Northrop Grumman Corporation

July 5, 2023Judge Stinson

Denied / Government PrevailedCost Allowability / Allocability (FAR 31)Indirect Rates / Incurred CostCost Accounting Standards (CAS)Quantum / DamagesDCAA InvolvedDCMA InvolvedCAS at Issue

Northrop Grumman Corporation challenged the disallowance of portions of its FY 2012 pay-as-you-go, nonqualified defined-benefit pension costs derived from compensation exceeding the FAR 31.205-6(p) cap. On cross-motions for partial summary judgment, the Board denied Northrop Grumman's motion and granted the government's cross-motion, holding that the challenged pension costs were unallowable directly associated costs and, alternatively, unreasonable costs.

Material Facts

Northrop Grumman performed flexibly-priced contracts containing FAR 52.216-7.
Northrop Grumman accounted for the relevant nonqualified defined-benefit pension plans on a pay-as-you-go basis.
The pension plans provided supplemental retirement benefits to selected executives and other key or highly compensated employees.
The pension formulas used final average earnings or annual compensation as a factor in calculating retirement benefits.
The compensation factors included salary and bonus amounts exceeding the applicable FAR 31.205-6(p) limitation in effect when the participants earned the compensation.
Northrop Grumman's FY 2012 Incurred Cost Submission included pension costs incurred under the identified pension plans.
DCAA issued a September 29, 2017, audit report questioning portions of the proposed pension costs as directly associated with expressly unallowable costs under FAR 31.205-6(p).
The DCMA CACO's final decision disallowed portions of Northrop Grumman's FY 2012 pension costs and assessed no penalties.
The parties stipulated that there was no genuine issue as to any material fact.

Parties

Appellant: Northrop Grumman Corporation
Respondent Agency: Defense Contract Management Agency
Contracting Agency: Defense Contract Management Agency
Contract Number: F33657-01-C-4600

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