Hp Gets $23.5M From U.S. Government Thank's To Fuzzy Math

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Hp Gets $23.5M From U.S. Government Thank's To Fuzzy Math

 news 2015-10-29 at 11:19:15 am Views: 325
  • #44189

    Hp Gets $23.5M From U.S. Government Thank's To Fuzzy Math
    HP Owed $23.5M In Pension Plan Underpayments From US
    By Jenna Ebersole

    Law360, Washington (October 27, 2015, 2:36 PM ET) — The Armed Services Board of Contract Appeals has approved a settlement agreement between Hewlett-Packard and the Defense Contract Management Agency, with the government agreeing to pay the company a $23.5 million shortfall it owes for pension payments over the course of multiple years and contracts.
    Hewlett-Packard Co. and government auditors agreed on the sum and filed with the board in order to finalize payment, an attorney for HP said Tuesday, with the board having approved the figure on Oct. 15. HP’s 2007 pension plan freeze triggered the complex calculating process to determine the difference between the amount paid initially with the actual cost of the pensions, the attorney said.

    The government will also pay interest on the amount from June 2014, according to the agreement.

    “It shows the system really working the way it should when the parties agree on a number, it’s the right number and you get paid,” HP attorney Terry Albertson told Law360 on Tuesday.

    Albertson said the adjustment, which in some cases results in contractors paying the government if the calculation finds overfunding, covers HP contracts that included agreements to contribute to pension plans extending back many years and covering untold numbers of employees.

    But HP rather than the employees will see the government’s cash, as the company was already required to fund the pension plans, Albertson said.

    “It’s not because anybody made a mistake or did anything wrong,” Albertson said. “It’s just because of the way the cost accounting standards work.”

    Albertson said it would take a “stroke of luck” for the calculation not to result in a later adjustment on pension plans and many are much larger.

    Still, recently the trend of including pension provisions even in major contracts has changed, he said.

    “There aren’t a lot of these cases because there aren’t that many contractors that have pension plans anymore, but it isn’t unusual to have a situation like this,” he said.

    The Defense Contract Management Agency does not have funding to pay agreed figures on its own, Albertson explained, and so the parties file with the board to receive payment from the U.S. Department of the Treasury.

    Typically, the payment would not be triggered until the end of the pension plans after a longer period of time, but HP decided to freeze the plans early.

    “But when you stop prematurely as happens when you freeze the benefits, then you’ve got to figure out where you are at that point,” he said.

    The government does not pay 100 percent of pension funding, but the analysis to calculate the figure reviewed contracts to determine the share it agreed to pay then analyzes where the plan is today to set a number, he said.

    Representatives for the Defense Contract Management Agency did not respond Tuesday to a request for comment.

    HP is represented by Terry L. Albertson, Stephen J. McBrady and Skye Mathieson of Crowell & Moring LLP.

    The government was represented by E. Michael Chiaparas and Lawrence S. Rabyne of the Defense Contract Management Agency.

    The case was the appeal of Hewlett-Packard Co., number 59657, before the Armed Services Board of Contract Appeals.