B-145402, MAY 9, 1961

B-145402, MAY 9, 1961

TO THE SECRETARY OF STATE:

REFERENCE IS MADE TO LETTER DATED MARCH 14, 1961, REQUESTING A DECISION AS TO WHETHER THERE EXISTS ANY AUTHORITY UNDER A CONTRACT ENTERED INTO WITH MR. BERTIL M. MORTENSON ON JANUARY 23, 1958, TO ADJUST THE COMPENSATION FOR HIS SERVICES IN THE MANNER PROPOSED IN THE LETTER.

ON JANUARY 23, 1958, YOUR DEPARTMENT ENTERED INTO A CONTRACT WITH MR. BERTIL M. MORTENSON TO SERVE AS A RESIDENT SUPERVISOR OF CONSTRUCTION AT THE BUILDING PROJECT OF THE NEW "EMBASSY RESIDENCE," SANTIAGO, CHILE. ARTICLE II PROVIDES THAT THE RATE OF COMPENSATION SHALL BE "AN AMOUNT NOT TO EXCEED $10,800.' DURING THE TIME OF SERVICE WITHIN THE UNITED STATES, MR. MORTENSON WAS TO BE PAID $33 PER DAY WHILE IN TRAVEL STATUS AND ENGAGED IN PERFORMANCE OF THE CONTRACT WORK. ON THE DAY THAT MR. MORTENSON DEPARTED FOR SANTIAGO, PAYMENT WAS TO BE MADE AT THE RATE OF $10,800 PER YEAR, PAYABLE IN INSTALLMENTS OF $900 PER MONTH. ARTICLE III PROVIDES THAT THE PERIOD OF SERVICE COVERED BY THE CONTRACT SHALL BE ONE YEAR FROM THE DATE OF CONTRACT OR UNTIL COMPLETION OF THE PROJECT AND THAT THE GOVERNMENT RESERVES THE RIGHT TO EXTEND THE CONTRACT IF IT IS DEEMED IN ITS BEST INTEREST TO DO SO. PARAGRAPH 9 OF GENERAL PROVISIONS MADE A PART OF THE CONTRACT SETS OUT THE PROVISIONS WITH REGARD TO TERMINATION OF THE CONTRACT. SUBPARAGRAPH (A) THEREOF, GIVES THE GOVERNMENT THE RIGHT TO TERMINATE FOR ANY CAUSE; SUBPARAGRAPH (B) PROVIDES FOR THE AMOUNT TO BE PAID TO THE CONTRACTOR IN THE EVENT THE CONTRACT IS TERMINATED FOR CONVENIENCE OF THE GOVERNMENT; SUBPARAGRAPH (C) PROVIDES FOR TERMINATION OF THE CONTRACT WHERE THERE IS A FAILURE OF THE CONTRACTOR TO FULFILL HIS UNDERTAKINGS UNDER THE CONTRACT; AND SUBPARAGRAPH (D) PROVIDES THAT IF DURING THE LIFETIME OF THIS CONTRACT THE CONTRACTOR SHOULD BE APPOINTED TO A REGULAR POSITION IN THE DEPARTMENT OR ELSEWHERE IN THE SERVICES OF THE UNITED STATES GOVERNMENT, THE CONTRACT WILL AUTOMATICALLY TERMINATE.

IT IS STATED THAT FOR REASONS BEYOND MR. MORTENSON'S CONTROL THE PROJECT HAS TAKEN FAR LONGER THAN THE 12 MONTHS CONTEMPLATED AT THE TIME HIS CONTRACT WAS SIGNED. THE CONSTRUCTION CONTRACT CALLED FOR COMPLETION OF THE PROJECT IN 12 MONTHS AFTER CONSTRUCTION BEGAN. THE CONSTRUCTION CONTRACTOR HAS FAILED TO PROCEED AT THE REQUIRED RATE OF PROGRESS AND LIQUIDATED DAMAGES ARE BEING ASSESSED FOR THE DELAY. AS A RESULT OF SUCH DELAY MR. MORTENSON HAS REMAINED ON THE JOB FOR 25 MONTHS AND IT IS EXPECTED THAT THE PROJECT WILL REQUIRE HIS SERVICES FOR ANOTHER 4 TO 6 MONTHS.

DURING THE PERIOD IN WHICH MR. MORTENSON HAS BEEN IN SANTIAGO ON THE CONTRACT WORK, THE COST OF LIVING IN CHILE HAS RISEN BY MORE THAN 50 PERCENT. IN APRIL 1959, AND IN FEBRUARY 1961, YOUR DEPARTMENT AUTHORIZED WAGE INCREASES OF 36 PERCENT AND 15 PERCENT, RESPECTIVELY, FOR THE FOREIGN SERVICE LOCAL EMPLOYEES IN ACCORD WITH THE DECREES OF THE CHILEAN GOVERNMENT.

MR. MORTENSON'S CONTRACT REFLECTS AN ALLOWANCE FOR QUARTERS OF $200 PER MONTH OR $2,400 PER YEAR. SINCE THE CONTRACT WAS DRAFTED, THE ALLOWANCE FOR QUARTERS FOR FOREIGN SERVICE OFFICERS AT HIS SALARY LEVEL HAS BEEN RAISED TO A PRESENT LEVEL OF $4,000 PER YEAR. IN VIEW OF THE FACT THAT THE CONTRACT HAS RUN FAR LONGER THAN WAS CONTEMPLATED AT THE TIME THAT IT WAS SIGNED AND BECAUSE THE EFFECTS OF INFLATION HAVE SUBSTANTIALLY REDUCED THE CONTRACTOR'S EFFECTIVE COMPENSATION FOR HIS SERVICES, YOUR DEPARTMENT WOULD LIKE TO ADJUST HIS SALARY TO ALLOW HIM AN INCREASE IN THE MONTHLY PAYMENTS OWING TO HIM UNDER THE CONTRACT.

YOUR DEPARTMENT PROPOSES TO FIX FUTURE MONTHLY PAYMENTS TO MR. MORTENSON AT $1,200 UNTIL THE END OF THE CONTRACT. YOU INQUIRE IF IT WOULD BE PROPER TO TERMINATE THE PRESENT CONTRACT AND REHIRE MR. MORTENSON AT A DIFFERENT SALARY LEVEL IF IT IS NOT POSSIBLE TO AMEND THE CONTRACT. ALSO, YOU INQUIRE AS TO WHETHER THE GOVERNMENT HAS THE OPTION UNDER ARTICLE III OF THE CONTRACT TO TERMINATE THE CONTRACT AFTER THE FIRST YEAR.

AT THE OUTSET IT MUST BE POINTED OUT THAT THE CONTRACT MAKES NO PROVISION FOR INCREASING THE COMPENSATION TO BE PAID THEREUNDER. ALSO, IT IS A FUNDAMENTAL PRINCIPLE OF LAW THAT VALID CONTRACTS ARE TO BE ENFORCED AND PERFORMED AS WRITTEN, AND THE FACT THAT INTERVENING AND UNFORESEEN CAUSES RENDER PERFORMANCE LESS PROFITABLE, OR EVEN OCCASION A LOSS, IS NOT SUFFICIENT TO ENTITLE A CONTRACTOR TO COMPENSATION IN ADDITION TO THAT PROVIDED IN THE CONTRACT. COLUMBUS RY. POWER AND LIGHT COMPANY V. COLUMBUS, 249 U.S. 399, 412; BLAUNER CONSTRUCTION COMPANY V. THE UNITED STATES, 94 CT.CL. 503, 511; 19 COMP. GEN. 903, AND CASES THERE CITED.

MOREOVER, OFFICERS OF THE GOVERNMENT HAVE NO AUTHORITY TO AMEND OR TO MODIFY EXISTING CONTRACTS UNLESS A COMPENSATING BENEFIT OR CONSIDERATION RESULTS TO THE UNITED STATES. SEE J. J. PREIS AND CO. V. UNITED STATES, 58 CT.CL. 81, 87, AND VULCANITE CEMENT CO. V. UNITED STATES, 74 CT.CL. 692, 705. SUCH BEING THE CASE, WE CAN FIND NO LEGAL BASIS FOR MODIFYING THE CONTRACT TO PROVIDE INCREASED COMPENSATION FOR MR. MORTENSON. IT MUST LIKEWISE BE HELD THAT NO LEGAL BASIS EXISTS FOR TERMINATING THE CONTRACT UNDER PARAGRAPH 9 OF GENERAL PROVISIONS AND ENTERING INTO ANOTHER CONTRACT WITH MR. MORTENSON TO PERFORM THE WORK AT AN INCREASE IN COMPENSATION. THE ONLY PROVISION IN THE CONTRACT WHICH RELIEVES MR. MORTENSON FROM PERFORMING THE CONTRACT WORK FOR THE CONSIDERATION AGREED UPON IS THAT CONTAINED IN SUBPARAGRAPH (D) OF PARAGRAPH 9 OF GENERAL PROVISIONS WHICH PROVIDES THAT IF THE CONTRACTOR IS APPOINTED TO A REGULAR POSITION IN YOUR DEPARTMENT OR ELSEWHERE IN THE SERVICES OF THE UNITED STATES GOVERNMENT, THE CONTRACT WILL AUTOMATICALLY TERMINATE.

WITH REGARD TO YOUR QUESTION AS TO WHETHER THE GOVERNMENT HAS AN OPTION UNDER ARTICLE III TO TERMINATE THE CONTRACT AFTER THE FIRST YEAR, THERE MUST BE TAKEN INTO ACCOUNT THE ACCEPTED PRINCIPLE OF CONTRACT CONSTRUCTION THAT ALL PARTS OF THE CONTRACT MUST BE READ TOGETHER IN THE INTERPRETATION OF THE CONTRACT. UNDER PARAGRAPH 9 (A) OF GENERAL PROVISIONS THE GOVERNMENT HAS THE RIGHT TO TERMINATE THE CONTRACT AT ANY TIME FOR ANY CAUSE BUT FOR REASONS STATED HEREINABOVE, THE GOVERNMENT MAY NOT ENTER INTO A NEW CONTRACT WITH THE PRESENT CONTRACTOR FOR THE SAME WORK AT AN INCREASE IN PRICE.

ACCORDINGLY, WE FIND NO AUTHORITY TO ADJUST THE CONTRACT WITH MR. MORTENSON AS PROPOSED IN YOUR LETTER.