Aydin Corporation (West) v. Sheila E. Widnall, Secretary of the Air Force

MAYER, Circuit Judge,

concurring in part and dissenting in part.

I would affirm the board’s decision in its entirety. Therefore, I dissent from Parts I. and II.A. of the opinion.

In Part I, the court concludes that the contracting officer constructively changed the MUTES contract by requiring Aydin to segregate its costs by delivery order. It holds that the contract did not incorporate FAR 32.503-5, and focuses on the “Progress Payments” clause of the contract, which provides that “each progress payment shall be computed as ... eighty percent (80%) of the Contractor’s cumulative total costs under this contract.”

The contract contains FAR clause 52.232-13 (April 1984), which emphasizes “[t]he need for customary progress payments conforming to the regulations in subpart 32.5.” Under subpart 32.5, “[generally, progress payments made under multiple-order contracts should be administered under each individual order as if the order constituted a separate contract.” 48 C.F.R. § 32.503 — 5(c)(1). Clause 52.232-13 also states that the “Progress Payments” clause “shall be inoperative during any time the contractor’s accounting system and controls are determined by the Government to be inadequate for segregation and accumulation of contract costs.” This was a requirements contract, which did not in itself authorize Aydin to manufacture MUTES or obligate any governmental funds. The board credited the contracting officer’s testimony, based on 25 years of experience, that he had “never seen” such a contract “where the contractor was not required or was not seg*1582regating costs by Delivery Order.” The board concluded that “these considerations required each delivery order be administered as though it was a separate contract.” I would not disturb that conclusion.

In Part II.A., the court remands for an explanation of the difference between the SOLAR II sales commission costs and other sales commission costs, without deciding whether the board properly held that Aydin was required to exclude these foreign sales commissions from its progress payment requests. I agree with the analysis of whether the contract is covered by the CAS, and the conclusion that it is. However, I disagree with the court’s premise that the SOLAR II sales commission costs must differ in purpose or circumstance from other sales commission costs, rather than just in size. Relative size of the commissions is relevant when considering whether it is proper to attribute these sales commissions to the contract. See FMC Corp. v. United States, 853 F.2d 882, 886 (Fed.Cir.1988); see also Lockheed Aircraft Corp. v. United States, 375 F.2d 786, 794, 179 Ct.Cl. 545 (1967) (“[T]he burden will be on the contractor to show the benefit and a reasonable allocation among different government contracts and between government and commercial work generally.”). Here, the SOLAR II commissions represented more than 91% of the total sales commissions for 1989, but only 19% of Aydin’s G & A base. Thus, the board properly concluded that Ay-din had not proved that it was equitable to allocate these commissions to the contract.