B-125642, NOV. 2, 1955

B-125642: Nov 2, 1955

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UNITED STATES ATOMIC ENERGY COMMISSION: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 23. " WAS TO PROVIDE A BASIS FOR LABOR ESCALATION ADJUSTMENTS UNDER ARTICLE IX OF THE CONTRACT. IT IS REPORTED IN YOUR LETTER THAT THE CONTRACT WAS AWARDED AS THE RESULT OF SELECTION AND NEGOTIATION DURING THE PERIOD OCTOBER TO DECEMBER 1952. THAT A LETTER CONTRACT WAS ENTERED INTO BY TELETYPE ON DECEMBER 24. NEGOTIATIONS WITH RESPECT TO ESCALATION AND OTHER MATTERS WERE CARRIED ON. THAT IT WAS NOT UNTIL SEPTEMBER 25. THAT APPENDIX "C" WAS SUBMITTED FOR INCORPORATION IN THE DEFINITIVE CONTRACT. IT IS FURTHER REPORTED THAT THE RATES CONTAINED IN APPENDIX "C" WERE NOT THE RATES ESTABLISHED AS OF DECEMBER 24.

B-125642, NOV. 2, 1955

TO MR. K. E. FIELDS, GENERAL MANAGER, UNITED STATES ATOMIC ENERGY COMMISSION:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 23, 1955, WITH ENCLOSURES, RELATIVE TO A REQUEST FROM CONTINENTAL COPPER AND STEEL INDUSTRIES, INC., PORTLAND, MAINE, FOR CORRECTION OF THE WAGE RATES CONTAINED IN APPENDIX "C" OF CONTRACT NO. AT/40-1/-1546, ENTERED INTO ON SEPTEMBER 25, 1953, BETWEEN THAT COMPANY AND THE ATOMIC ENERGY COMMISSION. APPENDIX "C," ENTITLED "WAGE RATE SCHEDULE IN EFFECT AT CONTRACTOR'S PORTLAND, MAINE, PLANT AS OF DECEMBER 24, 1952," WAS TO PROVIDE A BASIS FOR LABOR ESCALATION ADJUSTMENTS UNDER ARTICLE IX OF THE CONTRACT.

IT IS REPORTED IN YOUR LETTER THAT THE CONTRACT WAS AWARDED AS THE RESULT OF SELECTION AND NEGOTIATION DURING THE PERIOD OCTOBER TO DECEMBER 1952; THAT A LETTER CONTRACT WAS ENTERED INTO BY TELETYPE ON DECEMBER 24, 1952, WHICH ACCEPTED THE CONTRACTOR'S ORIGINAL PROPOSAL OF NOVEMBER 17, 1952, AS AMENDED, AND AS REVISED DECEMBER 15, 1952; THAT BETWEEN NOVEMBER 17, 1952, AND THE EXECUTION OF THE DEFINITIVE CONTRACT, NEGOTIATIONS WITH RESPECT TO ESCALATION AND OTHER MATTERS WERE CARRIED ON; AND THAT IT WAS NOT UNTIL SEPTEMBER 25, 1953, THAT APPENDIX "C" WAS SUBMITTED FOR INCORPORATION IN THE DEFINITIVE CONTRACT.

IT IS FURTHER REPORTED THAT THE RATES CONTAINED IN APPENDIX "C" WERE NOT THE RATES ESTABLISHED AS OF DECEMBER 24, 1952, BUT WERE, IN FACT, WITH EXCEPTION OF THE FIRST TWO CLASSIFICATIONS ON THE SCHEDULE, THE RATES IN EFFECT AT PORTLAND ON SEPTEMBER 25, 1953. THE ERROR WAS DISCOVERED AS THE RESULT OF THE SUBMISSION BY THE CONTRACTOR OF AN INVOICE DATED DECEMBER 27, 1954, FOR LABOR ESCALATION WHICH WAS RETURNED FOR CORRECTION AND REBILLING. THE SEPTEMBER 25, 1953, RATES ARE REFERRED TO AS HAVING RESULTED FROM A LABOR UNION CONTRACT ENTERED INTO BY THE CONTRACTOR EFFECTIVE MARCH 15, 1953, AND SUCH RATES EXCEED THESE IN EFFECT AT THE CONTRACTOR'S PORTLAND, MAINE, PLANT ON DECEMBER 24, 1952.

IT APPEARS THAT IN THE NEGOTIATION OF THE CONTRACT IT WAS UNDERSTOOD THAT THE WAGE RATES TO BE USED IN COMPUTING PRICE ADJUSTMENTS UNDER ARTICLE IX OF THE CONTRACT WOULD BE THOSE IN EFFECT AS OF DECEMBER 24, 1952, AT THE CONTRACTOR'S PLANT IN HOLYOKE, MASSACHUSETTS, ON THAT DATE. AND IT IS STATED IN YOUR LETTER THAT THE CONTRACTOR HAS SUBMITTED EVIDENCE TO SHOW THAT THE HOLYOKE DECEMBER 24, 1952, RATES WERE USED FOR INITIAL HIRING AT PORTLAND.

IN A LETTER DATED SEPTEMBER 25, 1953, ON WHICH DATE THE FORMAL CONTRACT WAS EXECUTED, THE CONTRACTOR INDICATED THAT THE HOLYOKE AVERAGE HOURLY WAGE RATE HAD INCREASED FROM $1.51 TO $1.65 AND THAT, IN THE MEANTIME, THE AVERAGE HOURLY WAGE RATE FOR OPERATIONS AT THE PORTLAND PLANT HAD INCREASED FROM APPROXIMATELY $1.51 TO $1.57. THE CONTRACTOR THEN STATED THAT "WE THINK THIS WILL GIVE YOU THE INFORMATION NEEDED FOR APPENDIX C AND THAT $1.51 MAY BE CONSIDERED AS THE STARTING AVERAGE.' THERE FOLLOWED A STATEMENT OF WAGE RATES WHICH ARE IDENTICAL TO THOSE SET FORTH IN APPENDIX "C," AND IT IS APPARENT THAT A WEIGHTED AVERAGE OF SUCH RATES COULD NOT POSSIBLY HAVE AMOUNTED TO ONLY $1.51 PER HOUR. AS A MATTER OF FACT, THE HOURLY RATES SHOWN FOR FOUR OF THE SEVEN CLASSES OF LABOR RANGED BETWEEN $1.65 AND $1.80, AND THE HOURLY RATE SHOWN FOR ANOTHER CLASS OF LABOR WAS SHOWN TO RANGE BETWEEN $1.80 AND $2.00. ON ONE OF THE TWO REMAINING CLASSES THE HOURLY RATE WAS SHOWN TO RANGE BETWEEN $1.50 AND $1.80. EVIDENTLY, IT COULD NOT REASONABLY HAVE BEEN ASSUMED THAT A LOWER WAGE RANGE OF BETWEEN $1.35 AND $1.45 FOR ONE OF THE CLASSES OF LABOR WOULD TEND TO REDUCE THE WEIGHTED AVERAGE TO A FIGURE AS LOW AS $1.51.

IN THE CIRCUMSTANCES, AND SINCE THE ATOMIC ENERGY COMMISSION NEGOTIATORS DID NOT REQUEST INFORMATION AS TO THE NUMBERS OF EMPLOYEES OF EACH CLASSIFICATION CONSIDERED BY THE CONTRACTOR IN COMPUTING THE WEIGHTED AVERAGE RATE OF $1.51, REFERRED TO AS THE "STARTING AVERAGE," YOU RECOMMEND THAT THERE BE ALLOWED AN APPROPRIATE MODIFICATION OF THE CONTRACT TO CORRECT A MUTUAL MISTAKE AND REFLECT THE LABOR RATES WHICH BOTH PARTIES ORIGINALLY INTENDED TO SET FORTH IN APPENDIX "C.'

IN ITS PROPOSAL OF NOVEMBER 17, 1952, THE CONTRACTOR STATED THAT "THIS QUOTATION IS BASED ON LABOR RATES AND MATERIAL COSTS PRESENTLY IN EFFECT.' ALSO, THE FACT THAT THE SCHEDULE OF WAGE RATES TO BE FURNISHED BY THE CONTRACTOR WAS INTENDED TO REPRESENT ACTUAL LABOR COSTS AT THE BEGINNING OF THE CONTRACT PERFORMANCE PERIOD SEEMS FAIRLY EVIDENT NOT ONLY FROM THE RECORD OF NEGOTIATIONS BUT ALSO FROM THE FACT THAT APPENDIX "C" IS RELATED TO A CONTRACT ARTICLE WHICH PROVIDES AGAINST INCREASES OR DECREASES IN THE COSTS OF PERFORMANCE. OBVIOUSLY, THE GOVERNMENT EXPECTED THAT THE STATEMENT OF WAGE RATES WOULD EQUAL OR AT LEAST APPROXIMATE THE ACTUAL RATES PAID TO LABORERS AT THE BEGINNING OF THE CONTRACT PERFORMANCE PERIOD SINCE, OTHERWISE, THERE WOULD HAVE BEEN NO PROPER BASIS FOR COMPUTING APPROPRIATE PRICE ADJUSTMENTS ON ACCOUNT OF CHANGES IN LABOR COSTS. FURTHERMORE, IT IS APPARENT THAT, IMMEDIATELY AFTER THE CONTRACTOR'S STATEMENT OF LABOR RATES WAS FURNISHED, THE GOVERNMENT WAS PLACED ON NOTICE OF PROBABLE ERRORS IN THE SPECIFIED RATES.

ACCORDINGLY, WE ARE OF THE OPINION THAT THE CONTRACT AS REDUCED TO WRITING DID NOT REFLECT THE ACTUAL CONTRACT WHICH THE PARTIES HAD PREVIOUSLY AGREED UPON AND ATTEMPTED TO NEGOTIATE SO FAR AS THE WAGE RATES SET FORTH IN APPENDIX "C" ARE CONCERNED. SUCH A MISTAKE FORMS THE USUAL BASIS FOR REFORMING A WRITTEN INSTRUMENT AND YOU ARE ADVISED THAT WE WOULD NOT, THEREFORE, BE REQUIRED TO OBJECT TO THE PROPOSED MODIFICATION OF THE CONTRACT. SEE 20 COMP. GEN. 533; 26 ID. 899; 30 ID. 220.