CGS successfully assisted a Fortune 100 government contractor in pursuing a claim against the US Air Force. The prime contractor was struggling with various complex technical issues on a significant Air Force program. Based on weak Defense Contract Audit Agency (DCAA) audit findings on an unrelated purchasing system audit, the Air Force began withholding 10% of each progress payment to the contractor across multiple contracts – ultimately withholding almost $425M in cash. The Air Force finally succeeded in getting the contractor’s attention!
Working with outside counsel, CGS analyzed the Air Force’s actions and withholdings, and as a part of that analysis, CGS identified one of the more egregious aspects of the Air Force’s withholdings – the Air Force was also withholding 10% of the progress payments that the contractor was making to its subcontractors. These are normally 100% reimbursable. This was a particularly harsh recourse against the contractor.
CGS prepared all of the financial analyses and modeling of the effects of the withholdings on the contractor’s cash flows and financial position. This included a detailed analysis of the progress payment requests made on SF 1443 (Contractor’s Request for Progress Payment) across multiple contracts. Because each of the cost-plus contracts were at different stages of completion, the financial analysis and modeling was very complex and interactive as some contracts were accumulating progress payment balances and some were liquidating previous progress payment balances.
Working with outside counsel, we helped to draft the actual claim documents and also to negotiate the settlement with the Air Force and the DCAA. The contractor ultimately received $9M in interest in addition to recouping all of the previously withheld funds. This was a very successful outcome considering that the government rarely, if ever, pays interest.
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