In these unprecedented, economically-challenging times for the aviation industry, it is especially important that airlines, manufacturers and other industry stakeholders have an accessible avenue open to them for pursuing reimbursement claims against the federal government arising out of government contracts. In a decision handed down last August, Boeing Co. managed to reverse its fortunes and resuscitate a claim under the federal Tucker Act to recover costs incurred in performing a Department of Defense (“DoD”) contract. Boeing did so by styling its claim as one to recover an “illegal exaction.” In so doing, Boeing avoided its failure to have raised its claim with the agency. Boeing Co. v. United States, 968 F.3d 1371 (Fed. Cir. Aug. 10, 2020).
The Boeing case highlights the fact that contractors should not shy away from identifying and pursuing successful legal theories to preclude the government from retaining money that rightfully should be returned to the contractor’s side of the ledger.
The case arose out of numerous contracts between Boeing and DoD. In 2011, Boeing changed multiple cost accounting practices simultaneously; some of the changes increased costs to the government, whereas others decreased costs to the government. In late 2016, the Defense Contract Management Agency, invoking Federal Acquisition Regulation (“FAR”) 30.606 determined the cost impact of these changes resulted in a cost increase and demanded that Boeing pay the government that amount plus interest. Boeing paid the money to the government under these two government claims, but also filed an action in the Court of Federal Claims (“COFC”) to seek recovery of the amounts thus paid, asserting that the government, in following FAR 30.606, committed a breach of contract and effected an illegal exaction.
The COFC, 143 Fed. Cl. 298, granted the government’s motions to dismiss and for summary judgment. Boeing appealed and the Federal Circuit reversed, holding that: (1) Boeing did not waive its challenge to the lawfulness of the regulation by failing to challenge the regulation before entering into its contract with the government; (2) the government failed to establish that Boeing could have raised its challenge to the regulation during contract formation in an action under the Administrative Procedure Act (APA); (3) the government failed to establish that Boeing could have pursued a challenge to the regulation during contract formation in an action under the bid protest statute; and (4) Boeing established subject-matter jurisdiction under the Tucker Act for its illegal exaction claim.
Boeing’s core argument, applicable to both claims, was that, although FAR 30.606 undisputedly required the DoD to act as it did, that regulation was unlawful—principally because it was contrary to 41 U.S.C. § 1503(b) (and also for procedural reasons). According to Boeing, that provision of the Cost Accounting Standards (“CAS”) statute, which was incorporated into its DoD contracts, required that simultaneously adopted cost-increasing and cost-lowering changes in accounting practices be considered as a group, with the cost reductions offsetting the cost increases. Boeing argued that, by following FAR 30.606’s command to disregard the cost-lowering changes and bill Boeing for the cost-increasing changes...
