Close X
Attorney Spotlight

What colorful method does Claire Miley use to keep up with the latest healthcare regulations as they relate to proposed transactions? Find out more>

Search

Close X

Experience

Search our Experience

Experience Spotlight

On December 1, 2016, Parker Hannifin Corporation and CLARCOR Inc. announced that the companies have entered into a definitive agreement under which Parker will acquire CLARCOR for approximately $4.3 billion in cash, including the assumption of net debt. The transaction has been unanimously approved by the board of directors of each company. Upon closing of the transaction, expected to be completed by or during the first quarter of Parker’s fiscal year 2018, CLARCOR will be combined with Parker’s Filtration Group to form a leading and diverse global filtration business. Bass, Berry & Sims has served CLARCOR as primary corporate and securities counsel for 10 years and served as lead counsel on this transaction. Read more here.

CLARCOR
Close X

Thought Leadership

Enter your search terms in the relevant box(es) below to search for specific Thought Leadership.
To see a recent listing of Thought Leadership, click the blue Search button below.

Thought Leadership Spotlight

Securities Law Exchange BlogSecurities Law Exchange blog offers insight on the latest legal and regulatory developments affecting publicly traded companies. It focuses on a wide variety of topics including regulation and reporting updates, public company advisory topics, IPO readiness and exchange updates including IPO announcements, M&A trends and deal news.

Read More >

Sponsored Claim for Subcontractor Severance Pay Granted under Fixed-Price Service Contract

Publications

May 19, 2015

The Armed Services Board of Contract Appeals (ASBCA) recently granted a claim sponsored by the prime contractor for its subcontractor's employee severance costs under a fixed-price contract. Appeal of Government Contracting Resources, Inc., ASBCA No. 59162 (March 12, 2015).

Government Contracting Resources, Inc. (GCR), sought additional compensation for severance costs it incurred, along with its subcontractor, upon expiration of its service contract with NASA for the distribution of mail at the Kennedy Space Center. A collective bargaining agreement (CBA) between GCR subcontractor Creative Management Technology Inc. (CMT) and the International Association of Machinists and Aerospace Workers (IAMAW) granted severance pay to CMT bargaining unit employees who were not rehired by a successor company at the end of the service contract. The provisions of the CBA had been incorporated, through a modification, into GCR's service contract with NASA.

GCR learned that upon expiration of the service contract, NASA intended to award the follow-on contract to a program that employed blind and disabled workers, leaving 13 union employees entitled to severance pay under the terms of the CBA. After severance payments were made to these employees, GCR sought an equitable adjustment for these costs, and that request was denied.

On appeal to the ASBCA, GCR sought compensation under FAR 52.222-43, the Fair Labor Standards Act and Service Contract Act Price Adjustment Clause. NASA agreed that GCR was bound by the CBA but argued that because the service contract was fixed-price, the severance payments had been accounted for in GCR's initial price proposal.

The ASBCA granted GCR's appeal and rejected NASA's position. The ASBCA held that NASA's reliance on the fixed-price nature of the service contract was incorrect, noting that the "focus is on whether the contractor has experienced an increase in its costs providing the benefits required by the applicable wage determination." The ASBCA also found that GCR could not have predicted severance costs in its initial price proposal because at the time the CBA was incorporated into the contract, GCR could not know whether severance costs would be owed since it could not have known whether the service contract would be reprocured, awarded to another contractor or performed by other employees.

Ultimately, the ASBCA found that the severance costs were compensable costs, not included in the initial fixed-price due to their uncertainty, and therefore GCR was entitled to additional compensation under the price adjustment clause. This decision is an important victory for service contractor's seeking reimbursement for severance costs which could not be known or accurately reflected in initial price proposals under fixed-price contracts. However, please remember that the decision does not relieve bidders of their obligation to assess potential future severance obligations when pricing a contract.


Related Professionals

Related Services

Notice

Visiting, or interacting with, this website does not constitute an attorney-client relationship. Although we are always interested in hearing from visitors to our website, we cannot accept representation on a new matter from either existing clients or new clients until we know that we do not have a conflict of interest that would prevent us from doing so. Therefore, please do not send us any information about any new matter that may involve a potential legal representation until we have confirmed that a conflict of interest does not exist and we have expressly agreed in writing to the representation. Until there is such an agreement, we will not be deemed to have given you any advice, any information you send may not be deemed privileged and confidential, and we may be able to represent adverse parties.