Raytheon Company

Material Facts

• Raytheon's corporate home office used performance sharing, results-based incentives, restricted stock, and long-term performance plan compensation programs.
• Raytheon's LTPP was deferred compensation and a component of its 2001 Stock Plan.
• Under the LTPP, participants could earn shares based on specified company-performance metrics over a three-year performance cycle.
• For the relevant LTPP cycles, Raytheon calculated the TSR metric using ending stock price, three years of dividends, and beginning stock price, and compared the result with ten peer companies.
• A higher relative TSR ranking generally resulted in additional shares, while a lower ranking resulted in fewer shares.
• Raytheon withdrew labor and a portion of fringe expenses for employees engaged in expressly unallowable advertising, lobbying, organization, and legal activities, but did not withdraw the applicable portion of bonus, restricted stock, and other incentive compensation.
• The government's final decision under ASBCA No. 57576 identified activities under FAR 31.205-1, FAR 31.205-22, FAR 31.205-27, and FAR 31.205-47, but did not assert a claim under FAR 31.205-8 for contributions activities.
• DCAA audits included reviews of Raytheon's bonus payments, forward pricing submissions, long-term incentive plans, overhead cost submission, and incurred cost submissions.
• The DCAA work paper stated an auditor's view that LTPP costs were allowable because the shares were based on stock price compared with peers rather than strictly on a change in Raytheon stock price.
• The CACO later issued final decisions asserting that TSR-related costs were expressly unallowable under FAR 31.205-6(i).

Parties

Appellant

Raytheon Company

Respondent Agency

Defense Contract Management Agency

Contract Number

FA8807-06-C-0004; NOOO 19-06-C-03 l 0