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Company is in REA negotiation and the CO is rejecting our submission for legal costs saying there isn't enough information to support the charges. We submitted our detailed legal invoices, but redacted what the lawyers considered to be privileged portions of the descriptions of their work on a line by line basis. What is usually required to support legal costs? Thanks for any insight. 

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3 hours ago, Gold and Marooned said:

What is usually required to support legal costs? 

Take a look at FAR 31.205-33 specifically and take a general read of part 31 and discussions of reasonable, allocatible, and allowable.  Might help you refrain how you present the costs to the CO.

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Thanks, @C Culham. We reviewed 31.205-33 and are still struggling with how to present documentation to a CO to support legal fees that were incurred to develop a negotiation strategy for an REA. Submission of documentation for legal fees is something we have never dealt with before, but we do have experience establishing allowability of other costs under FAR Part 31.

Here, the CO doesn't like our REA (this one is contentious) and the nature of the relationship right now is adversarial. But we are still in the REA negotiations, so legal costs are allowable subject to basic principles plus 31.205-33. So, how do we frame these fees for a CO that isn't happy with us? Are there limits on his discretion to demand more documentation? Can he force us to waive privilege in order to establish these are allowable/reasonable/allocable? Do we need to write a narrative summary of what the lawyers did with a summary of hours, rates and total fees?

Any practical advice regarding how to apply 31.205-33 to prepare documentation for submission would be very helpful. 

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20 minutes ago, Gold and Marooned said:

Any practical advice regarding how to apply 31.205-33 to prepare documentation for submission would be very helpful.

Others will most likely weigh in but consdiering your additional information and if me, even though I do know all the facts, I would be communicating in writing with the CO and posing the question of what data is missing in a straight forward and professional way.   I would note that by my read the fees are allowable, provide reference that supports that they are and then ask specifically what else is needed for the the CO to determine them to be included in the REA.   

Of sorts there are limits to a CO's discretion.  By example the CO does not allow yet all references, etc. points to the fact that they are then there is the last resort of a claim which the result of would set the limit so to speak.   Hopefully a a well drafted written comunication would help in avoiding the whole claim avenue.

Here are a couple of quick references I found doing an internet search, they might be helpful as you move forward.  I do realize the one clause reference may not be related to your contract but it might give an idea of what other agencies expect.

Good luck!

 https://www.dau.edu/acquipedia-article/request-equitable-adjustment-rea

https://www.acquisition.gov/gsam/552.243-71

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On 1/13/2025 at 11:29 AM, Gold and Marooned said:

Company is in REA negotiation and the CO is rejecting our submission for legal costs saying there isn't enough information to support the charges. We submitted our detailed legal invoices, but redacted what the lawyers considered to be privileged portions of the descriptions of their work on a line by line basis. 

In my experience, lawyers think most everything is privileged. Ask them to re-review their redactions to minimize what has to be protected while maximizing what can be provided. You have $$ riding in this.

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On 1/14/2025 at 9:34 AM, Gold and Marooned said:

Are there limits on his discretion to demand more documentation? Can he force us to waive privilege in order to establish these are allowable/reasonable/allocable? 

The answer to the first question is yes.  There are definite limits on the documentation that can be demanded by the government, but this is a fact specific question.  For example, I remember one instance where DCAA demanded the personal tax return of the CEO of a major defense contractor.  The rationale for this was to confirm the costs claimed by the contractor.  Also, there is a case involving Newport News Shipbuilding that discuses another aspect of the limits on the government's right of access to contractor records.

The answer to the second question is no.  Once the privilege is waived for one purpose, it is generally waived for all purposes.  The judges on the contract appeals boards and COFC are attorneys and are generally sympathetic to claims of attorney client/attorney work product privilege.  If this goes to dispute and documents that are truly subject to either privilege are sought by the government, it is highly unlikely that they would be required to be released.

H2H has given you some good advice.  However, we don't know what the CO's concerns are.  For example, the CO might be concerned by an entry on the attorney's invoice that simply says something like "telephone call with client to discuss REA."   The CO may be wanting to know the details of the call.  However, the details of the call very well could be privileged.  On the other hand, the call could have involved merely administrative matters like what is the timeline for certain actions to be taken.  The best thing you can do is consult with an attorney who is well versed in government cost allowability issues.

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One final note, if this matter goes to dispute and the question concerning the legal fees is allowability, not reasonableness or allocability, the government has the burden of proving that a cost is not allowable.  The contractor does not have to prove that it is allowable.  This is an important point if DCAA is involved.  DCAA takes the position that if a contractor cannot show that a cost is allowable, then it is unallowable.  This causes problems when contractors try to resolve questioned costs with contracting officers.  Many times, contracting officers will defer to DCAA on the allowability of costs.

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