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Costs to Negotiate Price of Changed Work Were Recoverable

The Court of Appeals for the Federal Circuit reversed a decision denying in part a construction contractor's claim for consultant and legal costs because costs related to negotiating the price of changed work are contract administration costs. The dispute arose when the government changed the type of refrigerant required under a work order for installing an air conditioning system, which required the contractor to substitute different equipment. The contracting officer granted an equitable adjustment, but the parties disputed the contractor's entitlement to consultant and legal costs associated with the negotiations relating to the price of the changed work. The Postal Service Board of Contract Appeals ruled the contractor was entitled to costs incurred until the government approved the substitute equipment but held the remaining costs were not "genuine contract administration costs," because the work of the contractor's attorney and subsequent efforts of its consultant were related to maximizing the contractor's monetary recovery (11-1 BCA 34,726).

Negotiation Process

The Federal Circuit disagreed, holding the costs were incurred "for the genuine purpose of materially furthering the negotiation process," and the fact the negotiations related to the price of the change did not remove the associated costs from the realm of negotiation and genuine contract administrations costs. Consideration of price is a legitimate part of the change order process, and the board erred in holding otherwise. In addition, there was no support for the board's alternative holding that the contractor failed to establish its costs for the time period after the government approved the substitute equipment. The contractor provided unrebutted evidence consisting of time sheets and billing records, while the board speculated

be suspended "was far more explicit than notices found sufficient in other cases." ( Scott Timber Co. v. U.S., CA-FC, 56 CCF 79,888)





(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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