Board of Contract Appeals General Services Administration Washington, D.C. 20405 _____________________________ DENIED: April 30, 1999 _____________________________ GSBCA 14645-C(13584) FOREMOST MECHANICAL SYSTEMS, INC., Applicant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Joseph W. Kardoley, President of Foremost Mechanical Systems, Inc., Lakewood, CO, appearing for Applicant. Leigh Ann Holt, Office of Regional Counsel, General Services Administration, Denver, CO, counsel for Respondent. Before Board Judges PARKER, HYATT, and WILLIAMS. HYATT, Board Judge. Foremost Mechanical Systems, Inc. has filed an application for reimbursement of fees and expenses pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. 504 (Supp. II 1996). Applicant seeks an award in the amount of $54,389.11. The General Services Administration (GSA) opposes any award of fees and expenses, arguing that the application was untimely filed and that the Government's position was substantially justified. In addition, GSA points out that the "fees" sought represent the time of Foremost's pro se representative, which is not recoverable under applicable precedent, and that many of the expenses claimed are not properly documented or otherwise appropriately reimbursed under EAJA. Background In the underlying appeal, Foremost challenged the contracting officer's decision determining the amount of money to which appellant was entitled under a termination for convenience of its contract with GSA. Previously, the Board had converted the termination for default of appellant's contract to perform modifications to the ventilation systems in a federal office building to one for the convenience of the Government. Foremost Mechanical Systems, Inc. v. General Services Administration, GSBCA 12335 et. al, 95-1 BCA 27,382 (1994). Foremost thereafter submitted a settlement proposal for the consideration of the contracting officer. Negotiations were unsuccessful, and eventually the contracting officer issued a decision awarding appellant some, but not all, of the costs claimed. Foremost appealed that decision, asserting entitlement to the amounts not awarded by the contracting officer. The Board's decision, which granted Foremost's appeal in part, held that appellant was entitled to more than was allowed by the contracting officer, but not to all of the amounts claimed. Foremost Mechanical Systems, Inc. v. General Services Administration, GSBCA 13250-C(12335) et al., 98-1 BCA 29,652.[foot #] 1 Following the issuance of the Board's decision on the default termination, Foremost presented a convenience termination settlement proposal. After the parties attempted to negotiate a mutually acceptable resolution of this matter, GSA made a final settlement offer of $125,000 to resolve the combined EAJA and convenience termination issues, which was declined by Foremost through its former counsel.[foot #] 2 Thereafter the contracting officer issued a decision determining that the net amount owed to Foremost, based on the available documentation and her belief that Foremost was in a loss position, was $85,139.50 plus interest. In its decision, based on a hearing and fully developed record, the Board awarded the net amount of $111,655 plus interest in settlement of Foremost's convenience termination costs and the amount of $22,481.18 under EAJA. 98-1 BCA at 146,922-23. Applicant's net worth does not exceed $7,000,000 and applicant is otherwise eligible under EAJA's size criteria for an award. 98-1 BCA at 146,912-13. Foremost's application for attorney fees and expenses seeks an award in the amount of $54,389.11. Of this, $46,271.25 represents the cost of Mr. Kardoley's time spent pursuing the quantum claim and preparing the EAJA application on behalf of Foremost. This amount was calculated by multiplying the hours logged by Mr. Kardoley by a rate of $75 per hour. The remainder of the claimed amount is attributable to various out-of-pocket costs incurred by Foremost in pursuing the appeal. These include charges for photocopies, postage, long distance telephone calls, office materials, and couriers. The most significant individual items of expense were ----------- FOOTNOTE BEGINS --------- [foot #] 1 This decision jointly addressed EAJA claims based on the default termination litigation and the disputed convenience termination quantum issues. [foot #] 2 See Response of the General Services ___ Administration to Foremost Mechanical Systems, Inc.'s Application for EAJA Fees and Expenses at 1. ----------- FOOTNOTE ENDS ----------- the fees charged by Mr. Grabau, an independent accountant, who reviewed the claim and supporting documentation and testified at the hearing on behalf of Foremost ($ 6,074), and the cost of purchasing the transcript ($1,147.60). The Government has opposed the application on several grounds. First, GSA argues that the application was not timely filed within thirty days after May 27, 1998, the date on which the parties agreed that the Board's decision would not be appealed. In addition, the Government maintains that its position in the quantum negotiation and litigation was substantially justified. Finally, GSA objects to specific items claimed by applicant. Timeliness The Board's quantum decision regarding the termination for convenience was issued on March 31, 1998. On May 27, 1998, GSA counsel spoke with appellant's representative by telephone and notified him that GSA would not appeal the Board's decision. After discussing the details involved in issuing checks in accordance with the Board's decision, appellant's representative similarly stated that he would not appeal the Board's decision. Appellant received the Government's checks on June 15. The application for costs was filed on July 6, 1998. Respondent contends that the application was not timely filed. Under EAJA, a prevailing party must file its application for costs "within 30 days of a final disposition in the adversary adjudication. . . ." 5 U.S.C. 504(a)(2). The thirty-day period for filing an application for fees under EAJA is jurisdictional; it cannot be waived by the Board or the parties. J.M.T. Machine Co. v. United States, 826 F.2d 1042, 1047 (Fed. Cir. 1987); accord Ludsin & Co. v. Small Business Administration, GSBCA 14175-C(13777-SBA), 97-2 BCA 29,185, at 145,156; Griffin Services, Inc. v. General Services Administration, GSBCA 11735- C(11171), 94-2 BCA 26,624, at 132,440 (1993). GSA contends that the final disposition of this case should be considered to have occurred on May 27, when the parties' representatives conferred by telephone and both stated that they would not appeal the Board's decision. Assuming that final disposition occurred on May 27, GSA then asserts that Foremost's application for costs, having been filed on July 6, is untimely. Foremost responds that the application is timely because, in its view, the date of final disposition was June 15, when appellant received the checks. As we stated in Griffin, ordinarily a decision becomes final upon the expiration of the right to appeal, which, under the Contract Disputes Act, occurs 120 days after receipt of the decision by the parties. Alternatively, a decision may be considered final after the parties have exchanged certificates of finality agreeing not to initiate an appeal of the decision. The exchange of oral representations that the decision will not be appealed, however, is not sufficient to confer finality upon the Board's decision such that an application for EAJA costs would be required to be filed within thirty days of that conversation. Although we do not doubt that the parties did not intend, as of that date, to file an appeal, oral communications to that effect are not binding upon either party, and both parties have an absolute right to change their minds. In a similar situation, the Interior Board of Contract Appeals has explained: "Counsel's statement that the Government did not intend to appeal did not qualify as any enforceable nullification of its right to appeal." EAJA Application of Hardrives, Inc., IBCA 3283-F, 96-1 BCA 27,935, at 139,512 (1995). Accordingly, Foremost's application was timely filed. Fees of Foremost's President Before addressing whether Foremost may be entitled to recover fees and expenses under EAJA, we note that the lion's share of the amount claimed represents Foremost's calculation of the value of Mr. Kardoley's time spent pursuing the quantum case before the Board. Even if we were to find that Foremost is otherwise entitled to EAJA fees and expenses incurred in connection with this matter, these amounts cannot be awarded in any event. Mr. Kardoley argues that he should be reimbursed for the time he spent representing the company as its agent. As the owner of the company, however, Mr. Kardoley effectively acted pro se. EAJA does not authorize payment to litigants for time spent acting pro se in appeals. Naekel v. Department of Transportation, 845 F.2d 976, 981 (Fed. Cir. 1988); Vehicle Maintenance Services v. General Services Administration, GSBCA 12942-C(11663), 95-1 BCA 27,513; Singleton Contracting Corp., GSBCA 11011-C(9614), et al., 91-2 BCA 23,817; American Power, Inc., GSBCA 10558-C(8752), 91-2 BCA 23,706. Non-attorneys are not entitled to an award of fees for performing legal work because the intent of EAJA is to encourage litigants to retain legal counsel. To award legal fees to a non-attorney would thwart the purpose of the fee-shifting statute. Joseph L. DeClerk & Associates, Inc., ASBCA 49595, 97-2 BCA 29,268 (citing Union Precision & Engineering, ASBCA 37549, 93-1 BCA 25,337). The term "agent" as used in EAJA does not encompass employees or officers of an EAJA applicant, but rather refers to outside non- lawyer professionals, such as accountants, who render litigation assistance to contractor-appellants. See Fanning, Phillips & Molnar, VABCA 3856E, 97-2 BCA 29,008. As such, even if we were to conclude that the Government's position in this matter was not substantially justified, appellant is not entitled to an award of the amounts claimed for the time spent by Mr. Kardoley pursuing the appeal and preparing the application. Substantial Justification With respect to the remaining amounts claimed by applicant, principally the cost of retaining an accountant to rebut the positions of the Government auditors and various out-of-pocket expenses incurred in preparing and presenting the quantum case, we must consider the extent to which applicant was a prevailing party and whether the Government's position in this matter was substantially justified. Since Foremost succeeded in increasing the amount of money awarded, although it did not obtain all that it sought, it is a prevailing party potentially eligible to recover a portion of these costs. It thus becomes the Government's burden to show that its position in the matter litigated was substantially justified. See, e.g., Community Heating & Plumbing v. Garrett, 2 F.2d 1143, 1145 (Fed. Cir. 1993). The term "substantially justified" has been defined to mean "justified in substance or in the main -- that is, justified to a degree that could satisfy a reasonable person." Pierce v. Underwood, 487 U.S. 552, 565 (1988); accord Commissioner, Immigration & Naturalization Service v. Jean, 496 U.S. 154, 158 (1990). EAJA was not intended to be an automatic fee-shifting device. The fact that the Government may have lost on some or all of the issues litigated does not necessarily establish that its position was not substantially justified. The test is whether the Government's actions had a reasonable basis in fact or law. See, e.g., Luciano Pisoni Fabbrica Accessori Instrumenti Musicali v. United States, 837 F.2d 465, 467 (Fed. Cir.), cert. denied, 488 U.S. 819 (1988). Thus, although Foremost may be deemed a "prevailing party," at least in part, because it succeeded in obtaining some of the benefit sought in the litigation, Hensley v. Eckerhart, 461 U.S. 424 (1983), it does not necessarily follow that the Government's position in negotiating the settlement proposal and in the litigation was not substantially justified. We find that GSA has met its burden to demonstrate that its position in this matter was substantially justified. First, as GSA points out, Foremost's appeal was not granted fully. Foremost's settlement proposal sought the net amount of approximately $164,000 with respect to the terminated contract. This included profit at a rate of ten percent and a claim for post-termination unabsorbed overhead. GSA forwarded the settlement proposal to its auditors for review. The auditors concluded that about $30,000 in claimed costs should be disallowed for lack of adequate backup documentation and that various other amounts had been improperly allocated to the contract. The contracting officer relied in part on the auditors' conclusions and recommendations in her evaluation of the settlement proposal, but also, using her independent knowledge of the contract administration process, allowed amounts that the auditors had questioned. She made adjustments to the contract price for change claims based on her judgments as to the probable cost of that work and concluded that Foremost had been in a loss position at the time of termination. As a result, she determined that no profit should be awarded and that the loss formula should be applied to the recovery. One of the Government's principal points is that both the amount the Government could offer in settlement, and the amount awarded in the contracting officer's final decision issued after settlement efforts failed, were limited by GSA's inability to verify costs in spite of repeated requests for additional documentation. A significant portion of the documentation requested by GSA in fact was not provided until shortly before or during the hearing on the merits of the quantum case. When additional documentation and supporting testimony was produced at the hearing, GSA volunteered to review the additional materials; prior to the completion of post-hearing briefing, GSA conceded to the Board that based on information provided additional amounts would be appropriate for award.[foot #] 3 Although the Board ultimately awarded more than the Government conceded for costs of performing the contract, the amount of direct and indirect costs initially determined to be due, supplemented by those conceded by GSA based on the additional information, was not so far off the mark as to be unreasonable given the circumstances. The GSA witnesses testified that they requested and did not receive documentation to support certain of the costs claimed. Although Mr. Kardoley asserted that these documents were provided to his former attorneys and to the best of his knowledge should and would have been made available to the contracting officer and the auditors, in the absence of affirmative testimony from his former attorneys explaining or contesting the documentation discrepancies, we accept the testimony of the auditors that the documents were not received when requested. The boards have recognized that when the contractor does not promptly meet its burden to provide evidence supporting the amounts it claims, this failure of proof creates an adequate basis for the contracting officer to reduce or deny a claim, and the Government's position in such cases is substantially justified. See Application of Tayag Bros. Enterprises, Inc., ASBCA 42097, 96-2 BCA 28,279; Industrial Constructors Corp., AGBCA 90-197-10, 91-3 BCA 24,363; Crown Laundry & Dry Cleaners, Inc., ASBCA 28889, 87-3 BCA 20,034. Another area in which the Board disagreed with the approach taken by the contracting officer concerned the application of the loss formula. Although the Board did not find that the loss formula was properly applied in the circumstances of this case, it also recognized that the evidence provided by the contractor ----------- FOOTNOTE BEGINS --------- [foot #] 3 This included both amounts claimed as direct costs and amounts claimed as settlement expenses. Attorney fees incurred in the proposal preparation process were initially disallowed for lack of supporting documentation. The requisite documentation and support was not forthcoming until the hearing. 98-1 BCA at 146,915. ----------- FOOTNOTE ENDS ----------- concerning additional costs caused by changes to the work and the likely cost to complete remaining work was, at best, sparse and inconclusive. The Board, like the Government, was not in a position to calculate accurately what the adjusted contract price would have been. Considering the totality of the record, including testimony provided by Mr. Kardoley for the first time at the hearing, the Board, mindful of the instruction of the termination for convenience principles to reach a fair and equitable settlement, was unwilling to apply the loss adjustment formula, but also declined to award a profit to the contractor. 98-1 BCA at 126,919-21. The Government's position is substantially justified when issues involve close evidentiary questions and the proper application of the governing legal principles is not clear until after the record is fully developed. See, e.g., Timber Rock Reforestation, AGBCA 97-117- 10, 97-2 BCA 29,122; Jack L. Olsen, Inc., AGBCA 95-119-10, 96-1 BCA 28,052 (1995); Labco Construction, Inc., AGBCA 95-104-10, 95-2 BCA 27,6777; Montgomery Ross Fisher, Inc., PSBCA 3261, 93- 3 BCA 26,106; Infotec Development, Inc., ASBCA 31809 et al., 92-2 BCA 24,817. To summarize, based on a full review of the circumstances, the Government's position in this matter was substantially justified. Although the Board did not always agree with the Government's conclusions concerning disputed facts and issues, this case was not readily resolved based on evidence and legal analysis available to all of the parties well before the hearing. Much of the evidence needed to support the conclusion eventually arrived at by the Board was not earlier available to the Government. This includes the testimony of Mr. Kardoley in support of his claim, and of Mrs. Kardoley, Foremost's bookkeeper, as well as the analysis presented by Mr. Grabau and the supporting documentation for the attorney fees incurred in preparation of the termination settlement proposal. The Government points out that Mr. Grabau had more documentation available to him than did the GSA auditors, which contributed at least to some degree to the discrepancies in the conclusions of the auditors vis-a-vis those of Foremost's accountant. Even with the benefit of the evidence and testimony produced at the hearing, this was a close case. The Government's overall position, given the difficulties it encountered in resolving documentation issues with Foremost, was not unreasonable. Accordingly, it would not be appropriate under the circumstances to award even a portion of applicant's expenses under EAJA. Decision The application is DENIED. _________________________________ CATHERINE B. HYATT Board Judge We concur: ______________________________ _________________________ ________ ROBERT W. PARKER MARY ELLEN COSTER WILLIAMS Board Judge Board Judge