When is the Price of a Fixed-Price Contract Not Fixed?

In Tolliver Group, Inc. v. United States (Aug. 17, 2022), the Court of Federal Claims (“COFC”) granted the contractor’s request for summary judgment, awarding $195,890 in legal fees the contractor incurred to successfully defend against a False Claims Act suit brought by a whistleblower.  The court held that the cost principles in Federal Acquisition Regulation (“FAR”) Subpart 31.2 applied to the contractor’s fixed-price task order, and the contractor’s legal fees were allowable and payable under the contract.  This is the second time that the COFC addressed the contractor’s entitlement to legal fees, having previously held that the contractor could recover a portion of them under the Spearin doctrine (which we reported on here).  The Federal Circuit later vacated that award on jurisdictional grounds (reported on here) and remanded the case to the COFC.

On remand, the COFC reinstated the contractor’s award of legal fees, setting aside its Spearin doctrine theory but holding that the fees were payable to the contractor because the FAR cost principles applied to the task order under two alternative theories.  First, the court found that the task order, initially awarded as a fixed-price, level-of-effort development contract, “operate[d] as a cost-type contract with the government reimbursing Tolliver’s labor and other related costs.”  Second, the court concluded that the cost principles applied because the government was required to perform a cost analysis to determine the task order’s price, and therefore the Christian doctrine mandated incorporation of FAR 31.205-47, which governs the allowability of legal costs, into the contract.  Having determined that the cost principle was incorporated into the contract by operation of law, the court held that the contractor was entitled to recover its legal costs notwithstanding the fixed-price nature of the contract, provided the costs were reasonable, allocable to the task order, and otherwise allowable under FAR 31.205-47.  The court found that they were, and granted summary judgment in favor of the contractor.

The Tolliver decision, much like the COFC’s earlier decision in this case, illuminates a new basis for recovery of litigation costs after defending against qui tam actions.