CSC takes $250M hit in contract settlement

But agreement includes 5-year, $1B contract extension

Computer Sciences Corp. signed an agreement to settle a contract dispute with the government.

While the company declined to name the customer or contract, the case had been pending infront of the Armed Services Board of Contract Appeal. In November, CSC and the government agreed to enter into nonbinding alternate dispute resolution process to resolve the matter, the company said in an announcement.

The agreement pays CSC an upfront cash settlement of $277 million along with a five-year contract extension valued at $1 billion. The extension is to “support and expand the capabilities of the systems covered by the original contract scheduled to expire in December 2011." 

But CSC also said it will take a noncash pre-tax charge to earnings in the second quarter of $250 million. The charge will reduce its earnings per share by $1.15.

“We are pleased we were able to reach an equitable agreement with the government while preserving our important role in a critical government program,” said James Sheaffer, CSC president, North America public sector, in the company statement.

A company spokesman said CSC could not comment beyond the published statement because CSC officials signed a nondisclosure agreement when they entered the alternate dispute resolution process.

CSC is ranked No. 11 on the 2011 Washington Technology Top 100 list of the largest government contractors.

About the Author

Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.

Reader Comments

Thu, Aug 25, 2011 spxz NY

Hmmm... CSC settles for $277 million cash but takes a $250 million pre-tax charge to earnings. So they reduce their entire taxable liability on their earnings, meaning the US taxpayer must pay interest on what Treasury will borrow to make up for the diminished amout of tax CSC will pay. Then the taxpayer can pay the principle too. Because the Fed spends more than it takes in, and it borrows to obtain that amount. Every time tax revenues drop, more is borrowed. And the taxpayer gets screwed yet again. Thanks guys! A real settlement would have been to NOT ALLOW a pre-tax deduction, as part of the penalty.

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