TITLE:   Ervin & Associates, Inc.--Costs, B-278850.2, August 1, 1999
BNUMBER:  B-278850.2
DATE:  August 1, 1999
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Ervin & Associates, Inc.--Costs, B-278850.2, August 1, 1999

Decision

Matter of: Ervin & Associates, Inc.--Costs

File: B-278850.2

Date: August 1, 1999

John Ervin, Ervin & Associates, Inc., for the protester.

Gary A. Nemec, Esq., Department of Housing & Urban Development, for the
agency.

Aldo A. Benejam, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. General Accounting Office (GAO) recommends that protester be reimbursed
costs of filing and pursuing protest only to the extent that such costs are
sufficiently documented and are reasonable; where protester provided no
support for its claimed overhead, GAO recommends that no overhead costs be
reimbursed.

2. Protest costs incurred in connection with agency-level protest are not
recoverable.

DECISION

Ervin & Associates, Inc. requests that we determine the amount it should
recover from the Department of Housing and Urban Development (HUD) for the
costs of filing and pursuing its protest in Ervin & Assocs., Inc., B-278850,
Mar. 23, 1998, 98-1 CPD para. 89.

We recommend that Ervin be reimbursed $1,448.19 out of its total claim of
$13,252.50.

Background

On February 17, 1995, HUD issued request for proposals No. DU100C000018424,
calling for the award of multiple indefinite-quantity task order contracts
to provide accounting support services. Ervin initially filed an
agency-level protest alleging that a task order issued to one of the
awardees improperly exceeded the contract's scope of work. After HUD denied
that protest, Ervin filed essentially the same protest in our Office.

We sustained the protest based on our conclusion that the task order
improperly exceeded the contract's scope of work. We recommended that HUD
terminate the task order and conduct a competitive acquisition to meet its
needs for the services. We also recommended that the protester be reimbursed
the reasonable costs of filing and pursuing its protest, including
attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (1997). We advised Ervin to file its
certified claim for such costs, "detailing the time expended and the costs
incurred," directly with the agency. Ervin & Assocs., Inc., supra, at 9; see
4 C.F.R. sect. 21.8(f)(1).

By letter dated April 14, 1998, Ervin submitted its claim for costs to the
agency totaling $13,252.50. Ervin's letter contained two exhibits: a copy of
our decision (exhibit No. 1), and a 1-page document entitled "ERVIN AND
ASSOCIATES, INCORPORATED SCHEDULE OF GAO PROTEST COSTS B-278850" (exhibit
No. 2), which listed for two individuals (Mr. B. Oleniacz and Mr. J. Ervin)
the number of hours each spent in various activities in pursuit of the
protest in chronological order between December 10, 1997, and February 3,
1998, as well as hourly rates and extended totals (calculated by multiplying
the number of hours spent by each individual by his corresponding hourly
rate) for each individual for each activity. Exhibit No. 2 listed the
various tasks (e.g., "Prepare GAO Protest," "Review GAO Protest," "Review
HUD Request for Dismissal and discuss strategy."), and the number of hours
spent on each activity. Exhibit No. 2 indicated that Mr. Ervin spent a total
of 15.5 hours at a rate of $340 per hour and Mr. Oleniacz spent 51.5 hours
at a rate of $155 per hour, for a total of 67 hours and $13,252.50.

After reviewing Ervin's letter, HUD concluded that Ervin had provided
insufficient details to determine the reasonableness of the claim.
Accordingly, on April 28, HUD requested that Ervin submit additional
documentation in support of its claim. Specifically, HUD requested that
Ervin explain the role and responsibilities of the two named individuals
(Mr. Oleniacz and Mr. Ervin) during preparation of the protest; a detailed
description of the work performed and time sheets or other documentation
that supported the actual time spent by the two individuals pursuing the
protest between December 10, 1997 and February 3, 1998; documentation
supporting the elements of cost (i.e., documentation showing that the
claimed hourly rates reflect the actual rates of compensation for Mr.
Oleniacz and Mr. Ervin, plus reasonable overhead); and an itemization of the
elements that comprise the hourly rates, including a breakdown of the
composition of the overhead. HUD specifically requested that Ervin specify
which amount was attributable to salary and which amount was attributable to
each element of overhead for each of the two listed individuals.

Ervin responded to HUD's request in very general terms. For example, with
respect to the request that the protester explain the specific roles and
responsibilities of the two individuals, Ervin, in its letter dated May 18,
1998, stated as follows:

Mr. Oleniacz and [Mr. Ervin] consulted on a regular basis whenever the need
arose to respond to HUD's filings in the course of GAO's consideration of
Ervin's protest. Mr. Oleniacz was the principal writer of the protest and
all follow up correspondence. . . . In addition, Mr. Oleniacz was
responsible for all legal research and opinion that formed the basis for the
protest. [Mr. Ervin] reviewed all documents before filing and made
significant contributions and comment to the overall direction of the
protest and each required response.

Letter from Ervin to HUD, Office of Procurement and Contracts at 1 (May 18,
1998).

Ervin responded to HUD's request for documentation supporting the elements
of cost by stating that the hourly rates represented the "base hourly
payroll of Mr. Ervin and Mr. Oleniacz plus an approximate 300 [percent]
overhead factor." Id. Ervin further stated that "[t]he overhead factor
includes such normally included items as payroll taxes, benefits, rent,
legal fees and so on." Id. Despite HUD's specific request for documentation
supporting the elements of these costs, Ervin provided nothing further in
support of its claim.

In a letter dated June 25, HUD informed Ervin that its response did not
provide sufficient support for its claim, and provided detailed guidance
regarding the type of documentation needed to support the claim.
Specifically, HUD renewed its request that Ervin provide documentation
showing that the claimed hourly rates reflect the actual rates of
compensation for Mr. Ervin and Mr. Oleniacz, plus reasonable overhead. In
this connection, HUD requested that Ervin provide copies of salary sheets,
pay stubs, or other documentation to support the claimed rates. In addition,
HUD reiterated its request for Ervin to "provide an itemization of the
elements that comprise the rates [Ervin] claim[s] for [Mr. Ervin] and Mr.
Oleniacz, including a breakdown of the composition of the overhead." Letter
from Contracting Officer to Ervin at 2 (June 25, 1998). With respect to
overhead, HUD's letter informed Ervin that "[o]verhead of 300 [percent]
seems excessive and unreasonable and the general information [Ervin]
provided regarding elements comprising the overhead is wholly inadequate."
Id. HUD's letter concluded by advising Ervin that it had not sufficiently
documented its claim, and requested that Ervin provide the additional
supporting information by July 10.

In response, by letter dated July 10, Ervin explained that since it does not
bill its clients for services on an hourly basis, its accounting system was
not designed to track the amount of time spent on any specific function or
subfunction, and that it does not account for the time spent for each letter
researched, written, or reviewed. In that letter, Ervin further stated that
it was not possible for it to go back to specific time records to obtain the
information HUD requested. The protester explained that the amount of time
Ervin claimed was a reconstructed approximation of the time spent by Mr.
Ervin and Mr. Oleniacz pursuing the protest.

With respect to the claimed hourly rates, Ervin provided copies of payroll
summaries showing hourly rates of $86.54 and $40.87 for Mr. Ervin and
Mr. Oleniacz, respectively. Regarding the 300 percent overhead rate, Ervin
stated that its accounting system does not separately track fringe benefits,
general and administrative (G&A) costs, overhead, or fees. Ervin further
stated that it relied on discussions with other firms regarding their
overhead to arrive at its claimed overhead rate. Ervin then asserted that
its actual overhead rate is 2,124 percent, which, if applied to the hourly
rates of the two individuals listed in its original claim, would result in
an increase of nearly $60,000, for a total claim of $73,197 for filing and
pursuing the protest, and requested that HUD adjust its claim to that
amount. Ervin provided no contemporaneous documentation supporting the
claimed hours spent pursuing the protest and provided no documents
supporting either the 300 percent or the amended 2,124 percent claimed
overhead.

Ervin continued to correspond with HUD until December 1998, requesting
payment of its claim. After failing to reach agreement with HUD regarding
its claim, on January 11, 1999, Ervin requested that we determine the amount
of protest costs which it should recover.

Discussion

A protester seeking to recover the cost of pursuing its protest must submit
sufficient evidence to support its monetary claim. McNeil Techs.,
Inc.--Claim for Costs, B-254909.3, Apr. 20, 1995, 95-1 CPD para. 207 at 5. The
amount claimed may be recovered to the extent that it is adequately
documented and shown to be reasonable. Patio Pools of Sierra Vista,
Inc.--Claim for Costs, B-228187.4, B-228188.3, Apr. 12, 1989, 89-1 CPD para. 374
at 3. 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.
CNA Indus. Eng'g, Inc.--Costs, B-271034.2, Nov. 20, 1997, 97-2 CPD para. 149 at
6. Although we recognize that the requirement for documentation may
sometimes entail certain practical difficulties, we do not consider it
unreasonable to require a protester to document in some detail the amount
and purposes of its employees' claimed efforts and establish that the
claimed hourly rates reflect the employees' actual rates of compensation
plus reasonable overhead and fringe benefits. W.S. Spotswood & Sons,
Inc.--Claim for Costs, B-236713.3, July 19, 1990, 90-2 CPD para. 50 at 3.

The protester's initial claim was based entirely on reimbursement at the
rates of $155 and $340 per hour for Mr. Oleniacz and Mr. Ervin,
respectively, for their time in filing and pursuing the protest. Although it
appears that Ervin calculated these rates by including approximately 300
percent overhead to the base hourly rates for Mr. Oleniacz ($40.87/hr.) and
Mr. Ervin ($86.54/hr.), the protester did not provide any supporting
documentation or explain in any detail what cost elements (e.g.,
direct/indirect costs, fringe benefits, overhead, G&A) are reflected in the
different hourly rates calculated for each individual. Ervin has also not
provided any documentation to HUD or to our Office to support its claimed
overhead rates. Ervin originally claimed an overhead rate of approximately
300 percent, with no explanation of the specific elements that comprised
that rate. In fact, the protester explained that it calculated the 300
percent overhead based on its discussions with other firms, not on Ervin's
overhead. Ervin subsequently claimed an increase in its overhead from 300
percent to over 2,000 percent, but provided no support for its initial or
amended overhead rate. [1] Ervin's failure to submit any documentation to
HUD in support of its claimed overhead effectively prevented HUD from
reviewing the reasonableness of the overhead amount Ervin claimed. While
Ervin argues that the information it provided to HUD is adequate, Ervin has
not established that the claimed hourly rates for Mr. Oleniacz and Mr. Ervin
include reasonable overhead. Accordingly, since Ervin has provided no
support for its claimed overhead, we recommend that none of the amount
identified as overhead be reimbursed.

We also find other aspects of Ervin's claim problematic. Specifically, for
the period of December 10-12, 1997, the protester claimed a total of 24
hours for Mr. Oleniacz to "Prepare GAO Protest" and 6 hours for Mr. Ervin to
"Review GAO Protest." HUD points out, however, that the amount of time Ervin
claimed for preparing, reviewing and filing the protest seems excessive
given that Ervin's GAO protest was essentially the same as its agency-level
protest. We believe that a prudent person would not have required more than
a fraction of the 30 hours charged in preparing and filing the protest. In
such cases, we will reduce the number of hours to reflect a reasonable work
effort, given the nature of the particular protest. JAFIT Enters.,
Inc.--Claim for Costs, B-266326.2, B-266327.2, March 31, 1997, 97-1 CPD
para. 125 at 3. Based on our review of the record, and in light of the fact that
Ervin has failed to provide any documentation on the specific work performed
by Mr. Oleniacz and Mr. Ervin in converting the agency-level protest to the
GAO protest, we consider 3 hours to be a reasonable estimate of the effort
that should have been employed here. The corresponding cost at the allowed
hourly rates of the two individuals is $150.01, which we recommend be
reimbursed for this task. [2]

In addition, although HUD does not dispute most of the remaining amount of
time Ervin claimed for pursuing the protest, we agree with HUD that the time
claimed for some of the tasks Ervin listed in exhibit No. 2 of its claim
seems unreasonable. In this regard, in its June 25 letter, HUD specifically
questioned a total of 14.5 hours Ervin claimed on various tasks. [3] We
think that a prudent person would not have required more than a fraction of
the hours charged to those activities. Accordingly, based on our review of
the record, we recommend that Ervin be reimbursed the cost of 2 hours for
those tasks, for a total of $104.58. [4]

After deducting from its claim the costs associated with the unsupported
overhead and with the 27 hours (for preparing and filing the protest in our
Office) and 12.5 hours (for the various tasks detailed above) which we
conclude are excessive, we recommend that Ervin be reimbursed $1,448.19.

Comptroller General
of the United States

Notes

1. In fact, in its comments on the agency report to our Office on its claim,
Ervin increased the amount of its claim to $175,824.95, calculated by
multiplying the hourly rates for Mr. Oleniacz and Mr. Ervin by approximately
5,000 percent, representing fringe benefits, overhead, and G&A. As with its
original claim, Ervin has failed to provide support for its revised claim.
Ervin states only that the 5,000 percent rate it now claims is derived from
an analysis it provided to the Defense Contract Audit Agency for reasons
unrelated to this protest.

2. We calculated this amount based on the respective hourly rates of Mr.
Oleniacz ($40.87) and Mr. Ervin ($86.54) by multiplying those rates by a
share of the 3 hours to reflect the proportion of the time preparing the GAO
protest that the protester states was spent by each of the two individuals
(80 percent of the 3 hours equals 2.4 hours for Mr. Oleniacz; 20 percent of
the 3 hours equals 0.6 hours for Mr. Ervin).

3. HUD noted that Ervin had claimed a total of 9.5 hours reviewing and
drafting a 3-page response to a relatively simple motion to dismiss the
protest based on timeliness, which seemed excessive. The agency also
questioned 3.75 hours Ervin claimed it spent drafting and reviewing a reply
to HUD's response to Ervin's document request, since Ervin's reply was
barely more than 1 page and appeared unrelated to HUD's response to Ervin's
document request. HUD further questioned 1.25 hours Ervin claimed it spent
reviewing and drafting a 3-sentence letter requesting a copy of the task
order at issue in the protest.

4. Again, we calculated this amount by multiplying the respective hourly
rates of Messrs. Oleniacz and Ervin by a share of the 2 hours to reflect the
proportion of the time that the protester stated that each individual spent
on the tasks at issue (in this case, 75.9 percent of the 2 hours equals
1.5 hours for Mr. Oleniacz; 24.1 percent of the 2 hours equals 0.5 hours for
Mr. Ervin).