B-145815, FEBRUARY 5, 1962, 41 COMP. GEN. 514

B-145815: Feb 5, 1962

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CONTRACTS - MODIFICATION - INTENTION OF PARTIES NOT EXPRESSED - CHANGE ORDERS THE ISSUANCE OF A CHANGE ORDER UNDER A STANDARD CONSTRUCTION CONTRACT WHICH MODIFIED THE SPECIFICATION CHANGES PROPOSED BY THE CONTRACTOR AND WHICH WAS FOUND TO HAVE BEEN BASED ON MATERIAL DISCREPANCIES AND ERRORS IN THE ELEMENTS OF WORK INCLUDED BY THE CONTRACTOR DID NOT RESULT IN A VALID CONTRACT MODIFICATION IN THE NATURE OF AN ACCORD AND SATISFACTION TO PRECLUDE THE CONTRACTING OFFICER ON THE BASIS OF THE ACTUAL FACTS FROM UNILATERALLY CORRECTING THE MATERIAL MISTAKES WHICH WERE ESSENTIAL TO A DETERMINATION OF THE AMOUNT OF THE EQUITABLE PRICE ADJUSTMENT DUE THE GOVERNMENT AS A RESULT OF THE SPECIFICATION CHANGES.

B-145815, FEBRUARY 5, 1962, 41 COMP. GEN. 514

CONTRACTS - MODIFICATION - INTENTION OF PARTIES NOT EXPRESSED - CHANGE ORDERS THE ISSUANCE OF A CHANGE ORDER UNDER A STANDARD CONSTRUCTION CONTRACT WHICH MODIFIED THE SPECIFICATION CHANGES PROPOSED BY THE CONTRACTOR AND WHICH WAS FOUND TO HAVE BEEN BASED ON MATERIAL DISCREPANCIES AND ERRORS IN THE ELEMENTS OF WORK INCLUDED BY THE CONTRACTOR DID NOT RESULT IN A VALID CONTRACT MODIFICATION IN THE NATURE OF AN ACCORD AND SATISFACTION TO PRECLUDE THE CONTRACTING OFFICER ON THE BASIS OF THE ACTUAL FACTS FROM UNILATERALLY CORRECTING THE MATERIAL MISTAKES WHICH WERE ESSENTIAL TO A DETERMINATION OF THE AMOUNT OF THE EQUITABLE PRICE ADJUSTMENT DUE THE GOVERNMENT AS A RESULT OF THE SPECIFICATION CHANGES.

TO THE ADMINISTRATOR, VETERANS ADMINISTRATION, FEBRUARY 5, 1962:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 17, 1961, REGARDING THE PROPRIETY OF THE ACTION TAKEN BY THE CONTRACTING OFFICER TO CANCEL AND SUPERSEDE A CHANGE ORDER ISSUED UNDER CONTRACT V-1006C 188 ENTERED INTO OCTOBER 24, 1956, WITH MALAM CONSTRUCTION CORP. FOR CONSTRUCTION OF A RECREATION AND THEATER BUILDING AT THE VETERANS ADMINISTRATION CENTER, DAYTON, OHIO.

THE SPECIFIC QUESTION PRESENTED IN YOUR LETTER IS WHETHER THE CONTRACTOR'S ACCEPTANCE OF A CHANGE ORDER DIRECTING CERTAIN CHANGES IN THE SPECIFICATIONS AT A NET CREDIT OF $240 TO THE GOVERNMENT GAVE RISE TO A FINAL AND BINDING MODIFICATION OF THE CONTRACT IN THE NATURE OF AN ACCORD AND SATISFACTION. THE QUESTION HAS ARISEN BECAUSE UPON REVIEW AFTER COMPLETION OF THE WORK IT WAS FOUND THAT THE INFORMATION AND DATA ON WHICH THE CONTRACTOR'S PROPOSAL WAS BASED CONTAINED MATERIAL DISCREPANCIES AND ERRORS OF FACT, AND THAT THE CHANGE ORDER DID NOT INCLUDE ALL THE ELEMENTS OF THE WORK INVOLVED, BUT THE CONTRACTOR REFUSED TO NEGOTIATE AN ADJUSTMENT. THE CONTRACTING OFFICER THEREUPON UNILATERALLY DETERMINED THAT A CREDIT IN A SUBSTANTIALLY GREATER AMOUNT WAS DUE THE GOVERNMENT AS AN EQUITABLE ADJUSTMENT UNDER THE CHANGES CLAUSE OF THE CONTRACT. FROM THIS DETERMINATION THE CONTRACTOR FILED A TIMELY APPEAL UNDER THE DISPUTES CLAUSE OF THE CONTRACT WHICH IS NOW PENDING BEFORE THE VETERANS ADMINISTRATION CONTRACT APPEALS BOARD.

IT IS STATED IN YOUR LETTER THAT THE MATTER HAS BEEN SUBMITTED HERE SINCE THE PENDING APPEAL WILL REQUIRE CONSIDERATION OF DECISIONS OF OUR OFFICE RELATING TO THE RIGHT OF THE GOVERNMENT TO RECOVER FUNDS ERRONEOUSLY PAID UNDER MISTAKE OF LAW OR FACT QUOTING IN THIS CONNECTION THE GENERAL RULE SET OUT IN OUR DECISION OF AUGUST 4, 1955, 35 COMP. GEN. 63. REFERENCE IS ALSO MADE IN YOUR LETTER TO OUR DECISIONS OF MARCH 14, 1956, 35 COMP. GEN. 512, AND NOVEMBER 6, 1956, B 125483, WHICH HELD THAT THE SCOPE OF AN APPEAL FROM A CONTRACTING OFFICER'S DETERMINATION OF AN EQUITABLE ADJUSTMENT STIPULATED IN A CHANGE ORDER WAS NOT RESTRICTED TO THE ITEMS MENTIONED IN THE CONTRACTOR'S APPEAL BUT EMBRACED ALL ITEMS INVOLVED IN THE CHANGES COVERED BY THE CHANGE ORDER.

THE RECORDS SUBMITTED SHOWS THAT THE CONTRACT WAS EXECUTED ON STANDARD FORM 23 ( REV. MARCH 1953) AND PROVIDED FOR PERFORMANCE IN STRICT ACCORDANCE WITH THE GENERAL PROVISIONS CONTAINED IN STANDARD FORM 23A ( MARCH 1953), AND THE SPECIFICATIONS AND DRAWINGS SPECIFIED AS SUPPLEMENTED BY THREE ADDENDUMS, ALL OF WHICH WERE MADE A PART OF THE CONTRACT. THE PLANS AND SPECIFICATIONS PROVIDED FOR CONCRETE CAISSONS. TOP AND BOTTOM ELEVATIONS, DETAILS INDICATING BELL-BOTTOM CONSTRUCTION, AND A SCHEDULE OF SHAFT AND BELL DIAMETERS WERE INCLUDED IN THE PLANS. DETAILED CONSTRUCTION REQUIREMENTS WERE SET OUT IN THE SPECIFICATIONS. PARAGRAPH 3 -5 PROVIDED THAT THE SIZES AND DIMENSIONS INDICATED ON THE PLANS WERE THE MINIMUM WHICH WOULD BE ACCEPTED AND THAT CAISSONS OF SHAPES AND SIZES DIFFERENT FROM THOSE INDICATED WOULD BE ACCEPTED UNDER STATED CONDITIONS, I.E., THAT THE STATED MINIMUMS WERE FURNISHED AND THAT THE SPECIFIED BEARING PRESSURE OF 7 1/2 TONS PER SQUARE FOOT WAS NOT EXCEEDED.

STRAIGHT SHAFT, OR CYLINDRICAL, CAISSONS (SUCH AS THE SHAPES ACTUALLY INSTALLED ON THIS JOB) WERE PERMISSIBLE UNDER THE CONTRACT PROVIDED THE REQUIRED MINIMUM DIMENSIONS WERE MET OR PROVIDED THEIR DIAMETERS WERE EQUAL TO THE BELL DIAMETERS SHOWN ON THE PLANS; THUS THE FOOTING SIZE AND THE BEARING PRESSURE WOULD REMAIN UNCHANGED. THE SPECIFICATIONS PROVIDED (PARAGRAPH 3-4 AND ADDENDUM 2) THAT THE ESTIMATED QUANTITY OF 30 CUBIC YARDS OF ROCK EXCAVATION IN CAISSONS WAS REQUIRED WORK UNDER THE CONTRACT AND IT WAS FURTHER PROVIDED THAT $45 PER CUBIC YARD WOULD BE PAID FOR OVERRUN AND A CREDIT OF $25 PER CUBIC YARD WOULD BE TAKEN FOR UNDERRUN. THE SPECIFICATIONS ALSO PROVIDED (PARAGRAPH 3-8) THAT SHOULD THE BOTTOM OF CAISSONS BE HIGHER OR LOWER THAN SHOWN (IN WHICH CASE THE CAISSON LENGTHS AND VOLUME WOULD CHANGE) ADJUSTMENTS THEREFORE WOULD BE MADE PER ARTICLES 3 AND 4 OF THE CONTRACT.

BY LETTER DATED APRIL 2, 1957, MALAN SUBMITTED A PROPOSAL FOR SUBSTITUTING STRAIGHT SHAFT IN LIEU OF BELL-BOTTOM CAISSONS BASED ON AN ATTACHED " FOUNDATION CAISSON SUMMARY" DATED MARCH 29, 1957, PREPARED BY ITS CONSULTING ENGINEERS, AS FOLLOWS:

BASED UPON THE LOAD TEST CONDUCTED BY THE BOWSER-MORNER TESTING LABORATORIES AND COMPLETED ON MARCH 31, 1957, WE FEEL THAT THE BEARING CAPACITY OF A ROCK STRATA UPON WHICH THE CAISSONS WILL REST WILL SAFELY SUPPORT 20 TONS PER SQUARE FOOT.

WE FEEL THAT THE BEST INTERESTS OF THE GOVERNMENT WILL BE SERVED BY PERMITTING THE CONTRACTOR TO ELIMINATE THE BELL FOOTINGS, AND SUBSTITUTE THEREFORE A STRAIGHT SHAFT CAPABLE OF SUSTAINING THE 20 TONS PER SQUARE FOOT LOAD MENTIONED ABOVE. THE FOLLOWING TABULATION IS OFFERED FOR YOUR CONSIDERATION:

CHART

CONTRACT REQUIREMENTS REQUESTED SUBSTITUTION

368 CUBIC YARDS OF CAISSON EXCAVATION 445 CUBIC YARDS OF CAISSON

EXCAVATION

32 CUBIC YARDS OF CAISSON BELL NONE

EXCAVATION

400 CUBIC YARDS OF CONCRETE IN THE 445 CUBIC YARDS OF CONCRETE IN

CAISSON THE CAISSON

WHILE THE CONTRACTOR IN ESTIMATING THE JOB DID NOT MAKE A DISTINCTION BETWEEN CAISSON COLUMN EXCAVATION AND CAISSON BELL EXCAVATION, WE REALIZE THAT BASED ON THE SOIL CONDITIONS DISCOVERED WHEN THE TEST HOLES WERE DRILLED, THE CONTRACTOR WOULD HAVE HAD TO GO TO ADDITIONAL EXPENSE, IN ORDER TO EXCAVATE THE CAISSON BELLS.

THE CONTRACTOR THEREFORE REQUESTS PERMISSION TO PROCEED ON THE BASIS OF THE REQUESTED SUBSTITUTION AND FURTHER AGREES THAT THE INCREASE IN THE AMOUNT OF CONCRETE FOR THE REQUESTED SUBSTITUTION WILL BE AT NO COST TO THE GOVERNMENT.

WE FURTHER OFFER TO THE GOVERNMENT FOR THEIR CONSIDERATION A CREDIT OF $7.50 PER CUBIC YARD FOR THE 32 CUBIC YARDS OF CAISSON BELL EXCAVATION, WHICH WILL BE ELIMINATED ---- $240.

NO EXTENSION OF TIME IS REQUESTED IN CONNECTION WITH THIS CHANGE.

THE CONTRACTING OFFICER ISSUED PROCEED ORDER NO. 1, APRIL 8, 1957, DIRECTING MALAN TO PROCEED WITH THE PROPOSED CHANGES SUBJECT TO EQUITABLE ADJUSTMENT AS PROVIDED BY CLAUSE 3 OF THE GENERAL CONDITIONS. THIS ORDER WAS SUPERSEDED BY CHANGE ORDER "B" ISSUED BY HIS AUTHORIZED REPRESENTATIVE JUNE 14, 1957, WHICH PROVIDED AS FOLLOWS:

WITH REFERENCE TO YOUR CONTRACT DATED OCTOBER 24, 1956, FOR RECREATION AND THEATER BUILDING NO. 305 AT VETERANS ADMINISTRATION CENTER, DAYTON, OHIO, YOU ARE HEREBY ORDERED TO PROCEED WITH THE FOLLOWING MENTIONED CHANGE IN THE WORK THEREUNDER:

CONSTRUCTION OF FOUNDATION CAISSONS AS SHOWN ON SHEET DATED MARCH 29, 1957 BY MOREN, PROCTOR, MUESER AND RUTLEDGE, AS MODIFIED BY CONTRACTOR TO MAKE CAISSONS 35, 38, 44 TO 47, 51, 53, 55, 56 AND 57, 39 INCHES IN DIAMETER RATHER THAN 36 INCHES AS SHOWN, IN ACCORDANCE WITH YOUR PROPOSAL DATED APRIL 2, 1957, AT A DECREASE IN THE CONTRACT PRICE, IN ACCORDANCE WITH THE PROVISIONS THEREOF, BY THE SUM OF TWO HUNDRED FORTY DOLLARS ($240.00). THIS CHANGE IN CONTRACT WORK WARRANTS NO CHANGE IN TIME FOR COMPLETION.

THIS CHANGE ORDER CANCELS AND SUPERSEDES PROCEED ORDER NO. 1 DATED APRIL 8, 1957, ISSUED UNDER THIS CONTRACT.

THIS CHANGE ORDER IS ISSUED BY ME PURSUANT TO CONSTRUCTION SERVICE AUTHORIZATION ORDER NO. 52, DATED AUGUST 9, 1954.

AFTER THE CAISSONS HAD BEEN CONSTRUCTED MALAN SUBMITTED A "PROPOSAL FOR ADJUSTMENT OF CAISSON WORK" DATED MARCH 11, 1958, WHICH INCLUDED A CLAIM FOR THE EXPENSE OF CLEARING OBSTRUCTIONS ENCOUNTERED IN BORING THE CAISSONS OF $2,301.60, AND OFFERED A CREDIT TO THE GOVERNMENT FOR 30 CUBIC YARDS OF UNEXCAVATED ROCK AT $25 A YARD AMOUNTING TO $750, AND A CREDIT FOR 29.5 CUBIC YARDS OF CEMENT NOT POURED AT $10.50 PER YARD AMOUNTING TO $309.75, MAKING A TOTAL CREDIT OF $1,059.75, AND A NET CLAIMED INCREASE OF $1,241.85.

BY HIS LETTER OF MARCH 28, 1958, THE CONTRACTING OFFICER REJECTED MALAN'S PROPOSAL ON THE BASIS OF DATA SUBMITTED THEREIN SHOWING THAT CREDITS FOR ROCK UNEXCAVATED, EARTH UNEXCAVATED AND CONCRETE NOT POURED WERE DUE THE GOVERNMENT IN THE AMOUNT OF $1,737.40, AND REQUESTED MALAN TO REVIEW THE MATTER AND REVISE THE PROPOSAL ACCORDINGLY.

AFTER EXTENDED CORRESPONDENCE CONCERNING THE MATTER, THE CONTRACTING OFFICER FINALLY ADVISED MALAN BY LETTER DATED SEPTEMBER 21, 1959, THAT BECAUSE OF ERRORS OF OMISSION AND DISCREPANCIES IN THE INFORMATION AND DATA UPON WHICH CHANGE ORDER "B" WAS BASED, IT WAS BEING CANCELED AND SUPERSEDED BY A NEW CHANGE ORDER TO PROVIDE A CREDIT OF $1,594.20 TO THE GOVERNMENT, AND CHANGE ORDER "T" WAS ISSUED ACCORDINGLY.

RECEIPT OF CHANGE ORDER "T" WAS ACKNOWLEDGED BY MALAN'S LETTER DATED OCTOBER 9, 1959, IN WHICH THE VIEW WAS EXPRESSED THAT IT IS IMPROPER TO REOPEN A CHANGE ORDER ONCE IT HAS BEEN CONSUMMATED AND ENTERED INTO THE RECORD AS A FORMAL MODIFICATION OF THE CONTRACT UNLESS BOTH PARTIES AGREE THAT AN ERROR HAS BEEN MADE. THE CONTRACTOR REQUESTED THAT IF THE CHANGE ORDER REPRESENTED A DECISION OF THE CONTRACTING OFFICER "BEFORE THE FACT" THIS LETTER ALSO BE CONSIDERED AS A FORMAL APPEAL, AND HE WAS INFORMED BY THE CONTRACTING OFFICER'S LETTER OF OCTOBER 26, 1959, THAT THE LETTER HAD BEEN REFERRED TO THE CONTRACT APPEALS BOARD, AS REQUESTED.

IT IS STATED IN YOUR LETTER THAT THE CONTRACTING OFFICER TAKES THE POSITION THAT CHANGE ORDER B" WAS NOT FINAL AND BINDING ON THE GOVERNMENT BECAUSE OF GROSS AND MATERIAL ERRORS IN THE DATA SHEET PREPARED BY MALAN'S CONSULTING ENGINEERS UPON WHICH THE CHANGE ORDER NEGOTIATIONS WERE BASED, AND THAT THE NATURE OF THESE ERRORS IS SET FORTH IN HIS SUPPLEMENTAL FINDINGS OF FACT DATED APRIL 4, 1961. THE MOST IMPORTANT ARE SUMMARIZED IN YOUR LETTER, AS FOLLOWS:

1. APPELLANT'S PROPOSAL STATED THAT AN INCREASE IN TOTAL VOLUME OF CONCRETE WOULD RESULT FROM THE SUBSTITUTION OF CAISSONS, WHEREAS THE INCREASE IN BEARING PRESSURE FROM 7.5 TO 20 TONS PER SQUARE FOOT IN THE SUBSTITUTION ACTUALLY RESULTED IN THE USE OF MUCH LESS CONCRETE THAN THE ORIGINAL PLANS WOULD HAVE REQUIRED.

2. THE CONSULTING ENGINEER'S DATA SHEET USED AN AVERAGE TOP ELEVATION FOR EACH OF THE CAISSONS RATHER THAN THE ACTUAL ELEVATIONS SHOWN ON THE PLANS.

3. THE DATA SHEET ASSUMED THE SAME ELEVATION FOR THE BOTTOM OF ALL CAISSONS WHEREAS THE BASE ELEVATIONS VARIED ON CONTRACT PLANS.

4. SHAFT LENGTHS AND DIAMETERS SHOWN ON THE DATA SHEET WERE INACCURATE. AS A RESULT THE VOLUMES SHOWN THEREIN FOR EXCAVATION AND CONCRETE WERE INCORRECT.

5. THE DATA SHEET REFERRED TO ONLY 169 CAISSONS, WHEREAS 176 WERE REQUIRED BY THE CONTRACT.

THE CONTRACTING OFFICER URGES, IT IS STATED,"THAT IT WAS HIS RIGHT AND HIS DUTY TO RECTIFY THE ERRORS WHICH LED TO THE ISSUANCE OF CHANGE ORDER "B," AND THAT HE EXERCISED THAT RIGHT BY CANCELING CHANGE ORDER "B" AND ISSUING CHANGE ORDER "T" TO CORRECT FOR SUCH ERRORS AS WELL AS TO MAKE CERTAIN FURTHER ADJUSTMENTS NOT COVERED IN CHANGE ORDER "B.'"

AS THE RESULT OF HIS FURTHER CONSIDERATION OF THE MATTER THE CONTRACTING OFFICER DETERMINED UNDER HIS SUPPLEMENTAL FINDINGS OF FACT OF APRIL 4, 1961, AS POINTED OUT IN YOUR LETTER, THAT THE ADJUSTMENTS IN CONTRACT PRICE MADE IN BOTH CHANGE ORDER "B" AND CHANGE ORDER "T" WERE INADEQUATE BECAUSE THE UNIT VOLUMES AND UNIT PRICES ON WHICH THEY WERE BASED WERE NOT REPRESENTATIVE FOR THE WORK ACTUALLY PERFORMED. HE FOUND THAT "TO BE EQUITABLE THE ADJUSTMENT SHOULD BE COMPUTED ON THE SAME VOLUME BASIS AND ON THE SAME WORK UNIT PRICING SCALES ADOPTED AND USED BY THE CAISSON TRADESMEN," AND CONCLUDED THAT THE PROPER CREDIT DUE THE GOVERNMENT FOR THE CHANGED WORK IS $6,263.45.

ON THE OTHER HAND, IT IS STATED IN YOUR LETTER, MALAN TAKES THE POSITION "THAT CHANGE ORDER "B" WAS A FINAL CHANGE ORDER, NEGOTIATED BY AND MUTUALLY AGREED TO BY THE PARTIES, AND ISSUED BY THE CONTRACTING OFFICER WITHIN THE SCOPE OF HIS AUTHORITY UNDER THE CONTRACT" AND "THAT CHANGE ORDER B" WAS THEREFORE BINDING AND CONCLUSIVE ON THE PARTIES AS A VALID BILATERAL MODIFICATION OF THE ORIGINAL CONTRACT IN THE NATURE OF AN ACCORD AND SATISFACTION WHICH COULD NOT BE REOPENED OR DISREGARDED BY EITHER PARTY IN THE ABSENCE OF PROOF OF FRAUD IN THE NEGOTIATION.' IN OTHER WORDS, IT IS URGED BY MALAN THAT THE ALLEGED ACCEPTANCE OF CHANGE ORDER "B" PRECLUDES CONSIDERATION AND SETTLEMENT OF THE DISPUTE PURSUANT TO THE PROCEDURE PROVIDED BY THE CONTRACT.

UNDER THE TERMS OF CLAUSE 3 OF THE GENERAL PROVISIONS OF THE CONTRACT RELATING TO " CHANGES" THE CONTRACTING OFFICER MAY "BY A WRITTEN ORDER, AND WITHOUT NOTICE TO THE SURETIES, MAKE CHANGES IN THE DRAWINGS AND/OR SPECIFICATIONS OF THIS CONTRACT AND WITHIN THE GENERAL SCOPE THEREOF" SUBJECT TO THE EXPRESS STIPULATION THAT " IF SUCH CHANGES CAUSE AN INCREASE OR DECREASE IN THE AMOUNT DUE UNDER THIS CONTRACT * * * AN EQUITABLE ADJUSTMENT SHALL BE MADE AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY.' ( ITALICS SUPPLIED.) THIS CLAUSE INCLUDES THE FURTHER STIPULATIONS THAT , IF THE PARTIES FAIL TO AGREE UPON THE ADJUSTMENT TO BE MADE THE DISPUTE SHALL BE DETERMINED AS PROVIDED IN CLAUSE 6 HEREOF. BUT NOTHING PROVIDED IN THIS CLAUSE SHALL EXCUSE THE CONTRACTOR FROM PROCEEDING WITH THE PROSECUTION OF THE WORK AS CHANGED.' CLAUSE 6 PROVIDES A PROCEDURE FOR THE SETTLEMENT OF " DISPUTES" WHICH STIPULATES THAT "ANY DISPUTE CONCERNING A QUESTION OF FACT ARISING UNDER THIS CONTRACT WHICH IS NOT DISPOSED OF BY AGREEMENT SHALL BE DECIDED BY THE CONTRACTING OFFICER, WHO SHALL REDUCE HIS DECISION TO WRITING," AND THAT IF THE CONTRACTOR UPON RECEIPT OF A COPY OF THE DECISION FAILS TO FILE AN APPEAL TO THE HEAD OF THE DEPARTMENT AS PROVIDED THEREUNDER ,THE DECISION OF THE CONTRACTING OFFICER SHALL BE FINAL AND CONCLUSIVE.' (ITALICS SUPPLIED.)

IN CONSIDERING SIMILAR CONTRACT PROVISIONS THE SUPREME COURT OF THE UNITED STATES POINTED OUT IN UNITED STATES V. BLAIR (1944), 321 U.S. 730, 735, THAT RULINGS AND ACTIONS BY SUBORDINATE OFFICERS ARE OFTEN ADJUSTED MOST EASILY AND SATISFACTORILY BY THEIR SUPERIORS AND THAT THE STIPULATED PROCEDURE PROVIDED THE GOVERNMENT WITH AN OPPORTUNITY TO MITIGATE OR AVOID DAMAGES BY CORRECTING ERRORS OR EXCESSES OF ITS SUBORDINATE OFFICERS. SEE ALSO HAPPEL V. UNITED STATES, 8TH C.A.A. (1960), 279 F.2D 88, 91, CITED IN AMERICAN PIPE AND STEEL CORP. FIRESTONE TIRE AND RUBBER CO., 9TH C.A.A. (1961), 292 F.2D 640, 644, IN SUPPORT OF THE STATEMENT " WHAT CONSTITUTES AN "EQUITABLE ADJUSTMENT" IS A QUESTION OF FACT.'

CHANGE ORDER "B" HERE IN QUESTION EVIDENCES AN ACCEPTANCE WITH CERTAIN MODIFICATIONS OF MALAN'S PROPOSAL OF APRIL 2, 1957, WHICH OBVIOUSLY WAS BASED ON INFORMATION AND DATA SUBMITTED WITH THE PROPOSAL AND EXTENDED NEGOTIATIONS BETWEEN THE PARTIES. MALAN APPARENTLY RECOGNIZES THAT THE CHANGE ORDER WAS A COUNTERPROPOSAL BUT MAINTAINS IT WAS "DULY SIGNED AND ACCEPTED" BY MALAN THEREBY CONSUMMATING A BINDING CONTRACT MODIFICATION. THIS IS QUITE DIFFERENT, HOWEVER, FROM THE SITUATION CONSIDERED IN SEEDS AND KERHAM V. UNITED STATES (1940), 92 CT. CL. 97, CITED BY MALAN. IN THE SEEDS CASE THE CHANGE ORDER WAS EXPRESSLY DESIGNATED A "MODIFICATION OF SAID CONTRACT," WAS ACCEPTED AS SUCH BY THE CONTRACTOR, AND ITS VALIDITY WAS NOT IN ISSUE. SEE ALSO B W CONSTRUCTION CO. V. UNITED STATES (1942), 97 CT. CL. 92.

THE CRUX OF THE PRESENT MATTER IS WHETHER MALAN'S ALLEGED ACCEPTANCE OF THE COUNTERPROPOSAL CONSUMMATED A BINDING MODIFICATION OF THE CONTRACT. THE SHORT ANSWER IS THAT THE COPY OF CHANGE ORDER "B" SUBMITTED WITH YOUR LETTER AND QUOTED ABOVE DOES NOT SHOW THAT IT WAS "SIGNED AND ACCEPTED" BY MALAN NOR IS THE ALLEGED ACCEPTANCE OTHERWISE ESTABLISHED. UNDER CERTAIN CIRCUMSTANCES, HOWEVER, WHERE AN ORIGINAL OFFEROR RECEIVES AN ALLEGED ACCEPTANCE CONTAINING ADDITIONAL OR ALTERED TERMS AND HE PERFORMS HIS PART OF THE AGREEMENT, HIS ACCEPTANCE OF THE COUNTEROFFER MAY BE INFERRED. SEE THE CASES COLLECTED IN THE ANNOTATION 135 A.L.R. 821, 826.

FUNDAMENTALLY, TO BE EFFECTIVE AND BINDING AS A MODIFICATION, THE NEW AGREEMENT GENERALLY MUST POSSESS ALL THE REQUISITES OF A VALID AND ENFORCEABLE CONTRACT. SEE 9 AM. JUR., BUILDING AND CONSTRUCTION CONTRACTS, SEC. 72; 17 C.J.S., CONTRACTS, SEC. 374. IN DETERMINING WHETHER A CONTRACT HAS BEEN AGREED UPON, IT IS THE MUTUAL INTENT THAT GOVERNS, AND FOR THIS REASON SUBSTANTIAL AGREEMENT IN ALL MATERIAL PARTICULARS MUST BE SHOWN. WHERE SUCH MUTUALITY IS LACKING THERE IS NO BINDING CONTRACT. SEE THE OPINION OF JUSTICE WASHINGTON IN THE LEADING CASE OF ELIASON V. HENSHAW (1819), 17 U.S. 225; ISELIN V. UNITED STATES (1926), 271 U.S. 136, 139, AND THE AUTHORITIES CONSIDERED IN NORTHEASTERN CONST. CO. V. WINSTON-SALEM, 4TH C.A.A. (1936), 83 F.2D 57. CF. TRIPLE ,A" MACHINE SHOP V. UNITED STATES, 9TH C.A.A. (1956), 235 F.2D 626, INVOLVING A CLAIM UNDER A GOVERNMENT CONTRACT AND WHETHER A JOB ORDER AND ITS WRITTEN ACCEPTANCE BECAME A CONTRACT, WHERE THE COURT STATED " PROPER PLEADINGS AND PROPER EVIDENCE MIGHT HAVE PRESENTED A CASE OF MUTUAL MISTAKE.'

IT IS WELL ESTABLISHED AS A GENERAL RULE THAT A CONTRACT MADE UPON AN ASSUMED STATE OF MATERIAL FACTS AS TO WHICH THERE WAS A MUTUAL MISTAKE IS INVALID AND MAY BE RESCINDED, AND THAT THIS GENERAL RULE APPLIES TO EVERY FORM OF CONTRACT INCLUDING ACCORD AND SATISFACTION. SEE THE AUTHORITIES COLLECTED IN 12 AM. JUR., CONTRACTS, SEC. 126 AND 17 C.J.S., CONTRACTS, SEC. 144. IN LONG V. ATHOL, MASS. SUP. JUD. CT. (1907), 82 N.E. 665, IT WAS HELD THAT A MUTUAL MATERIAL MISTAKE AS TO THE AMOUNT OF WORK TO BE DONE ARISING FROM AN ERRONEOUS ESTIMATE UPON THE BASIS OF WHICH THE AGREEMENT WAS MADE RENDERED THE AGREEMENT INVALID. SEE ALSO ROAD IMPROVEMENT DISTRICT. NO. 4 V. WILKERSON, 8TH C.C.A. (1925), 5 F.2D 416, 417, WHERE IT WAS ALLEGED THAT PAYMENT OF A FINAL ESTIMATE WAS MADE AND ACCEPTED AS A FINAL SETTLEMENT OF A ROAD CONSTRUCTION CONTRACT SO AS TO CONSTITUTE AN ACCORD AND SATISFACTION. THERE THE COURT HELD THAT SINCE THE FINAL ESTIMATE WAS BASED ON MUTUAL MISTAKE AND ERRORS SUFFICIENT TO DESTROY ITS INTEGRITY NO EFFECTIVE FINAL SETTLEMENT HAD BEEN MADE AND THEREFORE THE ALLEGED ACCORD AND SATISFACTION BASED ON THE FINAL ESTIMATE FELL WITH IT. CF. HARRISON ENGINEERING AND CONSTRUCTION CORP. V. UNITED STATES (1946), 107 CT. CL. 205, AND NIPPON HODO COMPANY, LTD. V. UNITED STATES (1958), 142 CT. CL. 1; ALSO, ANDERSON V. UNITED STATES, 9TH C.C.A. (1941), 123 F.2D 13, HOLDING THAT THE GOVERNMENT WAS ENTITLED TO RECOVER AN OVERPAYMENT MADE IN FINAL SETTLEMENT UNDER A FEDERAL BUILDING CONSTRUCTION CONTRACT WHICH WAS DUE TO AN ERROR IN COMPUTATION, FOLLOWING THE GENERAL RULE STATED IN OUR AFOREMENTIONED DECISION, 35 COMP. GEN. 63.

IN ITS PROPOSAL OF APRIL 2, 1957, MALAN STATED THAT BASED ON TESTS BY ITS CONSULTING ENGINEERS THE BEARING CAPACITY OF THE ROCK STRATA UPON WHICH THE CAISSONS WOULD REST WOULD SAFELY SUPPORT 20 TONS PER SQUARE FOOT. SUBSTANCE, MALAN PROPOSED ELIMINATION OF THE BELL FOOTINGS SPECIFIED BY THE CONTRACT AND THE SUBSTITUTION OF STRAIGHT SHAFT CAISSONS CAPABLE OF SUSTAINING A LOAD OF 20 TONS PER SQUARE FOOT IN LIEU OF 7 1/2 TONS PER SQUARE FOOT SPECIFIED BY THE CONTRACT. A TABULATION WAS OFFERED SUPPORTED BY COMPUTATIONS OF ITS CONSULTING ENGINEERS WHICH THE CONTRACTING OFFICER HAS FOUND WAS REPLETE WITH MATERIAL ERRORS. MOREOVER, THE CONTRACTING OFFICER HAS FOUND THAT ALL ELEMENTS OF THE WORK WERE NOT INCLUDED AND THAT THE REPRESENTATION IN MALAN'S PROPOSAL THAT THE REQUESTED CHANGE WOULD INCREASE THE AMOUNT OF CONCRETE REQUIRED WAS GROSSLY ERRONEOUS. SUBSTITUTION OF STRAIGHT SHAFT CAISSONS AS PROPOSED BY MALAN, IT SEEMS MANIFEST THERE WOULD BE A PROPORTIONATE REDUCTION IN THE BASE AREA OF THE CAISSONS WITH A CORRESPONDING REDUCTION IN THE VOLUME OF THE CAISSONS, WHICH NECESSARILY WOULD RESULT IN A SUBSTANTIAL REDUCTION IN THE CONCRETE REQUIREMENTS, INSTEAD OF AN INCREASE AS REPRESENTED BY MALAN. SEE IN THIS CONNECTION UNITED STATES V. BARLOW (1889), 132 U.S. 271, WHERE MANY YEARS AGO THE SUPREME COURT OF THE UNITED STATES IN CONSIDERING A CLAIM INVOLVING A MODIFICATION OF A GOVERNMENT CONTRACT POINTED OUT IT WOULD INDEED BE A MISCHIEVOUS DOCTRINE IF ACTIONS BY PUBLIC OFFICIALS BASED UPON GUESSES ONLY AND WITHOUT REGARD TO THE TRUE FACTS COULD PRECLUDE THE GOVERNMENT FROM RECOVERY. THE COURT ENUNCIATED THE PRINCIPLE WHICH IS NOW UNIFORMLY ACCEPTED THAT CONTRACTS MAY BE RESCINDED AND RESTITUTION OBTAINED FOR REPRESENTATIONS OF MATERIAL FACTS FOUND TO BE FALSE ON THE PREMISE THAT IT WOULD BE UNJUST TO ALLOW ONE WHO HAS MADE FALSE REPRESENTATIONS, EVEN INNOCENTLY, TO RETAIN THE FRUITS OF A BARGAIN INDUCED BY SUCH REPRESENTATIONS, AND CONCLUDED THAT REASONS FOR THE APPLICATION OF THIS RULE ARE MUCH MORE POTENT IN THE CASE OF GOVERNMENT CONTRACTS THAN OF CONTRACTS WITH INDIVIDUALS. CF. YORKE V. TAYLOR, SUP. JUD. CT. MASS., (1955), 124 N.E.2D 912; VAN METER V. BENT CONSTRUCTION CO., S.C. CAL., (1956), 297 P.2D 644, AND THE AUTHORITIES CITED BY THESE COURTS.

CHANGE ORDER "B" DOES NOT EXPRESSLY REJECT, AND THE AMBIGUOUS LANGUAGE USED REASONABLY MAY NOT BE CONSTRUED AS EVIDENCING AN INTENTION TO PRECLUDE ADJUSTMENTS OF ITEMS OMITTED THEREFROM AND WHICH MIGHT OTHERWISE BE CONSIDERED UNDER THE PROVISIONS OF THE SPECIFICATIONS AND THE PRESCRIBED CONTRACT PROCEDURE. THAT CONSIDERATION OF THE ACTUAL FACTS AND ALL THE MATERIAL ELEMENTS INVOLVED IN THE CHANGES WAS MUTUALLY INTENDED UNDER THE PROVISIONS OF THE CONTRACT SEEMS ABUNDANTLY CLEAR FROM THE DETAILED SPECIFICATIONS AND THE EXPRESS STIPULATIONS OF THE GENERAL PROVISIONS, AND APPLYING THE GOVERNING PRINCIPLES OF FAIR AND JUST DEALING REFERRED TO ABOVE WE BELIEVE CORRECTION OF THE MATERIAL MISTAKES AND ERRORS APPEARING IN THE DETERMINATION OF THE EQUITABLE ADJUSTMENT DUE WAS JUSTIFIED AND REQUIRED UNDER THE CIRCUMSTANCES. THIS CONSTRUCTION SERVES TO EFFECTUATE THE TERMS OF THE CONTRACT AS A WHOLE AND, IN FACT, MALAN'S " PROPOSAL FOR ADJUSTMENT OF CAISSON WORK" DATED MARCH 11, 1958, INDICATES AN UNDERSTANDING AT THAT TIME THAT THE PRIOR DETERMINATION WAS NOT CONCLUSIVE. THE SPECIFIC QUESTION PRESENTED IN YOUR LETTER IS THEREFORE ANSWERED IN THE NEGATIVE.