Contract analysis

I. Purpose and Summary The purpose of this memorandum is to summarize information received from Ashford & Reeves LLP — specifically, from Harold Reeves, Senior Partner, and Natalie Cheng, Associate — regarding the current status of the Defense Contract Management Agency ("DCMA") field audit being conducted under Prime Contract No. FA8620-19-C-0337, as that audit pertains to the cost overruns identified in the August

II. Background A. The Underlying Dispute On August 1, 2022, DCMA issued a Contracting Officer's Preliminary Determination ("COPD") identifying aggregate cost overruns of $14,726,583 on the Advanced Tactical Airframe Program ("ATAP"), a major defense acquisition program managed under Prime Contract No. FA8620-19-C-0337 between HDDS, as the prime contractor, and the United States Air Force. The COPD attributed $12,817,

III. Current Status of the DCMA Field Audit A. Information Received from Ashford & Reeves On September 12, 2023, Natalie Cheng of Ashford & Reeves provided a verbal update to me by telephone regarding the current status of the DCMA administrative review under Prime Contract No. FA8620-19-C-0337. The verbal update was followed the same day by an email confirmation summarizing the key points discussed. Ms. Cheng's upda

IV. Implications for the DJ Action A. Stay Remains Appropriate The ongoing nature of the DCMA field audit confirms that the administrative proceeding is far from concluding. The audit team is still in the process of gathering and reviewing the underlying factual data, and multiple procedural steps — including finalization of the cost analysis, internal legal review at DCMA headquarters, and the issuance of a COFD — r

V. Insurance and Financial Reporting Considerations There has been no change in the insurance coverage posture since the last comprehensive update circulated to the team. Meridian Surety & Insurance Group has not issued a definitive coverage determination since its November 1, 2022 reservation-of-rights letter. That letter reserved Meridian's rights with respect to the potential applicability of the contractual-liabi

VI. Recommended Next Steps Based on the current status of the DCMA field audit and the DJ action, the following next steps are recommended:

1. Continue monitoring the DCMA field audit. Ashford & Reeves LLP should continue to serve as the primary monitoring channel for developments in the administrative proceeding, consistent with the established coordination protocol. I recommend that we request Natalie Cheng provide updates to us on at least a monthly basis going forward, even if there are no material developments, to ensure that we maintain a current u

2. Prepare the second joint status report. The second joint status report is due for filing on or about November 12, 2023. Patrick Gallagher should take the lead in coordinating with Megan Forsythe at Voss, Trager & Kendall LLP to draft and finalize the joint report. I recommend initiating that coordination no later than October 15, 2023, to allow adequate time for review and approval by both sides.

3. No litigation action required at this time. There is no action required on the DJ action at this time. The stay remains in effect, no motions or filings are pending or contemplated, and no deadlines are approaching other than the joint status report. WAL should maintain the litigation hold and document preservation protocols that were put in place at the inception of the dispute, and Ashford & Reeves should contin

4. Follow up with Meridian Surety & Insurance Group. If no substantive response to the March 10, 2023 follow-up letter is received from Meridian by year-end 2023, I recommend that the team consider a more formal demand for a coverage determination, directed to Rachel Underwood at Meridian or, if necessary, to Meridian's coverage counsel. The prolonged silence from the carrier is not acceptable, and WAL is entitled to

5. Circulate this memorandum to WAL's General Counsel. Subject to privilege considerations, this memorandum should be circulated to Gregory Poole, General Counsel at Whitmore Aerospace LLC, for his information. Priya or Douglas should confirm that such circulation is appropriate and that WAL's internal distribution will be limited so as not to waive any applicable privilege.

VII. Fees and Budget Note Total fees incurred by Calderwood & Harkness through the current billing period remain well within the dormancy-period monitoring estimate established in the revised litigation budget. The reduced activity level during the pendency of the stay is consistent with the projections provided by Douglas Carmichael in the revised litigation budget memorandum dated April 15, 2023, which contemplated

VIII. Conclusion In summary, the DCMA field audit under Prime Contract No. FA8620-19-C-0337 remains in progress. No Contracting Officer's Final Decision has been issued, and the administrative review shows no signs of concluding in the near term. The stay of the declaratory judgment action entered by Judge Brannigan on March 17, 2023, is functioning as intended, and there is no basis to seek to lift or modify the sta