United States Court of Appeals 

for the Federal Circuit ______________________ 

RAYTHEON COMPANY,

Plaintiff-Cross-Appellant,

v.

UNITED STATES,

Defendant-Appellant.

______________________ 

2013-5004, -5006

______________________ 

Appeals from the United States Court of Federal 

Claims in No. 05-CV-0448, Judge Nancy B. Firestone.

______________________ 

Decided: April 4, 2014

______________________ 

KAREN L. MANOS, Gibson, Dunn & Crutcher LLP, of 

Washington, DC, argued for plaintiff-cross-appellant. 

With her on the brief were JOHN W.F. CHESLEY and 

GRETA B. WILLIAMS. 

C. COLEMAN BIRD, Senior Trial Counsel, Commercial 

Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendantappellant. With him on the brief were STUART F. DELERY, 

Principal Deputy Assistant Attorney General, JEANNE E.

DAVIDSON, Director, and KIRK T. MANHARDT, Assistant 

Director. Of counsel on the brief was LAWRENCE S.
2 RAYTHEON COMPANY v. US

RABYNE, Attorney, Defense Contract Management Agency, of Arlington Heights, Illinois. 

RICHARD D. BERNSTEIN, Willkie Farr & Gallagher 

LLP, of Washington, DC, for amicus curiae. With him on 

the brief were CARTER G. PHILLIPS and HOWARD 

STANISLAWSKI, Sidley Austin LLP, of Washington, DC.

______________________ 

Before REYNA, TARANTO, and CHEN, Circuit Judges.

REYNA, Circuit Judge.

This appeal concerns Raytheon Company’s (“Raytheon”) calculation and payment of pension fund adjustments 

pursuant to Cost Accounting Standard 413, 48 C.F.R. 

§ 9904.413, following the sale of three business segments. 

The United States Government appeals the judgment of 

the Court of Federal Claims (“trial court”) awarding

Raytheon $59,209,967.30 as the Government’s share of 

pension cost deficits related to two of the business segments. Raytheon cross-appeals the trial court’s rejection 

of its request for recovery with respect to the third business segment on the basis that Raytheon applied the 

wrong asset allocation method in its adjustment calculation. We affirm the decision of the trial court. 

I.

A. SEGMENT CLOSINGS

In this appeal, we address whether segment closing

adjustments are ordinary “pension costs” subject to the 

Federal Acquisition Regulation’s (“FAR”) timely funding 

requirement. See 48 C.F.R. § (“FAR”) 31.205-6(j)(2)(i).1 

1 Unless otherwise indicated, all citations to the 

FAR and the Cost Accounting Standards are to the provi-

 
RAYTHEON COMPANY v. US 3

In the early 2000s, Raytheon underwent a major reorganization that involved the sale of at least eight business 

segments, including the three segments at issue in this 

appeal—Aircraft Integrated Systems (“AIS”), Optical 

Systems (“Optical”), and Aerospace Division (“Aerospace”). As part of each sale, Raytheon retained the 

assets and liabilities of the defined-benefit pension plans 

associated with those segments. Raytheon also calculated 

segment closing adjustments as required by the Cost 

Accounting Standards (“CAS”). Raytheon determined 

that, while some of its business segments had pension 

surpluses, the three segments at issue in this case had 

pension deficits. Although Raytheon paid the Government its share of the surpluses, the Government refused 

to pay its share of the deficits (which Raytheon calculated 

to be around $69 million). 

On November 8, 2004, and January 24, 2005, Raytheon submitted certified claims for recovery of the deficits 

pursuant to the Contract Disputes Act. See 41 U.S.C. 

§ 7103 (2011).2 The contracting officer issued final decisions denying these claims on February 1, 2005, and 

March 7, 2005. The contracting officer concluded that the 

segment closing adjustments were subject to the FAR’s

timely funding requirement, and the pension deficits were 

therefore unallowable because Raytheon failed to fund the 

full amount of the pension deficits in the same year as the 

sions in effect in 2001 and 2002, when Raytheon’s segment closings took place.

2 Before January 2011, this provision was codified 

at 41 U.S.C. § 605. In January 2011, Congress reorganized Title 41 of the United States Code to “remove 

ambiguities, contradictions, and other imperfections.” 

Pub. L. No. 111-350 § 2(b), 124 Stat. 3677 (2011). This 

reorganization did not alter the substance of the provisions discussed here.

 
4 RAYTHEON COMPANY v. US

segment closings. See FAR 31.205-6(j)(2)(i). The contracting officer further concluded that Raytheon’s segment 

closing calculations “do[] not comply with CAS 413[.]” 

B. APPLICABLE REGULATIONS

In general, whether a contractor is required to comply 

with the CAS depends on the dollar value and type of 

contracts it has received from the Government. See 48 

C.F.R. §§ 9903.201-1 to -2. A standard contract clause at 

FAR 52.230-2, Cost Accounting Standards (Apr. 1998) 

(hereinafter the “CAS clause”), is incorporated into all 

CAS-covered contracts. The CAS clause requires the 

contractor to “[c]omply with all CAS, including any modifications and interpretations indicated thereto. . . .” 

FAR 52.230-2(a)(3). The CAS clause also allows the 

contractor or the Government to seek an equitable adjustment for any increased costs incurred due to a required change in the contractor’s established accounting 

practices that were made to comply with future modifications to the CAS. See id. § 52.230-2(a)(4)(i).

Two CAS provisions generally govern the accounting 

treatment of pension costs—CAS 412 and CAS 413. CAS 

412 requires contractors to fund pension costs within the 

cost accounting period in which those costs are assigned. 

48 C.F.R. § 9904.412-50(d)(1). CAS 412 defines the components of a pension cost as the following:

For defined-benefit pension plans, except for plans 

accounted for under the pay-as-you-go cost method, the components of pension cost for a cost accounting period are (i) the normal cost of the 

period, (ii) a part of any unfunded actuarial liability, (iii) an interest equivalent on the unamortized 

portion of any unfunded actuarial liability, and 

(iv) an adjustment for any actuarial gains and 

losses.
RAYTHEON COMPANY v. US 5

Id. § 9904.412-40(a)(1). CAS 412 also defines a definedbenefit pension plan as a type of pension plan in which

“the benefits to be paid or the basis for determining such 

benefits are established in advance and the contributions 

are intended to provide the stated benefits.” Id.

§ 9904.412-30(a)(10). Because a defined-benefit pension 

plan guarantees the payment of future benefits, the 

contractor must deposit enough money into the fund to 

cover all benefit payments to participants. Determining 

the proper amount to deposit into the fund first requires

making estimates on a wide range of variables, such as 

the expected growth of the pension fund’s assets and the 

length of time before participants retire. These estimates 

are known as “actuarial assumptions.” The standards 

that guide actuarial assumptions are set forth in the CAS, 

which define an “actuarial assumption” as “an estimate of 

future conditions affecting pension cost; for example, 

mortality rate, employee turnover, compensation levels, 

earnings on pension plan assets, changes in values of 

pension plan assets.” Id. § 9904.412-30(a)(3).

CAS 412 requires a contractor to determine its pension costs for each cost accounting period using an “immediate-gain actuarial cost method” that takes into 

account the contractor’s best actuarial estimates in light 

of past experience and reasonable expectations. See id. 

§ 9904.412-40(b). To the extent this pension cost calculation results in an unfunded actuarial liability, CAS 412 

requires the contractor to amortize this liability in equal 

annual installments for a period of 10 to 30 years. See id.

§ 9904.412-50(a). CAS 412 defines an unfunded actuarial 

liability as “[t]he excess of the actuarial accrued liability 

over the actuarial value of the assets of a pension plan.” 

Id. § 9904.412-30(a)(2). In other words, a pension fund 

has an unfunded actuarial liability when the value of 

benefits already earned in prior years exceeds the estimated future value of the fund. 
6 RAYTHEON COMPANY v. US

CAS 413 governs the adjustment and allocation of 

pension costs. In particular, CAS 413 provides for two 

types of pension cost adjustments: (i) adjustments based 

on actuarial gains and losses (i.e., differences between 

estimates and actual experience); and (ii) adjustments 

based on a closed segment’s pension surplus or deficit. 

Normally, CAS 413 requires actuarial gains and losses to 

be amortized in equal annual installments over a 15-year 

period. See 48 C.F.R. § 9904.413-50(a)(2). When a business segment closes, however, there are no future periods 

within which to adjust the pension costs applicable to that 

segment. Accordingly, the Cost Accounting Standards 

Board (“CAS Board”), which has “exclusive authority to 

prescribe, amend, and rescind cost accounting standards,” 

41 U.S.C. § 1502(a)(1) (2011),3 recognized that “a means 

must be developed to provide a basis for adjusting such 

costs,” Preamble to CAS 413, 42 Fed. Reg. 37,191, 37,195 

(July 20, 1977). Such a means was developed and is set 

forth in CAS 413. 

CAS 413 requires the contractor, following a segment 

closing, to “determine the difference between the actuarial 

accrued liability for the segment and the market value of 

the assets allocated to the segment[.]” 48 C.F.R.

§ 9904.413-50(c)(12). The difference between the market 

value of the assets and the actuarial accrued liability for 

the closed segment represents an adjustment of previously-determined pension costs. Hence, the goal of a segment 

closing adjustment is to determine the present value of 

the pension plan at the time of the segment’s closing and 

to adjust the plan’s value to ensure it is fully-funded to 

meet the promises made to the plan’s participants. The 

Government and the contractor then allocate the resulting surplus or deficit between them. In 1995, the CAS 

3 Before January 2011, this provision was codified 

at 41 U.S.C. § 422. 

 
RAYTHEON COMPANY v. US 7

Board amended CAS 413 to require, among other things,

the use of a specific formula to determine the resulting 

allocation between the Government and the contractor. 

See 60 Fed. Reg. 16534, 16552 (Mar. 30, 1995). If the 

adjustment results in a surplus, the Government may be 

entitled to recover its share from the contractor. See 48 

C.F.R. § 9904.413-50(c)(12)(vi). If the adjustment results 

in a deficit, the contractor may be entitled to recover its 

share from the Government. See id. The Government’s 

share of any adjustment surplus or deficit is allocable to 

contracts within the same year as the segment closing. 

Id. § 9904.413-50(c)(12)(vii). 

While CAS 412 and 413 govern the accounting treatment of pension costs, FAR 31.205-6(j) governs their 

allowability. In particular, this FAR provision requires 

all pension costs assigned to the current year to be “funded by the time set for filing of the Federal income tax 

return or any extension thereof.” FAR 31.205-6(j)(2)(i). 

This timely funding requirement is repeated under subparagraph (j)(3), which addresses “defined-benefit pension 

plans,” and provides that “pension costs (see 48 CFR 

9904.412-40(a)(1)) assigned to the current accounting 

period, but not funded during it, shall not be allowable in 

subsequent years[.]” Id. § 31.205-6(j)(3)(i)(A). But subparagraph (j)(4), which addresses segment closings and

requires that any “adjustment amount shall be the 

amount measured, assigned, and allocated in accordance 

with 48 CFR 9904.413-50(c)(12),” does not directly impose 

the timely funding provision. Id. § 31.205-6(j)(4)(i).

C. TRIAL COURT DECISION

On April 5, 2005, Raytheon filed suit in the trial 

court, challenging the contracting officer’s denial of its 

claims. Raytheon argued that the Government was 

required to pay its share of the deficits because the segment closing adjustments complied with the requirements 

of CAS 413. In response, the Government moved for 
8 RAYTHEON COMPANY v. US

summary judgment on the grounds that Raytheon’s 

segment closing adjustments did not comply with the 

FAR’s timely funding requirement. The Government also 

argued in the alternative that it was entitled to a downward adjustment on any recovery by Raytheon to account 

for certain pension contributions made on contracts 

entered into before CAS 413 was amended in 1995. 

On January 26, 2011, the trial court granted-in-part 

and denied-in-part the Government’s motion for summary 

judgment. The trial court relied on two previous decisions 

to conclude that segment closing adjustments are not the 

type of “pension costs” subject to the FAR’s annual timely 

funding requirement. See, e.g., Viacom, Inc. v. United 

States, 70 Fed. Cl. 649 (2006); Gen. Motors Corp. v. United 

States, 66 Fed. Cl. 153 (2005). The trial court noted that 

the Government has “repeated the same arguments that 

this court has previously rejected in the other CAS 413 

cases involving a deficit following a segment closing 

adjustment” and “has not provided the court with any 

reason to revisit its previous rulings.” Raytheon Co. v. 

United States, 96 Fed. Cl. 548, 552 (2011) (“COFC Decision I”). 

The case proceeded to trial, and on June 16, 2012, the 

trial court issued its decision in the case and determined 

that Raytheon was entitled to $59,209,967.30 for the 

Government’s share of the deficit adjustments for the AIS 

($56,276,815.61) and Aerospace ($2,933,151.69) segments. 

See Raytheon Co. v. United States, 105 Fed. Cl. 236, 302-

03 (2012) (“COFC Decision II”). The trial court found that 

the Government did not meet its burden of proving that 

Raytheon’s adjustment calculations for these two segments violated CAS 413. 

The trial court also held that it lacked jurisdiction to 

consider the Government’s request for a downward adjustment of Raytheon’s recovery. The trial court concluded that the Government’s equitable adjustment must take 
RAYTHEON COMPANY v. US 9

the form of a claim under the Contract Disputes Act 

because it is “distinct from the segment closing adjustment” required under CAS 413-50(c)(12) and is instead 

based on the equitable adjustment provisions of the CAS 

clause, FAR 52.230-2. COFC Decision II, 105 Fed. Cl. at 

286. The Government was thus required to submit its 

claim to the contracting officer for a final decision before 

it could be addressed by the trial court, which it failed to

do. See 41 U.S.C. § 7103(a)(3) (2011). 

Finally, the trial court found that Raytheon’s adjustment calculation for the Optical segment was improper. 

Because Raytheon’s pension plan covered multiple segments, CAS 413-50(c)(5) required Raytheon to use one of 

two methods to initially allocate a share of the pension’s 

assets to the Optical segment. Raytheon’s final adjustment calculation varied depending on which allocation 

method it used. Under the allocation method found at 

subparagraph (c)(5)(i), Raytheon calculated a pension 

deficit of $9,558,952 for the Optical segment. During 

trial, Raytheon’s actuarial expert revised these calculations and came to the slightly lower deficit of $8,972,581. 

Under the alternative allocation method found at subparagraph (c)(5)(ii), Raytheon calculated a pension surplus of 

$11,438,570. The trial court determined that Raytheon 

could not use the (c)(5)(i) method to allocate pension 

assets to the Optical segment because the “necessary 

data” on the Optical segment’s contributions to the pension fund were not “readily determinable” for the entire 

segment. Because Raytheon’s alternative calculations 

under the (c)(5)(ii) allocation method resulted in an adjustment surplus, the trial court held that Raytheon was 

not entitled to any recovery for the Optical segment.

On appeal, the Government asks us to reverse the trial court’s decision for three reasons. First, the Government asserts that the trial court erred in concluding that 

segment closing adjustments are not “pension costs” 

subject to the FAR’s timely funding requirement. Second, 
10 RAYTHEON COMPANY v. US

the Government argues that the trial court erred in 

placing the burden of proof on the Government to show 

that Raytheon’s segment closing calculations violated 

CAS 413. Finally, the Government argues that the trial 

court erred in concluding that it lacked jurisdiction to 

decide the Government’s request for a downward equitable adjustment. Raytheon cross-appeals the trial court’s 

rejection of its adjustment calculation for the Optical 

segment. 

We have jurisdiction under 28 U.S.C. § 1295(a)(3) and 

consider each of these issues in turn.

II.

We review decisions of the trial court de novo “for errors of law and for clear error on findings of fact.” Ind. 

Mich. Power Co. v. United States, 422 F.3d 1369, 1373 

(Fed. Cir. 2005); see also Scott Timber Co. v. United 

States, 692 F.3d 1365, 1371 (Fed. Cir. 2012). “A [factual] 

finding may be held clearly erroneous when . . . the appellate court is left with a definite and firm conviction that a 

mistake has been committed.” Ind. Mich., 422 F.3d at 

1373 (internal quotations omitted).

We also review legal interpretations of the CAS de 

novo. “When interpreting provisions of the CAS our task 

is ‘to ascertain the [CAS Board’s] intended meaning when 

it promulgated the CAS.’” Gates v. Raytheon Co., 584 

F.3d 1062, 1067 (Fed. Cir. 2009) (quoting Allegheny 

Teledyne v. United States, 316 F.3d 1366, 1373 (Fed. Cir. 

2003)).

A. TIMELY FUNDING REQUIREMENT

The Government’s primary argument on appeal is 

that the trial court erred in concluding that segment 

closing adjustments are not “pension costs” subject to the 

timely funding requirement of FAR 31.205-6(j). We

disagree. 
RAYTHEON COMPANY v. US 11

We have previously interpreted CAS 413 and the provisions governing segment closing adjustments, albeit in 

the context of adjustment surpluses. See, e.g., DirecTV 

Group, Inc. v. United States, 670 F.3d 1370 (Fed. Cir. 

2012); Gates v. Raytheon Co., 584 F.3d 1062 (Fed. Cir. 

2009); Allegheny Teledyne Inc. v. United States, 316 F.3d 

1366 (Fed. Cir. 2003). In Gates, we recognized the unusual nature of segment closing adjustments and concluded 

that CAS 413 effectively looks to whether the Government 

has over- or under-paid, in the past, its share of pension 

costs for the now-closed segment. 584 F.3d at 1068. In 

Allegheny Teledyne, we similarly recognized, in the context of the pre-1995 version of CAS 413, that segment

closing adjustments are treated differently than annual 

pension costs. 316 F.3d at 1381. But we have not yet had 

occasion to address the applicability of the FAR’s annual 

timely funding requirement to segment closing adjustments resulting in pension deficits. 

The Government’s assertion that FAR 31.205-6(j) 

clearly defines a segment closing adjustment as a “pension cost” subject to the provision’s timely funding requirement is incorrect. First, the Government ignores 

that neither CAS 412 nor CAS 413 treat a segment closing adjustment as a “pension cost” for purposes of the 

annual timely funding provision. CAS 412 specifically 

defines the four components of a pension cost, none of 

which include segment closing adjustments:

For defined-benefit pension plans, except for plans 

accounted for under the pay-as-you-go cost method, the components of pension cost for a cost accounting period are (i) the normal cost of the 

period, (ii) a part of any unfunded actuarial liability, (iii) an interest equivalent on the unamortized 

portion of any unfunded actuarial liability, and 

(iv) an adjustment for any actuarial gains and 

losses.
12 RAYTHEON COMPANY v. US

48 C.F.R. § 9904.412-40(a)(1). 

CAS 413 refers to segment closing adjustments as 

“adjustment[s] of previously-determined pension costs,” 

which suggests that the segment closing adjustment is 

not itself a pension cost. 48 C.F.R. § 9904.413-50(12). 

The Preamble to CAS 413 further states that a segment 

closing adjustment “is not an actuarial gain or loss as 

defined in the Standard” and that the “the purpose of this 

provision is to serve as a basis for recognizing and adjusting costs previously allocated to the segment being terminated.” 42 Fed. Reg. 37,191, 37,195 (July 20, 1977)

(emphasis added).4 The CAS Board thus intended to treat 

segment closing adjustments as something different from 

ordinary “pension costs” for purposes of CAS 412 and 413. 

See Allegheny Teledyne, 316 F.3d at 1381 (acknowledging 

that “the Board intentionally elected to treat a segment 

closing adjustment differently”). 

Second, the Government argues that “the dispositive 

issue is not whether the CAS 413 segment closing adjustment is a ‘pension cost’ for purposes of the 

CAS . . . [but] whether it is a ‘pension cost’ for purposes of 

the binding FAR regulation that governs the allowability 

of pension cost.” This argument confuses the relationship 

between the CAS and the FAR’s cost principles. Although 

the Government is correct that the FAR governs all 

matters of cost allowability, the CAS has exclusive au4 As noted in the FAR, “The preambles are not regulatory but are intended to explain why the Standards 

and related Rules and Regulations were written, and to 

provide rationale for positions taken relative to issues 

raised in the public comments.” FAR 30.101(d). The 

Preambles are thus persuasive evidence of “the [CAS 

Board’s] intended meaning when it promulgated the 

CAS.” Allegheny Teledyne, 316 F.3d at 1373.

 
RAYTHEON COMPANY v. US 13

thority over the measurement, assignment, and allocation 

of costs. See 41 U.S.C. § 1502(a)(1) (2011). 

In 1970, Congress empowered the CAS Board to 

“promulgate cost-accounting standards designed to 

achieve uniformity and constancy in the cost-accounting 

principles followed by defense contractors and subcontractors under Federal contracts.” Pub. L. No. 91-379 § 103, 

84 Stat. 796 (1970) (codified at 50 U.S.C. § 2168 (repealed 

1988)). In 1988, Congress established a new CAS Board 

under the auspices of the Office of Federal Procurement 

Policy. See Pub. L. No. 100-679 § 5, 102 Stat. 4055 (1988) 

(codified at 41 U.S.C. § 1501 (2011)). By statute, the CAS 

Board has the “exclusive authority to prescribe, amend, 

and rescind cost accounting standards, and interpretations of the standards, . . . governing measurement, 

assignment, and allocation of costs to contracts with the 

Federal Government.” 41 U.S.C. § 1502(a)(1) (2011). We

have thus recognized that the CAS is the exclusive authority on issues regarding the allocation of costs to cost 

objectives. See, e.g., Gen. Elec. Co., Aerospace Grp. v. 

United States, 929 F.2d 679, 680-81 (Fed. Cir. 1991);

United States v. Boeing Co., 802 F.2d 1390, 1394-95 (Fed. 

Cir. 1986). Of relevance to this appeal, the CAS Board 

has stated that “[a]llocability is an accounting concept 

involving the ascertainment of contract cost. It results 

from a relationship between a cost and cost objective such 

that the cost objective appropriately bears all or a portion 

of the cost.” Cost Accounting Standards Board Statement 

of Objectives, Policies and Concepts, 57 Fed. Reg. 31,036, 

31,037 (July 13, 1992). 

While the CAS governs issues of measurement, assignment, and allocability, “it does not determine the 

allowability of categories or individual items of cost.” Id.

at 31,036. Allowability is instead governed by the cost 

principles set forth in the FAR. See FAR pt. 31. Allowability reflects a policy judgment that a particular cost 

incurred by the contractor should be paid by the Govern-
14 RAYTHEON COMPANY v. US

ment. “A contracting agency may include in contract 

terms, or in its procurement regulations, a provision that 

will refuse to allow certain costs incurred by contractors 

that are unreasonable in amount or contrary to public 

policy.” 57 Fed. Reg. at 31,036. These same costs may 

nevertheless be allocable to the contract. 

“We have specifically held that, if there is any conflict 

between the CAS and the FAR as to an issue of allocability, the CAS governs.” Boeing N. Am., Inc. v. Roche, 298 

F.3d 1274, 1283 (Fed. Cir. 2002). The CAS’s authority 

over “measurement of a cost” includes “defining the 

components of costs, determining the basis for cost measurement, and establishing the criteria for use of alternative cost measurement techniques.” 48 C.F.R. § 9903.302-

1(a) (emphasis added). The CAS therefore has the exclusive authority to define the components of a pension cost, 

while the FAR determines whether that cost—as defined 

by the CAS—is allowable and will be reimbursed by the 

Government. 

Finally, the text of FAR 31.205-6(j) itself confirms our 

conclusion that segment closing adjustments are not 

ordinary pension costs subject to the timely funding 

requirement. The FAR explicitly recognizes the CAS’s 

authority and requires “[t]he cost of all defined-benefit 

pension plans [to] be measured, allocated, and accounted 

for in compliance with the provisions of [CAS 412 and 

413].” FAR 31.205-6(j)(2). The timely funding requirement under subparagraph (j)(3), which addresses definedbenefit pension plans, further directs the reader to CAS 

412 when it uses the term “pension costs.” See id.

§ 31.205-6(j)(3)(i)(A). On the other hand, subparagraph 

(j)(4), which addresses segment closing adjustments, 

directs the reader to CAS 413 and provides that the 

“adjustment amount shall be the amount measured, 

assigned, and allocated in accordance with 48 CFR 

9904.413-50(c)(12). . . .” Id. § 31.205-6(j)(4)(i). 
RAYTHEON COMPANY v. US 15

As discussed above, CAS 413 treats segment closing 

adjustments differently than ordinary “pension costs.” 

The apparent purpose of the FAR’s timely funding requirement, which is to ensure that contractors contribute 

to their pension funds on an annual basis, see Gen. Motors 

Corp., 66 Fed. Cl. at 158, supports the distinction between 

“pension costs” and segment closing adjustments, which 

do not necessarily invoke the same accounting treatment 

under CAS 413. Indeed, CAS 413 allows contractors to 

allocate ordinary pension costs above the tax-deductible 

amount to future periods. See 48 C.F.R. § 9904.413-40(c). 

As noted by the CAS Board in promulgating this provision:

For qualified defined-benefit pension plans, . . . 

[t]he cost assigned to a period is limited to the accrued cost that can be funded without penalizing a 

contractor. . . . Portions of pension costs computed 

for a period that fall outside of the assignable cost 

corridor ($0 floor and a ceiling based on taxdeductibility) are reassigned to future periods.

50 Fed. Reg. 16534, 16535 (Mar. 30, 1995) (emphasis 

added). At the same time, CAS 413 requires segment 

closing adjustments to be allocated to the same year as 

the segment closing, regardless of whether the adjustment (in the event of a deficit) is above the tax-deductible 

amount. See 48 C.F.R. § 9904.413-50(c)(12)(vii).

Nothing in the text of FAR 31.205-6(j) suggests that 

segment closing adjustments are subject to the provision’s 

timely funding requirement. Accordingly, we hold that 

segment closing adjustments pursuant to CAS 413 are not 

subject to the timely funding provisions of FAR 31.205-
16 RAYTHEON COMPANY v. US

6(j), and Raytheon was not required to fund its pension 

deficits within the same year as the segment closings.5

B. BURDEN OF PROOF

The Government also asserts that the trial court erred 

by placing the burden of proof on the Government to show 

that Raytheon’s segment closing calculations did not 

comply with CAS 413. The Government argues that 

Raytheon should have the burden of proving its compliance with CAS 413 because it is affirmatively seeking 

reimbursement from the Government for these adjustment deficits. We do not agree. 

Although we have not previously addressed this issue, 

both the trial court and the Armed Services Board of 

Contract Appeals (“ASBCA”) have for years determined

that the Government bears the burden of proving that a 

contractor’s accounting practices do not comply with the 

CAS. See, e.g., Sikorsky Aircraft Corp. v. United States, 

110 Fed. Cl. 210, 219 (2013) (“The government bears the 

burden of proof to establish that the accounting method 

Sikorsky used from 1999 to 2005 did not comply with the 

CAS.”); Gen. Dynamics Corp., ASBCA No. 56744, June 21, 

2011, 11-2 BCA ¶ 34,787 (“The burden of proof is on the 

government to establish noncompliance with the CAS.”); 

Unisys Corp., ASBCA No. 41135, Apr. 26, 1994, 94-2 BCA 

¶ 26,894 (“In any appeal that involves alleged noncompliance with cost accounting standards, the burden is on the 

Government to establish the noncompliance.”). As the 

5 The trial court was correct that Raytheon will be 

required to apply the judgment to the pension deficits for 

the AIS and Aerospace segments to the extent Raytheon 

has not made sufficient contributions to cover these 

deficits in the years following the segment closings. See 

COFC Decision II, 105 Fed. Cl. at 303 n.109 (citing Gen. 

Motors Corp., 66 Fed. Cl. at 159). 

 
RAYTHEON COMPANY v. US 17

ASBCA recognized, “allegations of noncompliance with 

cost accounting standards normally raise questions of fact 

concerning the acts or omissions which allegedly constitute a violation of an applicable standard, upon which the 

Government bears the burden of proof.” NI Indus., Inc., 

ASBCA No. 34943, Nov. 29, 1991, 92-1 BCA ¶ 24631. 

Although decisions of the ASBCA are not binding on this 

court, we nevertheless “give careful consideration and 

great respect to the Board’s legal interpretations in light 

of the Board’s considerable experience in the field of 

government contracts.” Donley v. Lockheed Martin Corp., 

608 F.3d 1348, 1353 (Fed. Cir. 2010) (internal quotations 

omitted). 

The Government concedes “that when [it] alleges contractor CAS noncompliance, the Government has the 

burden of proof[.]” It nevertheless makes the dubious 

argument that Raytheon is instead alleging CAS noncompliance by the Government. To the contrary, Raytheon

challenges the contracting officer’s final decisions concluding that Raytheon’s segment closing calculations “do[] not 

comply with CAS 413[.]” Indeed, the relevant provisions 

appear to be primarily focused on ensuring that the

contractor complies with the CAS and follows uniform and 

consistent cost accounting practices. See 48 C.F.R.

§ 9903.101 (“Public Law 100-679 . . . requires certain 

contractors and subcontractors to comply with Cost Accounting Standards (CAS) and to disclose in writing and 

follow consistently their cost accounting practices.”); FAR 

30.602-2 (discussing procedures for determining noncompliance with CAS requirements); FAR 52.230-2 (noting 

that “the Contractor, in connection with this contract, 

shall . . . . [c]omply with all CAS, including any modifications and interpretations indicated thereto”). 

The Government further argues that Raytheon should 

bear the burden of proof because Raytheon is asserting 

“affirmative claims” against the Government. We do not 

dispute the well-established rule that a contractor seeking 
18 RAYTHEON COMPANY v. US

an equitable adjustment for increased costs has the 

burden of proving entitlement and quantum to its claim. 

See Servidone Constr. Corp. v. United States, 931 F.2d 

860, 861 (Fed. Cir. 1991). But Raytheon is not seeking an 

equitable adjustment for a change in contract terms. 

Raytheon had an existing contractual obligation to calculate segment closing adjustments pursuant to CAS 413-

50(c)(12). Raytheon’s “obligation to perform an adjustment on the segment closing [pursuant to CAS 413] was a 

preexisting contract requirement that arises whenever a 

segment closes.” Allegheny Teledyne, 316 F.3d at 1375 

(emphasis added). Here, the Government bears the 

burden of showing that Raytheon did, in fact, fail to follow 

the terms of its contracts (i.e., that Raytheon’s segment 

closing calculations do not comply with CAS 413). We 

therefore hold that the Government bears the burden to 

prove that a contractor’s segment closing adjustment does 

not comply with the CAS, even if the adjustment is asserted in a claim brought by the contractor. 

C. EQUITABLE ADJUSTMENT

Turning to the Government’s request for an equitable 

adjustment, the Government argued before the trial court 

that it was entitled to a downward adjustment to Raytheon’s segment closing calculations to account for certain 

pension contributions made on contracts entered into 

before 1995, when revised CAS 413 took effect. The trial 

court determined that it lacked jurisdiction over the 

Government’s request for an equitable adjustment because the Government did not obtain a contracting officer’s final decision on its claim. The trial court 

concluded that such an equitable adjustment was not

within the scope of Raytheon’s claims but was instead a 

separate and distinct claim that must follow the jurisdictional prerequisites of the Contract Disputes Act. As set 

forth below, the trial court was correct that it lacked 

jurisdiction to entertain the Government’s claim under 

the Contract Disputes Act. 
RAYTHEON COMPANY v. US 19

In general, an equitable adjustment is a fair price adjustment designed to account for a change in the contract. 

One type of contract “change” that entitles the Government or the contractor to an equitable adjustment is any 

required change in the contractor’s cost accounting practices after the parties entered into the contract. See 

FAR 52.230-2(a)(4)(i). Entitlement to such an equitable 

adjustment derives from the standard CAS clause, FAR 

52.230-2, and not from any provision in the CAS. 

For this argument, the Government does not assert 

that Raytheon’s segment closing calculations fail to comply with revised CAS 413. Rather, the Government 

asserts that Raytheon’s use of revised CAS 413 effectively 

“changed” certain contracts that Raytheon entered into 

before CAS 413 was amended in 1995. Prior cases from 

the trial court have recognized that the use of revised 

CAS 413—and the inclusion of pension costs made under 

pre-1995 contracts in the recovery calculation—could 

result in a change in the parties’ expectations and accounting practices on contracts that incorporated the 

original provisions of CAS 413. See, e.g., Viacom, 70 Fed. 

Cl. at 662; Teledyne, Inc. v. United States, 50 Fed. Cl. 155, 

186-87 (2001), aff’d, 316 F.3d 1366 (2003). The contractor 

or the Government therefore may be entitled to an equitable adjustment for this change to the extent the segment closing calculation under revised CAS 413: (i) 

involves the adjustment of pension contributions made 

under contracts that did not include the terms of revised 

CAS 413; and (ii) results in a larger amount owed than 

under the original provisions of CAS 413.

This equitable adjustment, however, is separate and 

distinct from the calculation of a segment closing adjustment required by CAS 413. Under the original (pre-1995) 

provisions of CAS 413, the Government or the contractor 

could only recover the portion of a segment closing surplus or deficit attributable to pension contributions made 

under cost-type contracts. Allegheny Teledyne, 316 F.3d 
20 RAYTHEON COMPANY v. US

at 1376-77. In 1995, however, the CAS Board revised 

CAS 413 to allow recovery under both cost-type contracts 

and fixed-price contracts. See 48 C.F.R. 

§ 9904.413.50(c)(12)(vii). Because segment closing adjustments are to be calculated as of the date of the segment’s closing, the contractor is required to follow revised 

CAS 413 for any segment closing that occurred after 1995, 

even if the segment’s contract portfolio includes contracts 

entered into before 1995. 

The downward adjustment sought by the Government 

here is thus not an aspect of the segment closing adjustment calculation required by CAS 413—which was the 

subject of the suit before the trial court—but instead 

derives from the provisions of the CAS Clause, FAR 

52.230-2. “An action brought before the Court of Federal 

Claims under the [Contract Disputes Act] must be based 

on the same claim previously presented to and denied by 

the contracting officer.” Scott Timber Co. v. United 

States, 333 F.3d 1358, 1365 (Fed. Cir. 2003) (internal 

quotations omitted). Accordingly, the Government’s claim 

under FAR 52.230-2 for an equitable adjustment is outside the scope of Raytheon’s segment closing adjustments 

and must take the form of a separate claim under the 

Contract Disputes Act subject to a written decision by the 

contracting officer. 

It is a bedrock principle of government contract law 

that contract claims, whether asserted by the contractor 

or the Government, must be the subject of a contracting 

officer’s final decision. See 41 U.S.C. § 7103(a)(3) (2011). 

Before January 2011, the relevant provision was codified 

at section 605(a), which provided:

All claims by the government against a contractor 

relating to a contract shall be the subject of a decision by the contracting officer. . . . The contracting officer shall issue his decisions in writing, and 
RAYTHEON COMPANY v. US 21

shall mail or otherwise furnish a copy of the decision to the contractor.

41 U.S.C. § 605(a). Under the Contract Disputes Act, 

obtaining a final decision is a jurisdictional prerequisite 

to any subsequent action before a Board of Contract 

Appeals or the trial court. See, e.g., Sharman Co. v. 

United States, 2 F.3d 1564, 1568 (Fed. Cir. 1993) (“Under 

the CDA, a final decision by the contracting officer on a 

claim, whether asserted by the contractor or the government, is a ‘jurisdictional prerequisite’ to further legal 

action thereon.”), overruled on other grounds by Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995) (en 

banc). The purpose of this requirement is “to create 

opportunities for informal dispute resolution at the contracting officer level and to provide contractors with clear 

notice as to the government’s position regarding contract 

claims.” Applied Cos. v. United States, 144 F.3d 1470, 

1478 (Fed. Cir. 1998). This jurisdictional prerequisite 

applies even when a claim is asserted as a defense. See M. 

Maropakis Carpentry, Inc. v. United States, 609 F.3d 

1323, 1331 (Fed. Cir. 2010) (holding that a party “seeking 

an adjustment of contract terms must meet the jurisdictional requirements and procedural prerequisites of the 

[Contract Disputes Act], whether asserting the claim 

against the government as an affirmative claim or as a 

defense to a government action”). 

There is no evidence in the record of a contracting officer’s final decision in which the Government asserts this 

equitable adjustment against Raytheon. Nor does the 

contracting officer’s final decision denying Raytheon’s 

request for recovery of the Government’s share of the 

pension deficits alert Raytheon of the Government’s 

entitlement to this equitable adjustment. Therefore, 

because the Government’s equitable adjustment claim 

was never the subject of a contracting officer’s final decision, the trial court lacked jurisdiction to decide the issue. 
22 RAYTHEON COMPANY v. US

D. RAYTHEON’S CROSS-APPEAL

Raytheon cross-appeals the trial court’s decision denying any recovery related to the Optical segment. Raytheon challenges the trial court’s finding that Raytheon did 

not have sufficient “readily determinable” data on the 

Optical segment’s contributions to the pension fund to use 

the asset allocation method of CAS 413-50(c)(5)(i) in its 

segment closing calculation. We affirm. 

When a pension plan covers multiple business segments and one of those segments closes, CAS 413 requires 

the contractor, as part of its segment closing calculation, 

to make an initial allocation of a share of the pension’s 

assets to the closed segment. 48 C.F.R. § 9904.413-

50(c)(12)(ii). This allocation must be made in accordance 

with the methodology outlined in CAS 413-50(c)(5). In 

particular, this provision requires contractors to use one 

of the following two methods to make this initial allocation:

(i) If the necessary data are readily determinable, the funding agency balance to be allocated to 

the segment shall be the amount contributed by, 

or on behalf of, the segment, increased by income 

received on such assets, and decreased by benefits 

and expenses paid from such assets. . . . ; or

(ii) If the data specified in paragraph (c)(5)(i) of 

this subsection are not readily determinable for 

certain prior periods, the market value of the assets of the pension plan shall be allocated to the 

segment as of the earliest date such data are 

available. Such allocation shall be based on the 

ratio of the actuarial accrued liability of the segment to the plan as a whole, determined in a 

manner consistent with the immediate gain actuarial cost method or methods used to compute 

pension cost.
RAYTHEON COMPANY v. US 23

Id. § 9904.413-50(c)(5). A contractor can only use the 

allocation method described in CAS 413-50(c)(5)(i) if “the 

necessary data” on the segment’s contributions to the 

pension fund “are readily determinable.” Otherwise, the 

contractor must use the allocation method described in 

CAS 413-50(c)(5)(ii). 

Optical was first established as a segment in 1990 by 

Hughes Aircraft Company (“Hughes”), which acquired a 

division of PerkinElmer Corporation. At that time, employees of the Optical segment were covered by Hughes’s 

pension plan, known as the Hughes Nonbargaining Plan. 

Although the Hughes Nonbargaining Plan initially required regular employee contributions, the plan became 

noncontributory for all employees hired after December 1, 

1991. Existing employees, however, were allowed to 

continue making contributions to the plan if they chose. 

The only employer contribution that was made to the Plan 

while it covered the Optical segment occurred in 1991, 

when Hughes made a $55,172,000 contribution. Because 

the plan as a whole was over-funded, no additional employer contributions were made. In 1997, Raytheon and 

Hughes merged, and Raytheon placed all former Hughes 

employees (including employees of the Optical segment) 

on the Raytheon Nonbargaining Plan, which covered a 

number of additional business segments. 

Following Raytheon’s sale of the Optical segment in 

2001, it initially calculated a segment closing deficit of 

$9,558,952. During trial, Raytheon’s actuarial expert 

revised these calculations and came to the slightly lower 

deficit of $8,972,581. It arrived at these numbers by 

separating the noncontributory participants from the 

contributory participants and calculating different adjustments for these two groups. For contributory participants, Raytheon applied the ratio of pension liabilities 

attributable to those contributory participants who 

worked at Optical compared to all contributory participants covered by the plan. As the trial court noted, this 
24 RAYTHEON COMPANY v. US

“is the method identified in (c)(5)(ii).” See id. § 9904.413-

50(c)(5)(ii) (“Such allocation shall be based on the ratio of 

the actuarial accrued liability of the segment to the plan 

as a whole[.]”). For noncontributory participants, however, Raytheon used the (c)(5)(i) allocation method after 

assuming that the $55,172,000 contribution was for the 

sole benefit of the noncontributory participants, which 

gave Raytheon a data point from which it could “readily 

determin[e]” the necessary data. Using these two methods, Raytheon calculated an adjustment deficit for the 

noncontributory participants and a surplus for the contributory participants. 

The trial court disagreed with Raytheon’s “mixed” calculation and held that Raytheon should not have used 

different allocation methods for the contributory and 

noncontributory participant groups. The trial court 

concluded that Raytheon ignored the significant pension 

surplus associated with the pension plan as a whole and 

relied on assumptions that were contrary to fact. In 

particular, the court noted that Raytheon “erroneously 

assumed that the noncontributory participants are not 

beneficiaries of the pension surplus in the Nonbargaining 

plan and then incorrectly created a separate and identifiable pension deficit attributable to the noncontributory 

participants in that plan.” COFC Decision II, 105 Fed. Cl. 

at 295-96. The trial court also found that Raytheon 

ignored that the $55 million contribution was for the plan 

as a whole and was used to pay the benefits of both contributory and noncontributory participants. 

On appeal, Raytheon argues that the trial court erred 

in its interpretation that the (c)(5)(i) allocation method 

does not permit the use of reasonable estimates and 

assumptions. Contrary to Raytheon’s contentions, the 

trial court explicitly acknowledged that the (c)(5)(i) allocation method permits reliance on reasonable estimates and 

assumptions. As the trial court noted, this allocation 

method may be used whenever “there is sufficient ‘readily 
RAYTHEON COMPANY v. US 25

determinable’ data available to support reasonable assumptions regarding the segment’s contribution to the 

pension asset base as a whole.” Id. at 295. The trial court 

rejected Raytheon’s adjustment calculation because 

Raytheon “made assumptions in its (c)(5)(i) calculations 

that were contrary to the facts.” Id. Hence, contrary to 

Raytheon’s argument, the trial court did not conclude that 

(c)(5)(i) prohibits the use of assumptions.

Nor did the trial court determine that CAS 413 prohibits a contractor from separately calculating assets and 

liabilities of different groups of employees within the 

same segment. The trial court instead reasoned that a 

contractor must be consistent in the method it uses to 

allocate pension assets across the entire segment. The 

trial court’s conclusion is supported by the text of CAS 

413-50(c)(5), which requires a contractor to allocate “a 

share in the undivided market value of the assets of the 

pension plan to that segment,” using one of two allocation 

methods, and not a mix of allocation methods. CAS 413-

50(c)(5) (emphasis added). This language thus implies 

that the contractor will use the same method to allocate 

assets across the entire segment and may not switch 

methods to allocate assets to different groups within the 

same segment. We therefore hold that CAS 413-50(c)(5) 

requires contractors to apply the same allocation method 

across the entire segment. As a result, we affirm the trial 

court. 

III.

We have considered the parties’ other arguments, but 

as they do not affect the outcome of our decision, we do 

not address them. We therefore affirm the decision of the 

trial court. 

AFFIRMED

COSTS

Each side shall bear its own costs.