________________________________ GRANTED: May 27, 1993 ________________________________ GSBCA 11906-C(11736-P) DENRO, INC., Protester, v. DEPARTMENT OF TRANSPORTATION, and DEPARTMENT OF DEFENSE, Respondents. William H. Butterfield, Jed L. Babbin, Charlotte F. Rothenberg, and Lori Beth Feld of McGuire, Woods, Battle & Boothe, Washington, DC, counsel for Protester Denro, Inc. Richard J. McCarthy, John R. McCaw, Jr., and Anthony L. Washington, Office of the Chief Counsel, Federal Aviation Administration, Washington, DC, counsel for Respondent Department of Transportation. Roger B. Sabin and Captain Richard B. Wingate, Office of General Counsel, Defense Information Systems Agency, Arlington, VA; and Clifton M. Hasegawa, Virginia Farrier, and Douglas G. White, Defense Commercial Communications Office, Defense Information Systems Agency, Scott Air Force Base, IL, counsel for Respondent Department of Defense. Before Board Judges NEILL, HYATT, and WILLIAMS. Board Judge HYATT. Pursuant to Rule 35, protester, Denro, Inc., has moved for the recovery of its costs of pursuing the underlying protest. Respondent, the Federal Aviation Administration (FAA), initially opposed the award in part, challenging Denro's entitlement to certain portions of the costs claimed. Following settlement efforts by the parties, including the conduct of alternate dispute resolution with the Board, the parties have reached an agreement on the amount of costs which should be awarded to Denro. The joint settlement agreement was filed with the Board on May 14, 1993. Based on the settlement agreement and our independent review of the supporting documentation submitted by Denro with its motion, we grant Denro's motion for costs in the revised amount agreed upon by the parties, which is $508,000. Background On May 29, 1992, the Board granted the consolidated protests of Denro and Westinghouse Electric Corporation of their exclusion from the competitive range of an FAA procurement for voiceband switching boxes. In its decision on the merits of their protests, the Board held, inter alia, that the operational capability demonstrations (OCDs) involving Denro and Westinghouse were improperly conducted and that thereafter, their proposals were unfairly evaluated as to the ability of their products to meet the Government's requirements. Denro, Inc. v. Department of Transportation, GSBCA 11736-P, et al., 93-1 BCA 25,315, 1992 BPD 196. Thereafter, Denro timely filed its motion to recover its costs of pursuing the protest, and also sought to recover those portions of its bid and proposal preparation costs that it claimed were wasted as a result of the Government's violations of statute and regulation in the conduct of the OCDs, which contributed to Denro's improper elimination from the competitive range. In its initial motion, filed on June 29, 1992, Denro sought recovery of $310,356.62 in attorney fees and expenses, and claimed the amount of $426,324.56 in proposal preparation costs. In appendices to its motion, Denro supplied detailed documentation supporting the costs claimed. In a supplemental memorandum filed on October 15, 1992, Denro updated the attorney fees and disbursements portion of its cost application, adding the amount of $13,806.10. Denro and the FAA commenced negotiations to settle their disagreements concerning entitlement to the amounts claimed. After reaching an impasse, principally as to the extent to which Denro should recover proposal preparation costs, the parties requested that the presiding judge participate in an alternative dispute resolution (ADR) process to assist them in reaching an agreement. This ADR session, which consisted primarily of presentation of argument by counsel, with feedback from the presiding judge, was conducted on February 12, 1993. After completing negotiations, on May 14, 1993, the parties filed a joint settlement agreement, which provided in pertinent part: 6. On June 2[9], 1992, Denro, through counsel, made its application for the award of protest costs, including reasonable attorneys' fees, and bid preparation/ operational capability demonstration (OCD) costs. The parties have entered into negotiations to resolve amicably, and without further litigation, the amount of costs and fees to be provided to Denro by the Government. These negotiations have included an informal hearing before the Board, held on February 13, 1992. 7. Denro, through its attorney of record, offered to settle the case in exchange for payment by the United States of $508,000.00 (five hundred and eight thousand dollars). ($287,000 of this amount is to reimburse Denro for its attorneys' fees and costs pursuant to 40 U.S.C. 759(f)(5)(C); $221,000 of this amount represents bid preparation/OCD costs.) Discussion As the prevailing party in its protest, Denro may recover the costs of (i) filing and pursuing the protest, including a reasonable attorney fee, and (ii) proposal preparation, as applicable. 40 U.S.C. 759 (f)(5)(C) (1988). The recovery of costs of pursuing the protest is limited by the full Board decision in Sterling Federal Systems, Inc. v. National Aeronautics and Space Administration, GSBCA 10000-C(9835-P), 92-3 BCA 25,118, 1992 BPD 141, which held that the Board is without authority to award the expenses of expert witness fees and in-house personnel in protest cases. The Board ordinarily does not award proposal preparation costs, however, "unless the Government has by violating statute or regulation caused the successful protester to incur such costs unnecessarily." Xerox Corp. v. Government Printing Office, GSBCA 12408-C(12322-P), slip op. at 5 (May 14, 1993) (quoting Recognition Equipment, Inc., GSBCA 9408-C(9363-P), 89-1 BCA 21,281, at 107,351, 1988 BPD 228, at 3). In Xerox, we explained that in addition to the requisite violation of regulation or statute, the Board must also find that the claimed proposal preparation costs were wasted or rendered unnecessary as a result of the violation, and that the claimed costs are accurate and reasonable. Id. The settlement agreement of the parties indicates that $287,000 of the agreed-to amount is attributable to attorney fees and expenses. A review of Denro's application and supporting documentation establishes that this amount was incurred, is reasonable, and does not include recovery of any expenses, such as expert fees and in-house personnel costs, that the Board found could not be awarded in Sterling Federal. In addition, $221,000 is allocated to wasted proposal preparation costs. Denro documented some $426,000 in proposal preparation costs that it initially claimed were wasted.[foot #] 1 Given the need to conduct a second round of OCDs, this amount of proposal preparation costs may reasonably be deemed to have been wasted by Denro in having performed the first OCD. Decision Protester's motion, as amended by the settlement agreement of the parties, for the award of attorney fees and expenses and proposal preparation costs in the amount of $508,000 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: ___________________________ _____________________________ EDWIN B. NEILL MARY ELLEN COSTER WILLIAMS Board Judge Board Judge ----------- FOOTNOTE BEGINS --------- [foot #] 1 The OCD was an extensive demonstration exercise, involving, inter alia, the assemblage of a roomful of interrelated equipment comprising the integrated communications switching system (ICSS). See Denro, 93-1 BCA at 126,128 n.16, ___ _____ 1992 BPD 196, at 34 n.16. Denro has documented various costs associated with preparing for and performing the OCD; including planning, configuring the system, purchasing parts, setting up the system in the demonstration area, and conducting dry runs.