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

Heading: Conflict of Provisions

Text: 21 The government argues that allowability of costs is a matter of procurement policy as to which the Department of Defense (DOD) has exclusive authority; that DOD has the authority to disallow types and amounts of properly allocated costs for various policy reasons; and that there can be no conflict between DAR allowability criteria and CAS allocability criteria because the latter are subject to the former. In other words, costs may be assignable and allocable under CAS, but not allowable under DAR. We agree with these assertions as general propositions. See Boeing Company v. United States, 480 F.2d 854, 862-64, 202 Ct.Cl. 315 (1973). 22 Both the DAR and CAS 412 were incorporated by reference into Boeing's contract. FF 6-7. Indeed, because DOD has chosen to incorporate CAS 412 into the DAR cost principles and into these contracts, we need not, and do not, consider the question of whether Congress through the CASB can preempt DOD's procurement authority. Boeing Company v. United States, 680 F.2d 132, 141, 230 Ct.Cl. 663 (1982), cert. denied, 460 U.S. 1081, 103 S.Ct. 1768, 76 L.Ed.2d 343 (1983). Even if the Cost Accounting Standards Act was invalid, the law would still not limit the sources from which the Defense Department could find and pick its cost standards--so long as those standards were substantively proper.... Id. 23 Since the allowability of a cost remains the province of the procuring agencies, the DOD may limit costs based upon rational procurement policies and not all costs are deemed reasonable just because they have been incurred and measured, allocated and assigned in accordance with CAS requirements. See Lockheed Aircraft Corp. v. United States, 375 F.2d 786, 792, 179 Ct.Cl. 545 (1967). Hence, DOD has the legal authority to make all pension costs unallowable if it chooses to do so, to make the costs of specific types of pension plans unallowable, to put ceilings on the amount of costs which would be allowable, or to otherwise limit the allowability of pension costs. It also follows that, in order to effect an allowability limitation on any cost measured by CAS, a measurement--such as some percentage of cost--is required. However, a formula of allowability measured in whole or in part by payments attributable to costs accrued in and allocated to a prior year creates a conflict between the DAR and CAS 412. In this case, the amount of allowability was in fact measured by the cash payouts to retired employees which represented the payment and satisfaction of liabilities accrued for service prior to retirement and [were] not payments for services rendered during the years of payment. FF 25. 24 Therefore, the provisions of the DAR impose measurement by allocation and assignment requirements which are inconsistent with the allocation and assignment requirements of CAS 412. The DAR in effect provides that pension costs were unallowable unless measured, allocated and assigned among periods in a manner which conflicts with CAS 412. The DAR is not a provision which makes costs allowable or unallowable per se based upon a rational procurement policy entirely divorced from cost principles. Rather, the DAR makes the allowability of a cost contingent upon use of a cost measurement, allocation and assignment technique which conflicts with the requirements of CAS 412 and 413. Under the DAR, Boeing's SERP costs are only allowable if assigned to a period other than the period to which CAS 412 and 413 require they be assigned. Therefore, we hold that the DAR is in fact an allocability provision which conflicts with CAS 412 also an allocability provision.