GSA's Motion to Dismiss in Contract Case Fails

The Civilian Board of Contract Appeals (CBCA) recently handed down a decision in a dispute over a lease that denied General Services Agency's (GSA) Motion to Dismiss for failure to state a claim as well as the plaintiff's Motion to Exclude GSA's Opposition Reply. Since neither party's motions were granted, it appears the plaintiff prevailed in its efforts to get GSA to pay up for lost rent and increased costs the plaintiff experienced in the lease dispute.

A GSA Lease Issue

The case at hand, WSSA Birmingham, LLC v. GSA, CBCA 616, focused on a five-year firm lease (with a five-year option) that GSA let for Internal Revenue Service (IRS) office space in Birmingham, Alabama. Significant to performance of the lease obligation was holding a design intent drawing (DID) workshop prior to the GSA taking control of the space and the property owner getting paid any rent due to it.

Design Intent Drawing Workshop Delayed

The April 24, 2017 lease required the GSA to hold the three-day DID workshop within five to ten working days after the award was made. The lease also provided that there would be a total of 194 working days between when the contract was awarded and the IRS occupancy began allowing for the possible demolition and construction of a new interior suitable to IRS. The lease contract included both a Dispute clause and a Change clause.

But the DID didn’t take place. In fact, it wasn't until Dec. 14th, 2017, nearly nine months later, that WSSA sent a letter to GSA notifying of their claim based on GSA's delay on holding the DID. They said that GSA's continued delay in holding the DID workshop resulted in excessive costs to them that they should be reimbursed for since they weren't scheduled to be paid until after the space was occupied. The rent consists of amounts for shell rent, real estate taxes, tenant improvements, occupancy costs, and building specific amortized capital costs.

Offeror Made  Attempts to Get GSA to Perform

WSSA asked that GSA mitigate the damages by holding the DID workshop, amending the lease to extend the delivery and related dates and to negotiate an equitable adjustment for all the delay costs.

In January 2018, WSSA sent the GSA contracting officer a Request for Equitable Adjustment (REA) and a certified claim alleging 274 days of Government delay and requesting $269,249.93 for costs. The per diem costs include operating expenses ($296.23/day), overhead costs ($186.20/day), local property taxes ($95.50/day), and construction loan interest ($113.58/day). The additional costs include increases to shell construction costs ($71,250), additional builder’s risk insurance ($2500 for2017), and legal fees ($4645.90). The CO denied the claim and said no payment was due for the alleged delay.

WSSA timely appealed the CO's final decision to the CBCA. The CBCA said, among other things, that, Dismissal should not be granted unless it appears beyond a doubt that the appellant cannot prove any of the facts in support of its claim.

GSA Countered

GSA argued that the costs have not increased as a result of the delay in a manner that relief would be available. WSSA asserted its claim as seeking compensation for costs it had paid or was obligated to pay that it will not recover through the rental payments. The CBCA held that reimbursement of such costs is not necessarily prohibited under the lease or case law but that WSSA will still need to prove entitlement to such costs.

GSA also argued that WSSA was not entitled to the costs because they incurred within the period of time that the contract was scheduled for design and construction. However, the decision in a case that GSA relied on to prove its claim in this case doesn't support the premise that costs incurred during the base period are necessarily unrecoverable.

CBCA's Decision

The CBCA held that GSA's motion to dismiss also cannot succeed because GSA admits to failing to schedule the DID workshop in a timely manner. The notion that terms of a contract are to be enforced is well established. Carmazzi Global Solutions, Inc. v. Social Security Administration, CBCA 6264, et el, 191-BCA,  37,340 at 181, 595.

The CBCA went on to say that WSSA has established its right to relief beyond that speculative level which is sufficient to defeat the motion to dismiss for failure to state a claim upon which relief can granted. Id. at 181,595“96. The motion to dismiss was not granted and the CBCA said, there was the reasonable inference that GSA is liable for some delay and properly established costs.

Motion to Exclude

CBCA did not rule on plaintiff's motion to exclude GSA's oppositional reply saying it was a moot point since the motion to dismiss was not granted.

What does this tell us?

There is recourse if a federal agency fails to live up to the terms of a contract or lease. Following up with a letter and allowing the agency to correct or cure the defects are essential but when the contracting officer is unwilling to compromise or negotiate, then there are other avenues of relief.

It's important to have experienced legal assistance to tackle these problems. Call the attorneys at Whitcomb, Selinsky Law PC at (303) 534-1958 or complete an online contact form.