## Facts

- The Army awarded Bill Strong Enterprises, Inc. (BSE) a fixed-price contract to renovate family housing units at Selfridge Air National Guard Base in Michigan.
- BSE asserted that the Government released housing units out of sequence, causing delays and increased performance costs.
- BSE first notified the Government of increased costs and requested a contracting officer decision; the early correspondence was not a certified monetary claim.
- BSE later submitted a written claim seeking additional compensation for delay and out-of-sequence impacts; the Government requested supporting cost data and initiated a Defense Contract Audit Agency audit.
- During the audit and settlement efforts, BSE hired Excell, Inc. to analyze data and prepare a request for equitable adjustment (REA); BSE sought reimbursement of Excell’s fees.
- The parties settled the underlying delay/disruption amounts, but the Government refused to reimburse the Excell consulting costs as unallowable.

## Issues

1. Whether consultant costs incurred to analyze data and prepare an REA are unallowable as costs incurred “in connection with the prosecution of claims” against the Government.
2. Whether the Armed Services Board of Contract Appeals (ASBCA) erred by treating post-performance timing and pursuit of additional compensation as sufficient to bar recovery of consultant costs.

## Decision

- The Federal Circuit reversed the ASBCA and remanded.
- The court held the ASBCA misconstrued the applicable cost-principles regulation by applying the “claims prosecution” disallowance too broadly.
- The court ruled the consultant costs could not be categorically disallowed solely because they were incurred after contract work ended or related to seeking monetary relief.
- On remand, the ASBCA was directed to reassess which portions of Excell’s work were allowable contract-administration/REA-preparation costs and which, if any, were unallowable claim-prosecution costs tied to litigation or appeal.

## Legal Principles

- Cost principles distinguish between allowable contract administration expenses (including preparing and negotiating REAs and attempting negotiated resolution) and unallowable costs incurred in prosecuting formal claims or appeals against the United States.
- The allowability inquiry turns primarily on the objective purpose of the services—supporting negotiation and resolution at the contracting-officer level versus pursuing an adversarial claim in a tribunal—rather than on timing alone.
- Post-performance professional or consultant work is not automatically unallowable; it must be classified under the regulatory line between settlement-oriented administration and claim-prosecution activity.
- A tribunal errs when it collapses the REA/negotiation category into the prohibited “claims prosecution” category without applying the regulatory distinction.

## Conclusion

The Federal Circuit required a function-based assessment of consultant expenses, holding that costs incurred to prepare and negotiate an REA may be allowable contract administration and are not automatically barred as claim-prosecution costs simply because they are post-performance or seek additional compensation.


Bill Strong Enters., Inc. v. Shannon, 49 F.3d 1541 (Fed. Cir. 1995)