B-142222, MARCH 31, 1960, 39 COMP. GEN. 660

B-142222: Mar 31, 1960

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WHICH DOES NOT CONTAIN PROVISION FOR THE PAYMENT OF DEFERRED CONSTRUCTION COSTS BECAUSE THE MATTER WAS OVERLOOKED BY THE PARTIES. IS THE RESULT OF A MISTAKE IN MAKING THE AGREEMENT WHICH DOES NOT JUSTIFY REFORMATION RATHER THAN A MISTAKE IN DRAWING THE INSTRUMENT. IS NOT AUTHORIZED EVEN THOUGH THE EVIDENCE INDICATES THAT THE PARTIES WOULD HAVE COME TO A DIFFERENT AGREEMENT HAD THEY BEEN AWARE OF THE ACTUAL FACTS. 1960: REFERENCE IS MADE TO LETTER OF MARCH 7. IT IS STATED THAT THROUGH INADVERTENCE THERE WAS OMITTED FROM THE CONTRACTS A PROVISION FOR REIMBURSEMENT TO THE RAILROADS OF DEFERRED CONSTRUCTION COSTS. IN THE CITED REPORT THE DISTRICT ENGINEER POINTS OUT THAT THE RECONSTRUCTION OF THE BRIDGES WAS AUTHORIZED BY THE RIVER AND HARBOR ACT OF JULY 24.

B-142222, MARCH 31, 1960, 39 COMP. GEN. 660

CONTRACTS - REFORMATION - MISTAKE IN MAKING THE AGREEMENT - PROPRIETY A CONTRACT FOR THE RELOCATION OF A BRIDGE, WHICH DOES NOT CONTAIN PROVISION FOR THE PAYMENT OF DEFERRED CONSTRUCTION COSTS BECAUSE THE MATTER WAS OVERLOOKED BY THE PARTIES, IS THE RESULT OF A MISTAKE IN MAKING THE AGREEMENT WHICH DOES NOT JUSTIFY REFORMATION RATHER THAN A MISTAKE IN DRAWING THE INSTRUMENT, WHICH MISTAKE MUST OCCUR IN REDUCTION OF THE INSTRUMENT TO WRITING; THEREFORE, REFORMATION, WITHOUT ADDITIONAL CONSIDERATION, IS NOT AUTHORIZED EVEN THOUGH THE EVIDENCE INDICATES THAT THE PARTIES WOULD HAVE COME TO A DIFFERENT AGREEMENT HAD THEY BEEN AWARE OF THE ACTUAL FACTS.

TO THE SECRETARY OF THE ARMY, MARCH 31, 1960:

REFERENCE IS MADE TO LETTER OF MARCH 7, 1960, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE ARMY ( MANPOWER, PERSONNEL AND RESERVE FORCES) REQUESTING A DECISION AS TO WHETHER CONTRACTS NUMBERED DA-11 032-CIVENG-56 -25 AND DA-11-032-CIVENG-57-34, ENTERED INTO ON MAY 24, 1956, AND JUNE 20, 1957, BETWEEN THE CORPS OF ENGINEERS, AND THE GULF, MOBILE AND OHIO RAILROAD COMPANY AND THE WABASH RAILROAD COMPANY, RESPECTIVELY, MAY BE AMENDED TO REFLECT THE ALLEGED INTENTION OF THE PARTIES CONCERNING DEFERRED CONSTRUCTION COSTS.

EACH CONTRACT PROVIDES FOR THE RELOCATION AND REPLACEMENT OF THE CONTRACTOR'S BRIDGE OVER THE CALUMET-SAG CHANNEL, ILLINOIS. IT IS STATED THAT THROUGH INADVERTENCE THERE WAS OMITTED FROM THE CONTRACTS A PROVISION FOR REIMBURSEMENT TO THE RAILROADS OF DEFERRED CONSTRUCTION COSTS, DEFINED AS THE REMEDIAL WORK OF STABILIZING A NEW ROADBED OR OTHER RAILROAD FACILITY FROM THE EFFECTS OF SUBSIDENCE, LAND SLIDES, OR OTHER CONDITIONS, OR IN PREVENTING SUCH OCCURRENCES FOR A PERIOD OF FROM 3 TO 5 YEARS AFTER RELOCATION. UNDER THE PROPOSED AMENDMENTS REIMBURSEMENT WOULD BE MADE TO THE CONTRACTORS FOR COSTS OVER AND ABOVE ORDINARY MAINTENANCE OCCURRING DURING THE FIVE-YEAR PERIOD IMMEDIATELY FOLLOWING COMPLETION OF THE SCHEDULED CONSTRUCTION ON THE RELOCATED LINES, PURSUANT TO THE SPECIFIC PROVISIONS UNDER THE HEADING " ARTICLE XXI DEFERRED CONSTRUCTION" QUOTED IN THE REPORT OF JULY 30, 1959, FROM THE DISTRICT ENGINEER, THE CONTRACTING OFFICER.

IN THE CITED REPORT THE DISTRICT ENGINEER POINTS OUT THAT THE RECONSTRUCTION OF THE BRIDGES WAS AUTHORIZED BY THE RIVER AND HARBOR ACT OF JULY 24, 1946, 60 STAT. 634, AS IMPLEMENTED BY HOUSE DOCUMENT NO. 677, 79TH CONGRESS, WHICH CONTAINS EXHIBIT "A" SUMMARIZING THE PRINCIPLES AGREED UPON IN CONFERENCES BETWEEN REPRESENTATIVES OF THE CORPS OF ENGINEERS AND ALL THE AFFECTED RAILROADS PERTAINING TO THE ALLOCATION OF COSTS. AS INDICATED BY THE DISTRICT ENGINEER, PARAGRAPH 3 OF THIS AGREEMENT STATES THAT THE ENTIRE COST OF THE PROPOSED WORK WILL BE BORNE BY THE GOVERNMENT, EXCEPT CERTAIN COSTS ATTRIBUTABLE TO FACTORS NOT HERE MATERIAL. IN URGING APPROVAL OF THE PROPOSED AMENDMENTS TO THE CONTRACTS THE DISTRICT ENGINEER STATES THAT THE COST OF THE DEFERRED CONSTRUCTION WAS NOT INCLUDED IN ANY OF THE COSTS TO BE ASSUMED BY THE RAILROADS; THAT WITH RESPECT TO THE APPROACHES TO THE BRIDGES IT IS CONCEDED THAT THE RELOCATED PORTIONS INVOLVING FILLS CANNOT BE CONSIDERED AS CONSTITUTING ADEQUATE REPLACEMENTS UNTIL SEASONED; THAT SUBSIDENCE, SLOUGHING, OR OTHER DAMAGE MAY BE ANTICIPATED FOR A PERIOD OF TIME SUBSEQUENT TO COMPLETION OF THE NEW APPROACHES, AND THAT THE COST INVOLVED IN STABILIZING THE NEW FACILITIES, OVER AND ABOVE ORDINARY MAINTENANCE, SHOULD BE ALLOWED THE TWO RAILROADS OVER A REASONABLE PERIOD OF TIME, IN THIS CASE 5 YEARS, AFTER SUCH RELOCATION HAS BEEN PLACED IN OPERATION. THIS, IT IS ASSERTED, WOULD MEET THE REQUIREMENT THAT THE ENTIRE COST OF THE PROPOSED WORK SHOULD BE BORNE BY THE GOVERNMENT, SUBJECT TO CERTAIN IMMATERIAL EXCEPTIONS. CONCLUSION HE EXPRESSES THE VIEW THAT THE REQUEST BY THE RAILROADS REPRESENTS NOTHING MORE THAN AN EXPRESSION OF WHAT THE GOVERNMENT IS ALREADY OBLIGATED TO UNDERTAKE; THAT IN VIEW OF THE RECOGNIZED OBLIGATION ON THE GOVERNMENT TO REIMBURSE THE RAILROADS FOR THE ANTICIPATED COST OF DEFERRED CONSTRUCTION IT IS CONSIDERED IN EQUITY THAT THE CONTRACTS SHOULD BE REFORMED, AND THAT AMPLE BASIS EXISTS FOR EXECUTION OF THE RECOMMENDED SUPPLEMENTAL AGREEMENTS.

THE TWO CONTRACTS CONTAIN SIMILAR PROVISIONS. SUBPARAGRAPH 1 (A) OF ARTICLE IV PROVIDES FOR REIMBURSEMENT BY THE GOVERNMENT TO THE RAILROAD FOR THE GOVERNMENT'S PROPORTIONATE SHARE OF COSTS. IT IS RECITED THAT THE EXACT AMOUNT TO BE REIMBURSED TO THE RAILROAD CANNOT BE ASCERTAINED IN ACCORDANCE WITH THE FORMULAE SET FORTH IN THE ACTS OF CONGRESS UNTIL THE EXISTING BRIDGE HAS ACTUALLY BEEN REPLACED AND THE ACTUAL COSTS OF CONSTRUCTION HAVE BEEN FINALLY DETERMINED, AND THAT, THEREFORE, THE GOVERNMENT WILL INITIALLY REIMBURSE THE RAILROAD FOR 96.849 PERCENT OF ITS ACTUAL COSTS, WHICH REPRESENTS THE MOST ACCURATE AVAILABLE ESTIMATE OF THE GOVERNMENT'S ULTIMATE RESPONSIBILITY UNDER THE FORMULAE SET FORTH IN THE ACTS OF CONGRESS.

SUBPARAGRAPH (B) OF ARTICLE IV RECITES THAT WHEN THE ACTUAL COST OF RECONSTRUCTION HAS BEEN FINALLY DETERMINED AFTER COMPLETION OF THE PROJECT AND THE EXACT COSTS TO BE BORNE BY THE GOVERNMENT SHALL HAVE BEEN DETERMINED IN ACCORDANCE WITH THE AFORESAID FORMULAE, A MODIFICATION OF THE CONTRACT SHALL BE EXECUTED BY THE PARTIES FOR THE PURPOSE OF ADJUSTING THE AMOUNT TO BE REIMBURSED BY THE GOVERNMENT AND THAT IF THE PARTIES FAIL TO AGREE AS TO SUCH ADJUSTMENT SUCH FAILURE SHALL BE REGARDED AS A DISPUTE AS TO A QUESTION OF FACT TO BE DISPOSED OF UNDER THE " DISPUTES" CLAUSE.

SUBPARAGRAPH (C) OF ARTICLE IV PROVIDES THAT AFTER THE RECEIPT AND EVALUATION OF BIDS AS PROVIDED IN ARTICLE III, THE RAILROAD SHALL SUBMIT TO THE CONTRACTING OFFICER A WRITTEN GUARANTY THAT THE TOTAL COST OF THE PROJECT, INCLUDING COSTS THERETOFORE INCURRED IN PREPARING PLANS AND SPECIFICATIONS TOGETHER WITH COSTS INCURRED BY THE RAILROAD'S OWN OPERATIONS AND FORCES, SHALL NOT EXCEED THE SUM STATED IN SAID GUARANTY; THAT THE TOTAL PAYMENTS BY THE GOVERNMENT SHALL NOT EXCEED ITS PROPORTIONATE SHARE OF THE TOTAL COST OF THE PROJECT PAID OR INCURRED BY THE RAILROAD; AND THAT IF SUCH TOTAL COST EXCEEDS THE COST GUARANTEED, TOTAL PAYMENT BY THE GOVERNMENT SHALL NOT EXCEED ITS PROPORTIONATE SHARE OF THE GUARANTEED COST. IT IS FURTHER PROVIDED, HOWEVER, THAT IF THE COST OF THE WORK EXCEEDS THE GUARANTEED COST BY REASON OF EMERGENCY CONDITIONS BEYOND THE CONTROL OF THE RAILROAD, OR UNFORESEEN OR UNDETERMINED CONDITIONS, THE CHIEF OF ENGINEERS MAY, AFTER A FULL REVIEW OF ALL THE CIRCUMSTANCES, PROVIDE FOR ADDITIONAL PAYMENTS BY THE GOVERNMENT TO HELP DEFRAY SUCH EXCESS COST, TO THE EXTENT HE DEEMS TO BE REASONABLE AND PROPER.

SUBPARAGRAPHS (E) AND (E) 1 OF ARTICLE IV PROVIDE THAT PRIOR TO FINAL PAYMENT, AND AS A CONDITION THEREOF, THE RAILROAD SHALL FURNISH THE GOVERNMENT WITH A RELEASE OF ALL CLAIMS AGAINST THE GOVERNMENT ARISING UNDER AND BY VIRTUE OF THE CONTRACT OTHER THAN SUCH CLAIMS AS MAY BE SPECIFICALLY EXCEPTED BY THE RAILROAD FROM THE OPERATION OF THE RELEASE.

THERE IS NO SHOWING WHEN THE WORK ON THE TWO BRIDGES WAS ACTUALLY COMMENCED BUT IT IS REPORTED INFORMALLY THAT THE WORK ON THE GM AND O BRIDGE IS 61 PERCENT COMPLETE AND THAT THE WORK ON THE WABASH RAILROAD BRIDGE IS 35 PERCENT COMPLETE.

IN LETTER OF APRIL 24, 1958, FROM THE GM AND O TO THE DISTRICT ENGINEER, THE COMPANY REQUESTED THAT ITS CONTRACT BE AMENDED TO PROVIDE FOR REIMBURSEMENT OF THE EXCESS MAINTENANCE FOR THE NEW FILL ON ITS RELOCATED LINE FOR A FIVE-YEAR PERIOD AFTER COMPLETION DATE. IN SUPPORT OF THIS REQUEST IT IS STATED THAT GM AND O WAS THE FIRST RAILROAD TO NEGOTIATE A CONTRACT UNDER THE INVOLVED PROJECT; THAT SUBSEQUENT TO THE NEGOTIATIONS PROBLEMS HAVE ARISEN WHICH WERE UNFORESEEN BY THE RAILROAD AND APPARENTLY BY THE DISTRICT ENGINEER; THAT ONE OF THE PROBLEMS INVOLVES THE MAINTENANCE OF THE NEW FILL ON THE RELOCATED LINE WHICH WILL SUPPORT THE COMPANY'S TWO MAIN TRACKS WHICH WILL EXTEND ABOUT 2.1 MILES IN LENGTH; AND THAT THE CONTRACT DOES NOT STATE WHO WILL MAINTAIN THIS NEW FILL AFTER THE PROJECT COMPLETION DATE. IT IS STATED FURTHER THAT IT IS UNDERSTOOD THAT THE CORPS OF ENGINEERS SUBSEQUENTLY CONSIDERED THE MAINTENANCE PROBLEM RELATING TO NEW FILLS; THAT IN SOME OF THE CONTRACTS ENTERED INTO WITH OTHER RAILROADS IN THE SAME AREA A FIVE-YEAR MAINTENANCE PROVISION WAS ALLOWED TO BE INCLUDED IN THE CONTRACT; AND THAT IT IS BELIEVED THAT AS A MATTER OF EQUITY AND EQUAL TREATMENT THE DISTRICT ENGINEER WILL BE AGREEABLE TO ALLOWING GM AND O SIMILAR MAINTENANCE BENEFIT.

IN A LETTER OF MARCH 17, 1959, THE WABASH RAILROAD COMPANY REQUESTED A MODIFICATION OF ITS CONTRACT BY SUPPLEMENTAL AGREEMENT TO PROVIDE FOR REIMBURSEMENT TO IT FOR DEFERRED CONSTRUCTION COSTS IN ORDER THAT THE CONTRACTOR MIGHT HAVE THE SAME ADVANTAGES AS WERE GRANTED TO OTHER RAILROADS IN THE CALUMET-1SAG CHANNEL PROJECT.

WHILE IT IS TRUE THAT THE DEFERRED CONSTRUCTION COSTS WERE NOT SPECIFICALLY INCLUDED IN ANY OF THE COSTS ASSUMED BY THE RAILROADS, IT IS ALSO TRUE THAT SUCH COSTS WERE NOT INCLUDED IN ANY OF THE COSTS ASSUMED BY THE GOVERNMENT. AND THERE HAS NOT BEEN FOUND IN THE RIVER AND HARBOR ACT OF JULY 24, 1946, AS IMPLEMENTED BY EXHIBIT "A" TO HOUSE DOCUMENT 677, ANY CONCLUSIVE INDICATION THAT IT WAS INTENDED THAT THE GOVERNMENT SHOULD ASSUME ANY DEFERRED CONSTRUCTION COSTS AFTER COMPLETION AND ACCEPTANCE OF THE BRIDGE BY THE RAILROAD. ON THE CONTRARY, EXHIBIT "A" INDICATES THAT THE COSTS ALLOCATED TO THE GOVERNMENT ARE LIMITED TO THE COSTS INCURRED DURING CONSTRUCTION UP THROUGH COMPLETION OF THE BRIDGES AND ACCEPTANCE BY THE RAILROADS. FURTHERMORE, PARAGRAPH 13 OF EXHIBIT A" SPECIFICALLY PROVIDES THAT THE OWNER WILL NOT CLAIM ANY CREDIT FOR INCREASED COSTS OF MAINTENANCE, REPAIRS, OPERATIONS OF OR TAXES ON THE NEW BRIDGE.

AS TO THE REQUEST FOR REFORMATION THERE IS NO SHOWING THAT DEFERRED CONSTRUCTION COSTS WERE CONSIDERED BY THE PARTIES AT THE TIME THE CONTRACTS WERE BEING NEGOTIATED. ON THE CONTRARY, THE CONTRACTING OFFICER STATES THAT THESE COSTS WERE OVERLOOKED BY BOTH THE REPRESENTATIVES OF THE GOVERNMENT AND THE RAILROAD COMPANIES. THIS IS VERIFIED BY THE STATEMENT IN THE LETTER OF APRIL 24, 1958, FROM GM AND O WHEREIN IT IS SPECIFICALLY STATED THAT THE PROBLEM CONCERNING MAINTENANCE OF THE NEW FILL WAS UNFORESEEN.

THE PURPOSE OF REFORMATION IS NOT TO MAKE A NEW AGREEMENT BETWEEN THE PARTIES, BUT, RATHER, TO ESTABLISH THE TRUE EXISTING ONE; THAT IS, TO MAKE THE CONTRACT EXPRESS THE REAL AGREEMENT OF THE PARTIES. IN ORDER TO JUSTIFY REFORMATION OF ANY INSTRUMENT, THE MISTAKE MUST HAVE BEEN IN DRAWING THE INSTRUMENT AND NOT IN MAKING THE AGREEMENT ITSELF. THE MISTAKE MUST OCCUR IN REDUCING TO WRITING THE CONTRACT UPON WHICH THE PARTIES AGREED. REFORMATION IS NOT AUTHORIZED EVEN IF IT BE CLEARLY SHOWN THAT THE PARTIES WOULD HAVE COME TO A CERTAIN AGREEMENT HAD THEY BEEN AWARE OF THE ACTUAL FACTS. SEE SECTION 1548, WILLISTON ON CONTRACTS ( REV. USED.).

ON THE BASIS OF THE PRESENT RECORD IT MUST BE CONCLUDED THAT THE CONTRACTS AS EXECUTED EMBODIED THE AGREEMENT OF THE PARTIES; THAT IS, THEY MADE THE EXACT CONTRACTS THEY INTENDED TO MAKE. FOR THE FOREGOING REASONS THE CONTRACTS WHICH ESTABLISHED THE LEGAL RIGHTS AND LIABILITIES OF THE PARTIES THERETO MAY NOT NOW BE REFORMED AS PROPOSED TO PERMIT PAYMENT TO THE RAILROADS FOR DEFERRED CONSTRUCTION WITHOUT ADDITIONAL CONSIDERATION. ACCORDINGLY, THE SPECIFIC QUESTION PRESENTED IS ANSWERED IN THE NEGATIVE.