Federal Circuit Affirms Jurisdiction Over Claim Challenging Legality of FAR Provision

On August 10, 2020, the U.S. Court of Appeals for the Federal Circuit rejected the government’s jurisdictional and waiver defenses in The Boeing Co. v. United States, and remanded the case to the U.S. Court of Federal Claims (COFC) for examination of Boeing’s substantive claim that FAR 30.606 illegally barred the Contracting Officer from evaluating simultaneous unilateral accounting changes under the Cost Accounting Standards based upon the aggregate net impact and not just those changes increasing costs allocable to government contracts.

Specifically, Boeing argues that eight multiple simultaneous changes to its cost accounting practices did not require payment to the government because there was no “aggregate increased cost” under FAR 52.230-6(k)(2). The government disagreed because another regulation, FAR 30.606(a)(3)(ii)(A), provides that the contracting officer shall not “combine the cost impacts of . . . . [o]ne or more unilateral changes” “unless all of the cost impacts are increased costs to the government.” Consequently, the government asserted a claim against Boeing to recover increased costs (plus interest) stemming from two of Boeing’s eight cost accounting practice changes, disregarding the changes that lowered costs to the government “in the aggregate.” Boeing appealed the decision to the COFC, raising breach of contract and due process claims. The trial court held that Boeing waived its breach of contract claim by failing to object to FAR 30.606 before entering into the relevant contracts and that it lacked jurisdiction to consider Boeing’s illegal exaction claim.

The Federal Circuit reversed and remanded, concluding that the trial court misapplied the doctrine of waiver and misinterpreted the jurisdictional standard. With respect to Boeing’s alleged waiver to challenge FAR 30.606, the Federal Circuit held that Boeing did not waive its challenge because no effective remedy was available pre-contract, and therefore, any pre-award challenge would have been futile. To the extent the government urged such an approach to avoid waiver, the Federal Circuit held that the government failed to identify a judicial forum, pre-contract formation, in which Boeing would clearly have been entitled to obtain a ruling on the merits of its subsequently asserted objection. With respect to the jurisdictional question, the Federal Circuit held that Boeing’s illegal exaction claim asserted one of the three acknowledged bases for Tucker Act jurisdiction, specifically where “a party that has paid money over to the government and seeks its return must make a non-frivolous allegation that the government, in obtaining the money, has violated the Constitution, a statute, or a regulation.”