The new Raytheon case: mental gymnastics defining “work” and policy “bright-lines"

By now, you have probably heard about the recent and now infamous Raytheon case: the United States Court of Appeals for the Federal Circuit Case No. 2021-2304, Secretary of Defense V. Raytheon Company, Raytheon Missile Systems 21-2304.OPINION.1-3-2023_2056385.pdf (uscourts.gov). If you are unfamiliar with this case, consider this your introduction to the maelstrom. This case has kicked off the new year with a bang—or at least a gavel strike—and stirred many in our industry to ask about the case, its challenges and the subsequent fallout in two key ways.

Time worked and recording it

When it comes to timekeeping, total time accounting—or ensuring all hours worked are recorded—is the preferred standard amongst government auditors and reviewers; but it is not always right for every company and has yet to become a regulatory requirement. However, the court’s decision in this case certainly advances the ball in making the case for total time accounting.

Other methods of timekeeping (e.g., proration, by exception, and others) ultimately hinge on achieving the same result: what work effort was compensated and how does it align it to the corresponding activities? Or more technically, how can contractors ensure all costs, such as compensation for time worked, are proportionally spread across all benefitting cost objectives, including segregation of allowable and unallowable activities. Generally speaking, anything other than total time accounting can introduce additional risk to a timekeeping system, magnifying the importance of how contractors define “work” and what they require of employees with respect to time entry.

The case

Raytheon’s Government Relations department and Corporate Development department policies instructed employees to record compensated time spent on unallowable activities while simultaneously stating that they need not report time spent on unallowable activities outside of their scheduled workday. The theoretical example in Figure 1 below illustrates what Raytheon recorded and billed (A) against what the courts determined the split of allowable and unallowable time should be (B).

Figure 1.