Booker T. Washington Foundation

A firm requested reconsideration of a decision concerning its cost-reimbursement contract with the Department of Commerce. The contract stated that the firm could only be reimbursed for its indirect costs at a maximum rate of 33 percent of its total direct costs. It argued that the 33-percent figure was intended to be only a temporary ceiling subject to later adjustment when the actual indirect costs became known. After convincing the contracting officer to revise the allowable indirect cost rate upward, the protester still disputed the disallowance of certain costs and appealed the contracting officer's final decision to the Commerce Appeals Board. The Board opposed the requested relief, challenged the authority of the contracting officer to alter the indirect cost rate without a compensating benefit to the government, and reinstated the 33-percent rate. The protester then filed a claim with GAO arguing that a mutual mistake had occurred in the drafting of the agreement, because the 33-percent rate was not intended to be a permanent ceiling. GAO held that the matter had properly been brought before the Board and settled pursuant to the contract's disputes clause. Since there was no indication that the Board acted fraudulently or in bad faith, GAO had no basis to review the Board's decision. The protester argued that since the mistake occurred in the draft agreement, there was no binding contract. GAO agreed that this question was for its consideration. It held that reformation of a contract is only authorized where, by reason of mutual mistake, the contract does not reflect the actual agreement of the parties, and it can be established what the agreement would have been had the mistake not been made. In this case, the record was unclear as to what the contracting officials intended in regard to the 33-percent rate. GAO could not conclude that, at the time the parties reached their agreement, Commerce intended the 33-percent rate to be temporary. The evidence available did not provide clear and convincing proof of a mutual mistake required for reformation of a contract. Therefore, the claim was not allowed.