  
However, while some courts require the agreement expressly include a loss-sharing 
provision, “it is more commonly held that there need be no specific agreement to share 
in the losses since an agreement to share losses may be implied from an agreement to 
share profits.”  Id.  In addition, a loss does not have to be monetary but can include 
“time expenditures and out-of-pocket expenses, especially where one party to the 
venture furnishes property, and the other only services.”  Id.; see also 46 Am. Jur. 2d 
Joint Ventures § 16 (joint venture may exist “where the agreement requires the 

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expenditure of time, effort, and expense by the parties such that the parties would 
share in the loss caused by unsuccessful efforts under the agreement”). 
 
Further, if there is no loss-sharing provision, courts may allocate the losses in 
the same ratio as the profit sharing provision or the division of ownership.  46 Am. Jur. 
2d Joint Ventures § 24.  This is consistent with the Restatement of the Law-Contracts, 
which explains that when an essential term is omitted, “a term which is reasonable in 
the circumstances is supplied by the court.”  R
ESTATEMENT (SECOND) OF CONTRACTS 
§ 204 (1981).  Accordingly, if there is other evidence a joint venture exists, “it is not 
essential that the parties agree, expressly or implicitly, to share the losses.”  48A C.J.S. 
Joint Ventures § 14.  There is much evidence a joint venture exists here.  Likewise, per 
Kuwaiti law, if the agreement did not explain how losses would be shared, the parties 
would share in losses with the same percentage set forth for profit-sharing (SOF ¶ 23).  
Thus, the agreement here is still one for a joint venture, despite the fact it lacks a 
specific statement on the sharing of losses. 
 
We also note that even if this were not considered a joint venture, we would 
apply the principle of noscitur a sociis and conclude this was a “similar arrangement 
of shared interest.”  According to this principle, “a word is known by the company it 
keeps,” so as to “avoid ascribing to one word a meaning so broad that it is inconsistent 
with its accompanying words.”  Schlumberger Tech. Corp v. United States, 845 F.3d 
1158, 1165 (Fed. Cir. 2017) (quoting Yates v. United States, 574 U.S. 528, 543 
(2015)).  Here, the pertinent FAR subsection states that litigation costs are unallowable 
when arising from an agreement/contract “concerning a teaming arrangement, a joint 
venture, or similar arrangement of shared interest.”  FAR 31.205-47(f)(5)(i). 
 
A teaming arrangement is defined in a different section--FAR 9.601.  Per that 
definition, a contractor team arrangement is either when companies form a partnership 
or joint venture to act as a potential prime contractor, or a potential prime contractor 
agrees with other companies to have them act as its subcontractors under a government 
contract or acquisition program.  FAR 9.601.  Such arrangements may be useful from 
a government or industry standpoint when the companies complement each other’s 
unique capabilities and provide the best combination of performance, cost and delivery 
for the item acquired.  FAR 9.602(a).  In sum, a teaming arrangement is a partnership 
or joint venture created by companies with a shared interest in a government contract 
or program, where the companies’ capabilities complement each other. 
 
Accordingly, a joint venture and teaming arrangement are a partnership of 
companies with capabilities that complement each other for the purpose of a shared 
interest (i.e., the government contract or program).  Knowing there are other types of 
entities that can be formed, such as a partnership, FAR 31.205-47(f)(5) includes the 
catchall “a similar arrangement of shared interest.”  In other words, even if one were to 
conclude the agreement here did not culminate in a joint venture, it was a similar 

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arrangement (partnership) of shared interest; the interest being providing supplies, 
support and services for the U.S. Army or others in Kuwait and Iraq performed in 
Kuwait in return for remuneration which the parties would divide according to the 
terms set forth in the agreement (see SOF ¶¶ 3, 11). 
 
FAR 31.205-47(f) – The Exception to the Rule 
 
As noted, the FAR provides these costs may nonetheless still be allowable if 
they are incurred when complying with specific terms and conditions of the contract or 
subcontract.  FAR 31.205-47(f)(5)(ii)(A).  IAP argues that even if the agreement is 
considered a joint venture agreement, these litigation costs are still allowable because 
IAP incurred them as a direct result of its compliance with contract and host nation 
requirements (app. mot. at 13; app. reply at 17-18). 
 
Specifically, IAP contends its contracts required compliance with local Kuwaiti 
laws (app. mot. at 14; app. reply at 18; SOF ¶¶ 14-15).  IAP cites to FAR 52.236-7, 
Permits and Responsibilities, which required IAP obtain necessary licenses and 
permits to conduct business and comply with local laws, and another contract with a 
requirement for the leasing and rental of heavy lift equipment in compliance with 
contract and local laws and regulations (app. mot. at 14; SOF ¶¶ 14-15).  IAP contends 
the Kuwaiti law, during the requisite timeframe, stated:   
 
No person other than a Kuwaiti may carry on a trade in 
Kuwait, unless he/she has one or more Kuwaiti partners, 
provided that the capital invested by the Kuwaitis in the 
commercial establishment is not less than 51 percent of its 
total capital. 
 
(App. mot. at 14 quoting Article 23 of Kuwaiti Commercial Law (Law No. 15 of 1960, 
as amended by Law No. 68 of 1980))  IAP contends this required IAP either invest as 
a minority shareholder in a Kuwaiti company or appoint a Kuwaiti agent to conduct 
the business under its own license on behalf of the foreign principle (app. mot. 
at 14-15) (citation omitted). 
 
DCMA argues that IAP was not required to enter into a joint venture agreement 
to perform the contracts so this exception does not apply (gov’t mot. at 32; gov’t reply 
at 16).  DCMA highlights that IAP’s agreement with Mr. Khoursheed was not a joint 
venture agreement, and was a service agency agreement where Mr. Khoursheed was 
an independent contractor providing the needed local services (gov’t mot. at 32; SOF 
¶¶ 18-19).  According to IAP, the government’s argument that it could have entered 
into a different type of agreement with Mr. Al Ghanem misses the point; the point is it 
entered into the agreement to comply with the terms of the government contract (app. 
mot. at 15-16). 

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DCMA also argues that FAR 52.236-7, which requires the government 
contractor obtain necessary licenses and permits shall do so “without additional 
expense to the Government” and the government is not responsible for “damages to 
persons or property that occur as a result of the Contractor’s fault or negligence” 
(gov’t mot. at 31).  IAP argues this clause does not address litigation expenses in 
defending lawsuits bought by a local sponsor or make them expressly unallowable 
(app. reply at 19). 
 
While there are no cases on point addressing the exception in 
FAR 31.205-47(f), there are cases discussing the exact same language set forth in 
other FAR sections or agency clauses and, applying the presumption of consistent 
usage, see GEMS En’t. Mgmt. Servs., ASBCA Nos. 61737 et al., 24-1 BCA ¶ 38,621 
at 187,744, to the FAR, we find the meaning of this language elsewhere in the 
regulation to be helpful to our interpretation of it here.  As shown below, this 
subsection is constructed narrowly. 
 
For example, FAR 31.205-15(a) states that fines and penalties from failure to 
comply with laws and regulations are unallowable “except when incurred as a result of 
compliance with specific terms and conditions of the contract or written instructions 
from the contracting officer.”  In Alfair Dev. Co., Inc., the Board ruled that fines for a 
traffic violation were not allowable pursuant to FAR 31.205-15(a) because there was 
no evidence the truck overload violation was the result of compliance with specific 
terms and conditions of the contract or pursuant to instructions from the contracting 
officer.  Alfair Dev. Co., Inc., ASBCA Nos. 53119, 53120, 05-2 BCA ¶ 32,990 
at 163,517. 
 
In Abraham v. Rockwell Int’l Corp., the appellant sought to recover as 
allowable certain attorneys’ fees and costs incurred in defending itself and its 
employees against possible criminal environmental charges.  Abraham v. Rockwell 
Int’l Corp., 326 F.3d 1242, 1245 (Fed. Cir. 2003).  The appellant’s contract included a 
Department of Energy clause stating that fines and penalties resulting from contractor 
violations of laws or regulations were unallowable “except when incurred in 
accordance with the written approval of the Contracting Officer or as a result of 
compliance with the provisions of this contract.”  Id. at 1251 (citation omitted). 
 
Although the Federal Circuit did not rely on this clause in reaching its ultimate 
decision, its discussion is nonetheless useful here.  For example, the court stated “[i]t 
is questionable whether this clause should be construed to authorize the reimbursement 
of all fines and penalties attributable to work within the scope of the contracts” 
because the strong public policy is to bar the recovery of criminal fines and penalties.  
Abraham, 326 F.3d at 1251.  The court reviewed the statutory language pertaining to 
this Department of Energy clause, which is virtually the same as the Department of 
Defense statutory language regarding the same, as implemented in FAR 31.205-15(a).  

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The court explained the language did “not provide for a broad ‘scope of work’ 
exception, but rather narrowly refers to” compliance with the specific contract terms 
and conditions.  Id. (quoting Pub. L. No. 99-145, 99 Stat. 583, 774).  The court further 
explained:   
 
This suggests that the provision is applicable only to fines 
and penalties that resulted from particular work directly 
required by the contract.  For example, if the contract 
ordered that a particular area be filled, a fine incurred for 
doing that very act in the manner required by the contract 
would be recoverable.  If, however, the work could have 
reasonably been performed so as to avoid the levied fines 
or penalties, there would be no reimbursement under the 
exception to the general non-allowability language of the 
Fines and Penalties Clause.  A broader “scope of work” 
interpretation would appear to render virtually all fines and 
penalties allowable. 
 
Abraham, 326 F.3d at 1251-52; see also Security Assocs. Int’l, Inc., DOTCAB 
Nos. 1340, 1432, 84-2 BCA ¶ 17,444 (holding that the contract contained no 
requirement to ignore law requiring pay wages to employees in Puerto Rico when 
interpreting the same provision under the Federal Procurement Regulations). 
 
Based on all of this, we agree the “exception” in FAR 31.205-47(f)(5), that 
litigation costs be treated as allowable if a result of compliance with specific terms and 
conditions of the contract, should not be construed broadly.  Thus, we conclude there 
is no clause or requirement in the contracts here that expressly provide these litigation 
costs relating to the JVC should be allowable.  The clauses IAP relies on, the Host 
Nations clause and FAR 52.236-7, required IAP obtain necessary licenses and permits 
and comply with host nation laws (SOF ¶¶ 14-15), but did not explain how IAP should 
do this or require IAP enter into this JVC.  More important, these clauses do not 
expressly state that litigation (or other) costs arising from IAP’s compliance with host 
nation laws (e.g., to work with a Kuwaiti national in performing the contract) should 
be considered allowable.  In fact, the FAR 52.236-7 clause appears to state the 
opposite.  See SOF ¶ 14 (FAR 52.236-7 states IAP shall comply with local laws 
“without additional expense to the Government”). 
 
We note that IAP discusses the history of this regulation (albeit as it relates to 
the definition of joint venture), but we address the history here as it seems more 
pertinent to this argument.  Further, although we do not need to look beyond the 
language of the FAR because the regulation is clear, we find the regulatory history of 
the subsection also supports our interpretation.  See Parsons Gov’t Servs., Inc., 
ASBCA No. 62269 et al., 25-1 BCA ¶ 38,800 at 188,718 (citing Lockheed Corp., 113 

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F.3d at 1227 (examining regulatory history of provision at issue even where its plain 
language was clear as to its meaning); Exelis, Inc., ASBCA No. 58966, 17-1 BCA 
¶ 36,708 at 178,748 (same)). 
 
Initially, the FAR did not include this paragraph regarding litigation costs and 
joint ventures, etc.  Rather, the FAR originally stated that costs of professional and 
consultant services were allowable when reasonable.  Establishing the Federal 
Acquisition Regulation, 48 Fed. Reg. 42102, 42322 (Sept. 19, 1983) (to be codified 
at 48 C.F.R. ch. 1) (citing FAR 31.205-33(a)).  There were exceptions to the rule:  
legal, accounting and consulting services incurred relating to 
organization/reorganization, defense of antitrust suits, prosecution of claims against 
the government, and most patent infringement cases were not allowable.  Id. (citing 
FAR 31.205-33(d)). 
 
In 1985, Congress enacted 10 U.S.C. § 2324, as part of the Defense 
Procurement Improvement Act of 1985, Pub. L. 99-145, Sec. 911(a), requiring new 
FAR rules to clarify certain cost principles.  One such principle requiring clarification 
was “Professional and consulting services, including legal services.”  10 U.S.C. 
§ 2324(f)(1)(H).  As a result, the FAR councils issued a proposed rule which added, 
among other things, paragraph (f) to FAR 31.205-33, stating the following:   
 
Costs of legal, accounting, and consultant services and 
directly associated costs incurred in connection with the 
defense or prosecution of lawsuits or appeals between two 
contractors arising from either:  (1) An agreement or 
contract concerning a teaming arrangement, a joint 
venture, or similar arrangement of shared interest in a 
Government contract; or (2) dual sourcing, co-production, 
or similar programs, are unallowable. 
 
Federal Acquisition Regulation (FAR); Costs of Litigating Appeals Against the 
Government, 50 Fed. Reg. 51,778 (Dec. 19, 1985).  The rule also proposed as 
unallowable legal costs incurred in defense against government claims or appeals and 
prosecution of appeals against the government.  Id.  According to the preamble of the 
proposed rule, this revision added to the list of unallowable legal, account and 
consulting costs and was necessary “because of problems encountered in administering 
this cost principle and [were] not a change in policy,” as these costs were already 
being disallowed, but disputed by some contractors.  Id.  The FAR issued a final rule, 
with some changes from the proposed; specifically, the rule added the “exception” that 
such incurred costs would be allowable if a result of compliance with specific terms 
and conditions of the contract, written instructions from the contracting officer, or 
when the contracting officer agrees in writing.  Federal Acquisition Regulation, 51 
Fed. Reg. 12296, 12301 (Apr. 9, 1986) (to be codified at 48 C.F.R. pt. 31).  This 

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paragraph was later moved to current FAR 31.205-47.  Federal Acquisition Regulation 
(FAR); Miscellaneous Amendments, 54 Fed. Reg. 13,022 (Mar. 29, 1989) (to be 
codified at 48 C.F.R. pt. 31).9 
 
According to IAP, this cost principle was the result of litigation involving a 
Northrop and McDonnell Douglas teaming arrangement (app. mot. at 5 citing to 
Northrop Corp. v. McDonnell Douglas Corp., supra).  IAP contends that Northrop and 
McDonnell Douglas had created a teaming arrangement to pool resources to develop 
aircraft variants that would become the F-18A (app. mot. at 5).  The arrangement fell 
apart, resulting in litigation (id. at 5-6).  McDonnell Douglas allegedly submitted the 
litigation costs for reimbursement as indirect costs of doing business and the Navy 
refused to allow them because such litigation “provides absolutely no benefit to the 
Navy’s F-A-18 program” (app. mot. at 6 quoting Firm Seeks to Recover $24 Million It 
Spent on Northrop Court Fight:  U.S. Asked to Pay McDonnell Bills, L.A. Times 
(March 20, 1985), https://www.latimes.com/archives/la-xpm-1985-03-20-fi-22830-
story.html).  IAP contends that against this backdrop, the FAR Council issued the 
proposed and then final rule amending the cost principle to specifically disallow such 
costs (app. mot. at 6-7). 
 
In a decision involving this litigation, the court noted that the government had 
“urged them to ‘team.’”  Northrop Corp., 705 F.2d at 1037.  Pursuant to the 
arrangement, Northrop would submit proposals for Air Force competitions and 
McDonnell Douglas for Navy ones.  Id.  When McDonnell Douglas won the award for 
the F-18A fighter, Northrop served as a subcontractor.  Id. at 1038.  While Northrop’s 
complaint included many claims, the court noted it did “not challenge the wisdom or 
legality of any governmental act or decision” but instead sought “to restrain and 
recover damages from McDonnell for the latter’s allegedly improper tactics in 
marketing F-18’s.”  Id. at 1047.  The court explained this “challenged activity by 
McDonnell was neither authorized nor directed by any branch of Government” and the 
fact this conduct “occurred in a regulated industry does not alone alter its private 
commercial character.”  Id. 
 
Therefore, even assuming IAP’s legislative history argument is true, it does not 
help its case.  Rather, this evidences that the rule did not intend for the government to 
cover private litigation costs amongst joint venturers or partners, and if it did, there 
must be specific authorization by the government (either in the contract or by the 
contracting officer) for these costs to be allowable.  Although the purpose of IAP’s 
joint venture agreement here was to assist with certain government contracts, the 
litigation amongst the joint venturers concerns an agreement not specifically 
 
9 The FAR added the term “or subcontractors” in 2023.  Contract Cost Principles and 
Procedures, 88 Fed. Reg. 69517, 69522 (Oct. 5, 2023) (to be codified at 48 
C.F.R. pt. 31). 

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24 
authorized or directed by the government under the terms and conditions of the 
contract. 
 
CONCLUSION 
 
For the foregoing reasons, we grant DCMA’s motion for summary judgment 
that the costs at issue here are expressly unallowable.  IAP’s appeal is denied. 
 
Dated:  May 6, 2026 
 
 
 
 
 
 
 
 
 
 
 
LAURA EYESTER 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
I concur 
 
 
 
J. REID PROUTY 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
I concur 
 
 
 
MICHAEL N. O’CONNELL 
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 Nos. 62638, 63879, Appeals of 
IAP Worldwide Services, Inc., rendered in conformance with the Board’s Charter. 
 
Dated:   
 
 
 
 
 
PAULLA K. GATES-LEWIS 
Recorder, Armed Services 
Board of Contract Appeals