Secretary of Defense v. PRATT & WHITNEY, ADIVISION OF RTX CORPORATION, Cross-Appellant 2023-1337, 2023-1338…

United States Court of Appeals
for the Federal Circuit
______________________
SECRETARY OF DEFENSE,
Appellant
v.
PRATT & WHITNEY, A DIVISION OF RTX
CORPORATION,
Cross-Appellant
______________________
2023-1337, 2023-1338
______________________
Appeals from the Armed Services Board of Contract
Appeals in No. 59222, Administrative Judge David D’Ales-
sandris, Administrative Judge Cheryl L. Scott, Adminis-
trative Judge Owen C. Wilson, Administrative Judge
Richard Shackleford.
______________________
Decided: December 5, 2025
______________________
BORISLAV K USHNIR, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for appellant. Also represented by
BRIAN M. B OYNTON, P ATRICIA M. MCCARTHY ; ALEXANDER
MARTIN HEALY , Contract Disputes Resolution Center, De-
fense Contract Management Agency, Hanscom Air Force
Base, MA.
J EFFREY A. HALL , Bartlit Beck LLP, Chicago, IL,
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 2
argued for cross-appellant. Also represented by CINDY L.
SOBEL ; D HANANJAY S. MANTHRIPRAGADA , Gibson, Dunn &
Crutcher LLP, Los Angeles, CA; L INDSAY MIRIAM P AULIN,
Washington, DC.
______________________
Before M OORE, Chief Judge, D YK and CUNNINGHAM ,
Circuit Judges.
D YK, Circuit Judge.
Pratt & Whitney (“Pratt”) builds aircraft engines, both
for commercial airline customers and for the United States.
This case involves cost calculations for cost-plus contracts
between Pratt and the United States and specifically cost
allocation between Pratt’s government and private con-
tracts. The government contends that it overpaid Pratt on
the cost-plus contracts because Pratt incorrectly calculated
the government’s share of indirect costs (e.g., overhead).
The Armed Services Board of Contract Appeals (the
“Board”) ruled for the government in part and for Pratt in
part. The government appealed, and Pratt cross-appealed.
We hold that we lack jurisdiction over the Board’s decision
concerning the base for allocation of overhead costs because
the Board’s decision in this regard was not a final decision.
However, we hold that the Board’s decision that there was
an enforceable agreement between the parties as to the in-
clusion of so-called “Drag” in the overhead pool was final,
and that the agreement is invalid. We therefore dismiss in
part, reverse in part, and remand.
BACKGROUND
The facts underlying this case are complex but are vir-
tually undisputed by the parties. During the relevant pe-
riod, Pratt had a number of cost-plus contracts with the
government as well as commercial engine contracts with
private companies. Under the government contracts, the
government was required to reimburse Pratt for overhead
costs properly allocated to the government contracts. The
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 3
Cost Accounting Standards (“CAS”) govern allocability of
overhead costs. Pursuant to 48 C.F.R. § 9904.418
(“CAS 418”), a portion of the overhead pool is allocated to
the government based on the proportion of material costs
Pratt incurs for the government engine program as op-
posed to material costs associated with the commercial en-
gine program. See Rumsfeld v. United Techs. Corp.,
315 F.3d 1361, 1369 (Fed. Cir. 2003).1
To calculate Pratt’s overhead cost allocation to its gov-
ernment contracts, two different calculations must be un-
dertaken. The first concerns which costs are properly
included in Pratt’s overhead pool. The second relates to the
allocation base of the overhead pool and how much of the
pool is attributed to the government engine program ver-
sus the commercial engine program under CAS 418. This
calculation defines the proportion of the overhead pool for
which the government is responsible. The government
bears a larger burden of the indirect costs when the total
size of Pratt’s overhead pool increases and when the gov-
ernment’s portion of the base increases.
The long-running controversy in this case arises from
Pratt’s use of unconventional agreements with its parts
suppliers. Instead of simply purchasing commercial engine
parts from parts suppliers, Pratt has entered into “collabo-
ration agreements” with its suppliers under which the sup-
pliers (the “Collaborators”) are paid a percentage share of
1 CAS 418 is a method of allocating overhead costs.
48 C.F.R. § 9904.410 (“CAS 410”) provides that “[t]he cost
input base used to allocate the . . . expense pool shall in-
clude all significant elements of that cost input which rep-
resent the total activity of the business unit.” Rumsfeld,
315 F.3d at 1369 (quoting CAS 410-50(d)). Pratt elected to
use a form of total cost input accounting based on “material
costs” as provided by CAS 418-50. Id. (citing CAS 418-
50(d)(2)(iv)).
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 4
the engine program revenues in exchange for the provision
of parts.
The first computation involves the question whether
so-called Drag costs are properly included in the overhead
pool. Drag is calculated through a fixed percentage of a
Collaborator’s revenue share of commercial program prof-
its rather than a function of the actual cost of overhead in-
curred by Pratt.2 In the government’s view, Drag
represents money that Collaborators paid to Pratt to cover
the Collaborators’ share of commercial program expenses,
and Drag costs should be removed from the overhead pool
as an already-recovered expense. In this appeal, the reso-
lution of this question depends on the validity of an agree-
ment between the government and Pratt.
The second, more complex computation relates to the
base calculation. If the costs related to the government
program are larger, then the government pays more of the
overhead pool. If the costs related to the commercial pro-
gram are larger, then the government pays less of the over-
head pool. As we surmised in Rumsfeld,
It is therefore in the government’s interest to max-
imize the amount of material costs associated with
commercial contracts in order to increase the value
of the commercial program’s portion of the over-
head pool and inversely decrease the government’s
share of overhead; and it is in Pratt’s interest to
minimize the commercial program material costs,
decrease the value of the commercial program’s
portion of the overhead pool and increase the gov-
ernment’s share of overhead.
2 Drag represents a portion of Pratt’s cost of super-
vising the commercial engine program that is reimbursed
by the Collaborators. For simplicity, we refer to these un-
derlying program expenses as Drag costs.
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 5
Id. at 1363–64.
For over 30 years, the parties have disputed how to cal-
culate the cost of the commercial engine parts acquired un-
der the collaboration agreements. Initially, Pratt treated
these parts as having no direct material cost, so the cost of
the parts was not factored into the calculation of the com-
mercial contracts’ share of the overhead pool. At the same
time, Pratt reduced the total overhead pool by the Drag fig-
ure. In 1992, the contracting officer found that Pratt’s ac-
counting methods violated CAS 418 because Pratt did not
assign a cost to the engine parts that Pratt acquired from
the Collaborators for the commercial engine program. Ac-
cording to the contracting officer, the cost of the engine
parts was equivalent to the revenue share owed to the Col-
laborators. In 1996, another contracting officer issued a
decision incorporating the first decision and establishing
quantum for the violation.
Pratt appealed these decisions to the Board, which de-
termined that Pratt’s accounting practices did not violate
CAS 418. The government then appealed to this court, and
we determined that Pratt’s failure to account for a cost of
the engine parts violated CAS 418 and caused “a substan-
tial distortion in overhead allocation” between the commer-
cial and government engine programs. Id. at 1372. We
vacated the Board’s decision and remanded for the Board
to determine the proper method to determine the cost of the
engine parts. Id. at 1377.
After our decision in Rumsfeld, on June 5, 2006, the
parties reached a settlement agreement and also entered
an agreement (the “Drag agreement”) whereby in the fu-
ture Pratt would include the parts’ material cost in the
overhead pool base but would no longer reduce the over-
head pool by the Drag figure. The Drag agreement pro-
vided in relevant part:
The [contracting officer determined] that Pratt’s
discontinuance of its prior practice of crediting
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 6
DRAG to its overhead pools was compliant with
both CAS and the Federal Acquisition Regulation
[(“FAR”)] from January 1, 2005 to the date of this
agreement. The Government will not require such
credits prospectively, provided that Pratt continues
to include a cost for collaboration parts in its allo-
cation base or bases and that the “DRAG” provi-
sions of the collaboration agreements do not
materially change.
J.A. 5496.3
The Drag agreement did not resolve the dispute. In
2013, a new contracting officer issued a decision revisiting
the issue of how to calculate the government’s share of
Pratt’s overhead expenses. The contracting officer deter-
mined once again that Pratt’s accounting practices violated
CAS. One dispute concerned Pratt’s use of “Manufacturing
Target Cost” (“MTC”) to estimate the cost of the parts. This
number represented how much Pratt expected it would cost
to manufacture the parts itself. The contracting officer de-
termined that Pratt’s use of an estimate of material costs
of the commercial engine parts rather than the actual costs
was impermissible. To measure material costs, the con-
tracting officer instead used gross revenue share, which is
the percentage of the list price Pratt owed to a Collaborator
when a commercial engine was sold. In reaching this con-
clusion, the contracting officer referenced our decision in
Rumsfeld, stating that we “defined the cost of collaboration
material as revenue share payments,” which the contract-
ing officer apparently determined to mean gross revenue
share. J.A. 5710.
The contracting officer also determined that the Drag
agreement was not valid and therefore was not binding on
3 Citations to the J.A. refer to the Joint Appendix
filed by the parties. Dkt. No. 61.
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 7
the government. The contracting officer ruled that Pratt
was required to remove any Drag costs from the overhead
pool because those costs were reimbursed by the Collabo-
rators. The contracting officer calculated a total debt of
$210,968,414 owed to the United States.
Pratt once more appealed to the Board. The Board sus-
tained Pratt’s appeal in part, finding that the Drag agree-
ment was a valid agreement and that Pratt was not
required to eliminate Drag from the overhead pool. But the
Board concluded that Pratt improperly calculated its ma-
terial costs under CAS 418, rejecting Pratt’s MTC method
of calculating the material cost of the parts. At the same
time, the Board also rejected the contracting officer’s find-
ing that gross revenue share was the proper measure of
material cost. Instead, the Board determined that the
proper measure was net revenue share. This was because
Pratt rarely collects the full list price in its sales of com-
mercial engines, and it deducts certain items (including
Drag and certain discounts called Fleet Introductory Assis-
tance) from the payments it ultimately sends to Collabora-
tors. Therefore, as the Board viewed it, the total payment
that Pratt actually sent to Collaborators, net revenue
share, was the proper basis for determining the material
cost of the collaborator parts. The Board found that net
revenue share represents what Pratt “actually pays to its
collaborators for the parts it receives.” J.A. 99 (internal
quotation marks omitted); see also Rumsfeld, 315 F.3d.
at 1371 (discussing “material cost” as “the outlay for mate-
rials ‘purchased’”).
The Board remanded the issue of quantum to the par-
ties; in other words, the Board remanded to have the par-
ties agree on quantum. If the parties failed to do so, the
Board would be required to determine quantum itself. See
Teller Env’t Sys. v. United States, 802 F.2d 1385, 1390
(Fed. Cir. 1986) (noting that a remand to the parties to ne-
gotiate quantum is not “a transfer, or a cessation, of the
[B]oard’s jurisdiction over the case” but a “direction to the
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 8
parties to negotiate . . . and to come back to the [B]oard . . .
for resolution of any dispute if agreement cannot be
reached”). The government appeals, and Pratt cross-ap-
peals.
D ISCUSSION
I
In every appeal, the first and fundamental question is
that of jurisdiction. Steel Co. v. Citizens for a Better Env’t,
523 U.S. 83, 94 (1998) (quoting Great S. Fire Proof Hotel
Co. v. Jones, 177 U.S. 449, 453 (1900)). This court has ex-
clusive jurisdiction over “an appeal from a final decision of
an agency board of contract appeals” pursuant to 41 U.S.C.
§ 7107(a)(1). 28 U.S.C. § 1295(a)(10) (emphasis added).
The government characterizes this appeal as addressing
two separate claims. The first claim addresses the calcula-
tion of Collaborator commercial part costs for the purpose
of determining the government’s allocation base of Pratt’s
overhead pool (the “CAS 418 Claim”). The second claim ad-
dresses whether Pratt is required to reduce the total over-
head pool by the amount it receives in Drag payments from
Collaborators (the “Drag Claim”). The government asserts
that the Board’s decision as to the CAS 418 Claim was a
final decision, even though quantum remained to be deter-
mined. It also argues the Board’s Drag Claim decision was
itself a separate and final decision. The government ar-
gues that if we find we do not have jurisdiction over the
CAS 418 Claim, which required a quantum calculation, we
can still exercise jurisdiction over the Drag Claim, which
was fully resolved by the Board.
A
Although “finality in this context is a flexible concept,”
England v. Contel Advanced Sys., Inc., 384 F.3d 1372, 1378
(Fed. Cir. 2004), there are long-settled rules that guide our
analysis. The “relevant inquiry” centers on “the contract-
ing officer’s decision, for this determines the extent of the
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 9
contractor’s right of appeal and the [B]oard’s jurisdiction.”
Brownlee v. DynCorp, 349 F.3d 1343, 1347 (Fed. Cir. 2003)
(quoting Dewey Elecs. Corp. v. United States, 803 F.2d 650,
655 (Fed. Cir. 1986)). Where, as here, the contracting of-
ficer made a determination both as to liability and quan-
tum, we have long held that a Board decision that
determines only liability and does not reach quantum is not
final. See Teledyne Cont’l Motors v. United States, 906 F.2d
1579, 1583 (Fed. Cir. 1990); AAA Eng’g & Drafting, Inc.
v. Widnall, 129 F.3d 602, 604 (Fed. Cir. 1997); Kinetic
Builder’s Inc. v. Peters, 226 F.3d 1307, 1312–13 (Fed. Cir.
2000); United Pac. Ins. Co. v. Roche, 294 F.3d 1367, 1370
(Fed. Cir. 2002).
With respect to the CAS 418 Claim, the government ar-
gues that, despite the Board’s remand for determination of
quantum, we can exert jurisdiction over this appeal in its
entirety based on our decision in Southern California Edi-
son Co. v. United States, 226 F.3d 1349 (Fed. Cir. 2000)
(“SCE”). In SCE we held that, when a lower court remands
a case to an agency, that order is an appealable final order
where the court rules on an issue of law and remands for
the agency to apply that legal conclusion such that the
agency’s remaining task was merely ministerial. 226 F.3d
at 1354–55 (citing Sullivan v. Finkelstein, 496 U.S. 617,
619 (1990)). There, we said that “[s]uch orders are final
and appealable because they represent ‘the final disposi-
tion of the proceeding respecting the Secretary’s practice’
and ‘compel [ ] action . . ., on remand, contrary to the Sec-
retary’s prior ruling.’” Id. at 1355 (quoting Travelstead v.
Derwinski, 978 F.2d 1244, 1248 (Fed. Cir. 1992) (second
and third alterations in original)).
We do not find the logic of SCE to be applicable to the
present case. SCE was a case that dealt with the finality
of a Court of Federal Claims (“Claims Court”) decision in a
breach of contract action brought against the government.
Id. at 1354. There, once the Claims Court rendered its de-
cision, there were no further issues for the Claims Court to
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 10
resolve. This was so because the decision that we were re-
viewing in SCE originated in the Claims Court, not the
agency, and we were reviewing a decision of the Claims
Court that was final even though the decision was charac-
terized as a remand to the agency and further calculation
by the agency was required. That is not this case. Here,
we are being asked to directly review an agency determi-
nation, the decision of the Board. The Board’s decision as
to the CAS 418 Claim is not final. Instead, the Board re-
tained jurisdiction over the case when it remanded the
matter to the parties to negotiate quantum. See Teller,
802 F.2d at 1390. If the parties are unable to settle the
matter on quantum, then the Board must conduct further
quantum proceedings.
The parties have not cited to any cases where we have
applied SCE to a proceeding involving a remand from the
Board, nor are we aware of any. We have consistently held
a Board decision such as this one that does not resolve
quantum is not a final decision for the purposes of our ap-
pellate jurisdiction. Kinetic Builder’s, 226 F.3d at 1312–
13; United Pac. Ins. Co., 294 F.3d at 1370; see also Teller,
802 F.2d at 1389–90; Teledyne, 906 F.2d at 1583; AAA
Eng’g, 129 F.3d at 604. Indeed, in SCE, we described and
approved the holding of Teledyne, 226 F.3d at 1355, and
the government concedes that “read in isolation,” these
cases suggest that the Board’s decision is not final. Appel-
lant’s Br. 27. We continue to follow the long-settled rule
that, where the contracting officer made a determination
as to both liability and quantum, and the Board has only
made a determination as to liability, the Board’s decision
is not final for the purposes of our appellate jurisdiction.
Therefore, we do not have jurisdiction over the CAS 418
Claim.
B
The government separately argues we have jurisdic-
tion over the Board’s decision with respect to the Drag
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 11
Claim. It is established that where the contracting officer
has been presented with multiple entitlement claims, “not
based on a common or related set of operative facts,” and
some of those claims are remanded to the parties for nego-
tiation of quantum while others are finally decided, “the
Board decision on the non-remanded claims is deemed fi-
nal.” Kinetic Builder’s, 226 F.3d at 1313 (citing Dewey El-
ecs., 803 F.2d at 654); accord Elkins v. Gober, 229 F.3d
1369, 1373–74 (Fed. Cir. 2000). Therefore, if the CAS 418
Claim and the Drag Claim are separate claims, as the gov-
ernment contends, then we can assert jurisdiction over the
Drag Claim even though the CAS 418 Claim was not fully
resolved.
The Drag Claim concerns whether Drag costs are
properly included in the overhead pool. The Board decision
turned on the validity of the provisions of the Drag agree-
ment and whether the government contracting officer had
the authority to enter into the agreement. Therefore, the
Drag Claim turns on factual questions unrelated to the
CAS 418 Claim. See Kinetic Builder’s, 226 F.3d at 1314–
15 (finding two claims related to the same contract sepa-
rate where they “do not involve proof of a common set of
operative facts”). We conclude that the operative facts for
these two claims are distinct and constitute separate
claims.
The Board’s decision on the Drag Claim is final. While
a remand of the Board decision would require a calculation,
the Board decision does not require a new calculation to
determine the size and makeup of the overhead pool. In-
stead, the Board affirmed Pratt’s ongoing practice of calcu-
lating the overhead pool without regard to the Drag
payments. Because the Board’s decision as to the Drag
Claim was separate and final, not requiring a further cal-
culation, it was appealable, and we have jurisdiction over
the Board’s decision on the Drag Claim.
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 12
As the parties note, this case is also similar to Orlando
Helicopter Airways v. Widnall, 51 F.3d 258 (Fed. Cir.
1995). In Orlando Helicopter, we considered whether we
had jurisdiction over a partial summary judgment ruling
by the Board. 51 F.3d at 260. There, a contractor asserted
a single claim that an investigation into the contractor ini-
tiated by the Department of Justice (“DOJ”) and subse-
quent actions by the contracting officer had caused the
contractor to incur additional costs alleged to be compensa-
ble by the government. Id. at 259. At summary judgment,
the Board determined that the costs incurred as a result of
the DOJ investigation were not compensable under the
sovereign acts doctrine, but that the contractor could pur-
sue its claims before the Board for costs incurred as a result
of the contracting officer’s actions. Id. at 260.
We determined that the Board’s grant of summary
judgment with regard to the DOJ investigation costs was a
final decision, not requiring any further calculation, and
we had jurisdiction over its appeal because it “determine[d]
the rights and obligations of the parties” and was “wholly
separate and distinct from any issues which may remain
before the Board.” Id. at 261. Here, the Board’s decision
on the Drag Claim determined rights and obligations of the
parties separate and distinct from the issues presented by
the CAS 418 Claim, which required a quantum computa-
tion before the decision was final, and we have jurisdiction
over the Drag Claim.
II
Having established that we have jurisdiction over the
Drag Claim, we now consider the merits of the govern-
ment’s appeal. The Board determined that the Drag agree-
ment permitting Pratt to cease reducing the overhead pool
by the Drag figure was valid and enforceable. The parties
do not appear to dispute that the plain language of the
Drag agreement permits Pratt to discontinue this practice.
However, the government argues that the Drag agreement
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 13
was invalid and unenforceable against the government be-
cause it violated the FAR.
Whether an enforceable contract exists is a mixed ques-
tion of law and fact. See Ransom v. United States, 900 F.2d
242, 244 (Fed. Cir. 1990). We review the Board’s conclu-
sions of law de novo. Triple Canopy, Inc. v. Sec’y of the Air
Force, 14 F.4th 1332, 1337–38 (Fed. Cir. 2021). We may
only set aside the Board’s findings of fact if the Board’s
findings are “(A) fraudulent, arbitrary, or capricious; (B) so
grossly erroneous as to necessarily imply bad faith; or
(C) not supported by substantial evidence.” 41 U.S.C.
§ 7107(b)(2).
As the Board acknowledged, “[a] Government agent
must have actual authority to bind the Government to a
contract.” Liberty Ammunition, Inc. v. United States,
835 F.3d 1388, 1401 (Fed. Cir. 2016) (citing Trauma Serv.
Grp. v. United States, 104 F.3d 1321, 1325 (Fed. Cir.
1997)); accord Boyd v. United States, 134 F.4th 1348, 1352
(Fed. Cir. 2025). Here, the Drag agreement was explicitly
entered into “under authority of” the FAR. J.A. 5495. Gen-
erally, a government official lacks actual authority to enter
into a contract that violates the FAR. Johnson Mgmt. Grp.
CFC v. Martinez, 308 F.3d 1245, 1256 n.2 (Fed. Cir. 2002)
(citing McDonnell Douglas Corp. v. United States, 670 F.2d
156, 159 (Cl. Ct. 1982)). Without specific authorization
from the agency head or his designee (and there has been
no showing of such authorization here), “any deviation
from regulatory requirements is a violation of the regula-
tions and beyond the authority of the contracting officer.”
Id. The question then is whether the Drag agreement vio-
lates the FAR.
The government argues that the Drag agreement vio-
lates the FAR because it conflicts with the FAR’s require-
ments for advance agreements codified at 48 C.F.R.
§ 31.109 and it conflicts with the FAR’s credits provision.
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 14
Because we agree with the government’s first argument,
we need not address the second.
The FAR’s advance agreements provision notes that
“contracting officers and contractors should seek advance
agreement on the treatment of special or unusual costs.”
48 CFR § 31.109(a). This provision establishes an optional
pathway for contractors and contracting officers to negoti-
ate the future treatment of costs where “the reasonable-
ness, the allocability and allowability . . . of certain costs
may be difficult to determine” under standard FAR provi-
sions. Id. However, any advance agreement reflecting a
negotiated treatment of unusual costs “must be in writing,
executed by both contracting parties, and incorporated into
applicable current and future contracts. An advance agree-
ment shall contain a statement of its applicability and du-
ration.” Id. § 31.109(b). A contracting officer is not
authorized “to agree to a treatment of costs inconsistent
with this part” of the FAR governing advance agreements.
Id. § 31.109(c).
The Drag agreement here, on its face, states that it was
executed under the authority of § 31.109, the advance
agreements provision. The Board also correctly noted that
there was no evidence that the Drag agreement was incor-
porated into any of Pratt’s government contracts and that
the Drag agreement lacks a statement of its duration. The
undisputed facts establish how the Drag agreement does
not comply with the FAR. The Board agreed. J.A. 90.
Nonetheless, the Board concluded that the Drag agreement
did not need to satisfy the FAR’s requirements so long as it
satisfied the general requirements for forming a contract.
Pratt argues that this is permissible because contracting
officers are granted broad license “to settle CAS-related
disputes with contractors.” Cross-Appellant’s Br. 65.
We disagree. It is undeniable that the Drag agreement
is an advance agreement. The Drag agreement, on its face,
states that it is “entered into . . . under authority of [FAR]
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 15
31.109,” the advance agreements provision. J.A. 5495. The
Drag agreement is a negotiated agreement to “prospec-
tively” agree to the treatment of costs, namely Pratt’s in-
clusion of Drag costs in the overhead pool. J.A. 5496. We
are aware of no holding that gives the contracting officer
authority to disregard the FAR restrictions because a set-
tlement agreement is involved, and the Board cites to none.
To be sure, there is a strong public interest in enforcing
settlements, especially in complex litigation. See, e.g., FTC
v. Actavis, Inc., 570 U.S. 136, 154 (2013); Baseload Energy,
Inc. v. Roberts, 619 F.3d 1357, 1361 (Fed. Cir. 2010). How-
ever, a settlement agreement is a contract, so its enforcea-
bility first turns on basic principles of contracting, such as
whether there was authority to bind the parties. See, e.g.,
Sweeney v. U.S. Postal Serv., 159 F.3d 1342, 1344
(Fed. Cir. 1998) (“A settlement agreement is a contract be-
tween the parties.” (citing Mahboob v. Dep’t of Navy,
928 F.2d 1126, 1128 (Fed. Cir. 1991))); Slattery v. Dep’t of
Just., 590 F.3d 1345, 1347 (Fed. Cir. 2010) (“A settlement
agreement is a contract.”); Bell BCI Co. v. United States,
570 F.3d 1337, 1341 (Fed. Cir. 2009) (“Because a release is
contractual in nature, it is interpreted in the same manner
as any other contract term or provision.”).
Because the FAR was the source of the contracting of-
ficer’s authority and did not authorize the agreement, the
Board was required to find, as a matter of law, that the
contracting officer lacked the authority to execute the Drag
agreement on behalf of the government. See Johnson
Mgmt. Grp., 308 F.3d at 1256 n.2. Because the contracting
officer lacked authority to bind the government, the Drag
agreement cannot be enforced against it.4
4 Other provisions of the agreement do not relate to
the Drag Claim. For example, the Board determined that
a different provision operated as a waiver of the
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SECRETARY OF DEFENSE v. PRATT & WHITNEY 16
We recognize that Pratt argues that even without the
Drag agreement, it is not required to deduct Drag from the
overhead pool. The government argues that Drag costs
must be excluded from the overhead pool because they
were reimbursed. In this respect, the government relies on
the FAR’s credits provision, codified at 48 C.F.R. § 31.201-
5. We are skeptical a reimbursed cost could be properly
included in the overhead pool, but we decline to reach this
issue. Nor do we decide Pratt’s argument that there has
not been a showing that the Drag payments correspond to
any costs included in the overhead pool. On remand, the
Board will need to address and resolve these issues in the
first instance.
CONCLUSION
For the foregoing reasons, we dismiss this appeal with
respect to the CAS 418 Claim. With respect to the Drag
Claim, we conclude that we have jurisdiction, and we re-
verse the Board’s determination that the Drag agreement
was an enforceable contract. We remand for further pro-
ceedings consistent with this opinion.
DISMISSED-IN-PART, REVERSED-IN-PART, AND
REMANDED
COSTS
Costs to neither party.
government’s CAS 418 Claim for accounting that took
place between January 1, 2005, and the date of the agree-
ment, June 5, 2006. As we lack jurisdiction over the
CAS 418 Claim, we offer no opinion as to the enforceability
of this and other provisions of the agreement unrelated to
the Drag Claim.
Case: 23-1337 Document: 86 Page: 16 Filed: 12/05/2025

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