Opinion ID: 477882
Heading Depth: 2
Heading Rank: 1

Heading: Contract Provisions

Text: 11 At the heart of the controversy in this case are two regulatory provisions incorporated into Boeing's contracts with the Air Force. The first of these is CAS 412, which was promulgated by the Cost Accounting Standards Board (CASB) pursuant to the authority of Section 719 of the Defense Production Act of 1950, as amended by Pub.L. 91-379, 50 U.S.C.App. Sec. 2168. CAS 412 (together with CAS 413) governs the determination and measurement of pension costs, assignment of such costs to cost accounting periods and allocation of such costs to final cost objectives. CAS 412 and CAS 413 as applied to unfunded retirement plans such as the SERP, require SERP costs to be assigned to the year in which such costs are incurred and allocated to contracts for that year and prohibit assignment of such costs to any other year. FF 35. Boeing's SERP costs for each of the years 1980 through 1982 were measured, assigned to accounting periods and allocated to intermediate and final cost objectives in accordance with the provisions of CAS 412 and 413 as incorporated into DAR 15-205.6. FF 16. 12 The second regulatory provision included in Boeing's contracts is DAR 15-205.6, which incorporates the requirements of CAS 412 with respect to determination, measurement and assignment of such costs. However, DAR 15-205.6(f) further provides: 13 (2) Deferred compensation is allowable only to the extent that: 14 .... 15 (ii)(A) it is deductible for the same fiscal year for Federal income tax purposes under Section 404 (excluding subsection (a)(5)) of the [IRC] and the regulations of the Internal Revenue Service.... 16 .... 17 or 18 (B) it is deductible in the same fiscal year for Federal income tax purposes under Section 404(a)(5) ... except that the costs of unfunded pension and retirement benefits paid directly to, or on behalf of, former employees shall be allowable only to the extent the contractor demonstrates that such costs, together with any pension and retirement costs allowed pursuant to (A) above, do not exceed the amount that would be allowable under (A) above if the contractor were providing for equivalent benefits on an actuarial basis in the current period. 19 85-3 BCA p 18,435, at 92,609-10. 20 Succinctly, DAR 15-205.6(f)(2)(ii)(B)--the DAR--provides that the costs of unfunded pension plans are allowable only to the extent that they are deductible for the same cost accounting period for Federal income tax purposes.