LEGALLY SPEAKING Recovering Attorney Fees for Changes on Government Contracts I n dealing with changes on government projects, many cont ractors and subcontractors engage outside consultants only after a dispute over the changes has reached an impasse. Even more wait to engage an attorney until they are ready to prepare a claim or after a claim is submitted. While this may make sense in many situations, it is important for contractors and subcontractors to understand that they have a right to recover fees and costs for outside consultants and attorneys used to assist in the performance of work or in the pursuit of changes on the contracts or subcontracts. While recovery of such fees and costs has been allowable for years, recent federal court and board decisions have clarified the basis and conditions under which contractors may recover such fees. In a 1995 decision, a U.S. Court of Appeals recognized that the services of consultants and attorneys engaged by contractors on government construction contracts generally fall into three categories: (1) assisting in the perfor- mance of the work; (2) assisting in the admin- istration of the contract, including pursuing and negotiating change orders and other requests for equitable adjustment; and (3) assisting in the pro- secution of certified claims and disputes. Under Federal Acquisition Regulation (FAR) 31.205-33, outside consulting and legal fees are allowable under the first two categories, but not allowable under the third category. For many years, however, courts and boards struggled to draw a line between allowable contract administration costs and costs incurred as part of the prosecution of claims. In Bill Strong Enterprises, Inc. v. Shannon (1995), the U.S. Court of Appeals for the Federal Circuit held that, if the contractor engaged such professionals “for the genuine purpose of furthering the negotiation process, such cost should normally be a contract admini s trat ion cos t al low- able…even if negotiation eventually fails and a CDA claim is later submitted.” While Bill Strong involved fees for an outside accountant, the Federal Circuit applied the same reasoning with respect to a contractor’s use of an outside attorney in Tip Top Construction, Inc. v. Donahoe (2012). In Tip Top, the contractor engaged an attorney to assist in the preparation of a proposal for extra work — installation of substitute equipment for a post office — and to assist in negotiations with the government over the price for the extra work. Despite the fact that the parties failed to reach agreement on the changes, the Court determined that the legal fees were incurred “for the genuine purpose of materially furthering the negotiation process.” A recent decision “Contractors can recover attorneys’ fees incurred in pursuing changes on government contracts, but must carefully document the services.” illustrated the impor- tance of documentation when seeking to recover costs for outside consul- tants and attorneys. In Vistas Construction of Illinios, Inc. (2016), a contractor sought to recover accountant and attorneys’ fees incurred in relation to the contrac- tor’s pursuit of payment for extra work during the expansion of levees along Lake Cataouatche in Louisiana. The contractor engaged the outside consultants in part to assist with an audit of the contractor’s request for equitable adjust- ment by the Defense Contract Audit Agency. While the Armed Services Board of Contract Appeals awarded a portion of the contractor’s claims, the Board refused to compensate the contractor for most of its consulting fees. The Board concluded that the contractor had not met is burden of Brian Wood Attorney Of Counsel Smith, Currie and Hancock showing that the fees were incurred for the purpose of furthering the negotiation process, as the contractor had not “explained why it retained these firms, what they did (beyond the bare outlines in the bills), what work product they produced, or why the fees were in the amount billed.” Absent documentation demonstrating that the outside consultants were engaged to advance negotiations of changes, the Board concluded that the services were consistent with a litigation posture and that negoti- ations were with the government were not likely. The Board cited the FAR’s require- ments for evidence to support the recovery of fees for outside consultants, as follows: 1) Details of all agreements (e.g., work requirements, rate of compensation, and nature and amount of other expenses, if any) with the individuals or organizations providing the services and details of actual services performed (2) Invoices or billings submitted by consul- tants, including sufficient detail as to the time expended and nature of the actual services provided (3) Consultants’ work products and related documents, such as trip reports indicating persons visited and subjects discussed, minutes of meetings, and collateral memoranda and reports It is important not only to document the services rendered by consultants and attorneys, but also to make sure that the description of such services is consistent with the “purpose of furthering the negotiation process.” In Meridian Eng’g Co. v. United States (2015), the Court of Federal Claims denied a contractor’s request for fees because the DEEP FOUNDATIONS • JAN/FEB 2017 • 103
