Case Studies: Government Contracts

BAE Systems Successfully Completes the Future Combat Systems Termination for Convenience

Summary:

BAE Systems was a major subcontractor on the U.S. Army’s Future Combat Systems (“FCS”) program, which began in 2003 and was terminated for convenience in 2009.  BAE Systems had two subcontracts with the prime contractor, and nearly 200 subcontracts and purchase orders with over 75 suppliers that were also terminated as a result of the termination for convenience.

Kenrich was retained by BAE Systems to assist in reviewing, auditing, and negotiating settlements with terminated subcontractors.  Kenrich also authored two expert reports rebutting the Defense Contract Audit Agency (“DCAA”) audit of BAE Systems’ termination settlement proposal (“TSP”).  Kenrich’s work led to the successful closeout of over 100 TSPs.  Kenrich’s work also led to a fair settlement of BAE Systems’ TSP, with the prime contractor and the Government accepting the entirety of Kenrich’s positions related to the DCAA audit.

Background:

The FCS program was initiated in 2003 and was intended to modernize the U.S. Army’s tank fleet.  BAE Systems was awarded subcontracts to replace the Bradley Fighting Vehicle with eight different vehicle variants, all of which were intended to be built around the same chassis.  As the design and development phase progressed, the program began to experience cost overruns and schedule impacts.  In 2009, the Army terminated the program for convenience, citing its desire to shift toward counterterrorism efforts and away from preparations for conventional warfare.  At the time of termination, BAE Systems had incurred over $1.5 billion on its two subcontracts with the prime contractor.

Solution

With significant experience in terminations for convenience, Kenrich was retained by BAE Systems personnel to assist in the review and settlement of its lower-tier subcontractor TSPs.  Kenrich personnel reviewed over 100 lower-tier subcontractor TSPs with values ranging from hundreds of dollars to over $100 million.  Kenrich developed cost analyses, negotiated with the subcontractors, and presented recommendations to the prime contractor and the Government’s Termination Contracting Officer (“TCO”).  BAE Systems also retained Kenrich to perform a rebuttal of the DCAA audit of BAE Systems’ TSP.  Kenrich reviewed DCAA’s audit, gathered supporting documentation for the costs on a transaction-level basis for over 2,000 transactions, and authored two expert reports summarizing our opinions on the DCAA audit.

Result:

BAE Systems successfully settled all of its lower-tier subcontractors.  The prime contractor and the TCO also concurred with 100% of Kenrich’s positions on the DCAA audit of BAE Systems’ TSP, which led to the negotiation of a fair and reasonable settlement of the TSP for BAE Systems.  Kenrich’s detailed expert analysis were critical to BAE Systems’ successful negotiations with the prime contractor and the TCO.