ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeals of -- ) 
) 
Raytheon Company, ) 
Space & Airborne Systems ) 
) 
Under Contract Nos. F04701-03-C-0008 ) 
F A8650-09-C- l 503 ) 
APPEARANCES FOR THE APPELLANT: 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA Nos. 57801, 57803, 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. 
Senior Trial Attorney 
Defense Contract Management Agency 
Chantilly, VA 
OPINION BY ADMINISTRATIVE JUDGE O'CONNELL ON THE 
PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT 
In these appeals, appellant, Raytheon Company, Space & Airborne Systems 
(Raytheon), challenges government claims seeking to recover purported increased costs 
resulting from Revisions 1, 5, and 15 to Raytheon's Cost Accounting Standards (CAS) 
Disclosure Statement. In an earlier decision, we denied Raytheon's motion to dismiss the 
Revision 1 claim (ASBCA No. 57801) for lack of jurisdiction as untimely, but we granted 
its motion with respect to other revisions (ASBCA Nos. 57802, 57804, 57833). Raytheon 
Company, Space & Airborne Systems, ASBCA No. 57801 et al., 13 BCA ~ 35,319. The 
parties have cross-moved for summary judgment on the remaining claims. For the 
reasons stated below, Raytheon's motion is granted in part and denied in part. The 
government's cross-motion is granted in part and denied in part. 

STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTIONS 
Except as noted, the following material facts are undisputed: 
Revision 1 to Raytheon's CAS Disclosure Statement (ASBCA No. 57801) 
1. On 10 February 2004, Raytheon submitted to the Defense Contract 
Management Agency (DCMA) Revision 1 to its CAS Disclosure Statement, which, 
among other things, made four changes 
to its cost accounting practices. These changes 
related to: I) property accounting/property management; 2) offsite burden center; 3) IT 
secondary pools; and 4) fringe accommodation/composite rate. All of the changes went 
into effect on 1 January 2004. (R4, tab 4 at G-77) 
2. On 3 April 2006, Raytheon submitted a general dollar magnitude (GDM) 
analysis of these changes (R4, tab 13). According to the GDM, the property 
accounting/property management change resulted in increased costs of $313 ,200 to 
Raytheon's flexibly-priced contracts and a decrease in costs of $281, I 00 to its fixed-price 
contracts. The other three changes had the opposite effect: they decreased costs to 
flexibly-priced contracts and increased costs to fixed-price contracts. Collectively, these 
three changes resulted in $660,800 in decreased costs to flexibly-priced 
contracts and 
$518,200 in increased costs to fixed-price contracts. (R4, tab 13 at 159) 
3. These distinctions are important because, as we will see, the government takes 
the position that increased costs of $313 ,200 to Raytheon's flexibly-priced contracts and 
a decrease in costs of $281, 100 to its fixed-price contracts due to the property 
accounting/property management change each result in a cost increase to the 
government and, thus combined, result in a total cost increase of $594,300 ($313,200 + 
$281,100) (see R4, tab 41at369, tab 45 at 382). Conversely, following this same logic, 
cost decreases to flexibly-priced contracts and cost increases to fixed-price contracts 
both save the government money, which would mean that there was a cost savings of 
$1,179,000 from the other three Revision I changes ($660,800 + $518,200) (see R4, 
tab 41 at 370). Further, if the cost increase from the property accounting/property 
management change could be offset by the cost decrease from the other three changes, 
there would be an overall cost saving to the government of$584,700 ($1,179,000-
$594,300) from the Revision I changes. This question, whether multiple simultaneous 
accounting changes can be offset against one another, is central to this dispute. 
4. On 3 March 2011 (nearly five years after Raytheon submitted the GDM), the 
Defense Contract Audit Agency (DCAA) notified Raytheon that it was auditing 
Revision 1 (app. br., tab A, ex. 5). It is undisputed that DCAA did not complete the 
audit (see app. br., statement of undisputed material facts (SUF) ii 9; gov't resp. to SUF 
ii 9). The reasons why DCAA did not complete the audit are disputed; the parties blame 
each other. Raytheon contends that the late start to the audit and the six-year statute of 
2 

limitations made timely completion impossible, while the government contends that 
Raytheon failed to maintain important records in the course of a data migration. (Id.) 
5. On 25 May 2011, DCAA provided to DCMA a rough order of magnitude 
(ROM) of $772,590 for the Revision 1 property accounting/property management 
change (R4, tab 41). It calculated this amount by taking the sum of Raytheon's 
numbers from the GDM and adding 30 percent: $313,200 + $281,100 x 1.3= $772,590 
(R4, tab 41 at 369). By way of explanation, DCAA stated: "we utilized a 30 percent 
increment factor for the GD Ms based on at least one year of data to determine an 
estimated cost impact to the government. The 30 percent factor is an estimate intended 
to protect the taxpayer's interest for items that could have been found if an audit were to 
be performed." (Id.) 
6. DCAA did not complete a ROM for the other three Revision 1 changes 
because it concluded that these changes resulted in decreased costs to the government 
(R4, tab 41 at 368). 
7. On 7 July 2011, a DCMA divisional administrative contracting officer 
(DACO) issued a contracting officer's final decision with respect to the Revision 1 
property accounting/property management change (R4, tab 45). The DACO demanded 
payment of $1, 176,600.86 from Raytheon. He calculated this amount by taking 
DCAA's $772,590 ROM and adding compound interest (calculated from 1 January 
2004 to the date of the decision) of $404,010.86. (Id. at 382) He did not offset the 
$1, 176,600.86 by the cost savings from the other Revision 1 changes. 
8. The DACO stated that FAR 30.606(a)(2) allowed him to resolve the cost 
impact by, among other things, adjusting the amount due on a single contract. He stated 
that he would adjust Contract No. F04701-03-C-0008 (Contract I), a CAS-covered 
contract that had an effective date of 21 February 2003. Contract I incorporated FAR 
52.230-2, COST ACCOUNTING STANDARDS (APR 1998), which incorporates or requires 
the contractor to comply with the CAS Board regulations at 48 C.F .R. Parts 9903 and 
9904. (R4, tab 1 at 14) 
REVISION 5 (ASBCA No. 57803) 
9. On 8 July 2005, Raytheon submitted Revision 5 to its CAS Disclosure 
Statement to DCMA (R4, tab 10). Revision 5 contained one cost accounting practice 
change. The change was effective I January 2005 (id. at 136). 
10. In its 3 April 2006 GDM (SOF if 2), Raytheon also provided a GDM for the 
Revision 5 change (R4, tab 13). Raytheon stated that this change resulted in $153,000 
in increased costs to flexibly-priced contracts and a decrease of $117 ,900 to fixed-price 
contracts (id. at 159). 
3 

11. DCAA did not complete an audit of Revision 5. Once again the parties 
disagree as to why, blaming each other, with Raytheon contending that the 
government's action was driven by the statute of limitations, while the government 
contends it was due to a failure by Raytheon to maintain the integrity of its data. 
(Compare app. br., SUF if 32 & gov't resp. to SUF if 32 & gov't br., SUF if 11) 
12. On 13 June 2011, DCAA issued a ROM for the Revision 5 change (R4, 
tab 43). As with the Revision 1 property accounting/property management change, 
DCAA adopted the numbers in Raytheon's GDM and then added 30 percent "to protect 
the taxpayer's interest." Thus, DCAA calculated a ROM of $352, 170 ($117,900 + 
$153,000 x 1.3). (Id. at 375) 
13. On 7 July 2011, the DACO issued a final decision demanding payment of 
$512,73L97 from Raytheon (R4, tab 47). This amount consisted of the $352,170 
calculated by DCAA, plus compound interest of $160,561.97 from 1 January 2005 
through the date of the decision (id. at 390). Once again relying on FAR 30.606(a)(2), 
the DACO stated that he would adjust 
Contract I (id. at 391). 
14. In the final decision, the DACO did not state whether he considered the 
accounting practice changes 
to be desirable or material. However, in its discovery 
responses, the government has indicated that the Revision 5 change was material and 
not desirable because it resulted in increased cost to the government. (App. br., SUF 
ifif 42-43; gov't resp. to SUF ifif 42-43) 
REVISION 15 CASBCA No. 55068) 
15. On 1November2007, Raytheon submitted to DCMA Revision 15 to its CAS 
Disclosure Statement (R4, tab 20). This revision contained three cost accounting practice 
changes that: 1) consolidated [ REDACTED REDACTED REDACTED ]; 
2) moved [ REDACTED REDACTED REDACTED REDACTED REDACTED 
REDACTED REDACTED REDACTED ]; and 3) changed [ REDACTED ] 
[ REDACTED REDACTED REDACTED REDACTED REDACTED ]. 
The revision went into effect on 1 January 2008. (Id. at 215) 
16. On 26 February 2010, Raytheon submitted a GDM analysis for the three 
changes (R4, tab 27). Raytheon calculated that the [REDACTED ] change caused a 
$251,500 decrease to flexibly-priced contracts and an increase of $195,200 to 
fixed-price contracts (id. at 318). The other two changes had the opposite effect. 
Raytheon calculated that the communications change caused an increase of $4 7 ,800 to 
flexibly-priced contracts and a decrease of $41,600 to fixed-price contracts (id. at 319). 
It calculated that the inventory maintenance change caused an increase of $36,000 to 
flexibly-priced contracts and a decrease of $17,400 to fixed-price contracts (id. at 320). 
4 

17. In a draft audit report from September 2010, DCAA recognized that, 
considered as a whole, the three Revision 15 cost accounting practice changes resulted 
in net decreased costs to the government of about $304,000 (app. br., ex. I at 1347). 
However, DCAA stated that, under FAR 30.606(a)(3)(ii), the cost impact of unilateral 
changes could not be combined unless they all resulted in increased costs to the 
government (id.). 
18. On 4 October 2010, DCAA issued its final report (R4, tab 28). DCAA 
calculated a cost impact of $157 ,080 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 [REDACTED REDACTED REDACTED] changes then 
adding an estimated profit/fee of$14,280 ($47,800 + $41,600 + $36,000 + $17,400 
=$142,800) ($142,800 + $14,280 =$157,080) (id. at 323). 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 
adjustment related to this unilateral accounting practice change since adjustments are 
only made if changes result in increased costs to the Government." (Id.) 
19. On 15 March 2012, the DACO 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 1January2008 to the date of the final 
decision (id.). (The DACO did not agree that an estimated profit/fee of $14,280 should 
be added to the amount sought (id. at 429)). The DACO sought to recover the requested 
amount from Contract No. FA8650-04-C-l 706 (Contract II), which had an effective 
date of 30 December 2004 (id. at 429). Contract II incorporated FAR 52.230-2, COST 
ACCOUNTING STANDARDS (APR 1998) (ex. G-9 at 17). 
20. Although not stated in the final decision, the DACO determined that the 
[REDACTED REDACTED REDACTED REDACTED ] were material and not 
desirable because they resulted in increased costs to the government (app. br., SUF iii! 
55-56; gov't resp. to SUF iii! 55-56). 
DECISION 
The parties have filed 
cross-motions for summary judgment that place an array of 
issues before us. The government seeks the Board's rulings on: 1) whether a cost 
increase to the government from a contractor's unilateral cost accounting practice 
change may be offset against simultaneous but unrelated accounting practice changes 
that save the government money; 2) whether increased costs on flexibly-priced contracts 
should be combined with decreased costs on fixed-price contracts to calculate a total 
amount due when an accounting practice change has caused the shift of costs from 
5 

fixed-price to flexibly-priced contracts; 3) whether the government properly added a 
30 percent increase to Raytheon's GDM for the Revision 1 and 5 changes; 4) whether 
the government is entitled to interest; and 5) whether the interest should be compound. 
In addition to seeking summary judgment on these issues, Raytheon requests that the 
Board rule that: a) FAR 30.606, a regulation that bars offsetting the impact of multiple 
changes, is invalid to the extent that it defines aggregate increased costs and prohibits 
the offset of multiple simultaneous changes; b) the DACOs failed to consider whether 
the accounting changes were desirable; and c) the DACOs failed 
to consider 
appropriately whether the accounting changes were material. 
I. Standard of Review 
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 a motion for summary 
judgment, the Board's function is not to weigh the evidence and determine the truth of the 
matter but to determine whether there is a genuine issue for trial. Id. at 249. The fact that 
both parties have moved for summary judgment does not mean that the Board must grant 
judgment as a matter of law for one side or the other; summary judgment in favor of either 
party is not proper if disputes remain as to material facts. Rather, the Board must evaluate 
each party's motion on its own merits, taking care in each instance to draw all reasonable 
inferences against the party whose motion is under consideration. Mingus Constructors, 
Inc. v. United States, 812 F.2d 1387, 1391 (Fed. Cir. 1987) (citations omitted). 
II. Offsetting The Revision 1 and Revision 15 Changes 
The current CAS Board dates to the Office of Federal Procurement Policy 
Amendments Act of 1988. Pub. L. No. 100-679, § 5, 102 Stat. 4055 (1988); see Boeing 
North American, Inc. v. Roche, 298 F.3d 1274, 1282 (Fed. Cir. 2002). The CAS statute 
was codified at 41 U.S.C. § 422 until January 2011 but now resides at 41 U.S.C. 
§ § 1506-1506, after Congress recodified much of Title 41 (Public Contracts) of the 
United States Code. See Pub. L. No. 111-350, § 3. Because both the statute and House 
Report for Pub. L. No. 11-350 emphasized that the legislation was intended to be 
non-substantive, we will cite to the current statute. See Pub. L. No. 111-350, § 2(b); 
H.R. Rep. No. 111-42, 2-3, 2010 U.S.C.C.A.N. 1468, 1469. 
The CAS Board is an independent board in the Office of Federal Procurement 
Policy (OFPP). 41 U.S.C. § 150l(a). The Board consists of five members: the OFPP 
Administrator, who is the Chairman; two government appointees, one each by the 
Secretary of Defense and the Administrator of General Services; and two individuals 
from the private sector appointed by the Administrator. 41 U.S.C. § 150l(b)(l)(A)-(B). 
6 

The CAS Board has exclusive authority to prescribe, amend, and rescind cost 
accounting standards, and interpretations of those standards. 41 U.S.C. § 1502(a)(l). 
Subject to certain exceptions and thresholds, the CAS are mandatory for use by all 
executive agencies and by contractors and subcontractors in estimating, accumulating, 
and reporting costs in connection with the pricing and administration of, and settlement 
of disputes concerning, all negotiated prime contract and subcontract procurements with 
the Federal Government. 41 U.S.C. § 1502(b)(l)(B). 
Congress directed the CAS Board to issue implementing regulations that 
require 
contractors to agree to a contract price adjustment for any increased costs paid to the 
contractor by the government because of a change in the contractor's cost accounting 
practices or a failure by the contractor to comply with applicable cost accounting 
standards. 41 U.S.C. § 1502(t)(2). Congress included in the statute protections for both 
the government and contractors in the event of a § 1502( t)(2) contract price adjustment. 
On the one hand, it specified that such price adjustments shall be made "so as to protect 
the Federal Government from payment, in the aggregate, of increased costs, as defined 
by the" CAS Board. 41 U.S.C. § 1503(b). However, Congress also specified that the 
government "may not recover costs greater than the aggregate increased cost to the 
Federal Government, as defined by the [CAS] Board, on the relevant contracts subject 
to the price adjustment" (subject to an exception not applicable to this case). 1 Id. 
The CAS Board has promulgated various regulations that implement § l 503(b ). 
For example, 48 C.F.R. § 9903.306 specifies various considerations that apply when 
determining the amounts of a cost increase. Among other things, it provides that an 
adjustment to contract prices may not be required when a change in cost accounting 
practices is estimated to result in increased costs being paid under a particular contract. 
This is so if the change affects all CAS-covered contracts, and the change increases the 
cost paid under one or more of the contracts, while decreasing the cost paid under one 
or more of the contracts. The regulation specifies that in such a case, the government 
will not require a price adjustment for any increased costs paid by the government, so 
long as the cost decreases under one or more contracts are at least equal to the increased 
cost under the other affected contracts, provided that the contractor and the affected 
1 Prior to the January 2011 recodification, this section had somewhat different wording. 
Notably, the sentence barring excess recovery by the government formerly stated 
"In no case shall the Government recover costs greater than the increased cost (as 
defined by the Board) to the Government, in the aggregate." 41 U.S.C. § 
422(h)(3). Now it states "The Federal 
Government may not recover costs greater 
than the aggregate increased cost to the Federal Government, as defined by the 
Board." 41 U.S.C. § 1503(b). 
7 

contracting officers agree on the method by which the price adjustments are to be made 
for all affected contracts.2 48 C.F.R. § 9903.306(e). 
A. The Revision 1 Changes 
As described above, Contract I incorporates by reference FAR 52.230-2, COST 
ACCOUNTING STANDARDS (APR 1998) (SOF ir 8), which, in tum, incorporates the 
regulations issued by the CAS Board at 48 C.F.R. Part 9903 and requires the contractor to 
comply with all CAS. As we recently observed in The Boeing Company, ASBCA 
Nos. 57549, 57563, 13 BCA if 35,427 at 173,787, neither Part 9903, nor the CAS statute, 
specify the procedures that an agency should follow if the contractor makes multiple 
simultaneous changes to its cost accounting practices. Although both parties contended 
that the CAS Board regulations, including§ 9903.306, supported its position, we held 
that, for the time period at issue (prior to April 2005), the regulations were silent as to the 
offset of simultaneous accounting changes. Boeing, 13 BCA if 35,427 at 173,787. 
Raytheon and DCMA make nearly identical contentions as the parties in Boeing, 
with each pointing to what they believe are clues as to the intent of Congress and the 
CAS Board. The government points to the repeated use of the term "a change" in the 
statute and the regulations and infers from this construction that Congress and the CAS 
Board require that each change be viewed in isolation. See 41 U.S.C. § 1502(f)(2) (the 
contractor must "agree to a contract price adjustment. .. for any increased costs paid to 
the contractor ... by the Federal Government because of a change in the contractor' s ... cost 
accounting practices"); 48 C.F.R. § 9903.201-6(b)(2)-(3) ("Unilateral change by a 
contractor means a change in cost accounting practice") ("no agreement may be made 
with regard to a change to a cost accounting practice that will result in the payment of 
aggregate increased costs by the United States") (emphasis added). In considering this 
argument, we note that the Department of Defense (DoD) is not entitled to any 
deference with respect to its interpretation of the CAS Board regulations. Perry v. 
Martin Marietta Corp., 47 F.3d 1134, 1137 (Fed. Cir. 1995). 
In contrast, Raytheon points to the use of the term "in the aggregate" in the 
statute, 41 U.S.C. § 1503(b), and similar constructions in the CAS Board regulations. 
Raytheon derives from that a directive that agencies should 
determine a final cost 
impact only once all changes have been taken into account. Neither party has cited any 
statutory or regulatory history, or any other evidence, that buttresses its interpretation of 
the statute and regulations. Accordingly, we are bound by our precedent in Boeing, in 
2 Section 9903 .306 states that it applies to the contract clauses contained at 48 C.F .R. 
§ 9903.201-4(a), (c), (d) or (e). Section 9903.201-4(a) requires the contracting 
officer to insert the Cost Accounting Standard clause, FAR 52.230-2 (SOF iii! 8, 19). 
8 

which we concluded that neither the CAS statute, nor the CAS Board regulations 
address the offset of simultaneous changes. 3 13 BCA if 35,427 at 173,787. 
1 . The Parties Misinterpret the CAS Board Regulations 
Although both parties contend that the CAS Board has issued regulations that 
support its desired result, the 
CAS Board has repeatedly indicated that neither the statute 
nor that Board's regulations address the offset of simultaneous accounting practice 
changes. In the 1990s, the CAS Board attempted to close this gap by proposing detailed 
regulations governing changes in cost accounting practices. See, e.g., Cost Accounting 
Standards Board; Changes in Cost Accounting Practices, 61 Fed. Reg. 49196 (18 Sept. 
1996). In the course of that proposed rulemaking, the CAS Board recognized that it had 
"never previous! y defined [offsets] in a formal rule or regulation" and that the "proper 
application of offsets has long been a source of confusion and controversy." Id. at 
49204. The proposed rules addressed this deficiency by including a definition of "offset 
process," id. at 49215, and provisions that, among other things, would have governed the 
offset of simultaneous accounting practice changes, id. at 49219 (proposed 48 C.F .R. 
§ 9903.405-5(b)). 
Although the CAS Board ultimately abandoned this rulemaking effort, 
see 65 Fed. Reg. 37470 (14 June 2000), the published meeting minutes of the CAS 
Board demonstrate that the CAS Board continues to view the offset of accounting 
practice changes to be an important issue that it needs to resolve. For example, the 
minutes for the CAS Board meeting on 16 November 2009 state: 
There was a brief discussion on the status of other 
outstanding cases which have been held in abeyance due to 
3 Raytheon does bring one new argument to the table: the Dictionary Act, 1 U.S.C. § 1, 
provides that "In determining the meaning of any Act of Congress, unless the 
context indicates otherwise-words importing the singular include and apply to 
several persons, parties, or things." According to Raytheon, this means that when 
the statute uses the term "a change," it should be interpreted to also mean 
"changes." Raytheon has raised this argument for the first time in its reply brief. 
Even if this argument has not been waived, we reject it. The Supreme Court 
recently explained that it relies upon this rule only when it is necessary to carry out 
the evident intent of the statute. CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2187 
(2014) (citing United States v. Hayes, 555 U.S. 415, 422 n.5 (2009)). In our view, 
it is not necessary to interpret "a change" to mean "changes" to carry out the intent 
of the CAS statute. For one thing, the offset of multiple simultaneous cost 
accounting changes is a relatively obscure issue when one considers the CAS 
statute as a whole. As we conclude below, Congress has left a gap in the statute 
that it has entrusted the agency administering the statute to fill. 
9 

the Staff workload. The CASB agreed that the issue of 
whether the cost impacts arising from multiple accounting 
changes taking place for the "same event" can be combined 
into a single cost impact is of the highest priority among the 
outstanding non-statutory issues. That issue is part of the 
case on the cost impact of cost accounting changes .... The 
Staff will work 
on that issue as the highest priority non­
statutory case, subject to the workload. 
CAS Board, 58
1
h Meeting, available at http://www.whitehouse.gov/omb/casb_58/ 
(emphasis added). 
Similarly, the minutes for the meeting on 13 June 2011 state: 
Computing a Cost Impact 
The CASB discussed the staffing needs for this potential 
new Working Group. Mr. Wong informed the CASB that 
commitments on staffing to support the WG have been 
received from some of the agencies. The CASB requested 
that the initial draft of the project plan for the WG include 
within its scope the definition of "in the aggregate" (i.e., 
offsets or netting), multiple accounting changes 
implemented on the same day, and the recommendations of 
any issues for FAR regulatory consideration. 
CAS Board, 6ih Meeting, available at http://www.whitehouse.gov/sites/default/files/omb/ 
procurement/casb/minutes/casb-67-meeting_ minutes.pdf (emphasis added). 
In the CAS statute, Congress has left a gap concerning the offset of simultaneous 
changes. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 
U.S. 837, 842-44 (1984) ("The power of an administrative agency to administer a 
congressionally created ... program necessarily requires the formulation of policy and the 
making of rules to fill any gap left, implicitly or explicitly, by Congress.") (quoting 
Morton v. Ruiz, 415 U.S. 199, 231 (1974)). Based on: (1) the absence of any language 
in the CAS Board regulations that address the offset of simultaneous accounting 
changes; (2) the CAS Board's abandonment of its rulemaking effort; and (3) the CAS 
Board's long-stated desire to address this issue, we conclude that the CAS Board has 
not yet "filled the gap" in the statute by issuing regulations.
4 
4 Raytheon has submitted a document that it obtained from the Office of Management 
and Budget in a Freedom of Information Act request. The document states at the 
top of a copy of Working Group Item 76-8 "CASB approved 01124/08." (Item 
10 

2. The Effect of DoD's Established Practice In Light of the Absence of 
Regulatory Guidance 
As we also held in Boeing, at the time that the parties entered into Contract I, 
there was an "established practice of the government agencies primarily responsible for 
enforcing the cost accounting standards statutes and regulations" to allow the offset of 
simultaneous changes. Boeing, 13 BCA ~ 35,427 at 173,787. This established practice 
is reflected in various documents. First, in 1976, DoD established a CAS Steering 
Committee to "develop and disseminate" policy and guidance for integration of CAS 
Board rules and regulations into DoD procurement practices. ACAS Working Group 
carried out the detailed work of the committee. See Cost Accounting Standards Guide 
(CCH) ~ 5990 at 6463. On 17 December 1976, the Working Group issued Item 76-8, 
Interim Guidance on Use of the Offset Principle in Contract Price Adjustment Resulting 
from Accounting Changes. Id. at 6470. With respect to offsetting multiple changes, the 
Working Group concluded: "CAS publications including the CAS clause shed no light 
on how the offset technique may be related 
to ... simultaneous accounting changes." Id. 
The Working Group determined that the offsetting of simultaneous accounting changes 
within a segment was permissible and would serve to reduce the number of contract 
price changes. Id. at 6471. The Working Group recognized that treating voluntary 
accounting changes on an individual basis would provide the government with an 
opportunity to decrease the amount owed on some contracts, but it concluded that the 
interests of the government were adequately protected if the government paid no overall 
price increase. Id. 
Second, as we observed in Boeing, audit manuals for DCAA, and the 1990 Contract 
Administration Manual of the Defense Contract Management Command (DCMC), 
expressly allowed the offsetting. Boeing, 13 BCA ~ 35,427 at 173,786. For example, the 
2002 DCAA contract manual states that Item 76-8 was "still effective and [had] been 
incorporated into" the manual. DCAA Contract Audit Manual at 8-102.2. The manual 
later specifically stated "Within a segment, the effect of several changes may be combined 
in the offset consideration if the changes all take place at the same time." Id. at 8-503.5. 
Third, in Boeing, the Board relied upon a memorandum prepared by the 
contracting officer that documented the standard practice. This memorandum stated in 
relevant part: "Prior to 2005, the impact of all of the accounting changes would be 
76-8 is discussed in sub-section II.A.2 below.) Raytheon contends that this 
document shows that the CAS Board agrees with the Working Group Item and 
permits the offset of simultaneous changes. But, as described above, the CAS 
Board has repeatedly 
stated in its meeting minutes that it has not addressed this 
issue. Whether the CAS Board regulations permit offsetting is a legal, rather 
than a factual issue. 
11 

considered and netted together in determining if the Government paid increased costs in 
the aggregate." Boeing, 13 BCA ii 35,427 at 173,786. 
Fourth, in April 2000, the Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (the FAR Councils) published a proposed rule that would 
have codified DoD's longstanding practice of allowing the offset of multiple simultaneous 
changes. Federal Acquisition Regulation; Cost Accounting Standards Administration, 
65 Fed. Reg. 20854-01 (18 April 2000). The proposed regulation provided: 
( d) Offsets. ( 1) The CF AO [cognizant federal agency 
official] may offset increased costs to the Government 
against decreased costs to the Government for some or all 
contracts, depending upon the particular facts and 
circumstances. 
(3) In determining what contracts should be offset, the 
CF AO must 
consider the following: 
(ii) Within a segment, the CF AO may combine the effect of 
several changes in accounting practice in the offset 
consideration if the changes have the same effective date. 
Id. at 20859. As we will see, the FAR Councils later changed course dramatically, but 
not until well after the parties executed Contract I. 
We find CAS Working Group Item 76-8, the DCMC and DCAA manuals, and 
the proposed regulation to be quite informative in identifying the "context and 
intention" of the parties when they made their bargain. Metric Constructors, Inc. v. 
NASA, 169 F.3d 747, 752 (Fed. Cir. 1999). These documents also indicate a clear 
course of performance between the government and CAS-covered contractors on prior 
contracts concerning the treatment of simultaneous changes. See Metro. Area Transit, 
Inc. v. Nicholson, 463 F.3d 1256, 1260 (Fed. Cir. 2006). 
We recognize that this holding is fact specific. Although we are bound by our 
precedent in Boeing, ifthe government had come forward with affidavits or other 
non-conclusory evidence that demonstrated that our finding of an "established practice" 
in Boeing was incorrect, the result here might be different. If the government had 
submitted such evidence, we may have conducted a hearing to allow the government to 
present any extrinsic evidence it has with respect to the nature of the bargain that the 
12 

parties struck. Instead, the government has repeated the same arguments it made in 
Boeing and has put all of its eggs in the "Boeing is wrong" basket. Because the 
government has not identified any material fact in dispute, we enter summary judgment 
for Raytheon on Revision I. 
B. The Revision 15 Changes 
1. The Pre-FAR 30.606 Contracts 
As described above (SOF ii 19), the contract from which the DACO sought to 
recover the Revision 15 amount (Contract II) is dated 30 December 2004. Roughly 
three months later, the FAR Councils issued the final rule concerning the resolution of 
cost impacts that it had proposed in 2000. Federal Acquisition Regulation, Cost 
Accounting Standards Administration, 70 Fed. Reg. 11743 (9 March 2005). While the 
proposed rule had expressly allowed the offset of simultaneous changes, the final rule 
represented a complete turnabout in that it now prohibited such offsetting: 
30.606 Resolving cost impacts. 
(3) In resolving the cost impact, the CFAO-
(ii) Shall not combine the cost impacts of any of the 
following unless all of the cost impacts are increased costs 
to Government: 
(A) One or more unilateral changes. 
Id. at 11758 (codified at 30 C.F.R. § 30.606(a)(3)(ii)(A)). 
Revision 15 did not go into effect until 1 January 2008 (SOF ii 15). This would 
suggest that, in addition to contracts like Contract II that predate the issuance of 
FAR 30.606, this revision also applied to some contracts executed after the April 2005 
effective date of the regulation. In fact, Raytheon estimates that about two-thirds of the 
contracts subject to Revision 15 were executed after the regulation went into effect. 
(App. br. at 22 n.7) Raytheon's Revision 15 appeal thus raises the issue of how we 
should analyze the Revision 15 changes when that revision applies to contracts executed 
both before and after the issuance of FAR 30.606. 
13 

As a preliminary matter, Raytheon contends that, because the contracting.officer 
seeks to recover all of the Revision 15 funds from a pre-FAR 3 0. 606 contract, and there 
was no bar to such offsets at the time of contract execution, then the government's 
Revision 15 claim fails in its entirety. However, it cites no authority for its position. In 
fact, it is common for the government to offset money it owes on one contract from 
money it owes on another contract. As the Federal Circuit has explained, "The set-off 
right applies to government claims both under other contracts ... and under the same 
contract." Johnson v. All-State Constr., Inc., 329 F.3d 848, 852 (Fed. Cir. 2003) (citing 
William Green Constr. Co. v. United States, 477 F.2d 930, 936 (Ct. Cl. 1973); Cecile 
Indus., Inc. v. Cheney, 995 F.2d 1052, 1055 (Fed. Cir. 1993). Accordingly, the 
government could use Contract II to offset debts that arose on other contracts, even if 
Contract II is not subject to FAR 30.606. 
With respect to Revision 15 contracts executed prior to the effective date of FAR 
30.606, we apply the regulations in effect on the date that the parties signed the contract. 
Boeing, 13 BCA if 35,427 at 173,786. The accounting changes that Raytheon made in 
2008 do not change the nature of the bargains that the parties struck pre-FAR 30.606. 
Accordingly, our decision in Boeing means that the contractor can offset the Revision 15 
contracts that the parties executed prior to 8 April 2005, the effective date of FAR 
30.606. See 70 Fed. Reg. at 11743. We grant Raytheon summary judgment on this issue. 
2. Post-FAR 30.606 Revision 15 Changes 
Raytheon raises a second defense in its motion: whether the FAR Councils in 
issuing this regulation exceeded their authority by acting in an area that Congress 
reserved exclusively to the CAS Board. On its face, FAR 
30.606(a)(3)(ii)(A) would bar 
the offsetting that Raytheon seeks to perform in this case - unless it is invalid as 
Raytheon contends. 
a. The CAS Board's Authority to Regulate 
There are three provisions in the statute that define the authority of the CAS 
Board to regulate. First, as we observed 
above, the CAS Board "has exclusive authority 
to prescribe, amend, and rescind cost accounting standards, and interpretations of the 
standards ... goveming measurement, assignment, and allocation of costs to contracts 
with the Federal Government." 41 U.S.C. § 1502(a)(l). The statute later re­
emphasizes the primacy of the CAS Board when it comes to the measurement, 
assignment, and allocation of costs: "Costs that are the subject of cost accounting 
standards ... are not subject to regulations established by another executive agency that 
differ from those standards with respect to the measurement, assignment, and allocation 
of those costs." 41 U.S.C. § 1504(c). Second, the Board has authority to prescribe 
regulations for the implementation of cost accounting standards prescribed or 
interpreted under this section. Id. § 1502(f). Third, the Board is empowered to define 
14 

"aggregate increased cost to the Federal Government." Id. § 1503(b). Unlike 
§§ 1502(a)(l) and l 504(c), neither of these latter two sections specifically provide that 
the CAS Board's authority is exclusive. 
There is also a fourth provision in the statute of interest in defining the CAS 
Board's regulatory sphere in relation to other agencies. Section l 504(b) provides that 
the Administrator of OFPP (who, as noted, is also the CAS Board Chairman) "shall 
rescind or deny the promulgation" of any regulation or proposed regulation that is 
inconsistent with a cost accounting standard. 41 U.S.C.§ l 504(b ). The regulation at 
issue, FAR 30.606, was issued by the FAR Councils, which 
have responsibility for 
issuing revisions to the FAR, (see FAR 1.201-1 ), that is, to Chapter 1 of Title 48 of the 
Code of Federal Regulations (see FAR 1.10 I). The cost accounting standards are 
contained in a separate chapter of Title 48, namely, Chapter 99. In the nearly ten years 
that have elapsed since the effective date of FAR 30.606, the OFPP Administrator has 
not taken any action under § 
l 504(b) to rescind this regulation. 
The question in this case is whether the FAR Councils, in issuing FAR 30.606, 
have overstepped their authority. Put another way, we are being asked to invalidate a 
FAR provision even though a CAS Board regulation on this topic, if ever issued, might 
state the exact same thing. Or, put yet another way, we are being asked to rule that a 
regulation is invalid even though the official entrusted with statutory authority to do so, 
the OFPP Administrator, has not taken any action. 
Close scrutiny of the CAS Board's activity indicates that the OFPP 
Administrator not only has abstained from rescinding FAR 30.606, he or she actually 
supported the FAR Council's rulemaking. A few more words of history are in order to 
explain why. As described above, in the 1990s the CAS Board proposed regulations 
that would govern changes in cost accounting practices. This effort included 
regulations detailing permissible offsets for simultaneous accounting practice changes, 
that is, the precise issue here. See, e.g., 61 Fed. Reg. 49219. Ultimately, the CAS 
Board abandoned that effort, at least so far as it is relevant to this case. See Cost 
Accounting Standards Board; Changes in Cost Accounting Practices, 65 Fed. Reg. 
37470 (14 June 2000). The CAS Board explained that its abandonment of the 
rulemaking effort was due, in part, to the FAR Councils' issuance in April 2000 of the 
proposed rules that included FAR 30.606. The CAS Board stated that the FAR 
Councils' proposal was in response to "an initiative" by the OFPP Administrator. 
65 Fed. Reg. at 37470. The CAS Board's citation to the involvement of the OFPP 
Administrator is not surprising because, in addition to being the CAS Board Chairman, 
the OFPP Administrator is also responsible for providing "overall direction of 
procurement policy and leadership in the development of procurement systems of the 
executive agencies." 41 U.S.C. § l 12l(a). Congress has empowered the OFPP 
Administrator to prescribe government-wide procurement policies that are implemented 
in the FAR. Id. § l 12l(b). 
15 

In its June 2000 public notice, the CAS Board cited an expected decline in the 
number of CAS-covered contracts and "the expected issuance of more explicit FAR 
guidance regarding the CAS cost impact process," and concluded that the issuance of 
amendments to the CAS were "not presently warranted." The CAS Board explained 
that the FAR Councils' proposal addressed many aspects of the "fundamental CAS 
administration process" that the Board's proposed rules had covered. The CAS Board 
stated that it "encourages the Councils to finalize the proposed rulemaking." 65 Fed. 
Reg. at 37470. The FAR Councils responded to this apparent blessing from the CAS 
Board and the OFPP Administrator by finalizing their proposed rulemaking in 2005, 
which included FAR 30.606, as we have seen. 70 Fed. Reg. 11743. 
b. FAR 30.606 Does Not Infringe on CAS Board Authority 
The only sections of the CAS statute that explicitly grant exclusive regulatory 
authority to the CAS Board are the sections that grant that Board the authority to issue 
standards governing the measurement, assignment and allocation of costs to contracts 
with the Federal Government. 41 U.S.C. §§ 1502(a), 1504(c). Although the statute 
does not define measurement, assignment and allocation of costs, the CAS Board has 
defined them in its regulations. See 48 C.F.R. § 9903.30l(a) (identifying sections where 
terms are defined). 
The CAS regulations define measurement of cost in terms of methods and 
techniques that govern the manner in which a contractor will calculate or compute cost: 
(a) Measurement of cost, as used in this part, encompasses 
accounting methods and techniques used in defining the 
components of cost, determining the basis for cost 
measurement, and establishing criteria for use of alternative 
cost measurement techniques .... Examples of cost 
accounting practices which involve measurement of costs 
are-
( 1) The use of either historical cost, market value, or present 
value .... 
48 C.F.R. § 9904.302-l(a). 
For example, CAS 412 is entitled "Cost Accounting Standard for Composition 
and Measurement of Pension Cost." 48 C.F.R. § 9904.412. Among other things, it 
specifies the methods and techniques to be used in calculating pension costs: 
16 

(b) Measurement of pension cost. 
(I) For defined-benefit pension plans ... the amount of 
pension cost of a cost accounting period shall be determined 
by use of an immediate-gain actuarial cost method .... 
48 C.F.R. § 9904.412-40. 
With respect to assignment of costs, the CAS Board has defined it in terms of 
assigning costs to specific periods of time: 
(b) Assignment of cost to cost accounting periods, as used in 
this part, refers to a method or technique used in 
determining the amount of cost to be assigned to individual 
cost accounting periods. Examples of cost accounting 
practices which involve the assignment of cost to cost 
accounting periods are requirements for the use of specified 
accrual basis accounting or cash basis accounting for a cost 
element. 
48 C.F.R. § 9903.302-l(b). 
Finally, the CAS Board regulations define "allocate" as follows: 
( 1) Allocate means to assign an item of cost, or a group of 
items of cost, to one or more cost objectives. This term 
includes both direct assignment of cost and the reassignment 
of a share from an indirect cost pool. 
48 C.F.R. § 9904.402-30(a)(l). As the Federal Circuit has explained, the allocation of a 
cost deals with the accounting process of assigning costs to cost objectives. Rice v. 
Martin Marietta Corp., 13 F.3d 1563, 1565 (Fed. Cir. 1993). Cost objectives include 
contracts and other work units for which cost 
data are desired. Id. For a cost to be 
allocable to a cost objective, the cost must have benefited from or have been caused by the 
cost objective. Id. Thus, as the Federal Circuit has succinctly explained, "the concept of 
allocability is addressed to the question whether a sufficient 'nexus' exists between the 
cost and a government contract." Boeing North American, 298 F.3d at 1281. 
Raytheon does not contend that this case involves the measurement, assignment, 
or allocation of costs. Indeed, it seems to us that the issue here involves an event that is 
conceptually and temporally distinct from the period in which the contractor is 
measuring its costs, and assigning and allocating them to accounting periods and cost 
objectives. The dispute here is further down the road, that is, it occurs after the costs 
17 

have already been measured, assigned, and allocated. Conceptually, the decision to bar 
offsetting is more in the nature of contract administration or a policy determination than 
an accounting issue. As a number of cases have held, simply because a cost has been 
properly measured, assigned, and allocated does not mean that an agency is obligated to 
pay it. See, e.g., Martin Marietta, 13 F.3d at 1569 ("The fact that costs have been 
incurred, measured, and allocated in accordance with the CAS does not prohibit 
agencies from limiting the allowability of those costs under their own regulations .... 
Government agencies have the authority to disallow types and amounts of properly 
allocated costs for various policy reasons. Costs may be assignable and allocable under 
the CAS, but not allowable .... "). We are dealing with the same manner of dispute here; 
specifically, we are considering whether an agency is obligated to pay for costs that 
have been measured, assigned and allocated in accordance with CAS. 
c. Interpretation of Section l 503(b) 
In support of its contention that the FAR Councils exceeded their authority, 
Raytheon relies upon § l 503(b) of the statute, which provides, in part: "The Federal 
Government may not recover 
costs greater than the aggregate increased cost to the 
Federal Government, as defined by the Board, on the relevant contracts subject to the 
price adjustment." Raytheon contends that this provision should be read as assigning 
exclusive authority to define aggregate increased costs to the CAS Board, even though, 
unlike § 
l 502(b ), the statute does not explicitly state that the authority is exclusive. 
Based on this purported exclusive authority for the CAS Board, Raytheon contends 
that 
the FAR Councils lacked the authority to issue the regulation at issue because that 
regulation effectively defines aggregate increased cost. 
If Raytheon's argument is correct, then FAR 30.606 would have been just as 
unlawful if it had authorized the offsetting that Raytheon seeks. This is so because the 
purported grant of exclusive authority to the CAS Board would have prevented the FAR 
Councils from addressing the issue in any way. Thus, contracting officers would face a 
legal vacuum in determining whether to offset the cost impact of multiple changes 
because neither the statute, nor the cost accounting standards, answer this question. 5 
"Questions of statutory construction tum on 'the language itself, the specific 
context in which the language is used, and the broader context of the statute as a 
whole."' Bush v. United States, 655 F.3d 1323, 1329 (Fed. Cir. 2011) (quoting 
Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997)). "It is our duty 'to give effect, if 
possible, to every clause and word ofa statute.'" Duncan v. Walker, 533 U.S. 167, 174 
(2001) (quoting United States v. Menasche, 348 U.S. 528, 538-39 (1955) (quoting 
5 The CAS Board has defined the term "increased costs" but has done so only in the 
context of "a change" and has not defined "aggregate increased costs." See 48 
C.F.R. § 9903.306(a). 
18 

Montclair v. Ramsdell, 107 U.S. 147, 152 (1883)). It is also well settled that "where 
Congress includes particular language in one section of a statute but omits it in another 
section of the same Act, it is generally presumed that Congress acts intentionally and 
purposely in the disparate inclusion or exclusion." Duncan, 533 U.S. at 173 (quoting 
Bates v. United States, 522 U.S. 23, 29-30 (1997) (quoting Russello v. United States, 
464 U.S. 16, 23 (1983)). 
We hold that FAR 30.606 does not impermissibly intrude on authority reserved 
exclusively for the CAS Board. We reach this conclusion because we do not read the 
grant of authority to the CAS Board in § l 503(b) as being so broad that it prevents the 
FAR Councils from issuing regulations that provide guidance to contracting officers 
who may be faced with an accounting change that affects hundreds of contracts. While 
Congress has granted clear authority to the CAS Board to define aggregate increased 
costs in § l 503(b ), we cannot ignore the fact that the grant of authority is not as strong 
as the exclusive authority granted in§ 1502(a) with respect to the measurement, 
assignment, and allocation of costs. By including specific language in § l 502(a)(l) that 
it did not include in § l 503(b ), we presume that Congress acted intentionally. Duncan, 
533 U.S. at 173. The wording of§ 1503(b) allows for a coexistence between the CAS 
Board, whose primary concern in the measurement, assignment, and allocation of costs, 
and the executive agencies that must administer highly complex contracting 
arrangements. See Kearfott Guidance & Navigation Corp. v. Rumsfeld, 320 F.3d 1369, 
13 77 (Fed. Cir. 2003) (noting the canon of construction in favor of finding harmony 
between the CAS and FAR as two regulations dealing with similar subjects). 
A review of the drafting history of FAR 30.606 illustrates some of the policy or 
administrative decisions that an agency faces when processing the cost impact of 
accounting changes. In addition to addressing simultaneous unilateral accounting changes 
within the same business segment (the situation we have here), agencies may also have to 
address whether the following types of offsets should be allowed: changes that are not 
simultaneous; changes that are within the same company but for different business 
segments; changes that are all compliant changes but are for different categories of 
compliant changes, that is, required, unilateral, and desirable changes; and whether 
compliant changes may offset non-compliances. Federal Acquisition Regulation: Cost 
Accounting Standards Administration, 68 Fed. Reg. 40104-01, 40110-11 (3 July 2003). 
Ultimately, the FAR Councils determined to allow the combination 6 of some types of 
changes, but mostly took a hard line against offsetting. 70 Fed Reg. at 11749. Due to the 
lack of any guidance from Congress or the CAS Board that addresses offsetting multiple 
changes, we are unwilling to disturb the actions of the FAR Councils. 
6 When the FAR Councils issued the proposed FAR 30.606 the second time, they 
eliminated the term "offset" to "avoid potential confusion" and instead used the 
word "combine." 68 Fed. Reg. at 40104. 
19 

The CAS Board has long since recognized the authority of the FAR Councils to 
issue regulations that are administrative in nature and encouraged the rulemaking that 
resulted in FAR 30.606. 65 Fed. Reg. at 37470. While not binding on us, we find this to 
be meaningful based on the CAS Board's expertise. We also find significance in the roie 
played by the OFPP Administrator who not only prescribes government-wide 
procurement policies implemented in the FAR, but is also Chairman of the CAS Board. 
The OFPP Administrator is thus uniquely situated to determine which regulations should 
be issued in the FAR and those which should be issued in Chapter 99 of Title 48. We 
believe that the Administrator has sent a clear message by: 1) initiating the rulemaking 
that resulted in FAR 30.606 (65 Fed. Reg. 37470); 2) acting as Chairman of the CAS 
Board when it: a) abandoned that Board's proposed regulations that would have 
addressed offsetting; and b) published a Federal Register notice that characterized the 
FAR rulemaking as administrative in nature and which endorsed that rulemaking (id.); 
and 3) for nearly I 0 years, declining to use his or her authority under 41 U.S.C. § I 504(b) 
to rescind FAR 30.606. The actions of the CAS Board and the OFPP Administrator 
demonstrate that FAR 30.606 was a lawful exercise of the authority of the FAR Councils. 
Accordingly, we enter summary judgment in favor of the government with 
respect to the validity of FAR 30.606(g)(3)(ii)(A). 
III. The Desirability of The Changes 
Raytheon contends that the DACOs erred by basing their determinations that the 
Revision 1, 5 and 15 changes were not desirable strictly upon the increased costs to the 
government. 7 The CAS regulations define a desirable change as one in which the 
cognizant federal agency 
official finds that the change "is desirable and not detrimental to 
the Government and is therefore not subject to the no increased cost prohibition provisions 
of CAS-covered contracts affected by the change." 48 C.F.R. § 9903.201-6(c)(2). This 
determination "need not be based solely on the cost impact that a proposed practice 
change will have on a contractor's or subcontractor's current CAS-covered contracts." Id. 
A change can be deemed desirable "even though existing contract prices and/or cost 
allowances may increase." The determination that a change is desirable is made on a case 
by case basis. Id. 
Raytheon relies upon our decision in Lockheed Martin Corp., ASBCA 
No. 53822, 07-2 BCA if 33,614, ajf'd, Donley v. Lockheed Martin Corp., 608 F.3d 1348 
(Fed. Cir. 2010). In that case, the Board considered whether a particular contract should 
be considered in a cost impact proposal and, after deciding that it should, we remanded 
the quantum determination to the parties. At the conclusion of the opinion, the Board 
stated that, if material increased costs resulted from the changed practices, then the 
7 Having resolved the Revision 1 changes and the pre-April 2005 Revision 15 changes, 
we do not reach the desirability or the materiality of these changes. 
20 

contracting officer should consider whether the changes were desirable. Id. at 166,469. 
In dicta, the Board stated that an increase in costs alone was not a sufficient basis for 
determining that the changed practices were not desirable and that the relevant factors 
for assessing desirability "may include" the extent of active government involvement in, 
and support for, the decision to institute the changed practices; the degree to which the 
changed practices increased the accuracy and precision of the cost measurement, 
assignment, and/or allocation process; the degree to which the changed practices 
increased the visibility, manageability and/or controllability of the costs in question; 
and, any other short or long term benefits to the government. Id. 
The government counters by observing that nothing in§ 9903.201-6(c) prevents the 
contracting officer from considering only cost in determining whether the change is 
desirable. The government contends that the use of the phrase "need not" in this regulation 
means that it is "wholly permissive in nature." Thus, the government concludes that it is 
entirely within the considerable discretion of the contracting officer to make his or her 
determination by focusing solely upon the increased cost to the government. 
Prior to April 2005, the FAR"[ d]id not provide information on how to determine 
whether a change is desirable." 70 Fed. Reg. at 11751. Subsequent to the contract at 
issue in the Board's decision in Lockheed Martin, and as part of the same rulemaking 
that resulted in FAR 30.606, the FAR Councils amended FAR Subpart 30.6 to add 
criteria for the contracting officer to consider when determining whether a change is 
desirable. The new regulation provides: 
(b) Desirable changes .... 
(3) Some factors to consider in determining if a 
change is desirable include, but are not limited to, 
whether-
(i) The contractor must change the cost accounting 
practices it uses for Government contract and subcontract 
costing purposes to remain in compliance with the 
provisions of Part 31; 
(ii) The contractor is initiating management actions 
directly associated with the change that will result in cost 
savings for segments with CAS-covered contracts and 
subcontracts over a period for which forward pricing rates 
are developed or 5 years, whichever is shorter, and the cost 
savings are reflected in the forward pricing rates; and 
21 

(iii) Funds are available if the determination would 
necessitate an upward adjustment of contract cost or price. 
FAR 30.603-2(b ). 
Resolution of this issue once again requires us to consider the state of the law 
pre-April 2005, the time period applicable to Revision 5, and post-April 2005, the time 
period applicable to the Revision 15 contracts not disposed of above. Regardless of the 
time period at issue, however, the determination as to the desirability of a change is a 
discretionary determination by the contracting officer. The Federal Circuit has applied 
the following factors in determining whether a contracting officer has abused his/her 
discretion: ( 1) evidence of whether the government official acted with subjective bad 
faith; (2) whether the official had a reasonable, contract-related basis for his decision; 
(3) the amount of discretion given to the official; and ( 4) whether the official violated a 
statute or regulation. Campbell Plastics Eng'g & Mfg., Inc. v. Brownlee, 389 F.3d 1243, 
1250 (Fed. Cir. 2004). 
With respect to the Revision 5 changes, there is no evidence that the contracting 
officer acted in subjective bad faith. The contracting officer had a 
reasonable 
contract-related basis for his decision because the change resulted in a substantial increase 
of costs to the government. Further, with respect to the amount of discretion provided to 
the contracting officer, Contract I incorporated 48 C.F.R. § 9903.201-6(c)(2) (SOF ii 8), 
which, as noted above, merely states that the contracting officer's desirability 
determination "need not be based solely on the cost impact" of the change. The logical 
corollary of "need not be based solely on the cost impact" is that the determination may be 
based solely upon the cost impact. Finally, the contracting officer did not violate any 
statute or regulation. 
When Raytheon issued Revision 5, neither the CAS Board regulations nor the 
FAR required the contracting officer to consider any particular factors in making this 
determination. See Lockheed Martin, 07-2 BCA ii 33,614. While the contracting officer 
did not consider the factors that we identified in Lockheed Martin, under these facts the 
contracting officer acted within his discretion by not considering factors that were 
absent from the pertinent regulations. 
Raytheon contends that the Revision 5 [REDACTED REDACTED REDACTED 
REDACTED REDACTED REDACTED REDACTED REDACTED 
REDACTED ] and, as a result, increased the accuracy and precision [REDACTED 
REDACTED REDACTED ] (app. br. at 32). While the result of this accounting 
change may have been laudable, we conclude that it was not an abuse of discretion for the 
contracting officer to focus upon the increase in costs rather than these purported benefits. 
22 

As for Revision 15, Raytheon contends that the [ REDACTED REDACTED] 
moved [ REDACTED REDACTED REDACTED REDACTED REDACTED 
RE ] The change caused costs incurred by [ REDACTED REDACTED REDACTED ] 
to be more appropriately allocated [ REDACTED REDACTED REDACTED ] 
(app. br. at 33) (citations omitted). It contends that [REDACTED REDACTED 
REDACTED REDACTED REDACTED REDACTED REDACTED 
REDACTED REDACTED REDACTED REDACTED REDACTED 
REDACTED ] Such a change increases the visibility, manageability, and 
controllability of those costs." Id. (citations omitted). 
There is no evidence that the contracting officer acted in bad faith or violated a 
law or regulation with respect to the Revision 15 changes. She also had a reasonable 
contract-related basis for her decision because the change resulted in a substantial 
increase of costs to the government. However, it appears that, by focusing solely upon 
costs, she did not consider the factors for assessing desirability listed in FAR 30.603-2(b ). 
Whether this was an error we need not decide because Raytheon has not contended that it 
had to make the changes to remain in compliance with FAR Part 31, or that any of the 
other factors contained in FAR 30.603-2(b) weigh in its favor or even apply to this case. 
Nor did it make any such contention when it communicated with the contracting officer 
about Revision 15. 
In its reply brief, Raytheon contends that it is enough for it to show that the 
contracting officer failed to consider all of the factors (reply at 18-22), but it fails to cite 
any precedent. This is incorrect because the Federal Circuit has required contractors to 
show a prejudicial violation of a regulation in comparable circumstances. In Todd 
Construction, L.P. v. United States, 656 F.3d 1306 (Fed. Cir. 2011), a contractor 
contended that the contracting officer failed to follow the requirements of a pertinent 
regulation while issuing a performance evaluation. The court of appeals found, 
however, that the contractor had "alleged nothing to indicate that the outcome of the 
performance evaluations would have been any different if the purported procedural 
errors had not occurred." Id. at 1316. The court of appeals held that "[i]n general, 
standing requires that the plaintiff show an injury in fact, 'a casual connection between 
the injury and the conduct complained of,' and that his injury would likely be 
redressable by court action." Id. at 1315 (quoting Lujan v. Defenders of Wildlife, 
504 U.S. 555, 560 (1992)). As a result, the Federal Circuit held that the contractor 
lacked standing to sue with respect to these procedural violations. See id. (citing Labatt 
Food Service, Inc. v. United States, 577 F.3d 1375, 1378-80 (Fed. Cir. 2009) (bid 
protestor lacked standing because it could not show that it was prejudiced by a 
significant error, that is, that but for the error it would have had a substantial chance of 
receiving the contract)). Accordingly, because Raytheon has not contended that any of 
the factors for desirability identified in FAR 30.603-2(b) would have made a difference 
in the outcome, the contracting officer did not abuse her discretion in focusing solely 
23 

upon price in determining that the changes were not desirable, and we grant summary 
judgment to the government. 
IV. The Materiality of the Revision 5 & 15 Changes 
Raytheon contends that the DACOs improperly failed to consider whether the 
impacts of the accounting practice changes were material. FAR 30.602(c)(l) 
(April 2005 - present) provides that the contracting officer "shall" make no contract 
adjustments if the costs involved are immaterial. (Before April 2005, the regulation was 
similar, although it used "may" instead of "shall": "The [administrative contracting 
officer] may forego action to require that a cost impact proposal be submitted or to 
adjust contracts, if the ACO determines the amount involved is immaterial.") This FAR 
provision has at all relevant times directed the contracting officer, in determining 
materiality, to use the criteria issued by the CAS Board at 48 C.F.R. § 9903.305. 
Section 9903.305 lists several criteria for the cognizant federal agency official to 
consider "where appropriate" and provides that 
"no one criterion is necessarily 
determinative." The listed criteria include: "[t]he absolute dollar 
value involved. The 
larger the dollar amount, the more likely that it will be material"; the amount of contract 
cost compared with the amount under consideration; and the relationship between a cost 
item and a cost objective, with direct cost items normally having more impact than the 
same amount of indirect costs. See, e.g., Sikorsky Aircraft Corp. v. United States, 110 
Fed. Cl. 210, 223-25 (2013) (applying§ 9903.305 to determine whether an overhead 
pool contained significant costs of management or supervision of direct cost activities), 
ajf"d, 773 F.3d. 1315 (Fed. Cir. 2014). 
The FAR and CAS Board regulations concerning materiality must be read in light of 
the clear congressional prohibition on the government paying increased costs as a result of 
a contractor's accounting changes. In particular, the CAS statute requires the contractor to 
agree to a price adjustment "with interest, for any increased costs" paid to the contractor as 
a result of an accounting change. 41 U.S.C. § 1502(±)(2) (emphasis added); see also 
41 U.S.C. § 1503(b); FAR 52.230-2(a)(2), (4), (5). While one can imagine a de minimis 
exception to the statute so that the government does not spend thousands of dollars chasing 
a nickel, the statutory bar against the government paying increased costs is clear. The CAS 
Board has demonstrated its understanding of this principal, explaining in one of its first 
statements on materiality that the goal of the cost accounting standards is to be "reasonable 
and not seek to deal with insignificant amounts of cost." Cost Accounting Standards 
Board, Statement of Operating Policies, Procedures, and Objectives, 38 Fed. Reg. 6122 
(6 March 1973). This interpretation of materiality is consistent with the everyday 
definition of material: "being of real importance or great consequence; substantial." 
WEBSTER'S THIRD NEW INT'L DICTIONARY (1986). 
24 

Based on the clear statutory language barring payment of increased costs, the CAS 
Board's materiality regulation should be understood as an attempt to identify factors that 
assist in determining whether the amount of money at issue is significant enough for it to 
be worthwhile to recover. Indeed, one of the criteria in the regulation is whether the 
administrative cost of processing the price adjustment exceeds the amount to be 
recovered. Significantly, the regulation provides that the cost amount may be material 
even if the administrative costs are greater than the recovery; it simply provides that, in 
such a circumstance, it is "less likely" to be considered material. 48 C.F.R. § 9903.305(£). 
The DACOs determined that the impact of the Revision 5 change and the 
Revision 15 changes relating to communications and inventory maintenance were 
material. In reaching this determination, the DACOs relied solely upon the cost impact 
of the changes. (App. br., SUF iii! 43, 56; gov't resp. to SUF iii! 43, 56) Raytheon 
contends that the DACOs erred by considering only the amount of the cost increases. 
Among other things, it contends that the cost increases were immaterial in comparison 
to Raytheon's annual total overhead base of approximately $3 billion and that the cost 
impacts amounted to less than one percent of the total cost of the contracts at issue. 
While it appears that Raytheon is correct that the DACOs did not consider any of 
the§ 9903.305 factors beyond the amount of the cost increases, it may have been within 
their discretion to do so.' However, we will not decide this issue on summary judgment 
due to our holding below in favor of Raytheon with respect to the double counting of 
costs. Our ruling in favor of Raytheon on double counting means that the amounts 
considered by the DACOs were, in fact, greatly overstated. The contracting officers 
apparently relied upon DCAA to calculate the amounts to be recovered but we do not 
know if that reliance was reasonable at the time. Accordingly, we will reserve judgment 
on this issue until we have heard from the pertinent witnesses at trial and we have 
further briefing from the parties as to the standard of review we should apply to a 
contracting officer's final decision that was based on an overstated amount, and the legal 
remedies that apply. 8 
V. The Double Counting of Costs 
Raytheon contends that the government is seeking a double recovery on all three 
revisions because it seeks recovery for not only the increase in costs allocated to 
flexibly-priced contracts but also the corresponding decrease in costs allocated to fixed­
price contracts. Using the Revision 1 property accounting/property management change 
as an example, Raytheon emphasizes that it incurred the same amount of costs after this 
8 We have considered Raytheon's other arguments but reject them. Neither Sikorsky 
Aircraft Corp., 110 Fed. Cl. 210 nor the documents that Raytheon cites at pages 
38-39 of its opening brief involved a question as to whether an amount of money 
to be recovered was material. 
25 

change. The only thing that was different is that it had [REDACTED REDACTED 
REDACTED REDACTED REDACTED REDACTED REDACTED 
REDACTED REDACTED REDACTED REDACTED REDACTED ] 
Under Revision 1, Raytheon reduced the costs allocated to fixed-price contracts by 
$281, 100 and increased costs to flexibly-priced contracts by $313,200.
9 
(SOF if 2) 
Although the government has not challenged Raytheon's assertion that these are the 
same costs, it nevertheless contends that these two figures should be added together to 
ascertain the principal amount of its Revision I damages, that is, $594,300 (SOF ii 3). 
Raytheon provides a simple example to illustrate what it views as the unfairness 
of the government's position. It posits a world where the Revision I change applies 
only to two contracts, one fixed-price, one flexibly-priced, both at one million dollars. 
It then reduces the allocation to the fixed-price contract by $300,000 as a result of the 
property accounting change and increases the flexibly-priced contract by the same 
amount: 
Value Before Value After Change Increased Cost 
Change In to Gov't 
Accounting Practice 
Fixed-Price Contract $1,000,000 $1,000,000 
Flexibly-Priced $1,000,000 $1,300,000 
Contract 
Total Cost to Gov't $2,000,000 $2,300,000 $300,000 
Under this scenario, if no adjustments are made to the contracts, the government 
would pay $2.3 million for goods or services for which it expected to pay only $2 
million. This would violate the statutory bar that the government not pay increased 
costs in the aggregate. 41 U.S.C. § 1503(b). But this statute also prohibits the 
government from recovering greater than the aggregate increased cost to the 
government. As Raytheon points out in its brief, if the government recovers $300,000 it 
seemingly would be made whole because the government would receive the same goods 
or services as before the accounting change and it would still pay 
a total of $2 million. 
According to Raytheon, any recovery beyond $300,000 would violate the bar on 
recovering more than the aggregate cost increase. 
The government contends that it must recover costs on the fixed-price contracts 
because Raytheon would 
make a profit on these contracts in excess of that negotiated by 
the parties at the time of award. The government contends that this would violate 
48 C.F.R. § 9903.306, which provides in relevant part: 
9 Raytheon explains that these numbers are not equal because they account only for 
U.S. government contracts; it also allocated $32,000 less to its commercial and 
foreign contracts. 
26 

If the contractor under any fixed-price contract, including a 
firm fixed-price contract, fails during contract performance 
to follow its cost accounting practices or to comply with 
applicable Cost Accounting Standards, increased costs are 
measured by the difference between the contract price 
agreed to and the contract price that would have been agreed 
to had the contractor proposed in accordance with the cost 
accounting practices used during contract performance. 
48 C.F.R. § 9903.306(b). 
However, this regulation must be read in light of the statutory prohibition on 
recovering greater than the aggregate increased cost to the Federal Government. 
41 U.S.C. § 1503(b). The statute contains one exception to this bar: ifthe contractor 
was aware or should have been aware of the change at the time of the price negotiation 
and failed to disclose it to the government. The government does not allege that this 
occurred here. 
The government's position runs afoul of the prohibition in§ 1503(b). Going 
back to Raytheon's simple example of a world with one fixed-price and one 
flexibly-priced contract valued at one million each, the government's position would 
allow it to recover (or simply not pay) $300,000 on each contract. Thus, although it 
originally contracted to pay 
a total of $2 million, after the accounting change it would 
receive the same goods or services for a total of $1.7 million. This is the very definition 
of a windfall and is just as inequitable as if no adjustments were made and Raytheon 
received $2.3 million for this work. 
Accordingly, we hold that under § l 503(b) the government may recover the 
increased costs allocated to flexibly-priced contracts, but it may not also recover those 
same costs when they are removed from the allocation to fixed-price contracts, and 
grant Raytheon summary judgment on this issue. 
VI. The 30 Percent Markup 
The government has added a markup of 30 percent to the Revision 5 changes 
(SOF iii! 12, 13). The reasons why the government added this markup and the 
justification for it are sharply contested. Accordingly, because material facts are in 
dispute, we deny the cross-motions on this issue. 
On a related note, Raytheon has moved to strike the declaration of David Steele, a 
supervisory auditor at DCAA. Raytheon challenges the declaration as contradictory to his 
deposition testimony. Specifically, it contends that Mr. Steele's declaration contradicts his 
27 

deposition testimony on the reasons why DCAA was unable to complete its audit of 
Revisions 1 and 5, the basis for the 30-percent markup, and Mr. Steele's previous 
experience with Raytheon's cost impact proposals. After reviewing the government's 
response, we are satisfied that the government can identify portions of the deposition 
testimony that are consistent with the declaration. These issues and Mr. Steele's credibility 
should be addressed at trial. Accordingly, we deny Raytheon's motion to strike. 
VII. Interest 
Raytheon challenges the DACOs assessment of compound interest. The CAS 
statute provides that contractors must "agree to a contract price adjustment, with 
interest, for any increased costs paid to the contractor ... because of a change in the 
contractor's ... cost accounting practices." 41 U.S.C. § l 502(t)(2). The statute further 
provides that the interest rate applicable to a contract price adjustment is the interest rate 
established under 26 U.S.C. § 6621. Section 6622(a) of title 26 provides that interest 
paid under that title shall be compounded daily. As a result, the Federal Circuit "has 
held that statutes which require interest payments at the rate set out in § 6621 require 
compound interest." Gates v. Raytheon Co., 584 F.3d 1062, 1070 (Fed. Cir. 2009) 
(citing Canadian Fur Trappers Corp. v. United States, 884 F.2d 563, 568 (Fed. Cir. 
1989) (discussing 19 U.S.C. § 1677(g)). 10 Thus, any amounts that Raytheon is required 
to pay the government shall include compound interest. 
Raytheon also contends that the DACOs erred by calculating interest as if the 
government incurred all of the costs on the date that the change was implemented. The 
government appears to agree at least in part because it states in its response brief that 
"Raytheon should pay the Government compound interest from the time the 
Government paid Raytheon the increased costs until the time Raytheon fully 
compensates the Government" (gov't resp. br. at 37-38). 
Accordingly, we hold the government shall be entitled to compound interest from 
the date of the excess payments until the date that the government is repaid in full and 
enter summary judgment in its favor on this issue. 
10 The CAS clause incorporated in Contracts I and II, FAR 52.230-2, implements the 
statutory interest requirement (SOF iii! 8, 20). This clause provides that if a 
contractor makes a change in its cost accounting practices and the change affects the 
contract price or cost allowance, then an adjustment shall be made in accordance 
with subparagraph (a)(4) or (a)(5) "as appropriate." FAR 52.230-2(a)(2). While 
hardly a model of clarity, subparagraph (a)(5) does provide for interest pursuant to 
26 U.S.C. § 6621, the same statute cited in 41 U.S.C. § 1503(c). Thus, reading the 
contract in light of the clear mandate for compound interest in the CAS statute, the 
contracts require payment of compound interest. 
28 

CONCLUSION 
In summary, we grant 
summary judgment in favor of Raytheon with respect to 
Revision 1, ASBCA No. 57801. With respect to Revision 5, ASBCA No. 57803, we 
grant summary judgment in favor of the government with respect to the desirability of 
the changes; we deny the cross-motions with respect to the materiality of the changes 
and with respect to the 30 percent markup; we grant Raytheon summary judgment with 
respect to the double counting issue; we grant summary judgment in favor of the 
government that any interest paid should be compound and should be paid from the date 
that the government made the payment at issue until Raytheon repays the government. 
As for Revision 15, ASBCA No. 58068, we grant summary judgment in favor of 
Raytheon with respect to contracts entered into prior to 8 April 2005; we grant summary 
judgment in favor of the government on the issue of the validity of FAR 30.606; we 
grant summary judgment in favor of the government with respect to the desirability of 
the changes; we deny the cross-motions with respect to the materiality of the changes; 
we grant Raytheon summary judgment with respect to the double counting issue; and 
we grant summary judgment in favor of the government that any interest paid should be 
compound and should be paid from the date that the government made the payment at 
issue until Raytheon repays the government. Finally, we deny Raytheon's motion to 
strike the declaration of David Steele. 
The parties shall confer and submit a proposed schedule for further proceedings 
within 60 days of the date of this opinion. 
Dated: 7 May 2015 
I concur 
MARK N. STEMPLER 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
29 
111~TI.a'~ 
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 Nos. 57801, 57803, 58068, 
Appeals of Raytheon Company, Space & Airborne Systems, rendered in conformance 
with the Board's Charter. 
Dated: 
30 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals