BNUMBER: B-274676.2; B-274676.3
DATE: January 8, 1997
TITLE: 1301 New York Avenue Associates
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DOCUMENT FOR PUBLIC RELEASE
A protected decision was issued on the date below and was subject to a
GAO Protective Order. This version has been redacted or approved by
the parties involved for public release.
Matter of:1301 New York Avenue Associates
File: B-274676.2; B-274676.3
Date:January 8, 1997
Douglas L. Patin, Esq., Catherine R. Baumer, Esq., and Robert J.
Symon, Esq., Spriggs & Hollingsworth, for the protester.
Richard J. Conway, Esq., and Karen Lau, Esq., Dickstein Shapiro Morin
& Oshinsky, for Square 140 Associates, an intervenor.
Barry D. Segal, Esq., and Jeffrey M. Hysen, Esq., General Services
Administration, for the agency.
Paula A. Williams, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest that agency improperly evaluated the protester's best and
final offer for the lease of office space is denied where the record
shows that the agency's evaluation of the protester's rental rate that
included required tenant alterations was reasonable notwithstanding
the protester's expectation that its lower rate which excluded these
alterations would be used for evaluation purposes.
DECISION
1301 New York Avenue Associates Limited Partnership protests the award
of a contract to Square 140 Associates under solicitation for offers
(SFO) No. 96-012, issued by the General Services Administration (GSA)
for the lease of approximately 167,000 to 177,000 occupiable square
feet (osf)[1] of office and related space in Washington, D.C. for use
by the Department of Agriculture's Economic Research Service (ERS).
The protester argues that the evaluation of its offer and that of the
awardee was unreasonable in several specific areas.
We deny the protests.
The amended SFO solicited offers for a 5-year base period with a
5-year renewal option and a 10-year firm lease term. Among other
things, the SFO stated that award would be made to the lowest-priced
offeror whose proposed space conforms to the requirements of the SFO.
It also stated that price evaluation would be based on the "net
present value" of the annual rent per osf and explained how that
figure would be calculated for price evaluation purposes. In this
regard, paragraph 1.9 of the SFO entitled, "Price Evaluation (Present
Value)" reads, in pertinent part:
"Evaluation of offers will be on the basis of the total annual
present value per occupiable square foot including any option
periods and concessions. The Government will make independent
present value price evaluations on the five year firm term with
five year option and the ten year firm term The government
reserves the right to make an award based upon either term."
(Emphasis in original.)
. . . . .
"The Government will make present value price evaluation by
reducing the prices offered to a total annual present value price per
occupiable square foot, as follows:
(D) In the event the government competes an expiring lease for
the possibility of relocation, the cost per occupiable square
foot for relocation expenses shall be added to the total price
per occupiable square foot of all offers with the exception of
the offer submitted for the existing leased facility. Such
relocation costs may include but are not limited to physical move
costs, telecommunication costs, alterations cost and the
estimated cost of agency disruption. The sum of the total
present value price per occupiable square foot and the relocation
cost per occupiable square will be the basis for price evaluation
in determining if the Government shall relocate." (Emphasis in
original).
Offers were received from nine firms in response to the SFO. 1301 New
York Avenue, the incumbent lessor, offered the existing building which
it has leased to GSA for 11 years on an "as is" basis, while Square
140 offered a building located at 1800 M Street in Northwest
Washington, D.C. During discussions, each offeror was advised that
the tenant agency's needs included kitchenettes (the SFO was silent on
this feature). The protester was specifically advised of this
requirement as well as others that would require modifications to the
existing occupied space.
Best and final offers (BAFOs) were received by June 21. In its BAFO,
1301 New York Avenue submitted two rates: a base rental of [deleted],
which did not include the required tenant alterations and [deleted]
which did include the alterations which the protester identified in
its cover letter as:
"1. The entire premises will be painted.
"2. All tenant space (not to include the public space) will
receive new carpet.
"3. 1301 New York Avenue Associates will assume responsibility
for the repair and maintenance of all above building standard
items to include but not be limited to the air handling unit
located in the garage servicing the computer room, air
conditioning for the LAN units and the lift for the mail room.
"4. 1301 New York Avenue Associates will install seven
kitchenette units. . . ."
In evaluating BAFOs, the contracting officer considered 1301 New York
Avenue's pricing of [deleted] since this was the only rental rate
under which the protester proposed to provide the tenant alterations
GSA had identified as necessary for continued occupancy of that space.
1301 New York Avenue's evaluated BAFO was priced at [deleted] (i.e.,
net present value per osf) for a 5-year base with a 5-year renewal
option; Square 140's evaluated BAFO price was $20.36 for the same
lease term. After completing its review of BAFOs, the contracting
officer decided to award a 5-year base with a 5-year renewal option
lease to Square 140 whose offer was the lowest priced and met the
requirements of the tenant agency. Award was made to Square 140 on
September 12. The protester, debriefed by the agency on September 26,
filed this protest with our Office on September 30. We have been
advised by the agency of its determination that it is in the
government's best interest to continue performance of the contract.
The crux of the protest is that GSA's evaluation of its BAFO and that
of the awardee's was flawed. Specifically, 1301 New York Avenue
alleges that GSA failed to utilize a tenant alterations allowance
contained in the amended SFO to evaluate the present value of Square
140's rental rate. In addition, the protester asserts that GSA acted
unreasonably because its evaluation of 1301 New York Avenue's BAFO was
improperly based on the higher BAFO rental rate (that included the
costs for the required tenant alterations) which the protester
believed would only be utilized by GSA in subsequent negotiations if
1301 New York Avenue was selected for award. The protester also
challenges the agency's estimate of relocation expenses as arbitrary
and unreasonable and alleges that the agency waived a 3-year
termination option requirement for the awardee. However, the
protester concedes that its BAFO would be low only if GSA both
improperly used the protester's higher rental rate in evaluating its
BAFO and did not apply the correct tenant alterations allowance factor
to the awardee's price.[2]
We have no basis to question the agency's evaluation of the
protester's BAFO using the rental rate of [deleted] which represents
the cost for its offered space to satisfy the current needs of the
tenant agency.[3] As the record shows, the protester was asked during
discussions to include in its rental rate the costs for certain
alterations required to bring the offered space in line with ERS'
current needs and which other offerors were also required to meet.[4]
While the protester asserts that it expected GSA to use its lower BAFO
rate of [deleted] for evaluation purposes and would use the higher
rate only as a basis to negotiate the cost of the required alterations
after award of the lease, the protester has not shown, nor is there
any evidence, that this expectation was reasonable. In fact, it is
entirely inconsistent with the SFO evaluation scheme which envisioned
evaluated rental rates that included the cost of any alterations to
satisfy tenant needs. In short, we find nothing in the record,
including the hearing testimony, which shows that the agency acted
improperly in evaluating 1301 New York Avenue's rental rate of
[deleted].
As stated, the protester concedes that if GSA correctly used the
higher rental rate contained in its BAFO, it is not low under any
circumstances no matter how we resolve the remaining protest issues.
Therefore, since we conclude that GSA properly considered the
protester's BAFO rate of [deleted], we need not consider whether GSA's
application of the tenant alterations allowance factor to the
awardee's price was proper or whether GSA's estimate of relocation
expenses was reasonable.[5] See Alascom, Inc., B-227074 et al., Aug.
10, 1987, 87-2 CPD para. 144.
The protests are denied.
Comptroller General
of the United States
1."Occupiable space" is defined by the SFO to include only the portion
of rentable space that is available for the tenant's personnel,
equipment, and furnishings.
2. In addition to the issues above, the protester has also alleged, in
a supplemental protest filing, that Square 140 breached a restrictive
covenant in another lease agreement between Square 140 and one of its
tenants in the 1800 M Street building which prevents GSA from
occupying the space at 1800 M Street. In response to this allegation,
GSA and Square 140 both seek to have this issue dismissed asserting
that the issue is a matter of contract administration and is the
subject of litigation before a court of competent jurisdiction. We
agree that, to the extent this matter affects this subject lease, it
relates to contract performance which is a matter of contract
administration not for review by our Office. Bid Protest Regulations, sec.
21.5(a), 61 Fed. Reg. 39039, 39042 (1996) (to be codified at 4 C.F.R. sec.
21.5(a)).
3. A hearing was conducted for the purpose of receiving testimony from
GSA's contracting officer, realty specialist, and a representative of
1301 New York Avenue. See Bid Protest Regulations, sec. 21.7, 61 Fed.
Reg. 39039, 39042 (1996) (to be codified at 4 C.F.R. sec. 21.7)).
4. Any challenge to the agency's request to price the cost for these
tenant alterations which the protester describes as "above standard
tenant alterations," is now untimely. Since the request was made
during discussions with 1301 New York Avenue, challenges to this
requirement had to be filed prior to the time set for receipt of
BAFOs. Bid Protest Regulations, sec. 21.2(a)(1), 61 Fed. Reg. 39039,
39040 (1996) (to be codified at 4 C.F.R. sec. 21.2(a)(1)).
5. The protester also maintains that Square 140's offer failed to
include a required 3-year termination option. This allegation is
simply incorrect. Although Attachment 2 of the SFO does include
language in block 10 that reads, in pertinent part, "[lease] firm with
termination is for a five year firm term, but with the government
having the right to terminate the lease any time after 36 months . . .
" the SFO, when read as a whole and in a manner that gives effect to
all its provisions, simply does not require offerors to submit a
rental rate for a lease with a 3-year termination option. Indeed, as
quoted above, in paragraph 1.9 of the SFO, GSA advised offerors that
it intended to perform a price evaluation only on the basis of a "five
year firm term with five year option and the ten year firm term" and
specifically reserved the right to make award "based upon either
term." That being so, we find the protester's contention that the
agency improperly awarded the lease to Square 140 without the right of
termination option is premised on an unreasonable reading of the SFO.