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Manufacturing
General Discussion and Background
CECA has assisted manufacturing contractors with the preparation of claims and termination
settlement proposals. Termination settlement proposals frequently include claims, in
addition to requests for payment of costs incurred for work performed. CECA's experience
with manufacturing contractors include various airplane parts, weapons ammunition,
military clothing, and communication devices. Below is the discussion of a claim CECA
prepared for a satellite manufacturer.
CECA prepared a termination settlement proposal for a contractor that was initially
terminated for default. The contractor was able to convert the termination for default to
a termination for convenience and was now eligible to recuperate its costs incurred for
the terminated contract.
The contract was a "requirements" contract to provide a first article of a
satellite receiving system and provide the base year contract quantity, with four 1-year
options. The contract was terminated for default after the approval of the
first article, but before the first shipment was made by the contractor for the base year
portion of the contract.
After the contract was converted to a convenience termination, the contractor obtained the
services of CECA to assist in the preparation of its proposal. This project presented
several unique challenges for CECA, as the contract was originally terminated for default
10 years before it was converted to a termination for convenience. While litigating the
default termination, the contractor's business slowly dropped off until it was completely
dormant. The contractor's records were scattered over several locations in different
cities and much of the company's financial information had been water damaged during
storage. Below is a discussion of the challenges that were required to be overcome.
Locate documentation
CECA was able to find enough of the contractor's company financial documents and prepare
the termination settlement proposal that later withstood a Defense Contract Audit Agency
(DCAA) audit.
Organize termination inventory
The contractor also had two thousand different part numbers consisting of literally tens
of thousands of individual pieces that were purchased for the contract that could not be
used in the contractor's other work. CECA assisted the contractor with the termination
inventory.
Assist in verification of termination inventory
CECA assisted the contractor in the inventory verification with the Plant Clearance
Officer, where the Contracting Officer eventually directed the contractor to take title to
the parts and dispose of them at his discretion.
Prepare proposal, with limited documentation and Assist in DCAA Audit
CECA was able to locate enough of the contractor's documentation to support the costs
incurred. CECA worked side by side with the DCAA auditor during the field audit at a
temporary location, since the contractor no longer had an office or manufacturing
facility. CECA's capacity during the DCAA audit was to provide additional information and
explanations to the DCAA auditor, including searching through years of unorganized
invoices and check stubs to provide the auditor with enough documentation to verify the
contractor's incurred costs.
Reinstatement of Contract Funds
Because the original termination of the contract took place 10 years prior under a default
termination, the funds were de-obligated from the contract. This was a particularly unique
challenge to get the funds reinstated because the agency that initially issued the
contract was no longer in existence - it merged with another agency. The contracting
officer agreed to negotiate a settlement agreement, but could not issue a contract
modification until the funds were in place. Once the funds were made available, payment
was made to the contractor immediately.
Requests for Equitable Adjustment
The contractor incurred non-recurring R&D, manufacturing, and plant rearrangement
costs in performing the base year contract. CECA prepared requests for equitable
adjustment (REAs) for the contractor for loss of learning curve and loss of productivity,
as well as for the non-recurring costs.
Profit Analysis
CECA prepared a profit analysis to show the contractor would not have been in a loss
position had the contract gone to completion.
Conclusion
No matter how complicated your situation is, CECA's team of consultants can help you
maximize your recovery.
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