______________________________________________ GRANTED: April 30, 1996 _____________________________________________ GSBCA 12415 P.J. DICK INCORPORATED, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. John T. Flynn and Thomas J. Kelleher, Jr., of Smith, Currie & Hancock, Atlanta, GA, counsel for Appellant. Sharon A. Roach, Gerald L. Schrader, Martin A. Hom, Robert C. Smith, and M. Leah Wright, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), BORWICK, and NEILL. BORWICK, Board Judge. This appeal involves a contract for the renovation of certain floors of the United States Courthouse and Post Office, Pittsburgh, Pennsylvania, a thirteen-story building. The con- tractor and appellant is P.J. Dick Incorporated (P.J. Dick). The respondent is the General Services Administration (GSA). P.J. Dick, on behalf of its subcontractor, American Environmental Consulting (AEC), seeks accounting fees of $46,804.17 for prepar- ing cost or pricing data to support its prices for asbestos removal. GSA denied P.J. Dick's claim because it believed the costs were unallowable. We grant the appeal. We conclude the costs were direct costs benefitting the contract, and thus allocable and allowable under the Federal Acquisition Regulation (FAR). GSA does not contest the reasonableness of the amount claimed. We therefore grant the appeal. Findings of Fact Background and modification AS05: 1. GSA awarded contract no. GS-03P-88-DXC-0069 (the "contract") to P.J. Dick on September 17, 1988. Appeal File, GSBCA 11676, Exhibit 1. The contract was for the renovation of the basement through the fourth floor of the United States Post Office and Courthouse in Pittsburgh, PA. Id. The original contract amount was $13,446,000. Id. 2. After award of the contract to P.J. Dick, GSA determined that larger amounts of unexposed asbestos contaminated material (ACM) remained on the site than had previously been determined. Appellant's Supplemental Appeal File, GSBCA 11772, Exhibit 4. For efficiency's sake, GSA decided to enter into a supplemental agreement with P.J. Dick for the asbestos abatement, rather than conduct a separate procurement. Appeal File, GSBCA 11772-73, Exhibit 353. P.J. Dick agreed to modification of its contract to include asbestos removal and to procure a subcontractor for the job. 3. On March 23, 1989, GSA issued a price to be determined later (PDL) contract modification, AS05, in the not to exceed amount of $704,361, which directed P.J. Dick to perform the asbestos abatement work. Appeal File, GSBCA 11676, Exhibit 8. Modifica- tion AS05 provided a lump sum payment, on a price to be deter- mined later basis, for base work, with unit prices for work over and above the base amount. P.J. Dick, Inc. v. General Services Administration, GSBCA 11772, et. al., 94-3 BCA 27,266, at 135,845, 135,847 (Findings 2, 12). 4. P.J. Dick asked several firms to bid on a subcontract for the removal of certain asbestos from the building. Since AEC s proposal to P.J. Dick was for the lowest proposed price, Appeal File, GSBCA 11772-73, Exhibits 340, 342, 344, P.J. Dick entered into a subcontract with AEC on April 5, 1989 for $511,092. Id., Exhibit 364. Black floor tile and modification AC17 5. In April of 1989, AEC began performing the asbestos abate- ment work covered by modification AS05. Transcript, Vol. 2 at 628. On April 25, P.J. Dick advised the contracting officer by letter that the existing black floor tile on the third floor contained asbestos. Appeal File, GSBCA 11772-73, Exhibit 409. 6. On May 18, 1989, GSA issued RFP sixteen for the removal of the black floor tile. Appeal File, GSBCA 11772-73, Exhibit 377. On June 20, 1989, PDL modification AC17 was issued for the removal of the black floor tile, with a not to exceed price of $300,000. Id., Exhibit 375. Disagreement over payment for cost or pricing data 7. On July 5, 1989, the contracting officer requested that P.J. Dick provide cost or pricing data for modification AC17, related to AEC s subcontract. Appeal File, GSBCA 11772-73, Exhibit 405. Although AEC recalled receiving the request for cost or pricing data, it believed the information was not needed. Transcript, Vol. 2 at 561. Because the work to remove black floor tile on the third floor was in excess of the base bid work in modifica- tion AS05, AEC believed it was entitled to unit prices specified in AS05. Appeal File, GSBCA 11772-23, Exhibit 380. AEC did not track its costs. AEC had not anticipated submitting the data, and had not included any costs in its job estimate for preparing and submitting the data. Transcript, Vol. 2 at 488-89, 563. P.J. Dick similarly did not believe it necessary to submit cost or pricing data for AC17, because it believed it had obtained competitive proposals for the asbestos work. Appeal File, GSBCA 11772-73, Exhibit 404. 8. On July 28, 1989, the contracting officer directed P.J. Dick to provide cost or pricing data within three working days. If the contractor did not comply, he threatened that he would terminate for default P.J. Dick's contract. Transcript, Vol. 2 at 132-33, 1085. P.J. Dick subsequently agreed to provide the requested cost or pricing data but reserved the right to claim a waiver from the requirement. Appeal File, GSBCA 11772-73, Exhibit 358, at 402-03. 9. AEC hired Mr. David Francom, of Project Consultants, Inc., to assemble the required data for submission to the Government. Transcript, Vol. 2 at 487. Mr. Francom's report compared pro- posed costs from the original cost or pricing data submission in February 1989 supporting AS05 to actual costs incurred for AC17 as reflected on invoices, job cost records and payroll data. Id. at 622. 10. The costs incurred by AEC for the services performed by Project Consultants, Inc. totaled $46,804.17. Amended and Consolidated Complaint, Exhibit 1. 11. P.J. Dick transmitted AEC s cost or pricing data to the contracting officer on October 6, 1989. Transcript, Vol. 2 at 145. 12. P.J. Dick had withheld ten percent of progress payments in accordance with its retainage agreement with AEC and $54,700 from AEC because of P.J. Dick's concerns that the modifications might be definitized at less than originally stipulated maximum amounts. P.J. Dick Inc., 94-3 BCA at 135,849 (Finding 29). The lack of cost or pricing data was a contributing factor to GSA's reluctance to definitize the modifications. Transcript, Vol. 2 at 145. 13. In a separate decision concerning appellant's claims of payment for work done under modification AS05 and modification AC17, we concluded that the Government was estopped from definit- izing AS05 and AC17 at amounts lower than $511,092 and $615,- 357.60, respectively, plus appropriate mark-ups. P.J. Dick, 94-3 BCA at 135,845. This Board, however, rejected P.J. Dick's argument regarding the unit prices for modification AS05, and held instead that the unit prices for modification AS05 were never intended to apply to AC17. Id., 94-3 BCA at 135,847 (Finding 14). 14. AEC's claim for the costs incurred as a result of the preparation and submission of the cost or pricing data was submitted by P.J. Dick to the contracting officer on or about January 5, 1993. See Amended and Consolidated Complaint, Exhibit 1. By final decision dated February 19, 1993, the contracting officer denied the claim for $46,804.17 for the cost of recon- structing the subcontractor's records to provide cost or pricing data at the demand of the contracting officer. Id. The decision provided in part: In accordance with the terms of modification AS05, which supplemented the contract, your proposal was subject to audit and negotiation. In addition, it was subject to submission of certified cost or pricing data. AEC's decision to retain a consultant to construct the necessary records and analysis thereof to meet the contract requirements is not a change to the contract, as modified. Even if the requirement to submit cost or pricing data was considered a change, and the information submitted deemed to be accurate, complete, and current cost or pricing data, the costs associated with its compilation [are] an indirect expense recoverable only as allowed under the Federal Acquisition Regulation Part 31. Id. 15. P.J. Dick appealed the contracting officer's final decision to this Board. The case and was docketed as GSBCA 12415. Discussion The parties, in their respective briefs, focus on 48 CFR 15.804-3(a)(1)(1988) (FAR 15.804-3(a)(1)) as to whether or not the requested cost or pricing data was needed. This Federal Acquisition Regulation (FAR) provision provides that if adequate price competition for a contract has occurred, the contracting officer shall not require submission or certification of cost or pricing data. GSA argues that although adequate price competi- tion for AS05 existed, it did not take place for modification AC17, and therefore P.J. Dick was required to submit certified cost or pricing data for work performed under the latter modifi- cation. Respondent's Post-Hearing Brief at 49-60. GSA argues, relying upon FAR 15.804-2, that the data were required before accomplishing the modification of any sealed bid or negotiated contract when the modification involved a price adjustment expected to exceed $100,000. Id. P.J. Dick, on the other hand, argues that it was exempted from submitting cost or pricing data because adequate price competition existed when AEC was selected. Appellant's Post- Hearing Brief at 5. P.J. Dick also argues that cost or pricing data were not necessary to definitize a final price for modifica- tion AC17, because a final price could have been determined by application of the unit price for line item number ten from modification AS05. The issue here is whether AEC's cost of professional servic- es necessary to submit cost or pricing data to the Government is an allocable and allowable direct cost recoverable as part of the price to be paid by GSA for work done under modification AC17. The existence of adequate competition is not a relevant factor in deciding this issue. The FAR provides the answer, without reference to whether the Government's request was initially justified. Applicable FAR provisions: FAR 31.204(a) provides: Costs shall be allowed to the extent they are reason- able, allocable, and determined to be allowable under 31.201, 31.202, 31.203, and 31.205. FAR 31.201-4 provides: A cost is "allocable" if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship. Subject to the foregoing, a cost is allocable to a Government contract if it -(a) Is incurred specifical- ly for that contract[.] FAR 31.202 defines a "direct cost" as "any cost that can be identified with a particular final cost objective." FAR 31.203 defines "indirect costs" as "any cost not directly identified with a single, final cost objective, but identified with two or more final cost objectives or an intermediate cost objective." FAR 31.205-33, "Professional and consultant service costs," provides in pertinent part: (A) Costs of professional and consultant services are . . . allowable . . . when reasonable in relation to the services rendered and when not contingent upon recovery of costs from the Government . . . . The costs for such services are unallowable, however, if the services are rendered in connection with a judicial or adminis- trative proceeding involving fraud or similar misconduct and there is a finding of contractor liability or a monetary penalty in a proceeding not involving fraud. FAR 31.205-47(b). The costs are also unallowable if they were incurred in connection with the prosecution of claims or appeals against the Federal Government. FAR 31.205-33(d). If the contractor incurred the costs for the purpose of materially furthering the negotiation process, such cost should normally be a contract administration cost allowable under FAR 31.205-33 even when, as in this case, the negotiation fails and litigation eventually ensues. Bill Strong Enterprises Inc. v. Shannon, 49 F.3d 1541, 1550 (Fed. Cir. 1995). In Allied Materials & Equipment Co., ASBCA 17318, 75-1 BCA 11,150, the Armed Services Board of Contract Appeals approved as an allowable direct cost, allocable to a contract for cylinder assemblies, the contractor's cost of attorney services for preparing an equitable adjustment request. Allied Materials held that costs of preparing proposals to the contracting officer were properly charged as direct costs because "to regard the expenses as indirect costs would . . . unfairly and inequitably burden other contracts." Allied, 75-1 BCA at 53,086. Similarly, another board held that an estimator's fee for preparing an estimate requested by the contracting officer was incidental to contract performance, and thus allowable. William Lagnion, ENG BCA 4287, 82-2 BCA 15,939, at 79,006; see also Reinhold Con- struction, Inc., ASBCA 37052, et. al., 92-3 BCA 25,031, at 124,772. In Hewitt Contracting Co., legal fees incurred in preparing an equitable adjustment request during contract performance were held to be a direct cost of performance, when the request bene- fitted the contract's purpose and the entitlement to the request was well-nigh conclusive when the adjustment was requested. ENG BCA 4596, 83-2 BCA 16,816, at 83,664. The contracting officer here denied P.J. Dick's claim for professional fees incident to preparing the cost or pricing data because he considered the costs to be indirect and not a change to the contract. Finding 21. The accountant's fees incurred by AEC are attributable to a particular modification, AC17, and therefore are a "direct cost" as defined in FAR 31.202. As in the above cases, the contracting officer requested the cost or pricing data. Had P.J. Dick not provided the data, the Government would have terminated P.J. Dick's contract for default, substantially disrupting the work. Finding 8. P.J. Dick's providing the cost or pricing data to GSA also removed one hindrance to P.J. Dick's paying AEC progress payments during performance of the work. Finding 12. P.J. Dick's (and AEC's) entitlement to some payment for the asbestos work covered by modification AC17 was undisput- ed. The amount of payment, however, for asbestos work done under modification AC17 was disputed and resulted in litigation before this Board. We have, by separate decision, already awarded appellant for the work done under modification AC17[foot #] 1. With this decision we make a further award of the cost incurred by P.J. Dick in preparing cost or pricing data as demanded by the contracting officer in conjunc- tion with the same contract modification. It is clear that P.J. Dick's providing the cost or pricing data furthered the negotia- tion process and benefitted the contract. The cost should, therefore, have been allowed as part of the final pricing for modification AC17. Decision The appeal is GRANTED. P.J. Dick is awarded $46,804.17, plus interest as allowed by the Contract Disputes Act of 1978, 41 U.S.C. 601-13 (1994). _________________________ ANTHONY S. BORWICK Board Judge We concur: _________________________ _________________________ STEPHEN M. DANIELS EDWIN B. NEILL Board Judge Board Judge ----------- FOOTNOTE BEGINS --------- [foot #] 1 P.J. Dick, Inc. v. General Services ___________________________________ Administration, GSBCA 11772, et. al., 94-3 BCA 27,266 ______________