Government Claim Denied When It Couldn't Prove that Money Had Been Paid

Alaska Aerospace Corporation (AAC) is a corporation fully owned by the State of Alaska. It operates a missile test facility on Kodiak Island (Alaska) that has been used by the Missile Defense Agency (MDA) and the Air Force.

Employees of Alaska Aerospace are, in all respects, employees of the State of Alaska, and as such, receive all of the fringe benefits accruing to State employees including a defined benefit pension plan.

In it's Fiscal Year 2008 incurred cost proposal, AAC included contributions to the State's defined contribution pension plan including $302,637 in pension plan contributions that were paid by the State of Alaska on AAC's behalf. DCAA questioned the amount which the contract office then demanded payment in his COFD (Contracting Officer Final Decision). The contracting officer also demanded penalty even though DCAA audit report that questioned the amount concluded that the amount was not subject to penalty.

AAC appealed to the ASBCA (Armed Services Board of Contract Appeals).

The Government quickly retracted on its penalties argument and instead argued that it was entitled to recover that amount because the government paid that amount to AAC as reimbursement of employee pension plan contributions and AAC did not incur those charges since the State of Alaska made the contributions, not AAC.

AAC countered that it did incur those charges since AAC is a corporation run by the State of Alaska. Furthermore, AAC argued that the government is not entitled to recovery as it never paid any of the claimed amount to AAC. AAC states that the employee pension plan contributions were included at the end of FY08 in AAC's Incurred Cost Proposal and were not a part of any invoices that were paid by the government.

The Board sustained AAC's appeal on the basis that the Government could not show that it had reimbursed AAC for any of the costs. However, the Board expressed no opinion as to whether the pension plan contributions at issue in the appeal are allowable costs.

You can read the full ASBCA decision here.