Pratt & Whitney, a division of Raytheon Technologies Company

Material Facts

• Pratt produces jet engines for military and civilian jet airplanes.
• Pratt sources some parts from collaborators that participate in engine-program expenses and revenues based on program share.
• The collaborators pay Pratt an upfront fee to finance engine development and are compensated for engine sales based on a predetermined share of the engine price.
• Fleet Introductory Assistance discounts reduce the list price actually received by Pratt in some engine sales.
• Collaborators are responsible for a share of Pratt’s administrative and management expenses referred to as drag.
• Pratt’s Net Revenue Share represents Gross Revenue Share less Fleet Introductory Assistance, drag, and other miscellaneous deductions.
• Pratt holds cost type contracts with the government, and the costs assigned to collaborator parts affect overhead allocation between government contracts and Pratt’s commercial clients.
• A DCMA contracting officer entered into a written Accounting Practices Agreement permitting Pratt to value collaborator parts using Manufacturing Target Cost.
• A subsequent DCMA contracting officer found Pratt’s accounting treatment to violate the Cost Accounting Standards.
• The parties entered into the Accounting Practices Agreement and treated it as binding until after the inspector general investigation and the government’s change of position.
• The Government’s own witness testified that the Government did not test whether drag applied to costs allocated to government contracts and reimbursed by the Government.
• The document concerning FIA agreements was admitted to the record over the Government’s objection.

Parties

Appellant

Pratt & Whitney, a division of Raytheon Technologies Company

Respondent Agency

Defense Contract Management Agency

Contracting Agency

Defense Contract Management Agency

Contract Number

N00019-10-C-0005