DENIED: October 22, 1993 GSBCA 12374 STATE STREET MANAGEMENT CORPORATION, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. David D. Terry of State Street Management Corporation, Baton Rouge, LA, appearing for Appellant. John C. Ringhausen and Diana M. Parks, Office of Regional Counsel, General Services Administration, Atlanta, GA, counsel for Respondent. Before Board Judges DANIELS (Chairman) and DeGRAFF. DANIELS, Board Judge. A lease contract between State Street Management Corporation (State Street), the lessor and the appellant here, and the General Services Administration (GSA), the lessee and respondent, required State Street to provide interior doors in the space in question. The lease established a ratio of one door for each one hundred square feet of space, and said that if GSA ultimately ordered more or less doors than projected, payment would be adjusted accordingly. State Street maintains that GSA promised to alter the ratio to the lessor's benefit and must be estopped from taking a credit pursuant to the stated ratio. The amount in dispute is less than $50,000. State Street was therefore permitted to elect that the case be considered under our accelerated procedure. Rule 14. It did so. Consequently, the decision is being rendered by a panel of two judges and within 180 days of the date of election. The parties also asked that the case be decided on the basis of a written record, without benefit of a hearing. Rule 11. We hold that the assertion of estoppel is unsupported for several reasons: GSA never made a promise of sufficient specificity that reliance on what was said would have been reasonable; the promise (such as it was) was made by an individual who had no authority to bind the Government, and it was never reduced to writing; and no proof of reliance has been established. We consequently deny the appeal. Findings of Fact 1. On October 5, 1989, GSA awarded to State Street[foot #] 1 a twenty-year lease for space[foot #] 2 in a building to be constructed in Raleigh, North Carolina. Appeal File, Exhibits 1, 2. The building was to house a military entrance processing station. Id., Exhibits 3, 4. The lease incorporated the provisions of a Solicitation for Offers (SFO) which GSA had issued and to which State Street had responded. Id., Exhibit 1 at 2. 2. A key provision of the lease, with regard to this dispute, is paragraph 20 of the SFO, "Unit Costs for Adjustments." This paragraph states: Several paragraphs in this SFO specify means for determining quantities of materials. These are Government projections to assist the offeror in cost estimating. Actual quantities may not be determined until after the lease is awarded and the space layout completed. To enable an equitable settlement if the Government layout departs from the projection, the offeror must list a unit cost for each of these [following] materials. GSA will use each unit cost to make a lump sum payment or rental increase if the amount of material required by the layout is more than ----------- FOOTNOTE BEGINS --------- [foot #] 1 The name of the entity to which the contract was awarded is State Street Corporation. Virtually all of the documentation in the record is also from State Street Corporation. Whether there is any distinction between State Street Corporation and the appellant, State Street Management Corporation, is not known to us and is ignored by the parties. In this opinion, we use the name "State Street" to refer to both entities. [foot #] 2 The lease originally was for 23,989 net usable square feet of space. Appeal File, Exhibit 1 at 1. The document was later amended, in accordance with mutual measurement, to reflect an increase in net usable square feet to 25,550; the parties agreed, however, that rental should be based on a figure of 24,500 net usable square feet. Id. at Suppl. ___ Lease Agreement 2. ----------- FOOTNOTE ENDS ----------- specified or take credit from rental if the amount is less than specified. Appeal File, Exhibit 1 at page 7 of SFO. 3. Among the items for which a unit price was required by this paragraph was interior doors. Appeal File, Exhibit 1 at page 8 of SFO. The contract price for this item is $370 per door. Id. at 4. The lease states that interior doors "will be provided at a ratio of one door per 100 square feet of space provided." Id. at page 16 of SFO. At no time prior to award of the contract was the ratio of doors to space ever discussed by the parties. Declaration of Brenda S. Murray (July 15, 1993) (Murray Declaration) 7 (uncontested in "Appellant's Rebuttal Documentation" (Aug. 2, 1993)). 4. In late 1990 or early 1991 -- more than a year after contract award -- State Street first mentioned the ratio as a problem. The firm told GSA's Brenda Murray that its construction contractor had based its bid to State Street on the assumption that the Government would order one door for each 250 square feet of space. State Street asked that GSA alter the lease ratio. Murray Declaration 8, 9 (uncontested in "Appellant's Rebuttal Documentation" (Aug. 2, 1993)). Ms. Murray was a realty specialist at the time; she was not promoted to contracting officer until January 27, 1992. Id. 12. 5. On March 18, 1991, the contracting officer told State Street that "GSA would look at the ratio." Declaration of A. Fred Creighton, Jr., contracting officer (July 16, 1993) 6, 7 (uncontested in "Appellant's Rebuttal Documentation" (Aug. 2, 1993)). According to GSA, the contracting officer "considered the ratio to be high and requested that Ms. Murray advise [State Street] that GSA would amend the ratio, if possible. Ms. Murray verbally advised [State Street] of this in a telephone conversation." Respondent's Brief at 2. The State Street representative who received the phone call has sworn that Ms. Murray told him "that the lease provision relating to the Unit Cost Item, Interior Doors, would be reduced." Affidavit of David D. Terry (July 13, 1993). More specifically, State Street maintains in an answer to an interrogatory posed by GSA, "Ms. Murray gave the verbal assurances to [State Street], during telephone conversations only, that GSA would grant the same relief that was granted on State Street's Jackson project." Appellant's Answer to Interrogatory 11. 6. On April 5, 1991, State Street wrote to Ms. Murray, "As we discussed on the phone, the number of doors required in the SFO is unrealistical[ly] high. Our [construction] contractor used 1 per 250 square feet for his estimating purposes, but any relief you can give on this matter [would] be greatly appreciated." Appeal File, Exhibit 5. 7. At approximately the same time that the subject lease was agreed to, GSA awarded to State Street (or an affiliate thereof) a lease for space in a building in Jackson, Mississippi. Like the subject lease, the Jackson lease contains a requirement that the lessor provide one interior door for every 100 square feet of space. Under the Jackson lease, GSA actually paid for interior doors at the ratio of one per 200 square feet of space. Respondent's Response to Request for Admissions 3, 4. GSA also awarded to State Street (or an affiliate thereof), during this period of time, a lease for space in a building in Memphis, Tennessee. The ratio of interior doors to space in the Memphis building was one per 300 square feet. Id. at 6; Appeal File, Exhibit 7 at 11th unnumbered page. See, generally, Respondent's Brief at 4. 8. On August 8, 1991, State Street renewed its request that the ratio be changed for the subject lease. The letter says, "[W]e will adjust[] our budget quantity as authorized by GSA." State Street noted the ratios in the Jackson and Memphis leases and suggested "we split the difference and use 1 per 250." Appeal File, Exhibit 7 at 1. Appellant made this request in full knowledge that GSA's determination of costs for a particular item on one lease was "a guideline only" for other leases and "in no way obligated" GSA to accept those costs for the same item on those other leases. Id., Exhibit 5. 9. According to Ms. Murray, "No specific alteration or change to the interior door ratio stated in the Lease was ever approved by me, nor do I have any knowledge of any alternate ratio for the interior door ratio stated in the Lease being conveyed by any other GSA official to any representative of State Street." Murray Declaration 10. State Street says that Ms. Murray's statement is technically correct; "the assurance was unspecific in exact amount of reduction." Appellant's Reply Brief at 3. Appellant maintains, however, that "her verbal assurance was that she would grant the same relief granted on previous contracts. At the time the reduction in the ratio was granted we believed two different reductions in interior door ratios had been granted on two separate projects. Our appeal requests the least amount of reduction be honored to 1 door for every 200 square feet." "Appellant's Rebuttal Documentation" (Aug. 2, 1993). 10. The contract provides that the contracting officer may make changes to the instrument, within its general scope, by written order. Appeal File, Exhibit 1 at page 3 of GSA form 3517. The document states additionally that "[n]o services or work for which an additional cost or fee will be charged by the Lessor will be furnished without the prior written authorization of the Contracting Officer or a designated representative of the Contracting Officer." Id. GSA's award letter to State Street states that all modifications to the contract must be made by a contracting officer in writing (or in an emergency, orally with written confirmation to follow). Id., Exhibit 2. 11. State Street admits that it never received any documentation from Brenda Murray about her alleged verbal approval of the modification. Appellant's Brief at 2. State Street also admits that GSA never altered the ratio of interior doors to space in writing. Id.; Appellant's Response to Respondent's Request for Admission 1; Appellant's Response to Respondent's Request for Production of Documents 1. 12. On July 26, 1991, GSA informed State Street that GSA had available $215,000 to fund the cost of Government-ordered construction in the building. The agency's statement makes no reference to the cost of interior doors -- or any other item within the scope of the construction. Appeal File, Exhibit 6. On September 17, 1991, State Street borrowed $294,170.14 to finance the construction. Respondent's Reply Brief, Attachments B, C. 13. On January 10, 1992, GSA informed State Street by telephone that the ratio would not be changed. Appeal File, Exhibit 8. State Street asked the contracting officer to reverse this position. The firm said that Ms. Murray had "agreed to the same settlement reached on [two other] lease contracts." Further, State Street said that it had "relied on this verbal agreement in making certain business decisions including securing loans to be repaid with these funds." Id., Exhibit 9. 14. In writing a supplemental lease agreement on February 10, 1992, the parties agreed that a price adjustment relating to the number of interior doors "has not been resolved." Appeal File, Exhibit 10 at 3d unnumbered page. 15. The contracting officer issued his final decision in this matter on July 9, 1992. He determined "that the Government should not grant relief from a bargained for lease provision, especially, since all offerors relied on the door ratio contained in the SFO." Appeal File, Exhibit 11. 16. An undated supplemental agreement was apparently entered into during July of 1992.[foot #] 3 It shows that the lease was amended to give GSA a credit of $51,430 relating to interior doors. This amount was calculated by subtracting the number of doors GSA actually ordered (106) from the number projected in the SFO (245), and multiplying the ----------- FOOTNOTE BEGINS --------- [foot #] 3 The preceding supplemental lease agreement is dated March 12; the succeeding one is dated September 14. Appeal File, Exhibit 1 at Suppl. Lease Agreements 8-10. The contracting officer's decision on the matter now in dispute, which was issued on July 9, states that the agreement in question, which implements the substance of that decision, is enclosed. Id., ___ Exhibit 11. A letter from State Street dated July 27 makes reference to the agreement. Id., Exhibit 12. ___ ----------- FOOTNOTE ENDS ----------- difference by the unit cost of the doors ($370). Id., Exhibit 1 at page 3 of Suppl. Lease Agreement No. 9. 17. By letter dated July 22, 1992, State Street appealed the decision to this Board. Appeal File, Exhibit 13. This letter did not reach us, however; we were unaware of its existence until April 14, 1993, when State Street asked about the status of proceedings. The sender of the notice of appeal has provided us with an affidavit stating that the document was indeed mailed to us, and that "the [GSA] office in Atlanta, Georgia in fact received this written notice of appeal timely." Affidavit of MacAllynn J. Achee (May 3, 1993). GSA counsel has acknowledged that the assertion regarding the agency's timely receipt of the notice is correct. Board's Memorandum of Conference of May 18, 1993, at 1. GSA has subsequently not pursued the issue of whether the notice was filed sufficiently close in time to the issuance of the contracting officer's decision to vest in us jurisdiction to consider the case. See Cosmic Construction Co. v. United States, 697 F.2d 1389 (Fed. Cir. 1982); Marci Enterprises, Inc. v. General Services Administration, GSBCA 12197, 93-2 BCA 25,717. Discussion The contract in question is for the lease of a building some of whose interior space was to be constructed in accordance with a design, or "layout," which was to be provided by the Government. This layout had not been devised at the time the contract was awarded. (Indeed, the building whose interior was to be constructed did not even exist at that time.) To allow prospective offerors to prepare their proposals in accordance with a common set of expectations, GSA included in the solicitation for offers projections of the amounts of certain items that would ultimately be ordered, as well as a requirement that unit prices be given for those items. The projections were stated as ratios of the numbers of the items to numbers of square or linear feet of space. We have previously explained that the consequence of the inclusion of these definitive ratios in a lease is that when the Government orders more of an item than is projected, the Government must increase its payments in accordance with the unit price established, and when the Government orders less, it is entitled to a commensurate credit. Rock Creek Associates K Limited Partnership v. General Services Administration, GSBCA 11333, 93-1 BCA 25,351, at 126,270 (1992); Plaza Maya Limited Partnership, GSBCA 9086, 91-1 BCA 23,425, at 117,499-500 (1990). Thus, with relation to the subject lease, the lease projected that the lessor, State Street, would have to provide one interior door per 100 square feet of space, or 245 doors for the entire 24,500 square feet; GSA actually ordered 106 doors, or 139 less than projected; so under the terms of the lease, State Street owes GSA 139 times the unit cost of a door, $370, or $51,430. See Finding 16. Both sides accept this view of the law and the facts. The contracting officer's analysis stops here. State Street complains, however, that there is a compelling reason for going further and reaching a different result: GSA told the firm that it would modify the ratio of doors to space, with a significant negative impact on the amount of credit due the Government, and the firm relied on this statement to its detriment in borrowing money to finance the construction. Consequently, according to State Street, GSA must be estopped from collecting the entire amount it claims. The lessor asks us to conclude that the contract was effectively modified to require that State Street provide one door for each 200 square feet of space, rather than one for each 100. The change in ratio would have resulted in a requirement that the lessor provide 123 doors, not 245. Since only 106 were actually provided, State Street says that GSA is entitled to a credit for only seventeen doors. According to appellant, the credit should have been $6,290 (17 x $370), or $45,140 less than GSA took. Appeal File, Exhibit 13. The Court of Appeals for the Federal Circuit has questioned whether, in light of Office of Personnel Management v. Richmond, 496 U.S. 414 (1990), the defense of estoppel is still available against the Government. JANA, Inc. v. United States, 936 F.2d 1265, 1270 (Fed. Cir. 1991). This Board has continued to consider assertions of estoppel, however. Turner Construction Co. v. General Services Administration, GSBCA 11361, 92-3 BCA 25,115, at 125,213-14; Kozak Micro Systems, Inc., GSBCA 10519, 91-1 BCA 23,342 (1990), 92-2 BCA 24,853, aff'd, 989 F.2d 1201 (table) (Fed. Cir. 1993). The particular assertion made by State Street, however, fails on several counts. First, an essential element of promissory estoppel is that the promisor has made a binding offer in the form of a promise. This promise must be definite and certain so that the promisor should reasonably foresee that it will induce reliance by the promisee or a third party. A mere expression of future intention . . . does not constitute a sufficiently definite promise to justify reasonable reliance thereon. Santoni v. Federal Deposit Insurance Corp., 677 F.2d 174, 179 (1st Cir. 1982) (citations omitted). Whatever promises GSA made to State Street do not meet this test. The only commitments we have been able to identify are set out in Finding 5: GSA's contracting officer told State Street that the agency would "look at the ratio." The agency admits that its realty specialist, Brenda Murray, told the firm that the agency "would amend the ratio, if possible." These statements are so unspecific that the agency could not reasonably have foreseen that they would induce reliance by the lessor. Even one of State Street's versions of the commitment is nothing more than a "mere expression of future intention"; it is that Ms. Murray said that the lease provision relating to the ratio "would be reduced." State Street alleges in another version that the commitment was more particular: it was "that GSA would grant the same relief that was granted on State Street's Jackson project." The latter version is inconsistent with statements made by the lessor during the period of time that the parties were discussing the ratio; we consequently find this account not credible. The statements are described in the following paragraph. State Street's correspondence manifests an understanding that no definite promise had been made. The firm first told Ms. Murray that "any relief you can give on this matter [would] be greatly appreciated." Finding 6. Later, the company suggested that the agency "split the difference" between the ratios used on two other leases. Finding 8. After the fact, State Street maintained that Ms. Murray had "grant[ed] the same relief granted on previous contracts." Findings 9, 13. This contention does not help to find a definite commitment, however, because the two leases in question involved two different ratios of doors to space, and no relief whatsoever was granted on one of them. Finding 7.[foot #] 4 There are two additional problems with State Street's theory that Ms. Murray's statements were the sort of promise on which estoppel may be based. She was not authorized to make a commitment that could bind the Government, and whatever she told the lessor was not in writing. The Supreme Court has held that "anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority." Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384 (1947); see also Thanet Corp. v. United States, 591 F.2d 629, 635 (Ct. Cl. 1979) ("To the extent that the plaintiff depends on statements made by [Government] officials, it must prove that these officials were acting within the scope of their authority."). A person dealing with the Government may not rely on advice from a "mere conduit." Heckler v. Community Health ----------- FOOTNOTE BEGINS --------- [foot #] 4 We note additionally that whatever GSA did on the two other leases did not amount to the sort of pattern of performance that could bind the Government; it did not "involve[] repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other." Universal Development Corp. v. General _________________________________________ Services Administration, GSBCA 11468, 93-2 BCA 25,662, at ________________________ 127,675-76 (1992) (quoting U.C.C. 2A-207(1) (1992)). State Street understood this; it acknowledged that GSA's determination of costs for a particular item on one lease was "a guideline only" for other leases and "in no way obligated" GSA to accept those costs for the same item on those other leases. Finding 8. ----------- FOOTNOTE ENDS ----------- Services of Crawford County, Inc., 467 U.S. 51, 65 (1984). At all times relevant to State Street's estoppel claim, Ms. Murray was not a contracting officer. Findings 4, 12.[foot #] 5 The lessor had been specifically cautioned that only a contracting officer could modify the lease. Finding 10. Further, State Street has presented no evidence to the effect that a contracting officer ratified whatever Ms. Murray said. Appellant does address the subject of ratification in its reply brief, at 4, where it says that the contracting officer "never contested the many revisions of our Cost Differential Report which all showed a reduced ratio for interior doors" and "participated in the closing of our secondary loan," which was allegedly made after the lender had reviewed those Reports. There is nothing in the record to support this assertion. Even if there were, however, the argument is to no avail. A contracting officer's inaction might create a basis for a claim of estoppel only where it involves a knowing acceptance of benefits to the Government. Parking Co. of America, Inc., GSBCA 7654, 87-2 BCA 19,823, at 100,296-98. Here, the benefits from the change in the ratio would have been for the benefit of the lessor. The general rule is that "[r]atification . . . must be based on a demonstrated acceptance of the contract," EWG Associates, Ltd. v. United States, 231 Ct. Cl. 1028, 1030 (1982), and should be in writing. Drain-A-Way Systems, GSBCA 6473, 83-1 BCA 16,202, at 80,499 (1982). The oral nature of the statements is a problem for appellant, as well. The lease provided that all changes would be made in writing. Finding 10. State Street admits, however, that whatever GSA said about changing the ratio was never put onto paper. Finding 11. The Court has explained: It is not merely the possibility of fraud that undermines our confidence in the reliability of official action that is not confirmed or evidenced by a written instrument. Written advice, like a written judicial opinion, requires its author to reflect about the nature of the advice that is given to the citizen, and subjects that advice to the possibility of review, criticism, and reexamination. Community Health Services, 467 U.S. at 65. Even where the Government has been found to have been estopped by a contracting ----------- FOOTNOTE BEGINS --------- [foot #] 5 The reliance posited by State Street occurred when the firm borrowed money to finance interior construction of the building. This took place on September 17, 1991. Finding 12. Ms. Murray did not become a contracting officer until January 27, 1992. Finding 4. ----------- FOOTNOTE ENDS ----------- officer's order that incorporated a mistake of law, a written decision was necessary to the court's conclusion. Broad Avenue Laundry & Tailoring v. United States, 681 F.2d 746 (Ct. Cl. 1982). Lastly, even if State Street had been able to demonstrate the existence of a binding promise, its claim of estoppel would still fail. Critical to the success of such a claim is proof that the lessor actually relied to its detriment on the Government's commitment. USA Petroleum Corp. v. United States, 821 F.2d 622, 625 (Fed. Cir. 1987); American Electronic Laboratories, Inc. v. United States, 774 F.2d 1110, 1113 (Fed. Cir. 1985); Kozak Micro Systems, Inc., 91-1 BCA at 117,060, 92-2 BCA at 123,986-87. State Street points to only two concrete events in attempting to show detrimental reliance. The first is a statement in a letter: "[W]e will adjust[] our budget quantity as authorized by GSA." Finding 8. This statement, standing alone, says nothing more than that the lessor will comply with whatever direction GSA makes; it hardly establishes that the agency had already authorized a particular change in the ratio of doors to space. The same letter, indeed, shows that no change had yet been agreed to; in writing to the agency, State Street was still suggesting that the lease be modified to include a certain number. Id. State Street also maintains that when it borrowed money to finance construction of the building's interior to suit the Government, it did so in reliance on GSA's promise to alter the door ratio. The lessor has presented no evidence in support of this contention, and we find the proposition hard to swallow. Two months before the loan was made, GSA told State Street that it had available $215,000 to fund the cost of Government-ordered construction. Finding 12. This figure was stated without any apparent reference to the number of doors to be provided, or to any other specific construction matter. Id. There is no indication in the record that the agency's construction budget ever changed. Yet State Street borrowed nearly $80,000 in excess of that budget to finance the work. Id. Why it did this is not explained by any evidence before us. Even if the lessor had believed for some reason that an additional $45,000 would be forthcoming as a result of a change in the door ratio, that would account for little more than half of the very large disparity between what the agency said it had available to pay and what State Street actually borrowed. The maximum possible proceeds from GSA, even if supplemented in this way, would not give State Street enough funds to repay its loan. Decision State Street has not established that GSA should be estopped from enforcing the lease in accordance with its terms. The appeal is therefore DENIED. _________________________ STEPHEN M. DANIELS Board Judge I concur: _________________________ MARTHA H. DeGRAFF Board Judge