March 13, 2001
Appeal of
JARA REALTY TRUST
RICHARD B. ROSS, TRUSTEE
LEASE AGREEMENT
PSBCA Nos. 4211, 4278 & 4352
APPEARANCE FOR APPELLANT:
Alvin S. Nathanson, Esq.
APPEARANCE FOR RESPONDENT:
Charles J. Dudek, Esq.
OPINION OF THE BOARD
Appellant, Jara Realty Trust, has appealed from contracting officer's decisions partially denying its claims for construction costs incurred at a property that it leased to Respondent, United States Postal Service. A hearing was held in Boston, Massachusetts. Only entitlement is at issue in this proceeding.
FINDINGS OF FACT
1. On June 17, 1996, Respondent entered into an agreement with Appellant to lease existing premises located at 1313 Boylston Street, Boston, Massachusetts. The term of the lease was 20 years. (AF 1).[1]
2. Included as part of the lease was a Construction Rider, under which Respondent agreed to pay Appellant to complete design drawings for improvements to be made to the facility. The Construction Rider provided that after approval of the design, Appellant would submit a proposal for the cost of construction. Appellant employed an architect to produce the necessary design drawings and specifications. The final set of plans and specifications produced by the architect was dated August 1, 1996. (AF 1, 4; Tr. 131).
3. Lease Amendment 001, dated August 26, 1996, added $1,600,000 to the Construction Rider for construction based on the August 1, 1996 documents. On August 26, 1996, the contracting officer also issued a notice to proceed with the work. On or about September 9, 1996, Appellant entered into a contract with Richard White Sons, Inc., with a guaranteed maximum price of $1,563,113.72, to perform the construction work in accordance with the August 1, 1996 construction documents. (AF 2; AExh 6, 38).
Inspection Service Office Claim
4. The original plans and specifications provided for the construction of an "Inspectional Gallery" (Inspection Office) in the facility's workroom, for use by the Postal Inspection Service. In early October 1996, after construction at the facility had begun, but before construction of the Inspection Office had started, Respondent's contracting officer's representative (COR) informed Appellant that the location of the Inspection Office would have to be changed from the center of the workroom to one corner. Over the next six weeks, Appellant's architect prepared sketches of the proposed Inspection Office layout. In mid-November 1996, the COR approved the Inspection Office design and the architect issued the final sketches to Appellant's contractor for pricing. (AF 4, (Div. 10000); RExh 17; AExh 15; Tr. 57, 133-34, 162-64, 352).
5. On or about December 10, 1996, the contractor provided its initial estimate of the cost of changing the Inspection Office location. That estimate was $50,088. (AExh 31 (letter dated 12/10/96, Re: Change Estimate #12)).
6. The COR believed that the estimate was too high and asked Appellant and its contractor to go back and attempt to lower the estimated cost for the work. On or about December 17, 1996, the contractor submitted to Appellant a revised estimate, in the amount of $36,722. (Tr. 15, 349; AExh 15, 16, 33 (Change Estimate #12.1)).
7. A regular "jobsite" meeting was held on December 17, 1996, and attended by representatives of Respondent and Appellant and its contractor. At that meeting, after a discussion of the revised proposal, the COR directed that Appellant proceed with the work to change the Inspection Office location. (Tr. 16, 57, 68, 71, 74, 99, 100; AExh 15). The COR asked that Appellant keep an eye out for cost savings. The COR told the contractor that he still wanted to take a closer look at the pricing, and that he would get back to the contractor to discuss it. (Tr. 16, 71, 72, 74, 91).
8. Work on the project, including the Inspection Office construction, was completed in January or February 1997 (Tr. 23; AExh 15). At about the time the work was completed, the COR held a meeting with Appellant and its contractor and informed them, for the first time, that he did not believe that the Postal Service was obligated to pay all of the costs set out in the revised estimate. The COR's position was that some of the costs were overstated and some represented work that was already required under the original contract. The COR only agreed with the payment of $16,863 of the $36,722 estimate. Appellant did not accept the COR's position. (Tr. 105, 106, 108; AExh 13 (last page)).
9. A second meeting was held at the project site in late March 1997 to discuss a number of outstanding change order requests by Appellant, including the Inspection Office claim. Representatives of both parties participated, including Thomas Russell, the contracting officer's superior, and the parties had detailed discussions regarding Appellant's claims. No agreements were reached at the meeting, but Mr. Russell agreed to respond to Appellant with his evaluation of the claims. (Tr. 108; AExh 42 (pages 6, 14-15)).
10. By letter dated April 8, 1997, Mr. Russell provided the "Postal Service's position" on the change order requests. He agreed to the payment of $172,671 for eight items (including the Inspection Office), which sum included $163,471 in construction costs and $9,200 in design fees. With respect to the Inspection Office location change, he agreed to pay the sum of $18,082, which sum included $15,582 for construction costs, and $2,500 for design fees to be paid to Appellant's architect. (AExh 13).
11. On April 23, 1997, the parties executed Lease Amendment 002, which contained the following relevant language:
"The Lease, Attachments, Riders, drawings and/or specifications which are part thereof, are modified as follows:
The following items and costs are acceptable to the Postal Serivce [sic]:[2]
* * *
6. Inspection Service Investigativie [sic] Office, additional work - $18,082
* * *
The undersigned shall complete the work outlined above to the satisfaction of the Postal Service.
The undersigned shall be paid a fixed sum in the amount of $172,671.00 for the work described above, payable in the following manner:
* * *
In all other respects, the Lease shall remain the same and is hereby confirmed…." (AF 3).
12. Prior to execution of Amendment 002, although there had been some discussions between the parties, there had been no agreement that Appellant would accept the sum of $18,082 for the Inspection Office work (Tr. 127, 225, 388-89, 431, 434).
13. By letter dated March 12, 1998, Appellant requested that the contracting officer issue a final decision on a number of outstanding claims, including the claim for the Inspection Office work. Appellant requested the difference between its revised estimate ($36,722) and what had been paid pursuant to Amendment 002. (AExh 18).
14. By letter dated May 20, 1998, Appellant appealed the failure of the contracting officer to have issued a final decision on the March 12, 1998 claim. That appeal was docketed as PSBCA No. 4211.
15. On or about August 17, 1998, a successor contracting officer issued a final decision in which he denied, among others, the claim for the Inspection Office work. The bases for that denial were that the $18,082 already paid represented the costs for those items not already covered by the existing contract, and that the amount had been negotiated and agreed to by the parties under Amendment 002. (AExh 24). That final decision was appealed and was docketed as PSBCA No. 4278.
16. Following further discussions by the parties, nearly all of the outstanding claims were settled, and the successor contracting officer issued a revised final decision dated December 14, 1998. The revised final decision also denied the Inspection Office claim on the basis that it had been negotiated and agreed to by both parties under Amendment 002. (AExh 26). Appellant appealed that final decision, which appeal was docketed as PSBCA No. 4352.
DECISION
Inspection Service Office Claim
Respondent relies exclusively on the wording of Amendment 002 to support its contention that the amendment constituted an accord and satisfaction of Appellant's Inspection Office claim, citing Brock and Blevins Co., Inc. v. United States, 170 Ct. Cl. 52, 343 F.2d 951 (1965) and The Stephens Associates, PSBCA No. 970, 83-1 BCA ¶ 16,233. Respondent argues that the parties had met several times and discussed their positions before they executed Amendment 002; that Appellant's principal was not coerced into signing the amendment but did so freely; and that Appellant had no basis to expect any further payment after having signed the amendment.
Appellant argues that the defense of accord and satisfaction is an affirmative defense which Respondent bears the burden of proving. Appellant argues further that there was no "meeting of the minds," an essential element of an accord and satisfaction.
We agree with Appellant that Respondent has failed to prove the existence of an agreement between the parties regarding the Inspection Office claim. As argued by Appellant, such agreement is an essential element of an effective accord and satisfaction. Brock & Blevins Co., Inc. v. United States, 170 Ct. Cl. 52, 59, 343 F.2d 951, 955 (1965). The evidence of record shows that the parties never reached an agreement with respect to the price to be paid for the Inspection Office work, and that the price remained in dispute.
The only evidence of an agreement is Amendment 002 itself. However, the language in the amendment is not sufficiently explicit for us to conclude that by executing the amendment, Appellant's only reasonable understanding would have been that it was agreeing to an accord in settlement of its Inspection Office claim. See, e.g., The Chesapeake & Potomac Telephone Co. v. United States, 228 Ct. Cl. 101, 109, 654 F.2d 711, 716 (1981).
In the description of the work covered and the amounts to be paid, Amendment 002 states only that the costs were "acceptable to the Postal Service." This language does not state that both parties agreed to those amounts as final settlements of the items at issue. In its brief, Respondent cites the language providing that Appellant was to be paid a "fixed sum … for the work described above." That language, however, when considered in the context of the earlier statement regarding costs "acceptable to the Postal Service," the lack of any other evidence that an agreement between the parties had been reached, and the absence of any explicit "release" language, is not sufficient to support a conclusion that an accord had been reached. Accordingly, Amendment 002 does not serve as an accord and satisfaction with respect to the Inspection Office claim. This portion of the appeals is sustained and remanded to the parties for negotiation of the final amount due Appellant under this claim. Appellant may recover those incurred costs that it can demonstrate resulted from the change in location of the Inspection Office.
Sidewalk Redesign Claim
17. During the course of construction, a dispute arose regarding a sidewalk that had been installed by Appellant. The sidewalk had to be replaced because it presented an obstacle to some of Respondent's drivers when they were attempting to back certain trucks up to the loading dock. Appellant took the position that Respondent was liable for the costs of replacement because it had failed to identify the affected trucks to Appellant's architect when he was making measurements necessary to assure proper clearance. Respondent took the position that the sidewalk design was defective in any event in that it failed to meet the contract's handicapped accessibility standards. Appellant's demand to be paid the cost of replacing the sidewalk was rejected by Respondent following the on-site meeting (Findings 9, 10), and was included in Appellant's request for a contracting officer's decision (Finding 13).
18. In its March 12, 1998 request for a contracting officer's decision, Appellant sought $32,726 in construction costs and $5,200 in architectural fees, for a total of $37,926 for the sidewalk redesign and replacement (AExh 18).
19. In discussions held in September 1998, the parties agreed that Respondent would pay 65 percent of both the construction and design costs associated with the sidewalk replacement and that Appellant would absorb 35 percent of the costs (Tr. 400-401; AExh 30; contra Tr. 116).
20. In an October 30, 1998 letter to Appellant, the successor contracting officer stated that "Per our discussions, I will authorize the payment of 65% of the claimed cost, or $24,652." The stated amount of $24,652 was 65 percent of $37,926, the sum of the construction costs and architectural fees claimed by Appellant in its request for a contracting officer's decision. (AExh 30, 18).
21. In the revised contracting officer's decision of December 14, 1998, the successor contracting officer stated,
"Per our discussions, I will authorize the payment of 65% of the claimed cost, including both construction and architectural fees …. It was agreed that JARA would be liable for the remaining 35% of the construction costs. It is my decision to pay the percentage of the requested architectural fees equal to the percentage of the construction costs paid by the Postal Service. Accordingly, since JARA is liable for 35% of the construction costs, your request that the Postal Service reimburse you 100% for the architectural fees is not approved." (Emphasis added)(AExh 26).
DECISION
Sidewalk Redesign Claim
Appellant contends that it is entitled to recover the full amount of the design fees it incurred in connection with the redesign of the sidewalk. Respondent argues that the parties reached agreement that Appellant would be paid 65 percent of both the construction costs and the architectural fees, and that Appellant may not recover anything more.
As reflected in Finding 19, we have found that the parties reached agreement that Respondent would pay 65 percent of both the construction and design costs. The letter the successor contracting officer wrote to Appellant shortly after their discussions was consistent with that agreement (Finding 20). While the wording of the contracting officer's final decision (Finding 21), several months later, suggests that payment of 65 percent of the architectural fees was not part of the agreement, on balance we conclude that the parties had agreed to settle the claim for a payment of 65 percent of both amounts. That agreement is binding on both parties to the contract. Accordingly, Appellant may not recover the balance of the claimed architectural fees, and this portion of the appeals is denied.
"Fees Not Previously Paid" Claim
22. At the time the parties were negotiating the agreement for Appellant to perform the construction work, the parties understood that Appellant could charge a fee for its services and time, apart from the actual costs of construction (Tr. 211, 230). The lease and construction rider are silent with regard to the payment of such a fee.
23. Appellant incurred costs in administering the construction work, including the work added to the initial contract. The administrative costs included the cost of the time spent by Appellant's employees at numerous meetings, and the cost of such items as faxes and telephones. (Tr. 119, 228, 229).
24. In its March 12, 1998 request for a contracting officer's final decision, Appellant claimed a fee or markup of 10 percent of the additional construction costs still at issue in its request for a final decision. Appellant did not claim any markup on the additional architectural fees. (AExh 18).
25. In addition, in an item labeled "Fee not paid previously (10%)," Appellant claimed a fee or markup of 10 percent of the construction costs previously approved by Respondent and paid under Amendment 002 (Findings 10, 11). Appellant did not claim any markup on the additional architectural fees. (AExh 18).
26. In an October 30, 1998 letter, the successor contracting officer stated that pursuant to discussions at a meeting between the parties he would agree to pay Appellant "an overhead rate of 7% of the finally agreed to additional costs" with respect to those costs included in the request for a final decision (AExh 30).
27. In his revised final decision, dated December 14, 1998, the successor contracting officer repeated his statement that "as discussed" he would agree to pay Appellant a 7 percent markup on the costs allowed in the decision. However, in calculating the 7 percent, the successor contracting officer applied it to both the construction costs and the architectural fees claimed (Finding 24). (AExh 26).
28. With respect to the item labeled "Fee not paid previously (10%)," (Finding 25) the successor contracting officer stated that he understood the item to refer to "items invoiced but not paid." He stated that he had been unable to find any items that had been invoiced but not paid and, on that basis, declined to approve the item for payment. (AExh 26).
DECISION
"Fees Not Previously Paid" Claim
Appellant makes two arguments with respect to this claim item. First, Appellant argues that it should have received a 10 percent fee for the items covered by the revised final decision, in lieu of the 7 percent awarded by the successor contracting officer (Findings 26, 27). Second, Appellant argues that it is entitled to recover a 10 percent markup on the construction costs previously approved by Mr. Russell and paid via Amendment 002 (Findings 10, 11). Appellant's position is that it is entitled to receive a fee for the services it rendered, similar to an "overhead" markup paid to other contractors performing additional work on a project. Appellant also cites the fact that the successor contracting officer allowed a 7 percent markup as an acknowledgement that such a fee is justified.
Respondent argues that the payment of such fees is not required by the contract, and argues that the successor contracting officer approved the payment of the 7 percent fee only as part of an attempt to resolve the entire matter.
The unrebutted testimony in this appeal is that the parties understood that Appellant would be allowed a fee to cover its costs, over and above the cost of construction, and that it incurred such costs. We see no reason that such an understanding should not apply with equal force to the costs of additional work performed by Appellant and for which Respondent is responsible. Therefore, Appellant may recover a fee on the work approved by Mr. Russell and paid for under Amendment 002. The evidence in the record is insufficient for us to decide whether the fee should be 7 percent or 10 percent or some other amount, and we leave it to the parties to resolve this question as part of the quantum negotiations. This portion of the appeals is sustained.
To the extent indicated above, the appeals are sustained. The matter is remanded to the parties for negotiation of the amount due. If they are unable to agree, the contracting officer is to issue another final decision, which may then be appealed.
David I. Brochstein
Administrative Judge
Vice Chairman
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
William K. Mahn
Administrative Judge
Board Member
[1] "AF _" refers to Respondent's Appeal File, "AExh _" to Appellant's Hearing Exhibits, "RExh _" to Respondent's Hearing Exhibits, and "Tr. _" to the hearing transcript.
[2] The items listed in the amendment corresponded to the eight items approved by Mr. Russell in his April 7, 1997 letter (Finding 10).