Contract analysis

I. BACKGROUND AND QUALIFICATIONS OF DECLARANT

1. My name is Catherine Soo-Hyun Park. I am currently employed as Vice President, Government Contracts & Compliance of Whitmore Aerospace LLC ("WAL"), a Virginia limited liability company with its principal place of business and headquarters at 4200 Commerce Park Drive, Suite 600, Chantilly, Virginia 20151. WAL is engaged in the design, engineering, and fabrication of advanced structural components for defense and ae

2. I have held my current position at WAL since January 2017 — a period of approximately six years as of the date of this declaration. Prior to assuming this role, I served as WAL's Director of Contract Administration from 2013 to 2016, during which time I was responsible for the day-to-day administration of WAL's government subcontract portfolio. In total, I have been employed at WAL for approximately ten years.

3. In my capacity as Vice President, Government Contracts & Compliance, I have direct oversight and management responsibility for all government contract administration, compliance, and regulatory matters at WAL. My responsibilities include, but are not limited to, the administration and management of WAL's subcontract agreements under Department of Defense ("DoD") programs; interfacing with the Defense Contract Mana

4. Prior to joining WAL, I held positions of increasing responsibility in government contract administration in the defense industry. From 2007 to 2013, I served as a Senior Contracts Manager at Triton Defense Solutions, Inc., where I managed a portfolio of over $200 million in cost-type and fixed-price DoD contracts. I hold a Bachelor of Science degree in Accounting from the University of Virginia (2003) and a Juris

5. Over the course of my career, I have developed extensive experience in DoD contract administration, with particular expertise in cost-type contracts (including cost-plus-incentive-fee, cost-plus-fixed-fee, and cost-plus-award-fee arrangements), Contract Disputes Act proceedings under 41 U.S.C. §§ 7101–7109, DCMA audit processes, incurred-cost audits conducted by the Defense Contract Audit Agency ("DCAA"), and proc

6. WAL holds an active facility security clearance at the SECRET level, which is essential to its performance of classified and controlled work on DoD programs. This clearance has been maintained continuously since 2010 and is currently administered through the Defense Counterintelligence and Security Agency ("DCSA").

7. Since 2009, WAL has held subcontractor positions on over thirty (30) DoD programs across the United States Air Force, United States Navy, and defense agencies. DCMA contract administration for WAL is assigned to and conducted by DCMA Northern Virginia, which oversees WAL's contract administration, cost accounting, and compliance at WAL's Chantilly, Virginia headquarters and its manufacturing facility in Manassas,

II. OVERVIEW OF THE UNDERLYING GOVERNMENT CONTRACT

8. The dispute in this action arises out of, and is inextricably linked to, a U.S. government prime contract designated as Prime Contract No. FA8620-19-C-0337 (hereinafter, the "Prime Contract"). The following paragraphs describe the material terms and structure of the Prime Contract, as I understand them based on my review of the contract documentation and my involvement in WAL's performance under the program.

9. The Prime Contract was awarded by the United States Air Force, acting through the Air Force Life Cycle Management Center ("AFLCMC"), located at Wright-Patterson Air Force Base, Ohio, to Hargrove-Dalton Defense Systems, Inc. ("HDDS"), a Delaware corporation headquartered at 1100 Garrison Boulevard, Suite 2200, Bethesda, Maryland 20817. The Program Executive Officer for the program is Colonel Brian T. Matsuda, Unite

10. The Prime Contract funds and governs the Advanced Tactical Airframe Program, commonly referred to by its acronym "ATAP." The ATAP program encompasses the design, development, and initial low-rate production of advanced titanium-composite hybrid airframe structures intended for integration into next-generation tactical aircraft platforms. The ATAP program is a significant DoD acquisition effort, reflecting the Air

11. The Prime Contract is structured as a cost-plus-incentive-fee ("CPIF") contract. The material financial parameters of the Prime Contract, as set forth in the contract's Section B pricing schedule, are as follows: (a) Target Cost: $412,000,000; (b) Target Fee: 8% of target cost, equaling $32,960,000; (c) Ceiling Price: $470,000,000; (d) Share Ratios: For cost overruns in excess of the target cost, the government b

12. The CPIF contract structure is significant in the context of this dispute because it establishes a cost-sharing mechanism under which both the government and the contractor have a financial stake in the management and control of incurred costs. Under a CPIF contract, cost overruns reduce the contractor's fee, and in extreme cases, where costs approach or exceed the ceiling price, the contractor bears an increasin

13. The period of performance under the Prime Contract commenced on September 1, 2019, and extends through August 31, 2024, constituting a five-year base period. The Prime Contract also includes two one-year option periods, which, if exercised, would extend the period of performance through August 31, 2026. To my knowledge, as of the date of this declaration, neither option period has been exercised.

III. THE TEAMING AGREEMENT AND WAL'S ROLE

14. WAL's involvement in the ATAP program is governed by a Teaming Agreement executed between WAL and HDDS on June 12, 2019 (the "Teaming Agreement"). The Teaming Agreement was executed prior to the award of the Prime Contract and contemplated that HDDS and WAL would collaborate on the ATAP program, with HDDS serving as the Team Lead and prime contractor, and WAL serving as a Team Member and subcontractor.

15. Under the Teaming Agreement, HDDS is designated as the "Team Lead" and holds the position of prime contractor under the Prime Contract with the U.S. Air Force. WAL is designated as a "Team Member" and performs its work under the ATAP program as a subcontractor to HDDS. The Teaming Agreement governs the respective rights, obligations, and liabilities of HDDS and WAL with respect to their collaboration on the ATAP

16. WAL's scope of work under the Teaming Agreement encompasses the fabrication and delivery of titanium structural assemblies for the ATAP airframe. Specifically, WAL is responsible for the production of wing-box substructure components, center fuselage longerons, and bulkhead fittings. These items are collectively designated as Work Package 4 ("WP-4") under the ATAP program's work breakdown structure. WP-4 represen

17. WAL's allocated share of the Prime Contract target cost is eighteen percent (18%), equaling $74,160,000 (calculated as $412,000,000 × 0.18). This figure represents WAL's proportionate share of the total estimated cost of the ATAP program and serves as the baseline against which WAL's actual incurred costs are measured for purposes of cost-sharing and fee determination under the CPIF structure.

18. WAL performs its work under WP-4 using WAL's own incurred-cost accounting systems, which have been reviewed and approved by DCAA and are subject to ongoing DCMA cognizance at DCMA Northern Virginia. WAL's cost accounting practices are subject to the applicable Cost Accounting Standards and the cost principles set forth in FAR Part 31.

19. The Administrative Contracting Officer ("ACO") assigned to the Prime Contract is Lieutenant Colonel Sandra M. Vickers, United States Air Force, stationed at DCMA Northern Virginia. Lt. Col. Vickers is the government official responsible for administering the Prime Contract on behalf of the government, including the issuance of determinations, audit requests, and decisions relating to contract costs and performanc

IV. THE DCMA CONTRACTING OFFICER'S PRELIMINARY DETERMINATION (COPD)

20. On August 1, 2022, ACO Lt. Col. Sandra M. Vickers issued a Contracting Officer's Preliminary Determination ("COPD") under Prime Contract No. FA8620-19-C-0337. The COPD is an administrative determination that reflects the ACO's preliminary assessment of cost overruns incurred on the ATAP program and the allocation of those overruns among the program's work packages. The COPD was issued to HDDS as the prime contrac

21. I am personally familiar with the COPD, having received it in the course of my duties as Vice President, Government Contracts & Compliance of WAL. I coordinated WAL's initial review of the COPD, working with WAL's internal cost accounting and engineering teams, as well as WAL's outside regulatory counsel, to analyze the COPD's findings and assess their implications for WAL's position under the Teaming Agreement a

22. The COPD identified a total of $14,726,583 in cost overruns on the ATAP program as of the end of the second program year (through approximately August 2021). These overruns represent the excess of actual incurred costs over the proportionate share of target costs for the affected work packages.

23. Of the total $14,726,583 in identified overruns, the COPD attributed $12,817,441 — approximately 87.03% of the total — to Work Package 4, the titanium structural assembly work package performed by WAL. The remaining $1,909,142 — approximately 12.97% of the total — was attributed to other ATAP work packages that are not performed by WAL and for which WAL bears no work-package responsibility.

24. The COPD narrative identified the following root causes for the WP-4 overruns, with the following approximate cost allocations: (a) Titanium raw-material cost escalation: approximately $4,200,000. The COPD noted that the cost of titanium bar stock and plate used in WP-4 fabrication increased significantly during the first two program years, attributable in part to global supply chain disruptions; (b) Rework due t

25. It is important to note — and I wish to emphasize for the Court — that the COPD is a preliminary determination. It does not constitute a final agency decision under the Contract Disputes Act or otherwise. The COPD reflects the ACO's initial assessment of the cost overrun situation on the ATAP program and is expressly subject to further review, analysis, and revision before the ACO issues a Contracting Officer's F

V. HDDS'S FORMAL RESPONSE AND COFD REQUEST

26. On October 15, 2022, HDDS filed a formal written response to the COPD with ACO Lt. Col. Vickers. In connection with that response, HDDS submitted a request for the issuance of a Contracting Officer's Final Decision pursuant to the Contract Disputes Act, 41 U.S.C. §§ 7101–7109. I am familiar with the substance of HDDS's response and COFD request, having reviewed copies of those submissions that were provided to WA

27. In its response, HDDS disputes the allocation of cost overruns set forth in the COPD. Specifically, HDDS contends that the entirety of the WP-4 cost overruns — the $12,817,441 attributed to WP-4 by the COPD — should be attributed to WAL and that WAL should be held solely responsible for those overruns. HDDS's response does not, to my knowledge, contest the COPD's attribution of the remaining $1,909,142 in overrun

28. The filing of HDDS's formal response and COFD request on October 15, 2022, initiated a formal administrative review process within DCMA. Under the Contract Disputes Act, once a contractor submits a claim to the contracting officer, the contracting officer is required to issue a decision on that claim. For claims exceeding $100,000, the Act generally contemplates that the contracting officer will issue a decision

29. As of the date of this declaration, February 10, 2023, the ACO has not yet issued a Contracting Officer's Final Decision under Prime Contract No. FA8620-19-C-0337. The administrative review process remains ongoing.

VI. THE DCMA ADMINISTRATIVE REVIEW PROCESS

30. Because the DCMA administrative review process is central to WAL's motion for a stay, I believe it is important for the Court to understand the nature and scope of that process. The following paragraphs describe the DCMA administrative review process as it applies to cost-overrun determinations under CPIF contracts, based on my professional experience and knowledge of DCMA procedures.

31. The DCMA administrative review of cost overruns under a CPIF contract typically proceeds through several distinct phases, as follows: (a) Field Audit Phase. DCMA, working in coordination with the Defense Contract Audit Agency ("DCAA"), conducts a detailed field audit of the contractor's (and, where applicable, the subcontractor's) incurred costs. During the field audit, DCMA and DCAA examiners review the contract

32. As of the date of this declaration, February 10, 2023, the DCMA field audit under Prime Contract No. FA8620-19-C-0337 is ongoing. DCMA auditors have conducted site visits at both HDDS's facilities in Bethesda, Maryland, and WAL's manufacturing facility in Manassas, Virginia, and have requested and received substantial volumes of cost records and supporting documentation from both HDDS and WAL. The field audit is

33. The DCMA administrative review process is expected to address core factual and accounting questions that are directly relevant to the indemnity dispute in this action. Specifically, the DCMA review will address, at a minimum, the following issues: (a) The precise quantum and proper allocation of cost overruns between WP-4 and other work packages under the ATAP program; (b) Whether the identified costs are allowab

34. These are precisely the factual and accounting issues that lie at the heart of the indemnity dispute between HDDS and WAL in this action. The DCMA, with its specialized expertise in DoD cost accounting, contract administration, and the application of FAR Part 31, is uniquely positioned to adjudicate these issues through its established administrative process.

VII. ANTICIPATED TIMELINE FOR THE COFD

35. Based on my experience with DCMA administrative proceedings over the course of my career, and based on information I have received from WAL's government contracts regulatory counsel, the law firm of Ashford & Reeves LLP (specifically, Harold Reeves, Senior Partner, who has over thirty years of experience in government contract disputes and DCMA proceedings), the Contracting Officer's Final Decision under Prime Co

36. Applying this estimate, the COFD could potentially issue in the second half of 2023 at the earliest, but more realistically may not issue until sometime in 2024. This timeline is consistent with my experience in prior DCMA proceedings of comparable scope and complexity.

37. Several factors contribute to this anticipated timeline. First, the ATAP program is a large, complex program with a target cost of $412 million, multiple work packages, and a CPIF contract structure that requires detailed cost-sharing calculations. Second, the multi-work-package cost structure of the ATAP program complicates the allocation analysis, as the ACO must evaluate and apportion cost overruns among the v

38. I also note that DCMA's current workload and staffing constraints may further extend the review timeline. It is well known within the government contracts community that DCMA, like many government agencies, has faced staffing challenges in recent years, and that the volume of pending administrative actions and audits can result in processing delays beyond the statutory and regulatory targets.

VIII. THE RELEVANCE OF THE COFD TO THE INDEMNITY DISPUTE

39. The COFD, once issued, will have direct and material relevance to the core factual issues underlying the indemnity dispute between HDDS and WAL in this action. I address each principal area of overlap in turn.

40. First, the COFD will determine the final allocation of cost overruns between Work Package 4 and other work packages under the ATAP program. This allocation is of central importance to the indemnity dispute because HDDS's indemnification claim against WAL rests on the premise that WAL is responsible for costs incurred under WP-4. If the COFD reallocates any portion of the costs currently attributed to WP-4 by the

41. Second, the COFD will address whether the costs identified in the COPD are allowable under FAR Part 31 or are subject to disallowance. This determination is a threshold factual predicate for HDDS's indemnification claim under Section 11.4(b) of the Teaming Agreement. Section 11.4(b) provides, in relevant part, that: "Team Member shall indemnify and hold harmless Team Lead against any claim by the U.S. Government

42. As the contractual text makes clear, the indemnification obligation under Section 11.4(b) is triggered only by a "claim by the U.S. Government" that costs are "unallowable, unreasonable, or otherwise subject to disallowance." The COFD will constitute the definitive government determination on the allowability and reasonableness of the incurred costs. Until the COFD issues, the existence and scope of any governmen

43. Third, the COFD will evaluate the root causes of the cost overruns, including the specific question of whether the WP-4 overruns were caused by WAL's acts or omissions, by HDDS's specifications or conduct, by government-furnished equipment delays, or by external market forces. This causation analysis is directly relevant to the causation requirement embedded in Section 11.4(b) — namely, the requirement that the g

44. In light of the foregoing, it is my professional opinion that proceeding with litigation in this Court while the DCMA administrative review remains ongoing would be premature and would risk several adverse consequences: (a) Duplicative fact-finding. The DCMA review and this litigation would simultaneously address many of the same factual questions — including the quantum and allocation of cost overruns, the allow

IX. WAL'S POSITION ON THE MERITS (BRIEF SUMMARY FOR CONTEXT)

45. Although WAL's motion for a stay does not require the Court to adjudicate the merits of the indemnity dispute, I believe a brief summary of WAL's position on the merits provides useful context for the Court's consideration of the stay motion. The following summary is offered for that limited purpose.

46. WAL contests that it caused the cost overruns identified in the COPD. WAL's position, which it intends to present in detail during the DCMA administrative review and, if necessary, in this litigation, is as follows: (a) Titanium raw-material cost escalation (approximately $4,200,000). WAL contends that the escalation in titanium raw-material costs was driven by well-documented global supply chain disruptions that

47. In addition, I note that HDDS's demand of $14,726,583 in this litigation includes $1,909,142 in cost overruns that the COPD itself attributes to work packages other than WP-4 — that is, work packages that WAL did not perform and for which WAL bears no work-package responsibility under the Teaming Agreement. WAL has no contractual or factual basis for bearing liability for cost overruns incurred on work packages t

48. These factual disputes — regarding the causes of the titanium cost escalation, the source of the machining tolerance issues, the responsibility for schedule delays, the proper treatment of government-directed engineering change costs, and the allocation of overruns among work packages — are precisely the issues that the DCMA administrative review is designed and equipped to adjudicate. The DCMA's specialized expe

49. For the reasons set forth above, the DCMA administrative review under Prime Contract No. FA8620-19-C-0337 is ongoing and will directly bear on the factual and accounting issues that underlie the indemnity dispute in this action. The DCMA review will determine the quantum and allocation of cost overruns, the allowability and reasonableness of the incurred costs, and the root causes of the overruns — all of which a

50. A stay of this action pending the conclusion of the DCMA administrative review and the issuance of the Contracting Officer's Final Decision will promote judicial economy, avoid duplicative and potentially inconsistent fact-finding, conserve the resources of the parties and the Court, and allow both the Court and the parties to benefit from the expert agency determination on the core factual questions at issue.