[00:00:10] Speaker 04:
We will hear argument first in number 15 13 13 ASP Denver versus GSA May it please the court

[00:00:34] Speaker 03:
The board rejected ASP's tax claim on the factual finding that ASP and GSA never negotiated the base year tax rate.

[00:00:43] Speaker 03:
That finding is not supported by substantial evidence.

[00:00:46] Speaker 04:
Never, I'm sorry, never agreed on the base year tax rate.

[00:00:51] Speaker 04:
There was discussion about it.

[00:00:53] Speaker 04:
I believe that the- Never negotiated it to an agreement.

[00:00:59] Speaker 03:
I believe the board found that there was not a negotiation of the base year tax rate.

[00:01:05] Speaker 04:
I'm just trying to get the language straight.

[00:01:08] Speaker 04:
A rate or a number was not agreed upon by the parties.

[00:01:14] Speaker 04:
It was a subject of discussion, but they did not reach an agreement.

[00:01:21] Speaker 04:
That's what the board found.

[00:01:22] Speaker 04:
Your position is that they did.

[00:01:24] Speaker 03:
Yes, but the board also found that

[00:01:28] Speaker 03:
There was not a negotiation.

[00:01:30] Speaker 03:
There was not a negotiation or an agreement.

[00:01:32] Speaker 03:
The board did not find that there was a negotiation, but that they failed to reach an agreement.

[00:01:38] Speaker 03:
The board found that there was not a negotiation of the base year tax rate.

[00:01:43] Speaker 04:
Under the contract, if they had discussed it but not reached an agreement, you would be in the same position, wouldn't you?

[00:01:52] Speaker 04:
They either agreed to it or they agreed that whatever was going to come out of the first full year tax assessment was going to be at your position as the former and the government's position and the board's finding was 11.

[00:02:06] Speaker 03:
Our position is we did negotiate it and we reached an agreement.

[00:02:10] Speaker 03:
That position, in addition to being supported by the terms of the lease, including the best and final offer by ASP, which in turn incorporated the contracting officer's letter that solicited the best and final offer, confirmed that there was not only negotiations, but there was an agreement.

[00:02:31] Speaker 03:
The agreement is further confirmed by the testimony of the contracting officer at the hearing.

[00:02:37] Speaker 03:
He specifically testified that the party did negotiate and did agree to a base year tax rate.

[00:02:44] Speaker 03:
But he claimed, and GSA argues, that it was limited to one year.

[00:02:50] Speaker 03:
There is no such provision reflected in the lease or reflected in any of the standard clauses or the regulations.

[00:02:58] Speaker 03:
that contemplate a one-year negotiation of the base year lease rate.

[00:03:03] Speaker 05:
So his testimony, I guess, was that it was a placeholder pending the first year, if I recall, his ultimate.

[00:03:11] Speaker 03:
That is his testimony, but that is not what is reflected in the lease.

[00:03:18] Speaker 03:
And again, the lease including all the incorporated terms and particularly the best and final offer.

[00:03:25] Speaker 03:
They argue.

[00:03:26] Speaker 03:
And they also argued that he was interpreting the tax adjustment clause when he made that testimony.

[00:03:33] Speaker 03:
But as His Honor referred to, either they negotiated and agreed, or they didn't.

[00:03:39] Speaker 03:
The contracting officer testified they did negotiate and reach an agreement.

[00:03:47] Speaker 03:
Section 4.4 of the SFO has two things.

[00:03:50] Speaker 03:
You either agree on a tax rate,

[00:03:53] Speaker 03:
or it's established by the first year valuation.

[00:03:58] Speaker 03:
I'm sorry, go ahead.

[00:03:59] Speaker 03:
The contracting officer testified that there was an agreement.

[00:04:02] Speaker 05:
Why doesn't the paragraph 12 of the standard form two answer the question of which of those two choices was elected?

[00:04:12] Speaker 03:
Because that standard form 12 needs to be read in the context

[00:04:17] Speaker 03:
First of all, in which it was prepared, as well as part of reading the lease as a whole and trying to give meaning to all those terms.

[00:04:26] Speaker 03:
One of the fundamental problems with the- Well, let me back up a little bit.

[00:04:30] Speaker 05:
Standard form two, paragraph 12, refers us to the provision that says there are two different ways, as I understand it, to determine the starting point for the tax rate, right?

[00:04:45] Speaker 05:
You can either agree on something that will be the starting point, or you can go with the first full year.

[00:04:52] Speaker 05:
Those are the two choices.

[00:04:54] Speaker 05:
Standard form 2 paragraph 12 seems to say that it is the first full year of those two options that is the one that was chosen.

[00:05:04] Speaker 05:
As I read this language, it looks pretty unambiguous.

[00:05:08] Speaker 05:
Is there something about this language that should lead me to think that it isn't as clear as it looks on its face?

[00:05:15] Speaker 03:
Yes, several things, Your Honor.

[00:05:17] Speaker 03:
First of all, the lease is not standard form two.

[00:05:21] Speaker 03:
Standard form two is part of the lease.

[00:05:24] Speaker 03:
Standard form two expressly incorporates as part of the lease the best and final offer, which in turn has the contracting officer's letter incorporated and attached to it.

[00:05:34] Speaker 03:
That reflects, as a result of our negotiations, that's the contracting officer letter, he recites a number of things that have been negotiated, including the basic tax rate of $3

[00:05:46] Speaker 03:
in 88 cents.

[00:05:47] Speaker 03:
So that provision, the terms of the best and final offer have as much standing in the lease as does any provision in standard form two.

[00:05:59] Speaker 03:
Another important thing to understand is reading the board's decision, the board fundamentally misunderstood what standard form two was in terms of its nature, its timing, and its purpose.

[00:06:13] Speaker 03:
The board found that standard form two was to solicit an estimate from ASP for taxes.

[00:06:23] Speaker 03:
That was not the purpose of it.

[00:06:25] Speaker 03:
Standard form two was drafted after the fact, after the submission of the best and final offer, after the close of negotiations, and after the award of the lease to ASP.

[00:06:38] Speaker 03:
And the realty specialist for GSA who drafted

[00:06:43] Speaker 03:
Standard Form 2 specifically testified that its purpose, it was not to solicit anything.

[00:06:49] Speaker 03:
There was no more feedback from ASP.

[00:06:52] Speaker 03:
It was strictly to memorialize what had previously been agreed to.

[00:06:56] Speaker 03:
And what had previously been agreed to is reflected in the best and final offer, which in turn is incorporated in the lease.

[00:07:04] Speaker 05:
So are you saying that paragraph 12 then is erroneous?

[00:07:09] Speaker 03:
I'm saying the manner in which GSA interprets it

[00:07:14] Speaker 03:
makes it erroneous.

[00:07:16] Speaker 05:
What's an interpretation of just the text of that paragraph that is consistent with your position?

[00:07:24] Speaker 03:
One, it quotes back the precise figure of $3.88.

[00:07:27] Speaker 05:
And calls it an estimated annual tax base.

[00:07:31] Speaker 05:
Just estimated.

[00:07:32] Speaker 05:
And then it says, or immediately before that, it says that in accordance with

[00:07:38] Speaker 05:
paragraph 4.4, which is the one that creates the two options, that the first option, that is to say that the base, first full base year of assessment will be the binding one.

[00:07:50] Speaker 05:
What's the interpretation of that language that is in your favor?

[00:07:58] Speaker 03:
Well, first of all, again, the three options.

[00:07:59] Speaker 05:
I know you say that, well, there are other things that lead one to think that that can't be the real rule.

[00:08:06] Speaker 05:
But is there anything

[00:08:08] Speaker 05:
in that paragraph that I can look to and say, here's the ambiguity or here's the way to read this that favors you?

[00:08:16] Speaker 03:
Well, what is referred to as, what is trapped in terms of purporting to be from section 4.4 is not.

[00:08:27] Speaker 03:
It's a different language than is used in 4.4.

[00:08:30] Speaker 03:
4.4 refers to the first full calendar year

[00:08:36] Speaker 03:
as opposed to the first 12 months which is used at 4.4.

[00:08:40] Speaker 03:
But again, paragraph 12 is not the entire lease or the terms relating.

[00:08:49] Speaker 03:
The ambiguity and the conflict, first of all it should be and can be read consistent throughout the balance of the terms of the lease.

[00:08:57] Speaker 03:
And if it's not, it creates a conflict and an ambiguity with the best and final offer.

[00:09:02] Speaker 03:
That ambiguity is as a result of standard form two that was drafted unilaterally by GSA and in the context of the whole lease and when it was reviewed and executed by ASP, there was no evident conflict there.

[00:09:20] Speaker 03:
They understood it to be completely consistent with their best and final offer quoting $3.88 as the base tax rate.

[00:09:30] Speaker 00:
So if they did see any sort

[00:09:33] Speaker 00:
confusion or read this in a way that was inconsistent with their best and final offer that would have indicated as much?

[00:09:39] Speaker 00:
I mean, wouldn't you have, before you'd signed something like standard form two, wouldn't you have a duty to read it and make sure that you thought that it indicated the final agreement between the parties and what was negotiated?

[00:09:54] Speaker 03:
Absolutely, Your Honor.

[00:09:55] Speaker 03:
And ASP specifically testified that they read it consistent with everything, with all the other terms.

[00:10:02] Speaker 03:
and never realized nor was there any alert provided until the tax bill that we submitted was rejected.

[00:10:12] Speaker 00:
The point is that... There's a hard time with it because it says the base year taxes shall be the first calendar year of full assessment and will be set in accordance with paragraph 4.4.

[00:10:21] Speaker 00:
It seems pretty clear.

[00:10:23] Speaker 00:
Shall be.

[00:10:25] Speaker 03:
Respectfully, that's not inconsistent with what we understood it to be.

[00:10:30] Speaker 03:
that the first 12 months would, that is when the agreement relative to the base year would go into effect once the property was actually assessed.

[00:10:45] Speaker 04:
You're into your rebuttal time.

[00:10:47] Speaker 04:
If you want to take one minute to say something about the HVAC or you can leave it to the briefs, it's up to you.

[00:10:54] Speaker 03:
With respect to the HVAC, again, there are two things.

[00:11:00] Speaker 03:
The solicitation initially only requested one overtime rate.

[00:11:06] Speaker 03:
The solicitation was then amended to add 8.3B, which was a second form of overtime and the only way that you can get compensated for HVAC overtime.

[00:11:17] Speaker 03:
The solicitation instruction to bidders was never amended.

[00:11:21] Speaker 03:
It only required one overtime rate.

[00:11:24] Speaker 03:
We provided one overtime rate, one overtime rate.

[00:11:28] Speaker 03:
The contracting officer confirmed that singular overtime rate

[00:11:32] Speaker 03:
in his letter soliciting the best and final offer, and the contract does not provide two definitions of overtime, but the board applied two different definitions.

[00:11:45] Speaker 03:
And in terms of the GSA's understanding, the present value analysis by the GSA demonstrate the GSA understood completely that the $3.88 was submitted pursuant to 8.3B.

[00:12:00] Speaker 03:
because GSA used that precise, I'm sorry.

[00:12:03] Speaker 05:
Not 388, you're talking about.

[00:12:05] Speaker 03:
The hourly rental rates, thank you, were submitted pursuant to 8.3B because those are precisely the rates that GSA used to conduct the present value analysis and the present value analysis per the lease only related to 8.3B, not 8.4.

[00:12:24] Speaker 03:
Thank you.

[00:12:31] Speaker 02:
Thank you, Your Honor.

[00:12:32] Speaker 02:
Please, the court.

[00:12:33] Speaker 02:
The court should affirm the board's denial of ASP Denver's real estate tax and on-demand 24-7 HVAC claim, because both claims are defeated by the lease's plain terms and are supported by substantial evidence.

[00:12:45] Speaker 02:
The lease states that the real estate tax base is at taxes for the first calendar year of full assessment, not as separately negotiated and agreed upon rate as ASP Denver argues.

[00:12:56] Speaker 04:
Is that different from the language of 4.4 itself, which is not the first full calendar year?

[00:13:05] Speaker 01:
Section 4.4 refers to the first 12 months.

[00:13:10] Speaker 02:
And the standard form 2, which is the J74, talks about the first calendar year.

[00:13:16] Speaker 02:
I'm sorry, the first full calendar year.

[00:13:18] Speaker 05:
Right.

[00:13:18] Speaker 05:
Are those?

[00:13:19] Speaker 05:
Calendar year of full assessment.

[00:13:21] Speaker 04:
Are those different or are those the same?

[00:13:24] Speaker 02:
We believe they're the same.

[00:13:26] Speaker 02:
Because I don't think there's any dispute that the first 12 months of full assessment was the calendar year 2010, January 2010 through December 2010.

[00:13:36] Speaker 02:
So we don't think there's any dispute.

[00:13:38] Speaker 05:
So the assessment was done on a calendar year basis?

[00:13:41] Speaker 05:
Yes.

[00:13:42] Speaker 05:
OK.

[00:13:42] Speaker 05:
Invariably in this setting.

[00:13:44] Speaker 02:
Yes, and that is typically based on our understanding how real estate tax assessments are done.

[00:13:49] Speaker 04:
Okay, and can I ask you what role, if any, is played by the sentence in the J74, this is standard form 2 paragraph 12, the sentence just before the one that you've rightly been focusing on, the one that says the estimated annual tax base is $679.

[00:14:08] Speaker 04:
Is that doing any work at all?

[00:14:12] Speaker 04:
The rest is... In case you want to know.

[00:14:16] Speaker 02:
Well, the role that it plays is that in the offer, the offeror needs to, as the contracting officer testified, needs to have a placeholder for what it expects the real estate taxes to be.

[00:14:27] Speaker 02:
And so the GSA needs to have a way to evaluate the offers.

[00:14:31] Speaker 02:
And so in the lease, it states, and this is based on ASP Denver's offer, that the estimated annual real estate tax basis are $3.88 per square foot.

[00:14:41] Speaker 02:
And the estimated language is important because in a case that the board cited and that we cited in our briefing, which is a board case by the name of Sixth and E Associates LLC, the board interpreted an identical lease provision here and stated that the fact that the lease said estimated meant that it was not an agreed upon real estate tax base.

[00:15:06] Speaker 02:
But again, it was simply a placeholder that was based on ASP Denver's offer.

[00:15:11] Speaker 05:
But you say the importance of putting it into, in this case, standard form two, is because it tells the GSA something about the value of the offer.

[00:15:24] Speaker 05:
Is that the idea?

[00:15:25] Speaker 02:
Yes.

[00:15:25] Speaker 02:
There needs to be a way to... Because, depending on what the number is, that it

[00:15:32] Speaker 05:
changes the risk that the government will be on the hook for a larger or smaller amount of additional tax in the future?

[00:15:39] Speaker 02:
Yes, exactly.

[00:15:40] Speaker 02:
And the $3.88 per square foot is a part of the $35 per square foot rate the ASP Denver proposed.

[00:15:49] Speaker 02:
So it's actually a part of the offer.

[00:15:51] Speaker 02:
And GSA needed to evaluate what their estimate was for the real estate tax base.

[00:15:55] Speaker 04:
And just to be clear, when was this document standard form two prepared?

[00:16:02] Speaker 02:
After I think your friend on the other side said this was prepared after their offer was accepted this It was prepared after their best and final offer It was not prepared after the offer was accepted.

[00:16:17] Speaker 02:
I mean, this is the least so this is when the

[00:16:21] Speaker 02:
But the offer was accepted.

[00:16:22] Speaker 05:
I have what I think is the same question as the presiding judge, which is given that it was very late in the process that this standard form two came into play, what role at that point did it have?

[00:16:38] Speaker 05:
Was GSA still evaluating offers at that point?

[00:16:42] Speaker 05:
Or was this just memorializing something that had previously

[00:16:46] Speaker 05:
been submitted as part of an offer and not having any further operative effect on the agreement.

[00:16:54] Speaker 02:
I think it does have an operative effect on the agreement.

[00:16:55] Speaker 05:
OK, what's the operative effect of that 388 on the agreement?

[00:16:59] Speaker 02:
On the ultimate agreement?

[00:17:02] Speaker 02:
It memorializes the agreement.

[00:17:05] Speaker 05:
But only memorializes something that happened before, but is no longer pertinent to the obligations of the parties, as I understand it.

[00:17:11] Speaker 05:
Is that right?

[00:17:12] Speaker 02:
No, I believe that it is pertinent.

[00:17:14] Speaker 05:
How would it affect the obligations of the parties?

[00:17:18] Speaker 02:
Well, it clarifies that the parties did not negotiate and separately agree upon a real estate tax base.

[00:17:25] Speaker 02:
And the suggestion by Council for ASP that this was somehow inserted into the lease or unilaterally drafted, it's signed by ASP Denver.

[00:17:34] Speaker 02:
They read this provision and agreed to it.

[00:17:38] Speaker 02:
And it's fully consistent with the rest of the record.

[00:17:44] Speaker 02:
There's nothing in ASP Denver's offer.

[00:17:46] Speaker 02:
There's nothing in the correspondence that

[00:17:48] Speaker 02:
supports ASP Denver's suggestion that the parties separately negotiated and agreed upon a real estate tax base.

[00:17:54] Speaker 02:
It's just not there.

[00:17:56] Speaker 04:
Can you explain what all of the occupancy agreements are doing in saying page after page after page the rate for the real estate taxes is 388?

[00:18:13] Speaker 02:
Yes, the occupancy agreements

[00:18:17] Speaker 02:
were prepared by GSA and after consultation with the FBI.

[00:18:25] Speaker 02:
And they're not probative of obviously the meaning of the leech.

[00:18:29] Speaker 02:
These are extrinsic evidence.

[00:18:32] Speaker 02:
most of which were prepared, I believe, before the lease was signed.

[00:18:37] Speaker 02:
And as Ms.

[00:18:38] Speaker 04:
Boland testified... I'm sorry, I thought some of them go into even 2012, including well after this dispute arose.

[00:18:45] Speaker 02:
Yes, some of them.

[00:18:47] Speaker 02:
I think the last one does.

[00:18:49] Speaker 02:
But most of them, I believe, were prepared before the party signed the lease.

[00:18:54] Speaker 02:
But importantly, the effect of these occupancy agreements, as Ms.

[00:18:58] Speaker 02:
Boland testified, and this is at the record of J.A.

[00:19:01] Speaker 02:
1105.5, that all the occupancy agreements show is the breakdown of the rental rate from ASP Denver's SF2.

[00:19:11] Speaker 02:
So ASP Denver proposes a rental rate of $35 per square foot, and it's broken down for utilities and several other components, one of which is the $3.88 per square foot.

[00:19:25] Speaker 02:
So all that is is simply taking ASP Denver's offer, which was incorporated into the lease,

[00:19:31] Speaker 02:
and basically ticking down the components of their offer.

[00:19:37] Speaker 02:
It never says in any of these occupancy agreements that the parties separately negotiated and agreed upon a real estate tax base.

[00:19:45] Speaker 02:
And it furthermore cannot overcome, again, the SF2 and the plain language of the lease.

[00:19:50] Speaker 04:
But why isn't it indicative, or to use your word, probative,

[00:19:56] Speaker 04:
of a government understanding that the rate until changed built into the payments that ASB had to make to GSA and therefore GSA had to, I guess, ASB received from GSA and then GSA was going to receive from FBI was 388, including saying this repeatedly after the first year assessment.

[00:20:26] Speaker 02:
It certainly is probative before the first year of full assessment because, again, as the contracting officer testified, GSA needs to have a placeholder for what the offeror expects the real estate taxes to be.

[00:20:46] Speaker 04:
So the government expected this number and when it turned out that they were mistaken in estimating the tax rate and you were also mistaken in estimating, you got the benefit of that.

[00:21:01] Speaker 04:
They had to eat it.

[00:21:03] Speaker 02:
Yes, and I think it's important to understand why

[00:21:07] Speaker 02:
the real estate tax base was misestimated.

[00:21:09] Speaker 04:
They forgot one of the two taxing authorities, right?

[00:21:12] Speaker 02:
Yes.

[00:21:12] Speaker 04:
And therefore missed it by about half.

[00:21:16] Speaker 02:
They did, but it's also important to understand that had they used the correct mill rate and properly estimated the real estate tax base, they may not have been the successful off-roader.

[00:21:29] Speaker 02:
So essentially what ASP never is

[00:21:31] Speaker 04:
asking the court to do is to... Well, they might have decided that the deal wasn't worth it if they had to keep paying this.

[00:21:37] Speaker 04:
They might have been happy not to have been the successful offer, or if it meant losing all this money.

[00:21:42] Speaker 02:
We don't know that.

[00:21:43] Speaker 02:
Yeah, that's certainly a possibility.

[00:21:44] Speaker 02:
But again, this is a fixed price lease, and the burden upon ferreting out what the correct mill rate and what the correct estimated real estate tax base is supposed to be is on the

[00:21:57] Speaker 02:
the professional commercial real estate developer ASP Denver.

[00:22:00] Speaker 02:
It's not incumbent upon GSA to go behind ASP Denver's estimated real estate tax base and inform them that they were wrong.

[00:22:11] Speaker 02:
So that's not GSA's responsibility on the lease and the court, I'm sorry, the board correctly noted that in its decision.

[00:22:20] Speaker 02:
And as far as the reference to

[00:22:24] Speaker 02:
ASP Denver's Council says there's a lack of substantial evidence to support the board's finding that there was not an agreed upon real estate tax base rate, and that's simply not the case.

[00:22:34] Speaker 02:
Ms.

[00:22:34] Speaker 02:
Boland testified, who is the GSA Realty Specialist that actually conducted negotiations, that the parties never agreed to a real estate tax base.

[00:22:44] Speaker 02:
And Your Honor's question regarding the difference between negotiation and agreement is important here,

[00:22:52] Speaker 02:
ASP Denver never points to anything in the record that says there was an agreement between the parties for $3.88 real estate tax base.

[00:23:00] Speaker 02:
And it's further supported by the price memorandum negotiation that's in the record at J855 to J856 that recounts what the parties negotiated about.

[00:23:10] Speaker 02:
There's never any reference to negotiation or an agreement on real estate tax base.

[00:23:16] Speaker 02:
That's further substantial evidence.

[00:23:18] Speaker 05:
I'm confused now about whether we're

[00:23:20] Speaker 05:
drawing a distinction between negotiation over a real estate tax base versus negotiation over an estimated real estate tax.

[00:23:32] Speaker 05:
Are you saying that, well, they did negotiate it over the estimate, but they didn't negotiate it over the final base, i.e., the rate that would be binding?

[00:23:42] Speaker 05:
Or are you saying they negotiated over even?

[00:23:45] Speaker 02:
There's nothing in the record to indicate that there was any separate negotiation about the real estate tax base.

[00:23:51] Speaker 02:
ASP Denver cites one letter in the record.

[00:23:53] Speaker 05:
Well, how about the testimony that ASP has pointed us to that by, I've forgotten his name, but one.

[00:24:01] Speaker 05:
Mr. Pierce.

[00:24:02] Speaker 05:
Mr. Pierce, that's right.

[00:24:04] Speaker 05:
What about that testimony?

[00:24:05] Speaker 02:
He testified that the $3.88 estimated

[00:24:11] Speaker 05:
tax base was a placeholder and that's exactly- But was he testifying that that was negotiated?

[00:24:18] Speaker 02:
No, that was not separately negotiated.

[00:24:21] Speaker 02:
He testified and there's admittedly ASP Denver cites a portion where he suggests maybe that there is some negotiation, but there's other testimony in the record where Mr. Pierce says that $3.88 per square foot is not their base year taxes.

[00:24:38] Speaker 02:
and that the base of your real estate taxes would be established after one year of full assessment, which, again, is exactly what the lease says.

[00:24:44] Speaker 02:
And that's in J1074.

[00:24:46] Speaker 05:
So he testifies, as I see it, about 949 to 950.

[00:24:53] Speaker 05:
The base tax rate that GSA negotiated with ASP was good for one year.

[00:25:00] Speaker 05:
Negotiated.

[00:25:01] Speaker 05:
And he says yes.

[00:25:02] Speaker 05:
Yes.

[00:25:02] Speaker 05:
So has he testified?

[00:25:04] Speaker 05:
It sounds to my ear that he is testifying that there was negotiation.

[00:25:09] Speaker 05:
Yes, that is... That was being negotiated, an estimated rate?

[00:25:15] Speaker 02:
There was no... Again, Mr. Pierce did not conduct a negotiation.

[00:25:20] Speaker 05:
Well then what is he talking about here when he says negotiated?

[00:25:24] Speaker 05:
This is a negotiated procurement, so... Yeah, but they're talking specifically about the

[00:25:31] Speaker 05:
space tax rate that GSA negotiated with ASP.

[00:25:38] Speaker 05:
Are you saying that he simply was wrong in that testimony?

[00:25:42] Speaker 02:
No.

[00:25:42] Speaker 02:
What does that testimony mean?

[00:25:49] Speaker 02:
The real estate tax base that he's referring to is, again, a placeholder for what the taxes end up going to be.

[00:25:57] Speaker 02:
And this is confirmed by the magnitude of the lease.

[00:25:58] Speaker 05:
So he did negotiate for something, but he negotiated for a placeholder?

[00:26:02] Speaker 05:
Is that what you're saying?

[00:26:04] Speaker 02:
There was overall negotiations.

[00:26:06] Speaker 02:
Again, it was a negotiated agreement.

[00:26:09] Speaker 02:
But there was not a separate negotiation regarding real estate tax base.

[00:26:12] Speaker 02:
And that's confirmed by the testimony of Ms.

[00:26:14] Speaker 02:
Boland that's in the record and the price negotiation memorandum that's also in the record.

[00:26:19] Speaker 02:
And it's confirmed also by the plain language of the lease.

[00:26:23] Speaker 05:
Well, I understand what you're saying.

[00:26:25] Speaker 05:
But I'm left with the feeling that what you're saying is not consistent with the answer he gave to the question that appears at the top of J8950.

[00:26:34] Speaker 05:
Now, maybe your position is that he was simply mistaken or gave an imprecise answer.

[00:26:40] Speaker 02:
I think it's fair to say that it was imprecise.

[00:26:43] Speaker 02:
But later on in his testimony, he clarified that there was no separate negotiation about the real estate tax base.

[00:26:48] Speaker 04:
So we would ask the court to affirm... Can you say a word about the HVAC process?

[00:26:56] Speaker 04:
Sure.

[00:26:57] Speaker 04:
Is it your view that the calculation of an amount, lump sum amount, is this 8.3B, to be paid for the 24-hour HVAC service,

[00:27:13] Speaker 04:
Was part of the lease payment or over and above the lease payment, the rental payment?

[00:27:24] Speaker 02:
It's both.

[00:27:25] Speaker 02:
A portion of the 24-7 HVAC was a part of the lease rate, and that's confirmed by the FBI's program requirements.

[00:27:32] Speaker 02:
So the 24-7 system is a dedicated system.

[00:27:35] Speaker 02:
But it's broken down into two modes.

[00:27:37] Speaker 02:
One is a dedicated mode.

[00:27:39] Speaker 02:
So that's essentially one on time.

[00:27:40] Speaker 04:
It's always on or somebody can walk into a room and say, I want it on.

[00:27:43] Speaker 02:
Exactly.

[00:27:44] Speaker 02:
And the other portion is the on-demand portion.

[00:27:48] Speaker 02:
So this only operates if someone essentially pushes a button.

[00:27:51] Speaker 02:
So the dedicated portion of the 24-7 system is included in the lease rate of $35 per square foot.

[00:27:58] Speaker 02:
The 24-7 on-demand is not.

[00:28:01] Speaker 02:
And the GSA allowed

[00:28:04] Speaker 02:
ASP Denver or any of the offers to propose a cost for those services.

[00:28:08] Speaker 02:
ASP Denver did not propose a cost for that.

[00:28:10] Speaker 04:
They proposed a cost that would be over and above the $35 per square foot lease payment and then say, here's, it amounts to, I don't know, $120,000.

[00:28:20] Speaker 04:
Here's an invoice for that and pay us this in addition.

[00:28:23] Speaker 02:
Yes.

[00:28:23] Speaker 02:
And it's no surprise that ASP Denver did not propose a cost because, again, even though they claimed $900,000 for these services, the actual cost of the services was less than $25,000.

[00:28:34] Speaker 02:
And this is a $120 million lease.

[00:28:37] Speaker 05:
So you're saying that they just sort of threw this in as essentially a free item?

[00:28:45] Speaker 02:
Yes, it's essentially a de minimis cost.

[00:28:47] Speaker 02:
$20,000 per year is de minimis when you're talking about a $120 million lease.

[00:28:52] Speaker 02:
And their claim for these services for the 24-7 on-demand room, which is less than 25% of the building, is double the utilities for the entire building.

[00:29:03] Speaker 02:
ASB Denver's effort to misread the lease here asked the board and asked the court to provide them with a significant windfall.

[00:29:10] Speaker 02:
And for those reasons, we would ask that the court affirmed the board's denial of the real estate tax claim and the 24-7 on-demand claim.

[00:29:17] Speaker 02:
Thank you.

[00:29:18] Speaker 02:
Thank you.

[00:29:21] Speaker 04:
Five minutes total.

[00:29:27] Speaker 03:
Thanks.

[00:29:27] Speaker 03:
Thank you, Your Honor.

[00:29:28] Speaker 03:
A few things briefly.

[00:29:30] Speaker 03:
First of all, Mr. Pierce is the contracting officer.

[00:29:34] Speaker 03:
Mr. Pierce is the person that signed the November 8, 2007 letter that solicited the best and final offer and confirmed the negotiations of the multiple terms including the tax rate and a singular HVAC rate.

[00:29:52] Speaker 03:
He also signed the lease.

[00:29:54] Speaker 03:
Mr. Pierce's testimony was not imprecise with respect to the negotiation and agreement on the tax rate.

[00:30:01] Speaker 03:
It's very specific.

[00:30:03] Speaker 03:
The court has the citations correctly to the record.

[00:30:09] Speaker 00:
With respect to 6 and E. How do you respond to the comment that that's clarified at JA 1075, and that there, Mr. Pierce says that it's just a placeholder, just an estimated cost?

[00:30:24] Speaker 03:
Basically, that was backtracking, and it's inconsistent with the lease.

[00:30:28] Speaker 03:
That explanation of, oh, we negotiated the tax rate, but that it was just for one year, a one-off thing.

[00:30:35] Speaker 03:
The only place that that is found is in redirect testimony by the contracting officer.

[00:30:45] Speaker 03:
And it's not found in the lease.

[00:30:47] Speaker 03:
It's not in the regulations.

[00:30:49] Speaker 03:
It's not in standard form 4.4, which again has two options.

[00:30:54] Speaker 03:
You negotiate it or it's set automatically.

[00:30:58] Speaker 03:
Not you negotiate it for a year and then later on you do something else.

[00:31:03] Speaker 03:
So I think if you read his testimony, it's nothing more than his argument and interpretation of the lease and now standard form 2.

[00:31:12] Speaker 03:
And to the extent that's his position, it's completely inconsistent with the lease and the regulations and the standard forms.

[00:31:21] Speaker 03:
With respect to the HVAC claim and the cost versus the charges, the contracting officer specifically testified that 8.3B was added by addendum to the solicitation.

[00:31:36] Speaker 03:
That's also part of the record.

[00:31:38] Speaker 03:
It's indicated there specifically.

[00:31:40] Speaker 03:
For the express purpose,

[00:31:42] Speaker 03:
of providing offerors the opportunity to receive additional compensation over and above the $35 per square foot cap on the rental rate.

[00:31:55] Speaker 03:
ASP did precisely that.

[00:31:57] Speaker 03:
The evidence demonstrates that in financing the project, ASP relied upon the additional payments under 8.3b.

[00:32:06] Speaker 03:
And I'd also point out, if just reading 8.3b on its face,

[00:32:11] Speaker 03:
It does not say it provides a very precise formula.

[00:32:16] Speaker 03:
We will take 6,250 hours of possible 24-hour on-demand overtime.

[00:32:24] Speaker 03:
We're going to multiply that by the overhead rate you quote, and you will receive a lump sum payment every year for that.

[00:32:32] Speaker 03:
It's easy math.

[00:32:34] Speaker 03:
And it's also important to note that that math, once again, is reflected in the GSA's own documents.

[00:32:41] Speaker 03:
where they make precisely the calculation reflected in 8.3B in their present value analysis, which was only limited to 8.3B.

[00:32:52] Speaker 03:
They used the same 6,250 hours quoted in 8.3B.

[00:32:57] Speaker 03:
They used precisely the overhead rates provided by ASP.

[00:33:05] Speaker 04:
Briefly, with respect to... Can I just ask, does the apparent

[00:33:11] Speaker 04:
very large dollar figure disparity between costs to you and using the formula, as you've just described, way against interpreting the provision in the way that you suggest.

[00:33:28] Speaker 04:
No, it doesn't.

[00:33:29] Speaker 04:
Why is that?

[00:33:30] Speaker 04:
Why doesn't the apparent... First of all, do you agree that these two numbers are way out of whack with each other?

[00:33:40] Speaker 03:
If you were to isolate it and just look at utility costs, yes, but let me point out there's also the capital costs of putting the system in in the first place.

[00:33:47] Speaker 03:
But in any event, it's not inconsistent because, again, the express purpose or the stated purpose of 8.3B was so the offerors and ultimately ASP could get more money than the $35 rental cap so that, in essence,

[00:34:07] Speaker 03:
GSA could get more bang for its buck, and it got it.

[00:34:10] Speaker 03:
So there's not a windfall here.

[00:34:12] Speaker 03:
If you look at it outside the context of 8.3B, which does not say we'll reimburse your cost.

[00:34:19] Speaker 03:
It says you'll be paid your rate times 6,250 hours.

[00:34:23] Speaker 03:
There is no windfall in the context of the lease.

[00:34:28] Speaker 03:
On the contrary, there is a tremendous adverse impact to ASP and the

[00:34:37] Speaker 03:
And GSA essentially got about $20 million of scope in that project for free because of its failure to pay per 8.3B.

[00:34:53] Speaker 03:
The only thing I'd point out is with respect to 6 and E associates, it has no application to this case.

[00:34:59] Speaker 03:
There was no negotiations whatsoever.

[00:35:02] Speaker 03:
and as compared to the best and final offer and the contracting officers letter confirming the negotiations, which was incorporated into the best and final offer and incorporated into the lease.

[00:35:15] Speaker 03:
To the extent the details of these two issues are tedious and confusing and mind-numbing, I would suggest and point out that that is the fault and the responsibility for the GSA.

[00:35:28] Speaker 03:
It arises only from the two paragraphs.

[00:35:30] Speaker 04:
You need to wrap up.

[00:35:32] Speaker 04:
You've gone over your time.

[00:35:34] Speaker 04:
Thank you.