GSA's Motion to Dismiss in Contract Case Fails

In a recent ruling, the Civilian Board of Contract Appeals (CBCA) made an important decision regarding a lease dispute involving the General Services Agency (GSA). The CBCA denied both the GSA's Motion to Dismiss and the plaintiff's Motion to Exclude GSA's Opposition Reply, indicating that neither party's arguments were successful. As a result, it seems that the plaintiff has emerged victorious in their quest to hold the GSA accountable for unpaid rent and additional costs incurred during the lease dispute.

This particular case, known as WSSA Birmingham, LLC v. GSA, CBCA 616, centered around a five-year firm lease, with a five-year option, that the GSA had arranged for Internal Revenue Service (IRS) office space in Birmingham, Alabama. A crucial aspect of fulfilling the lease obligation was the requirement for a design intent drawing (DID) workshop to be conducted before the GSA assumed control of the space and the property owner received any rent payments.

A GSA Lease Issue

According to the terms of the lease, the GSA was expected to hold the three-day DID workshop within five to ten working days after the award was made. Additionally, the lease allowed for a total of 194 working days between the contract award and the IRS's occupancy, to accommodate possible demolition and construction necessary for IRS's specific needs. It's worth noting that the lease contract contained both a Dispute clause and a Change clause.

Design Intent Drawing Workshop Delayed

However, the DID workshop did not take place as scheduled. In fact, it wasn't until nearly nine months later, on December 14th, 2017, that WSSA sent a letter to the GSA, notifying them of their claim based on the GSA's delay in conducting the workshop. WSSA argued that the GSA's continued delay had resulted in excessive costs that they should be reimbursed for, considering they were not scheduled to be paid until after the space was occupied. The rent included various components such as shell rent, real estate taxes, tenant improvements, occupancy costs, and building-specific amortized capital costs.

In efforts to resolve the issue, WSSA requested that the GSA mitigate the damages by conducting the DID workshop, extending the delivery and related dates stated in the lease, and negotiating a fair adjustment for all delay costs.

In January 2018, WSSA submitted a Request for Equitable Adjustment (REA) and a certified claim to the GSA contracting officer. The claim alleged 274 days of government delay and sought $269,249.93 to cover various costs. These costs included operating expenses, overhead costs, local property taxes, construction loan interest, increases to shell construction costs, additional builder's risk insurance, and legal fees. However, the GSA's contracting officer denied the claim, stating that no payment was due for the alleged delay.

WSSA promptly appealed the contracting officer's final decision to the CBCA. The CBCA stated that dismissal should not be granted unless it is evident beyond a doubt that the appellant cannot prove any of the facts supporting their claim.

The GSA countered by arguing that the costs incurred did not increase in a way that would warrant relief. On the other hand, WSSA maintained that their claim sought compensation for costs they had already paid or were obligated to pay, which they would not recover through rental payments. The CBCA acknowledged that reimbursement of such costs is not necessarily prohibited under the lease or case law, but WSSA would still need to provide evidence to substantiate their entitlement to these costs.

Another argument put forth by the GSA was that WSSA was not entitled to the costs incurred during the base period outlined in the contract for design and construction. However, the CBCA found that the decision in a related case that the GSA relied on did not support the notion that costs incurred during the base period were automatically unrecoverable.

Ultimately, the CBCA concluded that the GSA's Motion to Dismiss could not succeed since the GSA admitted to failing to schedule the DID workshop in a timely manner. The principle of enforcing the terms of a contract was reaffirmed, and the CBCA determined that WSSA had sufficiently demonstrated their right to relief, thus defeating the motion to dismiss for failure to state a claim.

As for the plaintiff's Motion to Exclude GSA's Opposition Reply, the CBCA did not rule on it, deeming it irrelevant since the motion to dismiss was not granted.

This case serves as a reminder that there are avenues for recourse if a federal agency fails to fulfill the terms of a contract or lease. It is essential to follow up with a letter, providing the agency an opportunity to address and rectify any issues. However, when the contracting officer is unwilling to negotiate or compromise, it becomes crucial to seek assistance from experienced legal professionals who can navigate these complex problems. If you find yourself in a similar situation, don't hesitate to reach out to the knowledgeable attorneys at Whitcomb, Selinsky Law

WSSA requested that GSA mitigate damages by holding the DID workshop, extending the lease delivery dates, and negotiating an adjustment for delay costs. WSSA filed a claim for 274 days of government delay and requested $269,249.93. GSA argued that the costs did not increase significantly due to the delay. The CBCA ruled in favor of WSSA, stating that GSA failed to schedule the workshop in a timely manner. This case highlights the importance of seeking legal assistance when dealing with contract disputes.