from the Armed Services Board of Contract Appeals in No.
57743, Administrative Judge David D'Alessan-dris,
Administrative Judge Cheryl L. Scott, Administrative Judge
Louise Manos, Gibson, Dunn & Crutcher LLP, Washington,
DC, argued for appellant. Also represented by John William
Domenique Grace Kirchner, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washington,
DC, argued for appellee. Also represented by Joseph H. Hunt,
Robert Edward Kirschman, Jr., Patricia M. McCarthy.
Dyk, Linn, and Taranto, Circuit Judges.
Company ("Raytheon") appeals a decision by the
Armed Services Board of Contract Appeals ("Board")
that the unallowable salary costs associated with
Raytheon's lobbying activities are "expressly
unallowable" under Federal Acquisition Regulation
("FAR") § 31.205-22 ("Subsection
22") and thus subject to penalty under FAR §
42.709-1(a)(1) (known as "level 1" penalties).
Because we find that salary costs for lobbying activities are
expressly unallowable under Subsection 22, we affirm.
2, 2005, Raytheon submitted its 2004 incurred cost rate
proposal ("cost proposal") for a
Cost-Plus-Fixed-Fee contract for engineering services
associated with the Patriot Weapons system. In the proposal,
Raytheon's Corporate Controller certified that:
[T]o the best of my knowledge and belief:
(1) All costs included in this Corporate 2004 Overhead Cost
Submission . . . proposal to establish final indirect cost
rates for 2004 are allowable in accordance with the cost
principles of the [FAR] and its supplements applicable to the
contracts to which the final indirect cost rates apply; and
(2) This proposal does not include any costs which are
expressly unallowable under applicable cost principles of the
FAR or its supplements.
Raytheon Co. (Raytheon I), ASBCA No. 57743,
17-1 BCA ¶ 36724, slip op. at 13-14, 2017 WL 1740026
(Apr. 17, 2017) (third alteration in original).
Defense Contract Audit Agency reviewed the cost proposal in
April of 2006 and concluded that it contained various
expressly unallowable costs. On May 26, 2011 a Corporate
Administrative Contracting Officer of the Defense Contract
Management Agency ("DCMA") issued a final decision
determining that Raytheon's proposal included, among
other expressly unallowable costs, over $220, 000 of
expressly unallowable lobbying salary costs. The contracting
officer demanded that Raytheon repay the government for these
reimbursed expressly unallowable costs, and assessed
penalties and interest against Raytheon under FAR §
appealed the contracting officer's final decision to the
Board. The only cost at issue in this appeal is the one
related to lobbying expenses. Although Raytheon admitted that
salary costs associated with lobbying are unallowable and
that it committed several cost errors or omissions in its
calculations, Raytheon argued that salaries were not
specifically referenced in Subsection 22 and, accordingly,
were not "expressly unallowable." The Board upheld
the DCMA decision, finding that the lobbying costs are
subject to penalty because "[c]osts associated with
certain named lobbying activities are stated to be
unallowable under FAR 31.205-22" and "they are
[thus] expressly unallowable." Raytheon Co.
(Raytheon I), ASBCA No. 57743, 17-1 BCA ¶
36724, slip op. at 54, 2017 WL 1740026 (Apr. 17, 2017). The
Board alternatively relied on ...