Rush To Judgment - FAR Councils Propose Daily Compounding Of Interest For TINA Violations

We previously noted DCAA’s hasty implementation of the Court of Appeals for the Federal Circuit’s (“CAFC’s”) decision in Gates v. Raytheon Co., 584 F.3d 1062 (Fed. Cir. 2009), requiring daily compounding of interest on adjustments made to rectify Cost Accounting Standards (“CAS”) noncompliances. DCAA Implements Federal Circuit Decision Requiring Interest Compounded Daily on Adjustments for CAS Noncompliances (June 14, 2010). We say “hasty” because – while noting that its holding was required by Canadian Fur Trappers v. United States, 884 F.2d 563 (Fed. Cir. 1989) – the panel expressed reservations regarding that decision’s validity, commenting that appellee’s (Raytheon’s) arguments “may support the proposition that Canadian Fur Trappers was erroneously decided.” Not surprisingly, Raytheon accepted this implicit invitation to petition for rehearing en banc, and that petition is currently pending. Nonetheless, the FAR Councils are now rushing to mimic DCAA by proposing in equally hasty fashion to extend the holding to overpayments under the Truth in Negotiations Act (“TINA”). 75 Fed. Reg. 57719-57721 (Sept. 22, 2010).

The Councils say they are proposing the rule because (a) the CAFC has decided that “the interest on CAS cost impacts is set by reference in the enabling statute to 26 U.S.C. 6621 . . . which led to calculation of the interest using daily compounding [under 26 U.S.C. 6622],” and (b) “TINA also references 26 U.S.C. 6621 for interest calculation,” therefore, (c) 26 U.S.C. § 6622 requires that interest on “TINA cost impacts” likewise be compounded daily. The Councils do not identify language in Section 6622 that “leads” to calculation of interest using daily compounding for TINA overpayments, probably because, as the CAFC implicitly acknowledged, there is none.

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Published In: Administrative Agency Updates, Finance & Banking Updates, Government Contracting Updates

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