BNUMBER:  B-255868.2
DATE:  May 30, 1996
TITLE:  E&R, Inc.--Claim for Costs

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Matter of:   E&R, Inc.--Claim for Costs

File:        B-255868.2

Date:        May 30, 1996

Phillip E. Johnson, Federal Contract Specialists, Inc., for the 
protester.
Billie Spencer, Esq., and Diane Hayden, Esq., Department of the Navy, 
for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  A protester may be reimbursed for the costs of a non-lawyer 
representative of filing and pursuing the protest based upon a 
contingent fee agreement that provides that costs are only payable if 
the protester obtains the contract or if costs are awarded, to the 
extent that the hours and rate claimed are adequately documented and 
reasonable.

2.  The claimed hourly rate of a protester's non-lawyer representative 
for filing and pursuing a sustained protest is considered excessive, 
where it exceeds the rates that would reasonably be charged in the 
representative's locale to perform similar services.

3.  A protester is not entitled to reimbursement of its costs of 
pursuing its cost claim before the General Accounting Office where the 
contracting agency's handling of the protester's claim was reasonable 
and expeditious.

DECISION

E&R, Inc. requests that we determine the amount it is entitled to 
recover from the Department of the Navy for the preparation of its bid 
under invitation for bids (IFB) No. N62470-93-B-2366, and for filing 
and pursuing its protest in E&R, Inc., B-255868, Mar. 29, 1994, 94-1 
CPD  para.  218.

In our prior decision, we sustained E&R's protest that the awardee's 
bid was not supported by a valid power of attorney, as required by the 
IFB.  While ordinarily we would have recommended that the Navy 
terminate the awardee's contract for the convenience of the 
government, performance of the awardee's one-year contract had 
continued for nearly 6 months, so termination of the contract was 
impracticable.  Accordingly, we found that E&R was entitled to its 
costs of bid preparation, and of filing and pursuing the protest.

The parties have agreed that E&R should be reimbursed $1,969.08 for 
its reasonable costs of bid preparation.  E&R requests reimbursement 
of an additional $9,905.04, consisting of $7,205.04 for its costs of 
filing and pursuing the protest, and $2,700 for its costs of pursuing 
the claim for costs.  As explained below, we find that E&R should be 
reimbursed $4,805.04 for its costs of filing and pursuing the protest. 

A protester seeking to recover the costs of pursuing its protest must 
submit sufficient evidence to support its monetary claim.  The amount 
claimed may be recovered to the extent that the claim is adequately 
documented and is shown to be reasonable; a claim is reasonable, if, 
in its nature and amount, it does not exceed that which would be 
incurred by a prudent person in pursuit of the protest.   Data Based 
Decisions, Inc.--Claim for Costs, 69 Comp. Gen. 122 (1989), 89-2 CPD  para.  
538.

In support of its claimed costs for pursuing the protest, E&R has 
provided the fee agreement entered into between the protester and its 
non-lawyer representative (Mr. Phillip Johnson of Federal Contract 
Specialists, Inc.), as well as billing statements that list, by date, 
the work performed by Mr. Johnson and the amount of time spent.  
Specifically, the billing statements show that Mr. Johnson performed 
32 hours of work on the protest, at a rate of $225 per hour; the 
statements also show long-distance telephone charges of $5.04.  The 
fee agreement between E&R and its representative provided that Federal 
Contract Specialists would "appeal" the denial of E&R's agency-level 
protest to the General Accounting Office and that:

     "[s]hould the appeal be upheld, we will bill your company at our 
     customary rate of $225 per hour for time spent by our firm 
     pursuing the appeal on the condition you are awarded the contract 
     and/or the Comptroller General determines that you are eligible 
     for reimbursement of costs involving the appeal.  We estimate the 
     filing expenses not to exceed $10,000."

The Navy objects to the payment of any protest costs to E&R that are 
based upon the contingency fee agreement, citing 10 U.S.C.  sec.  2306(b) 
and Federal Acquisition Regulation (FAR) Subpart 3.4.  The Navy also 
argues the claimed hourly rate of $225 per hour is unreasonable.  The 
Navy does not challenge the number of hours claimed by Mr. Johnson for 
filing and pursuing the protest. 

The Competition in Contracting Act of 1984 (CICA), 31 U.S.C.  sec.  
3554(c)(1)(A) (1988), authorizes our Office to declare that an 
appropriate interested party is entitled to the costs of filing and 
pursuing its protest, including reasonable attorneys' fees.  The 
underlying purpose of CICA's provisions relating to the entitlement to 
bid protest costs is to relieve protesters of the financial burden of 
vindicating the public interest which Congress seeks to promote.  See 
Hydro Research Science, Inc.--Claim for Costs, 68 Comp. Gen. 506 
(1989), 89-1 CPD  para.  572.  In this regard, the bid protest process, as 
mandated by CICA, "was meant to compel greater use of fair, 
competitive bidding procedures 'by shining the light of publicity on 
the procurement process, and by creating mechanisms by which Congress 
can remain informed of the way current legislation is (or is not) 
operating.'"  Lear Siegler, Inc., Energy Prods. Div. v. Lehman, 842 
F.2d 1102, 1104 (9th Cir. 1988), quoting Ameron v. U.S. Army Corps of 
Eng'rs, 809 F.2d 979, 984 (3rd Cir. 1986).  Congress believed that the 
prospect of successful protesters being reimbursed their bid protest 
costs was necessary to enhance the effectiveness of the bid protest 
process.  See H.R. Rep. No. 98-1157, 98th Cong., 2nd Sess. 24-25 
(1984).  In essence, entitlement to bid protest costs relieves a 
protester of the financial demands of acting as a private attorney 
general where it brings to light an agency's failure to conduct a 
procurement in accordance with law and regulation.  Armour of Am., 
Inc.--Claim for Costs, 71 Comp. Gen. 293 (1992), 92-1 CPD  para.  257; 
Agency for Int'l Dev.; Development Alternatives, Inc.--Recon., 
B-251902.4; B-251902.5, Mar. 17, 1994, 94-1 CPD  para.  201.

Here, consistent with the purposes of CICA, E&R brought to light the 
Navy's improper acceptance of a nonresponsive bid and fulfilled its 
obligations as a private attorney general.  The record shows, and the 
Navy does not dispute, that the protester's representative worked the 
claimed time in filing and pursuing the protest on E&R's behalf.  
There is also no dispute that E&R is now obligated, by virtue of the 
fee agreement, to pay Federal Contract Specialists for the time 
incurred in pursuing the protest.[1]  Rather, as noted above, the Navy 
believes that the fee agreement provides for an illegal contingency 
fee arrangement in violation of 10 U.S.C.  sec.  2306(b) and FAR Subpart 
3.4.

The purpose of the contingent fee prohibition of 10 U.S.C.  sec.  2306(b), 
as implemented by FAR Subpart 3.4, is to prevent the attempted or 
actual exercise of improper influence by third parties over the 
federal procurement system.  Puma Industrial Consulting v. Daal 
Assocs., Inc., 808 F.2d 982 (2nd Cir. 1987); Quinn v. Gulf & Western 
Corp., 644 F.2d 89 (2d Cir. 1981); Howard Johnson Lodge--Recon., 
B-244302.2, Mar. 24, 1992, 92-1 CPD  para.  305.  The prohibition only 
applies to situations where a selling agency agrees "to solicit or 
obtain" a contract from a procuring agency.  Id.; Bertsch Constr., 
B-253526, Aug. 25, 1993, 93-2 CPD  para.  122.  The fact that a selling 
agency's fee is contingent upon the contractor's receiving the 
contract award is insufficient to bring a fee agreement under the 
contingent fee prohibition; rather, the regulation contemplates a 
specific demonstration that an agency is retained for the express 
purpose of contacting government officials, where such contact poses a 
threat of the exertion of improper influence to obtain government 
contracts.  Convention Mktg. Servs., B-245660.3; B-246175, Feb. 4, 
1992, 92-1 CPD  para.  144.  

The fee agreement here provides only for Federal Contract Specialists' 
representation of E&R before our Office in the filing and pursuing of 
the protest.  We fail to see how protesting an agency's procurement 
actions pursuant to the authority of CICA constitutes "solicit[ing] or 
obtain[ing]" a contract from a contracting agency, much less posing 
any threat of exertion of improper influence to obtain a government 
contract.

We also find no other provision in law or regulation that would bar 
the recovery of protest costs where the costs were incurred under 
binding contingent fee arrangement.[2]  CICA, pursuant to which these 
costs were awarded, does not prohibit the reimbursement of costs paid 
under such an agreement.  Indeed, as discussed above, the recovery of 
such costs is consistent with the purposes of CICA.  Federal courts 
interpreting fee-shifting statutes similar to CICA have uniformly 
found that "reasonable attorneys' fees" may be recovered, even though 
the underlying legal representation agreement provided for the payment 
of a contingent legal fee.  See, e.g., City of Burlington v. Ernest 
Dague, Sr., et al., 505 U.S. 557 (1992) (recovery of reasonable 
attorneys' fees under the Solid Waste Disposal Act and Clean Water 
Act); United States v. General Electric Co., 41 F.3d 1032 (6th Cir. 
1994) (False Claims Act); Hendrickson v. Branstad, 740 F. Supp. 636 
(N.D. Iowa 1990) (The Civil Rights Attorney's Fees Awards Act of 
1976); and Chrapliwy v. Uniroyal, Inc., 509 F. Supp. 442 (N.D. Ind. 
1981) (Title VII, Civil Rights Act).  Similarly, boards of contract 
appeals have found under an analogous fee-shifting statute, the Equal 
Access to Justice Act (EAJA), 5 U.S.C.  sec.  504 (1994), that a 
prevailing, eligible appellant in contract disputes litigation is 
entitled to recover attorneys' fees, subject to certain statutory 
limitations, even where the fees are based upon a contingent fee 
agreement.  See, e.g., Consolidated Technologies, Inc.--App. under 
EAJA, ASBCA No. 33560R, Dec. 29, 1989, 90-1 BCA  para.  22,603; Roberts 
Constr. Co.--App. under EAJA, ASBCA No. 32171R, Mar. 23, 1987, 87-2 
BCA  para.  19,712 ("[w]hile the statutory limit on hourly rates may 
preclude award of percentage-of-recovery contingent fees, there is 
nothing in the statute prohibiting award of actual fees at an hourly 
rate, within the specified rate limit, continent on recovery on the 
merits.")

In sum, we conclude that E&R may be reimbursed for the reasonable 
costs of its non-lawyer representative in filing and pursuing the 
protest based upon a contingent fee agreement, to the extent that the 
hours and rates claimed are adequately documented and reasonable.  
CICA's purpose of relieving successful protesters of the burdens of 
vindicating public interests would be frustrated if E&R were not 
reimbursed for the protest costs it owes its representative.

The Navy also challenges the reasonableness of Mr. Johnson's claimed 
rate of $225 per hour.  In this regard, the agency states that it 
attempted to compare Mr. Johnson's claimed rate with the rates of 
other government contract consultants in his locality--Garner, North 
Carolina--but determined that there were no other consultants engaged 
in similar work in Mr. Johnson's vicinity or in North Carolina.  The 
agency states, however, that it surveyed attorneys' rates at three law 
firms in Raleigh, North Carolina, and found that these attorneys 
billed between $100 and $175 per hour.  

E&R does not dispute that the attorneys' rates proffered by the Navy 
are representative of the rates billed by lawyers in North Carolina, 
but instead responds that its claimed hourly rates should be compared 
to the rates billed by government contract lawyers in Washington, D.C. 
as reported in our Office's cost claim decisions.  See, e.g., Komatsu 
Dresser Co.--Claim for Costs, B-246121.2, Aug. 23, 1993, 93-2 CPD  para.  
112.

We disagree with E&R that the reasonableness of Mr. Johnson's claimed 
rate should be compared to the rates charged by government contract 
lawyers in Washington, D.C.  In reviewing the reasonableness of rates 
charged by legal counsel for filing and pursuing protests, we 
generally compare the claimed rates with the rates charged by other 
similarly situated counsel for similar work in the community.   See 
Armour of Am., Inc.--Claim for Costs, supra; Bay Tankers, Inc.--Claim 
for Bid Protest Costs, B-238162.4, May 31, 1991, 91-1 CPD  para.  524.  We 
think that a similar rule should apply in the case of non-lawyer 
representatives, such as Mr. Johnson, who specialize in representing 
government contractors.  There is no evidence in the record, however, 
establishing that there are other non-lawyer protest representatives 
in Mr. Johnson's community to whom we could look to establish an 
amount that would be considered a customary fee for these services.  
We are aware of other non-lawyer protest representatives, however, 
that have charged $150 per hour to perform similar services.  See, 
e.g., W.S. Spotswood & Sons, Inc.--Claim for Costs, 69 Comp. Gen. 622 
(1990), 90-2 CPD  para.  50.  In the absence of any other evidence in the 
record, and given that a rate of $150 per hour is well within the 
range of fees that appear to be customarily billed by lawyers in North 
Carolina, we conclude that E&R should only be reimbursed for its 
representative's time at a rate of $150 per hour.

Accordingly, we find that E&R is entitled to be reimbursed for 32 
hours of Mr. Johnson's time at $150 per hour and for $5.04 for 
out-of-pocket expenses, for a total reimbursement of $4,805.04 for its 
costs of pursuing the protest.

E&R also requests that the Navy reimburse it $2,700 for the costs 
incurred in pursuing its claim before our Office.  Our Bid Protest 
Regulations, 4 C.F.R.  sec.  21.6(f)(2) (1995), provide that we may declare 
a protester entitled to reimbursement of the costs of pursuing its 
claim at our Office.  This provision is designed to encourage the 
agency's expeditious and reasonable consideration of a protester's 
claim for costs.  See  ViON Corp.--Claim for Costs, B-256363.3, Apr. 
25, 1995, 95-1 CPD  para.  219; Manekin Corp.--Claim for Costs, B-249040.2, 
Dec. 12, 1994, 94-2 CPD  para.  237.

Here, we do not find E&R entitled to reimbursement of its costs of 
pursuing its claim before our Office.  The question of whether 
reasonable protest costs can be reimbursed where the underlying fee 
agreement provided for the payment of contingent fees has not been 
previously addressed by our Office.  Thus, while we ultimately 
disagree with the agency's position, we are unable to say that the 
agency was not justifiably concerned that the payment of protest costs 
may not be allowable.  In addition, the record establishes that the 
agency acted with reasonable promptness in negotiating E&R's claim 
before the matter was submitted to our Office.  Under these 
circumstances, we think that the agency's handling of E&R's claim was 
reasonable and expeditious and should not provide the basis for the 
award of costs of pursuing this claim at our Office.    
  
In conclusion, we find that E&R is entitled to be reimbursed a total 
of $4,805.04 for its costs of filing and pursuing the protest.  In 
addition, the parties have agreed that E&R is entitled to be 
reimbursed $1,969.08 for its reasonable costs of bid preparation.

Comptroller General
of the United States

1. The fee agreement provided that E&R would pay Federal Contract 
Specialists at the specified rate if E&R were awarded the contract 
and/or was determined to be eligible for reimbursement of its bid 
protest costs.  While we did not recommend that the Navy terminate the 
improperly awarded contract and make award to E&R, we found that E&R 
was entitled to its costs of bid preparation, and filing and pursuing 
the protest.

2. The Navy cites our decision in Bush Painting, Inc.--Claim for 
Costs, B-239904.3, Aug. 16, 1991, 91-2 CPD  para.  159, in support of its 
arguments that protest costs cannot be reimbursed based upon a 
contingent fee agreement.  Unlike Bush, however, in which there was no 
evidence in the record that the protester had any obligation to pay 
the consultant for its claimed services, the record here establishes 
that E&R is now obligated under the terms of the fee agreement to pay 
its protest representative for the time incurred filing and pursuing 
the protest.