Board of Contract Appeals General Services Administration Washington, D.C. 20405 DENIED: March 15, 2000 GSBCA 15172-C(14919-COM) DRC CORPORATION, Applicant, v. DEPARTMENT OF COMMERCE, Respondent. Joseph C. Staak and Reginald M. Jones of Smith, Currie & Hancock LLP, Atlanta, GA, counsel for Appellant. Amy Freeman Pierce and Fred Kopatich, Office of General Counsel, Department of Commerce, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), NEILL, and PARKER. DANIELS, Board Judge. We consider here, and deny, an application by DRC Corporation for an award of attorney fees and other costs the contractor incurred in prosecuting an appeal of a decision by a contracting officer of the Department of Commerce's Bureau of the Census. The contracting officer had denied a claim by DRC for $35,525.60 in additional supervisory costs allegedly incurred by the contractor on a construction project. We granted this appeal in part, awarding DRC $7,500. DRC Corp. v. Department of Commerce, GSBCA 14919-COM, 00-1 BCA 30,649 (1999). Background A brief summary of the underlying decision may be helpful to an understanding of our analysis here. DRC completed work on a contract for renovation of restrooms at the Census Bureau's Jeffersonville, Indiana, facility about four months after the designated contract completion date. DRC asserted that the contract allowed it to perform the work in whatever sequence it found most efficient, and that the delay in completing the job was attributable to the agency's direction that the work be performed in three separate phases. Thus, according to DRC, the agency was liable for the supervisory costs the contractor incurred during this four- month period. The Department of Commerce maintained that the contract permitted it to require the contractor to perform the work in phases, and that the direction to perform in three phases consequently did not make the agency liable for any of the claimed costs. According to the agency, the costs resulted from the contractor's inefficient approach to the job. The Board "conclude[d] that each side's position has some merit." 00-1 BCA at 151,336. The contract contained a provision permitting the Bureau of the Census to direct phasing of work. This provision, coupled with the explicit, pre-bid statement of agency employees to DRC's president as to how the provision would be implemented (some restrooms would have to remain open at all times), compelled a conclusion that the understanding between the parties, when the contract was signed, was that the work would have to proceed in stages. Because the number of stages was not spelled out in advance, however, the contractor should have been able to bid the job on the assumption that the number of stages would be the least possible -- two. The agency was consequently liable for whatever extra costs resulted from the direction to perform the work in three phases rather than two. Given the contractor's slow pace in construction of the first two phases, we concluded that but for the requirement to separate some of the job into a third phase, DRC would have finished approximately three months later than the originally-specified completion date. Thus, the agency was responsible for only about one month, rather than four, of additional supervisory costs. At hearing, DRC reduced the amount of its claim to $29,515.45 and presented evidence that this sum represented its supervisory costs over the four-month period. Our award was designed to reimburse the contractor for roughly one- fourth of the amount shown to have been spent during the four months. Discussion DRC filed its application for costs pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. 504 (1994 & Supp. IV 1998). The Act establishes several requirements for eligibility for recovery. The applicant must: (1) have been a prevailing party in a proceeding against the United States; (2) if a corporation, have had not more than $7,000,000 in net worth and five hundred employees at the time the adversary adjudication was initiated; (3) submit its application within thirty days of a final disposition in the adjudication; (4) in that application, (a) show that it has met the requirements as to having prevailed and size (numbers (1) and (2) above) and (b) state the amount sought and include an itemized statement of costs and attorney fees; and (5) allege that the position of the agency was not substantially justified. Id. 504(a)(1), (2), (b)(1)(B); see Doty v. United States, 71 F.3d 384, 385 (Fed. Cir. 1995). Even if the applicant meets all of these eligibility requirements, the agency may defeat the application by persuading the adjudicative officer that the position of the agency was substantially justified or that special circumstances make an award unjust. 5 U.S.C. 504(a)(1). "EAJA is not a mandatory fee-shifting device." RAMCOR Services Group, Inc. v. United States, 185 F.3d 1286, 1290 (Fed. Cir. 1999). DRC has met all the requirements for eligibility for recovery. First, as the contractor maintains in its application, it was the prevailing party in the underlying case. A party is "prevailing," for laws such as EAJA which permit the shifting of fees, if it "succeed[s] on any significant issue in litigation which achieves some of the benefit [it] sought in bringing suit." Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). "The touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties in a manner which Congress sought to promote in the fee statute." Texas State Teachers Association v. Garland Independent School District, 489 U.S. 782, 792-93 (1989). "A judgment for damages in any amount, whether compensatory or nominal, modifies the defendant's behavior for the plaintiff's benefit by forcing the defendant to pay an amount of money he otherwise would not pay." Farrar v. Hobby, 506 U.S. 103, 113 (1992). Our awarding DRC $7,500 made the contractor a prevailing party. See Neal & Co. v. United States, 121 F.3d 683, 685 (Fed. Cir. 1997) (party "prevailed" though it recovered only 11.5% of claim); N & P Construction Co., VABCA 3283E, et al., 93-3 BCA 26,257, at 130,593 (party "prevailed" though it recovered only two percent of relief sought). Second, DRC meets the size limitations for eligibility for recovery. The applicant submitted as an attachment to its application a balance sheet prepared by an accountant and a list of employees. These documents establish that at the time the case was filed, the company had a net worth of less than $7,000,001 and a total staff of less than 501 employees. Third, DRC submitted its cost application in a timely manner. Explaining why is complicated. Depending on when one views the adjudication of the underlying dispute as having become final, the application was either filed within thirty days of a final disposition of the dispute or before finality arrived. The Board's decision on the merits of DRC's claim was issued on October 29, 1999. Because the contractor had elected to have the case considered under the Board's small claims procedure, 41 U.S.C. 608 (1994 & Supp. III 1997); Board Rule 202 (48 CFR 6102.2 (1999)), the decision was "final and conclusive" when issued. 41 U.S.C. 608(d) (1994). At the same time, however, it could have been appealed if fraud was alleged to have tainted the Board's proceedings. Id.; Palmer v. Barram, 184 F.3d 1373 (Fed. Cir. 1999). DRC filed its application on November 23, 1999, saying that the Board's decision was final when issued (and thus implicitly acknowledging that our proceedings had been free of fraud). The Department of Commerce, in responding to the application, said not a word about timeliness; apparently it, too, considered the decision unappealable. [Foot # 1 ] For two reasons, we do not analyze whether the application should have been dismissed without prejudice as prematurely filed. As a general principle, when filing of an EAJA cost application occurs at a reasonable time, litigating about when final judgment occurred would be senseless. Beta Systems, Inc. v. United States, 866 F.2d 1404 (Fed. Cir. 1989) (filing within thirty days of final appellate judgment accompanied by remand was reasonable). In any event, the time for appeal of the underlying decision (120 days after the date of a party's receipt of a copy of the decision, 41 U.S.C. 607(g) (1994)) has run and no appeal has been filed, so even if the decision was appealable earlier, it is now final for sure. Thus, even if the application was formerly here too early, it is properly before us now. ****************** Footnote Begin ********** [Foot # 1 ] The fact that the case was decided under the small claims procedure has no impact on our ability to consider an EAJA cost application relating to the case. Giancola & Associates v. General Services Administration, GSBCA 12305-C(12128), 93-3 BCA 26,146. The purpose of EAJA is "to eliminate legal expenses as a barrier to challenges of unreasonable government action," see Community Heating & Plumbing Co. v. Garrett, 2 F.3d 1143, 1145 (Fed. Cir. 1993) (quoting Ellis v. United States, 711 F.2d 1571, 1576 (Fed. Cir. 1983)), regardless of the way in which a challenge may have been resolved. ****************** Footnote End ************ Fourth, DRC has included in its application not only a showing that it has met the statutory requirements as to having prevailed and size, but also a statement of the amount it seeks ($10,902.50 in attorney fees and $1,390.45 in other costs of litigation) and an itemized accounting of those fees and costs. Fifth, the contractor has alleged that the position of the agency was not substantially justified. This specific allegation was not included in the original application, and the Commerce Department moved to dismiss the case because of its absence. In reply to the motion, however, DRC amended the application to contain the necessary allegation. The Court of Appeals for the Federal Circuit has held that while the statute's time limitation for filing "should be strictly met, the content of the EAJA application should be accorded some flexibility." Bazalo v. West, 150 F.3d 1380, 1383 (Fed. Cir. 1998). In Bazalo, id. at 1383, the Court agreed with a position established earlier by the Court of Appeals for the Third Circuit in Dunn v. United States, 775 F.2d 99 (3d Cir. 1985). The Third Circuit explained: Requiring the filing of a fee claim (or any other) with the court or adjudicative agency serves the purpose of establishing a means certain for proving compliance with a time bar. Such certainty is required in most situations in the interest of finality and reliance. But once the claim is filed, whether or not it is as complete as it should be, the interests of proof of timeliness and of finality and reliance have been satisfied. What remains is the fleshing out of the details. 775 F.2d at 104. Consistent with these decisions, we hold that when an EAJA application is timely filed, eligibility requirements may be shown through amendment within a reasonable period of time -- as long as the amendment does not prejudice the Government. We see no prejudice in allowing DRC to make the allegation as to substantial justification through an amendment to its application. We consequently deny the agency's motion to dismiss the application. Although DRC's failure to allege early on that the agency's position lacked substantial justification is not fatal to the contractor's eligibility for an EAJA award, the application founders on a closely related issue. The Commerce Department has advanced, as an alternative to its motion, the defense that its position was substantially justified. We agree with this proposition. As stated earlier, an agency may defeat an eligible party's EAJA cost application by persuading the adjudicative officer that the position of the agency was substantially justified. The Supreme Court has held that the adjudicator should ask, when confronted with this defense, whether the agency's position was "'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). Under this standard, the trier of the case must determine whether the Government's position had a reasonable basis in both law and fact. Chiu v. United States, 948 F.2d 711, 715 (Fed. Cir. 1991); see also RAMCOR Services Group, 185 F.3d at 1290; Ace Services, Inc. v. General Services Administration, GSBCA 12067-C(11331), 93-2 BCA 25,727, at 128,012. The burden is on the Government to show that its position was substantially justified. Doty v. United States, 71 F.3d 384, 385 (Fed. Cir. 1995); Community Heating & Plumbing Co. v. Garrett, 2 F.3d 1143, 1145 (Fed. Cir. 1993); Hospital Healthcare Systems, Inc. v. Department of the Treasury, GSBCA 14719-C(14442-TD), 99-1 BCA 30,282, at 149,785. Several factors demonstrate substantial justification for the Commerce Department's determination to contest DRC's claim. First, although the Board granted DRC some relief, we did so on different legal and factual grounds from those advanced by the contractor (or, for that matter, by the agency). The contractor's failure to enunciate a theory on the basis of which the Board could grant relief indicates justification for opposing the claim. Lionsgate Corp., ENGBCA 5432-F, et al., 91-3 BCA 24,148, at 120,838; Crown Laundry & Dry Cleaners, Inc., ASBCA 28889, et al., 87-3 BCA 20,034, at 101,423. Second, the Commerce Department's positions as to some of the issues in the case were persuasive. The agency acted reasonably in contesting the contractor's reading of the contract, for that instrument (as understood in light of the parties' pre-contractual arrangement) did not permit the contractor to perform its work without regard to agency- directed phasing. Critical to this determination was application of the parol evidence rule, as to which the agency's position was correct. See Foremost Mechanical Systems, Inc. v. General Services Administration, GSBCA 14645-C(13584), 99-1 BCA 30,352, at 150,105 (Government position held substantially justified where proper application of the governing legal principles not clear until after record was fully developed). The agency also acted reasonably in contesting the contractor's presentation of the facts, for we found that DRC's president's version of a key conversation was not credible. See Creske v. Commissioner of Internal Revenue, 946 F.2d 43 (7th Cir. 1991) (where outcome depended on resolution of credibility dispute, Government's position was substantially justified). Additionally, the agency's suggestion that the contractor's slow performance was the cause of delay in completion of the job, while not fully accepted by the Board, was found to be more correct than not. A third indicator that the agency was substantially justified in contesting the claim is that DRC recovered only a small percentage of the amount it sought. The amount in dispute, from submission of the claim until the eve of hearing, was $35,525.60. We ultimately awarded the contractor $7,500 -- only twenty-one percent of this sum. See Atlas Construction Co. v. General Services Administration, GSBCA 11088-C(8653), et al., 92-2 BCA 24,944, at 124,329 (quantum recovery grossly disproportionate to amount claimed indicates that "the Government's adamant refusal during the course of the litigation to recognize the validity of the claims was substantially justified"). Thus, the overall measure of damages was much closer to the position adopted by the agency than that presented by the contractor. See On Time Postal Services, Inc., PSBCA 2528, 91-2 BCA 23,770, at 119,068. In arguing that "[t]he only question at issue in this case [was] whether a constructive change existed," DRC's Reply Brief at 5, the contractor ignores the quantum aspect of the case (as well as the other complexities noted above). In other decisions, the Board has stated, "When, as here, the Government forces an appellant to litigate to obtain 'any relief whatsoever' the position of the Government is not substantially justified." Gilroy-Sims & Associates v. General Services Administration, GSBCA 11778-C(8720, et al.), 93-1 BCA 25,547, at 127,246 (1992); see also Universal Development Corp. v. General Services Administration, GSBCA 12174-C(11251), 93-2 BCA 25,836, at 128,585. These two cases involved situations quite different from the one at bar here: the contractor's position on entitlement was clearly correct and served as the basis for recovery, the agency did not enunciate persuasive positions on important legal and factual issues, and the amount of recovery was significant relative to the contractor's claim. [Foot # 2 ] The language used in Gilroy-Sims and Universal Development should not be taken beyond the type of situation found in those cases. ****************** Footnote Begin ********** [Foot # 2 ] In Gilroy-Sims, the sum awarded the contractor was only sixteen percent of that party's claim. The Board's decision also invalidated a Government claim, however, and considering both claims, the result was closer to the contractor's position than the agency's. ****************** Footnote End ************ Decision DRC's application for recovery of costs under the Equal Access to Justice Act is DENIED. ________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ EDWIN B. NEILL ROBERT W. PARKER Board Judge Board Judge