Boeing v. U.S.: Contract Dispute Over Cost Accounting Resurrected

In Boeing Co. v. United States, the U.S. Court of Appeals for the Federal Circuit addressed whether the Court of Federal Claims had jurisdiction to review Boeing's challenge to a contract price adjustment assessed under the Federal Acquisition Regulation (FAR) related to cost accounting standards (CAS). The court reversed the lower court's dismissal of Boeing's claims and remanded the case for further proceedings.

Boeing Disputed Price Adjustment Based on Cost Changes

In 2011, Boeing implemented eight simultaneous changes to its cost accounting practices. Two of these changes increased government costs on existing contracts, while the other six were cost-neutral or reduced costs. In total, Boeing estimated a net savings of approximately $1.5 million to the government.

Following a Defense Contract Audit Agency review, the government issued a final decision in 2016 demanding that Boeing pay $1,064,773 in accordance with FAR 30.606, which allows for adjustments in contract price due to cost accounting changes. Boeing began making installment payments under protest and formally challenged the decision.

Boeing filed a certified claim with a contracting officer and subsequently brought four counts in the Court of Federal Claims. These included three contract-based claims and one alternative illegal exaction claim, which argued that the price adjustment violated statutory limits under 41 U.S.C. § 1503(b).

Trial Court Dismissed All Claims

The Court of Federal Claims dismissed the contract claims for lack of jurisdiction, concluding that Boeing's challenge was a regulatory dispute not reviewable under the Contract Disputes Act (CDA). The court also dismissed the illegal exaction claim with prejudice, finding it was improperly pleaded.

On an earlier appeal, the Federal Circuit had already ruled that the court did have jurisdiction to consider the illegal exaction claim under the Tucker Act. On remand, however, the trial court maintained its prior position, declining to adjudicate any of Boeing's claims.

Federal Circuit Finds Claims Properly Raised Under CDA and Tucker Act

The Federal Circuit rejected the trial court's interpretation. It held that Boeing's claims arose from a contracting officer's final decision and involved a dispute over whether the government was entitled to recover the assessed costs under the contract. As such, the claims fell squarely within the scope of the CDA, which confers exclusive jurisdiction on the Court of Federal Claims to hear disputes related to government contracts.

The court emphasized that the presence of regulatory questions—such as the validity of FAR 30.606—did not strip the trial court of jurisdiction. Since the challenged regulation was incorporated into Boeing's contracts, its validity could be addressed as part of the contract dispute.

Regarding the illegal exaction claim, the appellate court reaffirmed that Boeing had made a non-frivolous allegation that the government collected funds in violation of statutory limits. The court explained that the trial court should have evaluated the merits of this claim under its separate jurisdictional authority provided by 28 U.S.C. § 1491(a)(1).

Case Remanded for Further Proceedings

The Federal Circuit reversed the dismissal of all four claims and remanded the case for further proceedings. It clarified that contract disputes involving CAS regulations fall under the CDA and that contractors may raise alternative claims under the Tucker Act if framed as illegal exactions.

Legal Guidance on Government Contract Price Adjustments

Government contractors navigating CAS compliance, FAR cost rules, or contract price adjustments may face complex disputes. Our attorneys at Whitcomb, Selinsky, PC help businesses resolve contract disagreements, assess claims under federal acquisition regulations, and pursue relief through the appropriate legal channels.