B-158463, MAR. 10, 1966

B-158463, MAR. 10, 1966

TO SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED JUNE 21, 1965, TRANSMITTED HERE BY THE OFFICE OF THE CHIEF OF ENGINEERS, WITH SECOND INDORSEMENT DATED FEBRUARY 2, 1966, SUBMITTING FOR OUR DECISION THE QUESTION WHETHER MODIFICATION NO. 4 TO CONTRACT NO. DA-41-443-CIVENG-60-100 (NEGOTIATED) WITH HARZA ENGINEERING COMPANY, MAY BE REFORMED TO PERMIT INCREASED PAYMENT THEREUNDER OF THE AMOUNT OF $16,500.

CONTRACT NO. DA-41-443-CIVENG-60-100 (NEGOTIATED) WAS AWARDED TO HARZA ENGINEERING COMPANY, HEREINAFTER REFERRED TO AS HARZA, ON NOVEMBER 6, 1959, IN THE AMOUNT OF $800,000. THE WORK TO BE PERFORMED INCLUDED: (1) PREPARATION OF DESIGN MEMORANDA FOR THE MAIN STRUCTURE COVERING (A) POWER INTAKE, (B) FLOOD CONTROL OUTLET WORKS, AND (C) POWER PLANT; (2) PREPARATION OF PROCUREMENT AND CONSTRUCTION DRAWINGS FOR ALL OF THE FEATURES AND EQUIPMENT INCLUDED IN THE DESIGN; (3) PREPARATION OF TECHNICAL SPECIFICATIONS FOR THE MAIN STRUCTURE AND ITEMS OF EQUIPMENT; AND (4) PREPARATION OF A DETAILED LIST OF BID QUANTITIES AND AN ESTIMATE OF COST OF THE ENTIRE POWER PLANT, POWER INTAKE, FLOOD CONTROL WORKS, ASSOCIATED DAM AND APPURTENANCES, ALL OF WHICH WERE SERVICES IN CONNECTION WITH THE DESIGN OF A HYDROELECTRIC POWER PLANT, POWER INTAKE, FLOOD CONTROL OUTLET WORKS AND APPURTENANT STRUCTURES FOR MCGEE BEND RESERVOIR, ANGELINA RIVER, JASPER COUNTY, TEXAS.

IT APPEARS THAT ON DECEMBER 20, 1961, MR. C. H. FOGG, OF SOUTHWESTERN U.S. ARMY ENGINEER DIVISION, AUTHORIZED REPRESENTATIVE OF THE CONTRACTING OFFICER, BEGAN NEGOTIATIONS WITH HARZA, SEEKING TO HAVE THE CONTRACTOR CHECK CERTAIN ELECTRICAL SHOP DRAWINGS RELATING TO THE DAM PROJECT. WAS ULTIMATELY AGREED BY MR. FOGG AND MR. E. J. BECK, PROJECT MANAGER FOR HARZA, THAT ABOUT 325 DRAWINGS WOULD HAVE TO BE CHECKED. A SUPPLEMENTAL AGREEMENT (MODIFICATION NO. 4) WAS NEGOTIATED AND WAS SIGNED FOR HARZA BY E. MONTFORD FUCIK, EXECUTIVE VICE PRESIDENT, ON MARCH 19, 1962. IT WAS SIGNED FOR THE GOVERNMENT BY COLONEL R. P. WEST, CONTRACTING OFFICER, ON APRIL 16, 1962. THE SUPPLEMENTAL AGREEMENT DESCRIBED IN DETAIL THE WORK TO BE PERFORMED AND STATED THAT AMOUNT OF $37,500 AS A LUMP-SUM PRICE. INDICATION WAS GIVEN OF THE NUMBER OF DRAWINGS TO BE CHECKED. AS OF APRIL 27, 1964, HARZA HAD REVIEWED AND CHECKED, OR WAS IN THE PROCESS OF REVIEWING AND CHECKING, 385 DRAWINGS. IT WAS ESTIMATED BY THE CONTRACTOR AT THAT TIME THAT 54 MORE SHOP DRAWINGS WOULD HAVE TO BE REVIEWED AND CHECKED, MAKING A TOTAL OF 439. THIS WOULD HAVE BEEN AN OVERRUN OF THE CONTRACTOR'S ORIGINAL ESTIMATE BY 114 DRAWINGS OR 35 PERCENT. THE CONTRACTOR REQUESTED AN INCREASE IN PRICE OF "ABOUT 27 PERCENT," WHICH WOULD HAVE AMOUNTED TO ABOUT $10,125. IN A LETTER DATED JUNE 11, 1964, THE CONTRACTOR REVISED ITS ESTIMATE AND ESTIMATED THAT APPROXIMATELY 500 SHOP DRAWINGS WOULD BE REVIEWED AND CHECKED UNDER MODIFICATION NO. 4. JUNE 22, 1964, THE CONTRACTOR INCREASED ITS CLAIM TO ABOUT 515 DRAWINGS RECEIVED AND A TOTAL OF 550 EXPECTED. ON NOVEMBER 13, 1964, THE CONTRACTOR PRESENTED ITS FINAL STATEMENT AS TO THE NUMBER OF DRAWINGS CHECKED--A TOTAL OF 575. THIS NUMBER EXCEEDED THE NUMBER UPON WHICH THE CONTRACTOR'S BID WAS BASED BY 250 DRAWINGS, OR ABOUT 77 PERCENT. FROM THE SUBMITTED FACTS IT IS APPARENT THAT NO ACCURATE ESTIMATE OF THE NUMBER OF DRAWINGS COULD HAVE BEEN MADE PRIOR TO THE TIME THEY WERE ACTUALLY RECEIVED.

THE CONTRACTOR HAS REQUESTED THAT SUPPLEMENTAL AGREEMENT NO. 4 BE MODIFIED TO INCREASE THE AMOUNT PAID FOR THE WORK COVERED BY IT FROM $37,500 TO $54,000, AN INCREASE OF $16,500, CONTENDING THAT ITS NEGOTIATOR HAD AN UNDERSTANDING WITH THE GOVERNMENT NEGOTIATOR THAT THERE WOULD BE A BASIS FOR A MODIFICATION IN PRICE IF THE NUMBER OF DRAWINGS DID OVERRUN ORIGINAL ESTIMATES. THE GOVERNMENT REPRESENTATIVE STATES THAT THE "UNDERSTANDING" WAS THAT HE WOULD DO HIS BEST TO SEE THAT THE CONTRACTOR WAS TREATED FAIRLY. HOWEVER, NO MENTION OF THE NUMBER OF DRAWINGS TO BE CHECKED WAS INCLUDED IN THE SUPPLEMENTAL AGREEMENT OR THE RECORD OF CONTRACT NEGOTIATIONS, ENG FORM 2180, WHICH INCLUDES THE GOVERNMENT ESTIMATE OF THE COST OF CHECKING THE SHOP DRAWINGS. IT IS NOTED THAT A SINGLE SHOP DRAWING MAY SHOW MUCH OR LITTLE, MAY BE SIMPLE OR DIFFICULT TO CHECK AND THAT DIFFERENT MANUFACTURERS WILL EMPLOY DIFFERENT APPROACHES TO THE PROBLEMS OF WHAT TO SHOW AND HOW TO SHOW IT ON EACH DRAWING. THE SUBMITTED RECORD INDICATES THAT WHILE THE GOVERNMENT NEGOTIATOR AGREED IN A TELEPHONE CONVERSATION WITH HARZA'S REPRESENTATIVE ON JANUARY 23, 1962, THAT 325 DRAWINGS WERE A REASONABLE NUMBER OF DRAWINGS TO EXPECT, THE GOVERNMENT REPRESENTATIVE'S UNDERSTANDING AT THAT TIME WAS THAT THE NUMBER OF DRAWINGS COULD NOT APPEAR IN THE CONTRACT AS A BASIS FOR THE PRICE AND THE RECORD OF NEGOTIATIONS AND THE SUPPLEMENTAL AGREEMENT WHICH WERE SUBSEQUENTLY SIGNED BY BOTH PARTIES TO THE CONTRACT CONTAIN NO REFERENCE TO ANY NUMBER OF DRAWINGS. FURTHER, THE GOVERNMENT ESTIMATE WAS NOT BASED ON AN ESTIMATED NUMBER OF DRAWINGS TO BE CHECKED. THE RECORD REVEALS FURTHER THAT IT IS THE GENERAL PRACTICE TO CONTRACT FOR CHECKING OF SHOP DRAWINGS ON A FIRM, FIXED-PRICE BASIS WITH NO PROVISION FOR ADJUSTMENT BASED ON THE NUMBER OF DRAWINGS TO BE CHECKED. THE NUMBER AND CLASSIFICATION OF PERSONNEL NEEDED AND THE AMOUNT OF TIME THEIR SERVICES WILL BE REQUIRED ARE BASIC FACTORS IN ESTIMATING THE COST OF SUCH WORK. THE AMOUNT TO BE PAID FOR ENGINEERING SERVICES OF CHECKING SHOP DRAWINGS CANNOT BE BASED SOLELY ON THE ESTIMATED NUMBER OF DRAWINGS TO BE CHECKED, AS THE NUMBER OF DRAWINGS CAN VARY CONSIDERABLY WITHOUT AFFECTING THE OVERALL TIME SPENT.

THE CONTRACTOR REQUESTS REFORMATION OF THE CONTRACT WHICH HAS BEEN FULLY PERFORMED. REFORMATION IS THE PROPER REMEDY WHERE THE CONTRACT, AS REDUCED TO WRITING, DOES NOT REFLECT THE ACTUAL AGREEMENT OF THE PARTIES, IF IT CAN BE ESTABLISHED WHAT THE AGREEMENT ACTUALLY WAS. SEE 30 COMP. GEN. 220, AND CASES CITED. SEE, ALSO, 20 ID. 782 AND ID. 533. DETERMINING THE VALIDITY AND ENFORCEABILITY OF A CONTRACT, IT IS THE MUTUAL INTENT OF THE PARTIES WHICH PRIMARILY GOVERNS, AND FOR THIS REASON SUBSTANTIAL AGREEMENT IN ALL MATERIAL RESPECTS MUST BE SHOWN. THE GENERAL RULE IS THAT A CONTRACT MADE THROUGH MUTUAL MISTAKE AS TO MATERIAL FACTS MAY EITHER BE RESCINDED OR REFORMED. SEE 12 AM.JUR., CONTRACTS, SECS. 126 AND 17 C.J.S., CONTRACTS, SEC. 144.

HOWEVER, THERE IS A PRESUMPTION OF LAW THAT A WRITTEN INSTRUMENT WAS CAREFULLY PREPARED AND EXECUTED, THAT THE PARTIES KNEW ITS CONTENTS, AND THAT IT SETS FORTH FULLY AND CORRECTLY THEIR FINAL AGREEMENT. 45 AM.JUR. 649; 53 C.J. 1025, 1026; FIRST NAT. BANK V. OCEAN ACCIDENT AND GUARANTEE CORPORATION, 294 F. 91; 26 COMP. GEN. 899. THE BURDEN IS ON THE PARTY SEEKING REFORMATION TO PRODUCE EVIDENCE SUFFICIENT TO OVERCOME SUCH PRESUMPTION. RELIEF BY WAY OF REFORMATION WILL NOT BE GRANTED UNLESS THE PROOF OF MUTUAL MISTAKE BE OF THE CLEAREST AND MOST SATISFACTORY CHARACTER --- PROOF THAT IS CONVINCING BEYOND REASONABLE CONTROVERSY. PHILIPPINE SUGAR ESTATES DEVELOPMENT CO. V. GOVERNMENT OF THE PHILIPPINE ISLANDS, 247 U.S. 385; SNELL V. INSURANCE CO., 98 U.S. 85; FIREMEN'S INS. CO. V. LASKER, ET AL. 18 F.2D 375; SOUTHERN SURETY CO. V. UNITED STATES CAST IRON PIPE AND FOUNDRY CO., 13 F.2D 833. WHILE THE CONTRACTOR HAS PRESENTED COPIES OF LETTERS TO THE CONTRACTING OFFICER DATED SOMETIME AFTER WORK HAD BEEN BEGUN WHICH REFER TO AN INCREASE IN THE CONTRACT PRICE, THERE HAS BEEN PRESENTED NO EVIDENCE SUFFICIENT TO SHOW THAT IT WAS THE INTENT OF THE CONTRACTING OFFICER, BEFORE OR AT THE TIME HE SIGNED THE SUPPLEMENTAL AGREEMENT ON BEHALF OF THE GOVERNMENT, TO PROVIDE FOR PAYMENT BASED ON THE NUMBER OF DRAWINGS CHECKED. LETTER DATED JANUARY 29, 1962, FROM HARZA TO THE GOVERNMENT NEGOTIATOR, DOES STATE THAT AN ESTIMATE OF ABOUT 325 DRAWINGS REPRESENTED THE "BEST THINKING AT THIS TIME ON THE NUMBER IN PREPARING OUR COST ESTIMATE," BUT THIS IS INSUFFICIENT TO OVERCOME THE PRESUMPTION THAT THE SUPPLEMENTAL AGREEMENT SUBSEQUENTLY EXECUTED BY THE PARTIES SETS FORTH FULLY AND CORRECTLY THEIR FINAL AGREEMENT. NO PART OF THE RECORD SHOWS THAT IT WAS EVER THE GOVERNMENT'S INTENTION TO BASE THE PRICE PAID FOR THE CONTRACT WORK SOLELY ON THE BASIS OF THE DRAWINGS CHECKED. WHILE IT APPEARS FROM THE ENTIRE RECORD THAT THE CONTRACTOR MAY HAVE BEEN CONCERNED AT TIMES WITH THE NUMBER OF DRAWINGS TO BE CHECKED IT DOES NOT APPEAR THAT THE GOVERNMENT NEGOTIATOR EVER BECAME ABSORBED WITH THE QUESTION TO THE SAME EXTENT.

ON THE BASIS OF THE FOREGOING, WE CANNOT FIND THAT AN AGREEMENT BINDING UPON THE GOVERNMENT TO ADJUST PRICES UNDER MODIFICATION NO. 4 ON THE BASIS OF THE NUMBER OF DRAWINGS CHECKED EVER CAME INTO EXISTENCE OR THAT THE CONTRACT AS REDUCED TO WRITING DID NOT REFLECT THE ACTUAL CONTRACT WHICH THE PARTIES HAD PREVIOUSLY AGREED UPON.