Exelis, Inc.

Material Facts

• Exelis was an intermediate home office that allocated its costs to subordinate business segments as indirect costs.
• Exelis’s total shareholder return compensation was calculated using a performance rating based on securities-price changes and dividend payments relative to peer companies.
• Exelis paid the relevant total shareholder return compensation in cash after measuring performance over a three-year period.
• Exelis included total shareholder return compensation and entertainment costs in its 2006 indirect cost proposal.
• The 2006 submission stated that it was Exelis’s final indirect cost proposal and certified that included costs were allowable and that no expressly unallowable costs were included.
• DCAA’s 2012 audit questioned the allowability of the total shareholder return compensation and entertainment costs and recommended a penalty.
• The contracting officer ordered removal of the unallowable costs from applicable indirect cost pools and certain billings.
• Exelis did not submit evidence to the contracting officer showing that it had established the policies, training, and internal control and review system required for waiver of the entertainment-cost penalty.
• Exelis’s corporate policies primarily relied upon for waiver became effective after submission of the 2006 indirect cost proposal.

Parties

Appellant

Exelis Inc.

Respondent Agency

Defense Contract Management Agency

Contract Number

W911SR-04-C-0100