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Novelty and Partial Success Not Substantial Justification

The government's position with respect to a breach claim was not substantially justified, according to the Court of Federal Claims, because the position contravened the terms and statutory basis of a hydroelectric power contract, and the novelty of the legal issues and the contractor's limited success were not sufficient to establish substantial justification. After prevailing on its claim the government breached the contract by wrongfully including a lost revenue component in the rates charged for irrigation pumping power (52 CCF 78,960), the contractor sought attorneys' fees and expenses under the Equal Access to Justice Act. The government contended its inclusion of a lost revenue component was based on a reasonable interpretation of its statutory duty under the authorizing legislation and the contract.

No Per Se Rules

However, the government's position directly contravened the contract terms. The contract limited the frequency of power rate changes to once every five years, but the effect of the lost revenue component was to "circumvent [this] periodic five-year cycle ... through [its] true-up mechanism." The lost revenue component also included substantial interest as a cost, but the legislation's intent was to set rates on the basis of interest-free financing. The fact the dispute involved issues of first impression did not affect the determination of substantial justification, which must be based on the entire record without reference to per se rules. The fact the contractor prevailed on only one of numerous claims and was awarded only $172,594 of the $8 million in damages sought affected the proportional amount of fees awardable but did not constitute substantial justification. Instead, the contractor was awarded three-sevenths of its legal fees and expenses to reflect its partial but significant success in the litigation. (Dalles Irrigation Dist. v. U.S., FedCl, 54 CCF 79,275)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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