Updated: Jul 21, 2020
By Dick Lieberman, Consultant and Retired Attorney
The Competition in Contracting Act provides that the Government Accountability Office (“GAO”) may recommend that an agency pay legal fees and certain other costs where the GAO has determined that a solicitation for a contract or a proposed award or the award of a contract does not comply with a statute or regulation. 31 U.S.C. §3554(c). The GAO recommends that these costs be paid where a protest is either (1) sustained; or (2) where a procuring agency takes corrective action in response to a protest, but the GAO determines that the agency unduly delayed taking corrective action in the face of a clearly meritorious protest. Generally, if an agency takes corrective action on or before the due date for its protest report to the, the GAO regards such action as prompt and declines to grant cost reimbursement. Palmetto Isotopes, B- 410268.2, Jan. 5, 2015, 2015 WL 65017.
CICA further states that GAO may recommend payment to the protester (interested party), the costs of: filing and pursuing the protest, including reasonable attorneys’ fees and consultant and expert witness fees; and bid and proposal preparation. However, except for small business concerns within the meaning of the Small Business Act, Sec. 3(a), no interested party may be paid attorneys fees that exceed $150 per hour unless there is a special justification for paying more (usually a cost of living factor). 31 U.S.C. § 3554(c)(2).
A recent GAO protest demonstrates the significant mistakes that an agency can make when the GAO recommends the payment of legal fees. 6K Systems, Inc., Costs, B-408124.6, Dec. 16, 2014. In 6K, GAO recommended that the Office of Personnel Management (“OPM”) pay 6K’s legal fees after it sustained 6K’s protest of an unreasonable agency price evaluation and an agency failure to engage in meaningful discussions. 6K, which OPM acknowledged was a small business under the Small Business Act, submitted a request for 120.5 hours of attorney work at $225 per hour, for a total of $27,112.50. OPM refused to agree to that amount, and 6K filed its claim for costs with GAO.
First, OPM challenged the number of hours, but GAO noted that OPM had provided “no substantive support for its position,” instead filing a one page statement that recounted the negotiations between the agency and the protester. GAO therefore examined the reasonableness of the attorney hours, and concluded that, except for three requests totaling 5.75 hours, all the hours were reasonable. GAO disallowed 2.25 hours related to attending the debriefing, 1.75 for researching remedies the Court of Federal Claims, and 3.5 hours to discuss post-protest decision steps with 6K. GAO concluded that 6K was entitled to reimbursement for 114.75 attorney hours (120.5 minus 5.75 hours).
Second, OPM refused to pay at the requested hourly rate of $225. OPM simply stated that it “calculates the hourly attorney fee at $150” without providing any basis for this position. The GAO noted that CICA’s cap of $150 applied only to large businesses, and small businesses are specifically excluded from this limitation. OPM had acknowledged that 6K was a small business, and never argued that a $225 rate was unreasonable for legal services in Washington, DC. The GAO cited the CICA statement above that “[n]o party (other than a small business concern...) may be paid costs for attorneys’ fees that exceed $150 per hour.” Since 6K was small, and GAO deemed the $225 rate reasonable, it was allowed by GAO.
6K got all of its protest costs back, except for 5.75 hours worth of attorney time that didn’t relate to the protest. GAO recommended reimbursement of $25,818.75, or 114.75 attorney hours at $225 per hour.
(1) Agencies must comply with the law and the FAR, just as contractors must. An agency may not disregard the plain language of the law, which in this case, excluded small businesses from the hourly cap, basing their reimbursement only on “reasonableness.”
(2) If an agency denies a cost claim, it must provide a reasonable basis for that denial. Merely stating that the agency “calculates the hourly attorney fee at $150”” is not sufficient. Failure to read the statute and provide logical support for an agency’s position will be overruled by GAO.
Copyright 2015 Dick Lieberman, Permission Granted to the Maryland PTAC. This article does not provide legal advice as to any particular transaction.