FAR 52.232-7; Contract Appeals Case (SERCO)

SERCO, INC.,Appellant, v. PENSION BENEFIT GUARANTY CORPORATION

Rebecca E. Pearson and Jeffery M. Chiow of Venable LLP, Washington, DC, and J. Scott Hommer, III of Venable LLP, Vienna, VA counsel for Appellant. Mark L. Hansen, KiKimberly A. Manganello, Scott D. Sadler, and Andrew J. Seff, Office of the General Counsel, Pension Benefit Guaranty Corporation, Washington, DC, counsel for Respondent.

Before Board Judges BORWICK, SHERIDAN, and WALTERS. BORWICK, Board Judge.

Overview

This appeal involves a claim by the Pension Benefit Guaranty Corporation (PBGC or respondent) against Serco, Inc. (Serco or appellant), involving two time and materials labor hour contracts for database management services and information technology support. The contracting officer issued a decision on May 18, 2009, seeking appellant’s reimbursement of $115,773 for alleged improper payments under the two contracts, including $84,769 for improperly billed subcontract labor, $24,894 for labor hour charges with insufficient time sheet support, and $6110 for charges billed through administrative error.

CBCA 1695 2

The parties have submitted cross-motions for partial summary relief on respondent’s claim for repayment of improperly billed subcontract labor. We grant respondent’s motion on that issue as to entitlement only. We conclude that appellant, or its predecessor contractors, billed respondent at its higher direct labor hourly rate for the subcontracted employees’ services, rather than at the lower hourly rate appellant actually paid the subcontractors for those services. Appellant’s arguments that it should be permitted to bill at the higher hourly rate are not persuasive and not in accordance with the plain meaning of the 2000 and 2002 versions of the Payments Under Time and Materials Labor Hours Contract clause. There are disputes of fact as to whether the amount owed is $75,588.16, the figure calculated by respondent 1, or $24,813.69, the figure calculated by appellant.

Background

The following facts are not disputed. Respondent administers the pension plan insurance termination program established by Title IV of the Employee Retirement Income Security Act of 1974, as amended, Pub. L. No. 93-406, 88 Stat. 829 (1974). Respondent’s Statement of Undisputed Facts ¶

1. Respondent funds its expenses through premiums it charges to employers, from plan assets of terminated plans, and from earnings on investment of terminated plan assets. Id. The money used by respondent to fund its contractual obligations does not come from the United States Treasury. Id.

Appellant’s first predecessor, Innerbase Technologies, Inc. (Innerbase), was awarded contract PBGC-CT-01-0603 (the “01-0603 contract”) on October 1, 2000. Respondent’s Statement of Undisputed Facts ¶

2. The contract, a labor hour contract for database administration and Unix support, was for a one-year base period and four one year options. Id. Respondent exercised each of the one-year options and paid Innerbase or Serco a total of $28,299,955. Id.

Payments Clause

The payments clause of the 01-0603 contract --Payments Under Time and Materials Labor Hours Contract, 48 CFR 52.232-7 (2000) -- was incorporated by reference and provided as follows:

• 1. The difference between the contracting officer’s determination of $84,769 overbilling of subcontract labor and the $75,588.16 identified by respondent in its statement of undisputed facts in its motion is $9180.84. That difference is not explained in the record.

CBCA 1695 3

The Government will pay the Contractor as follows upon the submission of invoices or vouchers approved by the Contracting Officer:

(a) Hourly rate

(1) The amounts shall be computed by multiplying the appropriate hourly rates prescribed in the Schedule by the number of direct labor hours performed. The rates shall include wages, indirect costs, general and administrative expense, and profit. Fractional parts of an hour shall be payable on a prorated basis. Vouchers may be submitted once each month (or at more frequent intervals, if approved by the Contracting Officer), to the Contracting Officer or designee. The Contractor shall substantiate vouchers by evidence of actual payment and by individual daily job time cards, or other substantiation approved by the Contracting Officer. Promptly after receipt of each substantiated voucher, the Government shall, except as otherwise provided in this contract, and subject to the terms of (e) below, pay the voucher as approved by the Contracting Officer.

(2) Unless otherwise prescribed in the Schedule, the Contracting Officer shall withhold 5 percent of the amounts due under this paragraph (a), but the total amount withheld shall not exceed $50,000. Reimbursable costs in connection with subcontracts shall be limited to the amounts paid to the subcontractor for items and services purchased directly for the contract only when cash, checks, or other form of payment has been made for such purchased items or services; however, this requirement shall not apply to a Contractor that is a small business concern.

(3) Unless the Schedule prescribes otherwise, the hourly rates in the Schedule shall not be varied by virtue of the Contractor having performed work on an overtime basis. If no overtime rates are provided in the Schedule and overtime work is approved in advance by the Contracting Officer, overtime rates shall be negotiated. Failure to agree upon these overtime rates shall be treated as a dispute under the Disputes clause of this contract. If the Schedule provides rates for overtime, the premium portion of those rates will be reimbursable only to the extent the overtime is approved by the Contracting Officer.

Related Pages

FAR 52.232-7 - Payments under Time-and-Materials and Labor-Hour Contracts