B-131033, JUN. 3, 1957

B-131033, JUN. 3, 1957

TO THE HONORABLE LEWIS L. STRAUSS, CHAIRMAN, UNITED STATES ATOMIC ENERGY COMMISSION:

REFERENCE IS MADE TO THE DEPUTY GENERAL MANAGER'S LETTER OF MAY 11, 1957, REQUESTING OUR OPINION AS TO THE PROPRIETY OF AMENDING CONTRACT NO. AT/29- 2/-452 WITH FEDERAL SERVICES, INC., TO RECTIFY AN ALLEGED MUTUAL MISTAKE IN THE RATE ESCALATION PROVISIONS OF THE CONTRACT.

FEDERAL SERVICES PROVIDED THE COMMISSION WITH SECURITY GUARD SERVICES AT LAS VEGAS AND NEARBY LOCATIONS UNDER A PREVIOUS SIMILAR CONTRACT WHICH EXPIRED JUNE 30, 1956. INVITATIONS FOR A NEW CONTRACT WERE ISSUED IN JANUARY 1956 IN RESPONSE TO WHICH THE ONLY BID RECEIVED WAS FROM FEDERAL. THE RATES QUOTED IN THE NEW BID WERE CONSIDERABLY HIGHER THAN THOSE BEING PAID UNDER THE PREVIOUS CONTRACT. THE RESPONSIBLE CONTRACTING OFFICIALS OF THE ALBUQUERQUE OPERATIONS OFFICE LEARNED THAT THE HIGHER RATES INCLUDED A CONTINGENCY FACTOR FOR POSSIBLE WAGE INCREASES. THE BID WAS REJECTED AND NEGOTIATIONS WERE UNDERTAKEN WITH A VICE PRESIDENT OF FEDERAL. DURING THE NEGOTIATIONS FEDERAL STATED THAT ITS EMPLOYEES WERE CONSIDERING THE FORMATION OF A LABOR UNION, AND THAT ITS BID PRICE INCLUDED A CONTINGENCY FACTOR FOR A FIFTEEN CENT PER HOUR WAGE INCREASE FOR EMPLOYEES PLUS RELATED OVERHEAD.

THE NEGOTIATORS FOR THE COMMISSION AND FOR FEDERAL AGREED THAT A CONTRACT WOULD BE ENTERED INTO AT RATES EXCLUSIVE OF THE CONTINGENCY FOR INCREASED WAGES AND RELATED OVERHEAD, BUT WITH A PROVISION FOR ESCALATION OF CONTRACT RATES IN THE EVENT INCREASED WAGES ACTUALLY WERE PAID. IT WAS FURTHER AGREED THAT ANY INCREASE IN CONTRACT RATES WOULD BE LIMITED TO ACTUAL WAGES INCREASES PAID NOT TO EXCEED FIFTEEN CENTS PER HOUR AND WOULD NOT INCLUDE ANY INCREASED OVERHEAD.

THE CONTRACT WAS PREPARED BY THE COMMISSION'S OFFICE OF ASSISTANT GENERAL COUNSEL, ALBUQUERQUE OPERATIONS OFFICE, SETTING FORTH THE AGREEMENT OF THE PARTIES AS UNDERSTOOD BY THAT OFFICE. HOWEVER, THE CONTRACT PROVISION DEALING WITH ESCALATION PROVIDED IN PART THAT:

"* * * ANY ADJUSTMENT IN ANY OF THE CONTRACT RATES SHALL BE EQUAL TO HOURLY WAGE INCREASES WHICH ARE UNIFORM IN ACCOUNT AND PAID TO THE GUARDS AND OR PASS AND BADGE UNIT PERSONNEL. * * *"

THE CONTRACT PROVIDED FOR DIFFERENT RATES OF PAY FOR TWO CLASSES OF SERVICE: GUARD SERVICE AND PASS AND BADGE SERVICE. IT APPARENTLY WAS ASSUMED IN THE DRAFTING OF THE CONTRACT THAT THERE WAS ONLY ONE CATEGORY OR CLASS OF PERSONNEL, EXCLUSIVE OF SUPERVISORS, EMPLOYED FOR EACH OF THE TWO TYPES OF SERVICE, AND THAT ANY WAGE INCREASE WOULD OF NECESSITY BE UNIFORM WITHIN THE CATEGORY OF PERSONNEL INVOLVED. THE INCLUSION IN THE CONTRACT ESCALATION PROVISION OF THE REFERENCE TO UNIFORMITY OF WAGE INCREASES WITHIN EACH OF THE TWO CATEGORIES OF PERSONNEL INVOLVED WAS NOT DISCUSSED WITH THE CONTRACTOR'S REPRESENTATIVE, WHO APPEARS TO HAVE EXECUTED THE CONTRACT WITHOUT REALIZING ITS SIGNIFICANCE.

IN FACT, THE CONTRACTOR EMPLOYED BOTH FULLY TRAINED PERSONNEL AND TRAINEES IN BOTH GUARD AND PASS AND BADGE SERVICE. SHORTLY AFTER COMMENCEMENT OF THE CONTRACT TERM, AS A RESULT OF NEGOTIATIONS WITH THE LABOR UNION FORMED BY ITS EMPLOYEES, THE CONTRACTOR INCREASED THE WAGES OF ALL ITS TRAINED PERSONNEL BY FIFTEEN CENTS PER HOUR AND THE WAGE OF ALL TRAINEES BY FIVE CENTS PER HOUR. IN VIEW OF THE UNIFORMITY CONDITION IN THE ESCALATION PROVISION OF THE CONTRACT, THE APPLICATION OF THAT PROVISION TO THE INCREASES GRANTED APPEARS TO BE OPEN TO DOUBT. THEREFORE IT IS PROPOSED TO EXECUTE A MODIFICATION OF THE CONTRACT WHICH WILL SET FORTH CLEARLY THE AGREEMENT OF THE PARTIES AS TO PERMISSIBLE ESCALATION. THE PROPOSED MODIFICATION HAS BEEN EXECUTED BY THE CONTRACTOR AND THE DEPUTY GENERAL MANAGER'S LETTER ASKS WHETHER EXECUTION THEREOF BY THE COMMISSION WOULD BE PROPER.

IN OUR OPINION, THE PROPOSED CONTRACT MODIFICATION IS JUSTIFIED. WRITTEN AGREEMENT NOT CONFORMING TO THE ACTUAL INTENTION OF THE PARTIES MAY BE REFORMED TO ACCORD WITH THEIR ACTUAL INTENT. WHERE, BY REASON OF MUTUAL MISTAKE, A CONTRACT AS REDUCED TO WRITING DOES NOT REFLECT THE ACTUAL AGREEMENT OF THE PARTIES, THE WRITTEN INSTRUMENT MAY BE REFORMED IF IT CAN BE ESTABLISHED WHAT THE AGREEMENT ACTUALLY WAS. SEE 36 COMP. GEN. 507, 509; 30 ID. 220; 26 ID. 899; 20 ID. 533, AND CASES THERE CITED. FURTHERMORE, AMBIGUITY IN THE TERMS OF A CONTRACT MAY ALWAYS BE RESOLVED BY REFERENCE TO THE NEGOTIATIONS LEADING UP TO IT. IT APPEARS TO BE CLEARLY ESTABLISHED THAT THE COMMISSION AND FEDERAL INTENDED TO PROVIDE ESCALATION FOR ALL WAGE INCREASES ACTUALLY PAID UP TO FIFTEEN CENTS PER HOUR, AND THAT THE INCLUSION OF THE REQUIREMENT FOR UNIFORMITY OF INCREASES WITHIN EACH OF THE TWO CLASSES OF SERVICE WAS DUE TO A FAILURE ON THE PART OF THE DRAFTERS OF THE CONTRACT FULLY TO UNDERSTAND THE AGREEMENT BETWEEN THE PARTIES.