Undue Burden And Its Application For Government Lessors
Undue Burden is an undefined theoretical concept within the Federal Government which boils down to this: The Government, in its course of operating as a business entity, cannot cause an undue burden to any of its vendors. There are a multitude of ways in which to argue Undue Burden but the most common justifications would be financial and time considerations. Below I’ll detail some of the past justifications I’ve made so you can see the basis of the argument. Each situation is obviously unique and each justification has to be built around your particular situation but generally the methods for constructing all of my arguments are represented below.
Example #1 Financial & Time – Government Requested Alteration During Lease Term
A few years ago I had a Govt. Agency request the Lessor to design, furnish, and install a radio and video communications tower. The total cost of the project was ~$3.5M and would have taken roughly 8 months to complete. Due to the large sum of the total project costs and duration of the project, I approached the LCO to allow for progress payments as outlaying ~$3.5M in capital to complete the project without being able to bill for progress payments would be a substantial cash flow hit for any sized owner. The LCO rejected progress payments based upon standard lease language that the Govt. does not pay for any construction costs until the completion of the project. I then approached the Govt. with an Undue Burden argument that if the LCO would not allow progress payments, the Landlord should be able to charge short term interest on the capital funds they would have to outlay for the duration of the project. After some back and forth the LCO finally agreed with me and we developed a reasonable bell curve for expected construction payments, applied a 6% interest rate to that bell curve of payments, and ultimately were able to charge the Govt. $70k for the Lessor having to carry the costs of such a large and long duration project.
Example #2 Unknown Worker Restrictions – Lessor Capital Improvement Project
While the standard GSA Lease affords the Government the sole authority to allow or deny access to the building (even access by the Lessor), that authority must be applied evenly. I had just finished a Government requested alteration at a property which only required the workers accessing the interior portion of the building to provide their full legal name and company represented, meaning no formal background check. A few months later, the landlord had a roof replacement project taking place and when we approached the GSA / tenant agency with the roof project, they wanted to complete a full background check on each employee that would be accessing the roof. They also stated that each employee must fall within the definition of “United States Person.” When I brought up the uneven application of security requirements to the LCO from the Government Requested Project a few month prior as compared to the owners roof project, the LCO determined that it would be an undue burden for the ownership to meet the higher requirements. They also stated that if the tenant agency wanted to apply those higher security standards, the tenant agency would need to pay the cost differential from the owners current bid and the revised bid to meet the more stringent background checks and employee requirements.
Example #3 Changes In Requirements – Post Government Requested Alteration
In this example, the Government asked the Lessor to furnish and install automatic door openers throughout a building with automatic hand wave operators. We had the project designed, competitively bid, and submitted those costs to the GSA for which they ultimately issued an Supplemental Lease Amendment (SLA) directly to the ownership. Having been copied on the proposal, the owner verified the Govt. had fully funded the project, signed the SLA, and sent it back to the GSA. The issue was that the GSA added language into the SLA that had the ownership on the hook for the design, installation, maintenance, repair, and replacement of the auto door openers for the remaining term of the lease, something that was not originally included in the Request For Proposal (RFP) from the GSA. When this was ultimately realized, I was able to approach the LCO with an argument that the original RFP did not include those requirements, our proposal reserved rights for the lessor to submit additional costs at the completion of the project, and that the repair / maintenance / replacement was an unknowable cost. After several conversations we all agreed the best way to resolve the issue was to create a theoretical repair / maintenance / replacement summary over the outstanding term of the lease, divide by the remaining term, and issue another SLA that added the cost as a supplemental rent payment.
As with most things relating to the Government, there is always a loophole to getting done what you want to get done. The first issue is knowing the loophole, the harder part is getting the Government to agree that the loophole is appropriate and that it’s needed in any given situation. Undue Burden is a very powerful argument to make under the appropriate circumstances but can’t be used often or applied to every situation.