_______________________________ GRANTED IN PART: March 31, 1994 _______________________________ GSBCA 11760-TD NORTHERN VIRGINIA SERVICE CORPORATION, Appellant, v. DEPARTMENT OF THE TREASURY, Respondent. Katherine S. Nucci of Dykema Gossett, Washington, DC, counsel for Appellant. Roger Rhodes and Sherry L. Travers, Regional Counsel, Internal Revenue Service, Southwest Region, Dallas, TX, counsel for Respondent. Before Board Judges WILLIAMS, VERGILIO, and GOODMAN. VERGILIO, Board Judge. On March 13, 1992, the Board received this appeal from Northern Virginia Service Corporation which was providing janitorial and related services under a contract with the respondent, the Department of Treasury, Internal Revenue Service (IRS). During the contract period, the agency reconfigured portions of the space in two ways: (1) carpet was installed over tile floors, and (2) banks of desks and file cabinets were replaced by systems furniture. The number of occupants/employees in the building also decreased. The contractor contends that the reconfiguration of space required it to expend additional effort and employ additional labor to accomplish the tasks under the contract. The contractor claims that through October 1991 it is entitled to $40,554.28 in increased costs it incurred because of such changes to the building. Given the changes from tile to carpet and from banked desks to systems furniture, the agency asserts that the contractor should have expended less effort and cost in accomplishing the contract tasks. Accordingly, the agency reduced the contract price by a total of $42,039.61 for the contract period through 1992. The contractor appeals both the contracting officer's denial of its claim and the Government claim reducing the contract price. In resolving this dispute, as all disputes, the Board relies upon the record developed in the matter. The Board concludes that the contractor has failed to meet its burden of proof to establish that it incurred greater expenses because of the reconfigured space. Similarly, the agency has failed to meet its burden of proof to establish that the contractor should have saved labor and expenses because of the space reconfiguration. Accordingly, the Board denies the appeal regarding the contractor's claim, and grants the appeal regarding the agency's claim. Findings of Fact The contract 1. The contractor and the agency entered into a contract under which the contractor would provide janitorial and related services in a building with approximately 379,465 square feet (SF) of cleaning area. Appeal File, Exhibit 1 at 1 ( 3), 33 ( J, Exhibit 1). Under the firm, fixed-price, award-fee contract, the contractor would receive a fixed price monthly for basic services and a quarterly award fee based upon evaluations of the contractor's accomplishments, and could provide additional requested services at specified hourly rates. Id. at 2, 8-9 ( B), 23-24 ( G.9), 47 ( 1). The contract contains a changes clause. Id. at 92 (48 CFR 52.243-1 Changes-Alternate II (APR 1984)). 2. The contract, as specified in a negotiated agreement, was for the initial period of January 1 through September 30, 1989. Three option years covered the successive fiscal years, with a final option period of October 1 through December 30, 1992. Appeal File, Exhibit 1 at 2, 72 at 4-5 ( 7).[foot #] 1 However, the contract also states that the contract may continue for "the period not to exceed five years including all options." Id. at 1 ( 15). The contractor, id., Exhibit 51 at 682, and the contracting officer's technical representative (COTR), Transcript at 150, have operated under the assumption that the contract was for one calendar year with four calendar year options, such that the option years would expire on December 31, 1993. But see Appeal File, Exhibit 78 at 3 (COTR memorandum to contracting officer: "The last installation of carpet, 20,406 sq ft in January 1991, will not be scheduled for ----------- FOOTNOTE BEGINS --------- [foot #] 1 The record contains contract modifications reflecting the agency's exercise of the first three options for the relevant fiscal years through September 30, 1992. Appeal File, Exhibits 4, 15, 36, 42. ----------- FOOTNOTE ENDS ----------- shampooing within the time frame of the existing contract which terminates December 31, 1992."). 3. The contract specifies the types and frequencies of services to be performed. The data regarding the building (an IRS complex in Ogden, Utah) notes that the population is seasonal--from 3,500 to 6,500. Appeal File, Exhibit 1 at 33. The contract details the cleaning of general office space with resilient tiles and with carpeting: On a daily basis, traffic patterned areas and obvious dirt around and under furniture is to be vacuumed, if carpeted, and swept, if tiled. Further, stains and spills on bare floors are to be spot mopped. Every week, horizontal and vertical surfaces are to be thoroughly dusted, carpets are to be thoroughly vacuumed, and floor areas are to be thoroughly swept. Every two weeks, resilient tile floors are to be damp mopped and buffed. Twice a year, flooring (resilient tile) is to be stripped, sealed, and four coats of floor finish applied. Half of all office carpeting shall be cleaned (i.e., shampooed or dry-cleaned) annually. Appeal File, Exhibit 1 at 115 ( 2.A(3)), 117 ( 2.B), 118 ( 2.C(1)(a)-(d)), 119 ( 2.E(3)), 139 ( 25.A), 146 ( 1). Added space and renovations 4. With an effective date of January 1, 1989, a contract modification added a Child Care Center for services at $3,300 per month. The services were separate from the basic services of the contract. The modification describes the space and services to be rendered and contains an agency estimate--with a note, "Please consider this as a guideline only!"--that approximately twelve man-hours of daily productive labor (including supervision) would be needed to service the 6,500 SF cleaning area. Appeal File, Exhibit 3 at 183, 188. 5. With a contracting officer's signature dated March 5, 1990, the agency unilaterally issued a modification, with an effective date of February 1, 1990. The modification added a "reduction in space" provision to the contract under which the agency could deduct for space (in blocks totalling at least 2,500 SF) expected to remain unoccupied for at least thirty calendar days. Appeal File, Exhibit 7. 6. By letter dated May 11, 1990, to the contractor, the COTR "confirmed the reduction in cleaning space" of a total of 28,500 SF at specified locations. All reduced space related to the basic services portion of the contract. The letter states, "Effective date of reduction is March 5, 1990." Appeal File, Exhibit 8. 7. Under a modification with an effective date of May 1, 1990, the parties jointly added to the contract a new cafeteria/ canteen area, including a mezzanine, stairwells and skylights, at a monthly price of $2,066. The services were separate from the basic services of the contract. This area encompasses 4,845 SF of structure to be cleaned and 4,000 SF of lawn area to be policed. The modification specifies the required cleaning services, including the following: indoor carpeting (2,115 SF)-- daily thorough vacuuming, spot cleaning as needed monthly, and complete cleaning twice a year; indoor tile (600 SF)--damp mopping twice daily; covered outdoor tile (200 SF)--daily damp mopping; exposed outdoor tile (930 SF)--daily sweeping, hose off weekly; and windows (848 SF)--standard cleaning twice yearly, with daily cleaning of finger prints on windows and doors. Appeal File, Exhibit 9. 8. By letter dated June 11, 1990, the COTR informed the contractor that effective June 10, it was to resume full cleaning of 10,800 SF of specified previously reduced space, Finding 6. Appeal File, Exhibit 11. 9. By letter dated August 24, 1990, the COTR informed the contractor that effective September 1, 1990, full cleaning of all previously reduced space, with the exception of 7,500 SF, was to resume. Appeal File, Exhibit 12. 10. By October 1, 1990, full cleaning of all previously reduced space resumed. Appeal File, Exhibit 16. By January 1991, renovations here relevant were completed. Appeal File, Exhibits 41 at 534, 64. Approximately 58,000 SF of general office space with resilient tile were carpeted. Appeal File, Exhibits 26 at 363, 64; Transcript at 114. In renovated areas initially occupied by approximately 380 metal, banked desks, the agency installed approximately 150 work stations of systems furniture. Transcript at 111-12, 115; Appeal File, Exhibit 64.[foot #] 2 The contractor was not required to clean the vertical surfaces of the newly installed systems furniture. Transcript at 90-91, 130-31; Appeal File, Exhibit 77 at 2. 11. A modification with an effective date of May 31, 1991, increases by $128.17 the monthly cost for basic services--added to the basic services is the cleaning of a new dock and document holding area. Daily work involves the sweeping of the resilient tile floor (1,095 SF) and five steps, and the cleaning of door hardware and safety window panes. Handrails and wall-mounted accessories are to be dusted weekly, and a 500 SF concrete garage floor is to be swept weekly. Twice a year the resilient tile must be stripped and waxed, and the garage floor degreased and scrubbed. Annual work (dust or clean as necessary) is noted for duct work, lights and brick walls. Appeal File, Exhibit 29. The dispute ----------- FOOTNOTE BEGINS --------- [foot #] 2 Earlier, in February 1990, the agency had reduced the population of employees in the building by approximately 500 individuals. Transcript at 112. ----------- FOOTNOTE ENDS ----------- 12. The contractor sent a letter, dated May 17, 1991, to the agency requesting an upward adjustment in the contract price for the period after October 1, 1990, when the renovated areas became daily cleaning items. The contractor maintains that, in comparison to the tile and banked desks, the carpeting and systems furniture has caused it to expend additional effort to perform. Appeal File, Exhibit 26. In support, the contractor relies upon sixteen of its payrolls (32 weeks) prior to the renovations and sixteen payrolls for the similar period after the renovation. Id.; Finding 19. 13. For over five months, the parties corresponded and met, as each attempted to communicate its understandings, concerns and position, and to refine its support. Appeal File, Exhibits 28, 30, 31, 34, 38, 40, 43. 14. By letter dated November 26, 1991, the contractor submitted a certified claim, with supporting documentation, for an equitable adjustment in the amount of $3,119.56 per month for increased costs incurred under the contract since October 1, 1990 (a then current total of $40,554.28). Appeal File, Exhibit 45. 15. By letter dated January 24, 1992, the contracting officer issued a decision denying the contractor's claim for an upward adjustment. The letter notes that the agency's analysis-- utilizing production rates from the General Services Administration (GSA)--reveals that the renovated carpeted areas should be cleaned at a lower cost than the pre-renovation tiled areas. Asserting a claim to a $40,592 (corrected to $42,059.61) price reduction for contract years 1990, 1991, and 1992, the agency states that a demand for payment will be forthcoming. Appeal File, Exhibits 48, 59; Finding 22. In projecting the contract to continue through December 1993, the agency seeks a total reduction of $63,118.33. Appeal File, Exhibit 70; Transcript at 150-51. To collect on the agency claim, the agency has deducted amounts from payments to the contractor; the final amount offset by the agency is not in the record. Transcript at 51. Information regarding the contractor's claim 16. The contractor's project manager credibly testified that it takes longer to vacuum carpet than it does to sweep tile floors. Transcript at 60, 66-69. The COTR agrees that it takes longer to vacuum than it does to sweep. Id. at 197. 17. The contractor conducted a "time study" of the hours required to vacuum carpeted, renovated areas. Two supervisors expended a total of 12.5 hours to perform the vacuuming. Appeal File, Exhibit 43; Transcript at 48. 18. The contractor hired three part-time employees (totalling twelve productive hours per day) to vacuum the carpeted, renovated areas. Transcript at 38; Appeal File, Exhibit 52. The contractor has not specified the number of employees who had previously swept the resilient tile floors or performed periodic tasks on the tile flooring (e.g., bi-weekly buffing, and bi-annual stripping, sealing, and coating); the record supports no specific number. The contractor reassigned to perform other tasks the individuals who had done the daily sweeping. Transcript at 73-74. Without credible substantiation, the contractor has proposed one hour per day or ten hours per pay period as the effort required to perform the periodic tasks on the tile and the shampooing under the originally configured building. Id. at 43-44; Appeal File, Exhibit 34. The contractor's project manager testified that it would take approximately 4.5 hours per day to sweep the renovated areas if they were tiled; the testimony does not address the time to sweep the area with the more numerous banked desks. Transcript at 88- 89. 19. In initially requesting an upward equitable adjustment, the contractor reviewed records from sixteen pay periods prior to the renovations (October 11, 1989 through May 9, 1990) and sixteen pay periods subsequent to the renovations (October 10, 1990 through May 8, 1991). Specifically, from its payroll records, the contractor calculated the number of productive labor hours and vacation, sick leave and holiday hours for each period to perform the contract (excluding hours for "additional requested services" which were separately reimbursed under the contract, Finding 1). After the renovations, 32,091.36 such hours were expended. Prior to the renovations, 30,163.08 such hours were expended. Appeal File, Exhibit 60 at 696-98. The difference, 1,928.28 hours or 120.52 such hours per pay period (1,928.28 divided by 16), formed the basis for the contractor's further calculations of the monthly rate used in the initial request for an equitable adjustment--the contractor burdens the wage rate, adding, e.g., taxes and benefits, and adds on percentages to cover equipment, materials, miscellaneous, overhead, and profit. Id., Exhibit 26.[foot #] 3 20. Using the same two sets of sixteen pay period records, one can calculate the number of productive hours (subtracting hours for vacation, sick leave and holiday) expended in performing the contract services (again excluding hours for ----------- FOOTNOTE BEGINS --------- [foot #] 3 In support of its claim, at the prompting of the agency, the contractor makes a similar calculation using twenty-six pay period records from before the renovations, and twenty-six pay period records from one year later (five of the pay periods involved work before renovations were completed). The contractor also provides a "credit" of ten hours per pay period for carpet and non-related work. The contractor finds that per pay period 121.7 additional hours of effort (not productive hours) were required because of the renovations. Appeal File, Exhibit 45; Finding 18. ----------- FOOTNOTE ENDS ----------- additional requested services). After the renovations, 29,580 productive hours were expended. Prior to the renovations, 28,329 productive hours were expended. Appeal File, Exhibit 60 at 696- 98. The difference is 1,251 productive hours, or 78.19 productive hours per pay period (1,251 divided by 16). 21. The hours of effort used in the calculations in the above two findings reflect overall contractor efforts for basic services and other services under the modified contract, with the exception of hours for "additional requested services" which were separately reimbursed. Of significance is the modification adding the new cafeteria/canteen area to the contract. Finding 7. Of the pre-renovation pay period records, only seven days of effort were expended performing services under the modification. The entirety of the post-renovation pay periods reflects efforts in performing such services. Using the contractor's methodology in calculating its claim, Appeal File Exhibit 45; Finding 19, one productive hour at the prevailing wage of $7.20, when burdened with taxes, equipment, materials, miscellaneous, benefits, overhead and profit, is charged at $11.66. The contractor received $2,066 per month to perform services under that modification. Finding 7. This represents $98.38 per day ($2,066 per month divided by 21 work days per month). The $98.38 per day purchases 8.437 productive hours per day using the contractor's calculation methodology, and represents in excess of 78.19 productive hours per pay period. Finding 20. The contractor has offered no explanation or information in the record to suggest that the differences in its payrolls pre- and post-renovation are not attributable to performing the services required by the modification.[foot #] 4 Information regarding the agency's claim 22. The agency has determined when renovations in each of the various areas were completed, and has calculated the efforts the contractor should have saved because of the renovations. Appeal File, Exhibits 41, 48, 70. The conclusion that efforts should have been saved is grounded in GSA statistics on custodial management, Appeal File, Exhibit 62; Finding 15, and said to be supported by a study of custodial management practices and costs, Appeal File, Exhibit 63. This later study does not fully support the agency's contentions. Transcript at 191-97. ----------- FOOTNOTE BEGINS --------- [foot #] 4 Although the other modifications adding to the basic services, Finding 11, and adding services for additional space, Finding 4, do not impact on the pre- and post-renovation effort analysis, the cost of the modifications and the level of effort potentially encompassed by the modifications lend support to the inference that the modification involving the new cafeteria/canteen would require approximately 80 hours of productive effort per pay period. ----------- FOOTNOTE ENDS ----------- 23. The record fails to substantiate the use and application of the GSA statistics to the given office environment. For example, the agency used the GSA productivity rates for the daily room cleaning of bare floors and of carpet floors. The rates are identical. The rates utilized contain no adjustments for furniture, or the lack thereof, in the room. Further, the record in this case establishes that the productivity rate for cleaning tile floors is greater than that for vacuuming carpets. Finding 16. The COTR applied the equivalent rates, despite his belief that the productivity rates were not equal. Moreover, the estimates fail to take into consideration any efficiencies the contractor may have obtained in performance, or other specifics related to the actual area. Transcript at 45. 24. The record does not support the belief of the contracting officer that the estimates utilized in formulating the agency claim for deductions accurately reflected the contractor's costs. Transcript at 257-58. Discussion This appeal involves a janitorial services contract. No alchemy is needed to justify a claim that changes either increased or decreased the necessary level of effort and costs to accomplish the performance requirements. Basic elements in support of the contractor's and the agency's claims are missing. The contractor has fallen far short of substantiating its claim by a preponderance of the evidence. Although the contractor added three part-time employees to vacuum after the renovation, the record does not demonstrate that all, or any portion, of those three individuals were necessary because of the changes to the building. Similarly, although the record demonstrates that more effort is needed to vacuum carpet than to sweep tiles, the contractor has failed to convincingly demonstrate that because of the changes to the complex it was required to expend more effort and resources to perform the daily and periodic tasks. That is, the contractor has not shown what it may have saved by not buffing, polishing and stripping the tiled areas. Finally, the modification involving the new cafeteria/canteen appears as a more likely explanation for the increased labor hours which the contractor attributes to the renovations. The support by the agency for its claimed price reduction also is wanting. The statistics relied upon by the agency are simply estimates without a connection to the work involved. The record fails to support the reasonableness of both the productivity rates and their application of the estimates to the performance. In short, a preponderance of the evidence does not demonstrate that the contractor should have saved efforts and resources because of the renovations to the building. Decision The contractor has failed to prevail on its claim for an upward price adjustment; the agency has failed to prevail on its claim for a downward price adjustment. Accordingly, the Board GRANTS IN PART the appeal. In accordance with statute and the terms of the contract, the agency is to reimburse to the contractor any amounts not paid to the contractor because of the agency's failed claim. __________________________ JOSEPH A. VERGILIO Board Judge We concur: __________________________ __________________________ MARY ELLEN COSTER WILLIAMS ALLAN H. GOODMAN Board Judge Board Judge