General Dynamics Corporation

Material Facts

• General Dynamics prepared Retirement Plan Forward Pricing Rates projecting assignable CAS 412 pension costs for the remainder of the current year and later years.
• General Dynamics incorporated the applicable Retirement Plan Forward Pricing Rates into pricing proposals for specific contracts and contract modifications.
• General Dynamics calculated projected future January 1 actuarial values by comparing an expected actuarial value with a projected January 1 market value because the future market value was not yet known.
• General Dynamics used actual market performance through part of the year and assumed an 8% annual return for the remainder of the year when calculating projected market values.
• General Dynamics had used this approach in its forward pricing proposals since 1986.
• The government did not object to the practice for approximately twenty years but objected in 2006.
• DCAA issued a draft opinion, a draft audit report, and an audit report concluding that use of actual year-to-date returns in the forward pricing methodology was noncompliant with CAS 412.
• The contracting officer's final determination identified periods of alleged CAS 412 noncompliance from 30 September 2004 to 24 January 2005, 12 May 2005 to 12 April 2006, 5 September 2006 to 30 April 2007, and 17 October 2008 to 14 January 2009.
• General Dynamics's methodology used a composite or blended rate combining part-year returns with the assumed 8% rate.
• The parties' established CAS 412 practice used the 8% rate in the annual measurement and assignment of pension costs.
• The two test contracts incorporated FAR clause 52.230-2.
• The parties agreed that there were no material facts in dispute.

Parties

Appellant

General Dynamics Corporation

Respondent Agency

Defense Contract Management Agency

Contracting Agency

United States Navy, Naval Air Warfare and the United States Army, TACOM-Rock Island

Contract Number

N00421-05-C-OII0; W52H09-09-C-OO 12