GRANTED IN PART: October 19, 1992 GSBCA 11252 UNIVERSAL DEVELOPMENT CORPORATION, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Kenneth K. Takahashi of Takahashi & Associates, P.C., Washington, DC, counsel for Appellant. Martin A. Hom, Real Property Division, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges LaBELLA, Acting Chief Judge, DANIELS, and HYATT. DANIELS, Board Judge. The General Services Administration (GSA), respondent, entered into a lease with Universal Development Corporation (UDC), appellant, for the rental of large portions of an office building. Under this contract, GSA instructed UDC to modify some of the office space to create a snack bar. UDC claims that as a consequence of this direction, GSA owes it $235 per month in costs associated with the installation of a separate heating, ventilating, and air conditioning (HVAC) unit in the area. We grant the appeal to the extent of awarding $75 per month in resulting utility costs. Findings of Fact 1. On March 4, 1980, UDC and GSA entered into a contract under which the former would lease to the latter office and related space in a building to be constructed in Gulfport, Mississippi. Appeal File, Exhibit 1. As amended, the lease covers 32,400 net usable square feet of space and extends from November 15, 1982, through November 14, 2002, at a rental rate of $383,320 per year. Id., Exhibit 4. The Government occupies all of two, and most of a third, of the building's six floors. Transcript at 5-6. 2. The contract made UDC responsible for installing, operating, and maintaining an HVAC system in the building. Appeal File, Exhibit 1 at Schedule B, Part III, 1, 4; Part V, 2; Schedule C, 1-3. The system must keep the temperature and humidity inside the building within prescribed ranges. When outdoor temperatures are sixty-five degrees Fahrenheit or below, the leased space must be heated to between sixty-eight and seventy-two degrees, and when outdoor temperatures are above sixty-five, the inside must be maintained at between seventy-six and eighty-two, with a maximum of fifty percent relative humidity. Id. at Schedule B, Part III, 4. The contract placed two constraints on the lessor in meeting this requirement. First, "Areas having excessive heat gain or heat loss, or affected by solar radiation at different times of the day, shall be independently and automatically controlled so that the interior temperature conditions stipulated can be maintained." Id. Second, "Heating energy shall not be used to achieve the higher temperature specified for cooling, and cooling energy shall not be used to achieve the lower temperatures specified for heating." Id. at Part V, 2.g. 3. The contract gave the Government "the right to install vending facilities within the confines of the leased space." Appeal File, Exhibit 1 at Schedule B, Part III, 10.a. With regard to the exercise of this right -- At the request of the Government, the lessor shall install all necessary mechanical, electrical and plumbing facilities, including . . . heating and airconditioning as required for the operation of the automatic vending machines and snack bars. Offers shall not include any amount to cover the cost of any additional utilities since these vending facilities may not necessarily be installed. Negotiations shall be held to arrive at a mutually acceptable lump-sum payment and/or rental increase should the Government require these alterations. Id. at 10.c. 4. To meet the contract's requirement for installation of an HVAC system, UDC put a water source heat pump system in the structure. Transcript at 10. This design involved a central boiler and cooling tower, from which water was circulated through fifty-five individual units, each with a separate temperature control, that were arranged throughout the building. Id. at 9, 12-15, 82-85. The design was premised on the assumption that the building would not contain a food service vending area. Id. at 70. 5. After UDC had installed the HVAC system, but before the Government occupied the building, GSA directed the lessor to convert some of the office space into an area in which a snack bar and vending machines would be placed. Transcript at 7, 71. 6. By letter dated August 24, 1982, UDC proposed to furnish and install a separate three-ton1 HVAC unit for the snack bar, at a price of $4,511.69. The letter asked that the lease be amended "to reflect an additional $125.00 per month for utilities and $110.00 per month for replacement reserve, maintenance and upkeep. Both of which should be adjusted annually by the CPI adjustment provided by the lease.2" The letter stated that the figures for maintenance and upkeep were based on an assumption that the unit would be operated for eight hours per day. Appeal File, Exhibit 5. 7. On September 7, 1982, the contracting officer wrote to UDC about several outstanding matters. Among those matters is this one: ____________________ 1 UDC's president testified that this number was a mistake and that the actual rating of the unit under discussion, and later installed, was three and one-half tons. Transcript at 18. 2 The phrase "CPI adjustment provided by the lease" is apparently a reference to this clause: The Government shall also pay to the lessor, as additional rent, for the second lease year and each lease year thereafter an amount determined by multiplying the total first year[']s estimated cost of the following items as negotiated and established for the first lease year prior to award of the lease contract: . . . Heating . . . by the percentage of increase, if any, in the cost of living index over and above the cost of living index . . . at the commencement of the lease term. Such increases in the cost of living index shall be measured by the U. S. Department of Labor Revised Consumer Price Index for Wage Earners and Clerical Work[er]s. Appeal File, Exhibit 1 at Schedule A, Attachment 2. We have received your offer for the 3 1/2 ton HVAC unit for the Blind Concession Stand3 in the amount of $4,511.69 and for a Supplemental Agreement to cover extra utilities and upkeep for this unit. It is our desire that you proceed with this installation. Your offer will be accepted and/or disapproved upon receipt of an individual estimate as to the reasonableness of cost. We will at a later date concur and/or disapprove that portion of your offer establishing a rate for utilities and upkeep. Appeal File, Exhibit 6 at 1. 8. According to UDC's building engineer, when the Government first occupied the building, the snack bar was excessively hot. Transcript at 78. At some later, though unspecified date, however, UDC installed an HVAC unit for the area. Id. The lessor's HVAC engineer decided not to connect this unit to the main system, but rather to close off the system's ductwork and operate this unit separately. In his judgment, this design was the best way to comply with the lease requirements for maintaining temperatures within prescribed ranges and not using extra energy to cool areas which were otherwise being heated. Id. at 14, 17-18, 73-79. As a result of his decision, the separate unit was the only air conditioner that supplied the snack bar area. Id. at 33. 9. GSA paid UDC the requested $4,511.69 for the supply and installation of the unit shortly after installation. Transcript at 21, 27-28. UDC understands that the Government owns the unit. Id. at 28. GSA has never told the lessor that it will have to replace this item. Id. 10. UDC admits that "[n]othing further happened until August 9, 1990." Appellant's Posthearing Brief at 4. By letter bearing that date, the lessor requested payment for the costs of utilities, maintenance, and replacement reserve associated with the snack bar HVAC unit. UDC asked that GSA pay $235 per month, plus an adjustment in accordance with increases in the consumer price index, from the effective date of the lease (November 15, 1982) to the present. Through August 15, 1990, then, ignoring adjustments, UDC was seeking payment of $21,620. Appeal File, Exhibit 7. ____________________ 3 During consideration of this case, the snack bar has frequently been referred to as a "blind stand," which apparently indicates that it was a concession to be operated by blind persons under authority of the Randolph-Sheppard Act, 20 U.S.C. ch. 6A (1988). 11. A new contracting officer reviewed the contract file and found no information pertinent to this matter, beyond the September 1982 direction to install the unit. He rejected out of hand any payment for replacement reserve or maintenance, but did express a willingness to negotiate payment for costs incurred in operating the unit. For assistance in calculating an appropriate amount, he asked UDC to provide him with "the actual tonnage of the machine installed and the horsepower of any electrical motors directly associated with the operation of the unit," as well as "the cost per kilowatt hour you are currently paying for electrical service, this rate to be supported by a current power bill." Appeal File, Exhibit 8. The contracting officer testified that "[t]here was no question [in] our mind that he was entitled to the cost of the [utility] services." Transcript at 35. 12. UDC responded on December 6, 1990. It did not provide the requested information. Instead, it simply insisted on payment in the amount stated in its August 9 letter and asked for a contracting officer's decision on the matter. Appeal File, Exhibit 9. This letter was received by GSA on December 10. Id. The contracting officer then denied the claim. Id., Exhibit 10. 13. UDC's claim is in four separate parts: utility costs ($125 per month), maintenance ($55), replacement reserve ($55), and cost of living adjustment. See Findings 6, 10, 12. At hearing, appellant provided the following substantiation of these costs. UDC's president testified that his building engineer would know how the $125 figure for utility costs was calculated. Transcript at 30-31. The engineer said that he had no recollection of specifics, "but I would have used some information from the power company on the cost to operate the unit and would have used an assumption from the engineer on how much it is going to operate." Id. at 80. The president based the charge for maintenance "on our experience" regarding the cost of changing filters and performing monthly preventive servicing. Id. at 58-59. UDC does not keep records of maintenance of HVAC units on an individual basis, id. at 30, 58-59, and it presented no evidence as to any HVAC maintenance charges whatsoever, even for the building as a whole. The figure for replacement reserve was derived simply by dividing the cost of the unit ($4,511.69) by the estimated useful life (84 months). Id. at 29-30. (The precise number is $53.71.) Entitlement to a cost of living adjustment was presented as a question of law. 14. At hearing, the contracting officer testified that in his judgment, UDC was entitled to a payment of $901.79 per year, or $75 per month, for utility costs associated with operation of the HVAC unit in the snack bar area. He based this conclusion on a series of calculations which applied, through a formula used by GSA, electric rates from the local utility company, standard conversion factors (including some developed by the American Society of Heating and Refrigeration Engineers), and his own assumptions. The key assumption was that the Government owed UDC only for the cost of operating the unit for three and one-half hours per day, since the snack bar -- which has seating for about thirty people -- was occupied primarily at lunchtime and during morning and afternoon breaks. According to the contracting officer, all costs of conditioning the air in the snack bar during the remainder of the day should be the responsibility of UDC because the lessor is generally obligated to provide appropriate heating and cooling for the building. Transcript at 37-49; Respondent's Exhibit 1. 15. UDC's building engineer testified that without air conditioning, the snack bar would at all times have been warmer than offices in the building. Heat in this area was generated by refrigerators, coffee pots, a coffee dispenser, a "hot sandwich machine," a microwave oven, other electrical appliances, and vending machines. Transcript at 73, 76, 81-82. The engineer estimated, from his experience in being in the building at night (when the air conditioners were off), that the snack bar was five to ten degrees warmer than the rest of the building. Id. at 82, 85-86. The contracting officer testified, to the contrary, that the machinery in the snack bar generates no more heat than is normally found in office space. Id. at 48-49. Discussion The lease in question requires the lessor, UDC, generally to heat and cool at its own expense the space rented by the Government. Finding 2. There is an exception to this rule, however: if the agency asks the lessor to convert office space to a vending facility, the two parties to the lease are supposed to negotiate an additional payment for the provision of such additional utility costs as are incurred for heating and cooling. Finding 3. During 1982, GSA did indeed tell UDC to make previously- designated office space into an area in which a snack bar and vending machines would be placed. Finding 5. UDC proposed to install a separate HVAC unit for this area. It proposed further to have the agency pay for the unit itself, a replacement reserve to cover future costs of a successor unit, and anticipated costs of additional utilities and maintenance. Finding 5. GSA directed UDC to proceed with the installation. Finding 6. The lessor complied, and the Government paid for the unit. Findings 8, 9. Several years then lapsed before UDC attempted to pursue its right to additional payments. We must now determine what those payments should be. Of the four categories of cost for which UDC seeks reimbursement, two are easily disposed of. Asking GSA to fund a reserve for replacement of a unit that is owned by the Government makes no sense, particularly in light of the fact that GSA has never given UDC any indication that when the unit fails, the lessor will have to replace it at no cost to GSA. See Finding 9. Awarding any costs for maintenance would also be improper, because UDC has not borne its burden of providing evidence on the basis of which such costs could be calculated or even estimated. Singleton Contracting Corp., GSBCA 8548, 90-2 BCA 22,748, at 114,178 (1990); see Finding 13. The contracting officer concedes that UDC is entitled to some payment for utility costs incurred in operation of the snack bar unit. Findings 11, 14. Because the lease makes GSA liable only for additional costs, the proper measure of this payment is the total cost of running the unit less the cost that would have been incurred in heating and cooling the area had the space remained offices. See Finding 3. If UDC had used the unit to supplement the work of the main HVAC system, this number would be relatively easy to determine; it would be simply the cost of operating the unit itself. UDC closed off the ducts from the main system when it installed the unit, however. Finding 8. This decision has made difficult calculating the additional cost of running the unit. UDC has not been of much assistance in reaching the correct result; appellant supplied no information other than supposition. Finding 13. The contracting officer was considerably more helpful. He performed a series of calculations which shows that the monthly cost of operating the unit for three and one-half hours per day is about $75. Finding 14. Apparently, his theory is that the additional heat generated by people being in the area during those hours would have necessitated running the separate unit even if the main system had been conditioning the air there. Using his formulas and data, we can easily determine that the monthly cost of operating the unit for eight hours per day is about $172. The contracting officer's numbers give us a good baseline from which to make adjustments. Unfortunately, as we attempt to work with those numbers, we find that we have insufficient information on which to base an informed judgment. First, we need to determine the number of hours per day that the snack bar unit would have had to supplement the main HVAC system if the system's ducts in the area had remained open. UDC has a legalistic approach to this matter. It discerns in the 1982 exchange of correspondence between the lessor and the then- contracting officer an agreement by GSA to pay additional utility costs on an eight-hour-per-day basis. Appellant comes to this conclusion by juxtaposing its own statement that proposed utility costs were predicated on the assumption that the unit would be operated daily for such a period, Finding 6, with the contracting officer's response that the offer to install the unit was accepted, subject to a later determination of "a rate for utilities," Finding 7. Appellant's Posthearing Brief at 7. We do not agree with this conclusion; the only reasonable reading of the exchange of correspondence, in our judgment, is that the amount of all payments associated with the unit would be determined later. The correspondence does not assist in finding utility costs due. The number of hours must be derived through an analysis of pertinent facts. The parties are in agreement that during at least some of each work day, more heat was generated in the snack bar area than in office space of comparable size. Findings 14, 15. Surely during the three and one-half hours that the contracting officer concedes -- lunch and break times -- the snack bar contained far more people than would have been present in an office. As many as thirty people at a time were seated there; presumably others were waiting in line or using vending machines. Finding 14. We find, based on conflicting testimony, that the equipment in the snack bar generated additional heat during other parts of the work day as well. The testimony of UDC's building engineer as to the production of heat by electrical appliances is credible (although his estimate of five to ten degrees seems excessive). See Finding 15. We conclude that some supplementation of the main system's cooling powers would have been necessary during the portion of the work day that the snack bar was not crowded with people. "Some supplementation" is not a particularly precise amount, however. We have no basis on which to make an informed estimate as to the percentage of time, during the rest of the day, that extra cooling was needed. We face an additional problem, in determining the utility costs associated with the snack bar area, on which the parties have not focused. All of the foregoing discussion assumes that extra cooling is necessary on all work days. Although the weather in Gulfport, Mississippi is surely such that keeping inside temperatures within a prescribed range requires cooling on more days than it requires heating, Gulfport has a winter, too. During the months of November through March, the average temperatures in this city are less than sixty-five degrees, the figure below which UDC is required to provide heat inside the building. National Oceanic and Atmospheric Administration, Climatological Data Annual Summary: Mississippi.4 The fact that people and machinery generate more heat in the snack bar than elsewhere means that on cool days, the existence of the snack bar instead of office space in the area may well mean that less, rather than more, electric energy is needed to moderate the temperature. We have no evidence at all as to this impact on the ____________________ 4 We have examined figures for the first three full years of Government occupancy of the building, 1983 through 1985. They show the following average temperatures at the Gulfport Naval Center: November, 61.1 degrees Fahrenheit; December, 53.5; January, 47.4; February, 53.5; March, 60.6. Even April evidently has some days sufficiently cool to require heating of inside space; the average temperature in that month is only 66.7 degrees. use of energy in regulating the temperature and humidity in the snack bar. Whether it is more or less than the impact of the machinery-generated heat on warm days is unknown. Our appellate authority has authorized boards of contract appeals, in appropriate circumstances, to make a "jury verdict" award. S. W. Electronics & Manufacturing Corp. v. United States, 228 Ct. Cl. 333, 350-53, 655 F.2d 1078, 1088-89 (1981). The Court of Appeals has cautioned, however, that use of this technique for constructing awards is not favored. Before adopting the 'jury verdict method,' the court must first determine three things: (1) that clear proof of injury exists; (2) that there is no more reliable method for computing damages; and (3) that the evidence is sufficient for a court to make a fair and reasonable approximation of the damages. Dawco Construction, Inc. v. United States, 930 F.2d 872, 880 (Fed. Cir. 1991) (citing WRB Corp. v. United States, 183 Ct. Cl. 409, 425 (1968)). A board should not guess at the correct amount of recovery; the burden is on the appellant to prove each of the first two elements and to provide the evidence on which the third element can be found. Id. at 881. Here, UDC has met its burden only as to the first element. We therefore award to UDC no more than the contracting officer has agreed to pay, $75 per month. Further, because the figures we have been dealing with have not been identified with any particular year, we conclude that applying any cost of living adjustment factor would be inappropriate. Decision This appeal is GRANTED IN PART. GSA shall pay to UDC $75 per month for additional utility costs incurred as a result of the agency's direction to convert office space into a food service vending area. Although the record indicates that the separate HVAC unit in the area was installed early in the life of the lease, we have no concrete evidence as to the precise date on which the unit went into operation. Finding 8. For purposes of calculating a total sum due, payments shall be made from May 15, 1983, or six months after the Government first occupied the building. Interest is also due; it accrues from the date on which GSA received UDC's claim, December 10, 1990. 41 U.S.C. 611 (1988); Finding 12. _________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ VINCENT A. LaBELLA CATHERINE B. HYATT Acting Chief Board Judge Board Judge