On federal contracts, there is a maxim. Costs incurred by a contractor in negotiating, facilitating, or expediting a government-mandated change are recoverable costs of contract performance. Costs incurred in preparing, furthering, or prosecuting a claim are not recoverable costs. The line, however, is not always easy to draw.
In one recent case, the government mandated a change in the HVAC equipment. It was not clear exactly what equipment would satisfy the government’s demands. The contractor retained a mechanical consultant to coordinate the discussion between the government and potential suppliers, arriving at an acceptable specification. The government had no problem paying the contractor for the increased cost of the substitute equipment. But the government balked at paying the contractor’s consultant fees.
The contractor recovered all fees incurred prior to the government’s approval of the substitute equipment. These were reasonable change order costs necessitated by the government’s demand for equipment other than that specified. These fees were direct costs of contract performance.
The consultant fees incurred subsequent to approval of the substitute equipment were a different matter, however. The consultant’s efforts at that point were to maximize the contractor’s recovery on the change order. These fees were incurred in the pursuit of a claim and were not recoverable.
What is your opinion? Should the fees of consultants, accountants and attorneys be recoverable as change order costs? And at what point do those efforts cease to be contract administration and become claim prosecution? I welcome your comments.
Featured in Next Week’s Construction Claims Advisor:
- Unlicensed Architect Loses Large Fee
- Construction Lender Cannot Take Interest and Fees Ahead of Contractor Payment
- Bid Preparation Costs Recovered Without Injunction
