Appeal of University of California, San Francisco

The University of California, San Francisco (UCSF) (plaintiff) entered into a scarce medical specialist services contract with the Department of Veterans Affairs (VA) (defendant) to provide anesthesiology services at the VA Medical Center in San Francisco. UCSF’s contract with the VA did not contain a price reduction for defective cost or pricing data clause (price reduction clause); however, the inclusion of a price reduction clause was required by the federal Truth in Negotiations Act (TINA). UCSF submitted cost and pricing documentation to the VA that included substantial administrative research costs and failed to properly itemize the costs comprising the total contract price. The contract then received several 90-day renewals, resulting in UCSF receiving compensation amounting to approximately 27 percent more than the original contract price. The VA Inspector General audited UCSF’s contract with the VA and found that the VA had overpaid UCSF because (1) the VA was not permitted to cover administrative research costs; and (2) UCSF failed to provide proper cost and pricing documentation to support the contract price. The VA petitioned to recover the overpayment. UCSF appealed the claim to the Veterans Affairs Board of Contract Appeals (VABCA) and moved for summary judgment, arguing that (a) UCSF’s contract with the VA did not include a price reduction clause; and (2) the Christian doctrine, which would incorporate the price reduction clause as a matter of law, was inapplicable because the inclusion of a price reduction clause was discretionary and not mandatory. The government countered, arguing that TINA mandated the inclusion of a price reduction clause.