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Posted on Monday, October 01, 2012

Government Contractors Entitled to Attorneys’ Fees for Work Changes

Contractors doing changed work under a government contract are entitled to attorneys’ fees according to a recent appeals court decision re-affirming the availability of attorneys’ fees as part of an equitable adjustment for changed work.

When the government ordered Tip Top Construction to change the kind of air conditioner the government had originally wanted to be installed in a Postal Service facility in the Virgin Islands, the company hired a lawyer to help negotiate the price for the changed work. At the end of the negotiations that dragged on for almost a year, the government paid Tip Top for the higher price of the air conditioner but refused to pay for its attorneys’ fees. The Postal Services Board of Contract Appeals agreed, concluding that the attorneys’ fees “had nothing to do with performance of the changed work and were solely directed at trying to convince the contracting officer to accept the contractor’s figure for the change and maximizing Tip Top monetary recovery.”

The appeals court told the government to pay the attorneys’ fees because they are a typical cost of administering a contract. Whether the negotiations were successful is irrelevant. So is the fact that the attorney’s negotiations had nothing to do with the actual installation of the different air conditioner. Negotiating helps in the long run “regardless of whether a settlement was finally reached or whether litigation eventually occurs because the availability of the process increases the likelihood of settlement without litigation. Additionally, contractors would have a greater incentive to negotiate rather than litigate if these costs of contract administration were recoverable.”

Not only are attorneys’ fees paid as part of an equitable adjustments for changed work.  They are also routinely paid as part of a termination for convenience settlement proposal. The rates that an attorney charges must be reasonable but they are not capped by law at any specific hourly rate.

Author Terrence O’Connor is the Director of Government Contracts for the Washington, DC regional business law firm of Berenzweig Leonard, LLP.  He can be reached at toconnor@BerenzweigLaw.com.