DENIED: November 8, 2016
CBCA 4985
MISSION SUPPORT ALLIANCE, LLC,
Appellant,
v.
DEPARTMENT OF ENERGY,
Respondent.
Kenneth B. Weckstein and Shlomo D. Katz of Brown Rudnick LLP, Washington, DC;
and Stanley J. Bensussen, General Counsel of Mission Support Alliance, LLC, Richland,
WA, counsel for Appellant.
Paul R. Davis, Office of Chief Counsel, Department of Energy, Richland, WA,
counsel for Respondent.
Before Board Judges SOMERS, WALTERS, and LESTER.
SOMERS, Board Judge.
This matter comes before the Board on cross-motions for summary relief.  The issue
is whether certain costs are allowable under the terms of the contract.  For the reasons
explained below, we conclude that the costs are not allowable.  Accordingly, we deny
appellant’s motion for summary relief, grant the Government’s motion for summary relief,
and deny the appeal.  

CBCA 4985 2
Background
Beginning in 1940 with the Manhattan Project, Hanford, Washington (the Hanford
Site) played a pivotal role in the nation’s defense through the production of nuclear materials. 
With the signing of the Hanford Federal Facility Agreement and Consent Order, the
Department of Energy (DOE) is engaged in the world’s largest environmental cleanup project
at the Hanford Site.  In support of this project, in April 2009, DOE and Mission Support
Alliance, LLC (MSA) entered into a performance-based cost-plus-award-fee contract,
contract no. DE-AC06-09RL14728 (the Mission Support Contract, MSC, or  contract), in the
amount of $3,059,369,580.1  
 Under this contract, MSA provides mission support services, including furnishing
personnel, equipment, material, supplies, and services.  MSA does “all things necessary for,
or incident to, providing its best efforts to manage, operate, and deliver mission support
services.”  The statement of work provides that MSA will accomplish the following:  
The Contractor shall directly provide time-phased ready-to-serve capability to
all Hanford Site environmental cleanup missions, including protective forces,
physical security systems, information security, personnel security, nuclear
materials control and accountability (MC&A), cyber-security, program
management, Hazardous Materials Management and Emergency Response
(HAMMER) facility operations, site-specific safety training, fire and
emergency response services, emergency operations, maintenance of a selected
set of Hanford Site safety standards, radiological assistance program (RAP)
operations, environmental regulatory management, and public safety and
resource protection.  These services are integral to the Hanford Site
environmental cleanup mission.  
The contract included various clauses from the Federal Acquisition Regulation (FAR) and
Department of Energy Acquisition Regulation (DEAR).  The regulations relevant to this
appeal are identified below.  
1 MSA is a joint venture of Lockheed Martin Integrated Technology, LLC;
Jacobs Engineering Group Inc.; and Centerra Group, LLC (formerly Wackenhut Services,
Inc.).  DOE initially awarded the contract to MSA on September 3, 2008, following a
competitive procurement under Federal Acquisition Regulation (FAR) part 15.  Following
resolution of a bid protest to the Government Accountability Office, on April 28, 2009, DOE
awarded the contract to MSA. 

CBCA 4985 3
Relevant Contract Clauses
FAR 52.216-7/DEAR 952.216-7, Allowable Cost and Payment (Dec 2002), Alternate
I,2 provided that “[t]he Government will make payments to the Contractor . . . in amounts
determined to be allowable by the Contracting Officer in accordance with [FAR] subpart
31.2 in effect on the date of this contract and the terms of this contract.”   Likewise, section
H.24(j) of the contract required the contracting officer to “determine allowable costs in
accordance with the [FAR] Subpart 31.2 and [DEAR] Part 931, Contract Cost Principles and
Procedures in effect on the date of this Contract and other provisions of this Contract.” 
 
In turn, FAR subpart 31.2 defined the allowability and allocability3 of costs incurred
in cost reimbursement contracts.  FAR 31.201-2 lists the factors to consider in determining
allowability: 
(a) The factors to be considered in determining whether a cost is allowable
include the following:  
(1) Reasonableness.
(2) Allocability.
(3) Standards promulgated by the CAS [Cost Accounting Standards] Board,
if applicable, otherwise, generally accepted accounting principles and practices
appropriate to the circumstances.
(4) Terms of the contract.
(5) Any limitations set forth in this subpart. 
With respect to reasonableness, the FAR provides, in part:
31.201-3 Determining reasonableness
(a) A cost is reasonable if, in its nature and amount, it does not exceed that 
which would be incurred by a prudent person in the conduct of competitive
business. . . . No presumption of reasonableness shall be attached to the
incurrence of costs by a contract.  If an initial review of the facts results in a 
challenge of a specific cost by the contracting officer or the contracting
officer’s representative, the burden of proof shall be upon the contractor to
establish that such a cost is reasonable.  
2 The contract refers to “Alternate II” of the clause.  However, in April 2009, the
year the parties entered into the contract, Alternate II of the clause did not exist. 
3 Allocability of these costs is not at issue in this appeal. 

CBCA 4985 4
(b) What is reasonable depends upon a variety of considerations and circumstances,
including – 
(1) Whether it is the type of cost generally recognized as ordinary and
necessary for the conduct of the contractor’s business or contract
performance; 
(2) Generally accepted sound business practices, arm’s length
bargaining, and Federal and State laws and regulations; 
(3) The contractor’s responsibilities to the Government, other
customers, the owners of the business, employees, and the public at
large; and  
(4) Any significant deviations from the contractor’s accepted practice.   
Also included is DEAR 952.231-71 (48 CFR 952.231-71), Insurance – Litigation and Claims
(Jul 2013), which states:
(a) The contractor must comply with 10 CFR part 719, contractor Legal
Management Requirements, if applicable.  
(b) (1) Except as provided in paragraph (b)(2) of this clause, the
contractor shall procure and maintain such bonds and insurance as
required by law or approved in writing by the Contracting Officer.
(2) The contractor may, with the approval of the Contracting
Officer, maintain a self-insurance program in accordance with FAR
28.308; provided that, with respect to worker’s compensation, the
contractor is qualified pursuant to statutory authority.  
(3) All bonds and insurance required by this clause shall be in the
form and amount and for those periods as the Contracting Officer may
require or approve and with sureties and insurers approved by the
Contracting Officer.  
(c) The contractor agrees to submit for the Contracting Officer’s approval,
to the extent and in the manner required by the Contracting Officer, any
other bonds and insurance that are maintained by the contractor in
connection with the performance of this contract and for which the

CBCA 4985 5
contractor seeks reimbursement.  If an insurance cost (whether a
premium for commercial insurance or related to self-insurance)
includes a portion covering costs made unallowable elsewhere in the
contract, and the share of the cost for coverage for the unallowable cost
is determinable, the portion of the cost that is otherwise an allowable
cost under this contract is reimbursable to the extent determined by the
Contracting Officer.
(d) Except as provided in paragraph (f) of this clause, or specifically
disallowed elsewhere in this contract, the contractor shall be
reimbursed –  
(1) For that portion of the reasonable cost of bonds and insurance
allocable to this contract required in accordance with contract terms and
approved under this clause, and 
(2) For liabilities (and reasonable expenses incidental to such
liabilities, including litigation costs) to third persons not compensated
by insurance without regard to the limitation of cost or the limitation of
funds clause of this contract. 
(e) The Government’s liability under paragraph (d) of this clause is subject
to the availability of appropriated funds.  Nothing in this contract shall
be construed as implying that the Congress will, at a later date,
appropriate funds to meet deficiencies.  
(f) (1) Notwithstanding any other provision of this contract, the 
contractor shall not be reimbursed for liabilities to third parties,
including contractor employees, and directly associated costs which
may include by not be limited to litigation costs, counsel fees, judgment
and settlements – 
(I) Which are otherwise unallowable by law or the provisions
of this contract, including the cost reimbursement limitations contained
in 48 CFR part 970.31, as supplemented by 48 CFR part 931; 
(ii) For which the contractor has failed to insure or to
maintain insurance as required by law, this contract, or by the written
direction of the Contracting Officer; 

CBCA 4985 6
. . . . 
(h) The contractor may at its own expense and not as an allowable cost
procure for its own protection insurance to compensate the contractor
for any unallowable or non-reimbursable costs incurred in connection
with contract performance.  
The contract included or incorporated by reference other standard FAR and DEAR
clauses, including FAR 52.250-1, Indemnification Under Public Law 85-804 (APR 1984)
Alternate I (APR 1984) (Deviation), and DEAR 952.250-70, Nuclear Hazards Indemnity
Agreement (Jun 1996). 
MSA Applies for Support Anti-Terrorism by Fostering Effective Technologies Act
(SAFETY Act) Designation
On August 5, 2009, subsequent to starting performance on the contract,4 MSA
submitted its application to the Department of Homeland Security (DHS) for designation as
a seller of a Qualified Anti-Terrorism Technology (QATT)5 pursuant to the Support Anti-
Terrorism by Fostering Effective Technologies Act (SAFETY Act), 6 U.S.C. §§ 441-444.6 
Before submitting this application, MSA employees recognized in several internal e-mail
4 Actually, a year before it submitted its application in August 2009, and shortly
before DOE’s original award of the contract to MSA, MSA had submitted an application to
DHS for SAFETY Act designation.  MSA withdrew that  application pending resolution of
a bid protest. 
5 FAR Subpart 50.2 implements the SAFETY Act liability protections “to
promote development and use of anti-terrorism technologies.”  FAR 50.201 defines QATT
as “any technology designed, developed, modified, procured, or sold for the purpose of
preventing, detecting, identifying, or deterring acts of terrorism or limiting the harm such acts
might otherwise cause, for which a SAFETY Act designation has been issued.  For purposes
of defining a QATT, technology means any product, equipment, service (including support
services), device, or technology (including information technology) or any combination of
the foregoing.  Design services, consulting services, engineering services, software
development services, software integration services, threat assessments, vulnerability studies,
and other analyses relevant to homeland security may be deemed a technology.”  
6 As noted in FAR 50.203, Congress enacted the SAFETY Act “to . . . provide
risk management and litigation management protections for sellers of QATTs and others in
the supply and distribution chain.”  

CBCA 4985 7
messages that the contract did not require MSA to have liability insurance, that the bid was
“not conditioned on getting SAFETY Act designation,” and that the cost of the premium for
such insurance was not likely to be an allowable cost under the contract.  In fact, MSA did
not discuss its plan to apply for SAFETY Act designation with the contracting officer either
prior to bidding on the contract or after contract award.   
In its DHS application, MSA, confirming that DOE had not approved reimbursement
for SAFETY Act insurance, stated:
MSA intends to obtain insurance for the Technology that is in an amount, at
a cost, and on terms and conditions that the DOE customer has approved under
the Contract . . . . Also, the U.S. government is providing two forms of
financial protection under the Contract to cover third-party losses resulting
from both nuclear and non-nuclear related incidents. . . .  The DOE-approved
insurance coverage and government liability protection under the Contract
taken together are comparable to – if not in excess of – insurance for the
technology that would be available at a reasonable cost to satisfy compensable
liability claims arising out of an act of terrorism in accordance with SAFETY
Act requirements. . . . Further to the above, any such insurance would be
duplicative of other risk management/financial protection already provided for
by the U.S. government customer (DOE).  Moreover, under the terms of the
Contract, the cost of any liability insurance additional to the DOE-approved
covered . . . is not an allowable cost of performance or reimbursable to MSA. 
Accordingly, even if it is available on the world market, MSA [sic] has
concluded that the cost of additional liability insurance that is not reimbursable
[sic] to MSA under the Contract is a cost that would unreasonably distort the
sales (or Contract) price of the Technology.   
. . . .  
The only insurance that the DOE customer has approved under the Contract
is the $5 million retroactively-rated insurance policy . . . Under DEAR
952.231-71, the cost of such insurance – $___ – and claims in excess of $5
million are [sic] reimbursable [sic] to MSA.  Costs associated with any other
insurance coverage is not reimbursable [sic].  
(Emphasis added.)  Likewise, in a “talking paper” to the MSA board of directors on the
SAFETY Act, employees indicated that if DHS requires MSA to have liability insurance, the
cost of that insurance may not be allowable.    

CBCA 4985 8
While MSA’s  application was pending, MSA continued to examine the allowability
of the SAFETY Act liability insurance premiums.  It asked a DOE subcontractor whether 
“DOE Sandia [had] determined insurance premium costs [to be] allowable.”  In response, a
Sandia employee stated that “insurance premiums that are Sandia specific (workers
compensation, auto, liability, bonds for self insured products, etc.) are paid by the Sandia
corporation.  All other coverage that is provided by Lockheed is not allowable. “
Advance Understanding on Costs Did Not Include SAFETY Act Insurance
Section H.14 of the contract required DOE and MSA to “reach advance
understandings regarding certain costs” under the contract within sixty days of contract
award.  As stated in that section:  
Such advance understandings enable both DOE and the Contractor to
determine the allocability, allowability, and reasonableness of such costs prior
to their incurrence, thereby avoiding subsequent disallowances and disputes,
and facilitating prudent expenditure of public funds.  
Notably, this section references DOE Acquisition Guide Chapter 70.28, which, in turn,
identifies the insurance requirements specified in DOE Order 350.1 as the basis for
identifying the insurance “required by the contract.”  DOE Order 350.1 requires contractors
to have, in addition to an approved program for self-insurance, “cost-effective liability
program . . . covering employer’s liability, commercial general liability, business auto
liability, aircraft public and passenger liability, and vessel liability.”  FAR 28.307-2.  The
contract requirements make no mention of terrorism liability insurance, SAFETY Act
insurance, or insurance of any kind associated with the requirements of the SAFETY Act. 
 
MSA submitted to DOE its proposed advance understanding on costs on July 23, 2009
(within one week of submitting its DHS application for QATT designation).  In the section
governing “insurance and indemnification,” MSA proposed that “[i]nsurance required by the
contract, law, and normal business requirements [be] allowable.”  Later, MSA amended its
proposal related to the insurance and indemnification costs to indicate, in part, that
“(i)nsurance required by the contract, law, and normal business requirements is allowable.” 
At no point did MSA reference SAFETY Act insurance in its proposal.
DOE responded in January 2010, revising the section concerning insurance and
indemnification to read that “insurance required by contract is allowable,” and deleting the
reference to “law and normal business requirements.”  In its comment, DOE states that “[w]e
are not sure what normal business requirements would entail, but are concerned that would
allow for more insurance than what is anticipated.  Thus, we have struck this language.  The

CBCA 4985 9
recommended language is also consistent with other PRC’s [other contractors] AU
[Advanced Understanding].” 
 
On April 21, 2010, MSA resubmitted its Advance Understanding on Costs, stating
“insurance required by the contract is allowable.”  This language remained the same
throughout the later contract modifications.  
MSA Receives SAFETY Act Designation
Meanwhile, by letter dated December 8, 2009, DHS issued a “Certificate of SAFETY
Act Designation” which designated MSA’s technology as “Qualified Anti-Terrorism
Technology.”  This certification required MSA to obtain third-party liability coverage for acts
of terrorism with a per-occurrence level of no less than $100,000,000.  On February 19, 2010
MSA appealed DHS’s decision concerning the level of insurance required, stating: 
As stated in the Application, the Contract provides for a 3-pronged approach
to liability protection against losses that the contractor sustains in performance
of the Contract – U.S. government indemnification of Price-Anderson claims;
contractor’s purchase of commercial liability insurance, and DOE
reimbursement of non-Price-Anderson claims in excess of such insurance as
an allowable cost under the Contract.  If the insurance is in an amount, at a
cost, and on terms and conditions approved by DOE, the premium is also an
allowable Contract cost.  This is the standard DOE approach to contract
liability – including insurance – for agency services contracts involving
nuclear/hazardous waste sites.  
For the Hanford program – consistent with its past practice – the only
insurance DOE would and did approve for MSA to purchase was insurance
provided under a DOE Rating Plan (or a comparable retrospectively-rated
policy).  Accordingly, MSA obtained the maximum amount of approved
insurance available on the market – $5,000,000 – at an allowable cost of
$71,750.  The cost of any additional insurance is not reimbursable under the
Contract.
(Emphasis added.)  MSA asked DHS to reduce the required amount of insurance coverage. 
In support of this request, MSA stated in its June 9, 2010, response:   
In the interests of expeditiously closing out the Proposed Modification, and in
light of the availability of the Homeland Protector coverage at a significantly
lower premium rate, MSA would be prepared to incur the additional, non-

CBCA 4985 10
reimbursable cost of the Homeland Protector policy to assure terrorism liability
protections afforded under the SAFETY Act.  
Ultimately, on June 24, 2010, DHS issued an amended certificate of SAFETY Act
designation, reducing the insurance requirement to $30,000,000.  MSA purchased a SAFETY
Act insurance policy (SAFETY Act insurance) and paid for the initial premium with its own
funds. 
On July 25, 2011, an MSA employee identified as the “Director, MSA - Contracts”
decided that the SAFETY Act insurance should be considered an allowable cost, noting:
The attached letter [from DHS] approves our application for Safety Act
coverage.  Within this document, there is a requirement to maintain insurance
to certain levels as a pre-requisite for receiving the Safety Act coverage.  I
consider this letter to be authorization to maintain the insurance as a contract
requirement.  By this requirement it is an allowable charge and is specifically
allocable to this contract.  
When another MSA employee stated in an email message dated August 12, 2011, that “I
understand that we have received approval from DOE to treat the SAFETY Act insurance
costs as allowable,” the MSA director responded: 
We do not have, nor do we need “approval” from DOE.  The requirement from
the government to purchase is clear.  Its [sic] also clear that its [sic] allowable
due to the government requirement.  I want to make sure we characterize this
correctly. 
Thereafter, starting in September 2011, MSA charged the initial premium for the SAFETY
Act insurance to the contract.  MSA continued charging the annual premiums for FY 2011-
FY 2014 to the contract, culminating in a total charge of $1,364,806.72.  Again, at no time
did MSA seek approval from the contracting officer to treat the cost of SAFETY Act
premiums as allowable. 
In 2014, DOE first learned that the costs of the SAFETY Act insurance policy were
being charged to the contract through an audit by a DOE contractor pension and benefits
specialist.7  When asked about the move of the insurance policy premiums from unallowable
7 A declaration submitted by a DOE contracting officer reveals that the
electronic invoices submitted by MSA simply show that in 2013, 2014, and 2015, MSA paid

CBCA 4985 11
to allowable costs. MSA’s director of finance and accounting assumed that MSA had
obtained approval from the DOE contracting officer.  DOE asked MSA to justify these costs,
including an explanation of  which contract provisions required MSA to purchase SAFETY
Act insurance and why the premiums should be reimbursed as allowable costs under the
contract. 
 
A flurry of correspondence between MSA and DOE ensured.  In one email message
dated November 17, 2014, the MSA director of contracts explained his rationale for deeming
insurance premiums reimbursable as allowable costs:
The request of Safety Act Designation was based on the requirements set forth
in the [statement of work] and the allowability for the cost is derived from the
requirement set forth in that letter to maintain liability insurance (pg 2 of 4). 
The cost principal [sic] associated with the insurance allowability contained
in FAR 31.205-19(e)(1) states costs of insurance required or approved
pursuant to the contract are allowable. . . . I believe the requirement stems
directly from the contract and not a stand-alone DOE letter and allowability is
governed by the FAR reference.” 
The contracting officer did not agree with MSA’s rationale, and, after more exchanges of
correspondence, on April 22, 2015, DOE’s contracting officer gave MSA notice of DOE’s
intent to disallow the costs of SAFETY Act insurance.  
After receiving MSA’s June 30, 2015, response to the April 22, 2015 notice, the
contracting officer issued a detailed decision on August 24, 2015.  The contracting officer
explained that “DOE has several cost-plus award fee contracts with companies that utilize
anti-terrorism technologies and provide security services to protect against threats related to
the presence of nuclear materials and hazards similar to or greater than those at Hanford,
including DOE’s contract with Centerra at the Savannah River Site,” and “[n]one of DOE’s
contractors – including Centerra – has ever charged the Government for insurance costs
associated with QATT certification, except for MSA.”  Next, the contracting officer
determined that MSA’s purchase of SAFETY Act insurance does not comply with the terms
of the subject contract, or does not meet the FAR definition of “reasonable.”  The contracting
officer concluded that the costs were unallowable, and that MSA must reimburse the
Government for the unallowable costs in the amount of $1,364,806.72, plus applicable
interest.  The contracting officer provided MSA with its appeal rights should it disagree with
itself for costs associated with “insurance.” The costs were not broken down, itemized, or
described in any meaningful way for DOE to identify what they actually represented.  

CBCA 4985 12
the decision.     
MSA subsequently submitted its appeal to us.  
Discussion
Standard of Review
Summary relief 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 (1986).  Only disputes over facts that might affect the outcome of the case
under governing law will properly preclude the entry of summary relief.  Id. at 248.  When,
as here, both parties have moved for summary relief, “each party’s motion must be evaluated
on its own merits and all reasonable inferences must be resolved against the party whose
motion is under consideration.”   CAE USA, Inc. v. Department of Homeland Security, CBCA
4776, 16-1 BCA ¶ 36,377, at 177,344; URS Energy & Construction, Inc. v. Department of
Energy, CBCA 2260, 12-2 BCA ¶ 35,094, at 172,353 (citing Charleston Marine Containers,
Inc. v. General Services Administration, CBCA 1834, 10-2 BCA ¶ 34,551, at 170,398).  
The parties’ motions require the Board to decide a contract interpretation issue. 
Contract interpretation “is a legal question that is often amenable to summary disposition.”
JAVIS Automation & Engineering, Inc. v. Department of the Interior, CBCA 938, 09-2 BCA
¶ 34,309, at 169,478 (citing Varilease Technology Group, Inc. v. United States, 289 F.3d
795, 798 (Fed. Cir. 2002)).  
Parties’ Contentions
Appellant: MSA contends that the cost of premiums for SAFETY Act insurance
is an allowable cost because its contract required it to maintain adequate insurance against
liability on account of damage to persons or property.  A terrorist attack at the Hanford Site,
MSA argues, could result in MSA having liability for damage to persons or property,
precisely the type of event the SAFETY Act insurance policy covers.  MSA also claims that
buying the insurance was reasonable, in that a terrorist attack is not far-fetched, a claim
allegedly supported by DHS’s requirement that MSA obtain insurance that will cover up to
$30 million in damages from terrorist attacks. 
Alternatively, MSA says, even if the contract did not require it to purchase such
insurance, MSA is entitled to exercise its reasonable judgment to purchase such insurance
and the costs of that insurance would be allowable under the contract.  Because the Mission
Support Contract is MSA’s only contract, such costs were allocable to the contract, and they

CBCA 4985 13
were reasonable in their nature and amount.  
In response to DOE’s claim that MSA failed to submit the SAFETY Act insurance
policy allowability issue to the contracting officer for approval, MSA asserts that while it is
true that MSA did not submit the policy for approval in fiscal year 2010, it was not true in
fiscal years 2011 through 2014.  This is so because, when MSA submitted the insurance
policies to the contracting officer, “DOE never bothered to respond.”  
Respondent:  DOE contends that nothing in the contract required MSA to obtain
designation as a QATT.  It purchased SAFETY Act insurance only because a different
agency, DHS, required it for QATT designation.  The cost of the premiums cannot be
determined to be “reasonable” as required by FAR 31.201-3 because, DOE claims, SAFETY
Act insurance is “uniformly recognized as unnecessary for the performance of any DOE
contracts, and equally recognized as not ordinary for any DOE contract.”  Focusing upon
MSA’s application for QATT designation, DOE points out that MSA certified, under penalty
of perjury, that the costs of SAFETY Act insurance were not allowable under the contract. 
DOE states that, even if MSA’s purchase of SAFETY Act insurance could be found
to be “reasonable” or “required,” the costs are nevertheless unallowable because MSA failed
to comply with an express contractual requirement to obtain the contracting officer’s
approval of the policy.  DOE highlights evidence in the record which suggests that MSA
considered having a discussion about the insurance premiums with the contracting officer,
but made a deliberate decision not to submit the policy to the contracting officer for approval. 
Analysis
In this case, we find the material facts are uncontested.  The dispositive issue is a legal
one – whether the premiums that MSA paid for a SAFETY Act insurance policy are
allowable costs under the terms of the contract.  We conclude that the premiums are not,
because (1) MSA failed to obtain contracting officer approval for its SAFETY Act insurance
policy, in violation of contract terms; and (2) the costs are not reasonable pursuant to FAR
31.201-3(a) and (b), because MSA has not demonstrated that SAFETY Act insurance is
generally recognized as ordinary and necessary for the contractor’s business or the contract
performance.  We review the applicable FAR regulations for determining allowability before
applying these regulatory mandates to the facts at hand. 
a. Allowability of costs 
As we noted above, various FAR and DEAR provisions incorporated in the contract
require that a cost be allocable to the contract under which it is incurred and that the cost be

CBCA 4985 14
allowable.  URS Energy & Construction, Inc., 12-2 BCA at 172,353.  Here, the issue is not
whether these costs are “allocable” to this contract, but rather, whether the costs are
“allowable”:  
Allocability is an accounting concept involving the relationship between
incurred costs and the activities or cost objectives (e.g., contracts) to which
those costs are charged. . . . The concept of cost allowability concerns whether 
a particular cost can be recovered from the government in whole or in part. 
Boeing North American, Inc. v. Roche, 298 F.3d 1274, 1280 (Fed. Cir. 2002).  “Contractor
costs are generally allowable upon consideration of five factors: reasonableness, allocability,
cost accounting standards (CAS) accounting principles, the terms of the contract, and
limitations included within FAR 31.2 (listing factors for determining allowability) – in
particular, FAR 31.205, which governs specific categories of costs.”  URS Energy &
Construction, Inc., 12-2 BCA at 172,353 (citing FAR 31.201-2); see generally FAR 31.205. 
Where neither the contract nor the FAR dictates the treatment of specific costs, the FAR
provides that “[t]he determination of allowability shall be based on the principles and
standards of [FAR 31.2] and the treatment of similar or related selected items.”  FAR
31.204(c).  In addition, whether a cost is considered reasonable depends upon a variety of
circumstances, including whether it is the type of cost generally recognized as ordinary and
necessary for the conduct of the contractor’s business or the contract performance.  Id.  FAR
31.201-3 affords the contracting officer “considerable flexibility in assessing the
reasonableness of costs.”  Kellogg Brown & Root Services, Inc. v. United States, 728 F.3d
1348, 1359 (Fed. Cir. 2013).  
b. MSA failed to obtain the contracting officer’s approval of its SAFETY Act
insurance 
The contract expressly requires MSA to have “all bonds and insurance required by this
clause be in a form and amount and for those periods as the Contracting Officer may require
or approve and with sureties and insurers approved by the Contracting Officer.”  DEAR
952.231-7(c)(b)(2).  In addition, the “Insurance – Litigation and Claims” clause of the
contract expressly provides that “[t]he contractor agrees to submit for the Contracting
Officer’s approval . . . bonds and insurance that are maintained by the contractor in
connection with the performance of this contract and for which the contractor seeks
reimbursement.”  DEAR 952.231-71(c).   
The record indicates that MSA submitted the SAFETY Act insurance policy to DOE
via email message on March 21, 2012, and through letters dated November 29, 2012, January
22, 2014, and October 30, 2014.  MSA asserts that DOE “constructively ‘approved’” the

CBCA 4985 15
policy because DOE did not object to the charges for more than three years.  Nonetheless,
the contract expressly required MSA to submit the SAFETY Act insurance policy “for the
contracting officer’s approval.”  There is no evidence that MSA did so, nor has MSA pointed
to any report to the contracting officer that identified the type of insurance, the cost of the
premium, or any other details related to the SAFETY Act premiums submitted in conjunction
with a request for approval.  MSA did not identify the reimbursements for SAFETY Act
premiums separately.  The accounting codes and amounts reflected in the payment system
did not correspond with MSA’s payments for SAFETY Act insurance.  Further, any
“approval” by the contracting officer of MSA’s treatment of SAFETY Act insurance
premiums as allowable costs would have to be knowing and intentional.  Automotive
Management Services, ASBCA 58352, 14-1 BCA ¶ 35,646, at 174,549; W.S. Jenks & Son,
GSBCA 10513, 92-1 BCA ¶ 24,502, at 122,282 (1991).  He could not “constructively”
approve it, as MSA argues, when he lacked the information that would have told him that
MSA was including SAFETY Act insurance premiums in its allowable costs.  After
evaluating the terms of the contract and the record evidence, we find that MSA failed to
submit the SAFETY Act insurance policy for approval, as required by the contract, and the
contracting officer never approved the allowability of SAFETY Act insurance premiums. 
c.  The costs are not reasonable
Cost reasonableness “is a question of fact.”  Kellogg Brown & Root Services, 728 F.3d
at 1360 (citing General Dynamics Corp., 410 F.2d 404, 409 (Ct. Cl. 1969)).  The standard
for assessing reasonableness is flexible.  Id. (citing FAR § 31.201-3).  A determination that
costs are “reasonable” for allowability purposes is an overall conclusion based on
consideration of all the factual circumstances relating to the incurrence of the costs in
question, including the amount incurred.  Abt Associates, Inc., ASBCA 54871, 06-1 BCA 
¶ 33,218, at 164,633.    
The contracting officer’s determination that MSA’s purchase of SAFETY Act
insurance does not meet the FAR definition of “reasonable” and, therefore, is not allowable,
is well supported by the facts.  The contracting officer properly noted that nothing in the
contract required MSA to apply for or obtain a QATT designation from DHS, nor does the
contract set forth any requirement for MSA to purchase SAFETY Act insurance.  Rather, the
contract required MSA to obtain the DOE contracting officer’s approval for its SAFETY Act
insurance policy, because the contract required “all bonds and insurance required by this
clause to be in a form and amount and for those periods as the Contracting Officer may
require or approve and with sureties and insurers approved by the Contracting Officer.” 
Because MSA did not submit the insurance policy to the contracting officer before
purchasing it, the contracting officer did not have the opportunity to review the nature of the
costs and their relationship with the contract.  

CBCA 4985 16
The contracting officer also found that the costs of the insurance are not ordinary
among DOE contracts.  Not only does the evidence in the record support the contracting
officer’s conclusion, it is consistent with FAR 31.201-3(a), which provides that a cost is not
“reasonable” unless it is of the type “generally recognized as ordinary and necessary for the
conduct of the contractor’s business or the contract performance.”  The record contains
several examples of other contractors performing security services for DOE under similar
cost-reimbursement contracts for the protection of nuclear facilities and assets from threats. 
Most did not elect to obtain QATT designations from DHS.  Those that have such
designations have not attempted to charge the costs of the SAFETY Act insurance to their
DOE contracts.  
In a circular argument, MSA contends that the requirement to purchase SAFETY Act
insurance can be implied by the fact that DHS approved its QATT designation and, citing
FAR 31.205-19(e)(1), asserts that if insurance is required pursuant to the contract or
applicable law, the cost of the insurance is allowable.  However, MSA fails to explain how
the DHS designation makes the cost of the SAFETY Act insurance premiums reasonable for
allowability purposes, particularly since the contract did not require MSA to obtain SAFETY
Act certification.  MSA’s decision to seek QATT designation arose on its own accord.  
Next, MSA points to contract clause 1.79, which requires MSA to maintain
“adequate” insurance to cover liabilities on account of damage to persons or property.  MSA
argues that “adequate” insurance must include SAFETY Act insurance.  MSA’s argument
ignores the contract modification incorporating the parties’ advance understanding on costs
which limits the types of insurance allowable under the contract to that “required by the
contract.”  The contract does not require terrorism liability insurance, SAFETY Act
insurance, or insurance of any kind associated with SAFETY Act requirements.  It is not
reasonable to infer that SAFETY Act insurance was “required by the Contract” when it was
entirely absent from the advance understanding on costs. 
MSA also argues that if MSA did not succeed in preventing, deterring, or mitigating
a terrorist attack, injured third parties could be expected to sue MSA.  The SAFETY Act
would limit MSA’s potential liability.  MSA contends that DOE directly benefits from
MSA’s SAFETY Act designation because, under the SAFETY Act, only MSA could be sued
for loss of property, personal injury, or death for performance or non-performance of the
seller’s QATT in relation to an act of terrorism, and that the buyer of QATT (meaning DOE)
could not be found liable for such costs.  Thus, MSA argues, its SAFETY Act designation
insulates DOE from lawsuits it might otherwise face under the Federal Tort Claims Act or
other potential grounds if MSA failed to deter a terrorist attack at Hanford and persons or
property were injured as a result.  

CBCA 4985 17
MSA’s argument on this point ignores the fact that the contracting officer never had
the chance to evaluate the SAFETY Act insurance policy or to make a decision as to whether
the benefits of the policy would be a worthwhile investment for the Government.  It is
entirely possible that the contracting officer, given the chance, would have concluded that
the SAFETY Act insurance policy provided no benefit to DOE, particularly since DOE is not
listed as a beneficiary under the policy.  Other DOE-approved insurance coverage and
financial protections under the contract appear to duplicate the benefits provided by SAFETY
Act insurance.  As one predecessor board noted in evaluating DOE’s indemnification policy
for management and operating (M&O) contractors as to the allowability of certain costs:   
For decades, the policy of DOE and its predecessor agencies has been to
provide its M&O nuclear weapons contractors with virtually complete
indemnification in the sense of reimbursing them for their expenses including
losses, incurred in the performance of the contract work, that are necessary or
incident thereto, with only narrow, defined exceptions.  
. . . DOE viewed its reimbursement policy as an integral part of a rational,
overall strategy to retain private industry to manage and operate the country’s
nuclear weapons production facilities at a reasonable price.  
Rockwell International Corp., EBCA C-9509187, et al., 02-2 BCA ¶ 32,018, at 158,217,
aff’d on other grounds sub nom. Abraham v. Rockwell International Corp., 326 F.3d 1242
(Fed. Cir. 2003).  In light of DOE’s indemnification policy, the contracting officer could
easily have found the SAFETY Act insurance unnecessary, had he been given the chance to
evaluate the policy.  
MSA’s own actions reflected its belief that the SAFETY Act insurance premiums
would not be allowable under the contract.  For example, in its application for SAFETY Act
designation, MSA stated that the only insurance that had been approved by DOE is “the $5
million retroactively-rated insurance policy” and that “costs associated with any other
insurance policy is not reimbursable [sic].”  MSA failed to list terrorism liability insurance
or SAFETY Act insurance when it identified insurance costs when it was negotiating with
DOE on its advance understanding of costs, as required by the contract.  After DHS approved
MSA’s SAFETY Act designation, in response to DHS’s requirement that MSA purchase
$100 million in coverage, MSA sought a reduction, in part on the grounds that it “would be
prepared to incur the additional, non-reimbursable cost of the [SAFETY Act] policy.”  Upon
DHS approval of the application, MSA did not seek reimbursement for the initial premium
at first.  In fact, MSA did not seek approval from the contracting officer before charging this
cost to the contract. 

CBCA 4985 18
Decision
For these reasons, MSA’s motion for summary relief is denied, DOE’s motion for
summary relief is granted, and the appeal is DENIED.  
_________________________________
 JERI KAYLENE SOMERS
 Board Judge
We concur:  
___________________________________ _________________________________
RICHARD C. WALTERS HAROLD D. LESTER, JR. 
Board Judge Board Judge