Under a cost-reimbursement, plus incentive fee contract with the Department of Energy, the Contractor agreed to build a Mixed Oxide FuelFabrication Facility near Aiken, South Carolina. The purpose of the project was to convert weapons-grade plutonium into fuel rods for use in commercial nuclear powerplants.
In denying one of the Contractor’s certified claims, the Government summarily clawed back $21.6 million of incentive fees previously paid to the Contractor. The Contractor argued that the Government could not do this before the contract performance was complete. The Court agreed with the Contractor and ordered return of the entire sum by the Government to the Contractor.
The Court saw the Government’s claw-back attempt as “baseless retaliation” and implied failure by the contracting officer to review the claim in good faith. “A contracting officer’s review of certified claims submitted in good faith is not intended to be a negotiating game where the agency may deny meritorious claims to gain leverage over the contractor,” like prematurely demanding the immediate refund of incentive fees.