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Later Reg Trumps Contract Clause Again


In Fluor Hanford Inc. v. U.S. (July 1, 2005, the Court of Federal Claims upheld the contracting officer's disallowance of 20 percent of the costs of successfully defending a False Claims Act case, holding that a specific contractual provision in a 1996 DOE M&O contract promising to reimburse the contractor for all costs of civil actions that arose from conditions that existed before the contractor assumed responsibility for the plant was effectively trumped by 2001 changes to the FAR imposing an 80 percent limit on the allowability of legal fees incurred in the successful defense of qui tam actions under the False Claims Act in which the Government did not intervene. The decision relies on the Federal Circuit's analysis in Boeing N. Am., Inc. v. Roche, 298 F.3d 1274 (Fed. Cir. 2002), and, with the ASBCA decision in Southwest Marine decided in February, this case reflects a disturbing trend to ignore specific contractual provisions about allowability in favor of substantive regulatory changes made years after the contract was awarded that the Federal Circuit characterized as a "clarification" with retroactive effect.

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Terry L. Albertson
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