Parsons Government Services, Inc.

Material Facts

• Parsons is a wholly owned subsidiary of Parsons Corporation, and its headquarters were located in Pasadena, California.
• The contract provided for task orders, some fixed-price and some flexibly priced.
• Parsons constructed the Pasadena Tower Building between 1973 and 1974 and had fully depreciated the building by December 1991, although improvements were not fully depreciated when the building was sold.
• The parties executed an advance agreement providing for a use charge for the fully depreciated building from 1992 through 2011.
• Parsons sold the building and other headquarters facilities to a third party in May 2011 and shortly thereafter leased the building back for a 15-year term.
• The government had partially reimbursed Parsons for depreciation costs associated with the building and its improvements.
• Parsons' recognized gain from the sale was capped at the difference between the building's acquisition cost and its undepreciated balance, and the resulting gain was credited to the government.
• Parsons initially proposed annual allowable lease costs using the capped recognized gain, but later asserted that allowable costs should be calculated using the realized gain from the sale.
• Parsons included the realized-gain calculation in its fiscal year 2018 final indirect cost rate proposal.
• DCAA's fiscal year 2018 audit identified Parsons' change in the method for computing allowable annual lease costs.
• The contracting officer found that the difference between the recognized gain and realized gain was unallowable.
• Parsons sought an upward adjustment of leaseback costs for fiscal years 2014 through 2017 in a certified claim.

Parties

Appellant

Parsons Government Services, Inc.

Respondent Agency

Defense Contract Management Agency

Contracting Agency

U.S. Army Corps of Engineers

Contract Number

W912DY-09-D-0062