By: Edward T. DeLisle

We are frequently asked whether attorneys fees are recoverable as part of the federal claims procedure. The answer is sometimes. A case just decided by the Court of Appeals for the Federal Circuit assists in explaining when such a recovery is possible.

In Tip Top Construction v. Donahue, the United States Postal Service required a contractor to perform additional work to complete an air conditioning repair project in the Virgin Islands. While it approved a change order to perform the additional work, the contractor incurred other additional costs, including attorneys fees, to convince the USPS to accept its request for additional money. Those monies were submitted in the form of a claim and denied.

The U.S. Postal Service Board of Contract Appeals upheld the denial stating that the costs included in the claim “had nothing to do with the performance of the changed work or genuine contract administration.” The Federal Circuit disagreed.

The Federal Circuit took the position that the monies included in the claim reasonably flowed from negotiations associated with the change order process. This conclusion was important, for the Federal Circuit framed the issue as follows: “If a contractor incurred the cost for the genuine purpose of materially furthering the negotiating process, such cost should normally be a contract administration cost allowable under FAR 31.205-33, even if negotiation eventually fails and a CDA claim is later submitted.” Here, the facts revealed that the parties were, in fact, making attempts to negotiate an amicable resolution regarding price for a number of months prior to submission of the claim. Consultants and attorneys were used by the contractor to assist it in its presentation to the Postal Service. Because the evidence suggested that the contractor’s underlying purpose was to resolve the dispute, the Federal Circuit held that these costs were recoverable.

Tip Top illustrates the fine line one must walk when it comes to the collection of attorneys fees. Certainly, once an actual claim is submitted by a contractor, there can be no expectation to collect fees from that point forward. The dispute has traveled too far down the road of dispute resolution. Prior to that point, however, if a contractor can prove that the costs incurred for counsel stemmed from a desire to negotiate an amicable resolution to a change order dispute, recovery of fees is possible.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.