GRANTED IN PART: May 30, 1997 GSBCA 13284-SEC 7 WORLD TRADE COMPANY, L.P., Appellant, v. SECURITIES AND EXCHANGE COMMISSION, Respondent. Cornelius J. Lynch, Senior Vice President (Ret.) of Silverstein Development Corporation, New York, NY, appearing for Appellant. George Conril Brown, Gary R. Allen, Arvind K. Lal, and Angela E. Clark, Office of the General Counsel, Securities and Exchange Commission, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), PARKER, and GOODMAN. DANIELS, Board Judge. In 1992, the United States Securities and Exchange Commission (SEC) entered into a contract with 7 World Trade Company, L.P., for the lease of office space in New York City. The lease is for a fifteen-year term; it covers the eleventh and twelfth floors, and part of the thirteenth floor, of the building known as 7 World Trade Center. The contract covered renovation of the space to meet the agency's needs. The parties disagree as to which is liable for various costs associated with this build- out and other items ordered by the SEC. Shortly after Lessor appealed from a contracting officer's decision as to claims under the contract, the parties filed cross-motions for summary relief. We granted each motion in small part, and also narrowed the remaining issues. 7 World Trade Co. v. Securities & Exchange Commission, GSBCA 13284-SEC, 96-1 BCA  28,240. The parties then supplemented the record with both documents and testimony. After reviewing the entire record, we now conclude that the positions taken by the SEC on virtually every issue are without any merit whatsoever. We grant the appeal in great part. The claims and the contracting officer's decision Lessor's claims were submitted, with proper certification, on August 23, 1995. Several claims, all of which the contracting officer disallowed, remain to be resolved by the Board. We list them here, in the order in which we will discuss them and with the names which were given them by the contracting officer and used in our earlier decision: rework security; reroute fire alarm; rework sprinkler; flash patch to level floors; power supply to thirteenth floor; and costs questioned by audit. 96-1 BCA at 141,003. Rework security The SEC designated one of its employees, Douglas B. Foster, to serve as its negotiator on this contract. Transcript at 495- 97. Mr. Foster's office was in Washington, D.C. Because he could not be in New York City every day during construction, he hired an on-site project manager. The project manager was Project Control Group, Inc. (PCG), which assigned its president, Evan B. Schneider, to this job. Id. at 505-06. At the conclusion of the build-out, Mr. Schneider made an Errors and Omissions Analysis regarding the project. The analysis states that $28,379 in costs were incurred because of design defects in the security system for the thirteenth floor. The analysis attributes these defects to Interior Space International (ISI), the project architect. 96-1 BCA at 141,004. Mr. Schneider explained that ISI was responsible for incorrect wiring diagrams and power requirements. Transcript at 737; Appellant's Opposition to Respondent's Motion for Partial Summary Judgment, Exhibit E (PCG Interrogatory Answers) at 5. Messrs. Schneider and Foster testified that neither Lessor nor the general contractor for the project, Ambassador Construction Co., Inc. (Ambassador), did anything wrong with regard to this matter. Transcript at 568; PCG Interrogatory Answers at 5; see also Appeal File, Exhibit 91 at 2. The SEC believes that the contract makes Lessor responsible, nonetheless, for the costs resulting from these design defects. In particular, the agency points to subparagraph 5(a)(iv) of the contract's Tenant Work Agreement as commanding this result. The contract required Lessor to "cause to be prepared all plans, working drawings and specifications for the Tenant Work and necessary for the construction and completion thereof (the 'Tenant Plans')." Lessor had to hire ISI as the architect for the project, to prepare these plans, and to hire (or cause ISI to hire) "Other Consultants" to assist in the preparation of the plans. The "Other Consultant" for mechanical, electrical, and plumbing engineering was specified as Flack & Kurtz Consulting Engineers, L.L.P. Lessor's responsibility as to plan preparation was "[s]ubject to subparagraph [5(a)](iv)." Appeal File, Exhibit 2 at TWA-9 to -10. The subparagraph reads as follows: SEC shall have the right to undertake directly to supervise and direct the day-to-day activities of the Architect and/or any Other Consultant(s) responsible for preparing the Tenant Plans. In such event, the terms of the Lease and this Tenant Work Agreement shall remain the same except that (A) SEC shall have the sole right to direct the activities of such Architect and/or Other Consultant(s), . . . and (B) Lessor shall not exercise any control over the activities of such Architect and/or Other Consultant(s), and shall have no responsibility or liability for the further or subsequent performance of such Architect and/or such Other Consultant(s) or for any cost or delay resulting from such performance, except in any such cases enumerated or described in this subpart (B) (x) as otherwise provided in this Tenant Work Agreement, (y) if resulting from the act or omission of Lessor (or its agents, employees or contractors), or (z) if such delay or cost arises in connection with any errors or omissions arising from matters or information set forth in the Construction Documents or in other written information supplied by Lessor or its agents, employees or contractors. Appeal File, Exhibit 2 at TWA-11 to -12. As we explained in our decision on the cross-motions for summary relief, this provision says that if the SEC exercises its right "to undertake directly to supervise and direct the day-to- day activities of the Architect and/or any Other Consultant(s) responsible for preparing the Tenant Plans," the SEC becomes liable -- unless one of three specified events occurs -- for any cost resulting from the subsequent performance of such a firm. 96-1 BCA at 141,006. At hearing and in briefs, the parties have presented evidence which permits us to conclude that the SEC exercised its right at the outset of work related to the build- out. Both Mr. Foster, the SEC's lease negotiator, and Cornelius J. Lynch, Lessor's negotiator, understood that the contract was written to make Lessor responsible for hiring and initially supervising the architect and the engineer simply to avoid the normal government hiring processes. Both parties contemplated even before the lease was signed that the build-out would be controlled by the tenant. Transcript at 362; Appellant's Exhibit 1; PCG Interrogatory Answers at 11. The SEC selected ISI to be the project architect and Flack & Kurtz to be the engineer, and it engaged an attorney to draft the contracts between the firms and Lessor. Id.; Transcript at 582; PCG Interrogatory Answers at 6; Appellant's Motion for Partial Summary Judgment, Tab 10. The contracts were never completed because the lawyer failed to finish them. Transcript at 334-35. Thus, we do not have a final written product dispositive of the relationship between ISI (or Flack & Kurtz) and the parties to this case. The draft of the contract involving ISI does indicate, however, the agency's intent that the architect consult with, and receive approval from, the tenant and PCG, not the owner. Appellant's Motion for Partial Summary Judgment, Tab 10. One provision of the draft contract says, "[T]he Architect's ultimate and primary loyalty and duty shall be to the Tenant." Id. at 6. No one has suggested that the draft is at variance with the way the architect actually acted. After the project had been completed and this litigation was underway, PCG's Mr. Schneider wrote the following letter to Lessor's Mr. Lynch: This letter will confirm that during the design and construction of the SEC space at 7 World Trade Center, the SEC exercised total control over the daily direction of the Architect (ISI) and their Engineer (Flack + Kurtz). This direction was accomplished through our firm, Project Control Group, Inc., as Agent for the SEC. Project Control Group was hired by the SEC through [Lessor] to provide project management for the 7 World Trade Center relocation. Although our purchase order was to [Lessor] for payment purposes, we took direction from Mr. Douglas Foster, the SEC's authorized representative, before directing the Architect and/or Engineer. Our role was to present Mr. Foster with the cost and schedule options, and to implement his direction. [Lessor's] role in the project was only that of a typical Landlord. Appellant's Opposition to Respondent's Motion for Partial Summary Judgment, Exhibit F. At hearing, Mr. Schneider explained that Mr. Lynch had asked him to write the letter differently, but that he had insisted on describing what really happened. Transcript at 631. Later, when the SEC asked him about what he had written, he replied, "The facts stated are common knowledge and are a matter of record as per my letter." PCG Interrogatory Answers at 12; Transcript at 365. He also told the SEC that as project manager, he was "responsible for the overall coordination of the project," and included in his resume a statement that PCG had "recently managed the [SEC] relocation . . . at 7 World Trade Center." PCG Interrogatory Answers at 1; Appellant's Opposition to Respondent's Motion for Partial Summary Judgment, Exhibit C. Other participants in the design and construction of the leased space confirmed Mr. Schneider's explanation of his role. Henry DiGregorio, a principal of Flack & Kurtz, testified at a deposition that the first two paragraphs of the letter are accurate. Respondent's Motion for Partial Summary Judgment, Exhibit B at 204. According to Mr. DiGregorio, the "SEC controlled the project." Id. at 208-09. Flack & Kurtz, ISI, and Ambassador all took direction from PCG, which was acting on behalf of the SEC. Id. at 210-11, 217, 220. Jack Shafran, Ambassador's executive vice-president, similarly testified that his firm took direction from Mr. Schneider. Transcript at 217. At the Board's hearing in this case, however, Mr. Schneider told a completely different story. This version had him simply observing, monitoring, and tracking events and budgetary implications, and reporting back to Mr. Foster what he learned. Transcript at 687, 712-13. He was concerned, he said, only with cost control and quality control. Id. at 627. We find Mr. Schneider's hearing testimony lacking in credibility insofar as it repudiates his earlier statements. The evidence is clear that the build-out of the space was designed by an architect and an engineer who were selected by the SEC, for the purpose of meeting the SEC's needs, under the direction of the SEC and its project manager. Mr. Schneider is a project manager for tenant build-outs, not landlord build-outs, and the SEC acted in ways similar to those of the many other tenants for whom he has worked. Transcript at 609-10. Lessor had little to do with the architect and the engineer other than purportedly hiring them (and even there, the contracts it was to have signed with these firms were being written by the SEC's lawyer to put the SEC in charge of their work). This was a tenant-controlled build-out, plain and simple. Mr. Foster testified in support of Mr. Schneider's hearing- day version of his activities during the build-out. The SEC's lease negotiator maintained that neither he, nor Mr. Schneider, nor anyone else at the SEC ever directed or supervised ISI or Flack & Kurtz on this job, and that Mr. Schneider was not authorized to direct those firms. Mr. Schneider, he insisted, had no role in resolving conflicts that arose on the job. Transcript at 514-15, 517, 596. Instead, Mr. Foster testified repeatedly, Ambassador -- the general contractor -- made all decisions on site and directed the work of the architect and the engineer. Id. at 515, 517, 536, 541, 596, 601. Some of this revisionist history was too much for Mr. Schneider. He admitted that Ambassador did not direct the work of ISI or Flack & Kurtz. PCG Interrogatory Answers at 10; Transcript at 783-85, 808. Messrs. DiGregorio and Shafran confirmed that Ambassador had no authority over the architect or the engineer. Transcript at 217; Respondent's Motion for Partial Summary Judgment, Exhibit B at 220. In an effort to identify someone other than himself who might have supervised and directed the day-to-day activities of ISI and Flack & Kurtz, he suggested that the architect supervised the engineer, and that the architect "interface[d] with the client." Transcript at 809-10. This conclusion, however, led him back to the position that "the client," which made all decisions, was actually him (or, in the event of a major issue, Mr. Foster). Id. at 718-19. We give Mr. Foster's testimony as to this subject no weight. This witness's statements were not based on his own observations; he admitted that he was on the job no more than once a month, and that his knowledge is derived primarily from what Mr. Schneider told him. Transcript at 542-43. Additionally, his conclusion as to who was in charge of the project not only appears fanciful on its face -- in the real world, general contractors do not tell architects and engineers what to design -- but was flatly contradicted by every knowledgeable witness who spoke about it. Consequently, as between the SEC and Lessor, the agency can escape liability for the cost of errors made by the architect in designing the security system only if the agency can demonstrate the existence of one of the exceptions stated in subparagraph 5(a)(iv) of the contract's Tenant Work Agreement. The SEC contends that one of the exceptions is present: the "cost [arose] in connection with . . . errors . . . arising from matters or information set forth in the Construction Documents," in that ISI s drawings were among the "Construction Documents." Reading the subparagraph in the way suggested by the SEC would make a mockery of the provision -- it would cause Lessor to be liable for mistakes flowing from errors in the architect's drawings, even where, pursuant to the same provision, that liability had been shifted to the agency because the agency supervised the architect. The only rational reading of the subparagraph is that the exception makes Lessor liable for the cost of mistakes flowing from errors in the architect's drawings if those drawings were made before the SEC took over supervision of the architect, or were so obvious that they should have been detected by Lessor. Because the SEC directed the work of the architect from the outset of the project, there was never a time before the SEC took over supervision. The SEC does not suggest that the mistakes were so obvious that Lessor should have found them. As between the SEC and Lessor, the former is liable for whatever costs were incurred due to "security rework." As to this matter and all others in dispute in this case, the parties agree that Lessor has paid the amount in question and seeks reimbursement from the SEC. Transcript at 431-33. Since the agency is liable for the "security rework" costs, it owes Lessor the $28,379 in dispute in this matter. Reroute firm alarm For the fire alarm system in the SEC's offices to operate properly, the system's wiring had to be connected to the building's class E system. Flack & Kurtz designed the system so that its wiring would be connected to the class E riser in telephone terminal boxes (TTB boxes) which were located in the west communications closet on each of the SEC's three floors. The class E riser on each of these floors -- and indeed, on each of the building's floors, except for the numerous floors occupied by Salomon Brothers -- is located in the mechanical equipment room, which is 100 to 150 feet distant from the west communications closet. To make the necessary connections, the electrician was required to run wires from each of the floors' west communications closet to its respective mechanical equipment room. The cost of this extra work, according to PCG, was $36,276. Transcript at 37-39, 53-54, 91, 265, 738-39; PCG Interrogatory Answers at 6; Appeal File, Exhibit 77. PCG, in its Errors and Omissions Analysis, allocated all of this cost to Flack & Kurtz. Transcript at 737-41; Appeal File, Exhibit 51 at 2. The SEC maintains that as between the agency and Lessor, Lessor is liable for the additional cost incurred for fire alarm system wiring. Two of the theories raised by the SEC in support of this conclusion -- the agency did not take over direction of the architect and engineer's work, and the work resulted from defects in construction documents -- fail for reasons we have already explained in discussing the "security rework" matter. The SEC advances a third theory as to the fire alarm: Lessor retains liability because it and Ambassador were both obligated by the contract to catch the design error, and neither did so. The contract has this to say about Lessor's responsibilities regarding base building drawings: Lessor must submit a copy of these drawings to the SEC. If the building is not as represented in the drawings, and the SEC incurs any costs or delays as a result, Lessor is responsible for those costs and delays. (On the other hand, if the SEC's design causes changes in the base building shell, the SEC is responsible for costs and delays incurred by Lessor in making such changes.) Lessor "shall be responsible for the coordination of the final Tenant Plans with the Base Building Drawings." Appeal File, Exhibit 2 at TWA-12 to -13. Lessor's building manager, engineer, and outside engineering consultant all reviewed the tenant plans to determine their compatibility with the base building drawings. Transcript at 34- 52, 76-77, 403; Stipulations A-E. None of them commented on the design which terminated the fire alarm system wiring in the west communications closets. Transcript at 45-46, 75-77, 99-102; Appeal File, Exhibits 56, 126; Appellant's Appeal File, Exhibit 7 at 2. The building manager and engineer explained that these reviews are to detect violations of building rules (such as no external air conditioning on certain sides of the structure) and obvious code violations. Transcript at 42, 48, 75-77. Generally, the engineer testified, Lessor does not review the location of TTB boxes because that location does not pose a problem for building operation or code compatibility. Id. at 51- 52. PCG's Mr. Schneider believed that Lessor should have noticed that the boxes were in the wrong place on the tenant plans. Id. at 741. He also seemed to acknowledge the reasonableness of Lessor's scope of review, however, when he testified, "The landlord . . . would have reviewed the drawings to make sure that the engineer hadn't put anything on the drawings that would adversely affect the [building's] system, either the HVAC [heating, ventilation, and air conditioning] system or the fire alarm system." Id. at 637; see also id. at 684-85. Of course, during their reviews, any of Lessor's employees and consultants could have spotted the fact that the tenant plans showed fire alarm wiring ending in locations where it would not connect with base building systems. We do not read the contract to require Lessor to engage in such detective work, however. The phrase "coordination of the final Tenant Plans with the Base Building Drawings" is not defined in the document. We hold that Lessor's understanding of the phrase, which involves a limited kind of coordination, is a reasonable reading. We therefore reject the SEC's proposition that the phrase imposes a more expansive duty on Lessor. The SEC s view of Ambassador's liability (and consequently Lessor s, since Lessor has accepted responsibility for Ambassador s errors and omissions) for the cost of additional fire alarm wiring is founded on the contract provision which states, "General conditions shall be pursuant to AIA [American Institute of Architects] Document A201, with such reasonable modifications as SEC shall request." Appeal File, Exhibit 2 at TWA-5. AIA Document A201 says that the general contractor "shall carefully study and compare the Contract Documents with each other and with [certain] information furnished by the Owner . . . and shall at once report to the Architect errors, inconsistencies or omissions discovered." Id., Exhibit 87 at 8. The document goes on to say, "The Contractor shall not be liable to the Owner or Architect for damage resulting from the errors, inconsistencies or omissions in the Contract Documents unless the Contractor recognized such error, inconsistency or omission and knowingly failed to report it to the Architect." Id. (emphasis added). The specifications book which ISI prepared for the project contains similar provisions. Id., Exhibit 53 at 01039-2. These provisions placed a clear limitation on the extent of Ambassador's liability for costs resulting from any failure to discover mistakes in contract drawings. There is no evidence that Ambassador recognized, prior to construction, that Flack & Kurtz had designed the firm alarm wiring in a way which appears to have been other than the most efficient possible. Thus, consistent with the very provisions which impose a duty on the general contractor, we must hold that contractor free from liability. All of the SEC's reasons for finding Lessor liable for the consequences of Flack & Kurtz's fire alarm system design are unavailing. Since Lessor is not liable for these costs, the SEC must pay Lessor the $36,276 which it attributes to them. Rework sprinkler As we explained in our earlier decision, the design for the space encompassed by the build-out called for the replacement of existing light fixtures with new, differently-shaped, energy- efficient fixtures. The existing sprinkler system had to be redesigned to avoid conflicts with the new lighting fixtures. According to the SEC, additional costs stemming from the redesign were caused by inadequate communication between Ambassador and Flack & Kurtz. The SEC maintains that the engineer gave a preliminary ceiling plan to the general contractor, which began construction of a sprinkler system before the lighting system had been designed; some of the sprinkler work had to be redone later. PCG's Errors and Omissions Analysis attributed $24,507 of the $42,237 in extra costs to Ambassador and the remainder to Flack & Kurtz. According to Lessor, the costs were entirely the result of the SEC's decision to replace the lighting fixtures, thereby making impossible the use of the existing sprinkler system. 96-1 BCA at 141,004. Having now taken a great deal of testimony on this matter, we are persuaded that the agency's view bears no relation to what actually occurred. The extra costs were nothing more than a garden-variety equitable adjustment to cover the value of added work. No errors or omissions were involved. In June of 1992, representatives of PCG, ISI, Flack & Kurtz, and Ambassador met to plan the approach to build-out construction. Ambassador's Jack Shafran and Martin Schneider (no relation to PCG's Evan Schneider) mentioned the probability that redesign of sprinkler, electrical, HVAC, and plumbing systems in the area to be occupied by the SEC was likely to lead to conflicts, within the area above existing ceilings, among the lines of the various systems. Transcript at 150-53, 225-27. All participants (including Evan Schneider, representing the SEC) agreed, however, that in the interest of completing the work quickly, and moving the agency into the space soon, the architects and engineers would make their designs after limited inspections of the space above the ceilings, rather than waiting to begin until after demolition had occurred. Id. at 161-62, 229. By early July, drawings on the basis of which Ambassador could seek subcontractor bids for portions of the work were nearly complete. On July 6, Evan Schneider decided to alter the design of the light fixtures. Transcript at 704. He directed Ambassador to release for bid, however, for all trades except electrical, the July 7 version of the drawings. Id. at 167-68, 229-31. Proceeding in this way "made sense," according to Mr. Schneider, taking into consideration the need to finish the project quickly. Id. at 793. The July 7 sprinkler drawings showed new locations for sprinkler heads, but not a detailed piping layout. Transcript at 167-69, 649. Abco Peerless Sprinkler Corp., which was selected by Evan Schneider to perform the sprinkler work on the project, bid the job as one for relocation of sprinkler heads only. Id. at 233, 675. Christopher Cronauer, Abco's field supervisor on the project, explained that in pricing such a job, one bases his bid on the number of sprinkler heads involved, figuring a cost per head on the assumption that each relocation will involve an average amount of pipe. Abco did not consider the type of light fixtures which would be installed when calculating its price. Id. at 676-78. Demonstrating consistency in taking this approach, Abco did not change its price once the light fixtures were redesigned, since the drawing showing the new fixtures did not show any sprinkler lines and did not change the number of sprinkler heads. Id. at 169, 232-35, 706. In mid-September, Abco began bringing to the jobsite materials it would need to perform its work. Transcript at 206, 657, 666. On September 22, Mr. Cronauer arrived on site and inspected the area in which he would be working. He quickly determined that the placement of electric lines or light fixtures, or sprinkler lines or heads, or all of the above, would have to be redesigned to avoid conflicts among them. Id. at 204, 661-62, 665-66. Mr. Cronauer called this situation to the attention of Ambassador, which in turn informed PCG, ISI, and Flack & Kurtz. Id. at 205, 772. Ambassador's project superintendent, James Conway, and a group of foremen (including Mr. Cronauer) surveyed the site to determine the extent of the conflicts. Id. at 216, 239, 299, 723. They provided their information to ISI, which, working with Flack & Kurtz, proposed a redesign. Id. at 240-42, 723-25. PCG's Evan Schneider, after receiving authorization from the SEC's Mr. Foster, then directed Ambassador and Abco to proceed with sprinkler installation on the basis of the new plans. Id. at 301-02, 732-33. The extra costs associated with the sprinkler system represented the value of work Abco performed in accordance with the new plans, but had not been earlier specified, to avoid potential conflicts that had been discovered. Transcript at 170- 71, 216-17. Mr. Cronauer testified that the price Abco charged for relocating heads as per the original drawings, plus the price it charged for installing more pipe to avoid conflicts, was the same as the price his firm would have charged for both parts of the job if it had had the later drawings when it made its bid. Id. at 681. Mr. Shafran did not accept Abco's first bid on the additional work; he negotiated a better price. Id. at 174-75, 243. Mr. Shafran viewed the cost of the extra work to be a good, competitive price, and Evan Schneider approved it without question. Id. at 175, 243-45. The SEC has inserted into the "sprinkler rework" matter several irrelevant issues. Surely, if ISI and Flack & Kurtz had waited to design the lighting and sprinkler systems until after demolition had taken place, the initial sprinkler drawings could have been complete and could have shown how to avoid conflicts between electrical and sprinkler systems. Design began earlier, however, with the approval of PCG, the SEC's project manager, and for perfectly rational reasons. Ambassador could not possibly have reviewed the drawings for inconsistencies with actual conditions on site until after demolition occurred, and there is no indication that if Ambassador had made its review any earlier, this would have had any impact on sprinkler costs. We do not find that Ambassador countenanced any unnecessary construction activity with regard to the sprinklers, either. Both Martin Schneider and Mr. Cronauer testified that Abco never had to remove any piping that it installed on the job. Transcript at 242, 681-82. Evan Schneider's contrary impression was based on his assumption that Abco had been installing pipe because it had brought materials onto the site. Id. at 721; see also id. at 771 (SEC's trial attorney's characterization of testimony). We have no reason to discredit the Martin Schneider/Cronauer view of events. (The term "rework" is thus a misnomer for this matter.) Finally, as to any doubts as to whether Ambassador proceeded in the sprinkler matter as expeditiously as it should have, we note Evan Schneider's testimony that "[f]rom a logistics perspective the job was getting knocked out on a proper schedule basis." Id. at 832. We hold that there is no reason to ascribe to Lessor any of the costs of sprinkler work on this project. The $42,237 in dispute as to this matter should be paid by the SEC to Lessor. Flash patch to level floors The contract requires Lessor to "[f]lash patch, scrape and level floor" at "Landlord s sole cost." In our opinion on the cross-motions for summary relief, we held that this provision made Lessor responsible for all reasonable costs of floor preparation. 96-1 BCA at 141,007. We reserved for later resolution a determination of the reasonableness of the amount billed by Chevy Chase Services Corp., which performed this work during the build-out of the SEC's quarters. Most of the work done on the build-out was funded through a "tenant allowance" of $5,561,230.77 which Lessor made available to the SEC as part of its contractual commitments. The allowance could be used by the agency "to be applied toward Tenant Work Costs, Tenant Plans Costs and any other fees of Lease related costs expressly determined in writing by SEC," as well as for rent or other specified expenses of the agency. 96-1 BCA at 141,002-03. In January 1993, the SEC's Douglas Foster directed Lessor to pay $39,302.68 from this allowance to Chevy Chase for its floor preparation work. Lessor complied with this direction. Appellant's Exhibit 6. Five months later, Mr. Foster asked Lessor to reimburse the allowance in the amount of $38,802.68 to cover the cost of floor preparation. (He accepted $500 of the larger sum, which had to do with carpet installation, as the agency's responsibility.) Appeal File, Exhibit 29. Lessor objected, maintaining that if floor repair had been necessary the SEC should have called that to Lessor's attention before proceeding with the work, so Lessor could have examined the floors and, if necessary, performed the work itself at an economical price. Nevertheless, "in a spirit of cooperation," Lessor agreed to pay $13,881.76 toward the floor repairs. 96-1 BCA at 141,007. When the build-out approached the stage at which floor preparation was necessary, Evan Schneider asked Ambassador whether it wanted to do the work. Ambassador declined; it wanted the firm which was providing carpeting to the SEC to prepare the floors. Transcript at 753, 757, 826. Chevy Chase was already involved in the project; it had been hired by PCG to supply the carpeting and vinyl composition tile. Id. at 442. Mr. Schneider engaged Chevy Chase, on a time-and-materials basis, to prepare the floors. Id. at 148, 218. Chevy Chase, which is a sales organization, subcontracted with a "labor shop," Adams and Gray, to perform the work itself. Id. at 447-48. Mr. Schneider contended that by hiring Chevy Chase directly, rather than through Ambassador, he saved the cost of Ambassador's markup. Id. at 819. The contract required the general contractor to perform all cleaning necessary in connection with the build-out, Appeal File, Exhibit 2 at TWA-5 (see also id., Exhibits 53 at 01500-4, 87 at 10), and Ambassador was cleaning the premises on a regular basis, Transcript at 224. This is standard practice on this sort of construction project. Id. at 445-46. Although Ambassador says that it was ready, willing, and able to sweep the floors for Adams and Gray's technicians, id. at 271, Mr. Schneider never asked Ambassador to do this cleaning. Id. at 757. Instead, he had Adams and Gray do something it had never done before in twenty years of working with general contractors -- bring laborers to the job to sweep floors clean. Id. at 448, 757. Chevy Chase billed for 182 hours of laborers time at $57.94 per hour -- $46.50 charged by Adams and Gray, plus a twenty-five percent markup. Appeal File, Exhibits 103-05; Transcript at 453- 58; see also Appeal File, Exhibit 29 at 3. The total charge for sweeping was $10,545.08. According to Ambassador's Jack Shafran, who has long experience in the construction field, especially in the capacity of general contractor, a laborer working a standard seven-hour day should be able to sweep about eight to ten thousand square feet per day. Transcript at 140. The SEC's space consists of 73,180 square feet. Appeal File, Exhibit 2 at 1. Thus, by Mr. Shafran's standards, laborers should have been able to sweep all of it in about eight man-days or fifty-six hours. Adams and Gray's process for cleaning was clearly less efficient that this; Gail Wasserman, Chevy Chase's president, acknowledged that the laborers sometimes swept the same rooms from four to seven times, as workmen of other trades kept entering the rooms. Transcript at 462-63. The most likely reason for this circumstance, we conclude, is a lack of coordination brought on by Mr. Schneider's decision to have these laborers work independent of the general contractor. See id. at 188. But for this decision, the sweeping could have been done by Ambassador, which could have organized the work such that floor preparation (including prerequisite cleaning) could have been done only after all other work had been completed. Lessor agrees that the base labor rates charged by Chevy Chase were appropriate. Appellant's Brief at 29. If laborers had swept for fifty-six hours, at a cost of $46.50 per hour plus the general contractor's prescribed thirteen percent markup -- ten percent for overhead plus three percent on top of that for general conditions (Appeal File, Exhibit 2 at TWA-4 to -5), the cost of sweeping would have been only $2,950.33. We conclude that $3,000 was a reasonable cost for sweeping. Chevy Chase also billed $25,101.60 for labor involved in flash patching itself -- 320 hours of technicians' time at a rate of $76.88 per hour ($61.50 charged by Adams and Gray, plus Chevy Chase's twenty-five percent markup), plus $500 for an unspecified number of hours. Appeal File, Exhibits 103-05; Transcript at 453-58; see also Appeal File, Exhibit 29 at 3, 5. Evan Schneider found this price acceptable. Transcript at 831. Lessor insists, based on Mr. Shafran's expert opinion, that the charge is excessive. Mr. Shafran testified that flash patching should cost between ten and thirty cents per square foot, depending on the condition of the floors, and that these floors were in average condition at the time that flash patching began. Id. at 145, 222-23. At twenty cents per square foot -- the cost of flash patching a floor in average condition -- preparing 73,180 square feet should have cost $14,636. Mr. Schneider's reason for considering the higher charge acceptable is that the floor preparers had to work under very crowded and dirty conditions. Transcript at 831. This explanation effectively applies to flash patching the problem of lack of coordination we found as to sweeping; because preparing floors for carpeting is virtually the last stage of this sort of construction, if the job sequence had been organized properly, the site would not have been crowded and dirty when the floor technicians arrived. The reasonableness of the price is also suspect in light of the fact that neither Mr. Schneider nor Ms. Wasserman nor anyone from Ambassador nor any other witness actually supervised the Adams and Gray technicians, so we have no evidence as to the efficiency of the way in which their work was accomplished. See id. at 224-25, 466-67, 829. Mr. Schneider and Ms. Wasserman's understanding of the basis of the pricing is suspect in another way, as well. These witnesses testified that the flash patching had to have been done on a time-and-materials basis; the job could not have been bid on a fixed-price basis since the floors could not be seen before the job was bid. Id. at 471-72, 821. As Lessor points out, however, the floors were bare when Chevy Chase came onto the job; demolition had been finished in August, and flash-patching did not begin until November. Id. at 296, 489. We accept $14,636, based on Mr. Shafran's testimony, as the fair price for the flash patching itself. Applying the thirteen percent that Ambassador would have charged if it had coordinated the work of the technicians, the total price to Lessor would have been $16,582.59 (which we round to $16,600). Adams & Gray billed $3,156 for materials used in the flash patching. Appeal File, Exhibits 103-05. Lessor does not challenge the reasonableness of this charge. With a thirteen percent markup, the cost of the materials would have been $3,575.75 (rounded to $3,600). We conclude that the reasonable cost of labor and materials involved in floor preparation -- sweeping and flash patching -- was $23,200 -- $15,602.68 less than the $38,802.68 that Chevy Chase charged for this work. The SEC is liable to Lessor for this excess amount. Power supply to thirteenth floor The contract provides that "[t]he lessor shall ensure that utilities necessary for operation are available." Specifically, Lessor represents and warrants that the electrical distribution system as presently existing is capable of supplying to Lessee, exclusively for Lessee's use within the Premises (and exclusive of any electricity necessary for HVAC or other uses or for areas which would be considered common or core areas on multi- tenanted floors . . .) at least six (6) watts per rentable square foot in the premises connected load. 96-1 BCA at 141,009. In asking for summary relief on a charge of $14,570 for electrical work, the SEC asserted that this amount represented the cost of bringing a separate power supply to the thirteenth floor of the building. 96-1 BCA at 141,009; see also Appeal File, Exhibit 1 at 4 of Settlement Offer. The SEC has offered no support for this theory, which is contrary to facts in the record of the case. In 7 World Trade Center, electricity is distributed vertically through bus ducts which contain copper bus bars. Transcript at 24-26. Floors 7 through 23, an area which includes all of the SEC's space, constitute a single zone, and an equal amount of electricity is available on each of these floors. Id. at 26-28. The SEC gets its electricity on the thirteenth floor not from a power supply on the twelfth floor, but from the floor 7-23 bus bar. Id. at 322. Both before the SEC moved in and at all times thereafter, there has been more than enough electric capacity within the building to accommodate the agency's needs as set out in the contract. Id. at 30. The SEC now asserts that the charge at issue is for installing a separate panel for the agency's use on the thirteenth floor. The Flack & Kurtz drawings on which bidders for the electric work subcontract based their bids included a note which states, "Electrical contractor to provide separate price for new bus tap" on the thirteenth floor. Appeal File, Exhibit 69. Each bidder gave a breakout price for this work, and $14,570 was the amount actually paid for it from the firm which was awarded the electric work subcontract. The "new bus tap" involved supply and installation of a separate panel for the SEC on the thirteenth floor. Transcript at 267, 270; Appeal File, Exhibit 88. The agency contends that the clause requiring Lessor to warrant that the electrical distribution system is "capable of supplying to Lessee, exclusively for Lessee's use within the Premises" commands that Lessor pay for the SEC's separate panel. We disagree with the agency's position. The phrase "exclusively for Lessee's use" requires only that Lessor provide to the SEC, regardless of whatever demands other tenants in the building make for electricity, as much power as is specified in the contract -- at least six watts per rentable square foot. The contract does not prescribe that the electricity be provided through a separate panel. The only specific reference to electric panels in the contract is, "Distribution panels must be circuit breaker type with 10 percent spare power load and circuits." Appeal File, Exhibit 2 at 22 of Solicitation for Offers. There is no evidence that Lessor failed to meet this requirement. The contract also contains provisions regarding the metering of electricity. It says: Lessee shall obtain its entire supply of electric current for the entire premises from Lessor on a submetered basis. . . . The meters and related fixtures and equipment to measure Lessee's consumption of electricity shall be installed by Lessor at Lessor's sole cost and expense and shall be capable of measuring the "demand" of Lessee's electric usage as well as the actual amount of electricity used by Lessee. Any additional risers, feeders or other equipment for proper service, or necessary to supply Lessee's electrical requirements, upon written request of Lessee, shall be installed by Lessor, at the sole cost and expense of Lessee (to the extent in excess of the requirements of the SFO [solicitation for offers]). Appeal File, Exhibit 2 at 14 of Addendum. Lessor met the metering requirement by providing a single panel for electricity on the thirteenth floor, since that panel was capable of metering separately, for each tenant on the floor (including the SEC), the electricity used by that tenant. Transcript at 322. The separate meter was, per the last-quoted sentence of the above contract provision, an additional item whose installation should have been at the sole cost and expense of the SEC. Costs questioned by audit The contract's Tenant Work Agreement states that "Lessor shall not be obligated or authorized to respond to or act upon any [plan, drawing, change order, or approval] unless and until such item has been initialed by the SEC Representative." Appeal File, Exhibit 2 at TWA-1. Douglas Foster and two other individuals were designated as "the SEC Representative." Id. In keeping with this provision, the billing practice during the build-out was as follows. Firms seeking to be paid for goods and services presented invoices to Lessor's building manager, Cynthia Rice. She sent them to Evan Schneider, who if he approved them, forwarded them to Mr. Foster. Mr. Foster then authorized Lessor (sometimes through Mr. Schneider) to pay the bills. Transcript at 63-66. Lessor's practice was not to pay bills unless it received written approval from Mr. Foster or another SEC representative. Id. at 82-83, 587-88. After the build-out was completed, outside auditors engaged by the SEC audited Lessor's accounts. In so doing, they discovered that contrary to the practice described in the preceding paragraph, Lessor had paid amounts on two groups of invoices which had not been approved by an SEC representative. One involved furniture, and the other electrical work. 96-1 BCA at 141,003, 141,009-10. The contract specifically contemplated that the SEC might order furniture through Lessor. Appeal File, Exhibit 2 at TWA-6. Mr. Foster asked Ms. Rice to order furniture for use in the SEC's new quarters. Ms. Rice's staff placed several orders. Transcript at 87-89, 109-14. Invoices covering $5,394 worth of furniture were paid by Lessor, but do not bear the written approval of an SEC representative. 96-1 BCA at 141,010. Mr. Foster acknowledged, however, that the SEC selected the furniture covered by the invoices, prepared the orders, and asked Lessor to order it and pay for it. Transcript at 552-53. Ray Reid, the office manager of the SEC's New York office, acknowledged that the agency received and has been using all of this furniture. Id. at 60-62; Appellant's Exhibit 5. Mr. Schneider informed Mr. Foster, in discussing issues remaining outstanding after the build-out had been completed, that the SEC had ordered "[a]n addit[i]onal $22,635 in post-move electrical work [which] was also directed by Ray Reid." Appellant's Exhibit 8 at 3; see also Transcript at 814. The SEC authorized payment of only $21,628 for this work. 96-1 BCA at 141,010. The SEC has not denied receiving the entire value of the work described by Mr. Schneider, nor has it explained why the record does not contain an authorization for payment of the last $1,007 for the post-move electrical work it ordered. The SEC's insistence that Lessor absorb these costs, since the record does not contain written authorizations, appears to us hypertechnical. The agency does not deny ordering or receiving the full value of the two items. It argues that Mr. Reid was not one of its "authorized representatives," but it does not indicate that any of the authorized representatives ever objected to his actions. To the contrary, the SEC's actions are consistent with a ratification of those actions. In these circumstances, the agency's refusal to give official written authorization for purchases it made is unreasonable; the agency should pay the $6,401 in question for the items. The other item questioned by the auditors was Lessor's payment of sales taxes in the amount of $610 on goods and services which were purchased for the SEC. The SEC is actually exempt from state and local sales taxes, as Lessor knew. 96-1 BCA at 141,009. Mr. Foster testified that in reviewing invoices, if he discovered that one included sales tax, he would scratch out the tax amount before approving the invoice for payment. Transcript at 548-49. In at least one instance, however, covering the majority of the $610, he specifically marked the invoice as approved for payment without making any comment about the tax. Appeal File, Exhibit 10 at 23. Both sides have erred here: the SEC should not have approved the sales tax portion of the invoices for payment, and Lessor should not have paid it. As we have earlier indicated, with respect to the floor preparation, furniture, and post-move electrical work, we do not view the agency's formal approval of payment as dispositive. Because items purchased for the SEC are exempt from sales tax, the taxes should not have been paid. The agency is not liable under the contract for reimbursing Lessor for this expense. This ruling, of course, does not preclude Lessor from taking, or the SEC from assisting in, an action which might have been more productive earlier: seeking a refund from the relevant taxing authorities. Motion for partial summary relief Shortly before our hearing on the merits of this case, the SEC filed a motion for partial summary relief. The motion addressed the agency's liability to Lessor for costs the agency thought had resulted from errors or omissions of Flack & Kurtz. We reserved ruling on the motion, since in the event we found that no such liability existed, the motion would become moot. Because we have made a contrary finding as to liability, we now proceed to consider the motion. According to the Errors and Omissions Analysis prepared by PCG's Evan Schneider, Flack & Kurtz was responsible for additional costs of $64,938, including the $17,730 as to the sprinkler system and $36,276 as to the fire alarm system noted above. Lessor paid Flack & Kurtz this amount, but the SEC has not reimbursed Lessor for it. Respondent's Motion for Partial Summary Judgment, Statement of Undisputed Facts  8-13. In 1993, the SEC told Flack & Kurtz that it thought the engineer owed it the $64,938 and asked Flack & Kurtz to reimburse the agency in that amount. Statement of Undisputed Facts  14. After discussions between the SEC and Flack & Kurtz, the SEC reduced its demand to $55,000. Id.  15; Transcript at 529. Late in 1994, Lessor's Cornelius Lynch attempted to arrange an overall settlement with regard to disputes remaining from the build-out. As part of this effort, he met with Flack & Kurtz's Henry DiGregorio. Mr. DiGregorio agreed that Flack & Kurtz would provide Lessor with $42,200 to settle its portion of the disputes. Statement of Undisputed Facts  16-19; Transcript at 346-49. In June 1995, Flack & Kurtz did make this payment, which it said was "in complete settlement of claims brought by the SEC." Statement of Undisputed Facts, Attachment A at 1-2. In return, Lessor gave Flack & Kurtz the following statement, entitled "INDEMNITY": TO ALL WHOM THESE PRESENTS SHALL COME OR MAY CONCERN, KNOW THAT 7 World Trade Company, L.P., a limited partnership organized under the laws of the State of Delaware, as INDEMNITOR, in consideration of the sum of FORTY-TWO THOUSAND TWO HUNDRED DOLLARS and other good and valuable consideration ($42,200.00), received from Flack + Kurtz, as INDEMNITEE, receipt whereof is hereby acknowledged, indemnifies the INDEMNITEE and the INDEMNITEE's heirs, executors, administrators, successors and assigns from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims and demands whatsoever, in law, admiralty or equity, which may be asserted as against the INDEMNITEE by the United States Securities and Exchange Commission (the "SEC") by reason of those matters specified in that certain letter [requesting payment of $64,938], as amended by the letter . . . which reduced the dollar amount of the SEC's potential claim to $55,000. Id. at 3-4. The SEC maintains that "were [Lessor] to prevail in its claim for $57,394 [on] the [Flack & Kurtz] issues, it would have been paid twice for one claim: $42,200 by [Flack & Kurtz] and $57,394 from the U.S. Treasury. This result cannot be allowed and [Lessor's] claim for this amount must be dismissed." Respondent's Motion for Partial Summary Judgment at 12. Lessor responds that the indemnity agreement is exactly what its name implies -- it commits Lessor to pay to the SEC, within the $55,000 that the agency sought, whatever amounts are ever determined to be owing from Flack & Kurtz to the SEC. As to this sum, Lessor is acting as an insurer in exchange for a premium which Flack & Kurtz has paid. We agree with Lessor's characterization of the agreement. As a consequence of this decision, Lessor may have received two payments regarding the Flack & Kurtz issues, but the payments are for two very different things. We deny the motion. Decision The appeal is GRANTED IN PART. We have found in this opinion that the SEC is obligated to pay to Lessor the sum of $143,465.68 on the various claims discussed above. In our earlier opinion in this case, on cross-motions for summary relief, we held that on a claim pertaining to window blinds, the SEC is obligated to pay $4,445 to Lessor. The total amount owed by the agency is $147,910.68. This sum is to be paid with interest from August 23, 1995. 41 U.S.C.  611 (1994). _________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ ROBERT W. PARKER ALLAN H. GOODMAN Board Judge Board Judge