GENERAL DYNAMICS CORPORATION, and Electric Boat Corporation, Plaintiffs, v. The UNITED STATES, Defendant, 47 Fed. Cl. 514

OPINION LYDON, Senior Judge. These claims, brought under the Contract Disputes Act of 1978 (41 U.S.C. Sec. 601, et seq.), are before the court on plaintiffs’ motion for an order finding jurisdiction and for partial

summary judgment, and on defendant’s cross-motion to dismiss. The initial claim was filed by General Dynamics Corporation (No. 99-45C). The claim of Electric Boat Corporation (No. 99-865C), a wholly-owned subsidiary of General Dynamics Corporation, is based on the same contract and breach of contract theory as the General Dynamics claim and was filed as a protective pleading in response to a jurisdictional issue raised by the Government. The two claims have been consolidated.

Plaintiffs contend that the contract with defendant — to design a nuclear submarine— was breached by a federal statute capping senior executive compensation as an allowable cost under the contract, thereby reducing the amount of costs plaintiffs could recover under the terms of the preexisting contract. Plaintiffs claim damages in the amount of $1,023,000. Defendant asserts that the instant claims should be dismissed because the court does not have jurisdiction over either claim, and, in any event, because the contract was not breached by the subject statute.

For the reasons set forth below, the court finds that it has jurisdiction over the claim of General Dynamics Corporation (No. 99-45C). Accordingly, the protective claim of Electric Boat Corporation (No. 99-865C) is superfluous. The court further holds that the contract at issue has been breached by the Government. Therefore, the court denies defendant’s motion to dismiss the claim of General Dynamics Corporation, while granting defendant’s motion to dismiss (as unnecessary) the protective claim of Electric Boat Corporation. The court also grants General Dynamics Corporation’s motion for

summary judgment on the issue of liability. FACTS General Dynamics Corporation (GDC) is a corporation organized under the laws of Delaware and headquartered in Falls Church, Virginia. GDC and its subsidiaries perform contracts and subcontracts for the United States for the construction of nuclear submarines, surface combatant ships, main battle tanks and other military vehicles, and also manufacture other defense and non-defense items. One of GDC’s business units until 1995 was General Dynamics Electric Boat Division (EBD), located in Groton, Connecticut.

On September 25, 1995 EBD was reorganized by GDC into a wholly owned subsidiary called Electric Boat Corporation (EBC). The certificate of incorporation was filed in the State of Delaware on October 11, 1995. On September 26, 1995, during the period of Electric Boat Division’s reorganization into EBC, Stephen J.

Filan, a contracting officer at the Department of the Navy, Naval Sea Systems Command (NAVSEA), in Arlington, Virginia, sent a solicitation for the development of a design for the Virginia-class nuclear submarine to “General Dynamics / Electric Boat Division” in Groton, Connecticut, requesting the submission of a cost-plus-fixed-fee contract proposal. On November 15, 1995 senior executives of EBC and GDC co-signed an “Authorization for Proposal/Contract” giving Electric Boat Division a green light to bid on the nuclear submarine contract.

This authorization accorded with GDC corporate policy, which delegated authority to GDC’s subsidiaries and other business units to enter into contracts “for, or in the name of, and on behalf of the Company [General Dynamics Corporation]” and required that they obtain approval from GDC headquarters before entering into contracts above certain dollar thresholds. With respect to Electric Boat (whether in the form of EBD or EBC), that dollar threshold was $100 million.

On November 20, 1995, notwithstanding the fact that Electric Boat Corporation had been formed since the contract solicitation was received, a proposal was submitted on letterhead of “GENERAL DYNAMICS, Electric Boat Division.” The proposal was signed by “John K. Welch, President — Electric Boat.” Mr. Welch was President & CEO of Electric Boat Corporation. He was also a Vice President of GDC. On January 29, 1996 the Department of the Navy (NAVSEA), awarded a letter contract, Contract No. N00024-96C-2100 (“Contract -2100”), for the detail design of the Virginia-class nuclear submarine.

The winning contractor was identified on the initial page of the document in Box 7 (Name and Address of Contractor) as “General Dynamics Corporation, Electric Boat Division, Eastern Point Road, Groton, CT 06340.” Signing on behalf of the contractor was “John K. Welch, President & CEO.” As previously discussed, Mr. Welch was President & CEO of EBC, as well as a Vice President of GDC. Signing on behalf of the Government was Stephen J. Filan, the NAVSEA procuring contracting officer located in Arlington, Virginia. The letter contract was definitized in a modification dated May 9, 1996 that was signed by Mr.

Filan and John V. Leonard, Jr., EBC’s Vice President — Finance. The entry for “Name and Address of Contractor” on the first page of the document was again “General Dynamics Corporation, Electric Boat Division ____ Groton, CT ____” The definitization set the total contract price at $1,374,958,371 (including estimated cost, fixed fee and potential performance incentive). The contract does not specify a completion date, but it does contain schedules for installment payments through January 2004 and performance incentive evaluation periods through December 2004.

Thus, it should be noted that the Navy awarded Contract -2100 in the name of General Dynamics Corporation. It was not awarded in the name of Electric Boat Corporation. (Electric Boat Division was never a viable contractor, as will be discussed, infra.) This designation of GDC as the “contractor” was consistent with GDC corporate policy, which authorized subsidiaries and other business units to enter contracts on behalf of GDC. Neither the letter contract at issue nor the definitization thereof has ever been amended to change the name of the contractor.

Meanwhile, prior to the time the letter contract was issued in January 1996, GDC, EBC and the United States had entered into a Novation Agreement on December 11,1995 with respect to 321 government contracts that had previously been awarded to GDC.

In this Agreement the three parties “acknowledge[d] the following facts:” — “As of December 11, 1995, the Transferor (GDC) has assigned, conveyed, and transferred to the Transferee (EBC) all the assets of [GDC’s] Electric Boat Division by virtue of an agreement between [GDC] and [EBC], — [EBC], by virtue of said assignment, conveyance and transfer, has acquired all the assets of [GDC’s] Electric Boat Division. — [EBC], by virtue of said assignment, conveyance and transfer, has assumed all obligations and liabilities of [GDC] under the [aforementioned] Contracts. — [EBC] is in position to fully perform the Contracts and____GDC agrees to guaranty the performance by EBC on all the Contracts and other obligations assigned or transferred to [EBC]. — It is consistent with the Government’s interest to recognize [EBC] as the successor party to the [aforementioned] Contracts.” The Novation Agreement went on to state that “[i]n consideration of these facts, the parties agree that .... — [GDC] ____ does hereby waive, any and all claims, demands and rights against the Government which it now has or may hereafter have in connection with the [321] Contracts. — The Government recognizes [EBC] as [GDC’s] successor in interest in and to the [321] Contracts and all claims, demands and rights thereunder. — [GDC] guarantees payment of all liabilities and the performance of all obligations that [EBC] (

i) assumes under this Agreement or (ii) may undertake in the future [with respect to the 321 contracts].” The Novation Agreement, it should be noted, applied only to contracts in existence on the date of the Agreement — December 11, 1995. It made no provision with respect to post-1995 contracts (like Contract -2100).

On January 22, 1996 GDC executed and delivered to the Government a Guaranty Agreement in which GDC “requested]____ the Government to award contracts to Electric Boat Corporation____” and “agree[d] to guarantee____the full, complete and faithful performances [by EBC] of any and all contracts awarded to [EBC] during calendar year 1996.” Thus, the Guaranty Agreement, by its terms, applied only to contracts awarded to EBC during calendar year 1996. Contract -2100, as aforementioned, was awarded to GDC (Electric Boat Division).

In essence, therefore, the Guaranty Agreement was superfluous with respect to Contract -2100. GDC considered itself the contractor from the outset and has never denied its obligation to ensure and guarantee the performance of the subject contract. Subsequent modifications to Contract - 2100 were inconsistent in their identification of the “contractor.” Thirty-eight modifications were issued by the NAVSEA procuring contracting officer (Mr. Filan) between March 1996 and June 1999 (so-called “P” modifications).

Twenty-two of these modifications identify the contractor as “General Dynamics Corporation, Electric Boat Division.” Twelve modifications, including most of the later ones, identify the contractor as “Electric Boat Corporation, a General Dynamics Company.” Another four modifications identify the contractor as “Electric Boat Corporation.” Additionally, from August 1996 to October 1999 over 200 modifications to the contract were issued by the Navy administrative contracting officer assigned to EBC in Groton, Connecticut (so-called “A” modifications).

These modifications all identify the contractor as “Electric Boat Corporation.” One of the many Federal Acquisition Regulations (FAR) incorporated by reference into the contract was FAR 52.216-7 — ALLOWABLE COST AND PAYMENT (JULY 1991). This regulation (48 C.F.R.

See. 52.216-7(a)(1995)) provided that: “[t]he Government shall make payments to the Contractor when requested as work progresses____in amounts determined to be allowable by the Contracting Officer in accordance with subpart 31.2 of the Federal Acquisition Regulation (FAR) in effect on the date of this contract and the terms of this contract.” FAR subpart 31.2 in effect on the date the parties executed and definitized Contract - 2100 in 1996 defined the allowability and allocability of costs incurred in cost-reimbursement contracts (like Contract -2100) through general provisions including FAR 31.201- 1 (“Composition of total cost”), FAR 31.201- 2 (“Determining allowability”), FAR 31.201- 3 (“Determining reasonableness”), FAR 31.201-4 (“Determining allocability”), and FAR 31.204 (“Application of principles and procedures”), as well as in provisions addressing specific costs (FAR sections 31.205-1 through -52).

None of these provisions imposed any fixed or numerical limitation on the allowability of executive compensation costs with respect to Contract -2100. The only monetary limitation on the allowability of executive compensation costs was the requirement that they be reasonable. FAR 31.205.6(

b) specifically governed the reasonableness of compensation for all personal services. Among the factors to consider were the compensation practices of other firms of like size, in the same industry, in the same geographic area, or engaged in predominantly non-Government work, as well as the cost of comparable services obtainable from outside sources. FAR 31.205-6(b)(1).

For GDC and its subsidiaries the allowability of executive compensation costs is determined by the corporate administrative contracting officer (CACO) — a government contracting officer assigned to GDC’s corporate headquarters — through a discretionary application of the relevant regulations. The CACO’s determination generally follows an audit by the Defense Contract Audit Agency (DCAA). The DCAA conducts periodic compensation system reviews (CSRs) of GDC’s personnel at headquarters and at its business segments.

A CSR is typically performed every second contractor fiscal year and the results are utilized in connection with the examination of the fiscal year for which the CSR was not performed. DCAA reviews executive compensation costs of GDC and its subsidiaries as part of its standard audits of incurred costs. There is typically a lag of several years between the completion of DCAA’s audits and the fiscal years they cover. DCAA issued the fiscal year 1993 CSR on December 4,1996.

DCAA determined therein that compensation costs for the leading executives at GDC headquarters and its Electric Boat Division in fiscal year 1993 were allowable in the following amounts: DCAA also determined that there was additional “unreasonable compensation” of the above headquarters personnel amounting to $1,139,670 and of the above Electric Boat personnel amounting to $200,250. GDC disputed these findings of the 1993 CSR. In early 1999 the CACO and GDC reached a settlement allowing the headquarters compensation costs that had initially been found “unreasonable” in the December 1996 report.

In a letter memorializing this settlement, dated January 27,1999, GDC’s Paul Steckley (Staff Vice President, Internal Audit and Government Accounting) wrote to the (Corporate) Administrative Contracting Officer, Raymond Eichman, that “[t]he purpose of this letter is to confirm our agreement regarding certain General Dynamics costs included in the 1993 Corporate Overhead submittal.....[W]e have agreed that $1,139,670 in questioned compensation costs will be included ____as allowable and allocable costs.” The letter was countersigned by Mr. Eichman.

According to this settlement the allowable compensation costs in 1993 would have risen to $1,950,168 for GDC’s Chairman & CEO and a total of $2,266,449 for GDC’s President & COO and Vice Chairman ($1,227,224 and $1,039,225, respectively).

The record also contains documentation, though incomplete, relating to DCAA’s audit of GDC for calendar year 1992. (The parties have not explained why the 1992 audit was based on the calendar year, while the 1993 audit was based on the fiscal year, or whether one document was simply mistaken.) According to a memorandum dated September 22, 1997, DCAA applied substantially the same cash compensation figures to executives at GDC’s headquarters and business segments for 1992 as it did for 1993 (since GDC apparently did not furnish raw data for 1992) and used the same “cost questioned percentage” from the 1993 audit to calculate questionable executive compensation costs for calendar year 1992.

This resulted in questioned compensation costs totalling $1,077,587 at GDC headquarters and $118,326 at Electric Boat Division. The parties state that the DCAA audit for 1992 is final, though the record does not indicate how this particular dispute was resolved. In any event, DCAA appears to have allowed roughly the same amounts of executive compensation costs to GDC and its business segments for 1992 as it did for 1993. According to the information furnished by the parties, as of the date of oral argument, no further audits have yet been issued for subsequent years.

Executive Compensation Cap On November 18, 1997 the National Defense Authorization Act for Fiscal Year 1998, Public Law No. 105-85, 111 Stat. 1629, was enacted (FY 98 Authorization Act). Sec. 808 of the Act imposed a cap on defense contractors’ allowable costs of “senior executive” compensation by making unallowable all such costs that exceed a “benchmark compensation amount” to be determined annually by the Administrator for Federal Procurement Policy.

The cap applied to “covered contracts” — defined as cost-reimbursement and fixed-price incentive contracts in excess of $500,000 (adjustable every five years to account for inflation) but not to fixed-price contracts without cost incentives or firm fixed-price contracts for the purchase of commercial items. The cap applied to all senior executive compensation costs incurred by defense contractors after January 1, 1998, regardless of whether the contracts were executed after that date or were already in existence prior to January 1,1998.

The term “compensation” was defined as the total amount of wages, salary, bonuses and deferred compensation for the year, whether paid, earned, or otherwise accruing. The term “senior executive” was defined as (

A) the CEO of the contractor or anyone acting in a similar capacity, (

B) the contractor’s other four most highly compensated management personnel, and (

C) in the case of a contractor with components reporting directly to its headquarters, the five highest compensated management personnel at each component. P.L. 105-85, Sec. 808(a), (e), (g); 111 Stat. at 1835, 1837; codified at 10 U.S.C. Sec. 2324(e)(1)(

P) and Sec. 2324(l)(1), (l)(4) and (l)(5). In a Federal Register notice on February 23, 1998, the Administrator for Federal Procurement Policy announced a “benchmark compensation amount” of $340,650 for fiscal year 1998 on allowable costs for senior executive compensation in covered contracts. 63 Fed.Reg. 8981. Thus, the cap limited the allowable compensation costs of any individual “senior executive,” as defined in the Act, to $340,650 in FY 1998. On October 17, 1998 the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999, Public Law No. 105-261, 112 Stat.1920, was enacted (FY 99 Authorization Act). Sec. 804(

a) of this Act amended the definition of senior executives subject to the compensation cap to provide that “the term ‘senior executives’, with respect to a contractor, means the five most highly compensated employees in management positions at each home office and each segment of a contractor.” 112 Stat. at 2083, codified at 10 U.S.C. Sec. 2324(l)(5). On May 26, 1999 the Administrator for Federal Procurement Policy announced a “benchmark compensation amount” of $342,986 for fiscal year 1999 on allowable costs for senior executive compensation in covered contracts. 64 Fed.Reg. 28,529.

This figure represented an increase of 0.7 % above the FY 1998 cap. Meanwhile, on July 24, 1998, EBC’s Vice President — Finance (J. V.Leonard, Jr.) wrote a letter to the Navy’s administrative contracting officer in Groton, Connecticut, protesting the imposition of the FY 1998 executive compensation cap to contracts entered into before the statute’s enactment. Mr.

Leonard stated, in pertinent part, that: “It is our position that the retroactive application of the executive compensation cost cap constitutes a breach of contract by the Government, and General Dynamics plans to file a breach of contract action against the Government as a result of the statute. In order to comply with the statute, Electric Boat Corporation will exclude executive compensation costs above the benchmark amount____[but] nevertheless reserves the right to seek appropriate compensation in the event that the retroactive application of the executive compensation cost cap is determined to be improper.

General Dynamics, and any subsidiary or division thereof, does not by accepting the award of any contract or contract modification acquiesce .... in the retroactive application of

Section 808 of the [FY 98 Authorization Act]____to contracts in existence as of November 18,1997.” On October 5, 1998, GDC’s Senior Vice President — Law (David A. Savner) submitted a “Claim for Breach of [Contract -2100]” under the Contract Disputes Act of 1978(CDA) to the CACO at GDC’s corporate headquarters in Falls Church, Virginia. He certified the claim “on behalf of General Dynamics.” Mr. Savner stated, in pertinent part, that: “the government has breached numerous contracts entered into prior to the effective date of the [FY 98 Authorization Act]..... By applying the new executive compensation cap to contracts entered into before the effective date of

Section 808, the Government is unilaterally reducing the amount it agreed to pay General Dynamics for its efforts and is thereby breaching those contracts. The United States Supreme Court held in United States v. Winstar Corp., 518 U.S. 839, 116 S.Ct. 2432, 135 L.Ed.2d 964 (1996), that the Government is liable for breach of contract when it uses legislation to change the terms of a contractual agreement retroactively under circumstances similar to those present here.....

The Government’s breach of contract with respect to executive compensation costs affects numerous contracts between the Government and General Dynamics’ subsidiaries. As a test case, General Dynamics has selected a contract between the Government and Electric Boat Corporation (“Electric Boat”) that was executed when no compensation cap was in effect. -i 5*» sj» On behalf of General Dynamics, I request a contracting officer’s final decision pursuant to 41 U.S.C. Sec. 605 ....” On December 2, 1998, in a letter to GDC (Attn: Mr. David A. Savner), the CACO, Mr.

Eichman, issued a “Final Decision on Executive Compensation Cap for Contract [-2100]” denying GDC’s claim on the grounds that: “The contracting officer, as a Government official, does not have the authority to waive statutorily imposed requirements; until a law is repealed or declared unconstitutional by the courts, it must be enforced by the contracting officer. ----[T]he CACO for GD[C] must enforce the laws enacted by Congress, including the Executive Compensation Cap imposed by Sec. 808 of P.L. 105-85..... [T]he Executive Compensation Cap applies to .... all of GD[C]’s covered contracts, including the referenced contract awarded to EB[C], GD[C]’s wholly-owned subsidiary.” GDC appealed this decision by filing a complaint for breach of contract in the U.S.

Court of Federal Claims on January 29,1999, in accordance with the provisions of the CDA.

Jurisdictional Dispute In its initial Complaint (No. 99-45C), GDC alleged that it performs contracts and subcontracts for the Government “through various wholly-owned subsidiaries” and that “in matters relating to government contracts and subcontracts the United States considers and has treated General Dynamics as a single entity.” GDC also alleged that “the Navy awarded the subject Contract -2100 to General Dynamics’ wholly-owned subsidiary, Electric Boat Corporation.” In its Answer, filed on April 29, 1999, defendant admitted that GDC performs government contracts through wholly-owned subsidiaries, and that Contract -2100 was awarded to EBC; but defendant denied that it treats GDC as a single entity for government contracting purposes.

In a joint preliminary status report to the court, dated June 8, 1999, the Government stated its position that the court lacks jurisdiction over this lawsuit (Case No. 99-45C) because GDC is not a party to Contract -2100 and, therefore, is not a “contractor” within the meaning of the Contract Disputes Act, 41 U.S.C. Sec. 601(4), 605(

a) and 609(a)(1) (1994). In subsequent status conferences held at the court on June 24, and July 27, 1999, the Government amplified its jurisdictional challenge, asserting that GDC is not a proper plaintiff because EBC, not GDC, is the “contractor.” While protesting that GDC was indeed the proper plaintiff, EBC, in an effort to move the proceedings forward, submitted a separate claim under the Contract Disputes Act on August 5,1999. The claim was sent in the form of a letter from EBC’s Vice President— Finance, John V.

Leonard, Jr., to the deputy administrative contracting officer (DACO) in Groton, Connecticut, Mr. Frederic Roever, who was responsible for the administration of Navy contracts with EBC. In a footnote Mr. Leonard indicated that “Electric Boat is filing this claim in order to remove the jurisdictional issue as an impediment to addressing the substantive Winstar issues in the case.” On August 20, 1999 Mr. Roever forwarded the EBC claim to the CACO at GDC headquarters in Falls Church, Virginia, Charles Davis (successor to Raymond Eichman). In an accompanying memorandum Mr.

Roever stated that “[i]n the division of contract administration responsibilities [between the CACO at GDC’s headquarters and the DA-COs at GDC’s operating units, pursuant to a Memorandum of Agreement dated April/May 1997] ____ the function of Executive Compensation was assigned to the CACO. Therefore ____I am forwarding [the Leonard letter] to you____for appropriate action.” By letter dated August 25,1999, the CACO wrote back to Mr. Leonard, stating that: “I am the cognizant contracting officer with authority____to issue a final decision in connection with this claim.

However, in light of the pending litigation in General Dynamics Corp. v. United States, No. 99-45C (Fed.Cl.), I am precluded by 28 U.S.C. Sec. 516 from issuing a final decision upon this claim. Accordingly, I am returning the claim to you without action.” (28 U.S.C. Sec. 516 provides that “[e]xcept as otherwise authorized by law, the conduct of litigation in which the United States----is interested____is reserved to officers of the Department of Justice, under the direction of the Attorney General.”) No final decision was issued on EBC’s claim by either the CACO or the DACO.

Accordingly, on October 7,1999, immediately following the 60-day time period prescribed in the Contract Disputes Act for a final decision by the contracting officer, 41 U.S.C. Sec. 605(c)(5), EBC filed a complaint in this court (No. 99-865C).

EBC characterized its complaint as “a timely appeal of the designated Administrative Contracting Officer’s deemed denial of Electric Boat’s claim.” GDC then filed an Amended Complaint in case No. 99-45C, dated October 8, 1999, alleging that Contract -2100 was awarded not to GDC’s subsidiary, EBC, but to “General Dynamics Corporation, Electric Boat Division.” Defendant answered by denying that Contract -2100 was awarded to “General Dynamics Corporation, Electric Boat Division” and affirming that the contract was awarded to EBC.

Defendant also denied that GDC performs government contracts “through various wholly owned subsidiaries,” but admitted that “wholly owned subsidiaries of [GDC], such as the Electric Boat Corporation,” perform such contracts. (Emphasis added.) Following another status conference on November 4, 1999, the cases of GDC and EBC were consolidated by judicial order on November 5, 1999. Oral argument was held on June 14, 2000. DISCUSSION The questions presented by these cases are basically twofold: I. Which corporate entity — GDC or EBC— is the contractor?

Does the court have jurisdiction over either or both of these plaintiffs? II. Did the enactment and implementation of the statutory cap on allowable senior executive compensation costs constitute a breach of Contract -2100? I. Identity of the Contractor / Jurisdiction Plaintiffs assert that the first page of Contract -2100 clearly identifies “General Dynamics Corporation” as the “contractor,” and that this designation has never been changed by contract modification or otherwise.

This fact establishes the court’s jurisdiction over the instant claim of GDC under the Contract Disputes Act (on appeal from the contracting officer’s final decision). Moreover, plaintiffs argue that the Government has consistently treated GDC and its subsidiaries as a single entity for government-contracting purposes.

In the alternative, plaintiffs contend that if the court concludes it does not have jurisdiction over the GDC case because GDC is not the contractor, then it has jurisdiction over the EBC case because of the Government’s judicial admissions (in its answers to GDC’s amended complaint and EBC’s complaint, the status conference of June 24, 1999, its briefs on the jurisdictional issue, and at oral argument) that EBC is the contractor. Accordingly, plaintiffs argue that the court has jurisdiction over one case (No. 99^15C) or the other (99-865C), and should not dismiss both of them.

The Government argues that both claims must be dismissed by the court for lack of jurisdiction. This argument is based on the contention that EBC, not GDC, is the party with whom NAVSEA entered into Contract - 2100. If GDC is not in privity of contract with the Navy (i.e., not the contractor in Contract -2100), then it has no legal grounds on which “to maintain a suit as a contractor against the government under the [CDA, 41 U.S.C. Sec. 609].” Thomas Funding Corp. v. United States, 15 Cl.Ct. 495, 501 (1988).

Until GDC’s present lawsuit is dismissed by the court, however, the Government argues that EBC is also precluded from pursuing any legal remedies by 28 U.S.C. Sec. 516 (1994), which reserves “the conduct of litigation in which the United States .... is interested ____to officers of the Department of Justice, under the direction of the Attorney General.” This means that the Navy contracting officer had no authority to issue a final decision on EBC’s administrative claim for breach of contract, since the matter was already in litigation and thus within the exclusive province of the Department of Justice.

See Sharman Co., Inc. v. United States, 2 F.3d 1564, 1571 (Fed.Cir.1993). Accordingly, the lack of a final decision on EBC’s claim from the contracting officer within 60 days would not constitute a “deemed denial” conferring jurisdiction on this court under 41 U.S.C. Sec. 605(c)(5). In sum, the Government maintains that the GDC and EBC claims must both be dismissed, after which EBC, as the contractor, can institute a brand new action under the CDA by filing another administrative claim with the contracting officer. Which Corporation is the Contractor?

To determine which corporation— GDC or EBC — is the contractor entitled to institute an action in this court, we must look first to the language of the contract instrument. If the provisions of a contract are clear and unambiguous, a court will give them their plain and ordinary meaning and will not resort to parol evidence. Wright Runstad Properties Ltd Partnership v. United States, 40 Fed.Cl. 820, 824 (1998).

If the contract language can be interpreted in two different and reasonable ways, however, then it is ambiguous and factors outside the contractual terms can be taken into account to aid the court in interpreting the instrument. In a case of ambiguity, the court can look at all the relevant circumstances surrounding the transaction to discover the parties’ underlying intention, including the conduct of the parties before the advent of the controversy, oral statements, writings, and other conduct by which the parties manifested their assent. KMS Fusion, Inc. v. United States, 36 Fed.Cl. 68, 76-77 (1996).

Plaintiffs’ Case With respect to Contract -2100, plaintiffs argue that the language of the contract instruments clearly and unambiguously identifies GDC as the contractor. “General Dynamics Corporation” is identified as the “contractor” in the appropriate space on page 1 of the letter contract (Box 7: Name and Address of Contractor). “Electric Boat Corporation” does not appear in that box.

The fact that “Electric Boat Division” is appended to the designation “General Dynamics Corporation” is legally inconsequential because an unincorporated division does not have a legal status independent of the corporation. “A division of a corporation is not a separate entity but is the corporation itself.” In re Sugar Industry Antitrust Litigation, 579 F.2d 13, 18 (3d Cir.1978); accord, Western Beef, Inc. v. Compton Investment Co., 611 F.2d 587, 591 (5th Cir.1980).

Thus, the appearance of “Electric Boat Division” and its Groton, Connecticut address (where the contract was to be performed) on the letter contract added nothing to the only designation in the box for “Name and Address of Contractor” with legal import — “General Dynamics Corporation.” The contract definitization in May 1996 contained exactly the same entry for “Name and Address of Contractor,” thus confirming GDC’s status as the contractor. Moreover, the contract was never amended by modification or otherwise to change the name of the contractor from GDC to EBC.

So General Dynamics Corporation remains the contractor of record to this day. Notwithstanding their position that the identity of the contractor is clearly established on the face of the contract, plaintiffs also refer to extrinsic evidence in support of their view that GDC is the contractor. Plaintiffs contend that the Government has consistently treated General Dynamics Corporation and its wholly-owned subsidiaries as a single entity for contracting purposes. According to Paul W.

Steckley, GDC’s Staff Vice President for Internal Audit (Steckley affidavit at 1), there was: “a tacit agreement and long-standing practice between General Dynamics and the Government under which the Government treats General Dynamics and its several subsidiaries and divisions, including Electric Boat Corporation, as a single entity and as a unified business enterprise.” As evidence thereof plaintiffs cite, among other things, the Memorandum of Agreement between the Defense Department and GDC (“General Dynamics CACO / DACO Agreement”) which specifies the respective responsibilities of the CACO at GDC headquarters and the DACOs assigned to GDC’s business units and subsidiaries in the administration of contracts.

Pursuant to this agreement the Government assigns several contracting officers and auditors to GDC’s corporate headquarters to carry out administrative functions pertaining to GDC as a whole as well as to individual wholly-owned subsidiaries. Among the tasks performed from GDC headquarters are the government audits of corporate-wide executive compensation costs.

When GDC filed its administrative claim under the Contract Disputes Act in 1998, alleging breach of Contract -2100 with respect to allowable senior executive compensation costs, the CACO at GDC headquarters considered the claim on the merits and issued a final decision denying it without raising any question as to whether GDC was the proper claimant.

Indeed, in his final decision the CACO stated that the “Executive Compensation Cap applies to____all of GD[C]’s covered contracts, including the referenced contract awarded to EB[C].” Thus, the CACO identified the EBC contract (Contract -2100) as a GDC-covered contract. Similarly, when EBC filed its administrative claim in 1999 with the DACO at Groton, Connecticut, the DACO conveyed the claim to the CACO because it fell within the latter’s functional responsibility.

In his subsequent letter to EBC the CACO stated that “I am the cognizant contracting officer with authority, pursuant to FAR subparts 1.6 and 42.6, to issue a final decision in connection with this claim.” Thus, the CACO at GDC headquarters asserted jurisdiction over the claim filed by the parent, GDC, as well as that filed by its subsidiary, EBC, thereby confirming his previous statement that the EBC contract was one of GDC’s contracts.

In essence, plaintiffs assert that both the Government and GDC recognized the Electric Boat facility as the performing entity in Contract -2100, but GDC as the ultimately responsible contractor. An unrelated CDA claim instituted by GDC in 1997 — based on three government contracts held by GDC’s wholly-owned subsidiary, Land Systems, Inc. — offers additional evidence of GDC’s “single entity” treatment by the Government. Land Systems, Inc., like EBC, is a corporate subsidiary of GDC.

The 1997 claim, filed in the name of General Dynamics Corporation, sought the payment of moneys due under the Land Systems contracts which had been withheld by the Government to pay an alleged debt of GDC (arising from a tax refund to GDC from the State of California). The contracting officer (CACO) did not contend that GDC was not the contractor or that the administrative claim should have been filed by Land Systems, Inc.

Following a deemed denial of the administrative claim, GDC appealed to the Armed Services Board of Contract Appeals (ASBCA No. 51045), which also raised no jurisdictional question before the claim was settled. Thus, as in the GDC and EBC claims at issue here, the cognizant contracting officer (as well as the ASBCA) in that earlier claim treated GDC as the contractor for purposes of the Contract Disputes Act, even though the subject contracts were held by a GDC subsidiary.

During the above-described litigation (involving Land Systems, Inc.) before the ASBCA, GDC took the deposition of the staff accountant at the Defense Finance and Accounting Service (DFAS) responsible for the collection of amounts allegedly due the Government from GDC. This official testified that the Government’s practice was to collect money owed by GDC from any one of its subsidiaries or business units. In that case the $8.945 million allegedly owed by GDC was withheld from three invoices submitted to the Government by Land Systems, Inc. The DFAS official, Emma J.

Carter, testified that the Government had first tried to collect the money from Electric Boat Corporation, but was unable to do so due to administrative complications. As she explained in her deposition (Deposition of Emma J. Carter at 113 and 173): “I was trying to take the offset against any General Dynamics Corporation. It didn’t have to be Electric Boat.” “General Dynamics is a very large corporation..... I was identifying some cage codes where there may be some invoices to offset for that amount.....

It could have been from any General Dynamics contract.” There is no evidence that GDC’s objection to the Government’s action had anything to do with the fact that a subsidiary (as opposed to the parent) was targeted for the withholding. As further evidence of the Government’s treatment of GDC and its subsidiaries as a single entity for contracting purposes, GDC points to the 38 modifications of Contract - 2100 issued between March 1996 and June 1999 by the NAVSEA procuring contracting officer in Arlington, Virginia.

Only four of the modifications identified the contractor as simply “Electric Boat Corporation.” These were issued in March and May 1996, December 1997 and April 1998. Twenty-two modifications were issued between the spring of 1996 and September 1998 in the name of “General Dynamics Corporation, Electric Boat Division.” Twelve modifications were issued in the name of “Electric Boat Corporation, a General Dynamics Company” — the first in February 1997, the next three in December 1997, and the last eight between September 1998 and June 1999.

According to the plaintiffs “[t]his almost random issuance of contract modifications to one entity or the other demonstrates that the Government is completely indifferent as to the precise corporate designations and treats all of General Dynamics and Electric Boat as a single integrated enterprise.” (Plaintiffs’ Motion for Order Finding Jurisdiction at 10-11.) Plaintiffs acknowledge that payments for work performed on Contract -2100 are made to EBC, not GDC. According to GDC Vice President Paul Steckley, however, the payments in practical effect go directly to GDC.

Government payments on contracts performed by GDC subsidiaries are deposited into “bank accounts listed in the name of the subsidiary but owned by General Dynamics.” GDC transfers “substantially all” of these funds into a central account daily. So payments on Contract -2100 accrue directly to the benefit of GDC.

In addition, GDC covers all of the costs incurred by EBC in performing the contract, since EBC commands no separate funds to pay for its own expenses. (Steckley affidavit at 4.) Government’s Case Defendant argues that Contract -2100 is ambiguous on its face as to the identity of the party with whom the Government entered into the contract. The letter contract of January 1996, while identifying the contractor in Box 7 as “General Dynamics Corporation Electric Boat Division,” was signed by “John K Welch, President & CEO.” Mr.

Welch was President & CEO of EBC, not GDC (where he was only a Vice President), which suggests to the Government that Welch was purporting to act on behalf of EBC in signing the contract. The same ambiguity, defendant argues, appears in the contract definitization of May 1996. There the contractor is likewise identified as “General Dynamics Corporation Electric Boat Division,” but the document is signed by an officer of EBC, Vice President John V. Leonard, Jr. (Defendant neglects to mention, however, that according to GDC corporate policy Mr.

Welch was acting “on behalf of GDC” and with GDC’s express permission.) The Government points out a couple of provisions in these two contract instruments which in its view cast further uncertainty on GDC’s claim to be the contractor.

Thus, the letter contract (page 42) contains a definition stating that “DESIGN YARD — means Electric Boat Corporation (EB) (emphasis in the original) in its capacity as Design Yard, not in its capacity as shipbuilding contractor (emphasis added).” In addition, the contract definitization (page 6) contains a clause under “H-8 Special Provision Concerning Divested Division Costs” with the words “[t]he contractor’s parent company, General Dynamics Corporation (emphasis added).” (These references to EBC as the “shipbuilding contractor” and GDC as “the contractor’s parent company,” however, do not detract from the distinction, previously discussed, that EBC is the performing entity while GDC, which provides the funding and covers the costs in Contract -2100, is the ultimately responsible contractor.) As for the myriad contract modifications issued in subsequent years, the Government acknowledges that many of the “P” modifications were in the name of “General Dynamics Corporation Electric Boat Division,” but points out that they were executed by EBC officials without any indication that they were acting on behalf of GDC.

In addition, the remaining “P” modifications, as well as all of the “A” modifications, were issued in the name of EBC and signed by EBC officials. (Under GDC corporate policy, however, EBC officials were acting “on behalf of GDC.”) In further support of its assertion that the designation of GDC as the contractor in documents pertaining to Contract -2100 is a mistake, the Government has submitted a declaration dated November 9,1999 from the NAVSEA procuring contracting officer, Stephen J. Filan. Mr.

Filan issued the solicitation for Contract -2100, was a member of the contract negotiation team, and signed the final contract and subsequent modifications on behalf of NAVSEA. Mr. Filan asserts that “General Dynamics Corporation Electric Boat Division” was incorrectly identified as the contractor in the letter contract of January 1996 and the contract definitization of May 1996, as well as in 22 contract modifications between March 1996 and September 1998. Mr. Filan states that he intended to award the contract and issue all subsequent modifications to Electric Boat Corporation, not General Dynamics Corporation.

According to Mr. Filan, all of the corporate representatives with whom he and the other NAVSEA team members negotiated the letter contract and definitization were officials of Electric Boat Corporation, and none of them purported to be acting on behalf of GDC. By itself the Filan declaration, since it postdated the commencement of the instant litigation, would be of minimal evidentiary weight. “Only the action of the parties before a controversy arises is highly relevant in determining what the parties intended.” Dynamics Corp. v.

United States, 182 Ct.Cl. 62, 389 F.2d 424, 430 (1968), quoting Northbridge Electronics, Inc. v. United States, 175 Ct.Cl. 426, 438,1966 WL 8866 (1966) (emphasis added). Filan does cite some documentation in the record that meets this temporal requirement, and which he maintains supports the view that the Navy intended to contract with EBC.

For example, in an internal Navy document dated January 6, 1996 Filan requested approval from NAVSEA’s Deputy Commander for Contracts (granted on January 16,1996) “to enter into an undefinitized contract action (UCA) in the form of a letter contract (N00024-96-C-2100) with Electric Boat Corporation ____” (emphasis added). (The letter contract that followed, however, was in actuality with GDC, Electric Boat Division.) Also, on May 1, 1996, EBC’s Director of Contracts and Estimating, D.R.

Banks, executed a “Certificate of Current Cost or Pricing Data” in support of Contract -2100 on behalf of Electric Boat Corporation. (This document cannot obscure the fact, however, that all contract costs were ultimately paid by GDC.) As for the modifications to Contract -2100 in succeeding years, Filan points out that most of the 38 modifications issued by the NAVSEA procuring contracting officer in Arlington, Virginia (Mr.

Filan), were signed on behalf of the contractor by senior officers of EBC. (A number were issued unilaterally by NAVSEA and bore no contractor signature.) As for the more than 200 modifications issued by the administrative contracting officer in Groton, Connecticut, virtually all were signed on behalf of the contractor by EBC officials. (A few of these were also issued unilaterally by the Navy and bore no contractor signature.) None of the modifications, whether from Arlington or from Groton, were signed by GDC representatives. (Once again, though, the Government’s emphasis on EBC officials’ involvement in the contract negotiation and modification process does not alter the fundamental relationship among the parties — ie., that EBC is the performing entity, but that GDC, which pays the bills and is responsible for the contract’s completion, is the ultimately responsible contractor.) As further evidence that EBC, not GDC, was the intended contractor, the Government cites the Novation Agreement executed by GDC, EBC and the United States in December 1995 and the Guaranty Agreement executed by GDC and delivered to the Government in January 1996.

The Novation Agreement, as previously discussed, acknowledged the transfer by GDC of all the assets of the former Electric Boat Division, including 321 government contracts, to EBC and recognized EBC as GDC’s successor in interest to the contracts. The Agreement does not cover Contract -2100, however, since it only applied to contracts in existence on December 11, 1995. Nevertheless, the Government argues that the intent of the parties to the Novation Agreement was to invest the newly-formed EBC with all future shipbuilding activities since EBC, not GDC, was the only entity capable of performing such contracts.

Moreover, in the Guaranty Agreement executed one week before the award of Contract -2100, GDC specifically requested the Government to award contracts to EBC and guaranteed the performance by EBC of any such contracts awarded in 1996.

This Agreement, in the Government’s view, contradicts plaintiffs’ assertion that GDC, rather than EBC, was the Navy’s intended contracting partner in Contract -2100. (Together, however, the Novation and Guaranty Agreements serve merely to confirm that EBC was the performing entity while GDC was the party looked to by the Government as the ultimately responsible contractor.) Finally, the Government cites the letters from GDC and EBC senior executives to the Navy, initiating their respective administrative claims under the Contract Disputes Act, as acknowledging that EBC is the contractor in Contract -2100.

Thus, in his letter dated October 5, 1998, GDC’s Senior Vice President — Law, David A. Savner, wrote that “[a]s a test case, General Dynamics has selected a contract between the Government and Electric Boat Corporation.” (As previously noted, though, Mr. Savner also certified this claim “on behalf of General Dynamics.”) In the subsequent letter of EBC’s Vice President — Finance, John V.

Leonard, Jr., dated August 5, 1999, reference is made to “contract number N00024-96-C-2100, which the Department of the Navy awarded to Electric Boat ____” (It should be borne in mind, however, that this letter was written only after the Government raised its jurisdictional objection to GDC’s claim and only for the purpose of initiating EBC’s protective action in this court.) Based on this documentary evidence and all the circumstances surrounding the award of Contract -2100, the Government argues that the intended contractor was EBC, not GDC.

The identification of GDC as the contractor in various contract documents, therefore, was allegedly a mistake. The Government contends that the court “should disregard that drafting error and construe the contract as one between the Government and EBC, in accordance with the parties’ intent, as opposed to what they wrote.” (Def. Opp. to Pl. Mot. for Order Find. Juris. at 30.) What the Government is seeking, in effect, is a reformation of the subject contract.

Reformation is a contract remedy which courts may grant in order to conform the parties’ written agreement with their antecedent intent, that is, with the agreement that actually was reached. Thus, reformation, for the most part, is concerned with mistakes in expression, as in the case of the omission of an agreed-upon term, or the inclusion of a term not agreed upon or the incorrect reduction of a term to writing. E. Allan Farnsworth, Contracts, Sec. 7.5 at 468 (1982); see also American Telephone and Telegraph Co. v. United States, 32 Fed.Cl. 672, 681 (1995). As further explained by Arthur L.

Corbin, “One who files a bill for reformation of a contract usually asserts that the written words do not express to others the meaning that he was trying to express; that he fully expressed that meaning outside the four corners of the document; and that the other party understood him, knew that meaning, and assented. He asks the court to interpret those extrinsic expressions and to make them legally effective. This is what the court does when it decrees reformation.” 3 Arthur L. Corbin, Corbin on Contracts, Sec. 540 at 84-87 (1960 and Supp.1992); see also George Hyman Construction Co. v.

United States, 30 Fed.Cl. 170, 174 (1993). As will be discussed, infra, the facts of this case do not warrant the reformation of Contract -2100. Conclusion: GDC is the Contractor After careful consideration of all the foregoing evidence, the court concludes that the Navy’s contracting partner in Contract - 2100 is General Dynamics Corporation.

The cardinal facts are: (1) the Navy made the contract offer to GDC (Electric Boat Division), (2) the company authorized the contract to be negotiated “on behalf of [GDC ],” and (3) the contract instruments (letter award and definitization) identify GDC, not EBC, as the contractor. That designation has never been changed, despite the Government’s assertion that it was a drafting error. The court recognizes that the actual entry on the contract documents was “General Dynamics Corporation, Electric Boat Division,” which was partially in error insofar as the Electric Boat Division no longer existed.

As previously noted, however, the unincorporated Electric Boat Division was not a legal entity separate and apart from its parent, GDC (In re Sugar Antitrust Litigation, supra ). So the only entry with legal import in the “Name and Address of Contractor” box was “General Dynamics Corporation.” The significance of the address that followed in the box was in identifying the Electric Boat design yard in Groton, Connecticut, as the GDC facility where the contract was to be performed.

If the Navy sincerely believed that GDC was not the contractor, it would surely have acted more quickly and with more conviction to correct the alleged “mistake” in the letter contract and insure that EBC was identified as the contractor in all subsequent documentation. Errors like this, if viewed as significant, are cured by official contract modifications. They should not be allowed to serve as a spawning ground for future litigation at the whim of one party.

In this case, the Government’s claim of “drafting error” in January 1996 is unpersuasive in view of the fact that this same “error” was made in the definitization of the contract in May 1996 and in no less than 22 contract modifications up to September 1998. During this time the identity of the contractor was not an issue, but there was no question that the Government looked to GDC to ensure the funding and completion of the contract.

Only after the instant litigation began in this court, three years after the contract was executed, did the Government adopt the unequivocal stance that EBC, rather than GDC, was the contractor. To this very day, however, there is no evidence that the Navy has made any effort to amend the contract documents to identify EBC, rather than GDC, as the contractor. Thus, the Government’s conduct cannot be reconciled with its contention that EBC was the intended contractor all along (see Northbridge Electronics, supra).

In the court’s view, the Navy’s conduct with respect to Contract -2100 accords fully with plaintiffs’ assertion that the Government, per “tacit agreement and longstanding practice” with GDC, “treats General Dynamics and its several subsidiaries and divisions, including Electric Boat Corporation, as a single entity and as a unified business enterprise” for contracting purposes (Steckley affidavit at 1-2). Lending further credence to this “one entity” contracting practice are (

a) the statements by the contracting officer assigned to GDC headquarters in 1999 that Contract -2100 was a “GD[CJ covered contract” and that he had decisional authority over the CDA administrative claims of both GDC and EBC, (

b) the Government’s acknowledgement of GDC as the “contractor” in the unrelated CDA claim in 1997-98 involving contracts performed by another GDC subsidiary, Land Services, Inc., and (

c) the Government’s practice, evident in that prior CDA claim, of collecting moneys owed by GDC out of the contract balances of any of the company’s subsidiaries or business units. The Government had an established working relationship with GDC and its Electric Boat Division that long predated the creation of EBC. It is clear that all contracts involving the former Electric Boat Division (EBD) were executed in the name of GDC, since EBD was not a legal entity capable of entering a contract. EBD was GDC’s performing arm in contracts for the construction of naval ships, but GDC was the contractor.

The record indicates that this relationship continued unchanged in Contract -2100, notwithstanding the fact that the new corporate entity, EBC, had replaced EBD. The entry for “name of contractor” — in both the letter contract and the definitization — was not Electric Boat Corporation, but General Dynamics Corporation. Below that was entered the name of GDC’s traditional performing arm — Electric Boat Division — and its address (Groton, CT). What this demonstrates to the court is that the Navy did not intend in Contract -2100 to change its established pattern of dealing with GDC.

It continued to regard GDC as its contracting partner, and the Electric Boat facility in Groton, Connecticut, as the performing entity. That the Navy dealt exclusively with EBC officials in negotiating and later modifying the contract is of little consequence, in the court’s view, since prior shipbuilding contracts were presumably negotiated and modified in a like manner with representatives of EBD. As previously discussed, GDC subsidiaries and divisions had authority to negotiate contracts “on behalf of the Company” (GDC), subject to approval from the GDC home office for contracts over certain threshold amounts.

The Novation and Guaranty Agreements are cited by defendant as evidence that both the Government and GDC intended to transfer all Navy shipbuilding activities and contracts from GDC’s Electric Boat Division to EBC. But the Novation Agreement applied only to pre-1996 contracts, and though the Guaranty Agreement requested that the Government award additional contracts to EBC in 1996, the contract awarded on January 29, 1996 (Contract -2100) was not in the name of EBC, but rather GDC (Electric Boat Division).

If the Navy’s intention pursuant to the Guaranty Agreement was to contract strictly with EBC — ie., to the exclusion of GDC — it is inexplicable how it could issue a contract one week later in the name of GDC. The Navy’s conduct, both in the immediate aftermath of the Guaranty Agreement and in succeeding years, contradicts its belated assertion that it did not regard GDC as its contracting partner in Contract -2100.

What the Guaranty Agreement indicates to this court is that the Navy wanted to make sure that GDC, which would continue to provide the funds for and reap the payments on all future contracts performed by EBC, remained ultimately liable for the performance of contracts by its Electric Boat subsidiary. In short, the designation of “General Dynamics Corporation” as the “contractor” in the letter contract and the subsequent definitization is persuasive evidence that the Navy still considered GDC to be its contracting partner. For the foregoing reasons, the court finds no grounds for contract reformation in this case.

The evidence of record does not corroborate the Government’s assertion that the designation of GDC as the “contractor” in the letter contract and definitization was a mistake. To the contrary, the Navy’s conduct then and in succeeding years under Contract -2100 manifested the intent to continue dealing with GDC and its Electric Boat facility as it had in the past — with GDC as its contracting partner and the Electric Boat facility as GDC’s performing entity.

The Navy’s conduct was in accord with, not in conflict with, the terms of the contract that listed the contractor as “General Dynamics Corporation, Electric Boat Division.” Accordingly, there is no basis to conclude that the parties had a different antecedent intent than that expressed in the written agreement. Contract reformation, therefore, is not in order. GDC is the Real Party in Interest Quite apart from the foregoing discussion, GDC is the real party in interest in this litigation. Rule 17(

a) of the Court of Federal Claims provides that: “Every action shall be prosecuted in the name of the real party in interest.” RCFC 17(a). The rule does not define real party in interest, but there is ample legal authority on this subject. “Real parties in interest are the persons or entities possessing the right or interest to be enforced through the litigation.” Moore’s Federal Practice, 3d ed., Vol. 4, Sec. 17.10[I]. See Cinema North Corporation v. Plaza at Latham Associates, 867 F.2d 135, 139 (2d Cir.1989), in which the court held that the guarantor on a proposed lease agreement who had the legal right to enforce the lease agreement was a real party in interest under Rule 17(

a) of the Federal Rules of Civil Procedure, FRCP 17(a). “A real party in interest is one who has a real, actual, material, or substantial interest in the subject matter of the action.” 59 Am.Jur.2d, Sec. 36 at 431. “Real party in interest status requires that the plaintiff have a present and substantial interest in the relief sought.” Id. See H.F. Allen Orchards, et al. v.

United States, 749 F.2d 1571, 1576 (Fed.Cir.1984), in which the court held that farmers who were the owners of water supplied from a federal irrigation project, and who were beneficiaries of the project, were the real parties in interest (with standing to sue the Government for an alleged breach of contract) under RCFC 17(a), not the local irrigation district which was acting as a surrogate for the farmers in contracting with the relevant federal agency. Contract -2100, at issue in this litigation, is a cost-type contract under which GDC covers all of the incurred performance costs.

Moreover, all payments from the Government pass through EBC to GDC, and GDC is ultimately liable for the contract’s performance. So GDC has substantial legal and pecuniary interests in the contract — it bears responsibility if the contract is not properly performed and it will reap the profit or bear the loss on the contract. Consequently, GDC is materially affected by any diminution of allowable executive compensation costs to which it is entitled under Contract -2100 and it has a substantial interest in the relief sought in this litigation. GDC, therefore, is the real party in interest in this action.

Accordingly, filing the initial complaint (No. 99-45C) in the name of GDC was procedurally sound under RCFC 17(a). The complaint later filed by EBC (No. 99-865C) is superfluous. For the purpose of this litigation, therefore, the court determines that the real party in interest and proper plaintiff is General Dynamics Corporation.

The Court has Jurisdiction of GDC’s Claim Having determined that General Dynamics Corporation is the contractor and real party in interest in Contract -2100, the court finds that it has jurisdiction under the Contract Disputes Act of GDC’s instant claim (No. 99-45C), which was duly filed in this court under 41 U.S.C. Sec. 609(

a) following the contracting officer’s final decision denying GDC’s administrative claim. The later-filed protective claim of EBC (No. 99-865C) — identical to the GDC claim in every respect — was filed as an alternative, not an addition, to the GDC claim for the express and sole purpose of overcoming the jurisdictional challenge raised by the Government. Its purpose is rendered moot by the court’s finding of jurisdiction with respect to GDC. Accordingly, the complaint of Electric Boat Corporation (No. 99-865C) can be dismissed, without prejudice.

Hereinafter, the use of the term “plaintiff’ applies exclusively to GDC. It is worth pointing out that the court’s finding of jurisdiction with respect to GDC’s complaint works no hardship or disadvantage on either plaintiffs or defendant.

As noted previously, neither side asserts that GDC would be entitled to a larger damages award than EBC. (Indeed, the plaintiffs have indicated that it makes no difference to them whether GDC or EBC is recognized as the proper plaintiff, as long as the court does not dismiss both claims.) The only mutually acknowledged difference with respect to a possible award is in the interest calculation under the Contract Disputes Act, but this difference is unlikely to be substantial considering the relatively small scale of the contract dispute at issue. (See Note 3, supra.) Furthermore, it would serve no useful purpose, and would fly in the face of judicial economy and rationality, for the court to dismiss both of the actions currently pending, especially since it is undisputed that a valid contract exists which has been the subject of an administrative claim and final decision by the contracting officer.

II. Liability — Was There a Breach of Contract? Plaintiff alleges that the enactment of

Section 808 of the FY 98 Authorization Act (P.L. 105-85, 111 Stat. 1629), which applied a retroactive cap on senior executive compensation costs, breached Contract -2100 because the cap imposed by the Act — $340,650 for 1998 and $342,986 for 1999 — is well below the executive compensation costs plaintiff incurred and regularly recovered prior to the Act, and but for the Act would have continued to receive under the applicable federal acquisition regulation, FAR 52.216-7 — ALLOWABLE COST AND PAYMENT.

This regulation was incorporated by reference into Contract -2100 and provided that payments were to be made by the Government to the contractor “in amounts determined to be allowable by the Contracting Officer in accordance with subpart 31.2 of the Federal Acquisition Regulation (FAR) in effect on the date of this contract and the terms of the contract.” (Emphasis added.) With the implementation of

Section 808, the contracting officer was no longer able to determine allowable amounts “in accordance with [FAR] subpart 31.2 ____in effect on” January 29, 1996, the date the letter contract was executed (or May 9,1996, the date the contract was definitized). The Government concedes that “under the cost standards prescribed by [FAR Subpart 31.2, effective in 1995-96] the allowable costs of GDC’s five most highly compensated senior executives incurred in 1998 exceed the benchmark compensation amount for fiscal year 1998 established by the Administrator [for Public Procurement Policy] pursuant to the

Section 808 Compensation Cap.” (Defendant’s Opposition to Plaintiffs Motion for Partial

Summary Judgment at 13.) Accordingly, there is no dispute between the parties that the statutory compensation cap of the FY 98 Authorization Act reduced the amount of money GDC would have received from the Government for executive compensation costs in 1998.

The Government argues that the cap does not constitute a breach of contract, however, “[b]ecause Contract -2100 does not contain an unmistakable promise that the Government will not exercise its sovereign authority to enact legislation that alters the extent to which senior executive compensation costs are allowed as indirect costs on Government contracts.” Id. at 14. In analyzing whether a particular exercise of sovereign authority breaches a contract between the government and a private party, two longstanding doctrines applicable to contracts with the sovereign come into play.

One is the sovereign acts doctrine, which excuses the government from performing a contractual obligation if performance is rendered impossible by a public and general sovereign act. The doctrine originated in the Court of Claims during the 19th century and was first enunciated in Jones v.

United States, 1 Ct.Cl. 383, 384, 1865 WL 1976 (1865), in which the court stated that “Whatever acts the government may do, be they legislative or executive, so long as they be public and general, cannot be deemed spedally to alter, modify, obstruct or violate the particular contracts into which it enters with private persons.” The doctrine was recognized by the Supreme Court in Horowitz v.

United States, 267 U.S. 458, 461, 45 S.Ct. 344, 69 L.Ed. 736 (1925), which noted that “[i]t has long been held by the Court of Claims that the United States when sued as a contractor cannot be held liable for an obstruction to the performance of the particular contract resulting from its public and general acts as a sovereign.” More recently, the Federal Circuit reiterated this principle in similar language: “Under the sovereign act doctrine, the United States as contractor will not be held responsible for the acts of the United States as sovereign.” Hughes Communications Galaxy, Inc. v.

United States, 998 F.2d 953, 958 (Fed.Cir.1993). The other pertinent doctrine bearing on contracts between the government and a private party is the unmistakability doctrine, which also had its genesis in the 19th century. In a line of cases extending back to the 1830s the Supreme Court has repeatedly held that a government will not be deemed in a contract to surrender a sovereign power unless it does so unmistakably. As expressed in Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 148, 102 S.Ct. 894, 71 L.Ed.2d 21 (1982), and Bowen v.

Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986), “sovereign power, even when unexercised, is an enduring presence that governs all contracts subject to the sovereign’s jurisdiction, and will remain intact unless surrendered in unmistakable terms.” The Supreme Court recently synthesized its view of the unmistakability doctrine in United States v.

Winstar Corporation, et al., 518 U.S. 839, 878, 116 S.Ct. 2432, 135 L.Ed.2d 964 (1996), stating that the “collective holding [of 19th and 20th century cases] is that a contract with a sovereign government will not be read to include an unstated term exempting the other contracting party from the application of a subsequent sovereign act (including

an Act of Congress), nor will an ambiguous term of a grant or contract be construed as a conveyance or surrender of sovereign power.” The application of these two doctrines by federal courts has not always been clear and consistent over the years. Judicial opinions have varied — some focusing on the sovereign acts doctrine, others on the unmistakability doctrine — without always explaining the interplay, if any, of the two. What has failed to emerge from federal jurisprudence thus far is a consistent approach that encompasses both doctrines in an integrated legal analysis. Supreme Court’s opinion in Winstar In its Motion for Partial

Summary Judgment, plaintiff alleged that the retroactive application of the statutory cap on allowable senior executive compensation costs imposed by the FY 98 Authorization Act constitutes a breach of Contract -2100 under the legal rationale set forth by the Supreme Court in United States v. Winstar Corporation, et al., 518 U.S. 839, 116 S.Ct. 2432, 135 L.Ed.2d 964 (1996).

The Winstar case was an outgrowth of the savings and loan crisis of the 1980s, in which the Government encouraged healthy S & Ls to merge with failing S & Ls by granting the merged entities favorable accounting treatment under federal capitalization requirements.

The contracts between the Government and the S & Ls — which allowed the thrifts to use “supervisory goodwill” to satisfy a portion of their minimum regulatory capital requirements — arose from acquisition agreements that incorporated resolutions and forbearance letters by federal regulators approving the mergers and promising specific favorable treatment of goodwill capital.

Congress subsequently enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), however, which ended this favorable accounting treatment by restricting the continued use of “supervisory goodwill” to help satisfy regulatory capital requirements. Three S & Ls (two of which were liquidated as a result of the changed accounting rules and the other of which had to be recapitalized) filed suit in the Court of Federal Claims, asserting that the Government was in breach of contract for unilaterally withdrawing the favorable accounting treatment.

The Supreme Court, affirming lower court decisions by the Court of Federal Claims (Winstar Corp., et al. v. United States, 21 Cl.Ct. 112 (1990) and 25 Cl.Ct. 541 (1992)) and the Court of Appeals for the Federal Circuit (Winstar Corp., et al. v. United States, 64 F.3d 1531 (1995) en banc), held that the Government by enacting FIRREA had breached its contractual obligations to the plaintiff S & Ls. The Supreme Court's vote in favor of the plaintiff S & Ls was 7-2. The justices differed in their reasoning, however, and did not issue a majority opinion.

The four-judge plurality opinion, authored by Justice Souter (joined by Justices Stevens, O’Connor, and Breyer), held that: “When the law as to capital requirements changed, the Government was unable to perform its promises and became liable for breach ____ applying ordinary principles of contract construction and breach that would be applicable to any contract action between private parties.” Winstar, 518 U.S. at 870-71, 116 S.Ct. 2432. “[The unmistakability doctrine is not implicated here because] the contracts have not been construed as binding the Government’s exercise of authority to modify banking regulation or of any other sovereign power, and there has been no demonstration that awarding damages for breach would be tantamount to any such limitation......

The contracts have been read as solely risk-shifting agreements and [the S & Ls] seek nothing more than the benefit of promises by the Government to insure them against any losses arising from future regulatory change. They seek no injunction against application of the law to them.” Id. at 881, 116 S.Ct. 2432. “[A] contract to adjust the risk of subsequent legislative change does not strip the Government of its legislative sovereignty.” Id. at 889, 116 S.Ct. 2432.

The plurality opinion also held that “[t]he facts of this case do not warrant application of the [sovereign acts] doctrine.” Winstar at 891, 116 S.Ct. 2432. “[That doctrine] balances the Government’s need for freedom to legislate with its obligation to honor its contracts by asking whether the sovereign act is properly attributable to the Government as contractor.....If the Government is to be treated like other contractors, .some line has to be drawn____between regulatory legislation that is relatively free of Government self-interest and therefore cognizable for the purpose of a legal impossibility defense and, on the other hand, statutes tainted by a governmental object of self-relief.” Id. at 896, 116 S.Ct. 2432. “Our holding [is] that a governmental act will not be public and general if it has the substantial effect of releasing the Government from its contractual obligations ....

In the present case, it is impossible to attribute the exculpatory ‘public and general’ character to FIRREA.....The statute not only had the purpose of eliminating the very accounting gimmicks that acquiring thrifts had been promised, but the specific object of abrogating enough of the acquisition contracts as to make that consequence of the legislation a focal point of the congressional debate.” Id. at 899-900, 116 S.Ct. 2432. “FIRREA had the substantial effect of releasing the Government from its own contractual obligations [which] ---- precludes a finding that the statute is a ‘public and general’ act for purposes of the sovereign acts defense.” Id. at 902-03,116 S.Ct. 2432.

In a concurring opinion authored by Justice Scalia (joined by Justices Kennedy and Thomas), three justices agreed that “the contracts at issue____gave rise to an obligation on the part of the Government to afford respondents favorable accounting treatment, and that the contracts were broken by the Government’s discontinuation of that favorable treatment, as required by FIRREA ....” Winstar at 919, 116 S.Ct. 2432.

However, the concurring justices took issue with the plurality’s reasoning that the unmistakability doctrine (and two other sovereign defenses raised by the Government) was inapplicable “simply by characterizing the contracts at issue as ‘risk-shifting agreements’ that ____ purport, not to constrain the exercise of sovereign power, but only to make the exercise of that power an event resulting in liability for the Government.” Id. “The ‘unmistakability’ doctrine has been applied to precisely this sort of situation— where a sovereign act is claimed to deprive a party of the benefits of a prior bargain with the government,” the concurring justices observed.

Id. at 920, 116 S.Ct. 2432. Their view is that the unmistakability doctrine applies without regard to the characterization of the contract and that, on the facts of the Winstar case, the Government made an unmistakable promise to the S & Ls that it would regulate in a certain fashion into the future.

In a brief discussion of the sovereign acts doctrine, the concurring justices expressed the view that “the ‘sovereign acts’ doctrine adds little, if anything at all, to the ‘unmistakability’ doctrine, and is avoided whenever that one would be — i.e., whenever it is clear from the contract in question that the Government was committing itself not to rely upon its sovereign acts in asserting (or defending against) the doctrine of impossibility, which is another way of saying that the Government had assumed the risk of a change in its laws.” Id. at 923-24, 116 S.Ct. 2432.

The two dissenting justices, Rehnquist and Ginsburg, agreed with the concurring justices that the unmistakability doctrine should apply, calling it a “canon of construction” (Winstar at 924, 116 S.Ct. 2432) whose application should not depend on the fine distinction drawn by the plurality as to whether the contract is one “bind[ing] the Government to refrain from exercising regulatory authority ---- [or] shifting] the risk of a change in regulatory rules.” Id. at 926-27, 116 S.Ct. 2432.

Unlike the concurring justices, the dissent viewed the S & L contracts with the Government as not containing an unmistakable promise to insure against future regulatory change. Chief Justice Rehnquist opined further that the plurality opinion renders the sovereign acts doctrine “a shell.” Id. at 931, 116 S.Ct. 2432. “I think it preferable .... to leave that law where it is,” he wrote, referring to the distinction the Supreme Court has drawn in prior holdings “that the congressional repeal of a statute authorizing the payment of money pursuant to a contractual agreement is a breach of that contract.

But as the term ‘public and general’ implies, a more general regulatory enactment .... cannot by its enforcement give rise to contractual liability on the part of the Government.” Id. at 933, 116 S.Ct. 2432. (Justice Ginsburg did not join in this part of the dissent dealing with the sovereign acts doctrine.) Plaintiff’s Arguments Applying the Winstar plurality’s ruling to the instant case, plaintiff argues that the Navy, in the cost reimbursement provision (FAR 52.216-7 — ALLOWABLE COST AND PAYMENT) incorporated in Contract -2100, indisputably agreed to reimburse GDC’s executive compensation costs in accordance with the regulations in effect on the date of the contract.

Nothing in Contract -2100 purported to bar Congress from enacting Sec. 808 of the FY 98 Authorization Act, plaintiff contends. Rather, the Navy simply agreed to accept the risk that Congress would change the allowability of executive compensation costs so as to breach the Government’s cost reimbursement obligations. Thus, according to plaintiff, the Navy was contractually obligated to indemnify General Dynamics in the event of legal changes that diminished its allowable executive compensation costs.

Since Contract -2100 did not block the Government’s exercise of sovereign power, plaintiff asserts that the unmistakability doctrine is inapplicable, citing Winstar. “So long as .... a contract is____construed to include a risk-shifting component that may be enforced without .... barring the exercise of [sovereign] power, the enforcement of the risk allocation raises nothing for the unmistakability doctrine to guard against, and there is no reason to apply it.” Winstar at 880, 116 S.Ct. 2432.

As for the sovereign acts doctrine, plaintiff argues that the statutory compensation cap does not constitute a “public and general” act that would exempt the government from damages for breach of contract. Pointing again to Winstar, plaintiff cites the plurality opinion that

an act meets the “public and general” criterion of a “sovereign” act “so long as the action’s impact upon public contracts is____merely incidental to the accomplishment of a broader government objective.” Winstar at 898, 116 S.Ct. 2432. Sec. 808 of the FY 98 Authorization Act fails to meet the “public and general” test, plaintiff asserts, insofar as it aims to curtail the Government’s existing contractual obligations with respect to allowable executive compensation costs.

The impact of this legislation falls squarely on a limited class of government contractors (with cost-type or fixed-price incentive contracts), plaintiff notes, thus involving the Government strictly in its contracting capacity. Though the compensation cap may be seen as serving the general public interest in saving money, the “Government may not forc[e] some people alone to bear public burdens which ____ should be borne by the public as a whole.” Winstar at 896-97, 116 S.Ct. 2432 (quoting Armstrong v. United States, 364 U.S. 40, 49, 80 S.Ct. 1563, 4 L.Ed.2d 1554 (1960)).

Federal Circuit’s opinion in Yankee Atomic Plaintiff expanded its legal argumentation (in its Reply to Defendant’s Opposition to Plaintiffs Motion for Partial

Summary Judgment) by citing the Federal Circuit’s opinion in Yankee Atomic Electric Company v. United States, 112 F.3d 1569 (Fed.Cir.1997), cert. denied, 524 U.S. 951, 118 S.Ct. 2365, 141 L.Ed.2d 735 (1998), as the only substantive application of the sovereign acts and unmistakability doctrines in the circuit since the Supreme Court’s opinion in Winstar. In Yankee Atomic an electric utility alleged that a federal assessment required by the Energy Policy Act (EPA) of 1992 based on the utility’s use of enriched ura

[…]