CBCA 3628

GRANTED IN PART : February 11, 2016 CBCA 3628 PJB JACKSON-AMERICAN, LLC, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Robert C. MacKichan, Jr. of Holland & Knight LLP, Washington D.C.; and Jacob W. Scott of Vedder Price P.C., Washington, DC, counsel for Appellant. Catherine Crow, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges SOMERS, VERGILIO, and POLLACK. POLLACK, Board Judge. The appeal arises out of the cancellation of a lease between the General Services Administration (GSA) and PJB Jackson-American, LLC (PJB) to house the United States Forest Service (FS) in a building in Jackson, Mississippi. For purposes of this decision, we will generally use the term cancellation when referring to the agency’s actions that (a) prohibited PJB from attaining a build-out to enable tenant occupancy and (b) ultimately repudiated the lease. Appellant claims a total of $2,967,636.90, of which $2,800,000 is for the cancellation of the lease. The remainder is for damages after award that were associated with maintaining the property (carrying costs), as well as costs associated with the Government’s changes to the lease. CBCA 3628 2 Appellant claims a nineteen-month delay or nineteen months of additional carrying costs, which it fully attributes to actions of GSA. Appellant bases its claim for cancellation damages on a diminution of value theory, while GSA asserts that recovery must be calculated on an expectancy basis. A hearing was held in Washington, D.C. on November 12 and 13, 2014. At the time of the hearing, appellant added to its claimed damages $236,156.51, which it characterized as un-reimbursed out-of-pocket costs. GSA objected, contending that the Board lacked jurisdiction to hear this claim because appellant had not previously presented the costs or the subject matter to the contracting officer (CO) for final decision. The Board allowed testimony on this matter at the hearing, but reserved the issue of jurisdiction for later determination. The lease in issue called for a fifteen-year term, starting at the date of occupancy. However, the lease gave the Government the right to cancel after ten years, subject to providing the lessor with 120-days’ notice. The lease was awarded on March 8, 2011. GSA formally directed appellant to stop work preparing the space for occupancy by letter of December 21, 2012, prior to the lessee taking occupancy. GSA had earlier, on or about December 5, 2012, directed appellant to stop all work, anticipating the formal notice. In the period between award of the lease and cancellation, PJB performed significant design and other work in preparation for occupancy, including design, as well as extensive efforts in costing the warm lit shell and tenant improvements (TIs) necessary for occupancy. At the time of cancellation, no physical work on either the TIs or warm lit shell had been performed. GSA concedes that appellant is owed some compensation due to the cancellation of the lease, money for added architectural/engineering (A/E) work, plus a small amount of added carrying costs during part of 2012, which GSA acknowledged was attributable to the extended time of performance. In his final decision of August 28, 2013, the CO recognized entitlement to costs due to added carrying time caused by delays or stretch out in the design segment of the lease, added design costs, and costs directly attributable to the cancellation. By the time of the hearing, however, GSA changed the numbers significantly; it now denies entitlement to the vast majority of the earlier-recognized claimed carrying costs. The parties do not agree on the calculation of damages resulting from the cancellation of the lease. At the time of the final decision, appellant had not yet entered into a mitigating lease. Therefore, that was not reflected in the final decision calculation. Both parties agree that a reduction for mitigation is appropriate, although they disagree as to the amount. To date, GSA has paid nothing on any segment of the claim. CBCA 3628 3 Findings of Fact Nicholas Properties, LLC (Nicholas) entered into a lease with GSA on March 8, 2011. The lease was for in excess of 28,000 rentable square feet of office area and related space in an existing building located in Ridgeland, Mississippi.