B-134716, JAN. 10, 1958

B-134716: Jan 10, 1958

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TO THE SECRETARY OF THE INTERIOR: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 20. REQUESTING A DECISION AS TO WHETHER THERE IS AUTHORIZED THE REFORMATION OF NEGOTIATED CONTRACT NO. 14-09-030-374. SO AS TO PERMIT PAYMENT OF THE FULL CONTRACT PRICE NOTWITHSTANDING THE FACT THAT THE TRANSPORTATION COST INCURRED BY THE CONTRACTOR IN MAKING SHIPMENT OF PART OF THE EQUIPMENT COVERED BY THE CONTRACT FROM EUROPEAN PORTS WAS LESS THAN IF SHIPMENT HAD BEEN MADE FROM AMERICAN PORTS AS PROVIDED IN THE CONTRACT. IT IS STATED IN THE CONTRACT THAT IT WAS MADE AND ENTERED INTO PURSUANT TO THE MUTUAL SECURITY ACT OF 1954 (PUBLIC LAW 665. PARAGRAPH NUMBERED 2 OF THE CONTRACT PROVIDES IN PERTINENT PART: "* * * IT IS UNDERSTOOD AND AGREED THAT SHIPMENT FROM POINT OF ORIGIN TO UNITED STATES PORT OF CONTRACTOR'S SELECTION WILL BE MADE UPON COMMERCIAL BILLS OF LADING BY THE CONTRACTOR.

B-134716, JAN. 10, 1958

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 20, 1957, WITH ITS ENCLOSURES, REQUESTING A DECISION AS TO WHETHER THERE IS AUTHORIZED THE REFORMATION OF NEGOTIATED CONTRACT NO. 14-09-030-374, DATED DECEMBER 27, 1956, SO AS TO PERMIT PAYMENT OF THE FULL CONTRACT PRICE NOTWITHSTANDING THE FACT THAT THE TRANSPORTATION COST INCURRED BY THE CONTRACTOR IN MAKING SHIPMENT OF PART OF THE EQUIPMENT COVERED BY THE CONTRACT FROM EUROPEAN PORTS WAS LESS THAN IF SHIPMENT HAD BEEN MADE FROM AMERICAN PORTS AS PROVIDED IN THE CONTRACT.

IT IS STATED IN THE CONTRACT THAT IT WAS MADE AND ENTERED INTO PURSUANT TO THE MUTUAL SECURITY ACT OF 1954 (PUBLIC LAW 665, 83D. CONGRESS, AS AMENDED), APPLICABLE APPROPRIATION ACTS, INTERNATIONAL COOPERATION ADMINISTRATION REGULATION NO. 1, AND THE INTERNATIONAL COOPERATION ADMINISTRATION PROJECT IMPLEMENTATION ORDER NO. 86-21-016-5 50318, AS AMENDED.

BY THE TERMS OF THE CONTRACT, SILVER ENGINEERING WORKS, INC., OF DENVER, COLORADO, AGREED WITH THE BUREAU OF MINES, DEPARTMENT OF THE INTERIOR, TO FURNISH AN INTEGRATED PILOT PLANT FACILITY, COMPRISING VARIOUS UNITS SPECIFIED IN THE CONTRACT, DELIVERED AT MADRAS, INDIA, FOR A CONSIDERATION OF $362,460 PLUS $65 PER DAY AND TRAVEL EXPENSES FOR SERVICES OF FIELD ENGINEERS IN INDIA IF REQUIRED. PARAGRAPH NUMBERED 2 OF THE CONTRACT PROVIDES IN PERTINENT PART:

"* * * IT IS UNDERSTOOD AND AGREED THAT SHIPMENT FROM POINT OF ORIGIN TO UNITED STATES PORT OF CONTRACTOR'S SELECTION WILL BE MADE UPON COMMERCIAL BILLS OF LADING BY THE CONTRACTOR, AND CONTRACTOR SHALL BEAR ALL RISK OF LOSS OR DAMAGE IN TRANSIT UNTIL THE INTEGRATED PILOT PLANT FACILITY SHALL HAVE PASSED THE SHIP'S RAIL AT THE PORT OF SHIPMENT. * * * THE COMPLETE INTEGRATED PILOT PLANT FACILITY IS REQUIRED TO BE DELIVERED ON THE DOCK AT UNITED STATES PORT OF CONTRACTOR'S SELECTION READY FOR OCEAN SHIPMENT TO INDIA WITHIN 240 CALENDAR DAYS FROM THE DATE OF RECEIPT BY THE CONTRACTOR OF NOTICE THAT THIS CONTRACT HAS BEEN DULY EXECUTED BY THE CONTRACTING OFFICER AND APPROVED BY THE DIRECTOR OF THE BUREAU OF MINES. SHOULD SHIPMENT FROM THE UNITED STATES PORT OF CONTRACTOR'S SELECTION BE DELAYED AFTER THE COMPLETE DELIVERY OF THE INTEGRATED PILOT PLANT FACILITY ON DOCK READY FOR SHIPMENT, THE TIME WITHIN WHICH FINAL PAYMENT SHALL BECOME DUE UNDER PARAGRAPH NO. 3 OF THIS CONTRACT SHALL BE EXTENDED BY THE NUMBER OF CALENDAR DAYS OF SUCH DELAY. * * *"

IN THE CONTRACTING OFFICER'S MEMORANDUM OF NOVEMBER 8, 1957, TO THE DIRECTOR OF THE BUREAU OF MINES, IT IS STATED:

"DURING THE COURSE OF NEGOTIATIONS IT DEVELOPED THAT THE SILVER ENGINEERING COMPANY INTENDED TO FURNISH THE COAL CRUSHING UNIT IDENTIFIED IN PARAGRAPH 1 (B) (1) OF THE CONTRACT ON PAGE 3 AND THE BRIQUETTING EQUIPMENT IDENTIFIED IN PARAGRAPH 1 (B) (4) ON PAGE 4 OF THE CONTRACT FROM A FOREIGN SOURCE, NAMELY, SWITZERLAND. THIS WAS ACCEPTABLE UNDER THE TERMS OF THE ABOVE IDENTIFIED PROJECT IMPLEMENTATION ORDER. ACCORDINGLY, THE SILVER ENGINEERING COMPANY CALCULATED ITS COSTS ON THE BASIS OF FURNISHING BOTH ITEMS OF SUCH EQUIPMENT OF PAWERT, A.G., MANUFACTURE FROM ITS PLANT AT BASIL, SWITZERLAND.

"BY INADVERTENCE, THE FARMERS OF THE CONTRACT WERE NOT INFORMED OF THIS FACT AND, ALTHOUGH BOTH PARTIES INTENDED THAT THE EQUIPMENT BE FURNISHED FROM THE ABOVE SOURCES, NO PROVISION WAS MADE THEREFOR IN THE CONTRACT AND THE CONTRACT AS DRAFTED CONTEMPLATES SHIPMENT OF ALL EQUIPMENT FROM A UNITED STATES PORT OF THE CONTRACTOR'S SELECTION. SEE PARAGRAPH 2 ON PAGE 8 OF THE CONTRACT.'

THE PROJECT IMPLEMENTATION ORDER UNDER WHICH THE CONTRACT WAS ISSUED AUTHORIZES WORLD-WIDE ACQUISITION OF PROPERTY AND SERVICES.

BY A LETTER DATED FEBRUARY 8, 1957, THE CONTRACTING OFFICER AUTHORIZED THE CONTRACTOR TO CHANGE THE PORT OF ORIGIN ON THE COAL CRUSHING UNIT AND THE BRIQUETTING EQUIPMENT FROM A UNITED STATES PORT TO A EUROPEAN PORT OF CONTRACTOR'S SELECTION, EXPRESSLY RESERVING THE QUESTION WHETHER THE CONTRACT PRICE WOULD BE REDUCED IN THE AMOUNT OF THE DIFFERENCE BETWEEN THE TRANSPORTATION COSTS FROM A UNITED STATES PORT AND TRANSPORTATION COSTS FROM A EUROPEAN PORT. IT IS REPORTED IN YOUR LETTER OF DECEMBER 20, 1957, THAT SHIPMENT OF THE TWO ITEMS OF EQUIPMENT FROM A UNITED STATES PORT AS SPECIFIED IN THE CONTRACT INSTEAD OF FROM A EUROPEAN PORT "WOULD HAVE REQUIRED THE EXPENDITURE OF SEVERAL THOUSANDS OF DOLLARS NOT CONTEMPLATED BY EITHER PARTY TO THE CONTRACT.'

A WRITTEN AGREEMENT NOT CONFORMING TO THE ACTUAL INTENTION OF THE PARTIES MAY BE REFORMED TO ACCORD WITH SUCH INTENTION. 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; 20 ID. 533 AND CASES THERE CITED. IN THE INSTANT MATTER, IT APPEARS TO BE CLEARLY ESTABLISHED THAT BOTH PARTIES CONTEMPLATED THAT THE COAL CRUSHING UNIT AND THE BRIQUETTING EQUIPMENT WERE TO BE PROCURED IN SWITZERLAND AND SHIPPED TO INDIA FROM A EUROPEAN PORT; THAT THE CONTRACTOR COMPUTED ITS TRANSPORTATION COST ON THAT BASIS; AND THAT THE CONTRACT REQUIREMENT THAT THE ENTIRE PILOT PLANT FACILITY BE SHIPPED FROM A UNITED STATES PORT RESULTED FROM A FAILURE ON THE PART OF THE DRAFTERS OF THE CONTRACT FULLY TO UNDERSTAND THE AGREEMENT BETWEEN THE PARTIES.

IN VIEW OF THE FOREGOING, WE OFFER NO OBJECTION TO MODIFICATION OF THE CONTRACT AS PROPOSED. APPROPRIATE REFERENCE TO THIS DECISION SHOULD ACCOMPANY THE MODIFICATION.