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.