RTX · 10-Q · 2026Q2 · Full report
Cost Accounting Standards Claims
RTX Corp · 2026-07-23 · Importance 65 · Surprise 60 · In source text
The U.S. Defense Contract Management Agency asserted a claim against Pratt & Whitney for approximately $1.7 billion plus $1.6 billion of interest as of June 30, 2026, alleging noncompliance with Cost Accounting Standards from January 2007 through March 2019. A second claim covering April 2019 through December 2023 demands $1.1 billion plus interest. Additional claims concern collaborator-parts cost allocation for 2005–2012, 2013–2017, and 2018–2022, with proceedings continuing before the Armed Services Board of Contract Appeals and potentially the Federal Circuit. RTX believes the claims lack legal merit and expects any damages owed for the three collaborator-parts claims would not materially affect results, financial condition, or liquidity.
Key facts
- In April 2019 a DCMA DACO asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $1.7 billion plus interest of $1.6 billion at June 30, 2026. source
- On September 30, 2024 a DCMA DACO issued a second claim against Pratt & Whitney alleging noncompliance with CAS for April 1, 2019 to December 31, 2023 and demanding payment of $1.1 billion plus interest. source
- On December 5, 2025, the Court of Appeals for the Federal Circuit issued an opinion which dismissed in part the government's appeal for lack of jurisdiction, reversed in part the ASBCA's November 22, 2021 decision with respect to enforceability of a provision within a 2006 agreement, and remanded the case to the ASBCA for further proceedings. source
- Pratt & Whitney filed an appeal to the ASBCA on June 7, 2019 in response to the April 2019 DACO claim. source
- Pratt & Whitney appealed the second claim to the ASBCA on October 15, 2024. source
- RTX stated it continues to believe the ASBCA’s rejection of the DCMA’s asserted measure of the cost of collaborator parts is well supported in fact and law and that amounts demanded by DCMA in three claims are without legal basis and would not have a material adverse effect on results of operations, financial condition, or liquidity. source
- The FAS service cost (expense) was $(29) million for the quarter ended June 30, 2026 and $(30) million for the quarter ended June 30, 2025. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| liability | negative | contingent | -0.1% | In April 2019 a DCMA DACO asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $1.7 billion plus… |
| liability | negative | contingent | -0.1% | On September 30, 2024 a DCMA DACO issued a second claim against Pratt & Whitney alleging noncompliance with CAS for April 1, 2019 to… |
| liability | unclear | contingent | — | On December 5, 2025, the Court of Appeals for the Federal Circuit issued an opinion which dismissed in part the government's appeal for… |