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Jana Inc. v. United States

Decided: June 13, 1991.

JANA, INC., PLAINTIFF-APPELLEE,
v.
THE UNITED STATES, DEFENDANT-APPELLANT



Appealed from U.S. Claims Court, Judge Turner.

Rich, Michel and Plager, Circuit Judges.

Michel

MICHEL, Circuit Judge

The United States appeals the judgment of the United States Claims Court holding that JANA, Inc. did not overcharge the government on two contracts, and dismissing the government's counterclaim for repayment. JANA, Inc. v. United States, No. 650-87 C (Cl. Ct. Aug. 23, 1990). Because the Claims Court's construction of the contracts' records retention requirements was incorrect, and because it is uncontested that JANA could not produce records supporting the disputed billings as required by the contracts, we reverse and remand, directing entry of judgment for the government on its counterclaim.

BACKGROUND

In October 1975, JANA was awarded two technical publication contracts with the United States Navy. These contracts were so-called "time and materials" contracts -- that is, the contract price was to be determined largely by multiplying the number of employee hours billed by JANA against fixed hourly rates stated in the contracts. The final contract price was to be determined after the work was completed and, if the government so elected, an audit was performed.

JANA's work on the contracts was completed in late 1980, and the Navy made its last payment in early 1981. Over two years later, in July 1983, the Defense Contract Audit Agency (DCAA) began a routine audit of the contracts, at the request of the Navy. The audit showed large discrepancies between the number of hours for which JANA had billed, and been paid by, the government, and the number of hours actually worked, according to JANA's own time records. The DCAA issued audit reports for both contracts characterizing charges of $343,622 and $220,164, for the unsubstantiated hours on each contract, as overpayments.

Based on the audit reports, the contracting officer issued a final decision in December 1986, finding that JANA had overcharged the government on the two contracts, and demanding repayment. Pursuant to the Contract Disputes Act, JANA contested the contracting officer's decision in the Claims Court. 41 U.S.C. § 609(a) (1988). The government counterclaimed for the alleged overpayments.

After denying cross-motions by the parties for summary judgment, the Claims Court tried the case and issued an oral bench ruling on August 10, 1990. The court found that the government had proven "beyond a reasonable doubt" that JANA could not produce records substantiating all the invoices it submitted to the government, but nevertheless found, in light of its construction of the contract provisions regarding JANA's duty to retain records, that the government had not proved that JANA had been overpaid. Bench Ruling, Joint Appendix (Jt. App.) at 5, 16. The court therefore entered judgment in favor of JANA. JANA, Inc. v. United States, No. 650-87 C (Cl. Ct. Aug. 23, 1990). The government appeals.

We have jurisdiction over the government's appeal pursuant to 28 U.S.C. § 1295(a)(3) (1988).

Discussion

I

The discrepancy at issue in this case concerns the various types of documents used in JANA's method of recording and billing the time its employees worked on these two government contrasts. Each JANA employee filled out "time cards," listing time worked on various jobs. The time each employee recorded for a given job -- such as one of the contracts at issue here -- was then transferred to a "labor recap sheet." The labor recap sheets for each of these contracts thus showed the time each employee spent working on just that contract during a given month. The time recorded on the labor recap sheets was then converted to a dollar value and recorded on the "job control register." Finally, the contents of the job control register were transferred to the "invoices" sent to the government for payment under each contract.

The DCAA audit of the two contracts at issue here detected that the labor recap sheets listed fewer hours than those reflected in labor costs on the job control register and billed to the government on invoices. In other words, the billings were not fully backed up by information from ...


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