_____________________________________ GRANTED IN PART: September 1, 1994 _____________________________________ GSBCA 12723 W.D.G., LTD., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. John Simcic, Managing Partner of W.D.G., Ltd., Waukegan, IL, appearing for Appellant. Debra J. Turchin, Office of Regional Counsel, General Services Administration, Chicago, IL, counsel for Respondent. NEILL, Board Judge. In this case, appellant, W.D.G., Ltd., challenges the contracting officer's decision assessing $10,908 against appellant for the cost of carpet replacement in office space leased by respondent, the General Services Administration (GSA). The office space in question is occupied by the Social Security Administration (SSA) in Waukegan, Illinois. The contracting officer issued her final decision on October 13, 1993, and appellant filed its notice of appeal on January 6, 1994. Appellant has elected the Board's accelerated procedure. Findings of Fact The Lease 1. The original lease provided for appellant to lease 7,510 square feet of office space to GSA on the first floor of a building in Waukegan, Illinois from October 1, 1990 through November 30, 2000. Appeal File, Exhibit 1. This original lease was signed by the contracting officer on August 2, 1990. On March 21, 1991, appellant and respondent entered into a supplemental lease agreement, effective January 1, 1991, which increased the total area of office space to 7,717 square feet. Id., Exhibit 2. Beneficial occupancy took place on January 1, 1991. Supplemental Appeal File, Exhibit 3. 2. A list of special requirements incorporated into the lease stated that new carpet tiles would be provided throughout all office areas except the storage room, the reception area, and the ADP room. The excepted areas were to have vinyl tile. Appeal File, Exhibit 1 (Special Requirements) at 3-4. 3. In November of 1990, after the lease had been signed, SSA asked that the requirement for vinyl tile in the reception area be changed to carpeting. This request was prompted by SSA's conclusion that the vinyl tile would be more costly. Respondent's Supplemental Appeal File, Exhibit 1. Although appellant had already purchased the vinyl tile, it agreed to the change, with the understanding that it not be a deductive change. The contracting officer directed the change with this understanding by letter dated November 28. Appellant's Supplemental Appeal File, Exhibit A-2. The lease does not memorialize this change. 4. Correspondence in the record between SSA and GSA indicates that a further change in office flooring was apparently agreed to when rolled carpet was substituted for carpet tiles. Supplemental Appeal File, Exhibit 8. This change, however, like the change from vinyl tile to carpet in the reception area, is not reflected in any formal amendment of the lease. 5. The lease also contains a Failure in Performance clause, which reads as follows: The covenant to pay rent and the covenant to provide any service, utility, maintenance, or repair required under this lease are dependent. In the event of failure by the Lessor to provide any of these items, the Government may by contract or otherwise perform the service, maintenance, utility, or repair, and charge to the Lessor any cost incurred by the Government that is related to the performance of such service, maintenance, etc., including any administrative costs, and deduct such cost from any rental payments. Alternatively, the Government may reduce rental payments by the corresponding value of the contract requirement not performed, as determined by the Contracting Officer. These remedies are not exclusive and are in addition to any other remedies which may be available under this contract or in the law. Appeal File, Exhibit 1 (General Clauses 15); 48 CFR 552.270-17 (June 1985) (GSAR 552.270-17). Original Carpet Installation 6. During January 1991, Susman Linoleum and Rug Co., Inc. (Susman) installed "nylon olefin level loop commercial carpet" over the existing pad at the SSA offices at a cost of $9,805. Appeal File, Exhibit 25. 7. On February 8, 1991, GSA conducted an acceptance inspection of the leased facilities. Supplemental Appeal File, Exhibit 3. GSA wrote a Condition Survey Report to accompany the inspection; it listed deficiencies for appellant to correct. Id. The survey report contained the following deficiency: "Seams in carpeting from entrance door to reception window may fray and split with the heavy traffic." Id. Appellant had addressed carpet problems in a letter it sent to SSA on February 7 in which it stated that it had "contacted Sussman's [sic] carpet to stop out and inspect the potential carpet flaw by the floor hydrant in the front area and have been told this has been remedied." Id., Exhibit 2. 8. On February 22, 1991, the District Manager for SSA wrote to appellant and stated that "Susman's repaired the carpet problems. They sheared the seams that were ragged and repaired the area near the fire entry in floor near the front of the office." Appeal File, Exhibit 4. On February 25, GSA's Director of Facilities for the Midwest Field Office (hereinafter "GSA's Director of Facilities") wrote to appellant and stated that "the seam(s) in the carpeting from entrance door to reception window may fray and/or split from the heavy traffic. A runner may alleviate this potential problem." Id., Exhibit 5. The Emerging Problem 9. On November 14, 1991, the District Manager for SSA called appellant's property manager. A telephone record of his call states that he informed appellant's property manager that the carpet "seams continue to get worse, especially in the recept[ion] area." Appeal File, Exhibit 6. The telephone record notes that appellant's property manager said that she would hopefully have the carpet installer look at the carpeting. Id. 10. On April 2, 1992, approximately five months later, GSA performed a periodic space inspection of the SSA offices. Supplemental Appeal File, Exhibits 7, 10. With regard to the carpeting, the inspector noted: " - Carpet near employee entrance is dirty and requires more frequent cleaning. - Carpet in the reception area is dirty and seam needs repair. Carpet buckling in a few areas." Id. 11. On April 21, 1992, GSA's Director of Facilities wrote to appellant's property manager regarding the inspection performed by GSA and SSA personnel at the SSA offices on April 2. Appeal File, Exhibit 4. The letter noted the following regarding the condition of the carpet: 7. The carpet in the reception area should be spot cleaned and a seam repaired. 8. The carpet in the break room (near counter) should be spot cleaned (a runner could prevent this from happening). 9. The carpet is buckling in a few areas. Id. The letter provided further: "Please take action to resolve these deficiencies by May 15. Our office will conduct another inspection during the following week to verify the completion of these items." Id. 12. With respect to the carpet problems listed in GSA's letter dated April 21, appellant responded on May 11, 1992 as follows: Regarding Item #7: This is being done. Regarding Item #8: This is social security's responsibility. Regarding Item #9: The carpet installer has been called back to review all carpet problems. He has been given 30 days to correct the problems. Appeal File, Exhibit 5. 13. On April 29, 1992, the Branch Chief of SSA wrote to the Director of GSA's Real Estate Division regarding lease compliance at the SSA office. Supplemental Appeal File, Exhibit 8. The letter stated the following with respect to the condition of the carpet: [S]ection "d" of our special requirements package part of the lease requires that carpet tile be installed throughout the office. Although we subsequently agreed to rolled carpeting, it is now buckling severely in several areas of the office. The carpet also has torn in the reception area. The buckling and tears present safety hazards as well as being unsightly. Surprisingly, this is the condition of the carpeting after only slightly more than 1 year's use. Id. The letter asks what action GSA will take to bring about necessary repairs. Id. 14. On May 22, 1992, the carpet installer wrote to appellant regarding the condition of the carpeting as follows: [W]e have inspected the carpet we installed in the Social Security Office at 1 N. Genesee, Waukegan. We feel the problem is due to [a] manufacturer defect, rather than poor installation. We have contacted the manufacturer, and have been assured that an inspector will be out to check on this problem. Appeal File, Exhibit 6. 15. Appellant's property manager responded to the installer's note of May 22, and requested that the installer give a time frame within which the manufacturer's representative would inspect the carpet and complete the repairs or replacement. Appeal File, Exhibit 7. Appellant's property manager further stated that she wanted to resolve the problems by the end of June 1992. Id. 16. On May 28, 1992, GSA's Director of Facilities met with SSA's District Manager and appellant's property manager to discuss the status of the deficiencies referenced in GSA's letter dated April 21, 1992. Supplemental Appeal File, Exhibit 11. A GSA field office memorandum reporting on the meeting stated: "Every deficiency had been corrected at the time of this meeting with the exception of the buckling carpet." Id. 17. On June 4, 1992, the carpet manufacturer inspected the carpet at the SSA office but did not indicate any plan of action at that time. Appeal File, Exhibit 8; Supplemental Appeal File, Exhibits 9, 11, 12. 18. On August 25, 1992, the SSA Section Chief wrote to the GSA Director of Facilities regarding the condition of the carpeting at the SSA office. The letter read as follows: In April 1992 . . . I visited the subject office. At that time we found the carpeting in very unsafe condition. It was buckling and torn in many areas. We asked that this be corrected as soon as possible. The manager of this office reports that, as of this date, the carpeting still has not been corrected. We are aware that there was some conflict between the lessor and the carpet installer/provider as to whose responsibility it was to replace the carpeting. We have been patient but the carpeting is a safety hazard and should be replaced now. Please take whatever action is necessary to accomplish this. Supplemental Appeal File, Exhibit 13. 19. The SSA Section Chief followed up his August 25 letter with a second letter on October 7, 1992 which provided: On August 25, 1992 I wrote to you about a safety hazard in the subject office . . . The District Manager indicates that the buckled and torn carpet still has not been replaced. We do not want a member of the public or an employee injured due to the unsafe condition of the carpet. The carpet must be replaced. Please advise me of the actions you have taken to ensure that the carpeting is replaced. Supplemental Appeal File, Exhibit 14. 20. From June 1992 through October 1992, appellant's property manager claims to have made periodic phone calls to the carpet installer in order to determine what, if anything, the manufacturer's inspector was going to do with regard to the carpet problems at the SSA office. Appellant's Supplemental Appeal File, Exhibit A-4, Affidavit of Elizabeth C. Scheffler[foot #] 1 (Scheffler Affidavit). Appellant's property manager states that the carpet installer claimed that the carpet manufacturer had only one inspector for six states and the inspector could not give an exact date as to when he could inspect the carpet at the SSA office. Id. Appellant's property manager states further that she stressed the urgency on the need for repairs to the carpet installer but that the installer believed it would compromise its position if it altered the carpet before the manufacturer inspected it. Id. GSA's Ultimatum 21. On November 10, 1992, GSA's Director of Facilities wrote to appellant's property manager. Appeal File, Exhibit 9. Pertinent portions of the letter read as follows: Per our recent telephone conversation, I am writing about the long delay in resolving the matter of buckled and torn carpeting in the Social Security Administration (SSA) Office at the subject location. We first notified you of the carpet problem in our letter dated April 21, 1992. Since that time, representatives from SSA and GSA have met with you and Mr. Simcic several times regarding the carpeting. You have repeatedly told us that the carpet manufacturer and/or installer were to inspect the carpet and make restitution. As of the date of this letter, nothing has been accomplished in resolving this safety hazard. After several months of inaction on your part, we must remind you that, if deficiencies are not corrected promptly, the Government reserves the right under the General Clauses, Paragraph 15, Failure in Performance, of the subject lease, to contract necessary work and ----------- FOOTNOTE BEGINS --------- [foot #] 1 This document, although entitled "Affidavit" is actually a declaration made under penalty of perjury. ----------- FOOTNOTE ENDS ----------- deduct the cost, to include administrative expenses, from rental payments. It is not the responsibility of GSA or SSA to follow-up with the carpet installer or manufacturer as you implied in our last phone conversation. Instead, we fully expect you to resolve any problems with those parties and promptly correct this deficiency. Please have the carpet either completely repaired or replaced before December 18, 1992. If the work is not fully completed at this time, our office will, in accordance with Paragraph 15, Failure in Performance and with the concurrence of the Contracting Officer for this lease, contract the work and have the costs deducted from your rental payments. Although we do not wish to conduct business in this manner, we are responsible to ensure the government receives all services to which it is entitled under the lease agreement. Please contact Mr. Allen Joy of the Waukegan SSA office to arrange for a mutually convenient schedule to repair/replace the carpet. If you have any questions in this manner, you may contact me or Tim Barnes, Assistant Director of Facilities . . . . Id. 22. On November 16, 1992, appellant's managing partner wrote to the carpet installer regarding the carpet problems and the letter dated November 10 from GSA to appellant. Supplemental Appeal File, Exhibit 16. The letter reads as follows: I have written to you on numerous occasions regarding the problem that was discovered after the carpet was installed at the above location. Attached is a copy of the letter received today from General Services Administration regarding the problem and what they are prepared to do if this is not resolved. I am sure you can appreciate that any interruption in rental payment is not acceptable. The manufacturer has had sufficient time to send a representative to look at the problem and make the necessary repairs or replacement. Any interruption in rental payment from this tenant will be assessed to you and whatever legal action is necessary to collect the amount withheld will be taken. I trust that it will not come to that. Yourself and the manufacturer have until December 1, 1992 to repair or replace the carpet in questions. [sic] Please notify us immediately as to what exactly will be done. Id. 23. On November 19, a carpet consultant, apparently retained by Susman inspected the carpeting at the SSA office. The consultant's report, dated December 1, confirms the existence of delamination in the traffic areas, especially in the entryway to the office. This condition is said to be less severe where the traffic is not as heavy. Some delamination was also noted under chairs where no chairmats were used. The consultant, however, after inspecting the corners and seams of the carpeting and after examining a piece of unused scrap, reported that he could not find any indication of a problem with the latex or lamination of the carpet backing. The report does note, however, that Mr. Susman claimed that some delamination was found already to exist in the carpet when it was installed. Not being in a position to confirm this one way or the other, the consultant suggested that Susman discuss his own observations with the carpeting mill. Second Supplemental Appeal File, Exhibit 5. 24. The carpeting consultant's report also commented on the carpet seams. The report notes that the seams had not been sealed, except for areas where the repairs had been made along the seams. Sealing of seams, however, is said to be required by most mills and is recommended by the Carpet & Rug Institute, since it helps lock in the yarns and minimize the type of damage that has occurred in this case. Second Supplemental Appeal File, Exhibit 5. 25. Susman did, in fact, pursue his concerns with the carpeting mill. Appellant's Supplemental Appeal File, Exhibit A- 5. The matter, however, was not resolved until considerably after the expiration of the December 18 deadline. Indeed, a little more than a month later, by letter dated January 19, 1993, Decathlon Carpet Mills agreed to provide Susman with a credit for a 12 by 32 foot piece of carpet (46.6 square yards) and a labor charge of $3.00 per yard to replace the same amount of carpeting said to be defective. Second Supplemental Appeal File, Exhibit 6. 26. By letter dated January 22, 1993, after reaching agreement with the carpet manufacturer, Susman wrote appellant, offering to repair the SSA carpet in the following fashion: For our part, we will remove the carpet from two side rooms, using it to repair the defective areas, and then install the new carpet in the two side rooms. The work must be performed in this manner (recommended by the manufacturer) to keep dye lot continuity. We are prepared to rectify this problem upon your approval. Second Supplemental Appeal File, Exhibit 7. 27. On December 16, even before completing negotiations with the carpet manufacturer and two days in advance of the December 18 deadline, Susman had made a similar repair proposal to SSA. Appeal File, Exhibit 11; Supplemental Appeal File, Exhibit 19; Declaration of Allen K. Joy (Joy Declaration) (July 20, 1994). 28. An unsigned[foot #] 2 telephone conference record from SSA files, dated December 16, 1992, states: Bob Susman called to say that they planned to use the carpeting from either the DM's [District Manager's] or ADM's [Assistant District Manager's] office to make repairs and order new carpeting to replace. I told him I didn't know if this would be acceptable. I called John and Mike.[foot #] 3 Mike said he felt all the carpeting should be replaced with carpet squares and had let John know this. John contacted GSA and it's up in the air as far as what will be done. Supplemental Appeal File, Exhibit 19. This same telephone record also contains a summary of a phone conversation with appellant's property manager. It states: Liz Scheffler called me to find out what had happened in response to Susman's call. I explained the above and told her GSA was to contact lessor (said I didn't know if this meant Simcic or Mgt Plus). Told her I felt there was real communications problem between GSA and lessor. Suggested that she might want to phone GSA if she hasn't heard from them by noon on 12/17. Id. ----------- FOOTNOTE BEGINS --------- [foot #] 2 Although unsigned, this record appears to be written by the SSA District Manager. The appeal file contains several such records, all of which are signed either by the SSA Manager or his assistant. The handwriting in this record is similar to that found in the records which bear the manager's own signature or initials. See Supplemental Appeal File, Exhibits ___ 17, 19, 22-26. [foot #] 3 The telephone record identifies "John" as John Flynn of FSMS, (i.e., SSA's Field Services and Management Section). "Mike" is identified as Mike Dusenbery, who is apparently employed in the same section as Mr. Flynn. Supplemental Appeal File, Exhibit 19. ----------- FOOTNOTE ENDS ----------- 29. Appellant's property manager did in fact contact GSA on December 17. On that date she spoke to the assistant to the GSA Director of Facilities regarding the needed repairs for the carpet. Scheffler Affidavit. Later that same day, in a letter to the GSA Director of Facilities, she confirmed her earlier conversation with his assistant. Appeal File, Exhibit 11. This letter states that: (1) the carpet installer had met with the SSA District Manager to discuss a proposal for carpet repairs; (2) the carpet installer proposed to remove carpet from the private offices at the SSA site, use it to repair the damaged areas, and then install new carpet in the private offices; and (3) the work under this proposal would, at the request of the SSA District Manager, be completed after January 1, 1993. The letter requested approval of this proposal. Id. 30. On Friday, December 18, 1992, GSA's Director of Facilities wrote to appellant as follows: This is [a] follow-up on our letters of April 21, 1992, and November 10, 1992. The subject premises was [sic] re-inspected on December 18, 1992, as scheduled, to ascertain the status of your corrective actions. The carpet had not been corrected since the November letter. Furthermore, the solution [your manager] proposed late in the afternoon prior to the deadline is not acceptable to SSA or to us. It is my determination that, since you did not correct the deficiency by December 18, 1992, the Government will exercise its right to correct deficiencies and deduct the costs from rental payments. Pursuant to paragraph 15 of the General Clauses of this lease, it is the Government's intent to undertake corrective actions on the carpeting in the main support staff office. TAKE NO FURTHER ACTION TO CORRECT THE ABOVE DEFICIENCIES. Proceeding with this work will result in your liability for expenses the Government incurs preparing to complete this work. Appeal File, Exhibit 12. 31. In his declaration, the GSA Director of Facilities described his inspection of the carpet in question. On December 18, 1992 prior to making the final determination to replace the carpet . . . I personally visited the office to verify the condition of the carpet. In fairness to all parties, a decision of this nature must be justified. The following observation supported my decision to ask the contracting officer for approval to replace the carpet and deduct all costs from the monthly rent. In the reception area these [sic] were two areas where the seams were exposed. The location and width of the damaged seams were such that to repair them would result with additional seams in an area where there is heavy people traffic. Repairing a seam normally requires a rectangular patch which would then have a seam on each side of the replaced carpet. In the office area, the condition had deteriorated more than I had anticipated. There were wrinkles in the carpet throughout the entire space. Some areas obviously were worse than others however it could not be attributed to one single factor. The areas that were in the worst condition were traffic areas where people normally walk during the course of a business day. There were some wrinkled areas under desk chairs however this was minimal. In my opinion pads under the chairs would not have prevented the carpet from wrinkling. With the exception of the office managers, pads are rarely used and I don't recall seeing a carpet problem like this in any of my one hundred ten lease locations. I checked out the entire space and recommended carpet replacement only on areas that absolutely needed it. Declaration of Ervin J. Schultz (Schultz Declaration) (July 19, 1994). 32. On the following Monday, December 21, 1992, Susman and a representative of the carpet manufacturer visited the Social Security Office. Mr. Susman spoke to the Assistant District Manager (the District Manager was not present) and expressed his desire to do a "patch job" repair on the carpeting. He asked for and was given the telephone number of the GSA Director of Facilities. Supplemental Appeal File, Exhibit 21; (Joy Declaration). 33. Also on December 21, 1992, appellant's property manager wrote to GSA's Director of Facilities regarding the carpet problems. Appeal File, Exhibit 14; Appellant's Supplemental Appeal File, Exhibit A-5. Appellant's property manager discussed the situation as of December 21 and stated that appellant was "ready, willing and able to make the repair." Id. 34. On the same day, GSA formulated separate cost estimates for replacing 5,571 square feet of carpeting at the SSA office with broadloom carpet and carpet tiles. Appeal File, Exhibit 13. GSA estimated the cost at $14,752 for broadloom and $25,509 for carpet tiles. Id. On February 12, 1993, GSA did a second set of cost estimates for the same surface area. Appeal File, Exhibit 18. The second estimates were $15,362 for broadloom and $18,733 for carpet tiles. Id. 35. The Assistant District Manager at the SSA office stated in a note she prepared for her supervisor on the "carpet situation," that on Tuesday, December 22, she had spoken with the GSA Director of Facilities. She wrote: [He] said he wanted to come out on 12/23 to take a look to be sure that what Sussman [sic] wants to do would be acceptable. . . . . On 12/23/93, [the GSA Director of Facilities] arrived and I showed him the new areas I had found that are beginning to show bubbles and we found even more when he was here. Also, Karen showed us where the seam is beginning to fray.... Pat Vena mentioned later today that the seam under her desk is also starting to fray very badly. One of the new areas is now very noticeable. It is directly to the left of Barb Beich's desk. There are more areas in the aisle.... Also, if you look under the chair at interviewing window #4 you will also see some bubbling. [The GSA Director of Facilities] stated that complete replacement should be done for all areas except the multipurpose room and our offices. I agree this needs to be done because this carpet will not last another year. We might as well bite the bullet now and get this over with. It will be all carpet tiles for easy replacement in the future. Supplemental Appeal File, Exhibit 21.[foot #] 4 36. On December 23, 1992, appellant's property manager sent another letter to GSA's Director of Facilities. In this letter she again stated appellant's willingness to solve the carpet problems. Appeal File, Exhibit 15; Appellant's Supplemental Appeal File, Exhibit A-6. The Replacement Contract ----------- FOOTNOTE BEGINS --------- [foot #] 4 The declaration of the GSA Facilities Manager makes no reference to this visit, which the SSA Assistant Manager claims to have occurred on December 23. Instead, his declaration describes only a single visit reportedly made on December 18. See Finding 31. Given the contemporaneous character of the ___ Assistant Manager's note to her supervisor, we find that the GSA Facilities Manager did visit the SSA offices on December 23. Whether he also visited the office five days before on December 18 is unclear. One would expect him to report on both visits in his declaration if, in fact, two were made. ----------- FOOTNOTE ENDS ----------- 37. On February 17, 1993, GSA awarded a contract to Helay's Carpet for replacement of the rolled carpeting at the SSA office with government-furnished carpet tiles. Supplemental Appeal File, Exhibit 27. The original contract was in the amount of $4,025. Id. Effective March 24, 1993, GSA increased the contract amount by $1,294 to a total of $5,319. Id. This increase represented the extra cost for an additional 1,291 square feet of floor to be patched and repaired and an additional five gallons of adhesive. Id. In addition to the $5,319 paid to Helay's Carpet for installation of the carpet tiles, GSA paid $10,329.90 in material costs and $1,943.90 in labor costs. Appeal File, Exhibit 22. The total cost to remove and replace the carpeting with carpet tiles was $17,592.80. Id. GSA's Claim for Cost of Replacement 38. On April 28, 1993, the contracting officer wrote to appellant regarding the costs to be assessed for the replacement of the carpeting. Appeal File, Exhibit 23. The letter provided as follows: Below are the costs associated with our replacement of the carpeting at the Social Security Administration Office, 7-9 Genessee [sic] Street, Waukegan, Illinois, under Lease No. GS-05B-15121. Cost of Carpeting $ 5,233.00 Installation Costs $ 7,926.00 GSA Administrative Costs $ 1,341.00 Total $14,500.00 This amount will be deducted from your monthly rent for May 1993. Id. 39. The Government's claim for $14,500 is based on material costs shown in the February 12 estimates prepared for the cost of purchasing and installing 650 square yards of broadloom carpeting. See Finding 34. The installation cost shown in the claim, however, is a substantial increase over the $3,390 total for installation and related costs appearing in that same estimate for installation of the broadloom carpeting. Appeal File, Exhibit 18. 40. On May 18, 1993, appellant's property manager responded to the contracting officer's letter dated April 28. Appeal File, Exhibit 25. The property manager took issue with the $14,500 assessment, pointing out that in December 1992, Susman and an independent appraiser inspected the carpeting and, based upon their observations, concluded that complete replacement was not required as the carpeting had a ten-year life and was less than two years old at that time. Id. 41. In response to appellant's letter of May 18, the contracting officer issued a revised claim dated July 6, 1993. It reduced the Government's claim to the following: Carpet and Installation $ 8,623 Patch Floor $ 1,294 _______ $ 9,917 Administration 10% $ 991 _______ Total $10,908 Appeal File, Exhibit 26. 42. A supplemental declaration provided by the GSA estimator explains the basis for the estimated cost of $8,623 included in GSA's revised claim. It says that the figure is composed of: $5,233 for the broadloom carpeting, $2,658 for installation of that type of carpeting, $42 for equipment rental, and $690 for removal of the existing carpet. Supplemental Declaration of William B. Solomon (Solomon Declaration) (July 21, 1994). The estimator has further explained that the $5,233 figure for the cost of the carpet was arrived at using the R.S. Means Facilities Cost Data 1992 Pricing Guide. This guide provides a national average cost of olefin twenty-eight ounce broadloom carpet at $8.05 per square yard. It was this figure which he used in calculating the material cost of the broadloom carpet. The figure of $2,658 is also said to be a national average price taken from the Means pricing guide. The equipment rental represents the cost associated with rental of a dumpster and removal of the existing carpet and preparation of the floor for installation. Id. This declaration of the estimator is supported by copies of the applicable pages from the Means pricing guide. We find his estimates to be reasonable. 43. By letter dated July 15, 1993, appellant took issue with the reduced assessment of $10,908. Appeal File, Exhibit 27. In its letter, appellant contended that the $1,294 for patching the floor was a cost that should be borne by the Government. Appellant noted that if the carpet had been replaced with the same type of carpet (i.e., wall to wall broadloom carpet), no patching of the floor would even have been required and the $1,294 cost would not have been incurred. Appellant also pointed out that wall-to-wall carpeting had been on the same floor under the previous ten year lease, with no resultant carpet problems. Appellant also requested a credit for the salvage value of the carpet and the carpet pad and for the damage done to the carpet by the failure to use carpet pads for desk chairs. Finally, appellant again complained that the replacement of approximately eighty-five percent of the carpet area was excessive and that only ten percent was in need of actual repair/replacement. Id. 44. On October 13, 1993, the contracting officer made her final decision. Appeal File, Exhibit 28. Notwithstanding appellant's letter of July 15, the contracting officer declined to make any adjustment in the revised claim for $10,908. With regard to the cost of patching the damaged floor, the contracting officer insisted that this work was necessary to ensure proper carpet installation regardless of the type of carpet. She observed that this poor floor condition contributed to the problems with the original rolled carpet and is one of the reasons why replacement was necessary. 45. The contracting officer's decision of October 13 further denied appellant's request for a credit based on the salvage value of the carpet and its padding. The decision states that the carpet could not be reused and, therefore, had no salvage value. As to the padding, that was said to be already old and another contributing cause to the problems with the carpet. On the issue of replacing eighty-five percent of the carpeting, the contracting officer noted: Most of the tearing and buckling was in the center of the office, and was continuously spreading to other areas of the office. Therefore, it was necessary to replace all the carpeting in the affected room. Only the carpet in the affected office was replaced. No carpet was replaced in the other smaller offices. Appeal File, Exhibit 28. 46. On November 19, 1993, appellant sent a check in the amount of $10,908 to GSA under protest for payment of the cost of carpet replacement at the SSA office. Appeal File, Exhibit 29. Condition of the Replaced Carpet and Surface Beneath 47. Appellant has submitted a declaration given under oath from the carpet installer, Robert Susman, regarding the condition of the floor and carpet and the amount of carpeting replaced. In his declaration, Mr. Susman states that his company has been in business for fifty-five years and that he himself has been in the carpet business and associated with the company for over twenty-five years. He states that GSA replaced 650 square yards of the original 765 square yards originally installed at the SSA office. The remaining 115 yards in the side rooms or offices were not replaced. Insofar as the floor condition is concerned, Susman states that no patching would have been required if the replacement had involved the same type of carpet. He explains that the carpet installed in 1980 had held up over ten years and that when it was replaced, after the lease was signed, the floor condition was not changed. On the issue of padding, Mr. Susman explains that 645 square feet of the previous padding was reused and 120 square feet was replaced with new padding. Declaration of Robert Susman (Susman Declaration) (April 22, 1994). 48. Appellant has also submitted a declaration given under penalty of perjury from Robert Raukohl, superintendent for appellant during the renovations of the SSA office. Mr. Raukohl states that on or about February 9, 1993, he was asked to review the carpeting at the SSA office. He took photographs and made a sketch of the site. Both the photographs and the sketch were submitted with his declaration. He states: [T]he main large area [of the office was] . . . in good condition and if anything only a possible need for the carpet to be restretched. This is not an abnormal need with some new carpet installations, particularly when a use of desk chairs without chair mats occurs. Declaration of Robert F.D. Raukohl, Jr. (April 26, 1994). Mr. Raukohl's declaration makes no mention of the condition of the carpet in the reception area. In a subsequent declaration he has explained that, at the time he visited the SSA office, it was not evident that there was a problem in the reception area. The principal concern was with the carpet inside the doorway to the business area. Second Declaration of Robert F.D. Raukohl, Jr. (August 1, 1994). 49. The photographs submitted with Mr. Raukohl's declaration do show some conspicuous seams and buckling. The overall appearance of the carpeting in the photographs, however, is good. The SSA District Manager contends that the photographs do not capture the worst seam problems. These, he claims, were in the reception area, where the seams went from "bad to terrible" and had pulled apart by as much as an inch. The district manager does admit that two of the photographs "capture the seams on our side of the interviewing wall." As to the bubbles or ripples said to be in the carpeting, he confirms that one photo does show the serious bubbles in the heavy employee traffic area where one employee caught a heel and produced the hole shown in the picture. The bubbles or ripples, however, are said to have been more extensive than shown on the photographs. The District Manager agrees that two of the pictures show "a couple [of] seams that weren't too bad yet, but they show on the pictures which should not be the case if they were well laid." Joy Declaration at 3-4. 50. Respondent has submitted for the record a declaration by Mr. Dan Lahey, the owner of the company which installed the carpet tiles to replace the carpeting laid by Susman. Declaration of Dan Lahey (Lahey Declaration) (March 31, 1994). Mr. Lahey confirms that the carpeting was torn in places, seams were separating, and the carpet was severely buckling. He criticizes Susman for failing to repair/patch the floor prior to installation of the carpet. He also contends that it was "poor workmanship to install an existing carpeting over a 10 year old pad." He insists that the patching was necessary regardless of whether carpet tile or broadloom carpet was used. "Carpet," he states, "should be installed over a smooth surface, otherwise the pad and the carpet will wear down at an accelerated rate, as the carpet did here." Mr. Lahey is also critical of the repair solution proposed by Susman. He states that patching would not be aesthetically acceptable and that it would reduce stretch in the carpeting and thus lead to a recurrence of the buckling. In addition, the solution proposed is, in his opinion, contrary to common carpet installation trade practice. Id. 7-14. Discussion In deciding this case the obvious threshold issue is whether appellant failed to provide maintenance or repair as those terms are used in the contract's Failure in Performance clause. This contract clause provides, among other things, that, in the event the lessor fails to provide maintenance or repair, the Government may contract or otherwise perform the maintenance and charge the lessor any cost incurred. See Finding 5. Under the circumstances described in our findings, we conclude that appellant did fail to provide the maintenance or repair required for the carpeting in the SSA office. GSA's decision to impose a deadline was certainly reasonable. The matter had dragged on for a considerable length of time. See Findings 9-31. Both GSA and SSA were extraordinarily patient with the lessor and its subcontractor, Susman. Their concerns for the safety of the public and the SSA employees were well-founded. It is true that as the December 18 deadline approached, Susman appeared to be seriously working on a promising solution. However, GSA had made it clear that repair/replacement had to be complete by December 18. This meant that certain preliminaries and scheduling had to be taken care of well in advance of that date. They simply were not. Appellant's imposition of a December 1 deadline on Susman was a prudent but, unfortunately, unsuccessful move to ensure that the December 18 deadline would be met. The subcontractor, however, failed to meet either deadline. Accordingly, under the applicable contract provision, appellant is responsible for the cost of repairs. Furthermore, we hold that the imposition of ten percent for administrative costs is reasonable and in keeping with specific provisions of the contract clause on failure in performance. This brings us to a second question. How much of the cost incurred can be justifiably imposed on appellant? Material Costs and Installation GSA recognizes that the replacement of broadloom carpet with carpet tiles certainly represents more than a mere repair. Carpet tile is considerably more expensive than broadloom carpet. See Finding 34. Indeed, it would appear that it was precisely because of financial considerations that SSA initially elected to forgo carpet squares for less desirable rolled or broadloom carpeting when the office was being refurbished shortly after the lease was signed. See Findings 3-4. GSA's decision to assess costs based upon material and installation costs for broadloom carpeting, therefore, is certainly a step in the right direction. Similarly, GSA's estimates of material and installation costs associated with this type of carpeting are reasonable. Finding 42. A substantive question remains, however, regarding how much of the carpet in the SSA offices required replacement. In this regard, we note that there is a significant difference between rejection of appellant's repair efforts because they are untimely and rejection of them because they are inadequate. As already noted, we support GSA's rejection of Susman's eleventh-hour efforts to implement its patch solution by December 18. This does not mean, however, that we believe, as apparently GSA does, that the proposed solution should, therefore, also be rejected for purposes of determining a theoretical, fair share of the repair/replacement costs. The mere fact that the patch solution was not as good in the long run as the carpet tile solution does not mean that it was not a viable solution under the circumstances -- particularly when one considers that SSA initially opted for broadloom carpet rather than carpet tiles. With this election came the inevitable consequences of typical maintenance for this type of carpeting, such as occasional patching, repair of seams, and restretching. We are told that of the 765 square yards of carpeting originally installed by Susman, a total of 650 square yards (all but those in the offices of the District Manager and Assistant District Manager) was replaced. For GSA to justify such a radical "repair" it must, in our opinion, have changed the nature of the very problem which appellant was asked to address and rectify. Any problem requiring the wholesale replacement of 650 square yards of broadloom carpeting would, of necessity, have to be substantively more severe than that described by SSA and GSA to appellant and that for which appellant was expected to find a solution. Replacement of 650 square yards would have been appropriate if the carpeting was found to be in an entirely deteriorated and/or irreparable condition. We are not persuaded that this was the case. The most dire description of the carpet's condition is that given by the SSA Assistant District Manager in her report on the visit of the GSA Facilities Manager on December 23. At that time she claims to have shown him "new areas" where bubbling and seam fraying were appearing. This, according to her, led the Facilities Manager to conclude that "complete replacement should be done for all areas except the multipurpose room and our offices." Finding 35. The description of the carpeting given by the GSA Facilities Manager in his own declaration is nowhere near as dire as that of the SSA Assistant District Manager. As already noted, in his declaration, the Facilities Manager does not even describe a visit to SSA on December 23, but writes instead of a visit said to have been made on December 18. Whenever his visit was made, he explains that at the time of his visit he saw two areas in the reception area where seams were exposed, and he observed wrinkles in the carpet throughout the entire office area. He notes, however, that some areas were worse than others and that he recommended carpet replacement only on areas that "absolutely needed it." Finding 31. Most importantly, the carpeting problem, as repeatedly described by SSA, GSA, appellant, and Susman, was said to involve parting or frayed seams, buckling and/or torn carpet. Findings 9-11, 13-14, 16, 18-19, 21. GSA in its ultimatum to appellant demanded that the "buckled and torn carpeting" be completely "repaired or replaced." Finding 21. The photographs submitted by appellant confirm the existence of the alleged torn and buckling carpet, but certainly do not confirm the widespread deterioration now claimed by GSA to have existed at the time. Finding 48. We find it bordering on the incredulous that a problem so described in the contemporaneous documentation included in the record for this case could only be adequately addressed by total replacement of all carpeting in the reception area and all carpet in the office area with the exception of the offices for the SSA managers. The contracting officer justifies the replacement of 650 square yards of carpeting on the ground that "[m]ost of the tearing and buckling was in the center of the office, and was continuously spreading to other areas of the office. Therefore, it was necessary to replace all the carpeting in the affected room." Finding 45. We hold that the record in this case simply does not support such a conclusion. Furthermore, if, indeed, GSA was of the opinion that the carpeting was or would inevitably become so deteriorated as to require wholesale replacement, then appellant should have been apprised of this fact and provided with an opportunity either to challenge that assertion or to suggest an appropriate solution. Appellant is of the opinion that the decision to replace 650 square yards of carpeting was driven more by SSA's desire to have carpet squares than by the need to replace the existing broadloom carpeting. Upon review of the entire record for this appeal, we agree. Carpet squares were obviously SSA's preference. This was true when the office was being refurbished after the lease was signed. Finding 2. It was also true at the time appellant was told to effect a repair or replacement by December 18. Finding 28. It was likewise true after appellant failed to meet that deadline. Finding 35. In short, we are convinced that it was this continuing preference for carpet tile which led GSA to replace the 650 square yards of broadloom carpeting and subsequently to overlook appellant's proposed solution as an appropriate measure for the theoretical calculation of appellant's liability for repair costs. The carpet replacement contractor suggests that Susman's solution would not have been aesthetically acceptable, would not have lasted, and would have been contrary to normal carpet installation trade practice. We are not convinced. Susman is an experienced carpet installer. Finding 47. Its proposal was one worked out in consultation with others who also are experienced in the field. Findings 26, 32. The aesthetic aspect of the proposal appears to have been carefully addressed by use of carpet from the same dye lot which could be found in the offices of the SSA managers. Finding 26. Furthermore, we are not prepared to accept the fact that, in a situation such as that actually described by extensive documentation in the record, restretching and patching to correct torn and buckling carpet is not normal carpet installation trade practice. We conclude, therefore, that GSA has erred in concluding that appellant should be responsible for the cost of replacing 650 square yards of broadloom carpeting in the SSA office. While we find the broadloom carpet rate fair and reasonable, we find the use of 650 square yards totally unjustified. Rather, we consider the ten percent or sixty-five square yards suggested by appellant to be more realistic.[foot #] 5 We recalculate appellant's liability for material and installation costs in the following fashion. For installation costs we use the figure of $2,658, developed by GSA's estimator in the February 12 estimates for broadloom carpet installation. We do not include his separate costs for renting a dumpster or removing 650 square yards of carpet, since the patch solution proposed by appellant and its subcontractor did not require removal of more than a maximum of sixty-five square yards. Based on a total of 650 square yards, we thus calculate a per square yard charge of $4.09 for installation. Multiplying that figure by sixty-five, we conclude that appellant is liable for $265.85 in installation costs. Similarly, using the estimator's figure of $8.05 per square yard for broadloom carpet costs, we conclude that appellant is liable for $523.25 in material costs for sixty- five square yards of carpet replacement. This results in a total of $789.10 in material and installation costs for which we find appellant liable. ----------- FOOTNOTE BEGINS --------- [foot #] 5 This figure also appears to be preferable to the more conservative figure of 46.6 square yards agreed to by the manufacturer in settling Susman's claim. See Finding 26. ___ ----------- FOOTNOTE ENDS ----------- Credit for Salvage Value Assuming that under appellant's proposal only truly damaged carpet or padding would have been removed, we conclude that no credit for salvage value is appropriate. Floor Repair Costs As to the $1,294 sought by GSA for "patch" or floor repair, we do not find appellant liable for any of this cost. Notwithstanding the statement of the carpet tile installer, we are not convinced that this floor repair would have been required regardless of whether carpet tile or broadloom carpet was installed. See Finding 50. Our principal reason for rejecting this argument is the uncontroverted fact that carpeting was laid at this same site on essentially the same surface and lasted without incident for ten years. See Findings 43, 47. Confronted with this fact, we conclude that the original floor preparation was certainly adequate for rolled carpet, but not for the more sensitive fitting of carpet tiles. We see no reason, therefore, why this cost should be assessed on appellant. Decision This appeal is GRANTED IN PART. We find appellant liable for $789.10 in material and installation costs and for an additional $78.91 in administrative costs for a total of $868.01. Appellant's payment of an amount in excess of that figure should, therefore, be refunded. Appellant is entitled to interest on that excess amount as provided under the Contract Disputes Act of 1978. 41 U.S.C. 611 (1988). We reject respondent's request that any award to appellant be limited by the amount that Susman already has allegedly paid to appellant in compensation for appellant's payment of the Government's claim under protest. We do not find that receipt of such payment, even if made for the reason alleged, necessarily limited appellant's rights to recover from respondent in this dispute. Presumably our decision will lead to a further settling of accounts between appellant and its subcontractor, if appropriate. ____________________ EDWIN B. NEILL Board Judge I concur: __________________________ MARY ELLEN COSTER WILLIAMS Board Judge