____________________________________ GRANTED: December 23, 1993 ____________________________________ GSBCA 11865 FULLER COMMERCIAL ASSET MANAGEMENT, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Timothy R. Brown of Brown, Parker & Leahy, L.L.P., Houston, TX, counsel for Appellant. T. Cass Taliaferro, Office of Regional Counsel, General Services Administration, Fort Worth, TX, counsel for Respondent. Before Board Judges DANIELS (Chairman), PARKER, and NEILL. PARKER, Board Judge. Findings of Fact 1. The General Services Administration (GSA) leased 31,255 net usable square feet of floor space on the fifth and sixth floors of a building in Houston, Texas from DVM, Inc. (DVM) for use by the U.S. Customs Service. The lease was for a ten year period beginning April 8, 1983, ending April 7, 1993. Appeal File, Exhibits 1, 3. The contract provides in part: 17. (m). If heat and/or air conditioning are required by the Government on an overtime basis beyond the hours specified, such services shall be furnished by the Lessor upon Government's request, and payment to the Lessor for such additional services will be made at the rate of $48.00 per hour for the first 12 months of the lease. Hourly charge for these services shall be adjusted annually by the percent increase or decrease from year to year in direct proportion to changes in utility costs by Houston Power and Light. Lessor will provide necessary documentation from Power Company to justify any change. Id. 2. During the term of the lease, Customs completed a large alteration project in the building for the Drug Enforcement Tactical Command Center, which included the addition of one 15- ton and two 80-ton air conditioning (commonly known as "HVAC") units to provide twenty-four hour heating and cooling for part of the leased facilities. Respondent's Exhibit 2. 3. The president of DVM and GSA's contracting officer negotiated a settlement to reimburse DVM for the increased utility expenses due to the additional units. Respondent's Exhibit 2. The revised agreement, embodied in Supplemental Lease Agreement (SLA) No. 5, dated July 29, 1988, provided in part: 1(a). Lessor shall submeter, and the Government will pay for the following utilities for the referenced equipment in U.S. Customs Service Contract No. TC-I-86-016 and its amendments: (1). Natural gas serving the emergency generator and the heating unit which is combined with the 15 ton air-conditioning unit. (2). Electricity for one (1) 15 ton and two (2) 80 ton air-conditioning units, required to cool the Government leased space on the 5th and 6th floors after the Government's normal working hours specified in this lease. . . . Appeal File, Exhibit 6. 4. Shortly thereafter, DVM discovered that it was still paying for after-hours electricity for certain equipment in the areas known as the Sector Communications Room, Radar Viewing Area, and Special Equipment Room. DVM asked the Government for an increase in the rent to cover after-hours electrical costs for these additional, non-submetered areas. 5. At DVM's request, the parties initiated negotiations for SLA No. 6, the subject of this dispute. According to the contracting officer, the following events occurred: [T]he Lessor's representative contacted us again regarding above normal usage of utilities by U.S. Customs and additional cleaning that was required. Based on additional information provided by the Lessor's representative, I obtained Government estimates for the additional utilities and cleaning. I also asked the local Customs people if they were receiving the said services/utilities. Customs acknowledged the receipt of the services/utilities and stated that they did not have a problem with us paying for the additional electricity. Respondent's Exhibit 2 (emphasis added). 6. SLA No. 6, dated January 13, 1989, provides in part: 1. Beginning October 1, 1988, the Lessor shall provide, and be responsible for the cost of the following: (a). Additional electricity on a 24-hour per day, 7-day per week basis required by the HVAC equipment and Government equipment in the areas known as Sector Communications Room, Radar Viewing Area and the Special Equipment Room. . . . Appeal File, Exhibit 7. SLA No. 6 also states that "[a]ll other terms and conditions of the lease shall remain in force and effect." Id. The agreement contains an increase in the rental rate in the amount of $800[foot #] 1 per month to compensate for the additional utility expenses, and a lump sum payment of $18,400 to settle appellant's claim for these items for the period of October 9, 1986, through September 30, 1988. Id.; see Respondent's Exhibit 2. 7. From October 1, 1988, to August 1991, the Government paid for both the electricity submetered for the HVAC equipment described in Finding 2 and the rent in the amount adjusted by SLA No. 6. According to the contracting officer, in August 1991, the Houston field office received a large invoice from appellant and forwarded the matter to the GSA Sites and Lease Administration Branch in Fort Worth, Texas. Upon further inspection, GSA concluded that in light of SLA No. 6, payment for the submetered 15-ton HVAC unit was an error. Appeal File, Exhibit 10. ----------- FOOTNOTE BEGINS --------- [foot #] 1 Although appellant states the amount of the rent increase as $1200 per month, our calculations show the increase as $800. The annual rent in SLA No. 5 from October 1, 1988, through April 7, 1989, was $36,502.17 per month and from April 8, 1989, through April 7, 1993, was $57,338.83 per month. SLA No. 6 increased the annual rental payments during the same time periods to $37,302.17 and $58,138.83 respectively. ----------- FOOTNOTE ENDS ----------- 8. On October 29, 1991, GSA's contracting officer wrote appellant a letter citing SLA No. 6 and requesting copies of the utility bills for the time period of September 20 through December 3, 1989. Appeal File, Exhibit 11. The letter stated that rental deductions would be taken in the future to compensate for the overpayment. Id. A copy of the metered utility payments paid by GSA from August 24, 1988, through September 20, 1989, and June 18, 1990, through January 31, 1991, was enclosed; it totalled $27,868.19. Id. Appellant provided GSA with the utility bill figures for September, October, and December 1989, totalling $3,116.98, in a letter written November 29, 1991. Id., Exhibit 12. 9. On March 2, 1992, the contracting officer sent a letter to appellant which contained his final decision, stating that SLA No. 6 "increased the rental payments to compensate for the additional utility costs associated with the operation of a 15- ton air conditioning unit on the sixth floor." Appeal File, Exhibit 14. The letter advised that a rental deduction totalling $30,985.17 ($27,868.19 + $3,116.98) would be taken over a two month time period to recoup GSA's overpayment. Id. The rental deduction was taken in March and April 1992. 10. On June 2, 1992, Fuller Commercial Asset Management, Inc., DVM's management company, filed an appeal on behalf of DVM from the contracting officer's final decision.[foot #] 2 Discussion This appeal involves the interpretation of SLA No. 6. SLA No. 6 states that the lessor shall be responsible for the cost of "[a]dditional electricity on a 24-hour per day, 7-day per week basis required by the HVAC equipment and Government equipment in areas known as Sector Communications Room, Radar Viewing Area and the Special Equipment Room." Appellant contends that the agreement refers only to the increased utility charges which were not already being paid for by the Government. The Government contends that the increased rent provided for in SLA No. 6 was also intended to cover electricity charges for the separately metered HVAC equipment, which the Government had previously been paying pursuant to SLA No. 5. We find the language of SLA No. 6 ambiguous and that DVM's interpretation is the more reasonable one. Thus, we grant the appeal. ----------- FOOTNOTE BEGINS --------- [foot #] 2 DVM's president filed a sworn Affidavit of Authority, which provides that "Fuller Commercial Asset Management, Inc. is duly authorized to act as agent and on behalf of DVM Properties, Inc. before the Board of Contract Appeals in GSBCA No. 11865. Fuller Commercial Asset Management, Inc. is acting in full conjunction with DVM Properties, Inc." Appellant's Record Submission, Exhibit B. ----------- FOOTNOTE ENDS ----------- The original contract directed that the lessor would furnish electricity and the Government would pay for overtime use at a set rate. When the Government made extensive alterations to the leased facilities and installed the HVAC units to provide overtime heating and cooling, lengthy negotiations took place between GSA and appellant's representative to negotiate a settlement to reimburse appellant for the extra electrical and natural gas charges occasioned by the use of these newly installed units. SLA No. 5 provided that appellant would submeter, and the Government would pay, the electrical expenses for these HVAC units required to cool the leased space after the Government's normal working hours. Six months later, GSA and appellant discovered that appellant was paying for overtime utility services, other than the submetered HVAC units, caused by extra Government equipment. Appellant asserts that negotiations for SLA No. 6 were initiated only to cover the extra utility charges not previously compensated for in SLA No. 5. GSA argues that the language in SLA No. 6 clearly involves all the electricity consumed by both the newly installed HVAC units and the other Government equipment with the rent adjusted accordingly. GSA's interpretation of SLA No. 6 encompasses the submetered electricity, which would effectively supersede SLA No. 5. We find appellant's position to be more persuasive. GSA's contracting officer stated that appellant's representative contacted GSA regarding the "above normal usage of utilities by U.S. Customs" and, after some discussion, Customs agreed to pay for the "additional electricity." Given the context of the conversations and events, it appears that Customs approved of paying for the extra cost of the equipment's after-hours electricity usage in addition to the submetered units covered by SLA No. 5. GSA contends that its payment for both the increased rent and the separate invoices for the HVAC units, pursuant to SLA No. 5, constituted double payment. The actual figures, however, support appellant's position. The Government paid an increase of $28,000[foot #] 3 in rent for the additional utility charges during the period of October 1, 1988, to August 1991. Appellant, however, paid $43,973.68[foot #] 4 in extra ----------- FOOTNOTE BEGINS --------- [foot #] 3 There are 35 months during this time period (October 1, 1988, through August 31, 1991). Thus, $800 x 35 = $28,000. The lump sum payment of $18,400 compensated DVM for twenty-three months at $800 (October 9, 1986, through September 30, 1988) in arrears for the excess electricity. [foot #] 4 An analysis of the measured electrical usage constructed from the electrical bills estimated the costs of the above standard electrical usage that is not submetered. The (continued...) ----------- FOOTNOTE ENDS ----------- utility charges during the same time period. The separately submetered HVAC units during this time period cost the Government $30,985.17, which it now seeks to recoup. According to these figures, the Government's payment of additional rent does not even cover the extra utility charges alone, much less the submetered HVAC portion. The Government's double payment argument is without merit. The Government's performance for a period of over two years is further evidence that there is ambiguity in the clause. The Government personnel who were most familiar with the contract paid both the submetered electrical bill for the HVAC units and the adjusted rent in accordance with SLA No. 6. It was not until the Houston field office forwarded an invoice and copies of previous bills to the Sites and Lease Administration Branch office, that payment of the invoices ceased. The Sites and Lease Administration officer, who had no personal involvement in the SLA No. 6 negotiations, conducted an audit and rendered a different interpretation of the clause. These actions demonstrate that inconsistent interpretations of SLA No. 6 were made even within the Government. The doctrine of contra proferentem states that ambiguous contract provisions shall be construed against the drafter, in this case the Government. Broyles & Broyles, GSBCA 5694, 81-1 BCA 14,969. Contra proferentem applies if the differing interpretation adopted by the contractor is reasonable and the contractor relied to its detriment on its own "reasonable" interpretation. Gateway Center Corp., GSBCA 6254-R, 84-2 BCA 17,496, at 87,145. Here, it was reasonable for appellant to have understood the agreement as covering only the additional expenses incurred and not previously addressed in SLA No. 5. Negotiations for SLA No. 6 were initiated with this purpose in mind. Although SLA No. 6 talks about the HVAC equipment, the clause appears to be limited to "additional" electricity costs of that equipment. There were, however, no "additional" HVAC costs; the only additional costs were due to additional equipment in the areas not covered by the already submetered HVAC equipment. Thus, we find appellant's interpretation of SLA No. 6 reasonable. Decision ----------- FOOTNOTE BEGINS --------- [foot #] 4 (...continued) study, conducted by Rodney H. Lewis Associates, Inc., evaluated the building's standard power usage in the sixth floor tenant space. Appellant's Exhibit 1. The spreadsheet shows the extra utility charges as follows: October 1988 $1217.94; November 1988 $1247.10; December 1988 $861.66; Total 1989 $14,888.23; Total 1990 $15,904.53; January 1991 $1411.87; February 1991 $1266.89; March 1991 $1266.89; April 1991 $1411.87; May 1991 $1514.92; June 1991 $1430.71; July 1991 $1551.07. Id. ___ ----------- FOOTNOTE ENDS ----------- The appeal is GRANTED. ________________________________ ROBERT W. PARKER Board Judge We concur: __________________________ STEPHEN M. DANIELS Board Judge __________________________ EDWIN B. NEILL Board Judge