_________________________ DENIED: September 10, 1993 _________________________ GSBCA 10842-TD NORTHERN VIRGINIA SERVICE CORPORATION, Appellant, v. DEPARTMENT OF THE TREASURY, Respondent. Katherine S. Nucci of Dykema Gossett, Washington, DC, counsel for Appellant. Sherry L. Travers, Regional Counsel, Internal Revenue Service, Southwest Region, Dallas, TX, counsel for Respondent. Before Board Judges LaBELLA, VERGILIO, and GOODMAN. VERGILIO, Board Judge. On September 19, 1990, the Board received this appeal from Northern Virginia Service Corporation. Northern Virginia was a contractor with the respondent, the Department of Treasury, Internal Revenue Service (IRS), providing janitorial and related services. The contractor claims entitlement to $87,944.08 in increased costs incurred in providing basic services because of population increases in the building over the life of the contract. The contractor premises its claim on breach of contract, and, alternatively, constructive change. The contracting officer denied the claim in its entirety. The contractor has failed to establish either a breach of contract or a constructive change. The underlying solicitation represented the building population as an estimate--a range of 2,500 to 4,000. The fixed-price contract required the contractor to provide basic--specified daily and periodic--services. Services were not described in terms of population; payment under the contract was not population dependent. The contractor has not demonstrated that the estimate was established improperly, or that it was misled by the estimate. Moreover, the contractor has not demonstrated that the increases in population required it to expend efforts disproportionate to the risks it assumed under the fixed-price contract. The contractor grounds its calculation of quantum on its own conservative estimate of the number of hours required to perform the basic services (as it takes the difference from actual expenditures of labor and estimates of material), and, in essence, inappropriately attempts to convert the fixed-price contract into a cost-reimbursement contract for its labor and supplies exceeding those in its bid estimate. Accordingly, the Board denies the appeal. Findings of Fact The solicitation 1. The General Services Administration (GSA) issued a sealed bid procurement to obtain a contract for an initial twelve-month period and two optional twelve-month periods. Appeal File, Exhibit 1. The contractor was to provide all management, supervision, manpower, equipment and supplies necessary to perform described janitorial and related services at a specified Internal Revenue Service (IRS) building. Id. at 11 ( C.1). 2. The services were of two types: (1) basic--daily and periodic cleaning and activities, and (2) additional--those "used to satisfy the Government's short term nonrecurring needs for service." Appeal File, Exhibit 1 at 8 ( B.3). Basic services were to be priced as a single, dollar figure on a yearly basis; additional services were to be priced on a yearly basis as hourly rates for supervisory and productive labor. Id. at 7 ( B.2), 8 ( B.3). 3. The solicitation describes the "contract effort required": A. General: Bidders/offerors are cautioned that the daily productive man-hour guidelines set forth below may be less than that which they will require to perform all of the daily and periodic work requirements. The determination of the total daily productive man-hour requirements for the performance of all services herein specified as well as all other cost factors above those associated with the daily productive man- hours specified is the sole responsibility of the bidder/offeror. Nothing in this provision should be construed as being contrary to this bidder/offeror responsibility. B. Daily Productive Man-Hour Guidelines: (1) The Government estimates that approximately 153 daily man-hours of productive labor, exclusive of supervisory work, will be required to satisfactorily accomplish the work called for in this contract. This base guidelines figure of 153 daily hours of productive labor is included as a guideline only, to assist the contractor in planning and executing the work. It is of the utmost importance that the contractor utilize skilled and productive manpower in order to satisfactorily furnish the required level of ser[]vices. Appeal File, Exhibit 1 at 11 ( C.2). 4. Regarding the "services required," the solicitation dictates that the "contractor shall provide the services outlined, at the frequencies specified in the Task and Frequency Chart . . . in accordance with the Cleaning Work and Quality Requirements described[.]" Appeal File, Exhibit 1 at 11 ( C.3.A). Moreover, The building areas to be serviced are described [in Exhibit 1]. The figures contained in Exhibit 1 are approximate and are estimates of the building statistical data. The contractor is responsible for verifying dimensions and quantities. The data contained in Exhibit 1 in no way modifies the "Site Visit" clause on the GSA Form 3501[.] Id. ( C.3.B). The referenced "Exhibit 1" is captioned "building information" and provides, among other items: "Number of Occupants: 2,500 to 4,000." "Note: Square feet and number of occupants are approximate figures." Id. at 68 ( J, Exhibit 1). 5. The solicitation contains the Federal Acquisition Regulation (FAR) clause, FAR 52.214-6 (APR 1984), captioned "Explanation to Prospective Bidders": Any prospective bidder desiring an explanation or interpretation of the solicitation, drawings, specifications, etc., must request it in writing soon enough to allow a reply to reach all prospective bidders before submission of their bids. Oral explanations or instructions given before the award of a contract will not be binding. Any information given a prospective bidder concerning a solicitation will be furnished promptly to all other prospective bidders as an amendment to the solicitation, if that information is necessary in submitting bids or if the lack of it would be prejudicial to other prospective bidders. Appeal File, Exhibit 1 at 119 ( 4). 6. The solicitation also contains the Changes clause, FAR 52.243-1, alternate I (APR 1984). Appeal File, Exhibit 1 at 51. The contract 7. Northern Virginia was the incumbent contractor (under a 153 minimum daily productive hour contract) at the time of bid preparation and submission. Transcript at 39-40; Agency Answer ( 17). An employee of Northern Virginia claims to have made oral inquiry of GSA personnel prior to bid submission, and to have been told that the contract would stay the same. Transcript at 9-10, 30. The record does not support the conclusion that the inquiry focused on the building population over the life of the new contract. Moreover, the stated response fails to recognize a distinction between the existing contract (minimum hour) and that being competed (no minimum level of effort). Although the president of (and preparer of the bid for) Northern Virginia testified that population is relevant to pricing, id. at 45, Northern Virginia obtained no written verification of the alleged statements. Id. at 107-09; Respondent's Exhibit 2 at 4 ( 3.c). The solicitation was not amended to alter its terms or otherwise specify a more definite population of the building over the life of the new contract.[foot #] 1 8. Northern Virginia formulated its bid based upon performance utilizing 90 productive man-hours of effort daily. Transcript at 48; Appellant's Exhibit 5. It bid a constant rate for the three years. Appeal File, Exhibit 1; Transcript at 317. Although the solicitation nowhere made reference to historical populations (or their relevancy), Northern Virginia presumed that, on average, the population would be in the 2,400 to 2,550 range, thus at or below the very low end of the estimated range. Transcript at 42, 58, 104, 121. Northern Virginia submitted the lowest-priced bid. The price was below the GSA estimate; the closest-priced bid viewed by GSA to be responsive was more than twenty-five percent greater than Northern Virginia's. Appeal File, Exhibits 6, 2. 9. Given the price disparity, GSA sought a bid verification from Northern Virginia. Northern Virginia intentionally projected fewer productive hours than those ----------- FOOTNOTE BEGINS --------- [foot #] 1 The president of Northern Virginia testified that at a post-award, pre-performance conference GSA provided verification of the anticipated constant population. Transcript at 116 ("I was told that the population was going to remain constant. I was told that mechanics in the boilerplate GSA spec was going to be the same, and I was told that there was no additional things that I should be concerned [with] or that would have a major cost impact on me."), 53. ----------- FOOTNOTE ENDS ----------- estimated in the solicitation. Northern Virginia verified this and its bid in writing and through a conversation with GSA personnel. Appeal File, Exhibits 2-5. 10. GSA awarded a contract to Northern Virginia; the initial twelve-month period was December 1, 1984, through November 30, 1985. Appeal File, Exhibit 1. Performance 11. Performance under the contract began December 1984. For the preceding twelve months, the average monthly population of the building was 2,790, with a monthly minimum of 2,248 and maximum of 3,219. Appellant's Exhibit 14.[foot #] 2 For the initial twelve months of performance, the average monthly population of the building was 3,387, with a monthly minimum of 2,475 and maximum of 4,223 (the single instance of the population exceeding 4,000). Id. During the first month of performance, the population was 2,475, the contractor utilized, on average, at least 95 productive labor hours per day to perform the basic services. Appellant's Exhibits 14, 16. 12. GSA exercised the first option under the contract, extending the performance date through November 30, 1986. Appeal File, Exhibit 8. GSA exercised the second option under the contract, extending the performance date through November 30, 1987. Id., Exhibit 12. With an effective date of December 1, 1986 (the start of option year two), GSA transferred the contract to the IRS. Appeal File, Exhibit 13. 13. A bilateral contract modification, with an effective date of August 1, 1987, reduced by 5,500 square feet the space to be cleaned and, under the contract terms, the associated contract amount for the basic services (from $29,302.91 to $28,875.56). Appeal File, Exhibit 30. The record does not suggest the number of daily productive man-hours the contractor had utilized for the deleted space.[foot #] 3 ----------- FOOTNOTE BEGINS --------- [foot #] 2 Although the contractor suggests in its post-hearing brief, at 36 n. 2, that these figures represent population totals in addition to the building cleaning, the record does not support the suggestion. Appellant's Exhibits 6, 7, 12; Transcript at 66-67, 73-74. [foot #] 3 Neither party has alluded to this modification--as affecting this claim or otherwise. The record does not enable the Board, with any degree of certainty, to extrapolate a number of hours to perform the deleted efforts. The record establishes no relationship between the level of effort on the deleted area and the average charge per square foot which was deleted; nor does it reasonably suggest the cost of supplies associated with the deleted efforts. The record (continued...) ----------- FOOTNOTE ENDS ----------- 14. A bilateral contract modification was signed by the contractor and IRS on February 2 and 4, 1988, respectively, with an effective date of December 1, 1987. Appeal File, Exhibit 34. The modification extended the contract from December 1, 1987, through May 31, 1988, with the option to continue on a month-to- month basis as needed, subject to possible adjustment as a result of a collective bargaining agreement. The modification specified six months of basic services at $29,302.91 per month. Id. The modification contains some other alterations not here relevant and notes that "All other terms and conditions remain the same." While the modification makes no mention of the contractor reserving a right to reprice the basic services for the period covered by the bilateral modification, it also fails to recognize the space deduction noted in Finding 13. Id. As anticipated in the modification, three subsequent contract modifications extended the period of the contract--two for two months and one for four months (through July 31, 1988, then September 30, 1988, and then January 31, 1989) at the stated monthly price. Id., Exhibits 39, 45, 52. The last modification was signed as a bilateral agreement. Id., Exhibit 52. Performance under the modified contract ceased on December 31, 1988. Id., Exhibits 54, 55. Claim to IRS 15. By letter dated March 21, 1989, after performance had ceased, the contractor informed the IRS that the contractor "has an existing claim against this contract." Appeal File, Exhibit 56.[foot #] 4 ----------- FOOTNOTE BEGINS --------- [foot #] 3 (...continued) suggests that the deduction was not taken in some months, and was taken based upon a miscalculation of space (6,500 square feet) in other months--in all, the contractor appears to have been overpaid by $815.85. Appeal File, Exhibits 38, 40, 43, 44, 46, 48, 50, 51, 54. [foot #] 4 A settlement agreement entered into in early June 1990 between the contractor and GSA recites that by letter dated August 8, 1985, the contractor presented a claim to the GSA contracting officer for alleged additional work performed (for the period December 1984 through July 1985) due to an increase in the number of IRS employees in the building to be cleaned. The contracting officer denied that claim by decision dated March 14, 1986. By letter dated August 7, 1989, the contractor presented a claim to the GSA contracting officer for additional costs for extra labor and supplies for period December 1985 through November 1986. Although the contracting officer denied each claim, GSA reimbursed the contractor for essentially its requested amounts through the settlement agreement which, by its terms, relates only to that portion of the contract administered by GSA and effects "a full (continued...) ----------- FOOTNOTE ENDS ----------- 16. By letter dated June 25, 1990, the contractor submitted to IRS a "claim for an equitable adjustment in the amount of $87,944.08 for increased costs incurred under" the IRS contract. The contractor claims to have incurred increased costs in furnishing labor and supplies as a result of the increase in government personnel at the building. Appeal File, Exhibits 56, 57. The claim consists of four basic elements: (1) additional labor (burdened with, e.g., taxes, FICA, and benefits); (2) additional supplies; (3) general and administrative overhead (at 6%); and (4) profit (at 6%). Id. 17. The contractor calculates the labor hours to be reimbursed as follows: (1) actual payroll hours 77.070.56 (2) additional services -12,229.19 (3) total hours 64,841.37 (4) bid hours for 25 months -57,240.00 (5) total hours to be reimbursed 7,601.37 Appeal File, Exhibit 56 at 1882. The initial entry is the sum of hours in its payrolls (see Finding 21) paid during the months of the IRS contract; however, the initial payrolls utilized reflect work performed under the GSA contract. The figure includes supervisory, productive and non-productive (vacation/sick/holiday) hours incurred to perform basic and additional services. Id. at 1883; Appellant's Exhibit 16. From that figure, the contractor subtracts hours reimbursed separately as additional services. From the result, the contractor subtracts approximately (explained in the following finding) the number of productive and supervisory hours it projected in formulating its bid. The contractor concludes that it expended 7,601.37 total additional hours caused by the population changes. 18. In its calculations, to its advantage, the contractor makes no adjustment in lines (2) or (4) for non-productive hours attributable to performing the basic or additional services (non- productive hours are included in line (1)). To its disadvantage, the contractor represents its bid labor hours, line (4), by utilizing 260 productive days per year, not 252 as it utilized in formulating its bid. The following reflects parallel calculations after (a) burdening line (2) hours for additional services with the associated proportional non-productive hours, and (b) making the adjustments for line (4) non-supervisory labor such that on a payroll basis, twenty-three 90-hour days per month of non-supervisory labor are used (encompassing productive and non-productive hours), as bid: ----------- FOOTNOTE BEGINS --------- [foot #] 4 (...continued) settlement and mutual release of all existing and/or potential claims, and causes of action relating to and/or arising under" the GSA contract. Appeal File, Exhibit 56, Settlement. ----------- FOOTNOTE ENDS ----------- (1) actual payroll hours 77,070.56 (2) additional services -13,393.87 (3) total hours 63,676.69 (4) bid hours for 54 payrolls -60,230.77 (5) total hours to be reimbursed 3,445.92 This total, 3,445.92, represents productive and non-productive non-supervisory hours over 54 pay periods. This averages 58.26 productive hours per pay period, or 6.01 productive hours per day, which is 6.68 percent greater than the contractor's daily estimate of 90, a figure which reflects no allowance for increased labor over the three-year life of the contract. 19. The record suggests that the contractor spent more money for supplies on average over successive years of the GSA/IRS contract, Appeal File, Exhibit 59, even when already reimbursed costs of supplies for additional services are subtracted. However, testimony and documentary evidence do not persuasively establish what portion, if any, of those increased costs may be directly attributable to population increases, and not, for example, attributable to increased prices (given that the contractor formulated its bid with a constant supply cost over the three-year contract life). Transcript at 67-68, 87, 317; Appeal File, Exhibit 59; Appellant's Exhibits 5, 11. Additional information 20. During the 25 months here at issue, the average population of the building was 4,253. For the December 1986 through November 1987 period, the average monthly population of the building was 4,268, with a monthly minimum of 3,593 and maximum of 5,038 (for 2 consecutive months); 5 months were in the 3,000s, 5 months in the 4,000s, and 2 months at 5,038. For the December 1987 through November 1988 period, the average monthly population of the building was 4,279, with a monthly minimum of 3,467 and maximum of 5,050; 3 months were in the 3,000s, 8 months in the 4,000s, and 1 month at 5,050. Appeal File, Exhibit 65. The average monthly population of the building over the 49 months of performance (with the 5-month period of May through September 1986 not considered, because figures are not in the record) was 3,940. Id.; Appellant's Exhibit 14. Similarly calculated, 3,814 was the average monthly population for the 36 months of the original contract. 21. For each two-week pay period, the contractor's payroll summary reveals the total hours of productive and supervisory labor expended in performing the basic services of the contract, and the additional services (denoted as extra or overtime[foot #] 5), as well as hours attributable to ----------- FOOTNOTE BEGINS --------- [foot #] 5 There are no overtime hours in any instance when "extra" hours are not indicated, Appellant's (continued...) ----------- FOOTNOTE ENDS ----------- vacation/sick/holiday. Appellant's Exhibit 16; Transcript at 92- 95. Thus, to perform basic services, for each twelve-month period under the GSA/IRS contract, the contractor utilized the following average number of productive and supervisory hours per pay period (the numbers are approximate given that pay periods overlapped between each contract year): Years 84/85 85/86 86/87 87/88 Average 1109.3 1115.5 1109.7 1115.3 Appellant's Exhibit 16. Subtracting 160 hours per pay period of supervisory labor, Appellant's Exhibit 5, yields the following averages for productive labor for basic services per pay period: Years 84/85 85/86 86/87 87/88 Average 949.3 955.5 949.7 955.3 The contractor bid a constant of 872.3 productive labor hours per pay period over the three-year life of the contract. Id. 22. The record does not demonstrate that the GSA or IRS was or should have been aware at the time of issuing the solicitation or of entering into the GSA contract that the likely average monthly population would be at the high end of (or above) the estimate during many months of performance. E.g., Appellant's Exhibits 12, 14, 15, 18. 23. Throughout the life of the contract, the IRS did not explicitly add to or modify any of the daily or periodic tasks to be performed under the basic services. Although an increase in the population of a building may necessitate the expenditure of more labor hours and supplies to perform janitorial services, Transcript at 18, 31, 33-35, the contractor has not convincingly demonstrated that, when the population (monthly or yearly) exceeded the estimate range, it incurred additional costs which were not compensated under the additional services portion of the contract. Discussion The contractor maintains that it is entitled to compensation of $87,944.08 for furnishing allegedly extra labor and supplies during the twenty-five month IRS portion of the contract to perform the basic services. The contractor raises two alternative theories of recovery: breach of contract and constructive change. Under the first theory, it asserts that the extra custodial services generated by the larger population at the building exceeded the scope of the contract and the ----------- FOOTNOTE BEGINS --------- [foot #] 5 (...continued) Exhibit 16; hence, the Board concludes that the overtime hours are attributable to the additional services. ----------- FOOTNOTE ENDS ----------- contractor's reasonable expectations. Under the second theory, it maintains the basic services to be performed with the population increase entailed efforts and expenses in addition to those encompassed in its contract.[foot #] 6 The claim focuses upon the provision of basic services under what the contractor characterizes as the changed condition of significantly increased building populations. Contending that the larger populations required it to expend more labor and supplies than it calculated in its bid, the contractor notes that its claim is discrete from any compensation it may have received for labor or supplies for the provision of "additional" services. The claim of entitlement focuses on the population estimate contained in the solicitation and contract. The contractor contends that the estimate was inaccurate and established improperly. Further, the contractor asserts that the increased populations exceeded the terms of the contract, either so significantly as to constitute a breach or enough to constitute a constructive change.[foot #] 7 Breach The record does not demonstrate that the estimate was knowingly or negligently determined. Womack v. United States, 182 Ct. Cl. 399, 389 F.2d 793 (1968); Finding 22. Nor does the record suggest that the contractor was misled by the estimate. In formulating its bid, the contractor intentionally departed from the population estimate found in the solicitation. The contractor chose to prepare its bid relying upon historical data ----------- FOOTNOTE BEGINS --------- [foot #] 6 The agency has not pursued theories of accord and satisfaction or estoppel. Transcript at 327. Accordingly, without a developed factual record, the Board does not reach the possible effect of the bilateral contract extensions being consummated when the building populations were known and a fixed, monthly price established without reservation for adjustment. Nor does the Board address how the assertion of breach squares with the contractor knowingly entering into bilateral contract extensions. [foot #] 7 If either of the contractor's theories for recovery is correct, any awardee under the solicitation would be entitled to relief given the population increase. The analysis would apply equally to the actual contractor and to any of the higher-priced bidders, even though the latter may well have formulated its bid in recognition of the population and man-hour estimates in the solicitation. The higher-priced bidders may have better provided for the risks inherent in the contract, while the contractor improperly attempts to shift those risks because of its lower price. Its bid price does not create the starting point for an analysis of the scope of the contract. ----------- FOOTNOTE ENDS ----------- (garnered as the incumbent contractor) not referenced in the solicitation, and presumed that the population would average at or below the lower-end of the estimate range. Contrary to the express notice in the solicitation that oral explanations would not be binding, Finding 5, and despite the solicitation's broad population range, Finding 4, the contractor maintains that it relied upon oral assurances (one prior to bid submission and the other after award) that the population would remain fairly constant over the contract life. Finding 7. The contractor did not seek an amendment specifying a more definite population, nor did it make provision for variations in the population within the estimated range. Therefore, it is not fully credible for this contractor to assert after award that population constituted a critical element in calculating cleaning rates and pricing the contract. The contractor has not established that the population estimate contained in the solicitation and contract (2,500-4,000) was substantially inaccurate. Over the three-year life of the original contract, the monthly average was approximately 3,814; over the entire forty-nine month period, the average was approximately 3,940. Finding 20. Over the twenty-five months here at issue, the monthly average was 4,253. Id. As discussed below, the record does not demonstrate that the efforts and supplies required to perform the basic services to accommodate the population in excess of the estimate increased so as to be outside the scope of the fixed-price contract. Constructive change The contractor contends that the increased populations constructively changed the contract because it had to expend more labor and supplies in performing the services. The contractor has failed to demonstrate that it performed work in addition to the contract requirements or at a cost in addition to what the contract reasonably encompassed. Mr. Klean's Janitor & Maintenance Service, Inc., GSBCA 9010, 91-2 BCA 23,683. The contractor entered into a firm, fixed-price contract for the provision of basic services. Once its bid was accepted, compensation was not to be dependent upon, or fluctuate with, the building population. The agency has not altered the basic services to be provided--in terms of the daily or periodic tasks to be performed. The solicitation represented the population range as an estimate, not as a "not to exceed" figure. The contractor assumed the risks of reasonable changes in the population of the building. The contractor has not demonstrated that the increases in the population required it to provide labor or supplies in excess of what the contract required. The solicitation expressed the building population as an estimate of 2,500 to 4,000. Over the initial three-year contract period and over the entire contract period, the average monthly population was within that range. Finding 20. Over the twenty-five months here at issue, the monthly average was 4,253, or slightly greater than 6% over the upper end of the range for each month. The record does not suggest that such a variance in population in a fixed-price janitorial services contract is unreasonable or unusual. The quantum portion of the claim also fails to evince a constructive change. The contractor expended relatively few hours in excess of its estimate, which was made for a constant population at or below the lower end of the estimate. Utilizing the numbers in the contractor's claim, as adjusted to conform to its bid, the contractor expended approximately 3,446 productive hours over its bid of 63,677. Finding 18. That is an additional 5.4% of productive effort. The contractor has not attempted to demonstrate what portion, if any, of those efforts may be attributable to population variances up to the upper end of the estimate range. Viewed another way, the recovery sought appears excessive. Given the monthly average of 4,253 over the twenty-five month period here at issue, the contractor provided services to a population of 6,325 (253 x 25) in excess of the upper estimate figure. This represents less than the population for two months' performance within the estimate. The contractor has not asserted that overall there is a one-to-one correspondence between the increase in population and performance of basic services; the increases in population did not alter the frequency of daily or periodic cleaning. However, the contractor claims $87,944.08, or the equivalent of performance for three months under the contract. This comparison does not enhance the reliability or reasonableness of the contractor's claim. The actual productive hours expended, Finding 21, show no significant change in effort due to the population variations. The contractor's claim does not fully recognize the risks inherent in the fixed-price contract, with estimates being represented as just that. In formulating its bid, the contractor chose to rely on information not contained in the solicitation, while down-playing the significance of the population and man- hour estimates contained therein. Although the contractor expended more labor and provided more supplies than it anticipated, the contract obligated the contractor to provide those services. The contractor has failed to demonstrate that the contract was constructively changed. Decision The Board DENIES the appeal. _________________________ JOSEPH A. VERGILIO Board Judge We concur: _________________________ _________________________ VINCENT A. LaBELLA ALLAN H. GOODMAN Board Judge Board Judge