Opinion ID: 785846
Heading Depth: 2
Heading Rank: 1

Heading: Lease Negotiations Between GSA and Golub

Text: 4 GSA issued a solicitation for offers (SFO) in July of 1996, seeking to lease 348,660 square feet of building space in Kansas City, Missouri, for a period of 10 years. Pursuant to the SFO, all utilities were to be included in any offered rental rates except for overtime heating and cooling costs, which were to be billed separately at an hourly rate to be negotiated. Paragraph 6.6(e), which was included in the SFO as originally issued, is at the center of the parties' disagreement and provides: 5 Zone Control: Individual thermostat control shall be provided for office space with control areas not to exceed 2000 occupiable square feet. Areas which routinely have extended hours of operation shall be environmentally controlled through dedicated heating and air conditioning equipment. Special purpose areas... with internal cooling load in excess of 5 tons shall be independently controlled. 6 This paragraph is standard in all GSA leases. 7 Golub and Company (Golub) submitted its initial offer to GSA on October 10, 1996. 1 Golub proposed to construct a new six-story building for the lease, with a flat hourly overtime heating and cooling rate of $45 per hour. Golub's lease negotiator on the project was Mr. James Wieger (Wieger). Prior to entering private industry as a lease negotiator, Wieger worked for GSA as a special assistant to the Commissioner of GSA's Public Building Service. 8 During negotiations, Wieger and Ms. Cindy Jackson-Kiley (Jackson-Kiley), GSA's negotiator, discussed various requirements of the SFO, including the Government's goals regarding overtime heating and cooling. Jackson-Kiley explained to Wieger that the Government required an efficient heating, ventilation, and air conditioning (HVAC) system that could be operated during overtime hours to provide heating and cooling only to those areas where needed, rather than servicing the entire facility. Based on a comparison of overtime heating and cooling costs for other leases in the Kansas City area, GSA had a target rate for overtime services for the entire building of between $40 and $75 per hour. At $45, Golub's rate was within GSA's target zone. 9 Following her initial meeting with Wieger, Jackson-Kiley issued an amendment to the SFO (SFO Amendment). In the SFO Amendment, Jackson-Kiley requested offerors to provide an additional breakdown of overtime heating and cooling costs, based on the cost per zone. The amendment stated: 10 Provide an hourly overtime rate for the following: Base or Minimum Hourly Charge _____ Cost per Zone _____ 11 Hourly calculation: Number of zones needed by tenant, times hourly charge per zone, plus base or minimum hourly charge = total hourly charge. 12 At the time Jackson-Kiley issued the amendment, the HVAC system had not yet been designed. Consequently, she did not have a clear concept of the square footage covered by a zone, but associated the term with the central HVAC equipment that would run to provide overtime services. HPI/GSA-3C, 03-1 B.C.A. (CCH) at 158,676. Wieger, however, recognized the amendment as an opportunity to increase Golub's profits on the lease without reducing the chances of winning the contract. 2 Id. His response to the SFO Amendment proposed a $120 base rate and a $40 hourly cost per zone for overtime heating and cooling. Wieger did not explain to GSA that his quoted rates equated a zone with the thermostat-controlled 2,000 square foot area described in paragraph 6.6(e) of the SFO. Based on the square footage in the building, Wieger estimated to himself that the final HVAC design for the building would contain approximately 175 zones. 3 Id. 13 During a second round of negotiations, Jackson-Kiley repeated to Wieger that the purpose and intent of the zone formula was to enable the Government to pay for only the equipment required to be turned on during any overtime heating or cooling period. Wieger informed her that such a system was possible, but again avoided clearly explaining his interpretation of zone under the formula contained in the SFO Amendment. Upon completing negotiations, Golub submitted its final offer with an annual rental rate of $5,495,017 and a revised overtime heating and cooling rate of $80 per hour base cost and a cost per zone of $40. The Government accepted Golub's offer on May 29, 1997. 14 The parties signed the final lease documents in April of 1998. The signed documents included paragraph 6.6(e) of the original SFO and incorporated the formula for overtime heating and cooling services contained in the SFO Amendment. Since the building was not designed at the time the parties entered into the lease, the parties agreed to establish the actual lease dates by supplemental lease agreement upon delivery of the space, which was to be within 810 days following the Government's approval of final construction drawings.