Sheppard Mullin

No aspect of Government contracting differs more materially from commercial norms than the cost accounting principles with which contractors must comply. The reimbursement of costs in connection with "flexibly-priced" and cost reimbursement Government contracts is subject to a startling array of extraordinarily complex rules, many of which are wholly inconsistent with customary commercial practice. The process starts with three deceptively simple, basic preconditions to reimbursability – "allowability," "allocability" and "reasonableness" – principles with respect to which volumes of cases have been litigated. On top of these basic rules, the Government then proceeds to levy upon contractors some 52 separate and specific "Cost Principles," dealing in sometimes minute detail with everything from such Government contracts-peculiar issues as IR&D, B&P, and Manufacturing & Production Engineering costs to everyday issues such as pension costs, employee compensation and relocation, facility costs, interest, advertising, alcoholic beverages and cafeteria expense. If a company is fortunate enough to secure sufficient flexibly priced business, it will also be required to structure its accounting system so that its measurement of costs, its allocation of costs to "cost objectives" and its assignment of costs to cost accounting periods comply with anywhere from four to twenty Cost Accounting Standards.

Additionally, in negotiating certain types of contracts, the Government requires "Truth in Negotiations." This means that the Contractor must disclose – and certify – the "cost or pricing data" relating to those negotiations. If the data ultimately prove not to have been "current, accurate and complete," then the contract has been "defectively priced" and the Government has the right to reduce the contract price, irrespective of whether the contractor made any profit at all in performance.

To enforce its rights in this area, the Government has created a vast infrastructure of contracting officers of all kinds – PCOs, ACOs, TCOs – administrators, auditors, investigators and lawyers, some of whom have carefully delineated lines of authority, some of whom have an unlimited charter. They come armed with an array of enforcement tools – multiple audit rights, threatened and actual disallowances, unilateral indirect rate determination prerogatives, subpoenas, civil investigative demands, search warrants, and the False Claims Act. The qui tam provisions of the FCA are designed to enlist the contractor's employees in the Government's investigative army, offering successful "whistleblowers" a significant share of any Government recovery.The recent Sarbanes-Oxley initiatives only heighten the risks associated with potentially erroneous accounting in this Byzantine realm.

The Sheppard Mullin Difference

The rules and regulations governing Government contract cost accounting form a veritable labyrinth that is difficult, if not impossible, for the uninitiated to navigate. Sheppard Mullin attorneys negotiate this course on a daily basis for the Firm's clients. Among the services that we provide to our clients in this area are:
 

• Counseling with respect to the classification and treatment of costs under virtually every one of the 52 Cost Principles and each of the 20 Cost Accounting Standards
• Assistance in the establishment of compliant cost accounting systems
• Assistance in the drafting of Cost Accounting Standards Disclosure Statements and in the preparation of "cost impact statements" relating to "changes in cost accounting practices"
• Providing advice and assistance to clients regarding the requirements of the Truth in Negotiations Act
• Responding to Government audit findings and negotiating the resolution of audit issues of all kinds, e.g., defective pricing, final indirect rate claims, CAS noncompliances
• Assistance in the quantification of claims for equitable adjustments
• Termination accounting
• Defending Government claims and prosecuting Contractor claims to maximize cost recovery, including court and board litigation as well as ADR
• Defense of False Claims Act allegations, whether brought by the Government or qui tam relators, relating to cost accounting issues

"As Sheppard Mullin continues to grow, it is important that we not lose sight of the need to recruit women, attorneys of color and others of diverse backgrounds."
-Guy Halgren, Chairman of the Executive Committee

At Sheppard Mullin, we make every effort to recruit the finest lawyers and nurture their talents. The firm recognizes the importance of diversity and the need to create a workplace of inclusion. We need ¿ and our clients demand ¿ a team of attorneys that is as diverse as our increasingly global client base. Achieving and maintaining diversity is key to great client service ¿ a core value of our firm. What distinguishes good intentions from results is a commitment by senior management to find the best attorneys possible coupled with the sincere belief that people with diverse backgrounds bring valuable attributes to the firm. At Sheppard Mullin, the Executive Committee, Diversity Committee, and the lawyers in each of our offices work hard to ensure that all attorneys who join our firm fit in seamlessly and are encouraged to succeed.

Members of our Diversity Committee include ethnically diverse attorneys and a representative from the firm's Executive Committee. Diversity Committee members have served on the Boards of the Anti-Defamation League, the Black Women Lawyers Foundation (Los Angeles), and the Charles Houston Bar Association (northern California). Women and minority attorneys participate on key committees of the Firm (Executive Committee; Compensation Committee; Diversity Committee; Recruiting Committee; Professional Personnel Committee; Associate Issues Committee). Four of the Firm's nine Office Administrative Partners are women, one of whom is African-American and another is multi-racial.

"Serving on the firm's Diversity Committee is one of the most important things I do. I firmly believe that we must be vigilant in our efforts to recruit talented women attorneys and attorneys of color. Our success in this area has a positive effect our firm's culture, practice and client relationships."
-Joan Story, Member Executive Committee and Diversity Committee

Below is a description of just some of our outreach efforts.

• The firm participates in and financially supports the California Minority Counsel Program and the ABA Minority Counsel Program, as well as several minority bar associations. These groups are dedicated to increasing access for and promoting and retaining minorities in the legal profession.
• The firm actively recruits law students of color, e.g., we participated in the National Black Law Students Association (NBLSA) of the Western Region job fair held at UCLA School of Law.
• Sheppard Mullin contributes to the Minority Corporate Counsel Association; California Women Lawyers; Queen's Bench; Black Women Lawyers Association of Los Angeles; and the National Black Law Students Association, among others.
• We actively participate with other major Los Angeles law firms in the Diversity Directors Roundtable, a group that is committed to promoting diversity in the legal profession and in our firms.
• The firm received the Law Firm Award from the Black Women Lawyers Association of Los Angeles Foundation for its strong commitment to the promotion of community and pro bono activities.
• Multicultural Law magazine named Sheppard, Mullin, Richter & Hampton LLP as one of "The 2011 Top 100 Law Firms for Diversity."
• Sheppard Mullin helped underwrite the production of a motion picture project entitled "Soul of Justice: The Life and Times of Thelton Henderson." The film chronicles the life of respected African-American jurist Thelton Henderson, a crusading civil rights litigator and role model.
• The firm signed the Bar Association of San Francisco's "No Glass Ceiling Initiative," BASF's "Minority Goals and Timetables," the New York County Lawyers' Association Diversity Statement, and the Los Angeles County Bar Association's Diversity Statement.

Much of our pro bono work relates to the diversity of the communities in which we practice; sample clients include:

• Constitutional Rights Foundation
• Domestic Violence Project, Los Angeles Bar Association
• Lawyers Committee for Civil Rights
• Task Force for the Women's Resource Fair, City of San Diego
• Tolerance Through Education Program, Beverly Hills Barristers Associations
• Violence Against Women Act Program, Legal Aid Foundation of Los Angeles

Awareness of diversity enables us to understand the value of differences. At Sheppard Mullin, we are committed to hiring top tier attorneys, without regard to race, ethnicity, gender or sexual orientation.