Contract analysis

I. BACKGROUND AND PROCEDURAL HISTORY

1. On November 28, 2022, WAL commenced this action by filing a Verified Complaint for Declaratory Judgment (Dkt. No. 1). The Complaint seeks a declaration that Section 11.4 of the Teaming Agreement dated June 12, 2019, between WAL and HDDS (the "Teaming Agreement") does not obligate WAL to indemnify HDDS for $14,726,583 in cost overruns identified in the Contracting Officer's Preliminary Determination ("COPD") issued

2. On January 13, 2023, HDDS filed its Answer and Counterclaim (Dkt. No. 12). In its Counterclaim, HDDS asserts a claim for contractual indemnification in the amount of $14,726,583, together with attorneys' fees and costs, under Section 11.6 of the Teaming Agreement. HDDS alleges that Section 11.4 of the Teaming Agreement unambiguously requires WAL, as the responsible subcontractor for Work Package 4 (titanium struct

3. On February 3, 2023, WAL filed its Reply to HDDS's Counterclaim (Dkt. No. 17), denying that the Teaming Agreement imposes an indemnity obligation on WAL under the circumstances presented and raising various affirmative defenses.

4. On February 10, 2023, WAL filed a Motion to Stay Proceedings Pending Conclusion of the DCMA Administrative Review (Dkt. No. 19). HDDS did not oppose the motion, and the Parties thereafter filed a Joint Stipulation on February 24, 2023 (Dkt. No. 22), confirming their mutual consent to a stay of this action.

5. On March 17, 2023, the Court entered an Order granting the stay (Dkt. No. 34) (the "Stay Order"). In the Stay Order, the Court found that: (a) the DCMA administrative proceeding would likely resolve or substantially narrow the factual predicate for the indemnity dispute between the Parties, particularly with respect to the allocation and characterization of cost overruns under the Prime Contract; (b) the primary-j

II. STATUS OF THE DCMA ADMINISTRATIVE REVIEW

6. The DCMA administrative review of cost overruns arising under Prime Contract No. FA8620-19-C-0337 remains pending and has not yet concluded. As of the date of this Third Joint Status Report, the Administrative Contracting Officer ("ACO") has not issued a Contracting Officer's Final Decision ("COFD").

7. As previously reported, HDDS submitted a formal written response to the COPD and a request for issuance of a COFD with the DCMA on October 15, 2022. That request remains under active review by ACO Lt. Col. Sandra M. Vickers, USAF, assigned to the DCMA Northern Virginia office. The Parties understand that the DCMA review process involves a comprehensive cost analysis and field audit of the $14,726,583 in total iden

8. As of the date of this report, the DCMA field audit remains ongoing. The Parties have been informed that the audit involves a detailed review of incurred costs, labor hour allocations, material procurement records, and subcontractor performance data. Neither Party has received any formal or informal indication from the DCMA or from ACO Lt. Col. Vickers as to a specific timeline or anticipated date for issuance of

9. The Parties note that, since the filing of the Second Joint Status Report on November 12, 2023, there have been no material developments in the DCMA administrative proceeding. The Parties have continued to cooperate with the DCMA review process as required and have responded to all information requests issued by the ACO's office in connection with the ongoing field audit.

III. REQUEST TO CONTINUE THE STAY

10. The Parties jointly represent to the Court that the basis for the stay — namely, the pendency of the DCMA administrative review and the anticipated issuance of a COFD by the ACO — continues to exist. The administrative proceeding has not concluded, and no COFD has been issued.

11. The Parties continue to believe, consistent with the Court's findings in the Stay Order, that the DCMA administrative proceeding remains the most efficient and appropriate vehicle for resolving or substantially narrowing the factual predicate underlying the Parties' indemnity dispute in this action. The COFD, once issued, is expected to provide a definitive determination regarding the amount, allocation, and char

12. Accordingly, both Parties respectfully request that the Court maintain the stay of this action in effect pending the conclusion of the DCMA administrative review and the issuance of a COFD by the Administrative Contracting Officer. The Parties submit that continuing the stay will promote judicial economy, avoid the risk of inconsistent determinations, and conserve the resources of both the Court and the Parties.

13. Pursuant to the Court's Stay Order, the Parties will file their next joint status report within one hundred and twenty (120) days of the date of this report, on or before approximately July 9, 2024, or sooner if there is a material development in the DCMA administrative proceeding warranting the Court's attention.

IV. CONCLUSION For the foregoing reasons, the Parties respectfully submit this Third Joint Status Report and request that the Court maintain the stay of this action in effect. The Parties will continue to monitor the DCMA administrative review and will promptly notify the Court of any material developments, including the issuance of a COFD or any other significant change in the status of the administrative proceeding