While the Department of Energy and the occupational medical services provider for the Hanford Site in Washington state are at odds over how much data should be shared during an audit, DOE’s refusal to mediate the dispute is no sign of bad faith, a federal contracting board ruled.
A DOE contracting officer told HPM Corp. to hand over any records needed to calculate indirect cost rates, which can include expenses like heat, light and power that can be spread over several line items. But the contractor claimed DOE was entitled only to materials related to environmental, health and safety records “to protect against ionizing radiation and radioactive materials.” HPMC said
HPMC wanted to settle the matter with an alternative dispute resolution, designed as a cost-effective option to legal or administrative hearings. That avenue can be used if both parties agree, the Civilian Board of Contract Appeals wrote in a July 12 ruling unsealed last week. But DOE refused an alternative dispute resolution over the cost audit in April 2022. The board subsequently dismissed HPMC’s October 2022 appeal of the DOE contract officer’s refusal.
In March 2022, HPMC paid about $3 million in fines and restitution to the federal government for making false statements to receive a COVID-19 pandemic-related loan from the Small Business Administration. This April, HPM Corp. was bought by Workcare.
The board also said DOE met with HPMC over the company’s contention that it is entitled to withhold certain firm-fixed price information from the government during an audit. But while DOE would not agree to mediation, this does not show bad faith, the board ruled.
“HPMC has not alleged that DOE has engaged in any type of chicanery in negotiations,” the board held. “HPMC merely alleges that DOE does not agree with and has not capitulated to HPMC’s position on DOE’s audit rights.”
The Civilian Board of Contract Appeals said HPMC has not shown the board should “step into the shoes of the auditors and micromanage what documents they may, or may not, need to support their review.”
HPMC argued DOE lacks authority to look at “proprietary” information from the firm-fixed price portion of its contract during audits. DOE said the information is needed to calculate HPMC’s indirect costs and is threatening to dock the contractor for any “unsupported” costs for the period in question, starting in fiscal 2019.
“HPMC stated that it would not provide the requested information directly to DOE but would allow [the Defense Contract Audit Agency] to send any documents to DOE that DOE had a “need to know.” HPMC took a similar position when New York-based consulting firm CohnReznick became the auditor for fiscal 2020.
But the appeals board said this is a long-settled issue. “The Court of Claims made clear more than forty years ago that a contractor cannot complain during contract performance about the government’s reliance upon audit access rights, including the right to access what the contractor views as proprietary information.”
DOE is currently procuring a follow on to HPMC’s $152-million contract, a deal that started in December 2018.
