Northrop Grumman Corporation

Material Facts

• NGC used an accrual cost method under FAS 106 for financial reporting.
• NGC used DEFRA to measure, assign, and fund the Plan's post-retirement benefit costs for government contract purposes from 1995 through 2006.
• FAR 31.205-6(o) required accrual-basis post-retirement benefit costs to be measured and assigned according to GAAP and to be timely funded.
• NGC disclosed its use of DEFRA in its CAS Part VII disclosure statements.
• In 2006, NGC sought an advance agreement concerning its continued use of DEFRA or its conversion to FAS 106, and the government declined both proposals.
• NGC formally notified the government of its switch from DEFRA to FAS 106 in November 2006.
• DCAA issued a report concluding that unfunded FAS 106 costs were unallowable in future accounting periods.
• The test contract was a cost-type contract containing FAR 52.216-7, ALLOWABLE COST AND PAYMENT (DEC 2002).
• The government did not question the lesser-funded DEFRA amounts that NGC funded each year before 2007.
• NGC's 2006 Plan amendments capped future health care cost increases.
• The parties did not address quantum in detail during the entitlement proceeding.

Parties

Appellant

Northrop Grumman Corporation

Respondent Agency

Defense Contract Management Agency

Contracting Agency

Defense Contract Management Agency

Contract Number

N68936-05-C-0059