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  1. Thanks for the direction to FMR, which led to CICA and both were helpful. I also located a GAO review at http://www.gao.gov/products/GAO-01-578R which found that a lease with a fixed tenant improvement allowance and a fixed lease payment was not a CPPC contract (p. 6). The reasoning seems to rely more on the fixed nature of the lease payment rather than whether or the fee was based on a percentage of the costs. This isn't identical to my hypothetical scenario which has the developer recovering CPPC through a combination of fixed lease payments and the additional amount, but an important difference seems to be the additional amount. Also, Footnote 10 suggests that at least the Inspector General recognizes that the risks associated with CPPC contracts can be present in agreements that are not necessarily contracts, which may be why GAO guidance prohibits CPPC "arrangements" rather than "contracts". Any other interpretations?
  2. Does this sound like a CPPC or any other violation? An agency enters into a lease with a landlord for office space. The number of square feet, the numbers of years, the base rent, and the tenant improvement allowance provided for by the base rent are stated in the lease. The lease provides that if the tenant improvement cost is less than the tenant improvement allowance then the difference will be credited to the base rent in equal monthly amounts over the term of the lease. However, if the tenant improvement cost is more than the tenant improvement allowance then the agency will pay the base rent and repay this additional amount to the landlord over the term of the lease amortized at a pre-determined interest rate. A cost estimate for the tenant improvement prepared before the lease is signed suggests that the tenant improvement will cost about 45% more than the tenant improvement allowance, but the extent and cost of the tenant improvement are unknown at the time the lease is signed. The landlord enters into a cost-plus-a-percentage-of-cost contract with a developer to complete the tenant improvement. There is no contract between the agency and the developer, but the arrangement is that the tenant provides specifications to the developer and the developer completes the tenant improvement per those specification at cost-plus-a-percentage-of-cost. No payment is ever made by the agency to the developer and the tenant improvement cost is not adjusted up or down by the landlord. The tenant improvement is completed at a cost of about 84% more than provided for by the tenant improvement allowance, the agency occupies the office space, and payments of the base rent and additional amount plus interest by the agency to the landlord commence. I have searched for the answer to my question but haven’t found a clear answer. The CPPC dialog in the archives of this site provides some help, but Muschany references CPPC “contracts” (not present in this scenario) while the GAO references CPPC “arrangements” (possibly present in this scenario). I welcome your comments, experience, suggestions, directions to additional resources, etc.
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