Court Opinion

ID: 9351744
Source: CourtListenerOpinion
Date Created: 2023-01-03 16:00:28.051093+00
Date Added: 2024-06-11T17:02:35.179557
License: Public Domain

Case: 21-2304    Document: 51    Page: 1    Filed: 01/03/2023

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

                SECRETARY OF DEFENSE,
                       Appellant

                            v.

    RAYTHEON COMPANY, RAYTHEON MISSILE
                   SYSTEMS,
                    Appellees
             ______________________

                        2021-2304
                  ______________________

     Appeal from the Armed Services Board of Contract Ap-
 peals in Nos. 59435, 59436, 59437, 59438, 60056, 60057,
 60058, 60059, 60060, 60061, Administrative Judge David
 D’Alessandris, Administrative Judge Cheryl L. Scott, Ad-
 ministrative Judge Richard Shackleford.
                  ______________________

                 Decided: January 3, 2023
                  ______________________

     DANIEL B. VOLK, Commercial Litigation Branch, Civil
 Division, United States Department of Justice, Washing-
 ton, DC, argued for appellant. Also represented by
 MICHAEL GRANSTON, PATRICIA M. MCCARTHY; ALEXANDER
 MARTIN HEALY, Contract Disputes Resolution Center, De-
 fense Contract Management Agency, Hanscom Air Force
 Base, MA.

    JOHN WILLIAM CHESLEY, Gibson, Dunn & Crutcher
Case: 21-2304    Document: 51     Page: 2    Filed: 01/03/2023

 2              SECRETARY OF DEFENSE   v. RAYTHEON COMPANY

 LLP, Washington, DC, argued for appellees. Also repre-
 sented by LINDSAY MIRIAM PAULIN, AMIR C. TAYRANI;
 DHANANJAY S. MANTHRIPRAGADA, Los Angeles, CA; NICOLE
 OWREN-WIEST, ERIN NICOLE RANKIN, Crowell & Moring
 LLP, Washington, DC.

     DOUGLAS W. BARUCH, Morgan, Lewis & Bockius LLP,
 Washington, DC, for amici curiae Aerospace Industries As-
 sociation, National Association of Manufacturers. Also
 represented by WILLIAM BARRON ARBUTHNOT AVERY,
 JENNIFER M. WOLLENBERG; SHEILA A. ARMSTRONG, Dallas,
 TX; CATHERINE LYNN ESCHBACH, Houston, TX. Amicus cu-
 riae Aerospace Industries Association also represented by
 MATTHEW F. HALL, Dunaway & Cross, PC, Washington,
 DC.
                  ______________________

  Before MOORE, Chief Judge, PROST and TARANTO, Circuit
                        Judges.
 PROST, Circuit Judge.
      The Secretary of Defense (“Secretary”) appeals an
 Armed Services Board of Contract Appeals (“Board”) deci-
 sion rejecting the government’s claim that Raytheon Co.
 (“Raytheon”) included unallowable costs in its final indi-
 rect-cost proposals for 2007 and 2008. We conclude that
 the Board erred in interpreting Raytheon’s corporate prac-
 tices and policies, which are inconsistent with the Federal
 Acquisition Regulation (“FAR”), Chapter I of Title 48 of the
 Code of Federal Regulations, and which led Raytheon to
 charge the government for unallowable costs. We therefore
 reverse.
                         BACKGROUND
                              I
     In cost-reimbursement contracts with the United
 States, the government agency agrees to pay the
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 SECRETARY OF DEFENSE   v. RAYTHEON COMPANY                  3

 contractor’s allowable costs. See 48 C.F.R. § 52.216-7. This
 case involves indirect costs, which are incurred as part of
 normal business operations rather than in performing a
 specific contract. Id. § 31.203(b). Each year, contractors
 submit indirect-cost rate proposals, which provide a sched-
 ule of all claimed expenses. Id. § 52.216-7(d)(2). A contrac-
 tor may not pass on all of its costs to the government; some
 costs are unallowable by law, and the contractor must cer-
 tify that its incurred-cost submissions do not include any
 unallowable costs. See 10 U.S.C. § 2324(e), (h) (2020). 1
      An allowable cost is a cost that complies with all of the
 following requirements: (1) reasonableness; (2) allocabil-
 ity; (3) “[s]tandards promulgated by the [Cost Accounting
 Standards (“CAS”)] Board, if applicable; otherwise, gener-
 ally accepted accounting principles and practices appropri-
 ate to the circumstances”; (4) “[t]erms of the contract”; and
 (5) “[a]ny limitations set forth in” subpart 31.2 of Title 48
 of the Code of Federal Regulations. 48 C.F.R. § 31.201-2(a).
 An expressly unallowable cost is “a particular item or type
 of cost which, under the express provisions of an applicable
 law, regulation, or contract, is specifically named and
 stated to be unallowable.” 48 C.F.R. § 31.001.
     Subpart 31.2 outlines the allowability of specific costs
 and makes some expressly unallowable even if the cost oth-
 erwise meets the general allowability criteria of § 31.201-
 2(a).   Relevant here, “lobbying and political activity
 costs”—which are costs associated with “[a]ttempts to in-
 fluence the outcomes of” elections, referenda, initiatives, or
 the introduction, enactment, or modification of legisla-
 tion—and “organization costs”—including costs associated
 with “planning or executing the organization or

     1   Section 2324 has since been repealed. See William
 M. (Mac) Thornberry National Defense Authorization Act
 for Fiscal Year 2021, Pub. L. No. 116-283, Div. A, Title
 XVIII, sec. 1881(a), 134 Stat. 4293.
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 4               SECRETARY OF DEFENSE     v. RAYTHEON COMPANY

 reorganization of the corporate structure of a business, in-
 cluding mergers and acquisitions”—are expressly unallow-
 able. See id. §§ 31.205-22, 31.205-27. “A contractor is
 responsible for accounting for costs appropriately and for
 maintaining records, including supporting documentation,
 adequate to demonstrate that costs claimed have been in-
 curred, are allocable to the contract, and comply with ap-
 plicable cost principles . . . .” Id. § 31.201-2(d). Contractors
 who submit indirect-cost rate proposals that include ex-
 pressly unallowable costs are subject to penalties.
 10 U.S.C. § 2324(b) (2020); 41 U.S.C. § 4303(b).
                                II
     The challenged costs in this case relate to Raytheon’s
 Government Relations and Corporate Development De-
 partments.
      Raytheon’s Government Relations Department, which
 in 2007 and 2008 consisted of 20 to 22 employees, is housed
 in Arlington, Virginia. During the relevant time period,
 government-relations employees engaged in various activ-
 ities including information gathering, internal discussions
 on lobbying strategies, attending meals with contractors
 and Congresspeople or Congressional staff, meeting with
 internal Raytheon customers, attending political fundrais-
 ing events, administering Raytheon’s Political Action Com-
 mittee, interfacing between Raytheon and the legislative
 branch of the U.S. government, and responding to requests
 from Congressional staffers, among other similar activi-
 ties. Raytheon’s Policy 23-3045-110, “Identifying and Re-
 porting Lobbying Activity Costs,” instructed employees to
 record all compensated time spent on lobbying activities.
 Accounting personnel then identified and withdrew costs
 associated with that time from Raytheon’s incurred-cost
 submissions.      Raytheon’s employees considered time
 worked outside of regular hours and on weekends to be part
 of their regular work duties, yet Raytheon’s Lobbying Pol-
 icy instructed them not to report “[t]ime spent on lobby
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 SECRETARY OF DEFENSE   v. RAYTHEON COMPANY                 5

 activity after the scheduled working day,” which was be-
 tween 8:00 a.m. and 5:00 p.m., Monday through Friday.
 Government-relations employees do not report time spent
 on allowable (i.e., non-lobbying) activities.
     Raytheon’s Corporate Development Department,
 which in 2007 and 2008 consisted of roughly seven to eight
 employees, is housed in Waltham, Massachusetts. During
 the relevant period, Corporate Development worked with
 Raytheon’s business units in strategic development and
 growth opportunities. When it identified gaps in a busi-
 ness’s capabilities, Corporate Development would work
 with that business to fill the gap through, for example, in-
 ternal investment, research and development, intellectual
 property licensing, partnerships, or acquisitions. Pro-
 posals for acquisitions or divestitures were made to the Ac-
 quisition Counsel, which made the final decision to submit
 a non-binding indicative offer or to go to market with offer-
 ing materials. Per Corporate Development policy, “[u]nal-
 lowable acquisition costs commence with the submission of
 an indicative offer,” and “[u]nallowable divestiture costs
 commence when the decision to ‘go to market’ with the of-
 fering materials is made.” These bright-line rules establish
 when Raytheon’s corporate-development employees begin
 recording their time: before the Acquisition Counsel makes
 its decision, Raytheon treats employee time as allowable
 and does not record it; after the decision, Raytheon
 switches the time to “unallowable,” and employees begin to
 record their time.
      In 2007 and 2008, Raytheon charged the government
 for roughly half of the salary costs of its Government Rela-
 tions and Corporate Development Departments.
                              III
     The Defense Contract Audit Agency (“DCAA”) audited
 both Raytheon’s Government Relations Department and
 its Corporate Development Department, determined that
 Raytheon’s 2007 and 2008 incurred-cost submissions for
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 6              SECRETARY OF DEFENSE   v. RAYTHEON COMPANY

 those departments included unallowable costs, including
 expressly unallowable costs, and demanded reimburse-
 ment and payment of penalties. Raytheon appealed to the
 Board, which held a hearing in May 2017. On February 1,
 2021, it ruled in Raytheon’s favor, concluding, as relevant
 here, that Raytheon’s claimed government-relations and
 corporate-development costs were allowable and appropri-
 ately charged to the government. See Appeals of Raytheon
 Co., ASBCA No. 59435, 21-1 B.C.A. ¶ 37,796 (Feb. 1, 2021)
 (J.A. 1–115).
     With respect to government-relations costs, the Board
 concluded that the government had not met its burden of
 proving that Raytheon’s costs were unallowable lobbying
 costs. J.A. 35. The Board found that Raytheon’s personnel
 were well trained in the FAR’s lobbying reporting require-
 ments and complied with Raytheon’s policies. J.A. 36. It
 rejected the government’s contention that the time Ray-
 theon’s employees spent lobbying outside regular working
 hours should be included because, even though “lobbying
 responsibilities were a regular part of the work duties,”
 Raytheon’s time-paid accounting policies meant that its
 employees were compensated for a 40-hour work week and,
 therefore, “[t]here was no cost to Raytheon or the govern-
 ment for work outside normal business hours.” Id. The
 Board further rejected the idea that all unsupported costs
 were unallowable. J.A. 38.
      The Board also concluded that the government had
 failed to show that the disputed corporate-development
 costs were unallowable. J.A. 50. The Board scrutinized
 Raytheon’s bright-line rules and concluded that they were
 a permissible articulation of the line between allowable
 economic- or market-planning costs under 48 C.F.R.
 § 31.205-12 and unallowable organization costs under
 § 31.205-27. Id. Because Raytheon trained its employees
 on that policy, who then followed it, the Board concluded
 that the government had failed to show that Raytheon’s in-
 curred-cost submissions were inaccurate. J.A. 51–52.
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 SECRETARY OF DEFENSE   v. RAYTHEON COMPANY                  7

    The Secretary appeals. We have jurisdiction under
 28 U.S.C. § 1295(a)(10).
                         DISCUSSION
      We review the Board’s legal determinations de novo
 and may set aside the Board’s findings of fact if they are
 (a) fraudulent, arbitrary, or capricious; (b) so grossly erro-
 neous as to necessarily imply bad faith; or (c) not supported
 by substantial evidence. 41 U.S.C. § 7107(b).
     The Secretary’s appeal challenges the Board’s findings
 that Raytheon’s cost-reporting policies comply with the
 FAR. 2 We address the government-relations and the cor-
 porate-development policies in turn.
                               I
     The Secretary contends that the government met its
 burden of showing that Raytheon overcharged the govern-
 ment because Raytheon’s policy disregarding after-hours
 lobbying rendered the government-relations incurred-cost
 submissions meaningless. We agree.
     The Board’s conclusion that “there was no cost to [Ray-
 theon] or to the government for work outside normal busi-
 ness hours,” J.A. 20, is not supported by substantial
 evidence. Indeed, the Board’s findings support the opposite
 conclusion. It observed that “Raytheon’s lobbyists worked
 early mornings, late nights, and weekends from time to
 time on what all of the testifying witnesses considered to
 be a regular part of their work duties.” J.A. 36. And it

     2  The Secretary also makes the more-general argu-
 ment that all unsupported costs are unallowable but agrees
 that we need not reach that issue if we find, as we do, that
 Raytheon’s policies are inconsistent with the FAR. Oral
 Arg. at 31:34–32:07, No. 21-2304, https://oralargu-
 ments.cafc.uscourts.gov/default.aspx?fl=21-2304_1101202
 2.mp3.
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 8               SECRETARY OF DEFENSE   v. RAYTHEON COMPANY

 stated, “logically, the expectation of regular night and
 weekend work would be factored into the salary paid to the
 lobbyists.” J.A. 20 n.12. Together, these statements lead
 to the conclusion that Raytheon, by ignoring after-hours
 lobbying, must have charged the government for unallow-
 able lobbying costs. Yet the Board ignored its own factual
 findings and logic and reached the opposite conclusion. It
 did so, seemingly, based on “Raytheon’s testimony that the
 government was not charged for the night and weekend
 work,” id., and the finding, unsupported by any citation,
 that “[a]ccounting for labor costs as a function of time paid,
 rather than time worked, is one common industry method.”
 J.A. 20.
      Both Raytheon’s testimony and the time-paid-account-
 ing point are inconsistent with the Board’s finding that
 “night and weekend work would be factored into the salary
 paid to the lobbyists.” That finding alone reflects what a
 salary is: compensation for work performed on behalf of the
 company, regardless of when. See, e.g., Salary, Black’s Law
 Dictionary (11th ed. 2019) (“An agreed compensation for
 services”); Abshire v. Cnty. of Kern, 908 F.2d 483, 486
 (9th Cir. 1990) (“A salaried employee is compensated not
 for the amount of time spent on the job, but rather for the
 general value of services performed.”), overruled on other
 grounds by Auer v. Robbins, 519 U.S. 452, 463 (1997). Ray-
 theon’s time-paid accounting is a fiction that necessarily
 overcharges the government when it ignores time spent
 working on unallowable activities after regular business
 hours. Raytheon’s lobbyists worked on unallowable activi-
 ties after-hours, and their salaries necessarily compen-
 sated them for that time. Raytheon’s policies ignoring
 after-hours time resulted in the government reimbursing
 Raytheon for unallowable costs.
      The FAR confirms that after-hours work on unallowa-
 ble activities should be accounted for. It instructs that
 “[t]ime spent by employees outside the normal working
 hours should not be considered except when it is evident
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 SECRETARY OF DEFENSE    v. RAYTHEON COMPANY                  9

 that an employee engages so frequently in company activi-
 ties during periods outside normal working hours as to in-
 dicate that such activities are a part of the employee’s
 regular duties.” 48 C.F.R. § 31.201-6(e)(2). In other words,
 if an employee’s after-hours work is extensive enough to be
 considered part of the employee’s regular duties, as was the
 case here, see J.A. 36, that time “shall be treated as directly
 associated costs to the extent of the time spent on the pro-
 scribed activity.” 48 C.F.R. § 31.201-6(e)(2). Though both
 parties point out that this provision is not directly applica-
 ble, it is nonetheless instructive: if after-hours activities
 should be considered for directly associated costs, for con-
 sistency’s sake they should also be considered for expressly
 unallowable costs. 3
      Raytheon’s arguments to the contrary are unconvinc-
 ing. It first suggests that not paying its salaried employees
 for time worked outside of normal business hours “simply
 reflects the reality that under the Fair Labor Standards
 Act [(“FLSA”)] . . . any exempt (i.e., salaried) employee is
 not entitled to pay for the time spent on business-related
 work beyond a 40-hour work week.” Appellee’s Br. 44.
 First, that argument is based on the premise—unprovable
 here—that all of Raytheon’s government-relations employ-
 ees worked full 40-hour work weeks during recordable time
 periods and that time worked outside regular business
 hours was only additional time. But employees could have
 worked less between 8:00 a.m. and 5:00 p.m., Monday

     3    Raytheon suggests that FAR 31.201-6(e)(2) only
 applies to salary expenses that generate unallowable costs;
 because the Board found that after-hours activities did not
 generate any costs, Raytheon contends, it does not apply.
 See Appellee’s Br. 46. But that argument, again, relies on
 the fiction that Raytheon’s employees were not compen-
 sated for after-hours lobbying, an idea fundamentally at
 odds with what a salary is.
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 10             SECRETARY OF DEFENSE    v. RAYTHEON COMPANY

 through Friday, to offset time spent working earlier or later
 in the day or on weekends. 4 Second, Raytheon’s argument
 is contrary to what the FLSA says. The exemption Ray-
 theon refers to comes from 29 U.S.C. § 213, which simply
 provides that salaried employees are not subject to the
 minimum-wage or maximum-hours and overtime provi-
 sions of §§ 206 and 207, respectively. See 29 U.S.C.
 § 213(a)(1). That, again, reflects the reality that a salary,
 by definition, compensates an employee for everything the
 employee does on behalf of the company irrespective of the
 time spent on those services. Cf. Brock v. Claridge Hotel &
 Casino, 846 F.2d 180, 184 (3d Cir. 1988) (observing that
 “the salaried employee decides for himself how much a par-
 ticular task is worth, measured in the number of hours he
 devotes to it,” while for hourly employees “it is the em-
 ployer who decides the worth of a particular task, when he
 determines the amount to pay the employee performing
 it”). It does not mean that salaried employees are not paid
 for time worked beyond 40 hours in a week.
      Raytheon also argues that the CAS required it to dis-
 close its cost-accounting practices to the government and to
 comply with those practices. Because, Raytheon says, that
 is exactly what it did here, it would be contrary to the CAS
 to find that Raytheon violated any other regulations. But
 as Raytheon admits, its CAS disclosure statements were
 not in evidence. Appellee’s Br. 45. So substantial evidence
 does not support any contention that Raytheon disclosed
 its after-hours policy in advance, let alone that the govern-
 ment consented to the policy and agreed to reimburse costs
 pursuant to it.

      4  We can only speculate on these points because, as
 mentioned previously, Raytheon’s employees do not record
 time that its policies deem allowable; Raytheon’s timekeep-
 ing policies, therefore, make no distinction between allow-
 able work time and time not worked at all.
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 SECRETARY OF DEFENSE   v. RAYTHEON COMPANY               11

      Because Raytheon’s incurred-cost submissions ac-
 counted only for unallowable costs incurred during regular
 hours and ignored after-hours lobbying, they do not accu-
 rately reflect the proportion of time that Raytheon’s em-
 ployees spent on unallowable lobbying activities. The only
 evidence, in the form of employee testimony, in the record
 of after-hours time was time spent on unallowable lobbying
 activities. There was no evidence of unaccounted for allow-
 able time, meaning that—so far as can be divined from the
 record—the proportion of time Raytheon’s lobbyists spent
 lobbying was necessarily higher than what Raytheon re-
 ported. We therefore conclude that the Board erred in find-
 ing that the government failed to meet its burden of
 showing that Raytheon charged it for unallowable costs.
 We reverse that finding and remand for the Board to deter-
 mine the amount of unallowable lobbying costs improperly
 charged to the government. We recognize that the lack of
 timekeeping records makes that a difficult task. That un-
 fortunate consequence, however, is attributable to Ray-
 theon’s policies. Raytheon, not the government, should
 bear the costs associated with Raytheon’s policies.
                              II
     The Secretary next contends that Raytheon’s bright-
 line corporate-development policies are inconsistent with
 the FAR and resulted in Raytheon charging the govern-
 ment for expressly unallowable costs. We agree.
     The FAR expressly disallows costs associated with
 “planning . . . mergers and acquisitions.”        48 C.F.R.
 § 31.205-27(a)(1). By only reporting time after the submis-
 sion of an indicative offer or the decision to go to market
 with offering materials—the bright-line rules—Raytheon’s
 corporate policies are plainly inconsistent with the regula-
 tion. As a matter of both logic and common sense, a deci-
 sion on submitting an offer or to go to market cannot be
 made unless at least some planning for that offer or the
 offering materials has occurred. The clearest illustration
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 12              SECRETARY OF DEFENSE    v. RAYTHEON COMPANY

 of that point is: acquire (or divest of) what? Even identify-
 ing the subject of the decision involves preliminarily plan-
 ning the acquisition or divestiture and is, per the
 regulation, unallowable. And, naturally, more preliminary
 planning must be involved before the Acquisition Counsel
 can capably decide what to do. So the language of the pol-
 icies alone reflects the fact that Raytheon fails to account
 for expressly unallowable costs in its indirect-cost rate pro-
 posals. Confirming that understanding, ample evidence
 before the Board established that at least some of Ray-
 theon’s “allowable” pre-decision salary costs related to
 planning mergers, acquisitions, or divestitures. See, e.g.,
 J.A. 4953 (slide illustrating divestiture process which
 shows tasks like “identify opportunity,” “preliminary valu-
 ation,” “team selection and launch,” all happening before
 go-to-market decision); J.A. 20547 (employee testifying
 that he performed “acquisition planning” before offer sub-
 mission); J.A. 20883–84 (employee testifying to research
 and analysis before offer submission). The Board therefore
 erred as a matter of law in concluding that Raytheon’s pol-
 icies are consistent with the FAR. The government met its
 burden of showing that Raytheon charged it for expressly
 unallowable costs.
      Raytheon tries to justify its policies by suggesting that
 the distinction between unallowable organizational-plan-
 ning costs and allowable economic- or market-planning
 costs is “unclear” and not “a defined line.” See Appellee’s
 Br. 47. The solution, Raytheon contends, is that the FAR
 creates a distinction between general planning and plan-
 ning for a specific acquisition or divestiture. Id. at 49. It
 then argues that its bright-line policies reflect that distinc-
 tion. There are at least two problems with Raytheon’s po-
 sition. First, if Raytheon’s point about the lack of a defined
 line is intended to suggest that there might be overlap be-
 tween these categories of costs, that’s wrong: FAR 31.205-
 12 says that “[e]conomic planning costs do not include or-
 ganization or reorganization costs covered by 31.205-27.”
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 SECRETARY OF DEFENSE   v. RAYTHEON COMPANY                13

 Even if it can sometimes be difficult to determine whether
 a specific activity generates allowable economic-planning
 costs or unallowable corporate-reorganization costs, that
 doesn’t justify Raytheon’s decision to establish policies
 drawing bright lines that start the clock on unallowable
 time at points obviously later than the FAR permits.
      Second, even if we accept that FAR § 31.205-27(a)(1)
 only disallows planning for a specifically identified acqui-
 sition or divestiture—a proposition that the generality of
 the regulation does not support—evidence before the Board
 shows that, before involving the Acquisition Counsel, Ray-
 theon employees identified specific acquisition targets and
 worked towards possible acquisitions, which are activities
 that plainly involve “planning . . . mergers.” See, e.g.,
 J.A. 4849 (employee Goals & Accomplishments document
 for 2007 identifying specific acquisition targets and ex-
 plaining work performed relating to each). But because
 Raytheon never submitted indicative offers to the identi-
 fied targets, all of those salary costs were deemed allowable
 under Raytheon’s corporate policies. J.A. 22349 (employee
 testifying that all time spent pursuing acquisition targets
 was included in charges to the government). So the evi-
 dence belies Raytheon’s justifications and confirms the
 common-sense view that Raytheon’s policies are facially in-
 consistent with the FAR.
     Amici suggest that siding with the Secretary on this is-
 sue is tantamount to finding that corporate policies and
 trainings purporting to explain the FAR to employees are
 impermissible. See, e.g., Brief for Amicus Curiae National
 Association of Manufacturers and Aerospace Industries
 Association, 12–13. But that is not what we understand
 the Secretary’s position to be, and that is not what we have
 concluded. We are not saying that all policies that attempt
 to draw lines interpreting FAR provisions are improper; we
 have simply concluded that these policies drawing those
 lines are inconsistent with the FAR. We see nothing
 wrong, as a general matter, with policies that interpret and
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 14              SECRETARY OF DEFENSE   v. RAYTHEON COMPANY

 explain the FAR; each policy should be evaluated on its
 own merits, as Raytheon’s have been here.
      Because the Board erred as a matter of law in conclud-
 ing that Raytheon’s corporate-development policies were
 consistent with the FAR, its factual determination that the
 government was not charged for unallowable costs because
 Raytheon’s employees complied with those policies is also
 legally incorrect. We therefore reverse the Board’s conclu-
 sion and remand for the Board to determine the amount of
 unallowable costs improperly charged to the government.
 We again recognize that Raytheon’s policies make this a
 difficult task, but we reiterate our view that Raytheon
 should shoulder the burden its policies created.
                        CONCLUSION
     We have considered Raytheon’s remaining arguments
 and find them unpersuasive. For the reasons set forth
 above, we conclude that the Board erred in finding both
 that Raytheon’s policies comply with the FAR and that the
 government failed to show by a preponderance of the evi-
 dence that Raytheon overcharged it. We therefore reverse
 the Board’s judgment and remand for a determination of
 costs Raytheon must repay and, if necessary and appropri-
 ate, an assessment of penalties.
                REVERSED AND REMANDED
                           COSTS

 No costs.