MOTION FOR SUMMARY RELIEF DENIED: January 13, 1995 GSBCA 12048 GREENVILLE STORAGE & INVESTMENT, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. David C. Hammond of Powell, Goldstein, Frazer & Murphy, Washington, DC, counsel for Appellant. John C. Ringhausen, Office of Regional Counsel, General Services Administration, Atlanta, GA, counsel for Respondent. Before Board Judges DANIELS (Chairman), NEILL, and HYATT. NEILL, Board Judge This is an appeal of a contracting officer's decision that the General Services Administration (GSA) is entitled to a credit for $50,438 in reimbursable costs paid to appellant for construction of a computer room on premises presently leased by appellant to the Government. The claim was asserted after completion of an agency audit of cost or pricing data relating to the construction. Appellant has brought a motion for summary relief. The motion argues that the Government is prevented, as a matter of law, from asserting this claim by both the doctrine of estoppel and the doctrine of laches. Upon review of respondent's opposition to its motion, appellant now agrees that there is a material fact in dispute which precludes the Board from granting the motion based on estoppel. We are asked, however, to consider the motion based on the remaining defense of laches. For the reasons set out below, however, we deny the motion. Findings of Fact From a review of the record thus far constituted, we find the following facts to be undisputed: 1. On October 15, 1987, GSA awarded a contract for construction and lease of the GSA Distribution Center located in Palmetto, Georgia. Initially, the lease required a total of 1,280,200 net usable square feet at an annual rent of $2,607,679.25 for twenty years. Appeal File, Exhibit 1. 2. Among other clauses, the lease contains the standard clause relating to examination of records by the Comptroller General. Under this clause, the contractor is required to retain, for at least three years after final payment, various records and other documentation relating to the contract. The clause also imposes on the contractor the obligation of including in first-tier subcontracts under this contract a similar provision regarding contract record retention. Appeal File, Exhibit 1, General Clauses, Number 36. 3. By Supplemental Lease Agreement (SLA) No. 11, dated January 6, 1989, the contract was amended to provide an additional 1,300 net usable square feet to accommodate a computer room. This amendment expressly provides: D.1 The lessor will be reimbursed a lump-sum amount of $267,764.00 for construction and lessor overhead-profit costs for these modifications. Payment will be made upon completion and acceptance by the Government . . . . G. All costs associated herein reflect the full equitable adjustment as a result of the Government Change Order Direction by letter dated October 25, 1988. The Supplemental Lease Agreement is subject to revision as a result of GSA audit review by the GSA Inspector General office. The prices reflected herein represent not-to-exceed prices. Appeal File, Exhibit 3. 4. During the months of April through June 1989, a GSA audit review was carried out. The purpose of the audit was to determine: (1) if the lessor's proposal for SLA No. 11 was supported by cost records or quotations and (2) if the costs proposed were allowable, reasonable, and allocable under the Federal Acquisition Regulation (FAR). Auditors did not visit the lessor's office because the lessor's only cost was a commission on its contractor's work. Instead, they visited the office of the general contractor responsible for the construction of the warehouse, Metric Constructors, Inc. (Metric), and the offices of three of Metric's subcontractors. Appeal File, Exhibit 6 at 1- 2. The audit report proposed an adjustment in the Government's favor of $75,245. This was later reduced by the contracting officer to $50,438. Id., Exhibit 6 at 3, 15 at 3. 5. The printed version of this GSA audit report (hereinafter the "audit report") bears the date August 30, 1989. Appeal File, Exhibit 6. On its title page is a notice that the report contains proprietary information not to be disclosed publicly or to individuals not having an official need to know. In the body of the report, it is stated that the office of audits has no objection to the release of the report to the lessor at the discretion of the contracting officer. However, the report notes that the office of audits should be "advised" prior to any such release. Id. 6. The contracting officer did advise the office of audits of her intention to release the audit report to the lessor. By memorandum dated October 30, 1989, the office of audits confirmed in writing earlier discussions in which it raised an objection to release of the report to the lessor. The memorandum explains that in a case such as this, where the report contains proprietary information of the prime contractor and the subcontractor, the office's policy is to release only that information directly applicable to the requesting auditee. This policy is said to be consistent with provisions of 18 U.S.C. 1905 relating to the disclosure of confidential information by an officer or employee of the United States. Respondent's Opposition to Appellant's Motion for Summary Relief, Exhibit 2. 7. By letter dated June 25, 1991, the contracting officer advised appellant of the audit report. The letter states that, based on the audit, the contracting officer has concluded that a credit of $50,438 is due the Government. The letter also points out that this sum "includes adjustments made by the Contracting Officer and is less than the initial audit report." Appeal File, Exhibit 7. Appellant was not furnished with a copy of the audit report at this time. Instead, the same letter states that "subcontractor disclosures" must be furnished in order to secure release of the detailed audit report. Id. 8. GSA admits that, based on a reasonably diligent review of its lease file, no document has been located showing that the lessor was informed of the results of the audit report of August 30, 1989, prior to this letter of June 25, 1991. Appellant's Motion for Summary Relief, Exhibit 4 at 2. 9. After receiving the contracting officer's letter of June 25, 1991, appellant requested a copy of the actual audit report and additional time to review and reply to it. By letter dated August 30, 1991, exactly two years from the date the audit report was issued, GSA responded to the request by furnishing appellant with an actual copy of the audit report and granting a sixty-day extension for review of it. Appeal File, Exhibits 8-9. 10. GSA, in response to discovery requests from appellant, has explained that the twenty-one-month delay in informing appellant of the results of the audit and the twenty-four-month delay in providing appellant with an actual copy of the report was attributable to "legitimate concerns . . . pertaining to the release of the audit report and the information contained therein which required review and analysis by the Government." Appeal File, Exhibit 3 at 1-2. 11. These "concerns" have been further described as including: (1) possible violations of 18 U.S.C. 1905, Disclosure of Confidential Information Generally; (2) compliance with Executive Order 12600 of June 23, 1987, Predisclosure Notification Procedures for Confidential Commercial Information; and (3) compliance with GSA ORDER, ADM 1800.3A, September 2, 1986, Safeguarding Privileged and Sensitive Unclassified Information. Appeal File, Exhibit 3 at 2. 12. In answer to specific discovery requests, GSA has further explained: The Office of the Regional Inspector General for Audits sought a legal opinion from counsel and received such an opinion. Shortly, thereafter, the contracting officer wrote the June 25, 1991, letter to the Lessor, referencing the amount in dispute and the need for the subcontractors who performed work on the computer room to submit consents to the release of the Audit Report. The Audit Report was then released on August 30, 1991. Appeal File, Exhibit 4 at 4. 13. On December 21, 1990, appellant and Metric agreed to a termination and closeout of their contract for the construction of the warehouse and to a mutual release and discharge. Under the terms of the release, Metric agreed to a reduction in the amount of the contract price by $101,819. Appellant, in turn, agreed to: fully and finally and forever release and hold harmless Metric from any and all claims, costs, liabilities, expenses, actions or causes of actions, charges and demands whatsoever which [a] party has, had or will have against the other, whether known or unknown. Appellant's Motion for Summary Relief, Exhibit 7. 14. Following receipt and review of the audit report, appellant provided additional documentation to the contracting officer for review. This information was passed on to the GSA's auditors, but their position remained unchanged. By letter dated July 16, 1992, the contracting officer issued her decision concerning the Government's claim of $50,438. Appellant was advised that the Government would begin to take a credit of this amount against overtime payments beginning with the month of July 1992. Appellant has appealed from that decision. Appeal File, Exhibits 11-12. Discussion It is well settled that to invoke the laches defense, a party has the burden of proving two factors: 1. the party bringing a claim delayed in doing so for an unreasonable and inexcusable length of time from the time the party knew of the claim, and 2. this delay has operated to the prejudice or injury of the party against whom the claim is asserted. A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020, 1032 (Fed. Cir. 1992) (en banc). It is likewise well settled that the defense of laches is available in contract actions, even against the Government, if it can be demonstrated that the offended party has been unmistakably prejudiced by delay in asserting the claim. S.E.R., Jobs For Progress, Inc., v. United States, 759 F.2d 1 (Fed. Cir. 1985). Given the uncontested facts in the record, as currently constituted, we cannot conclude that appellant is entitled to the laches defense. Appellant has certainly proven that there was a significant delay in making known the results of the audit report. The facts now before us, however, do not convince us that this delay was necessarily unreasonable and inexcusable. There appears to have been an internal dispute within GSA regarding the release of audit information to appellant. The advice of counsel was sought. Nevertheless, the discovery conducted thus far has yielded few details regarding this controversy. There are undoubtedly additional questions of fact which may well be relevant to the issue of whether this delay was unreasonable and inexcusable. This being a motion for summary relief, any inferences which we might draw regarding those matters must be drawn in favor of respondent rather than appellant. Armco, Inc. v. Cyclops Corp., 791 F.2d 147 (Fed. Cir. 1986). Similarly, given the limited uncontested facts before us, we are not prepared to conclude that this alleged unreasonable and inexcusable delay in passing on to appellant the results of the audit review actually operated to the prejudice or injury of appellant. Appellant admittedly changed its position by releasing Metric. We cannot determine on the existing record, however, that this was because appellant allegedly knew nothing of the audit review or its findings. It is apparently correct that appellant was not formally informed of the audit results by the contracting officer until the letter of June 25, 1991. It is also stated in the audit report that auditors did not visit the offices of the lessor. The fact that an audit was being conducted was not, however, a secret. Auditors did visit the offices of Metric and three of its subcontractors. What appellant knew or did not know of the audit review is still, therefore, very much an open question. Neither are we prepared to conclude at this time that the delay in providing appellant with the results of the audit review was to the prejudice of appellant. The circumstances leading to the release of Metric are still unknown to us. Appellant's willingness to agree to such a release is puzzling in view of the clear possibility of audits at any time up to three years following final payment. On the other hand, by its terms, the release secures for appellant a price reduction in excess of $100,000. One possible explanation for this is that this concession was to make appellant whole for any future audit claims on which it might otherwise look to Metric for relief. Because of the equitable nature of the laches defense, it is essential that a tribunal look carefully at all of the particular facts and circumstances of each case and weigh the equities of the parties. Aukerman, 960 F.2d at 1032. Given the limited uncontested facts currently available to us, we are unable to make such an analysis. For that reason, the motion is denied. Decision Appellant's motion for summary relief based on a defense of laches is DENIED. ___________________________ EDWIN B. NEILL Board Judge We concur: _____________________________ ___________________________ STEPHEN M. DANIELS CATHERINE B. HYATT Board Judge Board Judge