DENIED: May 2, 1996 GSBCA 13418 9TH & D JOINT VENTURE, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Brett D. Orlove of Grossberg, Yochelson, Fox & Beyda, Washington, DC, counsel for Appellant. Jeffrey H. Dunn, Office of Regional Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), PARKER, and HYATT. DANIELS, Board Judge. 9th & D Joint Venture, appellant, claims that under the terms of a contract for the lease of office space, the General Services Administration (GSA), respondent, owes appellant $156,656.75 for providing utilities and preventive maintenance for "special" heating, ventilation, and air conditioning (HVAC) equipment. GSA's contracting officer denied the claim on the ground that the contract's established rental rate includes the cost of these utilities and preventive maintenance efforts. We agree with the contracting officer and therefore deny the appeal of his decision. Findings of Fact 1. On October 30, 1992, GSA contracted to lease from 9th & D 116,206 net usable square feet of office and related space in the building located at 1441 L Street, N.W., in Washington, D.C. The lease was for a ten-year term, which could be renewed by the Government for an additional ten-year period. Appeal File, Exhibit 1 at 1. 2. The contract requires that "[t]he Lessor shall furnish to the Government, as part of the rental consideration, . . . [a]ll services, maintenance, repairs and utilities as further defined in Solicitation for Offers (SFO) #91-158." Appeal File, Exhibit 1 at 2. That SFO is a part of the lease. Id. The SFO states that it "is for a 'Full Service' lease, i.e., including all services and utilities." Id. at 47. 3. The following provisions of the SFO deal with utilities and maintenance: 7.4 Utilities. The lessor shall ensure that utilities necessary for operation are provided and all associated costs are included as a part of the established rental rate. 7.5 Utilities: Separate from Rental If the cost of utilities is not included as part of the rental consideration, the requirements of this paragraph apply. The offeror must specify which utilities are excluded on block 19 of GSA form 1364.[[foot #] 1] . . . The lessor shall provide separate meters for utilities to be paid for by GSA. . . . 7.6 Maintenance & Testing of Systems The lessor is responsible for the total maintenance and repair of the leased premises in accordance with paragraph 16, GSA form 3517.[2] . . . Appeal File, Exhibit 1 at 33. ----------- FOOTNOTE BEGINS --------- [foot #] 1 The lessor submitted a GSA form 1364 with block 19 blank. Declaration of Robert G. Roop, contracting officer (Mar. 12, 1996) at 3 & Attachment 1. 2 GSA form 3517 is also part of the contract. Appeal File, Exhibit 1 at 2. Paragraph 16 of this form, "Maintenance of Premises (Jun 1985)," states: "The Lessor shall maintain the demised premises, including the building and all equipment, fixtures, and appurtenances furnished by the Lessor under this lease in good repair and tenantable condition, except in case of damage arising from the act or the negligence of the Government's agents or employees." Id. at 156. The term "demised premises" ___ is defined in Rider Number 2 to the contract to mean "the office and related space demised and leased by the Lessor to the Government pursuant to the Lease." Id. at 70. ___ ----------- FOOTNOTE ENDS ----------- 4. Another portion of the contract, Rider Number 2, provides that "[t]he Government shall be responsible for the development of Space Requirements" for tenant improvements and that "[t]he Lessor shall be responsible for the design and construction" of those improvements. Appeal File, Exhibit 1 at 2, 49-50. The Government also reserved the right to review and approve or reject documents, plans, schedules, and proposals involved with this design and construction. Id. at 53-59. The term "tenant improvements" means -- all improvements to the building of which the demised premises are a part beyond the base building construction. The tenant improvements shall consist of the building standard tenant improvements which include all tenant improvement work required to be provided by the Lessor pursuant to the terms and provisions of the base SFO, and the "specials" which shall include any and all above building standard tenant improvements in addition to or in lieu of the improvements required by the base SFO. Id. at 68. 5. Tenant improvements are described more fully in yet another part of the contract, the "Special Requirements Section." The introduction to this section states: The base Solicitation for Offers (SFO) defines the tenant buildout requirements for the space under lease which are considered "standard" to this project (e.g., with no detailed description of individual spaces). There are certain areas that will require special (above building standard) alterations which are defined in these special requirements and are contained herein. . . . The intent of this Section is to provide all of the Government's additional minimum performance specifications such that the lessor may price the job in its entirety. . . . All requirements of the base Solicitation for Offers and the special requirements of this Section must function together (e.g., the two combined are minimum performance specifications) to meet the overall requirements of the space to be leased by the Government. Appeal File, Exhibit 1 at 2, 94. 6. Special requirements for designated spaces in the building include specifications for HVAC systems. Many of these requirements state that the HVAC for the spaces should be "per SFO standard." However, for each of twenty spaces -- the research/resources center, the computer facility, the personal computer support room, the computer training room, the conference/training facility, three foreign student training rooms, nine conference rooms, the publication/production workshop, and two copy centers -- the contract mandated higher standards for HVAC. The systems for these areas had to be separate, or at least independently controlled. The contract also noted the square footage of each of these spaces and, for most of the spaces, the number of individuals or the type of equipment which would occupy them. Appeal File, Exhibit 1 at 97- 153. 7. Generally, under the contract, "[s]ervices, utilities, and maintenance will be provided daily, extending from 6:00 a.m. to 7:00 p.m. except Saturdays, Sundays, and Federal holidays." Appeal File, Exhibit 1 at 33. The Government has the right to order heating or cooling on an overtime basis at established hourly rates. Id. A part of the contract designated "Rider #1" creates an exception to this rule: [T]he computer facility, the computer support room and the guard station area will not be metered for utilities along with the remainder of the space to be leased, and will not be included in the overtime utility calculation. These locations (to be specifically determined) will be in operation on a 24- hour a day, seven days per week basis. The costs for 24-hour a day, seven days per week utilities and services for these areas will be included in the rental consideration as these are the normal operating hours for these areas. Id. at 2, 46. The computer facility, computer support room, and guard station area are all designated as special requirements spaces. Id. at 97, 114-21, 126-27, 147. 8. The contract required the lessor to "provide an allowance in the amount of $2,800,000.00, hereinafter referred to as the TENANT IMPROVEMENT ALLOWANCE or T-I ALLOWANCE, to be used at the Government's discretion to pay for special (above building standard) tenant alterations." Appeal File, Exhibit 1 at 61. The allowance was to be available to the Government, which could draw against it "at any time from Lease award to final settlement and payment of all costs for tenant improvements." Id. If the Government did not use the entire allowance, it could apply the remainder to rental payments at the beginning of the lease term. Id. at 62. 9. The lessor's general partner, who was involved in the negotiation of this contract, has declared: There would be no way for us to determine what the costs for maintenance and utilities were before the tenant improvement work was engineered and designed[;] it is impossible to cost-out the entire scope of the specials until they are designed. Therefore we reasonably expected the maintenance and utilities for the specials to be paid from the Allowance. Declaration of Sylvan C. Herman (undated, but submitted with Appellant's Reply Brief on Mar. 29, 1996) (Herman Declaration) 7. 10. The GSA realty specialist who was responsible for the procurement that led to this contract has declared, however: I never discussed nor agreed with any potential Lessor that the cost of [electricity and maintenance of equipment in special requirement spaces] would be borne by the Government. Had I agreed to this, I would have indicated same on the SF2 [the first two pages of the contract]. In order to have been able to agree to these changes, I would have been required to obtain the consent of my supervisor, Robert G. Roop. As I never discussed these potential changes with Mr. Roop, I certainly did not agree to these changes. Declaration of Michael M. O'Brien (Feb. 9, 1996) at 3-4. Mr. Roop corroborates that the realty specialist did not indicate to him any agreement with the lessor that the Government would cover these costs. Declaration of Robert G. Roop (Mar. 12, 1996) at 3. The declaration of the lessor's general partner, which was submitted in response to some of the statements made in the O'Brien and Roop Declarations, does not take issue with these particular statements. Herman Declaration. Discussion The parties present us with a straightforward question: Does the contract's established rental rate include the costs of utilities and preventive maintenance associated with HVAC systems that are mandated by the instrument's special (above building standard) requirements, or is the Government obligated to pay these costs separately? The Court of Appeals for the Federal Circuit has explained how to approach such a question: Contract interpretation begins with the plain language of the agreement. See Fort Vancouver Plywood Co. v. United States, 860 F.2d 409, 413 (Fed. Cir. 1988). "[P]rovisions of a contract must be so construed as to effectuate its spirit and purpose . . . an interpretation which gives a reasonable meaning to all of its parts will be preferred to one which leaves a portion of it useless, inexplicable, inoperative, void, insignificant, meaningless, superfluous, or achieves a weird and whimsical result." Arizona v. United States, 216 Ct. Cl. 221, 575 F.2d 855, 863 (1978). Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991); see also Foley Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir. 1993); 7 World Trade Co. v. Securities & Exchange Commission, GSBCA 13284-SEC, slip op. at 9 (Mar. 11, 1996), and cases cited therein. The plain language of this contract mandates that the costs in question be incorporated in the rental rate. The "rental consideration" includes "[a]ll . . . maintenance . . . and utilities as further defined in [the] Solicitation for Offers" which is a part of the contract. Finding 2 (emphasis added). The SFO "is for a 'Full Service' lease, i.e., including all services and utilities." Id. (emphasis added). It further provides, in paragraph 7.4, that "all" costs associated with utilities "are included as a part of the established rental rate." Finding 3 (emphasis added). Additionally, the SFO states in paragraph 7.6 that "the lessor is responsible for the total maintenance . . . of the leased premises in accordance with" a boilerplate paragraph which says that "[t]he Lessor shall maintain the demised premises, including the building and all equipment, fixtures, and appurtenances furnished by the Lessor under this lease." Id. (emphasis added). In all of these regards, by including all utility and maintenance costs in the rental rate, the contract does not allow separate charges for any such costs. 9th & D takes several tacks in attempting to convince us that this conclusion is faulty. We do not agree with any of these arguments. Appellant tries to divide the contract into its constituent parts. Two of these parts are the SFO and the Special Requirements Section. Appellant asserts that because it is responsible for all maintenance and utilities "as further defined in [the SFO]," and the Special Requirements Section is not part of the SFO, the SFO's reference to "all" does not include special requirements. As we view the contract, this approach is artificial; it ignores the way in which the instrument treats the leased space as a whole. The contract considers "tenant improvements," for whose design and construction appellant is responsible, to include both "building standard" improvements mandated by the SFO and "special" (or above standard) requirements. Finding 4. The SFO and special requirements "must function together . . . to meet the overall requirements of the space to be leased." Finding 5. The Special Requirements Section was provided to offerors along with the SFO so that offerors could "price the job in its entirety," taking into consideration all the Government's minimum performance specifications. Id. An aspect of appellant's attempt to divide the contract is the argument that paragraphs 7.5 and 7.6 of the SFO do not pertain to the specials. Paragraph 7.5 by its own terms actually has no relevance to the issue before us. This paragraph's requirements apply only "[i]f the cost of utilities is not included as part of the rental consideration." Finding 3. Because paragraph 7.4 directs the lessor to ensure that costs of all utilities necessary for operation "are included as a part of the established rental rate," id., any requirements contained in paragraph 7.5 do not apply to this contract.3 Appellant reads paragraph 7.6, regarding the lessor's maintenance responsibility, as limited by the boilerplate provision to "the demised premises, including the building and all equipment, fixtures, and appurtenances furnished by the Lessor under this lease." See Finding 3. According to appellant, it did not "furnish" any of the specials, so it is not responsible for maintaining them. The specials were paid for out of a tenant improvement allowance. See Finding 8. While appellant admits that it furnished this $2.8 million allowance, it asserts that because GSA used the money to pay for the specials, appellant neither furnished the items nor leased them to the Government. We agree with GSA that the allowance was nothing more than a financing mechanism, and that the use of this mechanism does not limit the scope of the term "demised premises," which appellant must maintain. The term is defined by the contract to mean "the office and related space demised and leased by the Lessor to the Government pursuant to the Lease." Finding 3 n.2. The specials are not extraordinary requirements; they are simply parts of the space which must be configured in specific ways. These parts of the space do not lose their attribute of being within the lease simply because specifications regarding their buildout are included in a particular portion of the instrument or the financing of that buildout is structured in a particular way. ____________________ 3 An alternative reading of the contract is that the second and third portions of paragraph 7.5 qualify paragraph 7.4, such that GSA must pay, above the established rental rate, for utilities which are noted on block 19 of GSA form 1364, and that the lessor must provide separate meters for these utilities. This reading does not help appellant, either. The second portion of paragraph 7.5 directs each offeror to specify on block 19 which utility costs are excluded from the rental rate. Appellant left this block blank. Finding 3 n.1. Appellant's action leads us to conclude that appellant did not exclude any utility costs from the rent. The remaining portion of the paragraph requires the lessor to provide separate meters for utilities to be paid for by GSA. Id. Appellant asserts, and GSA does not deny, that ___ appellant installed separate meters to be connected to the "special" HVAC units, and that GSA paid for the meters as part of the "specials." Appellant posits that the only conceivable reason GSA might have had for paying for these meters is that the meters would measure the amount of electricity for which GSA would pay. We do not know why GSA paid for the meters. In any event, because appellant did not specify any utility costs as being excluded from the rent, the last portion of the paragraph does not obligate GSA to pay for any particular utilities. Another contention related to the tenant improvement allowance is that because the allowance was to pay for special alterations, it was intended to be used to pay for all continuing costs, including utilities and maintenance, associated with those alterations. This interpretation is inconsistent with the parties' understanding as to use of the allowance. The contract provides that if the Government did not use all the money for tenant improvements, it could apply the remainder to rental payments at the beginning of the lease term. Finding 8. If the parties had intended that the allowance be used throughout the ten-year (or possibly twenty-year) contract life, they would not have arranged for the sum to be exhausted at the beginning of the lease term. Evidently, the allowance was intended to cover the costs of design and construction, but not continuing costs, of the special alterations. Appellant maintains additionally that because the contract provides that costs of utilities and services for three of the special requirement spaces "will be included in the rental consideration," Finding 7, the instrument must be read to say that similar costs for the other special spaces are not included in the rent. This interpretation gives an incomplete and distorted meaning to the clause in question. The clause is an exception to the general mandate that the lessor provide utilities and services, without additional cost, only during defined working hours; it directs the lessor to include in the rent utilities for these areas on a twenty-four-hour-per-day, seven-day-per-week basis, since "these are the normal operating hours for these areas." Finding 7. This provision does not vary the rule that appellant is responsible for the costs of utilities and maintenance in the other special requirement spaces during the defined working hours. Appellant also asserts that it could not possibly have included in the rent the costs of utilities and maintenance for the "specials," since it could not have determined those costs before the tenant improvement work was engineered and designed. Finding 9. The record is clear that even if appellant actually believed this, it never communicated its concern to GSA during discussions which led to the signing of the contract, and the agency never agreed to appellant's current understanding of the instrument. Finding 10. Thus, this understanding was never incorporated into the contract. Furthermore, given the agency's instruction to offerors that contract requirements, including the specials, be priced as a whole, Finding 5, and the explicit instructions regarding aspects of those above-standard spaces (including HVAC specifications), Finding 6, appellant's assertion does not seem credible. Appellant's final argument is that on each of nine other leases it has or had with GSA, the contract was for a "full- service lease," but rent consideration did not include utilities or maintenance for "specials." Assuming that this statement is true, it has no impact on our holding. The provisions of each contract must be read as a whole, in accordance with the guidance of the Court of Appeals. The contract in question, standing on its own, does not support the reading appellant gives it. None of the referenced leases has been submitted for the record. Thus, we are in no position even to consider whether any of these leases has similar provisions to the ones in the contract now before us, or whether the provisions might be construed in a particular way, establishing a pattern of performance impacting contract interpretation. See Universal Development Corp. v. General Services Administration, GSBCA 11468, 93-2 BCA 25,662, at 127,675-76. Decision The appeal is DENIED. _________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ ROBERT W. PARKER CATHERINE B. HYATT Board Judge Board Judge