Board of Contract Appeals General Services Administration Washington, D.C. 20405 _______________________ DENIED: October 27, 1998 _______________________ GSBCA 14222 MMANTEC, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Lee C. Watkins, III, Contract Administrator of MManTec, Inc., Atlanta, GA, appearing for Appellant. George U. Lane, Office of Regional Counsel, General Services Administration, Atlanta, GA, counsel for Respondent. Before Board Judges PARKER, VERGILIO, and DeGRAFF. DeGRAFF, Board Judge. The General Services Administration (GSA) and MManTec, Inc. entered into a contract that required MManTec to provide facility management services. MManTec claims that GSA either breached the contract or took advantage of a latent ambiguity in the wording of the contract in order to avoid paying MManTec for equipment depreciation. The parties elected to submit the case for a decision based upon the written record. Because we do not find either that GSA breached the contract or that the contract was ambiguous, we deny the appeal. Findings of Fact On February 25, 1992, GSA issued a solicitation for commercial facility management services to be performed at the Federal Building-Courthouse, Federal Building-Courthouse Annex, and Federal Building Garage in Nashville, Tennessee. Only small business concerns were eligible for award of the contract. Exhibit 1 at 4, 52, 74, 108. On April 12, 1993, GSA awarded the facility management services contract to MManTec. Exhibit 4. The contract was for a term of one year, beginning June 1, 1993, and provided that GSA could exercise options for four additional one-year periods. The contract made it clear that GSA was not obligated to exercise its option to extend the contract term past the initial year of service. Exhibit 1 at 43, 44, 74, 108; Exhibit 5.1. The contract was a cost reimbursement plus award fee type of contract and contained a ceiling price per year for furnishing seven listed services, including facility management, operations and maintenance, elevator maintenance, maintenance repairs, architectural and structural maintenance, janitorial services, and utilities and fuels. Exhibit 1 at 6, 52. With certain exceptions not relevant here, the contract provided that MManTec was required to furnish "everything required to perform work under this contract." Exhibit 1 at 57. Concerning facility management, the contract stated that MManTec was required to provide "all needed . . . equipment [and] vehicles . . . ," with exceptions not relevant to this appeal. Exhibit 1 at 254. As for operations and maintenance, architectural and structural maintenance, and janitorial services, the contract stated that MManTec was required to provide "all . . . equipment." Exhibit 1 at 259, 278, 286. The contract provided that GSA would pay MManTec "when requested as work progresses . . . in amounts determined to be allowable by the Contracting Officer in accordance with Subpart 31.2 of the Federal Acquisition Regulation (FAR) in effect on the date of this contract . . . ." Exhibit 1 at 105. On June 9, 1993, GSA's Regional Inspector General for Auditing prepared a report concerning its audit of MManTec's accounting system. In the report, the GSA auditor stated that the contracting officer should determine whether equipment would be charged directly to the contract or whether it would be depreciated over the useful life of the equipment. The auditor also stated that the contracting officer would need to determine who owned the equipment if it was purchased for the contract and paid for by GSA. Exhibit 10. On July 9, 1993, MManTec submitted its initial invoice for its June 1993 costs. Exhibit 11. MManTec's vice president says in an affidavit that when MManTec submitted this invoice, questions arose "concerning how the depreciation costs of capital assets that MManTec was purchasing for use in the Contract" would be paid by GSA. MManTec's vice president also says that the initial invoice showed that MManTec intended to invoice GSA for the "entire five year depreciation cost of each capital asset" at the time MManTec purchased the asset. Exhibit 112. The auditor determined that MManTec invoiced for its equipment costs, and not depreciation costs. Exhibit 11. The GSA contracting officer's view of the questions that arose concerning equipment costs is consistent with the determination of the auditor, and slightly different from the view of MManTec's vice president. The GSA contracting officer says in an affidavit that questions arose as to how MManTec was to be reimbursed for the costs of equipment purchased for the contract. According to the contracting officer, MManTec read the contract to say that equipment purchased for the contract was being purchased for GSA, which meant that MManTec could immediately invoice for the full purchase price of the equipment. Exhibit 15. The contracting officer asked MManTec for an amended invoice, which MManTec supplied on August 2, 1993. Exhibit 11. In order to avoid future disputes concerning this issue, says the contracting officer, the parties signed contract modification PC02. Exhibit 15. MManTec signed contract modification PC02 on August 27, 1993, and GSA signed the modification on September 7, 1993. The modification stated that it was issued pursuant to the contract's changes clause, and that its purpose was to "incorporate into the contract clarifications" regarding two items. The first item was this: Equipment purchased by the contractor specifically for this contract will be the sole property of the contractor. The Government will pay depreciation costs for such equipment over the life of the contract. The modification does not state that either party received any consideration for the modification. Exhibit 5.2. The contracting officer says that the "life of the contract" referred to in the modification "was of one year duration subject to four (4) potential one year renewal options for a potential but not guaranteed 'life' of five (5) years." Exhibit 15. MManTec's vice president says in her affidavit that, before she signed modification PC02, she clearly recalls asking the contracting officer what would happen if GSA did not exercise its options for the entire five years. She says that she distinctly recalls the contracting officer stating that GSA would "pay out all of MManTec's remaining depreciation expenses as a claim." Exhibit 112. The contracting officer's affidavit does not mention this conversation. Exhibit 15. On September 20, 1993, the contracting officer sent a letter to MManTec concerning a preliminary report of an audit of MManTec's amended invoice for June 1993. Exhibit 101. The contracting officer explained the reasons for the difference between the amount of MManTec's invoice and the amount that the auditor approved for payment. Concerning the cost of capital assets, the contracting officer summarized the auditor's conclusions as follows: MManTec expensed capital assets. Contract modification #PC02 and [Cost Accounting Standard (CAS)] 9904.403-30 require capital assets to be amortized over 60 months, the life of the contract.[foot #] 1 Exhibit 101. MManTec's vice president says that this letter confirmed her understanding that GSA would reimburse MManTec for all of its depreciation costs when it said that capital assets would be "amortized over 60 months, the life of the contract." Exhibit 112. GSA exercised the first contract option, from June 1, 1994, through May 31, 1995, and the second contract option, extending the contract from June 1, 1995, through May 31, 1996. Exhibits 5.6, 5.12. GSA also extended the contract term for the period June 1, 1996, through July 31, 1996. Exhibit 5.19. GSA did not exercise its option to renew MManTec's contract for a fourth or fifth year. Complaint 12; Answer 12. On September 27, 1996, MManTec submitted a claim to the contracting officer for $25,043.95 for what it called the "balance remaining on amortized equipment expenses." The claim listed twelve vendors and described the equipment that each vendor supplied, the date MManTec incurred the expense for the equipment, the total expense, and the number of months over which MManTec amortized the equipment. MManTec amortized all of the equipment over the number of months between the date it purchased the piece of equipment and May 31, 1998, which was sixty months after MManTec began performing the contract.[foot #] 2 The claim then listed the amount that MManTec invoiced each month (the total expense divided by the number of months over which MManTec amortized the equipment), the "months remaining" (for all but two items, this was twenty-two months), and the balance that MManTec was claiming (the amount invoiced each month multiplied by the months remaining). Exhibit 6. The contracting officer denied the claim on March 6, 1997, and this appeal followed. Exhibits 7, 8. Discussion MManTec argues that GSA breached the contract. MManTec also argues that GSA is liable to MManTec because the language contained in modification PC02 is latently ambiguous. We reject both of MManTec s arguments, for the reasons set out below. ----------- FOOTNOTE BEGINS --------- [foot #] 1 This contract was exempt from the Cost Accounting Standards because it was a contract with a small business concern. 48 CFR 9003.201-1(b)(3) (1993). [foot #] 2 The record does not establish the useful life of the equipment. ----------- FOOTNOTE ENDS ----------- Breach of contract In its complaint, MManTec alleges that GSA asked MManTec to amortize its equipment costs, that MManTec agreed to do so with the understanding that the entire cost of the equipment would be reimbursed by GSA over a period of time, and that GSA's failure to reimburse MManTec for the cost of equipment constitutes a breach of contract. The breach count contained in MManTec's complaint does not mention depreciation, and says instead that MManTec is "entitled to full reimbursement of its allowable costs of acquisition of the Equipment . . . ." Complaint 18-22. MManTec s brief contains no argument in support of this allegation. GSA s failure to reimburse MManTec for the cost of its equipment does not constitute a breach of contract. The bargain that the parties struck in their contract called for GSA to purchase facility management services from MManTec. Several contract provisions required MManTec to furnish everything, including all of the equipment, that it needed in order to provide services to GSA. As PC02 made clear, whatever equipment MManTec purchased for the contract belonged to MManTec, and not to GSA. Because the contract did not obligate GSA to purchase equipment, GSA did not breach the contract by not reimbursing MManTec for the cost of its equipment. In its brief, MManTec makes a breach of contract argument that is not founded upon the allegations contained in its complaint. The basis for this argument is PC02's statement that GSA would reimburse MManTec for its equipment depreciation costs "over the life of the contract." In its brief, MManTec says that the parties defined "the life of the contract" to mean "sixty months," that MManTec used this definition when it executed PC02, and that GSA breached this provision by failing to pay depreciation costs over sixty months. Appellant s Initial Brief at 4-5. Before we address the merits of MManTec's argument, we note that we do not know whether the cost that MManTec calls "depreciation" is, in fact, depreciation. According to the FAR, depreciation is a charge to current operations which distributes the cost of a capital asset over the estimated useful life of the asset in a systematic and logical manner. 48 CFR 31.205-11(a) (1993). MManTec amortized the amount that it paid for equipment over the number of months between the date it purchased the piece of equipment and May 31, 1998, which was sixty months after MManTec began performing the contract. There is no evidence to establish that the number of months over which MManTec amortized the cost of its equipment was the same as the useful life of the equipment. In order to address the merits of MManTec's argument, we will assume that MManTec distributed the cost of its equipment over the useful life of the equipment. Turning to the merits, MManTec has not persuaded us that, when it signed PC02, it defined "the life of the contract" to mean "sixty months." As support for its position, MManTec relies upon its complaint and an affidavit submitted by its vice president during the course of this appeal. Neither the complaint nor the affidavit states that MManTec interpreted "the life of the contract" as meaning "sixty months" when MManTec signed PC02. The vice president says in her affidavit that she understood that GSA would pay a claim for MManTec's remaining depreciation expenses if GSA did not exercise its options for the entire five years. The complaint repeats the vice president's understanding. Complaint 10. Both the complaint and the affidavit, therefore, suggest that MManTec understood when it signed PC02 that GSA might make payments to MManTec over a period shorter than sixty months. We are not persuaded that GSA defined "the life of the contract" in PC02 as meaning "sixty months." MManTec points us to the contracting officer's September 20, 1993 letter to MManTec, which said that PC02 and a cost accounting standard required MManTec to amortize its capital assets "over 60 months, the life of the contract." MManTec says that this language shows that GSA defined "the life of the contract" in PC02 to mean "sixty months." We are not convinced that this is a fair reading of the September 20 letter, given its content and its context. In order to read the September 20 letter as supporting MManTec's position, we would have to disregard the fact that the portion of the letter upon which MManTec relies is not accurate. Although the letter says that both PC02 and a cost accounting standard "require[d] capital assets to be amortized over 60 months, the life of the contract," the cost accounting standard did not require anything at all because it did not apply to a small business such as MManTec, and PC02 did not require MManTec to amortize its capital assets over sixty months or any other specified amortization period. In addition, in order to read the letter as supporting MManTec's position, we would have to ignore the context in which it was written. The letter, which is dated two weeks after the contracting officer signed PC02, concerned a preliminary report of an audit of an invoice that MManTec submitted to GSA before the parties signed PC02. The stated purpose of the letter was to explain to MManTec the difference between the amount of the invoice and the amount of GSA's payment to MManTec. The letter explains that the audit report reduced the amount that GSA would pay MManTec for capital assets because MManTec's invoice included the expenses that it incurred in purchasing those assets and did not amortize their costs. The letter does not purport either to interpret the language of PC02 or to discuss the length of time that GSA would reimburse MManTec for its depreciation costs. The only basis for MManTec's argument that GSA breached the contract by refusing to reimburse MManTec for equipment depreciation costs is MManTec's assertion that the parties defined the words "the life of the contract" in PC02 to mean "sixty months," and that MManTec adopted this definition before it signed PC02. Because we are not persuaded that MManTec's assertion is supported by the facts, we do not find GSA's refusal to reimburse MManTec for equipment depreciation costs for sixty months to be a breach of contract. Latent ambiguity In its complaint and in its brief, MManTec contends that GSA is liable to MManTec because the language of PC02 is ambiguous. Complaint 30-33; Appellant s Initial Brief at 5-8. PC02 reads as follows: Equipment purchased by the contractor specifically for this contract will be the sole property of the contractor. The Government will pay depreciation costs for such equipment over the life of the contract. According to MManTec, the words "the life of the contract" are latently ambiguous. We do not find that the language of PC02 is ambiguous. Contract language is ambiguous if it is "susceptible of two different interpretations, each of which is found to be consistent with the contract's language." Sun Shipbuilding & Drydock Co. v. United States, 393 F.2d 807, 815-16 (Ct. Cl. 1968) (citation omitted). When deciding whether a contract is ambiguous, we begin by looking at its plain language. McAbee Construction, Inc. v. United States, 97 F.3d 1431 (Fed. Cir. 1996). We examine the entire contract and interpret it "in a manner which gives reasonable meaning to all its parts and avoids conflict or surplusage of its provisions." Granite Construction Co. v. United States, 962 F.2d 998, 1003 (Fed. Cir. 1992). The plain language of PC02, which says that GSA will pay depreciation costs over "the life of the contract," seems clear. Courts and boards have consistently referred to a contract's "life" as the time that a contract was in effect or in existence. A.B.G. Instrument & Engineering, Inc. v. United States, 593 F.2d 394 (Ct. Cl. 1979); David J. Joseph Co. v. United States, 82 F. Supp. 345 (Ct.Cl. 1949); Service Technicians, Inc. v. United States, 37 Fed. Cl. 383 (1997); 9th & D Joint Venture v. General Services Administration, GSBCA 13418, 96-2 BCA 28,304, aff'd, 108 F.3d 1394 (Fed. Cir. 1997) (table); Computer Valley International, Ltd., ASBCA 40496, 94-1 BCA 26,297 (1993); General Metals Corp., ASBCA 4962, 59-1 BCA 2118.[foot #] 3 As these and other decisions ----------- FOOTNOTE BEGINS --------- [foot #] 3 These are just a few of several hundred such decisions. In addition, the Federal Acquisition Regulation uses (continued...) ----------- FOOTNOTE ENDS ----------- establish, "the life of the contract" is frequently used in solicitations and contracts to mean the time that a contract is expected to be in existence or in effect. Reading the plain language of PC02 leads to the conclusion that GSA was required to reimburse MManTec for depreciation costs that it incurred over the time that the contract was in existence. This reading of PC02 does not conflict with any other contract provision. MManTec suggests that "the life of the contract" can also be interpreted to mean something other than the time that the contract was in existence, such as "sixty months." Interpreting "the life of the contract" to mean "sixty months," however, would distort the plain language of PC02. A contract with a one-year term that can be extended at the Government's option for four additional one-year terms has a possible maximum life of sixty months. But, the "life" of such a contract is not guaranteed to be sixty months and ends when the Government does not exercise its option to extend the contract's term. In addition, interpreting "the life of the contract" to mean" sixty months" would create an ambiguity because there would be at least two ways to read PC02, each of which would lead to a conflict with other provisions of the contract. First, one could read PC02 as saying that GSA was required to pay depreciation costs over sixty months because the contract was required to last for sixty months. This, however, would conflict with the contract provisions that made it clear that GSA was not required to exercise its option to extend the contract term past the initial year. Second, one could read PC02 as saying that GSA was required to pay depreciation costs over sixty months, regardless of whether the contract lasted for sixty months. This, however, would mean that GSA would be required to continue to make payments for depreciation costs that would accrue after the contract ended, which would conflict with the contract provision that stated that GSA would pay MManTec as work progressed. This cost-reimbursement contract did not provide a mechanism that GSA could use to continue to reimburse MManTec for its costs after MManTec stopped performing any reimbursable work, unless GSA terminated MManTec's performance for the convenience of the Government. Even if we were able to find a latent ambiguity in PC02's language, we could not resolve the ambiguity in favor of MManTec. If contract language is latently ambiguous, we apply the doctrine of contra proferentem and resolve the ambiguity in favor of the party that did not draft the latently ambiguous language, so long as the non-drafting party's interpretation of the language is reasonable and so long as the non-drafting party actually relied upon its interpretation of the ambiguous language when it ----------- FOOTNOTE BEGINS --------- [foot #] 3 (...continued) the life of the contract dozens of times to mean the time that a contract is in effect or in existence. ----------- FOOTNOTE ENDS ----------- prepared its bid. Fruin-Colnon Corp. v. United States, 912 F.2d 1426 (Fed. Cir. 1990); Newsom v. United States, 676 F.2d 647 (Ct. Cl. 1982). MManTec has not established either that it relied upon its reading of PC02 or that its reading of PC02 was reasonable.[foot #] 4 MManTec says that it relied upon its interpretation of "the life of the contract" when it submitted its proposal, when it signed PC02, and "at all times thereafter. Appellant s Initial Brief at 7-8. Clearly, MManTec could not have relied upon its interpretation of these words when it submitted its proposal, because the words are found in PC02 which did not exist until after the contract was signed. As explained above in our discussion of MManTec's breach claim, the evidence does not establish that when MManTec signed PC02, it interpreted "the life of the contract" to mean "sixty months." Finally, even if MManTec relied upon its interpretation of PC02 after it signed PC02, such belated reliance would not satisfy the requirement set out in Fruin-Colnon. MManTec says that its reading of the life of the contract is reasonable because it has read "the life of the contract" to mean "sixty months" for the past five years. Appellant's Initial Brief at 7. The length of time that MManTec reads "the life of the contract" to mean "sixty months" does not establish whether its reading is reasonable. An unreasonable reading does not become reasonable simply because time passes. MManTec also says that its reading of "the life of the contract" is reasonable because GSA s September 20, 1993 letter confirms MManTec s reading of that phrase. Appellant's Initial Brief at 7-8. As we explained above in our discussion of MManTec's breach claim, the September 20 letter does not purport either to interpret the language of PC02 or to discuss the length of time that GSA would reimburse MManTec for its depreciation costs. Thus, the letter does not confirm MManTec's reading of PC02. There are at least three reasons why MManTec's interpretation of "the life of the contract" is not reasonable. First, as explained above, reading "the life of the contract" to mean "sixty months" would create an ambiguity in that there would be at least two ways to read PC02. On the one hand, PC02 might say that GSA was required to pay depreciation costs over sixty months because the contract was required to last for sixty months. On the other hand, PC02 might say that GSA was required to pay depreciation costs over sixty months, regardless of whether the contract lasted for sixty months. As discussed ----------- FOOTNOTE BEGINS --------- [foot #] 4 In addition, MManTec's evidence establishes only that GSA forwarded PC02 to MManTec for signature, and not that GSA drafted PC02. GSA, however, has not denied that it drafted PC02 and our resolution of this appeal does not depend upon who drafted PC02. ----------- FOOTNOTE ENDS ----------- earlier, either of these readings of PC02 would lead to a conflict with other provisions of the contract. A second reason why MManTec's interpretation of "the life of the contract" is unreasonable is because it means that GSA would be required to reimburse MManTec for all of its equipment costs, even though the contract, including PC02, said that MManTec was supplying services, and not equipment, to GSA. MManTec's claim asked GSA to pay for all of the equipment costs for which MManTec had not been reimbursed when the contract ended. This is also what MManTec requests in its complaint. MManTec's request is based upon PC02, which it reads as requiring GSA to reimburse MManTec in full for the cost of its equipment. But, this is not the bargain that the parties originally struck in their contract and this bargain was reinforced, not altered, by PC02. Looking at the parties original bargain, the contract stated that GSA was purchasing services, and that MManTec was responsible for providing the equipment that it would need to provide those services. Also, the contract said that GSA would pay MManTec in accordance with subpart 31.2 of the FAR, which provides that depreciation is an allowable contract cost. 48 CFR 31.205-11(c). Despite these provisions, when MManTec entered into the contract, it was apparently under the misapprehension that GSA would pay for MManTec's equipment costs. The auditor saw this in the first invoice that MManTec submitted. In an affidavit submitted during the course of the appeal, MManTec's vice president said that MManTec's first invoice was for the "entire five year depreciation cost of each capital asset." This confirms that MManTec misunderstood the difference between depreciation costs and equipment costs. Depreciation is a charge to current operations which distributes the cost of a capital asset over the estimated useful life of the asset in a systematic and logical manner. 48 CFR 31.205-11(a). Invoicing for five years of depreciation at one time is not invoicing for depreciation at all, because it is not distributing the cost of an asset over its life. MManTec s invoicing for five years of depreciation amounted to invoicing for the cost of its equipment. After MManTec prepared its first invoice, PC02 was issued in order to make clear what the contract required. Although PC02 was issued pursuant to the contract's changes clause, it states on its face that it was a clarification of the contract. PC02 plainly states that GSA would reimburse MManTec for equipment depreciation costs, just as subpart 31.2 of the FAR says, and that MManTec would own the equipment for which it paid. If PC02 had actually changed the contract to require GSA to pay for MManTec's equipment costs instead of depreciation costs, it would not have stated that the "[e]quipment purchased by the contractor . . . will be the sole property of the contractor." Neither would it have stated that GSA would pay equipment depreciation costs. If PC02 had changed the contract to require GSA to pay for MManTec's equipment, it would be reasonable to expect that GSA would have required MManTec to provide some consideration to GSA, but PC02 does not show that MManTec paid any consideration in connection with PC02. It is not reasonable to read "the life of the contract" in PC02 as requiring GSA to reimburse MManTec for the full cost of its equipment, when both the contract as originally written and PC02 say that GSA was obligated to reimburse MManTec for depreciation costs. A third reason why it is unreasonable for MManTec to read PC02 as saying that GSA is responsible for paying costs that MManTec distributed over all of the option years, is that GSA did not have to exercise its option to extend the term of the contract. It is well established that when an agency does not exercise an option to extend a contract, a contractor cannot recover for costs that it believed it would recover during the option years. An agency s decision concerning the exercise of an option is committed to the agency s discretion, and a contractor s decision to spread its costs over option years creates a risk which belongs to the contractor.[foot #] 5 Plum Run, Inc., ASBCA 46091, 97- 2 BCA 29,193 (no recovery of depreciation costs and other costs that the contractor expected to spread over the initial year and four option years); Pennyrile Plumbing, Inc., ASBCA 44555, 96-1 BCA 28,044 (no recovery of startup costs that the contractor intended to amortize over the initial year and four option years); Integrated Clinical Systems, Inc., VABCA 3745, 95-2 BCA 27,902 (no recovery of lease costs that contractor agreed to pay to a third party for five years, when the contract with the agency was for a one-year term with four one-year options); Arieb Development Co., ASBCA 44953, 95-2 BCA 27,856 (no recovery of costs that the contractor amortized over a seven-month initial term plus a six-month option period; contractor acquired no rights with respect to the period of time subsequent to the expiration of the basic contract term ); Sample Enterprises, ASBCA 44564, 94-3 BCA 27,105 (no recovery when the contractor amortized its costs over five years based upon its expectation that the agency would lease vehicles from the contractor for the initial year and for four option years); Monarch Enterprises, Inc., ASBCA 31375, 86-3 BCA 19,227 (no recovery of startup costs that the contractor intended to amortize over the initial year and two option years). MManTec says that this line of cases is irrelevant to its appeal because it does not argue that the contracting officer abused her discretion when she decided not to exercise the option to extend the contract. Appellant's Reply Brief at 3. To us, ----------- FOOTNOTE BEGINS --------- [foot #] 5 MManTec says that it does not assert that the contracting officer acted outside of her discretionary authority when deciding to not exercise the two final Contract option periods. Appellant s Reply Brief at 3. MManTec does not allege any bad faith or other abuse of discretion by GSA in deciding not to exercise its options. ----------- FOOTNOTE ENDS ----------- the cases seem quite relevant. Like the litigants in the cases cited in the preceding paragraph, when MManTec decided to amortize some of its costs (equipment depreciation) over all of the option years, it assumed the risk that the government would not exercise all of its options to extend the terms of the contract. MManTec says that its appeal should be decided differently from Integrated Clinical Systems, because the appellant there did not make a claim of ambiguity. Appellant's Reply Brief at 7. The fact that Integrated Clinical Systems, unlike MManTec, did not claim that its contract was ambiguous does not dictate that the two cases should be decided differently, because we do not find MManTec's contract to be ambiguous. MManTec also says that its appeal should be decided differently from Integrated Clinical Systems because the appellant there assumed "on its own" that the Government would exercise all of the option periods. MManTec says that it, however, relied upon the assurances of the contracting officer that there would be "a claim-induced pay-out of remaining equipment depreciation expenses in the event of Contract non- renewal prior to year five," and upon the contracting officer's September 20, 1993 letter which MManTec says is "substantially consistent" with the contracting officer's statement. Appellant's Reply Brief at 7. In Integrated Clinical Systems and all of the other cases cited above, the contractors relied upon something their reading of their contracts or statements made by Government officials when they decided to spread their costs over option years. There, as here, the contracts clearly stated that the Government did not have to exercise its option to extend the terms of the contracts. If a contractor chooses to ignore such a statement, as did both MManTec and the contractors in the cases cited above, it does so at its own peril. MManTec's reliance upon a statement made by the contracting officer does not relieve MManTec from the risk that it assumed when it amortized its depreciation costs over a period that included all of the option years. MManTec suggests for the first time in its reply brief that the contracting officer falsely assured MManTec that GSA would pay a claim for all of MManTec's equipment depreciation costs in order to secure MManTec's signature on PC02. Appellant's Reply Brief at 7. This argument again reflects MManTec's apparent misunderstanding concerning the terms of the contract. As we discussed earlier, the contract provided that GSA was purchasing services from MManTec. The contract also provided that MManTec would provide its own equipment, and that GSA would pay MManTec for depreciation costs. PC02 does nothing more than reiterate these other contract provisions by stating that equipment purchased by MManTec would belong to MManTec, and that GSA would pay depreciation costs for the equipment. If MManTec had not signed PC02, GSA would have paid MManTec equipment depreciation during the life of the contract and MManTec would have owned the equipment when the contract ended. Even if the contracting officer's statement induced MManTec to sign PC02, the inducement was not to MManTec's detriment because PC02 added nothing to the existing contract and did not alter the legal rights and obligations of the parties. Conclusion When the Government reimburses a contractor for the cost of equipment by reimbursing the contractor for equipment depreciation costs, it is the contractor's responsibility to establish the useful life of each piece of equipment and to calculate its depreciation costs accordingly. If a piece of equipment has a useful life of twenty years, for example, the contractor is supposed to amortize the cost of that piece of equipment over twenty years. If the contractor uses that piece of equipment to perform a contract that lasts for eight years, the Government will reimburse the contractor for eight years of depreciation costs. When the contract ends after the eighth year, the contractor owns the equipment and can use it for the remaining twelve years of its useful life, and the Government will have fully reimbursed the contractor for the equipment depreciation costs that accrued while the contractor was performing the contract. GSA did not breach the contract by not reimbursing MManTec either for the entire cost of its equipment or for equipment depreciation costs over sixty months, and the contract is not ambiguous. When GSA did not exercise its option to extend the contract after thirty-eight months, the contract came to an end. The contract did not require GSA either to continue to pay MManTec after the contract ended, or to reimburse MManTec for depreciation that MManTec scheduled to accrue after the contract ended. Until the end of the thirty-eighth month -- in other words, over the life of the contract -- GSA reimbursed MManTec for its cost of performance by reimbursing MManTec for the equipment depreciation costs for which MManTec submitted invoices. This is all that the contract required. Decision The appeal is DENIED. __________________________________ MARTHA H. DeGRAFF Board Judge We concur: ________________________________ __________________________________ ROBERT W. PARKER JOSEPH A. VERGILIO Board Judge Board Judge