In the United States Court of Federal Claims
                                            No. 16-101C

                               (Filed Under Seal: August 16, 2017)

                                     (Reissued: August 24, 2017)

                                                )
 Q INTEGRATED COMPANIES, LLC,                   )      Bid preparation and proposal costs
                                                )      awarded in a bid protest; 28 U.S.C. §
                        Plaintiff,              )      1491(b)(2); 48 C.F.R. § 31.205-18(a);
                                                )      attorneys’ fees and other expenses
           v.                                   )      awardable under the Equal Access to
                                                )      Justice Act; 28 U.S.C. § 2412(d)
 UNITED STATES,                                 )
                                                )
                        Defendant,              )
                                                )
           and                                  )
                                                )
 SAGE ACQUISITIONS, LLC,                        )
                                                )
                  Defendant-Intervenor.         )
                                                )

       James C. Fontana, Dempsey Fontana, PLLC, Tysons Corner, Virginia for plaintiff. With
him on the briefs were David B. Dempsey and Jeffry R. Cook, Dempsey Fontana, PLLC, Tysons
Corner, Virginia.

        Devin A. Wolak and Heidi L. Osterhout, Trial Attorneys, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Washington, D.C. for defendant. With them
on the briefs were Chad A. Readler, Acting Assistant Attorney General, Civil Division, and
Robert E. Kirschman, Jr., Director, and Douglas K. Mickle, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C. Of
counsel was Rosamond Z. Xiang, Trial Attorney, United States Department of Housing & Urban
Development, Washington, D.C.

                                     OPINION AND ORDER1


       1
         Because this opinion and order might have contained confidential or proprietary
information within the meaning of Rule 26(c)(1)(G) of the Rules of the United States Court of
Federal Claims (“RCFC”) and the protective order entered in this case, it was initially filed under
seal. The parties were requested to review this decision and provide proposed redactions of any
confidential or proprietary information. The resulting redactions are show by brackets enclosing
asterisks, e.g., “[***].”
LETTOW, Judge.

         Pending before the court in this post-award bid protest are an application by plaintiff, Q
Integrated Companies, LLC (“Q Integrated”), for an award of bid preparation and proposal costs
(“bid costs”) pursuant to RCFC 54(d)(1), the Tucker Act, 28 U.S.C. § 1491(b)(2), and the court’s
judgment as stated in the opinion and order entered on April 20, 2016, see Q Integrated Cos.,
LLC v. United States, 

, 148 (2016) (“Q Integrated I”), appeal dismissed, No.
2016-1991 (Fed. Cir. June 2, 2016), and a motion for attorneys’ fees and related nontaxable
expenses (“attorneys’ fees”) pursuant to the Equal Access to Justice Act (“EAJA”), 28 U.S.C. §
2412. Q Integrated claims that it should be awarded $63,373.41 in bid costs, while the
government asserts that an award of no more than $9,049 is a proper allocation of bid costs.
With regard to attorneys’ fees, Q Integrated seeks an award of $82,591.06. The government
resists such an award based upon the contention that Q Integrated has not demonstrated that it
was an eligible party under EAJA and that the government’s position in the underlying litigation
was substantially justified, and alternatively argues that Q Integrated is eligible to receive an
award of attorneys’ fees of no more than $24,729.56.

                                        BACKGROUND

        Q Integrated filed suit in this court on January 19, 2016, protesting the Department of
Housing and Urban Development’s (“HUD’s”) award of three Asset Management contracts to
Sage Acquisitions, LLC (“Sage”). See Q Integrated 

, 138. On April 20,
2016, the court granted Q Integrated’s motion for judgment on the administrative record in part
and denied it in part, and granted the government’s and Sage’s cross-motions for judgment on
the administrative record in part and denied them in part. See 

Specifically, “[t]he
court determined that HUD’s evaluations of Q Integrated’s and Sage’s past performance
information were not arbitrary and capricious, . . . but found that HUD did not hold meaningful
discussions with Q Integrated.” Q Integrated Cos., LLC v. United States, 

, 129
(2017) (“Q Integrated II”) (citing Q Integrated 

), appeal dismissed, No.
2017-2090 (Fed. Cir. July 24, 2017). The court also concluded that Q Integrated was prejudiced
by HUD’s errors and omissions during the discussion process, determining that “[i]f the
discussions with Q Integrated had been accurate and the ratings had not been adjusted contrary to
the solicitation, Q Integrated could have revised its proposal and would have had a substantial
chance of receiving the contract award.” 

Integrated 

). In
addition to injunctive relief, which the court calibrated to allow a limited period of contract
performance by Sage that was already underway, the court awarded Q Integrated “its reasonable
costs incurred in bid preparation and proposal” and specified a schedule for submission of those
costs and for the government’s response. Q Integrated 

.

        Q Integrated filed its application for bid costs on May 18, 2016, see generally Pl.’s Appl.
for Bid Preparation and Proposal Costs (“Pl.’s Appl.”), ECF No. 82, and filed its motion for
attorneys’ fees on July 19, 2016, see generally Pl.’s Mot. for Att’ys’ Fees and Related
Nontaxable Expenses (“Pl.’s Mot.”), ECF No. 90. On June 22, 2016, the government filed a
motion for relief from the court’s judgment pursuant to RCFC 60(b), claiming that Q Integrated
did not have standing to bring its protest because it had been deemed “other than small” by the
Small Business Administration (“SBA”) in a size determination for a different area of the HUD
procurement. See Q Integrated 

. Size challenges to Sage were also

                                                 2
pending before SBA. 

suspended briefing on the motion for relief from judgment,
as well as the application for bid costs and motion for attorneys’ fees, on August 18, 2016,
“pending the resolution of SBA size appeals for Q Integrated and Sage for areas of the HUD
procurement that were not at issue in this case.” Q Integrated Cos., LLC v. United States, 

, __, 

, at *2 (Fed. Cl. July 5, 2017) (“Q Integrated III”) (citations
omitted).2 Ultimately, SBA ruled that Sage also was not a qualifying small business for HUD
areas not involved in this protest. See Q Integrated 

.

         After the SBA size appeals were resolved, the court turned to the government’s motion
for relief from judgment. On March 27, 2017, the court denied the government’s motion,
“finding that Q Integrated remained an interested party and therefore maintained standing to
bring its protest because the SBA’s size determinations eliminated virtually all small-business-
qualified offerors.” Q Integrated III, 132 Fed. Cl. at __, 

, at *2 (citing Q
Integrated 

). That same day, the court lifted the suspension of briefing
on Q Integrated’s application for bid costs and motion for attorneys’ fees. See Scheduling Order
of Mar. 27, 2017, ECF No. 113. On May 25, 2017, the government appealed the court’s denial
of its motion for relief from judgment. The court again suspended its consideration of Q
Integrated’s application for bid costs and motion for attorneys’ fees while the appeal was
pending before the Federal Circuit, see Q Integrated III, 132 Fed. Cl. at __, 

,
at *5, but shortly thereafter, the parties stipulated to a voluntary dismissal of the government’s
appeal on July 24, 2017, and the mandate of the court of appeals was issued the same day.

        With the removal of the jurisdictional impediment stemming from the now-dismissed
appeal by the government, Q Integrated’s application for bid costs and motion for attorneys’ fees
are ready for the court’s disposition.

                                           ANALYSIS

                             A. Bid Preparation and Proposal Costs

        Under the Tucker Act, as amended by the Administrative Dispute Resolution Act of
1996, Pub. L. No. 104-320, § 12, 110 Stat. 3870, 3874 (Oct. 19, 1996), in bid protest cases, bid
costs are the only form of monetary relief that this court is empowered to award. 28 U.S.C. §
1491(b)(2). Bid preparation and proposal costs are defined by regulation as “costs incurred in
preparing, submitting, and supporting bids and proposals (whether or not solicited) on potential
[g]overnment or non-[g]overnment contracts.” 48 C.F.R. (“FAR”) § 31.205-18(a).
Compensable bid costs include “those in the nature of researching specifications, reviewing bid
forms, examining cost factors, and preparing draft and actual bids.” Geo-Seis Helicopters, Inc. v.
United States, 

, 80 (2007) (citing Lion Raisins, Inc. v. United States, 

, 631 (2002) (“Lion Raisins I”)). “Such costs are recoverable only if three conditions are
satisfied: (i) the agency has committed a prejudicial error in conducting the procurement; (ii) that
error caused the protester to incur unnecessarily bid preparation and proposal costs; and (iii) the

       2
         The Asset Management procurement included a number of small business set-aside
contracts, including the three areas at issue in this case and the areas at issue in the
aforementioned size appeals. See Q Integrated 

; Q Integrated II, 131 Fed.
Cl. at 129-30.
                                                 3
costs to be recovered are both reasonable and allocable, i.e., incurred specifically for the contract
in question.” Reema Consulting Servs. v. United States, 

, 532 (2012) (footnote
omitted). The plaintiff bears the burden of proving that it is entitled to recover its costs. Geo-

(citing Lion Raisins 

). The first condition is not at
issue here, as the court previously held that HUD committed prejudicial error by conducting
inadequate discussions with Q Integrated during the procurement. See Q Integrated I, 126 Fed.
Cl. at 144-47.

       1. Necessity of costs incurred.

        The government argues that Q Integrated is not entitled to an award of bid costs because
such costs were not unnecessarily incurred. Def.’s Resp. to Pl.’s Appl. for Bid Preparation and
Proposal Costs (“Def.’s Resp. to Appl.”) at 6, ECF No. 120. The government claims that all of
Q Integrated’s costs in preparing its proposal were necessary because Q Integrated used “nearly
identical” proposals for ten contract areas, modifying the proposals primarily respecting “area-
specific component[s],” but protested only three areas in this case. See 

also
received one award for the HUD procurement, prompting the government to further argue that Q
Integrated benefited from all of the bid costs it incurred, so the company must bear them itself.
See 

arguments are misplaced. Bid costs are unnecessarily incurred when
the agency commits an error in the procurement process that prejudices the disappointed bidder.
See Reema Consulting 

. The court specifically held here that HUD’s
failure to conduct meaningful discussions for the three contract areas of the protest prejudiced Q
Integrated by “materially and adversely affect[ing] its chance to receive the contract awards.” Q
Integrated 

. Q Integrated therefore unnecessarily incurred bid costs with
respect to the three contract areas at issue in this case. The fact that a similar proposal was used
in a winning bid for one area is of no relevance to this protest; Q Integrated devoted at least some
of the bid costs it incurred to proposals rendered futile by HUD’s errors in the procurement
process. Further, the court awarded bid costs to Q Integrated because injunctive relief was time-
limited and therefore insufficient to fully remedy the harm to the company. See Q Integrated 

(citations omitted). It is within the court’s discretion to grant these forms of
relief, see CMS Contract Mgmt. Servs. v. United States, 

, 537 (2015), and the
cost award is directly tied to HUD’s prejudicial errors during the procurement. Therefore, Q
Integrated is entitled to at least some measure of bid costs that it unnecessarily incurred.

       2. Allocation of costs.

        Although Q Integrated has demonstrated that at least some of its bid costs were incurred
unnecessarily, the court must determine the proper allocation of bid costs attributable to the three
contract areas at issue in this case. A claimed cost is allocable if it “[i]s incurred specifically for
the contract,” or if it “[b]enefits both the contract and other work, and can be distributed to them
in reasonable proportion to the benefits received.” FAR § 31.201-4(a), (b). More specifically, a
cost is allocable if “a sufficient ‘nexus’ exists between the cost and a government contract.”
Boeing N. Am., Inc. v. Roche, 

, 1281 (Fed. Cir. 2002) (quoting Lockheed Aircraft
Corp. v. United States, 

, 794 (Ct. Cl. 1967)). In its original application for bid
costs, Q Integrated sought to recover all of the costs it incurred in connection with the HUD

                                                   4
procurement. See generally Pl.’s Appl.; Pl.’s Reckoning of Bid Preparation and Proposal Costs
(“Pl.’s Reckoning”), ECF No. 82-1. The government has argued, however, that Q Integrated is
only entitled to bid costs for the three contract areas at issue in this case, not for all ten areas for
which Q Integrated submitted bids, which would result in an award of 30% of Q Integrated’s
total bid costs incurred. See Def.’s Resp. to Appl. at 12. Q Integrated countered in its reply that
it is entitled to bid costs for all of the areas for which it did not receive an award, i.e., nine out of
the ten submitted proposals, which would result in an award of 90% of total bid costs. Pl.’s
Reply to Def.’s Resp. to Pl.’s Appl. for Bid Preparation and Proposal Costs (“Pl.’s Appl. Reply”)
at 4, 6, ECF No. 125.

        In this instance, a 30% allocation of bid costs is appropriate. Even though all of the bid
costs incurred by Q Integrated are attributable to each area for which Q Integrated submitted a
proposal (i.e., all of the costs were necessarily incurred for each proposal, regardless of how
many proposals were submitted), such costs must be allocated among the proposals “in
reasonable proportion to the benefits received.” FAR § 31.201-4(b). Since Q Integrated used
much the same proposal for all ten areas, see Def.’s Resp. to Appl., Attach. A (Decl. of Craig
Karnes, Principal Administrative Contracting Officer, HUD (June 8, 2017)) ¶ 4,3 it is reasonable
to allocate bid costs in equal proportion among the ten areas. Although Q Integrated did not
receive nine of the ten contracts for which it submitted proposals, it only protested the award for
three areas.4 The court’s holding in its judgment on the administrative record is limited to those
three areas. See Q Integrated 

(“[T]he court concludes that the
government’s discussions with Q Integrated involved a violation of regulation or procedure . . .
with respect to the procurement awards at issue.”) (internal quotation marks and citation
omitted) (emphasis added). Therefore, the court shall only award Q Integrated bid costs that are
allocable to the three areas at issue in its protest, which account for 30% of the bid costs incurred
by Q Integrated with respect to the entire HUD procurement.

        3. Cost award.

         In light of the 30% allocation, the court must determine whether Q Integrated’s requested
total costs are reasonable. A claimed cost is generally viewed as reasonable “if, in its nature and
amount, it does not exceed that which would be incurred by a prudent person in the conduct of
competitive business.” FAR § 31.201-3(a). Q Integrated sought $145,464.92 in bid costs in its
initial application, specifically seeking to recover $71,384.52 in direct labor costs, $42,354.00 in
indirect labor costs, $28,894.99 in consultant costs, and $2,831.41 in other costs related to travel,
copying, printing, and shipping with regard to the procurement. Pl.’s Reckoning at 4-6. In

        3
         Mr. Karnes did note that “the Technical Proposal . . . contained a significant amount of
tailoring by area.” Decl. of Craig Karnes ¶ 4.
        4
         On the eve of the hearing on the parties’ cross-motions for judgment on the
administrative record, Q Integrated filed a motion to amend its complaint to add four additional
areas of the HUD procurement to its protest. See Q Integrated 

n.17. The
court denied the motion pursuant to RCFC 15(a)(2) because Q Integrated had failed to put those
areas at issue earlier in the litigation, work on the contracts had already begun, and Q Integrated
would have had to file a new bid protest regarding the additional areas, which it had not done
(and did not do thereafter). 

to its objections regarding the allocation of these costs across multiple contract areas in
the procurement, the government specifically objected to labor costs incurred prior to HUD’s
issuance of the solicitation, the per-hour labor rate applied by Q Integrated for its two principals,
Michael Ognek and Christopher Ognek, the rate used to calculate indirect labor costs as a
percentage of direct labor costs, certain consulting fees, and certain travel and shipping costs.
See Def.’s Resp. to Appl. at 12-19.

       (a.) Labor costs.

        Respecting labor costs, Q Integrated has reduced its request in response to the
government’s objections and seeks $43,702.75 in direct labor costs and $16,986.38 in indirect
labor costs. See Pl.’s Appl. Reply at 4-5. Although Q Integrated’s principals did not maintain
contemporaneous time records, Michael Ognek, Q Integrated’s president, recreated the time that
he and Christopher Ognek, Q Integrated’s vice president, worked on Q Integrated’s proposal for
the HUD procurement, relying on calendar entries, notes, and personal recollection. See Pl.’s
Appl. at 2; Pl.’s Reckoning at 2; Decl. of Michael Ognek (May 18, 2016) ¶ 10, ECF No. 82-8;
Decl. of Christopher Ognek (May 18, 2016) ¶ 8, ECF No. 83. Such summaries that are based on
records maintained by the business are sufficient to support a claim for reasonable bid costs,
particularly with regard to small businesses that do not regularly maintain contemporaneous time
records. See Geo-

; Beta Analytics Int’l, Inc. v. United States, 

, 163 (2007).

         The government objects that Q Integrated’s time records improperly include time
incurred before the solicitation was issued on July 25, 2014. Def.’s Resp. to Appl. at 12-13; Pl.’s
Appl., Ex. A-1 at 3-4, ECF No. 82-2. Certain preparatory bid costs can be incurred, however,
before a solicitation is officially released. See Naplesyacht.com, Inc. v. United States, No. 04-
252C, 

, at *2 (Fed. Cl. Mar. 31, 2005) (“Although costs must support an initial
or revised proposal, there is no requirement that a solicitation be issued before costs may be
recovered as bid and proposal costs.”) (citations omitted). Q Integrated’s requested hours prior
to the issuance of the solicitation are reasonable here because HUD released a draft version of its
performance work statement on June 19, 2013, upon which Q Integrated relied to begin
developing its proposal. Pl.’s Appl. Reply at 4.

        Following the government’s objections to Q Integrated’s use of market rates to calculate
direct labor cost, Q Integrated revised its application to apply an hourly rate based on Michael
Ognek’s and Christopher Ognek’s annual compensation for the years they worked on the HUD
proposal, as reflected in the company’s tax filings for each year, and “calculated by dividing
[each] employee’s total compensation by 2,080 (52 weeks at 40 hours).” See Pl.’s Appl. Reply
at 4-5 & n.2. This approach is reasonable, see Gentex Corp. v. United States, 

, 54
(2004) (“[B]id proposal costs ‘must be based upon actual rates of compensation . . . and not
market rates.’”) (citations omitted), and the court accepts that Q Integrated incurred $43,702.75
in direct labor costs in preparing its proposal.

       With regard to indirect labor costs, Q Integrated has revised its initial request by adopting
the government’s proposed indirect labor rate of [***], resulting in $16,986.38 in indirect labor
costs. Pl.’s Appl. Reply at 5. The court accepts this rate as reasonable.


                                                  6
       (b.) Other costs.

        Q Integrated initially sought $28,894.99 for fees paid to two consultants, [***] and [***].
Pl.’s Reckoning at 4-5; see also Pl.’s Appl., Ex. A-4, ECF No. 82-5 ([***] invoices for work
performed for Q Integrated); Pl.’s Appl., Ex. A-5, ECF No. 82-6 ([***] engagement agreement
and invoice for work performed for Q Integrated). Following the government’s objection that
the fees paid to [***] were incurred several months after Q Integrated’s proposal for the HUD
procurement was submitted, see Def.’s Resp. to Appl. at 16, Q Integrated agreed to withdraw its
request for those fees, totaling $15,518.99, see Pl.’s Appl. Reply at 6; Pl.’s Reckoning at 5. Q
Integrated also agreed to reduce the requested fees for [***] to $7,680, reflecting the 38.4 hours
of consulting work that was applicable to the HUD procurement. Pl.’s Appl. Reply at 6; see also
Decl. of Craig Karnes ¶ 8(a).

         Q Integrated also seeks other costs “directly related to the [p]rocurement for travel,
copying and printing and shipping and postage expenses.” Pl.’s Reckoning at 5. These costs
include travel expenses related to a “strategy session” held by Q Integrated and its subcontractor
to finalize its proposal submission, as well as certain FedEx charges. See Pl.’s Appl., Ex. A-6,
ECF No. 82-7; Pl.’s Appl. Reply at 6. Following the government’s objections, Q Integrated
agreed to remove its requests for two expenses that were not substantiated by credit card
statements, reducing Q Integrated request for direct costs to $2,045.77. Pl.’s Appl. Reply at 6.

         Both the consulting fees and direct costs sought by Q Integrated fall within generally
recognized categories of recoverable bid costs. See, e.g., Beta 

(awarding reasonable consultant fees for work allocable to the proposal, as reflected in
contemporaneous invoices); Lion Raisins 

(“Expenses compensable as bid
preparation costs are those in the nature of researching specifications, reviewing bid forms,
examining cost factors, and preparing draft and actual bids.”) (citations omitted). Q Integrated
has fulfilled its burden of showing these costs, as amended in its reply, to be reasonable, and thus
is entitled to $9,725.77 in other direct costs pre-allocation.

       (c.) Allocated award of bid costs.

        In sum, Q Integrated has incurred reasonable bid costs of $70,414.90 respecting its
proposals for ten contract areas. Pl.’s Appl. Reply at 6. Applying a rate of 30% to properly
allocate these costs to the three areas at issue in this case, Q Integrated is awarded $21,124.47 in
bid costs.

                     B. Attorneys’ Fees under the Equal Access to Justice Act

       1. EAJA criteria.

       EAJA provides:

       [A] court shall award to a prevailing party[,] other than the United States[,] fees
       and other expenses . . . incurred by that party in any civil action (other than cases

                                                  7
       sounding in tort), including proceedings for judicial review of agency action,
       brought by or against the United States in any court having jurisdiction of that
       action, unless the court finds that the position of the United States was
       substantially justified or that special circumstances make an award unjust.

28 U.S.C. § 2412(d)(1)(A). Eligibility for such an award requires that: (1) the claimant be a
“prevailing party;” (2) the government’s position was not “substantially justified;” (3) no
“special circumstances make an award unjust;” (4) any fee application be submitted to the court
within 30 days of final judgment in the action and be supported by an itemized statement; and (5)
if the qualifying party is a corporation or other organization, it must have had less than or equal
to $7,000,000 in net worth or 500 employees at the initiation of the litigation. 28 U.S.C. §
2412(d); see also Commissioner, Immigration & Naturalization Serv. v. Jean, 

, 158
(1990); Hyperion, Inc. v. United States, 

, 544 (2014); KWV, Inc. v. United
States, 

, 537 (2013). The plaintiff bears the burden of demonstrating that it
meets these requirements, Al Ghanim Combined Grp. Co. v. United States, 

, 496
(2005), except that the government has the burden of proof respecting the second criterion, i.e.,
establishing that its position was substantially justified, see White v. Nicholson, 

,
1316 (Fed. Cir. 2005); Hillensbeck v. United States, 

, 479-80 (2006), appeal
dismissed, 226 Fed. Appx. 998 (Fed. Cir. 2007); Al Ghanim Combined 

.

         The government does not contest the applicability of the first, third, and fourth criteria in
this instance, but the government disputes the other two criteria. See generally Def.’s Resp. to
Pl.’s Mot. for Att’y Fees and Expenses (“Def.’s EAJA Resp.”), ECF No. 119. The government
first argues that Q Integrated’s motion failed to affirmatively establish that it met the net worth or
employee-count requirements. 

The government next maintains that its position prior
to and during litigation was substantially justified. 

In the alternative, the government
argues that Q Integrated is not entitled to recover the full amount of requested fees because it
was only partially successful in its motion for judgment on the administrative record, and
because it has not sufficiently demonstrated that all of the claimed fees and expenses are
attributable to this bid protest. 

       2. Net worth and size.

        The government contends that Q Integrated failed to sufficiently establish its size and net
worth because the sole evidence of these criteria that it submitted to the court with its motion
was an affidavit signed by Christopher Ognek, Q Integrated’s majority owner and vice president.
Def.’s EAJA Resp. at 7; see also Pl.’s Mot., Ex. 1, Attach. A., ECF No. 90-1. Relying on Fields
v. United States, 

, 382-83 (1993), aff’d, 

(Fed. Cir. 1995), the
government asserts that “‘a self-serving, non-probative affidavit alone’ is insufficient to establish
party eligibility” for an EAJA award. Def.’s EAJA Resp. at 7 (quoting 

).

         With its reply, Q Integrated submitted a supplemental declaration and additional
documentation that affirmatively establish that Q Integrated meets the requisite criteria for
eligibility to receive an award under EAJA. See Pl.’s Reply to Def.’s Resp. to Pl.’s Mot. for
Att’y Fees and Expenses (“Pl.’s EAJA Reply”) at 1-2, ECF No. 126. Q Integrated specifically
appends to its reply a balance sheet reflecting Q Integrated’s assets and liabilities as of January

                                                  8
19, 2016, the date the complaint was filed, excerpts from Q Integrated’s 2015 federal tax filings,
and Q Integrated’s payroll records for the payroll period of January 11, 2016 to January 24,
2016. See Suppl. Decl. of Michael Ognek, Exs. S-1, S-2, and S-3, ECF No. 126-2. These
documents indicate that Q Integrated had total assets of $[***] at the end of 2015 and employed
[***] people as of the filing of the complaint. See Suppl. Decl. of Michael Ognek, Exs. S-2 and
S-3.5 Even though this financial information was submitted with Q Integrated’s reply rather than
with its initial motion, the supplementation is appropriate. See, e.g., Scarborough v. Principi,

, 416-19 (2004) (holding that the “relation-back” principle permits an EAJA
applicant to supplement or amend a timely but incomplete application); Bazalo v. West, 

, 1383 (Fed. Cir. 1998) (“[W]hile the time limitation [on filing an EAJA application] should
be strictly met, the content of the EAJA application should be accorded some flexibility.”);
Dalles Irrigation Dist. v. United States, 

, 700 n.3 (2010) (applying Scarborough
and Bazalo).

       Consequently, while the government may have been correct in observing that the
information contained in Q Integrated’s initial motion was insufficient, Q Integrated ultimately
has met its burden of establishing eligibility to recover attorneys’ fees under EAJA.

       3. “Substantially justified.”

         To establish that its position was “substantially justified,” the government bears the
burden of showing that its position was “‘justified in substance or in the main’ – that is, justified
to a degree that could satisfy a reasonable person.” Pierce v. Underwood, 

, 564-65
(1988). “[S]ubstantially justified means there is a dispute over which ‘reasonable minds could
differ.’” Norris v. Securities and Exch. Comm’n, 

, 1265 (Fed. Cir. 2012) (quoting
Gonzales v. Free Speech Coal., 

, 618 (9th Cir. 2005)). The court does not inquire
into the government’s position on every individual issue in the case, Gargoyles, Inc. v. United
States, 

, 148 (1999), appeal dismissed, 

(Fed. Cir. 2000), but rather
“make[s] a judgment call whether the government’s overall position [both prior to and during the
litigation] had a reasonable basis in both law and fact.” Chiu v. United States, 

, 715
(Fed. Cir. 1991); see also Blakley v. United States, 

, 1341 (Fed. Cir. 2010) (“In the
context of EAJA claims, we have held that the ‘position of the United States’ in judicial
proceedings refers to the United States’ position ‘throughout the dispute, including not only its
litigating position but also the agency’s administrative position.’”) (quoting Doty v. United
States, 

, 386 (Fed. Cir. 1995)). The government’s position may be substantially
justified even if it is ultimately incorrect. Miles Constr., LLC v. United States, 

,
178 (2013) (citing Manno v. United States, 

, 589 (2001)). The appropriate
inquiry is “not what the law now is, but what the [g]overnment was substantially justified in
believing it to have been.” Loomis v. United States, 

, 355 (2006) (quoting 

). The substantial justification standard requires less than winning the case and
more than being “merely undeserving of sanctions for frivolousness.” 

.

       5
         The balance sheet submitted by Q Integrated indicates that the company’s net worth as
of January 19, 2016 was $[***]. Suppl. Decl. of Michael Ognek, Ex. S-1. Since this balance
sheet was generated by QuickBooks accounting software and is unaudited, however, the court
cannot rely on it in determining whether Q Integrated is a qualifying party. See 

; Scherr Constr. Co. v. United States, 

, 250-51 (1992).
                                                  9
         The government argues that HUD’s determination that discussions with Q Integrated
regarding past performance were unnecessary was substantially justified because HUD relied on
the overall past performance rating of “Fair/Some Confidence,” a “passing” rating that on its
own did not constitute adverse past performance information. See Def.’s EAJA Resp. at 9-11.
In the decision on the merits, however, the court determined that the sub-ratings of “Not
Relevant” assigned to Q Integrated’s past performance references “constituted ‘significant
weaknesses’ or ‘adverse past performance information’ within the meaning of FAR §
15.306(d)(3) and the specific definitions in the solicitation.” Q Integrated 

.
The solicitation specifically provided that adverse past performance information includes
“information that supports a less than satisfactory rating on any evaluation element or any
unfavorable comments received from sources without a formal rating system.” 

(internal quotation marks and citation omitted) (emphasis added). Relevancy was an evaluation
element within the terms of the solicitation, see 

and the “Not Relevant” ratings were
the primary reason for HUD assigning a “Fair/Some Confidence” rating to Q Integrated’s past
performance, indicating HUD’s low expectation of Q Integrated’s successful performance of the
contracts, see 

The effect of the relevancy ratings on the overall past performance
rating rendered the relevancy ratings “deficiencies” or “significant weaknesses,” which HUD
was obligated to raise with Q Integrated during discussions pursuant to FAR § 15.306(d)(3). See

a “Fair/Some Confidence” past performance rating was technically “passing,”
in that it did not immediately disqualify Q Integrated from consideration for a contract award, the
government’s argument obscures the fact that the “Not Relevant” ratings adversely affected the
overall past performance rating, “materially reduc[ing] Q Integrated’s chance of receiving the
contract awards.” 

Relevant” ratings fall squarely within the definition of adverse
past performance information under the solicitation and FAR § 15.306(d)(3) regardless of the
overall past performance rating, and therefore the government was not justified in failing to
conduct discussions with Q Integrated regarding these ratings.

        The government’s reliance on REO Sol., Inc. v. United States, 

(2016), is
unavailing. In REO, the protest of a disappointed bidder in another area of the HUD
procurement was dismissed for lack of standing. 

The bidder was deemed not to have
had a substantial chance of receiving the contract award because it was the highest-price offeror,
regardless of a proffered series of alternative scenarios in which the bidder argued that its past
performance rating should have been “Excellent/High Confidence” rather than “Fair/Some
Confidence.” See 

In evaluating these scenarios, the court stated that “[t]he fact
that the agency ultimately gave REO a confidence rating of Fair/Some Confidence does not,
however, rise to the level of a deficiency or significant weakness.” 

The government
latches on to this statement, claiming that it constitutes a reasonable difference of opinion
regarding “what must be discussed under FAR [§] 15.306 when an offeror received an overall
past-performance rating of ‘Fair/Some Confidence’ under the evaluation scheme established by
[the HUD solicitation].” Def.’s EAJA Resp. at 13. There is not, however, any reasonable
comparability between the court’s evaluation of the discussion issue in this case and the
evaluation in REO that would render the government’s position substantially justified. See DGR
Assocs., Inc. v. United States, 

, 1341 (Fed. Cir. 2012).

       First, the discussions issue had no impact on the court’s decision in REO because REO
was deemed not to have a substantial chance of receiving a contract award. See REO, 125 Fed.

                                                10
Cl. at 665. There were nine eligible offerors for that particular contract area, and REO was the
highest-priced offeror by several million dollars, so the court determined that regardless of any
errors in the proposal process, including the overall past performance rating and accompanying
discussions, REO would not have received an award. 

664-65. On the other hand, Q
Integrated was either the lowest-priced or second-lowest-priced offeror for the contract areas at
issue in its protest, and had a substantial chance of receiving the award but for HUD’s errors
during the discussion phase. See Q Integrated 

. The discussions issue
was central to the court’s decision here, and the court in turn evaluated it fully, whereas the court
in REO only gave a passing mention to the discussion requirements.

        Further, in REO, the court found that the overall past performance rating of “Fair/Some
Confidence” did not, in itself, constitute a deficiency or significant weakness that would require
discussions. See 

. REO’s challenge amounted to “mere disagreement
with the agency” over its overall past performance rating where there was no evidence of adverse
past performance information in the sub-categories to determine the overall rating. See 

was no adverse past performance noted, as REO had no past performance to
speak of and its subcontractor received high marks.”). Here, however, the court did not assess
the overall “Fair/Some Confidence” past performance rating assigned to Q Integrated, but rather
held that the “Not Relevant” sub-ratings assigned to Q Integrated’s past performance references
were adverse past performance information that were required to be disclosed in discussions
because these ratings had a specific downward effect on the overall past performance rating. See
Q Integrated 

. Even if a rating of “Fair/Some Confidence” would be
considered “passing,” as the government claims here, see Def.’s EAJA Resp. at 11, the evidence
of adverse past performance that HUD did not discuss with Q Integrated distinguishes this case
from the circumstances in REO, in which there was no such information to be discussed. Unlike
in DGR, where there was substantial disagreement between and among agencies and courts
regarding the interpretation of a statute and its accompanying regulations, see 

, the court here and in REO assessed distinct issues regarding discussions under FAR §
15.306(d)(3) and the terms of the solicitation, specifically distinguishing between overall
“passing” ratings and adverse sub-factor ratings. Overall, the court’s decision in REO is not in
conflict with the court’s merits determination here and therefore does not serve to justify the
government’s position.

        The government further asserts that HUD’s failure to conduct adequate discussions was
justified because Q Integrated should have known that past performance information regarding
its work as a subcontractor would be downgraded in the evaluation process without discussions
taking place. See Def.’s EAJA Resp. at 11-13. Regardless, the “Not Relevant” ratings
constituted adverse past performance information that needed to be disclosed during discussions.
See Q Integrated 

. The government was not relieved of its explicit duty
under the solicitation and FAR § 15.306(d)(3) to conduct discussions because Q Integrated
purportedly should have known what the substance of such discussions would be.6

       6
         The government also attempts to argue that its position was substantially justified
because Q Integrated received a contract award in an area of the procurement not at issue in this
protest. Def.’s EAJA Resp. at 13. That award is not relevant to whether the government’s
position was substantially justified in this case because Q Integrated received the award after
another offeror was disqualified from consideration, regardless of the same errors in the
                                                 11
        Accordingly, as the government has failed to show that its position was substantially
justified, Q Integrated is entitled to an award of attorneys’ fees pursuant to EAJA.

       4. Partial success on the merits.

       The government next argues that Q Integrated is not entitled to a full award of attorneys’
fees under EAJA because “it was only partially successful” in its protest. Def.’s EAJA Resp. at
15. The government specifically argues that “Q Integrated should be limited to recovering, at
most, one-third of the reasonable and incurred amount of fees because the [c]ourt upheld HUD’s
evaluations of both Q Integrat[ed] and Sage” and only found for Q Integrated on the issue of the
adequacy of discussions. 

Court has held that when a plaintiff’s claims involve “a common core of
facts or [are] based on related legal theories,” “the most critical factor” a court must consider in
determining whether to adjust an award of reasonable attorneys’ fees is “the degree of success
obtained” in the litigation. Hensley v. Eckerhart, 

, 435-36 (1983). A plaintiff need
not prevail on every contention raised in the lawsuit to recover a full fee, so long as the plaintiff
has been awarded “substantial relief.” See 

“Litigants in good faith may raise
alternative legal grounds for a desired outcome, and the court’s rejection of or failure to reach
certain grounds is not a sufficient reason for reducing a fee.” 

However, “[i]f . . . a
plaintiff has achieved only partial or limited success, the product of hours reasonably expended
on the litigation as a whole times a reasonable hourly rate may be an excessive amount.” 

In Hubbard v. United States, 

(Fed. Cir. 2007), the Federal Circuit clarified
that “a ratio [of damages sought to damages awarded] provides little aid in determining what is a
reasonable fee in light of all the relevant factors.” 

(quoting 

n.11 (internal citation omitted)). Rather, the court “should focus on the significance of the
overall relief obtained by the plaintiff in relation to the hours reasonably expended on the
litigation.” 

.

        This court has concluded in several cases that a plaintiff experiences “partial or limited
success” where the plaintiff fails on the majority of its claims or recovers significantly less
damages than the amount it originally sought. See, e.g., Dalles Irrigation 

(reducing attorneys’ fees where plaintiff succeeded on three of its seven claims and
recovered only 18% of the damages sought); CEMS, Inc. v. United States, 

, 483-
84 (2005) (reducing award where plaintiff prevailed on nine of its thirty claims and received
slightly less than 24% of the damages it sought); Filtration Dev. Co., LLC v. United States, 

, 627 (2005) (reducing plaintiff’s award where court enjoined only one-quarter of the
procurement at issue); Baldi Bros. Constructors v. United States, 

, 82-84 (2002)
(reducing attorneys’ fees incurred in damages trial where plaintiff recovered 55% of the damages
sought and the court found that “many of plaintiff’s claimed costs” were “subsumed” in its other
claims or were “otherwise unsubstantiated”).




procurement that the court identified in this protest. See Q Integrated 

. The
belated award in an unrelated area does not absolve the government of its unjustified errors here.
                                                 12
        Here, the court finds that Q Integrated’s degree of success obtained in its bid protest is
more appropriately characterized as “substantial relief” than “partial or limited success.”
Although the court found that HUD’s evaluation of Q Integrated’s and Sage’s past performance
information was not arbitrary and capricious, see Q Integrated 

, the
court held that HUD conducted inadequate discussions with Q Integrated regarding its past
performance information in violation of FAR § 15.306(d) and the terms of the solicitation, and
that this violation prejudiced Q Integrated, see 

In light of Q Integrated’s success
on the merits of its protest, the court awarded injunctive relief to the fullest possible extent in
light of the timing of the court’s decision vis-à-vis the beginning of contract performance, and
also awarded bid preparation and proposal costs. See 

Q Integrated’s failure on
two alternative protest grounds does not diminish its overall success in its protest, i.e., that the
HUD procurement was flawed and resulted in prejudice to Q Integrated, and accordingly the
court awarded full relief. Therefore, since Q Integrated received an “excellent result[]” in its
protest rather than “limited success,” 

-36, Q Integrated is entitled to a
full award of attorneys’ fees under EAJA.

       5. Amount of award.

        Q Integrated requests attorneys’ fees of $77,129.72, reflecting 401.55 hours of attorney
time at the rate of $192.08 per hour, as well as related nontaxable expenses of $3,128.95. See
Pl.’s Mot. at 6-7.7 The government objects to Q Integrated’s fee request on the grounds that (1)
Q Integrated should not recover fees for time spent on its motion to amend the complaint that
was denied by the court, (2) certain claimed fees were incurred with respect to actions before the
SBA rather than this court, and (3) the documentation of related expenses is vague such that it
cannot be determined that these expenses were incurred with respect to Q Integrated’s protest
before this court rather than a concurrent action before the SBA. Def.’s EAJA Resp. at 18-22.

       (a.) Cost of living adjustment.

        Under EAJA, a $125 per-hour cap applies to attorneys’ fees “unless the court determines
that an increase in the cost of living or a special factor . . . justifies a higher fee.” 28 U.S.C. §
2412(d)(2)(A). To receive a cost of living adjustment (“COLA”) in its award, a plaintiff must
“allege[] that the cost of living has increased, as measured by the Department of Labor’s
Consumer Price Index (‘CPI’),” California Marine Cleaning, Inc. v. United States, 

, 733 (1999), and supply the court with relevant CPI data, see Lion Raisins, Inc. v. United
States, 

, 519 (2003) (“Lion Raisins II”) (citing Weaver-Bailey Contractors, Inc. v.
United States, 

, 580-81 (1991)). The court should “freely grant[]” adjustments
based on the cost of living. Infiniti Info. Sols., LLC v. United States, 

, 751 (2010)
(citations omitted). The government does not contest Q Integrated’s COLA claim or method of
calculations.



       7
         Q Integrated’s motion incorrectly states that it seeks $80,258.67 in attorneys’ fees. See
Pl.’s Mot. at 6. This figure reflects the total fees and expenses sought by Q Integrated. See Pl.’s
Mot., Ex. 2. For clarity, the court has separated the amount of attorneys’ fees from the amount
of related expenses in its analysis.
                                                 13
        A base date of March 1996 is the starting point used to calculate the COLA because
EAJA was amended that month to increase the hourly statutory rate for attorneys’ fees from $75
to $125. California 

; see also 

; Lion
Raisins 

. “The end date for calculating the COLA is the ‘final date on
which legal services were rendered.’” 

(citations omitted). The
Federal Circuit has also endorsed using “a single mid-point inflation adjustment factor applicable
to services performed before and after that mid-point” in appropriate circumstances. 

n.10 (citation omitted); see also 

(calculating the COLA
using a mid-point adjustment factor).

        Q Integrated’s attorneys performed services from January 2016 to July 2016, using April
2016 as a mid-point to calculate the COLA. Pl.’s Mot. at 6-7. April 2016 is an appropriate mid-
point, and the government does not contest the use of April 2016 as a COLA end date.
Accordingly, based upon an increase in the CPI from 155.70 in March 1996 to 239.26 in April
2016,8 the proper rate is $192.08.9 The court shall apply this hourly rate in determining total
attorneys’ fees to be awarded to Q Integrated.

       (b.) Attorneys’ chargeable time.

         Q Integrated requests fees for 401.55 hours of attorney time, including time spent on the
litigation of the merits and the preparation of the application for bid costs and the motion for
attorneys’ fees. Pl.’s Mot. at 6 & Ex. 2. The government criticizes this time as excessive
because it includes certain hours spent preparing a motion to amend the complaint that was
ultimately denied by the court, as well as other hours “that appear to have been incurred due to
actions with the SBA.” Def.’s EAJA Resp. at 18-19, 21-22.

        Q Integrated is not entitled to fees for the time incurred on its motion to amend the
complaint. Q Integrated’s billing records indicate that its attorneys spent 63.2 hours preparing
the motion to amend. See Pl.’s Mot., Ex. 3 at 18-20, 30. The court denied Q Integrated’s
motion, however, because work was already underway on the four contract areas that Q
Integrated sought to add to its protest, the motion was filed on the eve of the hearing on the
parties’ cross-motions on the administrative record, and it effectively sought to appeal a size
determination for Sage even though the determination had been rescinded and the appeal process
before the SBA had not been exhausted. Q Integrated 

n.17. Since Q
Integrated did not prevail on its motion to amend, even though its overall success in the litigation
was not affected, the court will not award fees for the attorney time spent on the motion. See

(explaining that the court may deny fees where a “plaintiff fail[s] to
prevail on claims that were unrelated to the claims on which he succeeded”); see also
Information Scis. Corp. v. United States, 

, 635 (2009) (denying fees for time
spent on an unsuccessful motion to strike that “did not contribute to [plaintiff’s] success”).

       8
        Compare Bureau of Labor Statistics, United States Department of Labor, Consumer
Price Index: March 1996 at Table 1, https://www.bls.gov/news.release/history/cpi_041296.txt,
with Bureau of Labor Statistics, United States Department of Labor, Consumer Price Index:
April 2016 at Table 1, https://www.bls.gov/news.release/archives/cpi_05172016.htm.
       9
           $125 x 239.26/155.7 = $192.08.
                                                14
Therefore, the court shall reduce the number of attorney hours that are eligible for award by 63.2
hours.

        The government’s objection to hours that were allegedly spent on SBA actions is
unavailing, however. The government argues that 27.7 hours should be disallowed because the
corresponding time entries refer to the review of SBA decisions and regulations. Def.’s EAJA
Resp. at 21-22; see also, e.g., Pl.’s Mot, Ex. 3 at 19 (billing time for “[r]eview[ing] and
analyz[ing] SBA regulations re[garding] outcome of adverse size determination”); 

(billing time for “[r]esearch[ing] [SBA Office of Hearing and Appeals] decisions re[garding]
impact of adverse size determination and HUD’s ability to not immediately terminate awards to
Sage and Alpine”); 

(billing time for “[r]eview[ing] Alpine SBA size determination”).
This review is relevant to Q Integrated’s protest before this court, however, because adverse size
determinations affected Q Integrated’s standing to bring the protest. It was also reasonable for Q
Integrated to assess whether an adverse size determination for Sage or Alpine could lead to Q
Integrated receiving a contract award for the disputed areas, regardless of the protest, if the other
offerors were deemed ineligible for award. See Q Integrated 

(rejecting
the government’s claim on a motion for reconsideration that Q Integrated did not have standing,
finding that virtually all offerors had been determined by SBA to be other than small). The time
entries indicate that these hours were reasonably spent in connection with Q Integrated’s bid
protest before this court, and therefore Q Integrated is eligible to receive an award respecting the
27.7 hours identified by the government. See Oliveira v. United States, 

, 744 (Fed.
Cir. 1987) (explaining that recoverable expenses are those that are “incurred or expended solely
or exclusively in connection with the case before the court,” but that “[t]he quantum and method
of proof of each allowable expense is discretionary with the trial court”).

         In sum, the court awards attorneys’ fees to Q Integrated for 338.35 hours of attorney time
at a rate of $192.08 per hour, bringing the total fee to $64,990.27.

       (c.) Other expenses.

        Finally, the government argues that Q Integrated’s claim for $3,128.95 in related
expenses should be denied in its entirety because the documentation provided by Q Integrated’s
attorneys lacks sufficient detail to show that all claimed expenses were incurred with respect to
the protest in this court rather than Q Integrated’s related proceedings before the SBA. See
Def.’s EAJA Resp. at 19-21. These expenses include Westlaw research, shipping charges,
conference call charges, courier charges, and working lunches. 

In its reply, Q
Integrated agreed to withdraw its request for $796.56 of these expenses to account for the
government’s objections. Pl.’s EAJA Reply at 8.

         Subsection 2412(a) of Title 28 states that “[e]xcept as otherwise specifically provided by
statute, a judgment for costs, as enumerated in section 1920 of this title, but not including the
fees and expenses of attorneys, may be awarded to the prevailing party in any civil action
brought by or against the United States.” 28 U.S.C. § 2412(a)(1). In turn, Subsection 2412(d)
invokes the statutory exception, providing that “a court shall award to a prevailing party other
than the United States fees and other expenses, in addition to any costs awarded pursuant to [28
U.S.C. § 2412(a)], incurred by that party in any civil action . . . brought by or against the United
States.” 28 U.S.C. § 2412(d)(1)(A) (emphasis added). Expenses of the type sought by Q

                                                 15
Integrated “are consistently held to be recoverable under EAJA.” 

(allowing recovery for “FedEx Office printing, binding, and overnight deliveries”); see also Jean
v. Nelson, 

, 778 (11th Cir. 1988) (allowing recovery for telephone, reasonable
travel, postage, and computerized research expenses), aff’d sub nom. Commissioner,
Immigration & Naturalization Serv. v. Jean, 

(1990). Therefore, taking into
account Q Integrated’s concessions to ensure that all claimed expenses relate to this litigation,
the court awards Q Integrated $2,332.39 in related expenses pursuant to EAJA, encompassing
the $400 filing fee, electronic legal research, FedEx shipping, courier charges, travel expenses,
and conference calls.

                                        CONCLUSION

        For the foregoing reasons, Q Integrated is awarded bid preparation and proposal costs of
$21,124.47 and attorneys’ fees and related expenses under EAJA of $67,322.66. The clerk shall
enter final judgment for plaintiff in the total amount of $88,447.13.

       It is so ORDERED.


                                                 s/ Charles F. Lettow
                                                 Charles F. Lettow
                                                 Judge




                                               16