__________________________________ GRANTED: September 17, 1992 __________________________________ GSBCA 11710-C(11616-P) ELECTRONIC DATA SYSTEMS CORPORATION, Protester, v. DEPARTMENT OF THE AIR FORCE, Respondent. AMERICAN CORPORATE COUNSEL ASSOCIATION, Amicus Curiae. David S. Cohen, Lisa Hovelson, Donn Milton, and Jeanne Anderson of Cohen & White, Washington, DC, and Daniel Parker, Jr. of Electronic Data Systems Corporation, Herndon, VA, counsel for Protester. Clarence D. Long, III and Joseph M. Goldstein, Office of General Counsel, Department of the Air Force, Washington, DC, counsel for Respondent. Frederick J. Krebs and Susan J. Hackett, American Corporate Counsel Association, Washington, DC, counsel for Amicus Curiae. Before Board Judges LaBELLA, Acting Chief Judge, NEILL, and HYATT. HYATT, Board Judge. Pursuant to Rule 35 of the Board's Rules of Procedure, Electronic Data Systems Corporation (EDS) has timely moved for an award of its costs, including reasonable attorney fees, incurred in the pursuit of the subject protest.[foot #] 1 The protest challenged awards by the Department of the Air Force of two contracts, to CompuAdd Corporation and Sysorex Information Systems, Inc., for the acquisition of microcomputer systems to support general purpose applications, including standard office automation functions such as word processing, data base management, and business graphics. The awards were made under a procurement commonly referred to as "Desktop IV." The EDS protest, which was filed on November 26, 1991, was consolidated with seven other protests also involving the Desktop IV procurement. The protests alleged that the awards to CompuAdd and Sysorex were in violation of applicable statute, regulation, and the agency's delegation of procurement authority for a number of reasons. EDS contended, inter alia, that the Air Force wrongfully excluded its proposals from consideration for award, contained deficiencies and weaknesses, ignored the evaluation and award criteria set forth in the solicitation in awarding to Sysorex and CompuAdd, abused its discretion in electing not to hold discussions, improperly conducted discussions with the awardees, and failed to treat all offerors equally. EDS requested, by way of relief, that the Board order termination of the contracts to CompuAdd and Sysorex, and that it either declare EDS to be in line for award or require the agency to permit EDS to clarify the alleged deficiency in its proposals and require that its proposals be reevaluated pursuant to an order directing a "proper evaluation." The protesters, respondent, and intervenor/awardees conducted extensive written discovery and depositions. On January 7, 1992, the parties filed a joint motion to dismiss all eight protests. The settlement entered into jointly among all the parties included, among other provisions, agreements by the Air Force 1) to terminate the contracts awarded and to cancel any delivery orders issued under those contracts; 2) to review the solicitation and to amend its terms so as to clarify the requirements that were the subject of these protests; 3) to issue clarification requests (CRs) and deficiency reports (Drs) based upon evaluations of initial proposals of offerors involved in the protests; 4) to permit each offeror in the competitive range to submit revised proposals in response to the solicitation amendments and CRs and DRs; and 5) to establish a reasonable due date for submission of revised proposals. ----------- FOOTNOTE BEGINS --------- [foot #] 1 The American Corporate Counsel Association was granted leave to enter an amicus curiae appearance to present its position regarding the potential impact of the Board's recent decision in Sterling Federal Systems, Inc. v. National __________________________________________________ Aeronautics and Space Administration, GSBCA 10000-C(9835-P), 1992 ____________________________________ BPD 141 (May 22, 1992), with respect to the recovery of in- house attorney fees in protest cases. This issue is addressed below. ----------- FOOTNOTE ENDS ----------- In addition, the settlement agreement contained the following pertinent provision: The Air Force agrees that for purposes of recovering protest costs, including reasonable attorneys' fees and disbursements, protesters shall be deemed to have prevailed on the merits in this proceeding under 40 U.S.C. 759(f)(5)(C). The parties agree, in compromise of protester's claims, that each protester may recover seventy-five percent (75%) of its total protest costs, including attorneys' fees and disbursements, incurred in these proceedings. Protesters shall follow the procedures of Rules 35 and 36 of the Board's Rules of Procedure in seeking recovery of these costs. The consolidated protests were dismissed on January 8, 1992. Apple Computer, Inc. v. Department of the Air Force, GSBCA 11611-P, et al., 1992 BPD 9 (Jan. 8, 1992). On February 6, 1992, EDS filed its motion, seeking recovery of $71,267.66 in protest costs. The total costs documented, $95,023.37, consisted of the following: 1) fees and expenses incurred by EDS's retained counsel; 2) allocable salary costs of in-house attorneys; and 3) other internal EDS costs incurred in pursuit of the protest. The Air Force has not opposed the motion. Discussion Under the Brooks Act, in protests where the Board has found that an agency has violated statute, regulation, or the conditions of a delegation of procurement authority, it "may . . . declare an appropriate interested party to be entitled to the costs of . . . filing and pursuing the protest, including reasonable attorney's fees." 40 U.S.C. 759(f)(5)(C) (1988). The Board, relying on Hensley v. Eckerhart, 461 U.S. 424, 433 (1983), has construed this provision to permit an award of protest costs to a "prevailing party," that is, one that has succeeded on any significant issue that achieves some of the benefit the party sought in bringing the protest. E.g., Julie Research Laboratories, Inc., GSBCA 9693-C(9474-P), 91-1 BCA 23,389, 1990 BPD 345; NCR Comten, Inc., GSBCA 8229-C(8091-P), 86-2 BCA 18,822, at 94,852, 1986 BPD 24, at 10. Here, the Air Force stipulated in the joint settlement agreement that protester is a prevailing party. Moreover, the terms of the stipulation provide virtually all of the relief that EDS had sought. As such, we deem EDS to be an appropriate interested party entitled to recover its costs of pursuing the protest. In the case of EDS, a further issue arises as a result of the recent full Board decision rendered in Sterling Federal Systems, Inc. v. National Aeronautics and Space Administration, GSBCA 10000-C(9835-P), 1992 BPD 141 (May 22, 1992), in which the Board held that it is without authority to award the expenses, fees, or salaries of expert consultants and in-house personnel in protest litigation, unless those costs qualify as taxable costs under 28 U.S.C. 1920. The Board requested that all of the Desktop IV parties presently pursuing a cost claim provide input with respect to the extent, if any, to which this decision might affect an award of costs. EDS responded that its total protest costs of $95,023.37 incorporated the amount of $27,806.98, representing internal costs of EDS. A large portion of the in-house EDS costs, the amount of $17,504.51, is attributable to allocable salary costs of in-house attorneys. The remaining EDS costs consist of the allocable salary of a contract manager who assisted in protest activities and courier, copying, and word processing costs attributable to the protest. The Air Force, in a letter submitted on July 13, 1992, by its new counsel, declined to take a position advising the Board as to the impact that Sterling Federal may have on the recovery of costs by the Desktop IV protesters, but confirmed that the settlement agreement was premised on the parties' mutual understanding that "total protest costs" would include all costs recoverable under the law as it existed at the time of settlement. Prior to issuing the decision in Sterling Federal, the Board routinely included in-house counsel costs in protest cost awards. In Sterling Federal, the Board expressly noted that it was not required to decide, and thus did not address, whether the allocable salary costs of in-house counsel could be awarded under the rubric of "attorney's fees." Sterling Federal, 1992 BPD 141, at 11 n.3. Here, however, EDS has incurred in-house costs, including costs of in-house attorneys, computed on the basis of salary plus benefits, that come to more than twenty-five percent of the total protest costs it has incurred. Because of this, ACCA was granted permission to file a brief, as amicus curiae, in support of the continued award of in-house counsel fees to protesters that prevail in Brooks Act protest litigation. This issue has now been dealt with in two recent Board decisions, both affirming that these costs may be awarded under the Brooks Act. See SMS Data Products Group, Inc. v. Department of the Treasury, GSBCA 10783-C(10644-P)-REIN, slip op. at 6 (Sept. 10, 1992); International Business Machines Corp. v. Department of the Treasury, GSBCA 11605-C(11359-P), slip op. at 4 n.2 (Aug. 21, 1992). These holdings comport with the notion that an arbitrary distinction should not be drawn with respect to the roles of in-house versus retained counsel. Cf. Upjohn Co. v. United States, 449 U.S. 383 (1981) (attorney-client privilege applies to communications between in-house counsel and corporate clients); U.S. Steel Corp. v. United States, 730 F.2d 1465, 1468 (Fed. Cir. 1984) ("in-house counsel are officers of the court, are bound by the same Code of Professional Responsibility, and are subject to the same sanctions"); Merrick v. American Security & Trust Co., 107 F.2d 271, 278 (D.C. Cir. 1939), cert. denied, 308 U.S. 625 (1940) ("Salaried attorneys and outside counsel are subject to like motives and obligations, public and private, and to like public control."). Accordingly, the lion's share of the EDS internal costs is properly recoverable as attorney fees.[foot #] 2 In these circumstances, we believe it is both possible and appropriate to give full effect to the settlement agreement of the parties while at the same time adhering to the ruling in Sterling Federal.[foot #] 3 Those costs which may no longer be recoverable under Sterling Federal amount to substantially less than twenty-five percent of the total costs incurred. Thus, an award to EDS of seventy-five percent of total costs, an amount the Air Force agreed to, does not result in recovery of any costs which the Board under Sterling Federal is not authorized to award. Protester has submitted appropriate documentation justifying the legal fees and expenses incurred in pursuing the consolidated protests. We find that the costs incurred and claimed by protester were reasonable. ----------- FOOTNOTE BEGINS --------- [foot #] 2 The allocable salary costs of EDS's in-house attorneys, amounting to more than $17,000, are clearly recoverable. This is enough to ensure that more than 75 percent of the EDS claim consists of costs and expenses that the Board is authorized to award under Sterling Federal. We thus need not, _________________ and do not, consider the allowability, under the attorney fee rubric, of the additional in-house costs documented by EDS. [foot #] 3 Indeed, the Board has already held, in addressing the impact of Sterling Federal on another cost _________________ application, that the stipulation of the parties should and will be effectuated "to the greatest possible degree consistent with our statutory authority." International Business Machines Corp. _____________________________________ v. Department of the Treasury, GSBCA 11605-C(11359-P), slip op. ______________________________ at 3-4 (Aug. 21, 1992). At the same time, the Board is obligated to follow the outcome in Sterling Federal and is not permitted, ________________ regardless of what the terms of a settlement agreement between the parties might provide, to award items of cost that are not authorized by statute. Id. at 3. __ ----------- FOOTNOTE ENDS ----------- Decision Protester's motion for reimbursement of costs in the amount of $71,267.66 is GRANTED. This award may be paid, without interest, from the permanent indefinite judgment fund, 31 U.S.C. 1304 (1988). 40 U.S.C. 759(f)(5)(C) (1988). _____________________________ CATHERINE B. HYATT Board Judge We concur: ___________________________ _____________________________ VINCENT A. LaBELLA EDWIN B. NEILL Acting Chief Board Judge Board Judge