B-157741, OCT. 7, 1965

B-157741: Oct 7, 1965

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AUTHORIZED CERTIFYING OFFICER BUREAU OF RECLAMATION: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 24. THE LAST PART OF ARTICLE 7 STATES: "* * * THE ESTIMATED NET COST OF ALL WORK TO BE PERFORMED UNDER THIS CONTRACT IS $121. SHOWS THAT IT WAS ESTIMATED THAT THE ENGINEERING COST WOULD BE ABOUT $6. IT APPEARS THAT AT CERTAIN LOCATIONS THE TRANSMISSION LINES WERE RAISED INSTEAD OF RELOCATED AS WAS ORIGINALLY CONTEMPLATED. THE CONSTRUCTION COSTS WERE REDUCED SUBSTANTIALLY FROM THE ORIGINAL ESTIMATE SO THAT IT IS NOW ESTIMATED THAT THE TOTAL CONSTRUCTION COSTS WOULD BE $76. THE CONTRACTOR HAS INDICATED THAT IT IS ONLY BECAUSE OF ADDED ENGINEERING EFFORT BEYOND ITS ORIGINAL ESTIMATE THAT IT WAS ABLE TO SAVE MORE THAN $40.

B-157741, OCT. 7, 1965

TO MR. EDWARD KNEUPER, JR., AUTHORIZED CERTIFYING OFFICER BUREAU OF RECLAMATION:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 24, 1965, REQUESTING A DECISION AS TO THE AMOUNT TO BE PAID FOR ENGINEERING TO THE OKLAHOMA ELECTRIC COOPERATIVE UNDER CONTRACT 14-06-500-770.

UNDER THE SUBJECT CONTRACT, THE GOVERNMENT AGREED TO REIMBURSE THE COSTS THAT WOULD BE INCURRED BY THE CONTRACTOR IN RELOCATING CONTRACTOR-OWNED ELECTRIC TRANSMISSION LINES LOCATED IN AN AREA TO BE INUNDATED BY THE NORMAN DAM AND RESERVOIR. THE PAYMENT PROVISIONS IN ARTICLES 6 AND 7 OF THE CONTRACT PROVIDE THAT THE ENGINEERING COSTS SHALL BE REIMBURSED AT A RATE NOT TO EXCEED 7 PERCENT OF THE TOTAL CONSTRUCTION COST. IN ADDITION, THE LAST PART OF ARTICLE 7 STATES:

"* * * THE ESTIMATED NET COST OF ALL WORK TO BE PERFORMED UNDER THIS CONTRACT IS $121,152.75, AS INDICATED ON EXHIBITS "B," BUT TOTAL PAYMENT FOR THE WORK DESCRIBED SHALL NOT BE LIMITED TO THIS AMOUNT, IT BEING THE INTENT OF COMPANY TO USE ITS BEST EFFORTS TO PERFORM THE WORK IN THE MOST ECONOMICAL AND EFFICIENT MANNER AND THE INTENT OF THE UNITED STATES TO FULLY REIMBURSE COMPANY FOR ACTUAL COSTS OF WORK NECESSARY TO MAKE THE RELOCATIONS.'

EXHIBIT "B," REFERENCED IN THE QUOTATION, SHOWS THAT IT WAS ESTIMATED THAT THE ENGINEERING COST WOULD BE ABOUT $6,977.43, AN AMOUNT WELL WITHIN 7 PERCENT OF THE ESTIMATED TOTAL COST OF CONSTRUCTION ($121,152.75).

HOWEVER, ACCORDING TO THE RECORD FURNISHED, IT APPEARS THAT AT CERTAIN LOCATIONS THE TRANSMISSION LINES WERE RAISED INSTEAD OF RELOCATED AS WAS ORIGINALLY CONTEMPLATED. AS A RESULT, THE CONSTRUCTION COSTS WERE REDUCED SUBSTANTIALLY FROM THE ORIGINAL ESTIMATE SO THAT IT IS NOW ESTIMATED THAT THE TOTAL CONSTRUCTION COSTS WOULD BE $76,031.64. BASED ON THIS AMOUNT AND THE 7-PERCENT ENGINEERING COST LIMITATION IN THE CONTRACT, THE CONTRACTOR WOULD BE REIMBURSED NO MORE THAN $5,322.21 FOR ENGINEERING COSTS. HOWEVER, THE CONTRACTOR HAS BILLED $10,073.33 FOR ENGINEERING COSTS. THE CONTRACTOR HAS INDICATED THAT IT IS ONLY BECAUSE OF ADDED ENGINEERING EFFORT BEYOND ITS ORIGINAL ESTIMATE THAT IT WAS ABLE TO SAVE MORE THAN $40,000 FROM THE ORIGINAL ESTIMATE OF TOTAL CONSTRUCTION COSTS. IT THEREFORE SUGGESTS THAT SINCE ITS ADDED ENGINEERING COSTS RESULTED IN A SUBSTANTIAL SAVINGS TO THE GOVERNMENT, IT SHOULD BE ALLOWED ITS ACTUAL ENGINEERING COSTS.

THE WORK AS PERFORMED APPEARS TO HAVE BEEN DIFFERENT FROM THE WORK CONTEMPLATED AT THE TIME THE PARTIES ENTERED INTO THE CONTRACT SINCE IT WAS APPARENTLY ANTICIPATED THAT THE TRANSMISSION LINES WOULD BE RELOCATED WHEREAS IN FACT THEY WERE RAISED. THE CONTRACT AS PERFORMED AND ACCEPTED THEREFORE SEEMS TO BE NOT THE SAME CONTRACT IN ALL RESPECTS ENTERED INTO, AND IT MAY VERY WELL BE THAT IF THE PARTIES HAD ENVISIONED THE ACTUAL RESULT THEY WOULD HAVE PROVIDED A DIFFERENT PAYMENT FORMULA. MOREOVER, THE LAST SENTENCE IN ARTICLE 7 OF THE CONTRACT INDICATES THAT IT IS THE INTENT OF THE GOVERNMENT TO FULLY REIMBURSE THE CONTRACTOR FOR THE ACTUAL COSTS OF ITS WORK. SINCE IT DOES NOT APPEAR THAT THERE IS ANY ELEMENT OF PROFIT ACCRUING TO THE CONTRACTOR AS A RESULT OF AN ALLOWANCE OF THE ACTUAL ENGINEERING COSTS AND CONSIDERING FURTHER THE BENEFIT THAT HAS ACCRUED TO THE GOVERNMENT BY VIRTUE OF THE ADDITIONAL ENGINEERING COST, OUR OFFICE WOULD OFFER NO OBJECTION TO THE PAYMENT OF THE ACTUAL ENGINEERING COST.