1019-00005 · Whitmore Aerospace LLC · Stay Motion

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

DECLARATION OF CATHERINE SOO-HYUN PARK IN SUPPORT OF PLAINTIFF'S MOTION TO STAY PROCEEDINGS PENDING CONCLUSION OF DCMA ADMINISTRATIVE REVIEW

Filed: February 10, 2023

I, Catherine Soo-Hyun Park, hereby declare as follows:

I am over eighteen (18) years of age, competent to testify, and I make this declaration under penalty of perjury pursuant to 28 U.S.C. § 1746. The statements set forth herein are based on my personal knowledge, my review of documents and records maintained by Whitmore Aerospace LLC in the ordinary course of business, and information obtained in the course of my professional duties as Vice President, Government Contracts & Compliance of Whitmore Aerospace LLC. If called as a witness, I could and would testify competently to the matters set forth in this declaration.

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 aerospace applications, with a particular specialization in titanium and composite-hybrid airframe structures.

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 Management Agency ("DCMA") and other government contracting agencies on matters of contract performance, cost accounting, and regulatory compliance; overseeing WAL's incurred-cost submission process; managing WAL's responses to audit inquiries, Contracting Officer's Preliminary Determinations, and Contracting Officer's Final Decisions; and ensuring WAL's compliance with the Federal Acquisition Regulation ("FAR"), the Defense Federal Acquisition Regulation Supplement ("DFARS"), and applicable Cost Accounting Standards ("CAS").

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 Doctor from the George Washington University Law School (2007). I am a member in good standing of the Virginia State Bar.

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 proceedings before the Armed Services Board of Contract Appeals ("ASBCA"). I have personally managed or directly supervised WAL's involvement in more than fifteen DCMA and DCAA audit engagements and have participated in the preparation of responses to multiple Contracting Officer's Preliminary Determinations.

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, Virginia.

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, United States Air Force.

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 Force's requirement for structurally superior, weight-optimized airframe components capable of meeting the demanding performance requirements of advanced tactical aircraft.

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;

(d) Share Ratios: For cost overruns in excess of the target cost, the government bears 70% and the contractor bears 30% of such overruns. For cost underruns below the target cost, the government retains 60% of the savings and the contractor retains 40%.

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 increasingly disproportionate share of excess costs. This cost-sharing feature places a premium on the accurate identification, allocation, and adjudication of cost overruns — precisely the issues now under review by DCMA.

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 program, including provisions relating to work allocation, cost accounting, intellectual property, indemnification, and dispute resolution.

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 represents a critical element of the ATAP airframe, as the titanium structural assemblies that WAL produces form the primary load-bearing structure of the aircraft's center section and wing-root interface.

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 performance.

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 contractor, and a copy was provided to WAL through HDDS in accordance with the flow-down and notice provisions of the Teaming Agreement.

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 and the ATAP program.

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 to non-conforming machining tolerances: approximately $5,100,000. The COPD identified costs associated with the rework, re-inspection, and, in some cases, scrapping and replacement of titanium structural components that failed to meet specified machining tolerances during initial production;

(c) Schedule delays causing idle-labor charges: approximately $2,300,000. The COPD identified costs incurred as a result of production schedule delays that resulted in idle-labor charges at WAL's Manassas manufacturing facility, where fabrication personnel were retained on site but unable to perform productive work during delay periods;

(d) Engineering change proposal ("ECP") implementation costs: approximately $1,200,000. The COPD identified costs associated with the implementation of engineering changes directed by the government and flowed down through HDDS to WAL, including redesign, re-tooling, and re-qualification costs;

(e) Total WP-4 overruns: approximately $12,800,000 (with the COPD's precise figure for WP-4 being $12,817,441).

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 Final Decision ("COFD"). The COPD itself states on its face that it is "preliminary and subject to revision" and that "[t]he contractor may submit a written response within sixty (60) calendar days."

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 WAL.

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 overruns to non-WP-4 work packages. However, in this litigation, HDDS appears to seek indemnification from WAL for the full $14,726,583, including the non-WP-4 overruns, a position that WAL contests.

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 within sixty (60) days of receipt of the claim, or alternatively, within sixty days notify the contractor of the time within which a decision will be issued. 41 U.S.C. § 7103(f). In practice, however, complex cost-overrun reviews — particularly those involving CPIF contracts with multiple work packages, multi-year periods of performance, and contested issues of cost allowability and causation — routinely take substantially longer than sixty days, often requiring twelve (12) to twenty-four (24) months or more for the DCMA to complete its review and issue a COFD.

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 contractor's cost records, material procurement documentation, labor timekeeping records, equipment usage logs, subcontract and vendor invoices, and related accounting records. The field audit is designed to verify the accuracy and completeness of the contractor's reported incurred costs and to identify any costs that may be questioned or disallowed. The field audit also examines the contractor's compliance with applicable Cost Accounting Standards and the cost principles of FAR Part 31. Field audits of this type are comprehensive and time-intensive, particularly on large, multi-year programs like ATAP.

(b) Cost Analysis Phase. Following the completion of the field audit, DCMA cost analysts prepare a detailed cost analysis evaluating the allowability, allocability, and reasonableness of the incurred costs under the applicable provisions of FAR Part 31. The cost analysis addresses, among other things, whether the incurred costs are allowable under the specific cost principles of FAR Subpart 31.2, whether the costs are properly allocable to the contract or work package in question, and whether the amounts claimed are reasonable in light of the nature of the work performed, the market conditions prevailing at the time, and the contractor's established cost accounting practices. The cost analysis often involves complex accounting and economic assessments, including the evaluation of material price variance analyses, labor rate and efficiency analyses, and overhead allocation methodologies.

(c) Legal Review Phase. Upon completion of the cost analysis, the analysis and the supporting documentation are reviewed by DCMA's internal legal counsel. This review is typically conducted at DCMA headquarters and is intended to ensure that the proposed COFD is legally sufficient, factually supported, and consistent with applicable law and regulation. The legal review may result in requests for additional information or analysis, which can extend the overall timeline.

(d) COFD Issuance. Upon completion of the legal review, the ACO issues the Contracting Officer's Final Decision. The COFD is the final agency determination on the claim and sets forth the ACO's findings regarding the allowability, allocability, and reasonableness of the disputed costs, the allocation of cost overruns among work packages, and the resulting financial impact on the contractor and the government. The COFD is subject to appeal by the contractor to the Armed Services Board of Contract Appeals ("ASBCA") under 41 U.S.C. § 7104(a), or alternatively, to the United States Court of Federal Claims under 41 U.S.C. § 7104(b).

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 not yet complete, and the cost analysis and legal review phases have not yet commenced.

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 allowable, allocable, and reasonable under the cost principles of FAR Part 31 — or whether any of those costs should be disallowed in whole or in part;

(c) The root causes of the cost overruns — specifically, whether the WP-4 overruns were attributable to acts or omissions of WAL, to engineering specifications or other conduct of HDDS, to delays in the delivery of government-furnished equipment, or to external market forces such as the well-documented escalation in global titanium prices during 2020 and 2021; and

(d) Whether any of the incurred costs should be disallowed, and if so, the amounts and categories of such disallowances.

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 Contract No. FA8620-19-C-0337 is not expected to issue for at least twelve (12) to eighteen (18) months from the date of HDDS's COFD request on October 15, 2022.

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 various work packages with specificity. Third, the CPIF contract type itself adds analytical complexity, as the ACO must consider the cost-sharing implications of any overrun determination for both the government and the contractor. Fourth, the contested nature of the overrun causation — with HDDS and WAL taking diametrically opposed positions on the root causes of the WP-4 overruns — necessitates a thorough and careful factual investigation.

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 COPD to other work packages, or reduces the total quantum of WP-4 overruns, that reallocation or reduction would directly affect the scope and amount of any potential indemnification obligation.

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 that costs incurred under Team Member's Work Package are unallowable, unreasonable, or otherwise subject to disallowance, to the extent such claim is caused by Team Member's acts or omissions."

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 government "claim" within the meaning of Section 11.4(b) remains uncertain and preliminary, resting solely on the non-final COPD.

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 government's claim be "caused by Team Member's acts or omissions." The DCMA's expert evaluation of root causes will provide a factual foundation that is essential to any adjudication of the causation element of the indemnity claim.

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 allowability of incurred costs, and the root causes of the overruns — resulting in duplicative, parallel fact-finding processes that would impose unnecessary burdens on WAL, HDDS, and the Court;

(b) Inconsistent determinations. There is a meaningful risk that this Court's determination of the factual issues underlying the indemnity dispute could be inconsistent with the DCMA's subsequent determination of those same issues in the COFD, creating confusion and potentially necessitating further proceedings to reconcile the inconsistency;

(c) Wasteful expenditure of resources. The parties would be required to engage in extensive and costly discovery — including the production of voluminous cost records, depositions of cost accounting and engineering witnesses, and the retention of expert witnesses — on issues that the DCMA is in the process of evaluating through its established administrative procedures. This expenditure of party and judicial resources would be rendered largely unnecessary if the Court were to stay this action and await the COFD.

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 occurred during 2020 and 2021, including disruptions arising from the COVID-19 pandemic and geopolitical tensions affecting titanium supply chains. These disruptions constituted a force-majeure event that was entirely beyond WAL's control. WAL had no ability to prevent or mitigate the global increase in titanium prices, and WAL's procurement practices were consistent with industry standards and its established purchasing procedures.

(b) Rework costs (approximately $5,100,000). WAL contends that the rework costs identified in the COPD were attributable to engineering specifications provided by HDDS, not to deficiencies in WAL's machining processes or quality control procedures. Specifically, WAL has identified instances in which HDDS's engineering drawings and specifications contained dimensional tolerances that were inadequately defined or internally inconsistent, leading to the production of components that were subsequently determined to be non-conforming upon inspection. WAL's machining processes were performed in accordance with the specifications as provided, and WAL's quality management system was in full compliance with AS9100 Rev D throughout the relevant period.

(c) Idle-labor charges (approximately $2,300,000). WAL contends that the schedule delays that gave rise to the idle-labor charges were caused by HDDS's late delivery of government-furnished equipment ("GFE") to WAL's Manassas manufacturing facility. Under the Teaming Agreement, HDDS was responsible for coordinating the timely delivery of GFE to WAL. On multiple occasions during the first two program years, HDDS failed to deliver GFE on schedule, forcing WAL to retain fabrication personnel on site in an idle status while awaiting the equipment necessary to commence or continue production operations.

(d) Engineering change proposal ("ECP") implementation costs (approximately $1,200,000). WAL contends that the ECP implementation costs arose from engineering changes that were directed by the U.S. Air Force (the government) and flowed down through HDDS to WAL. These changes required WAL to redesign tooling, re-qualify manufacturing processes, and in some instances re-fabricate components that had already been produced in conformance with the prior engineering baseline. The costs of implementing government-directed engineering changes are not properly attributable to WAL under the Teaming Agreement.

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 that are entirely outside its scope of work.

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 expertise in DoD cost accounting and contract administration makes it the appropriate forum for the initial resolution of these factual questions.

X. CONCLUSION

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 are central to the parties' dispute and to the Court's eventual adjudication of HDDS's indemnification claim under Section 11.4(b) of the Teaming Agreement.

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.

51. I respectfully submit this declaration in support of Plaintiff Whitmore Aerospace LLC's Motion to Stay Proceedings Pending Conclusion of DCMA Administrative Review, and I respectfully request that the Court grant the requested stay.

I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.

Executed on February 10, 2023, at Chantilly, Virginia.

________________________________________

Catherine Soo-Hyun Park Vice President, Government Contracts & Compliance Whitmore Aerospace LLC 4200 Commerce Park Drive, Suite 600 Chantilly, Virginia 20151

CERTIFICATE OF SERVICE

I, Priya Anand, hereby certify that on February 10, 2023, I caused a true and correct copy of the foregoing Declaration of Catherine Soo-Hyun Park in Support of Plaintiff's Motion to Stay Proceedings Pending Conclusion of DCMA Administrative Review to be served upon all counsel of record via the Court's CM/ECF electronic filing system, which will send notification of such filing to the following:

Leonard Trager, Esq. Megan Forsythe, Esq. Voss, Trager & Kendall LLP 900 17th Street NW, Suite 800 Washington, D.C. 20006 Telephone: (202) 555-3400

Email: ltrager@vtklegal.com; mforsythe@vtklegal.com

Counsel for Defendant Hargrove-Dalton Defense Systems, Inc.

________________________________________

Priya Anand Calderwood & Harkness LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 555-7100

Email: panand@calderwoodharkness.com

Attorneys for Plaintiff Whitmore Aerospace LLC

WHITMORE AEROSPACE LLC,

Plaintiff,

Case No. 1:22-cv-10147-RMB

Hon. Richard M. Brannigan

HARGROVE-DALTON DEFENSE SYSTEMS, INC.,

Defendant.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
DECLARATION OF CATHERINE SOO-HYUN PARK IN SUPPORT OF PLAINTIFF'S MOTION TO STAY PROCEEDINGS PENDING CONCLUSION OF DCMA ADMINISTRATIVE REVIEW
Filed: February 10, 2023
I, Catherine Soo-Hyun Park, hereby declare as follows:
I am over eighteen (18) years of age, competent to testify, and I make this declaration under penalty of perjury pursuant to 28 U.S.C. § 1746. The statements set forth herein are based on my personal knowledge, my review of documents and records maintained by Whitmore Aerospace LLC in the ordinary course of business, and information obtained in the course of my professional duties as Vice President, Government Contracts & Compliance of Whitmore Aerospace LLC. If called as a witness, I could and would testify competently to the matters set forth in this declaration.
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 aerospace applications, with a particular specialization in titanium and composite-hybrid airframe structures.
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 Management Agency ("DCMA") and other government contracting agencies on matters of contract performance, cost accounting, and regulatory compliance; overseeing WAL's incurred-cost submission process; managing WAL's responses to audit inquiries, Contracting Officer's Preliminary Determinations, and Contracting Officer's Final Decisions; and ensuring WAL's compliance with the Federal Acquisition Regulation ("FAR"), the Defense Federal Acquisition Regulation Supplement ("DFARS"), and applicable Cost Accounting Standards ("CAS").
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 Doctor from the George Washington University Law School (2007). I am a member in good standing of the Virginia State Bar.
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 proceedings before the Armed Services Board of Contract Appeals ("ASBCA"). I have personally managed or directly supervised WAL's involvement in more than fifteen DCMA and DCAA audit engagements and have participated in the preparation of responses to multiple Contracting Officer's Preliminary Determinations.
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, Virginia.
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, United States Air Force.
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 Force's requirement for structurally superior, weight-optimized airframe components capable of meeting the demanding performance requirements of advanced tactical aircraft.
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 bears 70% and the contractor bears 30% of such overruns. For cost underruns below the target cost, the government retains 60% of the savings and the contractor retains 40%.
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 increasingly disproportionate share of excess costs. This cost-sharing feature places a premium on the accurate identification, allocation, and adjudication of cost overruns — precisely the issues now under review by DCMA.
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 program, including provisions relating to work allocation, cost accounting, intellectual property, indemnification, and dispute resolution.
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 represents a critical element of the ATAP airframe, as the titanium structural assemblies that WAL produces form the primary load-bearing structure of the aircraft's center section and wing-root interface.
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 performance.
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 contractor, and a copy was provided to WAL through HDDS in accordance with the flow-down and notice provisions of the Teaming Agreement.
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 and the ATAP program.
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 to non-conforming machining tolerances: approximately $5,100,000. The COPD identified costs associated with the rework, re-inspection, and, in some cases, scrapping and replacement of titanium structural components that failed to meet specified machining tolerances during initial production;
(c) Schedule delays causing idle-labor charges: approximately $2,300,000. The COPD identified costs incurred as a result of production schedule delays that resulted in idle-labor charges at WAL's Manassas manufacturing facility, where fabrication personnel were retained on site but unable to perform productive work during delay periods;
(d) Engineering change proposal ("ECP") implementation costs: approximately $1,200,000. The COPD identified costs associated with the implementation of engineering changes directed by the government and flowed down through HDDS to WAL, including redesign, re-tooling, and re-qualification costs;
(e) Total WP-4 overruns: approximately $12,800,000 (with the COPD's precise figure for WP-4 being $12,817,441).
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 Final Decision ("COFD"). The COPD itself states on its face that it is "preliminary and subject to revision" and that "[t]he contractor may submit a written response within sixty (60) calendar days."
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 WAL.
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 overruns to non-WP-4 work packages. However, in this litigation, HDDS appears to seek indemnification from WAL for the full $14,726,583, including the non-WP-4 overruns, a position that WAL contests.
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 within sixty (60) days of receipt of the claim, or alternatively, within sixty days notify the contractor of the time within which a decision will be issued. 41 U.S.C. § 7103(f). In practice, however, complex cost-overrun reviews — particularly those involving CPIF contracts with multiple work packages, multi-year periods of performance, and contested issues of cost allowability and causation — routinely take substantially longer than sixty days, often requiring twelve (12) to twenty-four (24) months or more for the DCMA to complete its review and issue a COFD.
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 contractor's cost records, material procurement documentation, labor timekeeping records, equipment usage logs, subcontract and vendor invoices, and related accounting records. The field audit is designed to verify the accuracy and completeness of the contractor's reported incurred costs and to identify any costs that may be questioned or disallowed. The field audit also examines the contractor's compliance with applicable Cost Accounting Standards and the cost principles of FAR Part 31. Field audits of this type are comprehensive and time-intensive, particularly on large, multi-year programs like ATAP.
(b) Cost Analysis Phase. Following the completion of the field audit, DCMA cost analysts prepare a detailed cost analysis evaluating the allowability, allocability, and reasonableness of the incurred costs under the applicable provisions of FAR Part 31. The cost analysis addresses, among other things, whether the incurred costs are allowable under the specific cost principles of FAR Subpart 31.2, whether the costs are properly allocable to the contract or work package in question, and whether the amounts claimed are reasonable in light of the nature of the work performed, the market conditions prevailing at the time, and the contractor's established cost accounting practices. The cost analysis often involves complex accounting and economic assessments, including the evaluation of material price variance analyses, labor rate and efficiency analyses, and overhead allocation methodologies.
(c) Legal Review Phase. Upon completion of the cost analysis, the analysis and the supporting documentation are reviewed by DCMA's internal legal counsel. This review is typically conducted at DCMA headquarters and is intended to ensure that the proposed COFD is legally sufficient, factually supported, and consistent with applicable law and regulation. The legal review may result in requests for additional information or analysis, which can extend the overall timeline.
(d) COFD Issuance. Upon completion of the legal review, the ACO issues the Contracting Officer's Final Decision. The COFD is the final agency determination on the claim and sets forth the ACO's findings regarding the allowability, allocability, and reasonableness of the disputed costs, the allocation of cost overruns among work packages, and the resulting financial impact on the contractor and the government. The COFD is subject to appeal by the contractor to the Armed Services Board of Contract Appeals ("ASBCA") under 41 U.S.C. § 7104(a), or alternatively, to the United States Court of Federal Claims under 41 U.S.C. § 7104(b).
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 not yet complete, and the cost analysis and legal review phases have not yet commenced.
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 allowable, allocable, and reasonable under the cost principles of FAR Part 31 — or whether any of those costs should be disallowed in whole or in part;
(c) The root causes of the cost overruns — specifically, whether the WP-4 overruns were attributable to acts or omissions of WAL, to engineering specifications or other conduct of HDDS, to delays in the delivery of government-furnished equipment, or to external market forces such as the well-documented escalation in global titanium prices during 2020 and 2021; and
(d) Whether any of the incurred costs should be disallowed, and if so, the amounts and categories of such disallowances.
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 Contract No. FA8620-19-C-0337 is not expected to issue for at least twelve (12) to eighteen (18) months from the date of HDDS's COFD request on October 15, 2022.
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 various work packages with specificity. Third, the CPIF contract type itself adds analytical complexity, as the ACO must consider the cost-sharing implications of any overrun determination for both the government and the contractor. Fourth, the contested nature of the overrun causation — with HDDS and WAL taking diametrically opposed positions on the root causes of the WP-4 overruns — necessitates a thorough and careful factual investigation.
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 COPD to other work packages, or reduces the total quantum of WP-4 overruns, that reallocation or reduction would directly affect the scope and amount of any potential indemnification obligation.
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 that costs incurred under Team Member's Work Package are unallowable, unreasonable, or otherwise subject to disallowance, to the extent such claim is caused by Team Member's acts or omissions."
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 government "claim" within the meaning of Section 11.4(b) remains uncertain and preliminary, resting solely on the non-final COPD.
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 government's claim be "caused by Team Member's acts or omissions." The DCMA's expert evaluation of root causes will provide a factual foundation that is essential to any adjudication of the causation element of the indemnity claim.
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 allowability of incurred costs, and the root causes of the overruns — resulting in duplicative, parallel fact-finding processes that would impose unnecessary burdens on WAL, HDDS, and the Court;
(b) Inconsistent determinations. There is a meaningful risk that this Court's determination of the factual issues underlying the indemnity dispute could be inconsistent with the DCMA's subsequent determination of those same issues in the COFD, creating confusion and potentially necessitating further proceedings to reconcile the inconsistency;
(c) Wasteful expenditure of resources. The parties would be required to engage in extensive and costly discovery — including the production of voluminous cost records, depositions of cost accounting and engineering witnesses, and the retention of expert witnesses — on issues that the DCMA is in the process of evaluating through its established administrative procedures. This expenditure of party and judicial resources would be rendered largely unnecessary if the Court were to stay this action and await the COFD.
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 occurred during 2020 and 2021, including disruptions arising from the COVID-19 pandemic and geopolitical tensions affecting titanium supply chains. These disruptions constituted a force-majeure event that was entirely beyond WAL's control. WAL had no ability to prevent or mitigate the global increase in titanium prices, and WAL's procurement practices were consistent with industry standards and its established purchasing procedures.
(b) Rework costs (approximately $5,100,000). WAL contends that the rework costs identified in the COPD were attributable to engineering specifications provided by HDDS, not to deficiencies in WAL's machining processes or quality control procedures. Specifically, WAL has identified instances in which HDDS's engineering drawings and specifications contained dimensional tolerances that were inadequately defined or internally inconsistent, leading to the production of components that were subsequently determined to be non-conforming upon inspection. WAL's machining processes were performed in accordance with the specifications as provided, and WAL's quality management system was in full compliance with AS9100 Rev D throughout the relevant period.
(c) Idle-labor charges (approximately $2,300,000). WAL contends that the schedule delays that gave rise to the idle-labor charges were caused by HDDS's late delivery of government-furnished equipment ("GFE") to WAL's Manassas manufacturing facility. Under the Teaming Agreement, HDDS was responsible for coordinating the timely delivery of GFE to WAL. On multiple occasions during the first two program years, HDDS failed to deliver GFE on schedule, forcing WAL to retain fabrication personnel on site in an idle status while awaiting the equipment necessary to commence or continue production operations.
(d) Engineering change proposal ("ECP") implementation costs (approximately $1,200,000). WAL contends that the ECP implementation costs arose from engineering changes that were directed by the U.S. Air Force (the government) and flowed down through HDDS to WAL. These changes required WAL to redesign tooling, re-qualify manufacturing processes, and in some instances re-fabricate components that had already been produced in conformance with the prior engineering baseline. The costs of implementing government-directed engineering changes are not properly attributable to WAL under the Teaming Agreement.
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 that are entirely outside its scope of work.
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 expertise in DoD cost accounting and contract administration makes it the appropriate forum for the initial resolution of these factual questions.
X. CONCLUSION
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 are central to the parties' dispute and to the Court's eventual adjudication of HDDS's indemnification claim under Section 11.4(b) of the Teaming Agreement.
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.
51. I respectfully submit this declaration in support of Plaintiff Whitmore Aerospace LLC's Motion to Stay Proceedings Pending Conclusion of DCMA Administrative Review, and I respectfully request that the Court grant the requested stay.
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.
Executed on February 10, 2023, at Chantilly, Virginia.
________________________________________
Catherine Soo-Hyun Park Vice President, Government Contracts & Compliance Whitmore Aerospace LLC 4200 Commerce Park Drive, Suite 600 Chantilly, Virginia 20151
CERTIFICATE OF SERVICE
I, Priya Anand, hereby certify that on February 10, 2023, I caused a true and correct copy of the foregoing Declaration of Catherine Soo-Hyun Park in Support of Plaintiff's Motion to Stay Proceedings Pending Conclusion of DCMA Administrative Review to be served upon all counsel of record via the Court's CM/ECF electronic filing system, which will send notification of such filing to the following:
Leonard Trager, Esq. Megan Forsythe, Esq. Voss, Trager & Kendall LLP 900 17th Street NW, Suite 800 Washington, D.C. 20006 Telephone: (202) 555-3400
Email: ltrager@vtklegal.com; mforsythe@vtklegal.com
Counsel for Defendant Hargrove-Dalton Defense Systems, Inc.
________________________________________
Priya Anand Calderwood & Harkness LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Telephone: (212) 555-7100
Email: panand@calderwoodharkness.com
Attorneys for Plaintiff Whitmore Aerospace LLC
WHITMORE AEROSPACE LLC,
Plaintiff,
Case No. 1:22-cv-10147-RMB
v.
Hon. Richard M. Brannigan
HARGROVE-DALTON DEFENSE SYSTEMS, INC., | United States District Judge
Defendant.