GRANTED IN PART: September 20, 2011 
CBCA 2075 
KD1 DEVELOPMENT, INC., 
Appellant, 
v. 
GENERAL SERVICES ADMINISTRATION, 
Respondent. 
Douglas C. LaSota of Dickie, McCamey & Chilcote, P.C., Pittsburgh, PA, counsel for 
Appellant. 
Lesley M. Busch, Office of General Counsel, General Services Administration, 
Washington, DC, counsel for Respondent. 
Before Board Judges GILMORE , VERGILIO , and GOODMAN . 
VERGILIO , Board Judge. 
On July 8, 2010 (incorrectly stated in earlier decision), the Board received from KD1 
Development, Inc. (lessor) a notice of appeal disputing a contracting officer’s decision 
concerning two of its leases, GS-03B-70059 and GS-03B-08368, with the General Services 
Administration (GSA or agency).  The dispute focuses upon the total rental price under the 
first lease. The agency contends that the rental rate includes operating costs with a base rate 
that is adjusted annually after year one. The lessor maintains that it is entitled to the sum of 
the rental rate and the operating costs rate (annually adjusted after year one). In resolving 
cross-motions for summary relief, the Board held that the language of the lease supports the 
agency’s interpretation, not that of the lessor, and that the agency could offset amounts due 
under the first lease against amounts payable under the second lease. KD1 Development, Inc. 
v. General Services Administration , CBCA 2075, 11-1 BCA ¶ 34,744. Factual disputes 

 
               
             
             
                
              
              
                 
             
       
           
    
              
       
                
              
               
              
   
  
           
                 
            
              
        
              
            
                
      
  
    
             
                
            
2 CBCA 2075 
concerning the intent of the parties and ratification, which the Board could not resolve in the 
context of those motions for summary relief, are now resolved with a developed record. 
The Board concludes that factually and legally, the written lease must be enforced. 
The record fails to demonstrate that the intent of the parties was to compensate the lessor for 
operating costs in addition to the rental rate. The lessor has not demonstrated persuasively 
its interpretation at the time of the negotiations and award, much less that the agency 
understood that it would pay the lessor the sum of the rental rate and operating costs rate. 
The support for the lessor’s interpretation is testimony and affidavits of its president, without 
corroborating, contemporaneous documentation. The agency prepared contemporaneous 
documentation (including a lease negotiation memorandum and a certification of funds) that 
supports the interpretation consistent with the plain language of the lease.  That is, the total 
lease rate and annual rent include operating costs, and the agreed upon operating costs base 
is to be used for pricing annual adjustments. 
The actions of those within the agency in paying the sum of the rates in excess of 
seven years do not demonstrate an intent at the time of the agreement or constitute 
ratification of payments in contravention of the terms of the lease. Those involved in the 
award did not participate in the payments. Those making payments did not understand or 
intend to alter the terms of the lease.  The passage of time and payments made do not make 
the lease audit-proof. 
However, statute dictates that each claim by the Government against a contractor 
relating to a contract shall be submitted within six years after the accrual of the claim. Here, 
the agency seeks repayment of the duplicative operating costs portion of each monthly 
payment. Such a potential claim accrued with each payment. Therefore, the agency is 
limited in recovery to those claims accruing within the six-year period, beginning when the 
agency provided the lessor with notice of its claim. The agency may recover $216,762, 
which represents the payments for the double operating costs payments made within those 
six years. Therefore, the Board grants the appeal to the extent that the lessor disputes the 
agency’s entitlement to recover for earlier overpayments. 
Findings of Fact 
Solicitation for the First Lease 
1. In addition to providing instructions on how to submit an offer to the agency 
for office, lab, and related space to be used by the Department of Labor, Mine Safety and 
Health Administration, the solicitation states: “GSA will negotiate rental price for the initial 

 
          
            
           
           
        
        
         
  
         
          
   
        
        
            
    
           
         
           
       
   
             
          
            
            
      
        
     
3 CBCA 2075 
term, any renewal periods, and any other aspect of the offer as deemed necessary.”  Exhibit 
21 at 19 (¶¶ 1.8, 1.9) (all exhibits are in the appeal file). 
2. A Price Evaluation (Present Value) clause in the solicitation specifies that the 
total price per rentable square foot is to include the operating expense: 
(a)	 If annual CPI [Consumer Price Index] adjustments in operating 
expenses are included, Offerors are required to submit their 
offers with the total “gross” annual price per rentable square 
foot and a breakout of the “base” price per rentable square foot 
for services and utilities (operating expenses) to be provided by 
the Lessor. The “gross” price shall include the “base” price. 
. . . . 
(c)	 If the offer includes annual adjustments in operating expenses, 
the base price per occupiable square foot from which 
adjustments are made will be the base price for the term of the 
lease, including any option period. 
Exhibit 21 at 19-20 (¶ 1.10). Regarding award, the solicitation specifies: 
After conclusion of negotiations, the Contracting Officer will require the 
Offeror selected for award to execute the proposed lease prepared by GSA 
which reflects the proposed agreement of the parties. 
. . . . 
The acceptance of the offer and award of the lease by the Government occurs 
upon notification of unconditional acceptance of the offer, execution of the 
lease by the Lessor, execution of the lease by the GSA Contracting Officer, 
and mailing or delivery of the fully executed lease to the successful offeror. 
Exhibit 21 at 20 (¶ 1.11, Award). 
3.	 The solicitation contains a specific clause on operating costs: 
OPERATING COSTS, GSAR 552.270-33 (JUN 1985) 

 
           
        
     
      
      
        
         
        
         
            
            
         
           
          
           
    
   
         
            
         
         
         
    
                 
           
         
   
              
     
                 
              
              
             
               
4 CBCA 2075 
(a)	 Beginning with the second year of the lease and each year after, 
the Government shall pay adjusted rent for changes in costs for 
cleaning services, supplies, materials, maintenance, trash 
removal, landscaping, water, sewer charges, heating, electricity, 
and certain administrative expenses attributable to occupancy. 
Applicable costs listed on GSA Form 1217, Lessor’s Annual 
Cost Statement, when negotiated and agreed upon, will be used 
to determine the base rate for operating costs adjustment. 
(b)	 The amount of adjustment will be determined by multiplying the 
base rate by the percent of change in the Cost of Living Index. 
. . . Payment will be made with the monthly installment of fixed 
rent. Rental adjustments will be effective on the anniversary 
date of the lease. Payment of the adjusted rental rate will 
become due on the first workday of the second month following 
the publication of the Cost of Living Index for the month prior 
to the lease commencement date. 
. . . . 
(e)	 The offer must clearly state whether the rental is firm 
throughout the term of the lease or if it is subject to annual 
adjustment of the operating costs as indicated above. If 
operating costs will be subject to adjustment, it should be 
specified on the GSA Form 1364, Proposal to Lease Space, 
contained elsewhere in this solicitation. 
Exhibit 21 at 24 (¶ 3.5). A separate clause also addresses the operating costs base: “The base 
for the operating costs adjustment will be established during negotiations based upon 
occupiable square feet.” Exhibit 21 at 24 (¶ 3.6). 
Offers, Negotiations, and Award 
4. In its initial proposal, the lessor indicated on the agency’s form 1364 a total rate 
per square foot and total amount for the offered space; for the lease term and for alternates, 
the lessor quoted a price per square foot. The lessor also provided its operating costs on a 
separate form (form 1217). Exhibit 32 at 37-39. Discussions occurred regarding the lease 
price, the space, and the operating costs, as the agency sought a reconfigured space, different 
building construction, and more precision in the identified operating costs. Transcript at 27­
28. In its second proposal, on form 1364, the lessor stated the occupiable square footage, 

 
                  
            
               
               
                 
               
             
                
       
              
          
             
                 
    
                
               
                 
              
           
 
            
             
   
           
  
    
       
 
      
     
5 CBCA 2075 
price per square foot, and the total amount per year for the lease term and for alternates. The 
lessor also revised its operating costs as indicated on a completed form 1217. Exhibit 32 at 
27-30. The parties agreed upon the stated annual operating costs base of $36,100 for the 
9100 net usable (occupiable) square feet of space, from which one derives a base rate of 
$3.97 per square foot. Transcript at 24. In its third revised offer, the lessor stated the 
occupiable square footage, price per square foot, and total amount per year for the lease term 
and for alternates. The submission references the earlier submission for unit costs or 
operating costs to which the parties had agreed. Exhibit 32 at 10-11; Transcript at 27-30. 
In its ultimate best and final offer, on the appropriate form, the lessor stated the occupiable 
square footage (9100 square feet), price per square foot ($17.47), and the total amount per 
year for the lease term ($159,000). Exhibit 1 at 1-2. 
5. As stated in a letter dated June 16, 1997, the contracting officer accepted for 
award the lessor’s final offer. Exhibit 21 at 98. A cover letter dated September 4, 1997, 
indicates that the contracting officer therewith provided a fully executed copy of the lease. 
Exhibit 21 at 160. Pursuant to the lease, the lessor became obligated to construct a building 
on a given site; upon acceptance of the leased premises by the Government the lease term 
would commence and continue for ten consecutive calendar years. Exhibit 2 at 4 (¶ 13). The 
lease contains a Disputes clause (Oct 1995) (48 CFR 52-233-1). Exhibit 2 at 47. 
6. The lease contains provisions not found in the solicitation, here quoted in 
pertinent part: 
3. The Government shall pay the Lessor annual rent of $ (SEE LEASE 
RIDER PARA[G]RAPH 13) at the rate of $ SEE LEASE RIDER 
PARAGRAPH 13)    per   month    in arrears. Rent for a lesser period shall be 
prorated. 
6. The Lessor shall furnish to the Government as part of the rental 
consideration, the following: 
A.	 All services, maintenance, repairs, utilities, 
alterations and other considerations as set forth in 
the lease. 
B.	 The provisions of SFO [solicitation for offers] 
#MPA96182 are to be provided without 
modification. 

 
           
           
       
           
    
            
         
           
      
                 
          
        
                   
              
              
              
            
                 
                  
                 
               
               
                
               
             
         
         
              
             
              
               
         
          
6 CBCA 2075 
11. For purposes of determining the base rate for future adjustments to the 
operating cost, the Government agrees that the base rate quoted on the 
“Lessor’s Annual Cost Statement” (GSA Form 1217), dated March 5, 1997 , 
at $ 3.97 per occupiable square foot, is acceptable. 
13. Upon acceptance of the leased premises by the Government, the same 
shall be measured and rental shall be paid, in accordance with Paragraph 3.7 
of Solicitation MPA96182, “Occupiable Space” and Paragraph 22 of the 
General Clauses, GSA Form 3517, “Measurement for Payment” at the rate of 
$17.47 per occupiable square foot per year. 
Exhibit 2 at 1-4 (¶¶ 3, 6, 11, 13). The referenced paragraph 3.7 defines occupiable space and 
specifies how such space is determined. Exhibit 2 at 7. 
7. Throughout the submission and negotiation process, the lessor’s president 
states that he did not include operating costs as part of the per square foot or total rental rate. 
Transcript at 15-16. The testimony does not indicate that he expressly discussed this aspect 
of pricing and payment with the agency negotiators or that anyone for the agency understood 
that the total price offered was other than a total inclusive of operating costs.  Transcript at 
29-30, 33-34. The lessor’s president acknowledges that the contracting officer never told 
him that the rental and operating costs rates would be added for a total rental rate. Transcript 
at 48. In response to whether he was told by somebody else that the rates would be added 
together, he testified that, as to the costs in the lease, it “was interpreted to me by [the 
agency’s negotiator] that these were separate costs when I asked her about it.” Transcript at 
48. In an affidavit, the president avers that in finalizing the terms of the lease: 
It was pointed out to me that the operating costs and the base rent as well as 
the Lease time period were addressed in the Lease rider. It was clear to me 
and them that the operating costs were $3.97/sq. ft. and the base rent was 
$17.47/sq. ft. which was set for the 10 year term. 
16. I subsequently executed the Lease and the Payments which were 
set up and made by the GSA as [the agency negotiator] had described to me 
prior to executing the Lease. Specifically, the base rent was $17.47/sq. ft. for 
a 10 year term. The operating costs that were subject to cost escalation were 
initially set at $3.97/sq. ft as provided for in Paragraph 11 to the rider of the 
Lease. 
17. The GSA paid its rent consistent with this understanding from 
the date of the occupancy in August 1998 through February 2006. 

 
     
        
          
            
         
             
        
               
               
             
             
               
                   
         
              
           
               
             
 
                  
                  
             
     
             
              
                
               
                
          
            
                
7 CBCA 2075 
Exhibit 56 at 3 (¶¶ 15-17). 
8. The lessor offers no contemporaneous documentation that buttresses its 
position regarding its interpretation or the agency’s interpretation during the negotiation 
process. 
9. In the course of this proceeding, the initial contracting officer (no longer with 
the agency) has indicated that she has no memory of the particulars of the negotiations; the 
realty specialist cannot be found. Board Memorandum of Conference (Dec. 16, 2010). 
However, contemporaneous documentation prepared during the negotiation process and 
finalization of the lease indicate that the agency understood that the first year of the lease 
would be priced at the lease rate as inclusive of operating costs. A price negotiation 
memorandum, dated May 5, 1997, and signed by both the realty specialist and contracting 
officer (the two agency individuals involved in the negotiation and award of the contract), 
details the rounds of offers, specifies the per square foot rate and base operating costs rate, 
and concludes with the cost per year and for the ten-year term of the lease. Exhibit 21 at 49, 
57-58. The conclusion of the price negotiation memorandum states: 
Based on the above, it is determined to be in the best interest of the 
Government to award a lease for 9,100 sf to Mr. Kevin Doody/Doody 
Engineering, for a 10 year firm term lease. Rate is $17.47 per square foot or 
$158,977.00 per year. Aggregate cost of this fully serviced, 10 year lease, will 
be $1,589,770.00. 
Exhibit 21 at 58. Prior to the award of the lease, these same two individuals had certified to 
the availability of funds for the first year in the amount of $158,977. Exhibit 21 at 112. 
There are other contemporaneous references to the $17.47 rate, and the annual rental and 
aggregate rates. Exhibits 28, 31. 
10. Upon review of the record as a whole, including the testimony and affidavit of 
the lessor’s president, the Board finds that the agency’s understanding and intent at the time 
of award was that the base rental rate of $17.47 per square foot was inclusive of operating 
costs, and that the operating costs base of $3.97 would not be an additional component of 
payment. If the lessor held a contrary interpretation, such was not made clear to the agency 
during the negotiations nor at the time the lease was signed. 
Payments 
11. Acceptance of the premises and the ten-year lease term began on August 11, 
1998, to continue through August 10, 2008. Exhibit 21 at 59. The agency made payments 

 
               
                
         
            
              
         
            
       
 
  
 
    
              
            
                
              
               
          
               
              
            
              
              
           
             
              
               
     
           
           
                
      
           
                
8 CBCA 2075 
for each month of occupancy. As explained in more detail below, from the beginning of 
rental payments through a check with a payment date of March 1, 2006, the agency paid the 
lessor the sum of the rental rate and the operating costs base with annual adjustments to the 
operating costs. These payments were supported by “lease digest actions” prepared internally 
by the agency; signatures are not by the contracting officer or negotiator involved in the 
negotiation and execution of the lease. E.g. , Exhibits 33-42. 
12. In September 1998, the agency began payments to the lessor. An agency-
generated lease digest action document details financial information: 
annual rent: $ 195,104.00
 
operating rent: $36,127.00
 
base rent: $ 158,977.00
 
monthly rent: $ 16,258.67
 
The document states the total rentable square footage as 10,465; this figure was used to 
calculate the stated rate per square foot of $18.64.  However, the operating rent of $36,127 
corresponds to the 9100 square feet and rate of $3.97 per square foot found in the contract. 
The document, dated September 18, 1998, is signed by a contracting officer other than the 
contracting officer who negotiated and entered into the lease. Exhibit 21 at 59. In 
subsequent months, the Government made payments consistent with this approach, treating 
the base rent of $158,977 per year, and the annual operating rent of $36,127 subject to 
escalation, as separate items comprising the rental payment. Exhibit 21 at 59-66. The 
testimony elicited during the hearing indicates that the agency officials preparing and signing 
the payment-related materials did not intend to alter the terms and conditions of the lease. 
13. With a letter dated March 16, 2006, to the lessor, a contracting officer (not the 
one involved in lease negotiations and award) provided an unsigned and undated 
supplemental lease agreement, with the explanation that it was to clarify the annual rent, 
among various items. Exhibit 6. The proposed amendment contains an effective date of 
August 11, 1998, and specifies an annual rent of $158,977 at the rate of $13,248.08 per 
month in arrears. Exhibit 7. 
14. By letter dated April 5, 2006 the agency sought repayment of $272,969.26, 
because, “Our records indicate an overpayment has been made to your company 
erroneously.” Exhibit 8. The lessor responded to the agency by letter dated April 26, 2006, 
explaining that no overpayment had been made: 
We entered into the lease agreement with the understanding that the operating 
costs were to be paid in addition to the base rent of the building. We recall 

 
         
           
           
             
        
           
         
 
           
              
             
              
            
          
            
               
              
                
               
             
             
                   
                
               
                
             
                
            
        
              
    
             
                 
9 CBCA 2075 
originally (prior to lease signing) having discussions with the contracting 
officer, and it was our understanding and theirs (GSA), that the second 
sentence of paragraph 11 in the rider to lease GS-03B-7005[9] illustrated that 
the figure $3.97 for operating costs was in addition to the base rate. 
Specifically: “This figure represents the government’s pro-rata share of 
operating costs”. Subsequently, the lease was signed and executed and the 
payments were set-up and made, as all parties understood it. 
Exhibit 9. 
15. The lessor did not resolve its dispute during negotiations of the subsequent 
lease and thereafter. However, after March 2006, beginning with an April 3 payment, the 
agency’s payments no longer treated the operating costs base as an additional item of 
payment; that is, payments were made consistent with the total rental rate (as inclusive of 
operating costs) plus the escalation to the operating costs base. Exhibit 33. 
16. Consistent with the contracting officer’s decision dated May 19, 2010, the 
agency has asserted a Government claim to recover $272,969.26 for overpayments made by 
the agency covering the period from August 11, 1998, through February 28, 2006. The lessor 
has asserted its own claim disputing the agency’s interpretation of the lease and seeking to 
recover what it deems to be the unpaid operating costs for the remainder of the lease; the 
contracting officer denied the lessor’s claim in the decision dated May 19, 2010. Exhibit 16. 
Discussion 
As explained in resolving the motions for summary relief, the plain language of the 
solicitation (Finding 2) and lease (Finding 6) supports the interpretation of the agency, not 
that of the lessor. No ambiguity exists in the written documents. The lease rate is a total (or 
gross) rate inclusive of operating costs. The operating costs base rate is identified to be used 
for adjustments after the first year of occupancy. However, the Board must determine if the 
lease language accurately reflects the intent of the parties at the time the contract was signed. 
The payments by the agency raise a factual question regarding the intent of the parties. “Is 
our reading of the plain meaning of this provision consistent with the intent of the parties at 
the time the contracts were executed, since contract interpretation is fundamentally a question 
of the contracting parties’ intent?” Stockton East Water District v. United States , 583 F.3d 
1344, 1362 (Fed. Cir. 2009); Cities of Burbank, Glendale and Pasadena v. Bodman , 464 F.3d 
1280, 1284 (Fed. Cir. 2006). 
Factually, the lessor has not demonstrated that the intent of both parties was to 
compensate the lessor the sum of the total rental rate and the operating costs base. Even if 

 
             
               
             
           
            
           
              
             
             
          
        
            
                 
    
              
   
  
             
                 
               
            
              
              
   
               
      
               
              
            
               
              
                 
                
               
   
10 CBCA 2075 
the lessor’s president priced his offer and understood his submissions and the contract as 
entitling him to the operating costs base in addition to the total rental rate, such an 
interpretation in inconsistent with the language of the solicitation and contract. There is 
inadequate support to conclude that the agency shared that interpretation. The 
contemporaneous materials reveal that the agency interpreted the contract then as it does 
now. 
The actions of subsequent contracting officers and other agency personnel in making 
and approving payments were not made with the understanding or intent of altering the terms 
and conditions of the lease. Accordingly, the lessor has not demonstrated that ratification 
occurred. Winter v. Cath-dr/Balti Joint Venture , 497 F.3d 1339, 1346-47 (Fed. Cir. 2007) 
(“Ratification requires knowledge of material facts involving the unauthorized act and 
approval of the activity by one with authority.”). 
In conclusion, the Board determines that the lease rate of $17.47 per occupiable 
square foot per year is inclusive of operating costs; the lessor is entitled to payment of rental 
based upon that rate, with annual adjustments after the first year to the operating costs base 
of $3.97 per occupiable square foot per year. The agency’s, not the lessor’s, interpretation 
of the lease prevails. 
Limits of Recovery 
Statute dictates that each claim by the Government against a contractor relating to a 
contract shall be submitted within six years after the accrual of the claim. 41 U.S.C. § 605(a) 
(2006) (now codified at 41 U.S.C. § 7103(a)(4)). Because the statute lacks a definition of 
“claim,” one looks to language of implementing regulations, the contract, and facts. 
Reflectone, Inc. v. Dalton , 60 F.3d 1572, 1576 (Fed. Cir. 1995). Here, the agency seeks 
repayment of the duplicative operating costs portion of each monthly payment. As a party 
to the lease, the agency should have known the plain meaning of its lease. Such a potential 
claim accrued with each payment. 48 CFR 33.201 (1997). Therefore, the agency is limited 
in recovery to those claims accruing within the six-year period, beginning when the agency 
provided the lessor with notice of its claim. The contracting officer’s letter of March 16, 
2006, provides the lessor with notice of the agency’s interpretation of the contract to be 
applied from the occupany; the agency’s payments subsequent to that letter reflect the 
agency’s interpretation of the contract. Findings 13, 15. The letter of April 5, 2006, 
expressly seeks a sum certain, $272,969.26. Finding 14. Such agency actions constitute a 
claim pursuant to the Disputes clause of the lease, Finding 5. A claim is a written demand 
or assertion by one of the contracting parties, seeking as a matter of right, the payment of 
money in a sum certain, the interpretation of the contract, or other relief arising under or 
relating to the contract. 

 
           
             
              
     
             
             
             
               
     
  
 
 
    
  
11 CBCA 2075 
Because of the six-year limitation, the agency may recover $216,762, which represents 
the payments for the double operating costs payments made within those six years. 
Therefore, the Board grants the appeal to the extent that the lessor disputes the agency’s 
entitlement to recover for earlier overpayments. 
Decision 
The Board GRANTS IN PART the appeal. The agency is entitled to recover 
$216,762, which represents duplicative operating costs paid for six years under the lease; but 
the agency may not recover duplicative operating costs for earlier accruing claims. The 
lessor does not prevail on its interpretation or on its claim to receive additional payments for 
the final months of the lease. 
______________________________ 
JOSEPH A. VERGILIO 
Board Judge 
We concur: 
________________________ ________________________ 
BERYL S. GILMORE ALLAN H. GOODMAN 
Board Judge Board Judge