United States: The Equal Access To Justice Act

Welcome to a new feature of the Government Contracts Quarterly Update, "Contract Spotlight." We intend to use this space to highlight fundamental but often-overlooked aspects of government contracting law that can give contractors a leg up in this fiercely competitive space. This quarter, we are highlighting the Equal Access to Justice Act ("EAJA"), 29 U.S.C. § 2412.

Under the EAJA, a small business, nonprofit organization, or low-net-worth individual who prevails in a suit against the United States government is generally eligible to obtain reimbursement for attorneys' fees of up to $125 per hour, as well as related expenses, if the government's position was not "substantially justified"; the award may be increased above this limit when warranted by "special circumstances" such as a cost-of-living increase or if there is a limited number of qualified attorneys to handle the case due to the need for special skills. Although certain practice areas, including patent law, have been held to require such specialized skills as to justify an increase, government contracts are not generally treated as sufficiently special to support an increase. See, e.g., Cal. Marine Cleaning, Inc. v. U.S., 43 Fed. Cl. 724, 733 (1999). Because of these limitations on eligibility and award under the EAJA, many contractors do not account for it when contemplating litigation against the government. Two decisions by the Court of Federal Claims ("COFC") this past quarter, however, demonstrate how the EAJA can be a powerful tool for enabling litigation when the government engages in arbitrary or spurious behavior.

On July 23, the COFC awarded attorneys' fees to a contractor who successfully protested the U.S. Army Corps of Engineers' decision to exclude the contractor's proposal as nonresponsive. BCPeabody Const. Svcs., Inc. v. U.S., — F.3d —, 2014 WL 3640776 (2014). Due to a clerical error, BCPeabody's proposal omitted a project information sheet demonstrating the prior experience of a subcontractor, and the contracting officer deemed the proposal technically unacceptable. However, the omission constituted a "minor or clerical error" under FAR § 15.306(a), providing the contracting officer with discretion to allow BCPeabody to clarify the error; because the contracting officer learned from a different proposal that the subcontractor had significant prior experience, the court determined that it was an arbitrary abuse of discretion not to allow BCPeabody to clarify the error. BCPeabody was awarded compensation for 130.65 attorney hours, which came to a total of $16,331.25 at the statutory rate.

On August 7, the COFC awarded attorneys' fees to another contractor in litigation stemming from a claim for payment. Ulysses, Inc., v. United States, — Fed. Cl. —, 2014 WL 3883329 (2014). The contractor, believing that it was an approved source, planned to manufacture a part internally on task orders issued by the government; one of these orders stipulated that the part be manufactured by a certain third party. The government canceled both orders and then responded to the contractor's claim for payment with a series of counterclaims alleging violations of the False Claims Act ("FCA"), Contract Disputes Act ("CDA"), and Forfeiture of Fraudulent Claims Act ("FFCA")—a common government tactic that can dramatically increase the risks and costs associated with litigation for contractors. The COFC found that while the government had properly canceled the purchase order with explicit performance requirements, ambiguities in the task orders and solicitations provided a plausible basis for the contractor's belief that it was permitted to produce components for other task orders internally. Stressing the importance of sound prosecutorial discretion in FCA cases, the court characterized the government's decision to counterclaim as an "overreaction" to a reasonable error and held that the government's position was not substantially justified. Ulysses was awarded $24,493.79 for 132.5 attorney hours.

Because increases in the cost of living are among the "special circumstances" for which a court may grant an increased award, the plaintiff in Ulysses was able to recover at a rate of $184.83 per hour, though contractors are reminded that this increase is not automatic—BCPeabody, as discussed above, was awarded only $125 per hour because it failed to request a cost-of-living adjustment. Although this may not be enough to cover the full costs of litigation, government contractors assessing the value of litigating with the government should consider the EAJA's potential to defray costs when deciding whether to pursue litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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