B-144494, MAY 26, 1961, 40 COMP. GEN. 644

B-144494: May 26, 1961

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CONTRACTS - CAPEHART HOUSING CONSTRUCTION - LETTER OF ACCEPTABILITY - BUY AMERICAN ACT UNDER A CAPEHART HOUSING CONSTRUCTION INVITATION WHICH PROVIDED THAT ALL OF THE MATERIAL CONDITIONS OF THE CONTRACT WERE ESTABLISHED BY THE TERMS OF THE BID DOCUMENTS. NOTWITHSTANDING THAT A FORMAL CONTRACT DOCUMENT WHICH WAS SUBSEQUENTLY PRESENTED TO THE CONTRACTOR CONTAINED A DIFFERENT BUY AMERICAN ACT PROVISION WHICH. PERMITTED THE USE OF FOREIGN COPPER AND PROHIBITED OTHER FOREIGN ITEMS WHICH WERE PERMITTED ORIGINALLY UNDER THE INVITATION. ON THE BASIS THAT AN ADMINISTRATIVE DETERMINATION HAD BEEN MADE TO CHANGE THE CONTRACT LANGUAGE IN LIEU OF A CHANGE ORDER IN ACCORDANCE WITH THE TERMS OF THE CONTRACT IS ENTITLED TO A PRICE ADJUSTMENT FOR THE DIFFERENCE BETWEEN THE COST OF FOREIGN COPPER AND DOMESTIC COPPER.

B-144494, MAY 26, 1961, 40 COMP. GEN. 644

CONTRACTS - CAPEHART HOUSING CONSTRUCTION - LETTER OF ACCEPTABILITY - BUY AMERICAN ACT UNDER A CAPEHART HOUSING CONSTRUCTION INVITATION WHICH PROVIDED THAT ALL OF THE MATERIAL CONDITIONS OF THE CONTRACT WERE ESTABLISHED BY THE TERMS OF THE BID DOCUMENTS, INCLUDING A BUY AMERICAN ACT PROVISION PRECLUDING THE USE OF FOREIGN COPPER, THE ISSUANCE OF A LETTER OF ACCEPTABILITY TO A BIDDER BROUGHT INTO EXISTENCE A BINDING CONTRACT OBLIGATING THE CONTRACTOR TO EXECUTE A FORMAL CONTRACT WITH THE BUY AMERICAN ACT PROVISION AS ESTABLISHED IN THE INVITATION, NOTWITHSTANDING THAT A FORMAL CONTRACT DOCUMENT WHICH WAS SUBSEQUENTLY PRESENTED TO THE CONTRACTOR CONTAINED A DIFFERENT BUY AMERICAN ACT PROVISION WHICH, IN EFFECT, PERMITTED THE USE OF FOREIGN COPPER AND PROHIBITED OTHER FOREIGN ITEMS WHICH WERE PERMITTED ORIGINALLY UNDER THE INVITATION. A CAPEHART HOUSING CONSTRUCTION CONTRACTOR WHO SIGNED A FORMAL CONTRACT, INCLUDING A BUY AMERICAN ACT PROVISION PERMITTING THE USE OF FOREIGN COPPER AND DELETING OTHER ITEMS CONTRARY TO THE BUY AMERICAN ACT PROVISION IN THE INVITATION, ON THE BASIS THAT AN ADMINISTRATIVE DETERMINATION HAD BEEN MADE TO CHANGE THE CONTRACT LANGUAGE IN LIEU OF A CHANGE ORDER IN ACCORDANCE WITH THE TERMS OF THE CONTRACT IS ENTITLED TO A PRICE ADJUSTMENT FOR THE DIFFERENCE BETWEEN THE COST OF FOREIGN COPPER AND DOMESTIC COPPER, WHICH THE CONTRACT WAS REQUIRED TO USE, ON THE BASIS OF A CHANGE MADE AFTER AWARD RATHER THAN ON THE BASIS OF A UNILATERAL ERROR IN A CONTRACT WHICH WAS REGARDED BY THE CONTRACTING AGENCY AS AUTOMATICALLY SUBJECT TO ANY CHANGES MADE IN BUY AMERICAN ACT EXEMPTIONS BETWEEN THE ISSUANCE OF THE LETTER OF ACCEPTABILITY AND THE EXECUTION OF THE CONTRACT.

TO THE SECRETARY OF THE ARMY, MAY 26, 1961:

WE HAVE A LETTER OF MARCH 20, 1961, FROM THE CHIEF, CONTRACTS DIVISION, OFFICE OF THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, WITH ENCLOSURES, PROVIDING A REPORT ON THE PROPOSED ISSUANCE OF A CHANGE ORDER TO CONTRACT NO. DA-44-110-ENG-4789 FOR THE CONSTRUCTION OF CAPEHART HOUSING AT FORT LEE, VIRGINIA, WHEREBY THE CONTRACT PRICE AND THE MORTGAGE INSURANCE AMOUNT WOULD BE INCREASED. THE REPORT WAS FURNISHED IN RESPONSE TO OUR REQUEST OF DECEMBER 1, 1960.

INVITATION NO. ENG-44-110-59-18 WAS ISSUED UNDER DATE OF JANUARY 30, 1959, FOR THE CONSTRUCTION OF A 285-UNIT ARMED SERVICES HOUSING PROJECT AT FORT LEE, VIRGINIA. THE INVITATION DOCUMENTS INCLUDED A SO-CALLED "SPECIMEN HOUSING CONTRACT" WHICH CONTAINED THE FOLLOWING TWO PARAGRAPHS:

23. BUY AMERICAN ACT.

THE ELIGIBLE BUILDER AGREES THAT IN THE PERFORMANCE OF THE WORK UNDER THIS HOUSING CONTRACT THE ELIGIBLE BUILDER, SUBCONTRACTORS, MATERIALMEN AND SUPPLIERS SHALL USE ONLY SUCH MANUFACTURED ARTICLES, MATERIALS AND SUPPLIES (WHICH TERM "ARTICLES, MATERIALS AND SUPPLIES" IS HEREINAFTER REFERRED TO IN THIS CLAUSE AS "SUPPLIES") AS HAVE BEEN MINED OR PRODUCED IN THE UNITED STATES, AND ONLY SUCH MANUFACTURED SUPPLIES AS HAVE BEEN MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM SUPPLIES MINED, PRODUCED, OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES. PURSUANT TO THE BUY AMERICAN (41 U.S.C. 10A D), THE FOREGOING PROVISIONS SHALL NOT APPLY (I) WITH RESPECT TO SUPPLIES EXCEPTED BY THE HEAD OF THE DEPARTMENT FROM THE APPLICATION OF THAT ACT, (II) WITH RESPECT TO SUPPLIES FOR USE OUTSIDE THE UNITED STATES, OR (III) WITH RESPECT TO SUPPLIES TO BE USED IN THE PERFORMANCE OF WORK UNDER THIS HOUSING CONTRACT WHICH ARE OF A CLASS OR KIND DETERMINED BY THE HEAD OF THE DEPARTMENT OF HIS DULY AUTHORIZED REPRESENTATIVE NOT TO BE MINED, PRODUCED, OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY, OR (IV) WITH RESPECT TO SUCH SUPPLIES, FROM WHICH THE SUPPLIES TO BE USED IN THE PERFORMANCE OF WORK UNDER THIS HOUSING CONTRACT ARE MANUFACTURED, AS ARE OF A CLASS OR KIND DETERMINED BY THE HEAD OF THE DEPARTMENT OR HIS DULY AUTHORIZED REPRESENTATIVE NOT TO BE MINED, PRODUCED, OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORILY QUALITY, PROVIDED THAT THIS EXCEPTION (IV) SHALL NOT PERMIT THE USE IN THE PERFORMANCE OF WORK UNDER THIS HOUSING CONTRACT OF SUPPLIES MANUFACTURED OUTSIDE THE UNITED STATES IF SUCH SUPPLIES ARE MANUFACTURED IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY.

42.USE OF DOMESTIC ARTICLES.

BECAUSE THE MATERIALS LISTED BELOW, OR THE MATERIALS FROM WHICH THEY ARE MANUFACTURED, ARE NOT MINED, PRODUCED OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY, THEIR USE IN THE WORK HEREIN SPECIFIED (SUBJECT TO THE REQUIREMENTS OF THE SPECIFICATIONS) IS AUTHORIZED WITHOUT REGARD TO THE COUNTRY OF ORIGIN:

CHART ANTIMONY, AS METAL OR OXIDE. GRAPHITE, NATURAL, CRYSTALLINE, CRUCIBLE ASBESTOS, AMOSITE. GRADE. BISMUTH. JUTE AND JUTE BURLAPS. CADMIUM, ORES AND FLUE DUST. KAURIGUM. CHALK, ENGLISH. LAC. CHROME ORE OR CHROMITE.

LOGS, VENEER, AND LUMBER FROM ALASKAN COBALT, IN CATHODES, RONDELLES, YELLOW CEDAR, ANGELIQUE, BALSA, EKKI, OR OTHER PRIMARY FORMS. GREENHEART, LIGNUM CORK, WOOD OR BARK AND WASTE. VITAE, MAHOGANY, AND TEAK. DAMAR GUM. MERCURY. MICA.

RUBBER, CRUDE AND LATEX. NICKEL, PRIMARY, IN INGOTS, SHELLAC. PIGS, SHOT, CATHODES, OR TIN, IN BARS, BLOCKS, AND PIGS. SIMILAR FORMS; NICKEL OXIDE AND NICKEL SALTS.

THE FOREGOING PARAGRAPHS WERE INCLUDED PURSUANT TO THE PROVISIONS OF THE BUY AMERICAN ACT, AS AMENDED, 41 U.S.C. 10; EXECUTIVE ORDER NO. 10582; AND ASPR 6-200. IT WILL BE NOTED THAT COPPER WAS NOT LISTED IN PARAGRAPH 42 OF THE SPECIMEN CONTRACT.

AFTER BID OPENING, ON MARCH 26, 1959, THE H. L. COBLE CONSTRUCTION COMPANY WAS FOUND TO BE THE LOW ACCEPTABLE BIDDER, AND, IN ACCORDANCE WITH THE TERMS OF THE INVITATION, A LETTER OF ACCEPTABILITY DATED APRIL 20, 1959, WAS SENT TO THAT FIRM OBLIGATING IT TO PERFORM A NUMBER OF ACTS INCLUDING, UNDER PARAGRAPH I, THE EXECUTION OF THE HOUSING CONTRACT. CONSIDERABLE DELAY THEN ENSUED, APPARENTLY BECAUSE OF SOME DIFFICULTY IN ARRANGING FOR FINANCING. FINALLY, ANOTHER LETTER OF ACCEPTABILITY, SIMILAR TO THE FIRST, WAS SENT TO COBLE ON JANUARY 11, 1960. BY AN INADVERTENCE, PARAGRAPH 42 OF THE HOUSING CONTRACT WHICH WAS SIGNED BY THE PARTIES MADE SEVERAL CHANGES IN THE LIST OF ITEMS EXEMPT FROM THE BUY AMERICAN PROVISIONS. ONE OF THE CHANGES WAS THE INCLUSION OF COPPER ON THE EXEMPT LIST. ALTHOUGH THAT PARAGRAPH IS ON THE SAME PAGE AS THE SIGNATURE OF THE CONTRACTING OFFICER, IT APPEARS TO HAVE GONE UNNOTICED BY THE REPRESENTATIVES OF THE GOVERNMENT WHO WERE PRESENT.

IT MAY BE ASSUMED THAT WHEN THE ELIGIBLE BUILDER FOUND THAT THE LIST IN THE EXECUTED CONTRACT, UNLIKE THAT IN THE SPECIMEN CONTRACT, INCLUDED COPPER AND SOME OTHER ITEMS WHILE EXCLUDING OTHERS, HE CONSIDERED THAT THE LIST HAD BEEN DELIBERATELY CHANGED, IN ACCORDANCE WITH PROPER PROCEDURE, BETWEEN THE PREPARATION PERIODS OF THE TWO DOCUMENTS. IN ANY EVENT, FOREIGN COPPER WAS OBTAINED FOR USE IN THE PROJECT. THIS CAME TO THE ATTENTION OF THE CONTRACTING OFFICER AND, AFTER A DETERMINATION THAT COPPER COULD NOT PROPERLY BE EXEMPTED, THE CONTRACTOR WAS DIRECTED TO SUBSTITUTE DOMESTIC COPPER FOR THE FOREIGN MATERIAL. FOLLOWING CONSIDERABLE CORRESPONDENCE BETWEEN THE CONTRACTING OFFICER AND THE CONTRACTOR, THE FORMER INITIATED A CHANGE ORDER UNDER THE PROVISIONS OF THE CONTRACT DELETING COPPER FROM THE EXEMPT LIST AND PROVIDING FOR AN EQUITABLE ADJUSTMENT OF $60,700, WHICH, ACCORDING TO THE JUSTIFICATION PREPARED BY THE CONTRACTING OFFICER IN CONNECTION WITH THE PROPOSED CHANGE ORDER, REPRESENTED "THE DIFFERENTIAL BETWEEN THE COST OF FOREIGN AND DOMESTIC COPPER, INCLUDING HANDLING AND SHIPPING CHARGES COVERING DISPOSAL OF THE FOREIGN COPPER," AND ADDITIONAL COSTS RESULTING FROM THE NECESSITY FOR THE CONTRACTOR TO REVISE HIS SEQUENCE OF OPERATIONS.

THE PROJECT WAS THEN COMPLETED USING DOMESTIC COPPER. IN THE MEANTIME, THE CONTRACTING OFFICER FORWARDED THE CHANGE ORDER, OR CHANGE REQUEST TO THE FEDERAL HOUSING ADMINISTRATION FOR APPROVAL FOR MORTGAGE INSURANCE OF THE RECOMMENDED INCREASE IN ACCORDANCE WITH PARAGRAPH 9 OF THE HOUSING CONTRACT'S SEVERAL PROVISIONS. A QUESTION AROSE WITHIN THE FHA AS TO THE PROPRIETY OF THE CHANGE ORDER AND THE MATTER WAS SUBMITTED FOR OUR ADVICE BY LETTER OF NOVEMBER 18, 1960, FROM THE THEN ACTING COMMISSIONER.

AFTER SUCCESSFUL COMPLETION OF THE PROJECT THE PARTIES, IN ORDER NOT TO DELAY FINAL SETTLEMENT, ENTERED INTO AGREEMENTS WHEREBY THE AMOUNT AT ISSUED WAS PLACED IN ESCROW SUBJECT TO FINAL DETERMINATION BY "A GOVERNMENT AGENCY, BOARD OR COURT OF COMPETENT JURISDICTION.'

THE PROJECT IN QUESTION WAS UNDERTAKEN PURSUANT TO SECTIONS 403 THROUGH 406 OF THE HOUSING AMENDMENTS OF 1955, 69 STAT. 651, 42 U.S.C. 1594. SECTION 403 (A) OF THE ACT PROVIDES THAT CONTRACTS THEREUNDER SHALL BE PRECEDED BY AN INVITATION FOR THE SUBMISSION OF COMPETITIVE BIDS AFTER ADVERTISING IN THE MANNER PRESCRIBED BY WHAT IS NOW 10 U.S.C. 2305, WHICH READS IN PART:

* * * AWARDS SHALL BE MADE WITH REASONABLE PROMPTNESS BY GIVING WRITTEN NOTICE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED.

THE LANGUAGE OF THE PROVISION MAKES CLEAR THE CONGRESSIONAL INTENT THAT THESE CONTRACTS SHALL BE AWARDED PURSUANT TO COMPETITIVE BID PROCEDURES. SEE ALSO SENATE REPORT NO. 404, 84TH CONGRESS, PP. 17, 28; AND HOUSE REPORT NO. 1622, 84TH CONGRESS, P. 31.

IT IS WELL RECOGNIZED THAT THE CONTRACT AWARDED AFTER FORMAL ADVERTISING MUST BE THE SAME CONTRACT OFFERED TO ALL BIDDERS IN THE INVITATION. DIAMOND V. CITY OF MANKATO, 93 N.W. 911; 61 L.R.A. 448; 40 COMP. GEN. 447. FURTHER, A PURPORTED AWARD, PURSUANT TO A COMPETITIVE BIDDING STATUTE, WHICH DIFFERS IN A MATERIAL RESPECT FROM THE CONTRACT ADVERTISED IS INVALID. SEE UNITED STATES V. ELLICOTT, 223 U.S. 524. UNDER THE LAW RELATING TO COMPETITIVE BIDDING, THEREFORE, THE CONTRACT AWARDED MUST HAVE BEEN THAT ADVERTISED.

THAT THE PARTIES INTENDED THAT THE CONTRACT AWARDED WOULD BE THAT ADVERTISED IS SHOWN BY THE FACT THAT PARAGRAPH 1 OF THE BID FORM CONTAINS AN OFFER ON THE PART OF THE BIDDER TO PERFORM "IN STRICT ACCORDANCE WITH THE TERMS OF THE SPECIMEN COPIES OF THE LETTER OF ACCEPTABILITY AND THE HOUSING CONTRACT ATTACHED TO THE SAID INVITATION FOR BIDS.' FURTHER, PARAGRAPH 2 INCLUDES A REPRESENTATION BY THE BIDDER THAT THE PRICE BID INCLUDES "EVERYTHING TO BE CALLED FOR BY A HOUSING CONTRACT CONTAINING THE SAME TERMS, CONDITIONS, PROVISIONS, AND DRAWINGS AND SPECIFICATIONS AS THE SPECIMEN FORM OF HOUSING CONTRACT.' ALSO, PARAGRAPH 3 OF THE SAME DOCUMENT STATES:

3. THE BIDDER UNDERSTANDS THAT, IF THIS BID IS DETERMINED TO BE THE LOWEST ACCEPTABLE BID, THE DEPARTMENT WILL ISSUE TO HIM A LETTER OF ACCEPTABILITY IN THE FORM ATTACHED TO THE INVITATION FOR BIDS AND THE BIDDER AGREES THAT UPON ISSUANCE OF SUCH LETTER OF ACCEPTABILITY HE BECOMES OBLIGATED TO CARRY OUT ITS TERMS WITHIN THE TIMES THEREIN STATED, AT HIS OWN EXPENSE WITHIN THE CONDITIONS OF HIS BID SECURITY, AND WITHOUT FURTHER ACCEPTANCE, AWARD, ADVICE, OR OTHER ACTION BY THE DEPARTMENT. SUCH OBLIGATIONS INCLUDE AN OBLIGATION TO CAUSE PERFORMANCE BY THE MORTGAGOR-BUILDER CORPORATION, TO BE FORMED BY THE BIDDER, OF EACH AND EVERY ACT REQUIRED OF IT IN THE LETTER OF ACCEPTABILITY, TO CAUSE THE EXECUTION BY SAID MORTGAGOR-BUILDER CORPORATION OF A HOUSING CONTRACT CONTAINING THE SAME TERMS, CONDITIONS, PROVISIONS AND DRAWINGS AND SPECIFICATIONS AS THE SPECIMEN FORM OF HOUSING CONTRACT ATTACHED TO THE INVITATION FOR BIDS, AND AN OBLIGATION TO EXECUTE THE HOUSING CONTRACT WITH GOOD AND SUFFICIENT SURETY OR SURETIES AS REQUIRED THEREIN, WITHIN THE TIMES SPECIFIED IN AND IN ACCORDANCE WITH THE LETTER OF ACCEPTABILITY. (1ITALICS SUPPLIED.)

IN OUR VIEW, THE FOREGOING CLEARLY ESTABLISHES THAT ALL OF THE MATERIAL CONDITIONS OF THE CONTRACT WERE INTENDED TO BE ESTABLISHED BY THE TERMS OF THE BID DOCUMENTS. WHERE NONE OF THE MATERIAL CONDITIONS REMAINS UNSETTLED, THE ACCEPTANCE OF A BID EFFECTS A BINDING CONTRACT EVEN THOUGH THE PARTIES CONTEMPLATE A LATER EXECUTION OF A MORE FORMAL DOCUMENT. CONTI V. UNITED STATES, 158 F.2D 581. A BINDING CONTRACT CAME INTO EXISTENCE THEREFORE UPON THE ISSUANCE OF THE LETTER OF ACCEPTABILITY. 144012, JANUARY 25, 1951; B-134772, SEPTEMBER 14, 1959. ACCORDING TO THE ADVERTISED TERMS OF THE INVITATION THE CONTRACTOR WAS THEREUPON OBLIGATED TO EXECUTE A FORMAL CONTRACT WHICH WOULD, UNDER THE "1BUY AMERICAN" PROVISIONS, PRECLUDE THE USE OF FOREIGN COPPER.

NEVERTHELESS, WHEN THE FORMAL DOCUMENT WAS FINALLY DRAFTED AND PRESENTED TO THE CONTRACTOR FOR EXECUTION IT CONTAINED DIFFERENT "1BUY AMERICAN" PROVISIONS, WHICH IN EFFECT PERMITTED THE USE OF FOREIGN COPPER BUT PROHIBITED CERTAIN OTHER FOREIGN ITEMS WHICH WOULD HAVE BEEN PERMITTED BY THE ORIGINALLY ADVERTISED CONDITIONS. IN THIS FORM IT WAS EXECUTED BY THE CONTRACTOR WITHOUT QUESTION, AND MUST BE REGARDED AS FIXING THE OBLIGATIONS OF THE PARTIES UNLESS THE CHANGES IN THE "1BUY AMERICAN" EXEMPTIONS ARE TO BE CONSIDERED AS IN EXCESS OF THE POWERS OF THE CONTRACTING OFFICER AND THEREFORE NOT BINDING UPON THE GOVERNMENT.

THE ADMINISTRATIVE REPORT FURNISHED UNDER THE LETTER OF MARCH 20, 1961, STATES THE LEGAL POSITION OF THE CHIEF OF ENGINEERS. IT IS STATED THAT THE INVITATION MAKES POSSIBLE CHANGES IN THE LIST OF ITEMS EXEMPT FROM THE BUY AMERICAN PROVISIONS, THAT THE CONTRACTOR REASONABLY CONSTRUED THE ERROR IN THE EXEMPT LIST IN THE FORMAL CONTRACT, FOR WHICH HE WAS IN NO WAY RESPONSIBLE, AS A DELIBERATE CHANGE PROPERLY MADE, AND RELIED ON SUCH REASONABLE UNDERSTANDING TO HIS DETRIMENT. IT IS FURTHER STATED THAT, SINCE THE GOVERNMENT WAS SOLELY RESPONSIBLE FOR THE ERROR, ANY LOSS DIRECTLY ATTRIBUTABLE TO THE ERROR SHOULD BE BORNE BY THE GOVERNMENT AND THE CHANGE ORDER WOULD BE THE PROPER VEHICLE FOR SUCH PURPOSE. IT IS ALSO STATED:

* * * IN THE INSTANT CASE THE LETTER OF ACCEPTABILITY WAS EVIDENCE OF A CONTRACT AWARD CONDITIONED ON THE PARTIES FULFILLING STATED OBLIGATIONS AMONG WHICH IS THE ONE TO EXECUTE A HOUSING CONTRACT, THE FORM OF WHICH WAS PRESCRIBED BUT IN WHICH CERTAIN MATERIAL PROVISIONS WERE TO BE DETERMINED AS OF THE DATE OF ACTUAL EXECUTION, I.E. THE PREVAILING WAGE DETERMINATION, THE APPLICABLE LIST OF MATERIALS EXEMPT FROM THE BUY AMERICAN ACT AND THE NUMBER AND NAMES OF THE MORTGAGOR BUILDER CORPORATIONS TO BE SIGNATORY TO THE CONTRACT. SINCE PROVISION WAS MADE THAT ALL OF THE PROVISIONS OF THE HOUSING CONTRACT WOULD NOT BE DETERMINED IN THESE MATERIAL ASPECTS UNTIL JUST BEFORE THE DATE OF EXECUTION, IT IS CONSIDERED THAT THE LETTER OF ACCEPTABILITY IS LEGALLY A CONTRACT TO ENTER INTO A FURTHER CONTRACT AT A LATER DATE, THE TERMS OF WHICH ARE SUBJECT TO DEFINITION AND REFINEMENT DURING THE PERIOD IN WHICH THE LETTER OF ACCEPTABILITY IS IN EFFECT. UNDER THIS CONCEPT THE FORMALLY EXECUTED CONTRACT IS PRESUMED TO EVIDENCE THE FINAL AGREEMENT OF THE PARTIES AND ANY INCONSISTENT OR DIFFERENT PROVISIONS CONTAINED IN THE INVITATION FOR BIDS AND BID ARE NOT FOR CONSIDERATION UNLESS THE CONTRACT INSTRUMENT CANNOT BE READ OR INTERPRETED WITHOUT REFERENCE THERETO.

7. IN THE INSTANT CASE THE WORDING OF THE CONTRACT AS EXECUTED IS CLEAR, FOREIGN COPPER WAS SPECIFICALLY STATED TO BE AN EXEMPT ITEM UNDER THE BUY AMERICAN ACT. BECAUSE OF THE STATUTORY PROVISION FOR EXEMPTIONS AND THE LONG PERIOD BETWEEN THE DATE OF THE ORIGINAL INVITATION FOR BIDS AND THE DATE OF THE CONTRACT, THE CONTRACTOR COULD ASSUME THAT THE INCLUSION OF COPPER IN THE EXEMPT LIST WAS THE RESULT OF A PROPER ADMINISTRATIVE DETERMINATION PURSUANT TO THE STATUTE AND RELY ON THE CLEAR CONTRACT PROVISION SO STATING. THEREFORE, IT IS CONSIDERED THAT THE CONTRACTOR HAD A LEGAL AND BINDING CONTRACT, EVEN THOUGH THE BUY AMERICAN EXEMPTIONS CONTAINED THEREIN VARIED FROM THOSE SET FORTH IN THE INVITATION FOR BIDS AND THE CONTRACTOR IS PRESUMED TO HAVE ENTERED INTO THE CONTRACT WITH FULL KNOWLEDGE OF THE STATUTORY RESTRICTION. ON THIS BASIS, WHEN THE ERRONEOUS LISTING OF COPPER WAS FOUND TO EXIST IT WAS NECESSARY TO CORRECT THE UNILATERAL ERROR BY A CHANGE TO THE CONTRACT PROVISION IN ACCORDANCE WITH THE CHANGES CLAUSE AND PROVIDE FOR AN EQUITABLE ADJUSTMENT TO COMPENSATE FOR INCREASED COSTS. * * * (ITALICS SUPPLIED.)

WHILE, AS ABOVE INDICATED, WE DO NOT AGREE WITH THE POSITION OF THE CORPS OF ENGINEERS THAT UNDER THE TERMS OF THE INVITATION FOR BIDS AND THE ACCEPTANCE THEREOF BY THE LETTER OF ACCEPTABILITY THE CONTRACT WAS AUTOMATICALLY SUBJECT TO ANY CHANGES MADE IN THE EXEMPT LIST BETWEEN THE DATE OF ACCEPTANCE AND THE EXECUTION OF THE FORMAL CONSTRUCTION CONTRACT, WE CONCLUDE ON THE FACTS HERE PRESENTED THAT THE CONTRACTOR IS ENTITLED TO A PRICE ADJUSTMENT.

UNDER THE TERMS OF THE BUY AMERICAN ACT, THE APPLICABLE REGULATIONS, AND PARAGRAPHS 23 AND 42 OF THE HOUSING CONTRACT, A PROPER DETERMINATION COULD BE MADE AT ANY TIME TO ADD ITEMS TO, OR DELETE THEM FROM, THE EXEMPT LIST. IN OUR VIEW, ANY SUCH CHANGE MADE AFTER AWARD WHICH HAVE BEEN MADE THROUGH THE MEDIUM OF A CHANGE ORDER WITH, WHERE APPROPRIATE, AN ACCOMPANYING EQUITABLE ADJUSTMENT IN PRICE. IN THIS INSTANCE, WHILE COPPER AND ALUMINUM WERE ADDED TO THE EXEMPT LIST IN THE CONTRACT DOCUMENT SIGNED BY THE PARTIES, A NUMBER OF OTHER ITEMS WERE DELETED. THE CONTRACTOR COULD REASONABLY, AND APPARENTLY DID, THEREFORE ASSUME THAT A PROPER DETERMINATION HAD BEEN MADE, THAT THE CHANGE IN CONTRACT LANGUAGE WAS ADOPTED IN LIEU OF A CHANGE ORDER, AND THAT NO ADJUSTMENT IN PRICE WAS CALLED FOR BECAUSE THE ADDITIONS TO BE EXEMPT LIST WERE BALANCED BY THE DELETIONS. THIS CONCLUSION IS PARTICULARLY REASONABLE IN VIEW OF THE UNUSUALLY LONG PERIOD (APPROXIMATELY 10 MONTHS) BETWEEN BID OPENING AND EXECUTION OF THE FORMAL CONTRACT DOCUMENT. IN RELIANCE UPON THIS UNDERSTANDING, RESULTING ENTIRELY FROM THE CONTRACTING AGENCY'S NEGLIGENCE, THE CONTRACTOR COMMITTED HIMSELF TO THE USE OF FOREIGN COPPER IN THE CONSTRUCTION. UNDER THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CONTRACTOR MAY PROPERLY BE PAID THE DIFFERENCE BETWEEN THE COST OF THE FOREIGN AND DOMESTIC COPPER. AS TO THE REMAINING AMOUNTS IN THE "EQUITABLE ADJUSTMENT," WE ARE IN AGREEMENT WITH THE POSITION STATED IN THE ADMINISTRATIVE REPORT THAT THEY ARE IN THE NATURE OF CONSEQUENTIAL DAMAGES WHICH ARE OUTSIDE THE SCOPE OF THE CONTRACT AND NOT FOR INCLUSION IN THE ADJUSTMENT. THE COMMISSIONER, FEDERAL HOUSING ADMINISTRATION, IS BEING ADVISED OF OUR CONCLUSION BY LETTER OF TODAY.