APPELLANT’S MOTION FOR SUMMARY RELIEF DENIED;
 
RESPONDENT’S MOTION FOR SUMMARY RELIEF GRANTED IN PART:
 
April 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 November 25, 2009, the Board received from KD1 Development, Inc. (lessor) a 
notice of appeal of a contracting officer’s decision concerning two of its leases, GS-03B­
70059 and GS-03B-08368, with the General Services Administration (GSA or Government). 
The dispute focuses upon the operating costs under the first lease. The Government contends 
that operating costs were to be treated as part of the agreed upon rental rate; the lessor asserts 
that they were to be treated as a separate or added reimbursement. Further, the lessor 
disputes the Government’s claims that it may offset amounts due under the first lease against 
payments owing under the second lease. 

 
             
             
            
         
               
              
           
  
    
              
                
            
               
             
          
     
        
        
         
  
         
          
   
        
        
            
    
           
2 CBCA 2075 
Each party seeks summary relief. Regarding the liability under the first lease, factual 
disputes preclude resolution of entitlement. Thus, based upon the below findings made on 
the existing record for such relief, the Board denies each motion concerning the first lease. 
The Board grants the Government’s motion for summary relief regarding its right to 
offset debts due under the first lease against payments due under the second lease. Absent 
specific circumstances not here present, the Government has the right to offset debts of a 
contractor; the lessor has asserted no basis to alter that right here. 
Findings of Fact 
Solicitation for the First Lease 
1. In addition to providing instructions on how to submit an offer to the GSA 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 term, 
any renewal periods, and any other aspect of the offer as deemed necessary.” Appeal File, 
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 includes direction 
on submitting information on operating expenses: 
(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: 

 
         
           
       
   
             
          
            
            
      
        
     
           
        
     
      
      
        
         
        
         
            
            
         
           
          
           
    
   
         
            
         
3 CBCA 2075 
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) 
(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 

 
         
         
    
               
            
            
  
         
                 
                 
            
              
              
                
        
       
              
           
               
             
 
                 
   
 
             
                 
               
                 
             
              
4 CBCA 2075 
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) (emphasis added). 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 and Negotiations 
4. Following the submission of initial offers and negotiations, this lessor 
submitted its best and final offer (dated April 5, 1997). The offer is for 9100 net usable 
(occupiable) square feet of space, with a square foot rate per year of $17.47, at a stated total 
amount of $159,000. The lessor-completed two-page GSA Form 1364 does not mention 
operating costs or adjustments. Exhibit 1. The lessor did submit information regarding its 
operating costs on GSA Form 1217 (dated March 5, 1997), with total annual operating costs 
of $36,100 for the 9100 square feet; from the completed form one derives a base rate of 
$3.97 per square foot. Exhibit 2 at 32. 
5. The conclusion of a 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. This memorandum is dated May 5, 1997, and signed by both the realty 
specialist and contracting officer. 
First Lease 
6. As stated in a letter dated June 16, 1997, the contracting officer accepted for 
award the lessor’s 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). 

 
           
 
           
            
              
       
   
           
  
       
      
         
   
         
          
        
             
     
   
           
          
      
        
         
      
                 
          
5 CBCA 2075 
7. 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 #MPA96182 are to be provided without 
modification. 
. . . . 
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. 

 
           
      
           
            
     
           
            
                
            
                
  
           
       
 
  
 
    
              
               
               
              
             
         
               
            
      
          
               
             
6 CBCA 2075 
8. Consistent with the solicitation, Exhibit 21 at 20 (¶ 1.11(b)), the contract 
specifies that it represents an integrated agreement: 
This Lease, upon execution, contains the entire agreement of the parties and 
no prior written or oral agreement, express or implied, shall be admissible to 
contradict the provisions of the Lease. 
Exhibit 2 at 37 (¶ 8 (GSAR 552.270-38, Integrated Agreement (AUG 1992))). 
9. The realty specialist and the contracting officer signed off on a certification of 
funds for the annual amount of $158,977 for the first fiscal year. Exhibit 21 at 112. 
Performance 
10. It appears to be undisputed that acceptance of the premises and the ten-year 
lease term began on August 11, 1998, and was to continue through August 10, 2008. Exhibit 
21 at 59. 
11. In September 1998, the Government began payments to the lessor. A 
Government-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 a 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. 
12. In subsequent months, the Government made payments consistent with the 
approach described in Finding 11, treating the base rent of $158,977 per year, and the annual 
operating rent of $36,127 subject to escalation, as separate items composing the rental 
payment. Exhibit 21 at 59-66. 
13. In March 2006, a different contracting officer concluded that the Government 
mistakenly had been paying the operating cost base as a supplement to the rental payments. 
Exhibits 6, 9. That contracting officer unsuccessfully sought the lessor’s signature on a 

 
              
              
              
     
      
           
      
           
                
         
           
           
             
        
           
         
 
          
            
     
              
             
             
              
             
            
       
 
           
             
               
            
7 CBCA 2075 
supplemental lease agreement that would amend paragraph three of the lease to say explicitly 
that “the Government shall pay the Lessor annual rent of $158,977.00 at the rate of 
$13,248.09 per month in arrears.” Exhibit 7. By April 2006, the Government sought 
repayment of $272,969.28, because “[o]ur records indicate an overpayment has been made 
to your company erroneously.” Exhibit 8. 
14. The lessor responded to the Government 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 
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. By affidavit, the lessor’s president reiterates the pertinent facts from his 
viewpoint, noting that after questioning the payment provisions, he executed the lease and 
the payments were set up and made as the realty specialist had described prior to executing 
the lease. Further, he specifies that the Government paid its rent consistent with this 
understanding from the date of the occupancy in August 1998 through February 2006. 
Affidavit at 3 (¶¶ 16, 17). During this appeal, the initial contracting officer (no longer with 
the Government) has indicated that she has no memory of the particulars of the negotiations; 
the realty specialist cannot be found. Board’s Conference Memorandum (Dec. 16, 2010). 
Affidavits addressing matters which occurred several years after award do not assist in 
determining the intent at the time of award. 
Second Lease 
16. With the disagreements over the rental payments due under the first lease 
remaining unresolved as the ten-year lease term expired, the parties entered into a second 
lease. No clause of the agreement limits the Government’s right to offset payments due the 
lessor for other debts of the lessor to the Government. Exhibit 12. 

 
              
             
        
                 
                 
              
   
 
            
               
         
                
            
                
             
             
            
              
              
                
                
               
                 
              
        
 
               
               
               
              
           
          
8 CBCA 2075 
Discussion 
The lessor pursues relief at this Board under the Contract Disputes Act of 1978, as 
amended, 41 U.S.C. §§ 7101-7109 (previously 41 U.S.C. §§ 601-613 (2006)). What is 
directly at issue is the operating costs base of $36,127 per year over the ten-year lease term 
under the first lease. The Government seeks repayment of the portion of this that it has paid; 
the lessor seeks payment of what, in its view, remains to be paid. The lessor contends further 
that the Government may not offset any debt from the first lease against payments owed 
under the second lease. 
Summary Relief 
The standards for summary relief are well established and not disputed by these 
parties. With a motion for summary relief, the moving party bears the burden of establishing 
the absence of any genuine issue of material fact to resolve its request; all significant doubt 
over factual issues must be resolved in favor of the party opposing summary relief. At the 
summary relief stage, the Board may not make determinations about the credibility of 
witnesses or the weight of the evidence. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249 
(1986). However, it is also true that “the party opposing summary judgment must show an 
evidentiary conflict on the record; mere denials or conclusory statements are not sufficient.” 
Mingus Constructors, Inc. v. United States , 812 F.2d 1387, 1390-91 (Fed. Cir. 1987) 
(citations omitted). To preclude the entry of summary relief, the non-movant must make a 
showing sufficient to establish the existence of every element essential to the case, and on 
which the non-movant has the burden of proof at trial. Celotex Corp. v. Catrett , 477 U.S. 
317, 322-23 (1986). When a motion is made and supported as required in Federal Rule of 
Civil Procedure 56(a), the adverse party may not rest upon the mere allegations or denials in 
its pleadings, but must set forth specific facts showing there is a genuine issue for trial. Fed. 
R. Civ. P. 56(e); Celotex , 477 U.S. at 324; California Business Telephones v. Department of 
Agriculture , CBCA 135, 07-1 BCA ¶ 33,553, at 166,170-71. 
Lease Interpretation 
In resolving this dispute, the Board must discern the intent of the parties at the time 
the contract was signed. Stockton East Water District v. United States , 583 F.3d 1344, 1362 
(Fed. Cir. 2009) (“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?”); Cities of Burbank, Glendale 
and Pasadena v. Bodman , 464 F.3d 1280, 1284 (Fed. Cir. 2006). 

 
            
                
                
             
          
            
            
              
             
             
           
               
           
            
               
            
            
       
            
          
          
     
              
         
              
           
              
           
       
              
9 CBCA 2075 
The plain language of the solicitation and lease supports the interpretation of the 
Government, not that of the lessor. No ambiguity exists in the written documents. The lease 
rate is a gross rate inclusive of operating costs. Operating costs are not identified as a 
separate element of payment apart from escalations. The operating costs base rate is 
identified for use in future (those after the first year) adjustments. 
This conclusion does not resolve the dispute, given the question posited above; that 
is, the contracting officer may have inexactly reduced to writing the intent (understanding 
and agreement) of the parties. The lessor supports its interpretation with an affidavit and 
through the payments made by the Government. Questions of intent and of ratification 
(through payments by a subsequent contracting officer) are factual in nature. Similarly, the 
contracting officer’s decision references erroneous payments, but fails to support the view 
that any earlier contracting officer erroneously agreed to the payments of the sum of the two 
elements. However, the contemporaneous certifications (Findings 5, 9) of the negotiating 
contracting officer and realty specialist lend factual support to the position of the 
Government that the intent was as described in the contract, to make the lease rate inclusive 
of operating costs, and the conclusion that erroneous payments occurred. The ultimate 
question of intent requires factual determinations which cannot be made on the existing 
record in resolving each motion for summary relief. 
Offset 
The Government asserts its right to offset from payments under the second lease 
amounts found due under the first lease. The lessor objects. 
The law regarding the Government’s right to offset debts is well-established: 
It is undisputed that the government has the right to offset debts owed 
to its contractor with a debt owed to it by the same contractor absent explicit 
contractual, statutory, or regulatory language stating otherwise. United States 
v. Munsey Trust Co. , 332 U.S. 234, 239, 108 Ct.Cl. 765, 67 S.Ct. 1599, 91 
L.Ed. 2022 (1947); Applied Cos. v. United States , 144 F.3d 1470, 1476 
(Fed.Cir.1998). This right extends not only to debts on that contract but to any 
other contract between the government and the same contractor. Cecile Indus., 
Inc. v. Cheney , 995 F.2d 1052, 1054 (Fed.Cir.1993). 
J.G.B. Enterprises, Inc. v. United States , 497 F.3d 1259, 1261 (Fed. Cir. 2007). 

 
           
                
            
           
           
          
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10 CBCA 2075 
The lessor has identified no contractual, statutory, or regulatory language that would 
make improper the offset under the second lease of amounts found due under the first lease. 
Accordingly, the Board grants this aspect of the Government’s motion for summary relief. 
Decision 
The Board DENIES each motion for summary relief regarding the first lease, 
GRANTS the Government’s motion for summary relief regarding the second lease, and 
DENIES the lessor’s motion for summary relief regarding the second lease. 
JOSEPH A. VERGILIO 
Board Judge 
We concur: 
BERYL S. GILMORE ALLAN H. GOODMAN 
Board Judge Board Judge