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Saul Subsidiary v. Barram

August 11, 1999

SAUL SUBSIDIARY II LIMITED PARTNERSHIP, APPELLANT,
v.
DAVID J. BARRAM, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, APPELLEE.



Before Plager, Circuit Judge, Friedman, Senior Circuit Judge, and Bryson, Circuit Judge.

The opinion of the court was delivered by: Friedman, Senior Circuit Judge.

Appealed from: General Services Administration Board of Contract Appeals United States Court of Appeals for the Federal Circuit

This appeal challenges a decision of the General Services Administration Board of Contract Appeals (Board) that the annual rent the government paid to the appellant in an extension of a real estate lease covered the costs of certain services the appellant provided. We affirm.

I.

The basic facts are undisputed. In August 1987 the appellant Saul Subsidiary II Limited Partner's predecessor (both referred to as "Saul") leased to the federal government office space in a building it owned. This lease, on a standard government form, was for five years. (There were actually two leases, but since the legal issues under both are identical, we discuss only the one).

Paragraph three of the lease provided:

The Government shall pay the Lessor annual rent of $522,810.00 at the rate of $43,567.50 per month in arrears.

In paragraph six, Saul agreed to furnish to the Government, as part of the rental consideration, the following:

A) All maintenance, services and utilities as specified in SFO [Solicitation for Offers] 87-057, as amended.

B) Make available 20 parking permits for Government employees which shall be paid directly by the Government employees at the prevailing rental.

The Solicitation included a document entitled "Lessor's Annual Cost Statement," which set forth the "estimated annual cost of services and utilities furnished by lessor as part of rental consideration" as $78,150. The operating costs provision of the Solicitation provided for annual adjustments of those operating costs. Beginning in the second year of the lease the government was required to "pay adjusted rent for changes in costs," which were to be "determined by multiplying the base rate [for operating costs] by the percent of change in the cost of living index," as measured by a designated Consumer Price Index. The adjusted costs were to be paid "with the monthly installment of fixed rent."

In the second through the fifth years of the lease, the parties annually amended the lease to increase the base operating cost in accordance with the Solicitation. In the second year, this was done through a supplemental lease agreement which, "to reflect operating cost escalation provided for in the basic lease agreement," provided that "the annual rental is increased by $6,328.72. The new annual rental is $979,339.72 payable at the rate of $81,611.64 per month in arrears." Increases in operating costs for the third through fifth years were made in the identical way.

During the term of the lease, Saul also agreed to provide additional space, parking spaces, and services, and the parties executed supplemental lease agreements so stating. For the added office space and parking spaces, these agreements "amended the [original] lease" by providing that "[t]he Government shall pay the lessor an annual rental increase of [stated dollars] at a rate of [stated dollars] per months in arrears." For additional cleaning services, the lease was "amended" (1) "[t]o reflect day-time cleaning for the 6th floor, . . . at a rate of $13,344.96 per annum" and (2) "[t]o reflect an increase in rent of $5,950 per year to provide for daytime cleaning . . . on the first floor."

At the end of the lease term, Saul and the government had extensive and hard-fought negotiations over extending the lease. The government considered Saul's offers too high and began condemnation proceedings. After further negotiations, the parties agreed upon a two-year extension. The negotiations related to the annual rent and the length of the extension. The parties did not ...


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