B-167604, NOV. 6, 1969

B-167604: Nov 6, 1969

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PRICE REASONABLENESS ACCESS ROAD AND TIMBER PURCHASE CONTRACTS IN WHICH MINIMUM PRICE WAS STIPULATED FOR TIMBER MAY NOT BE REFORMED TO PROVIDE PRICE ADJUSTMENT BASED ON MUTUAL MISTAKE BECAUSE APPRAISED PRICE WAS UNREASONABLE ON NORMAL MARKET SINCE MUTUAL MISTAKE IS ONLY JUSTIFIED WHEN WRITTEN CONTRACT FAILS TO REFLECT AGREEMENT OF BOTH PARTIES AND NO BASIS EXISTS TO CONCLUDE THAT CONTRACTOR AND AGENCY MUTUALLY INTENDED THAT APPRAISED TIMBER PRICES WERE TO BE CONSIDERED IN ARRIVING AT CONSTRUCTION CONTRACT PRICE. BID ON CONSTRUCTION CONTRACT SHOULD HAVE INCLUDED SUFFICIENT AMOUNT TO COMPENSATE FOR POSSIBLE LOSSES ON TIMBER TRANSACTION. MEYER: REFERENCE IS MADE TO YOUR LETTERS OF JULY 28 AND OCTOBER 3.

B-167604, NOV. 6, 1969

TIMBER SALES--CONTRACT MODIFICATION--PRICE REASONABLENESS ACCESS ROAD AND TIMBER PURCHASE CONTRACTS IN WHICH MINIMUM PRICE WAS STIPULATED FOR TIMBER MAY NOT BE REFORMED TO PROVIDE PRICE ADJUSTMENT BASED ON MUTUAL MISTAKE BECAUSE APPRAISED PRICE WAS UNREASONABLE ON NORMAL MARKET SINCE MUTUAL MISTAKE IS ONLY JUSTIFIED WHEN WRITTEN CONTRACT FAILS TO REFLECT AGREEMENT OF BOTH PARTIES AND NO BASIS EXISTS TO CONCLUDE THAT CONTRACTOR AND AGENCY MUTUALLY INTENDED THAT APPRAISED TIMBER PRICES WERE TO BE CONSIDERED IN ARRIVING AT CONSTRUCTION CONTRACT PRICE, NO GUARANTEE HAVING BEEN MADE EITHER IN INVITATION FOR ROAD CONSTRUCTION OR IN PROSPECTUS FOR TIMBER SALE WITH RESPECT TO PRICES. THEREFORE, BID ON CONSTRUCTION CONTRACT SHOULD HAVE INCLUDED SUFFICIENT AMOUNT TO COMPENSATE FOR POSSIBLE LOSSES ON TIMBER TRANSACTION.

TO MR. PAUL R. MEYER:

REFERENCE IS MADE TO YOUR LETTERS OF JULY 28 AND OCTOBER 3, 1969, REQUESTING THAT EITHER DEPARTMENT OF TRANSPORTATION, BUREAU OF PUBLIC ROADS, CONTRACT DOT-FH-8-203 OR DEPARTMENT OF THE INTERIOR, BUREAU OF LAND MANAGEMENT (BLM), CONTRACT 14-11-0008/8/-349, BOTH WITH COLUMBIA CONTRACTORS, INC., BE REFORMED TO PROVIDE AN ADJUSTMENT IN PRICE FOR THE TIMBER COVERED BY THE SUBJECT CONTRACTS.

THE BUREAU OF PUBLIC ROADS CONTRACT PROVIDED FOR THE CONSTRUCTION OF A 4.798-MILE TIMBER ACCESS ROAD WITH TURNOUTS IN COOS COUNTY, OREGON, DESIGNATED AS BLM PROJECT 610-B1,C. PARAGRAPH 100-3.3 OF SECTION 100 OF THE SPECIAL PROVISIONS, ENTITLED "CLEARING AND GRUBBING," REQUIRED THE CONTRACTOR TO CONTRACT WITH THE BUREAU OF LAND MANAGEMENT FOR THE PURCHASE OF TIMBER DESIGNATED FOR CLEARING AND/OR LOGGING AND CERTAIN DANGER TREES OR SNAGS MARKED FOR CUTTING. THE BUREAU OF LAND MANAGEMENT CONTRACT IDENTIFIES THREE SPECIES OF TIMBER AND STIPULATES THE PRICES TO BE PAID BY THE CONTRACTOR FOR EACH THOUSAND BOARD FEET OF THE ESTIMATED QUANTITY OF EACH SPECIES.

THE CONTRACTOR SEEKS AN ADJUSTMENT IN THE $102 PER THOUSAND BOARD FEET PRICE STIPULATED IN THE CONTRACT FOR DOUGLAS FIR. THE $102 PRICE IS THE APPRAISED PRICE THAT WAS INCLUDED IN THE BUREAU OF LAND MANAGEMENT PROSPECTUS ON THE TIMBER. THE PROSPECTUS STATED THAT NO SALE SHALL BE MADE FOR LESS THAN THE TOTAL APPRAISED PRICE.

YOU POINT OUT THAT 43 U.S.C. 1181A PROVIDES THAT TIMBER FROM THE OREGON AND CALIFORNIA RAILROAD AND COOS BAY WAGON ROAD GRANT LANDS BE SOLD AT "REASONABLE PRICES ON A NORMAL MARKET.' YOU STATE THAT AT THE TIME OF THE TRANSACTIONS, THE REASONABLE PRICE FOR DOUGLAS FIR SHOULD HAVE BEEN APPROXIMATELY $70 TO $80 PER THOUSAND BOARD FEET INSTEAD OF $102. YOU HAVE FURNISHED AN AFFIDAVIT FROM THE PRESIDENT OF THE CONTRACTING COMPANY STATING THAT THE BID ON THE CONSTRUCTION CONTRACT WAS SUBMITTED ON THE ASSUMPTION THAT THE PRICES STATED IN THE BUREAU OF LAND MANAGEMENT PROSPECTUS WERE REASONABLE PRICES AND THAT, THEREFORE, NO AMOUNT WAS INCLUDED IN THE CONSTRUCTION CONTRACT BID TO COMPENSATE THE CONTRACTOR FOR ANY LOSS THAT MIGHT RESULT FROM THE TIMBER SALE CONTRACT.

YOU CONTEND THAT THE CONTRACTOR IS ENTITLED TO A CONTRACT PRICE ADJUSTMENT ON EITHER OF TWO ALTERNATIVE BASES. YOU STATE THAT THE BUREAU OF LAND MANAGEMENT CONTRACT SHOULD BE REFORMED TO REDUCE THE TIMBER SALES PRICE BECAUSE IT IS IN VIOLATION OF THE STATUTORY REQUIREMENT IN 43 U.S.C. 1181A THAT THE TIMBER BE SOLD AT "REASONABLE PRICES ON A NORMAL MARKET.' IN THE ALTERNATIVE, YOU STATE THAT THE BUREAU OF PUBLIC ROADS CONTRACT FOR THE CONSTRUCTION OF THE TIMBER ACCESS ROAD SHOULD BE REFORMED TO PROVIDE ADDITIONAL COMPENSATION TO THE CONTRACTOR SINCE BOTH THE BUREAU OF PUBLIC ROADS AND THE CONTRACTOR ENTERED INTO THE CONTRACT UNDER A MUTUAL MISUNDERSTANDING THAT THE PRICE OF THE TIMBER WOULD BE SUCH THAT THE CONTRACTOR WOULD BE ABLE TO DISPOSE OF IT WITHOUT COST TO THE ROAD BUILDING CONTRACT.

THE CITED ACT, 43 U.S.C. 1181A, IS SUCCESSOR TO THE ACT OF JUNE 9, 1916, 39 STAT. 218. SECTION 4 OF THE 1916 ACT AUTHORIZED THE SALE OF TIMBER ON REVESTED GRANT LANDS WITH THE PROVISO "THAT SAID TIMBER SHALL BE SOLD AS RAPIDLY AS REASONABLE PRICES CAN BE SECURED THEREFOR IN A NORMAL MARKET.' THE QUOTED LANGUAGE SUGGESTS THAT WHILE THE TIMBER SHOULD BE DISPOSED OF QUICKLY, IT WAS NOT TO BE SOLD AT PRICES DETRIMENTAL TO THE INTERESTS OF THE GOVERNMENT. IN 1937, A POLICY OF CONSERVATION WAS ADOPTED AND 43 U.S.C. 1181A WAS ENACTED TO ACCOMPLISH THAT PURPOSE. THE DIRECTION TO SELL TIMBER "RAPIDLY" WAS ELIMINATED, BUT THE REQUIREMENT THAT IT SHALL BE SOLD "AT REASONABLE PRICES ON NORMAL MARKET" WAS RETAINED. THUS, THE POLICY OF OBTAINING REASONABLE PRICES FOR THE GOVERNMENT REMAINED UNCHANGED. THEREFORE, WE BELIEVE THAT THE REQUIREMENT THAT THE TIMBER BE SOLD AT REASONABLE PRICES IS FOR THE BENEFIT OF THE GOVERNMENT RATHER THAN FOR THE PROTECTION OF PURCHASERS. ACCORDINGLY, THE FIRST ALTERNATE CLAIM IS DENIED.

WITH RESPECT TO THE SECOND ALTERNATE CLAIM, YOU STATE THAT IT IS THE CUSTOM AND PRACTICE THAT THE TIMBER BE SOLD AT REASONABLE PRICES SO THAT THE CONSTRUCTION CONTRACTOR MAY DISPOSE OF THE TIMBER WITHOUT COST TO THE ROAD BUILDING CONTRACT AND THAT BOTH THE BUREAU OF PUBLIC ROADS IN PREPARING THE ESTIMATE FOR ROAD CONSTRUCTION AND THE CONTRACTOR IN PREPARING ITS BID ON THE ROAD CONSTRUCTION ASSUMED THAT SUCH WOULD BE THE SITUATION. ALTHOUGH IT MAY BE THAT OVER THE YEARS THE APPRAISED PRICES FOR TIMBER SALES CONTRACTS WERE SUCH AS TO HAVE RENDERED UNNECESSARY THE INCLUSION OF CERTAIN TIMBER EXPENSES IN THE CONSTRUCTION CONTRACTS, NO GUARANTEE IS MADE IN EITHER THE INVITATION FOR THE ROAD CONSTRUCTION OR IN THE PROSPECTUS FOR THE TIMBER SALE WITH RESPECT TO THE TIMBER PRICES, AND THERE IS NOTHING IN EITHER OF THESE DOCUMENTS DISCOURAGING BIDDERS FROM MAKING THEIR OWN INDEPENDENT DETERMINATIONS IN THAT REGARD. SINCE THE BUREAU OF PUBLIC ROADS IS ADMINISTERING THE ROAD BUILDING CONTRACT, IT IS NATURAL THAT IT WOULD MAKE AN ESTIMATE OF THE ROAD BUILDING ASPECTS OF THE CONTRACT AND LEAVE THE APPRAISAL OF THE TIMBER TO THE BUREAU OF LAND MANAGEMENT WHICH IS RESPONSIBLE FOR THE SALE OF THE TIMBER. ALTHOUGH THE BUREAU OF PUBLIC ROADS COST ESTIMATE DID NOT TAKE INTO CONSIDERATION THE BUREAU OF LAND MANAGEMENT TIMBER APPRAISAL, BIDDERS COULD WEIGH THE TIMBER PURCHASE ASPECT IN PREPARING THEIR BIDS ON THE ROAD CONSTRUCTION. IN YOUR JULY 28, 1969, LETTER YOU RECOGNIZED THAT IF A BIDDER WAS COGNIZANT OF THE FACT THAT THE PRICES IN A BUREAU OF LAND MANAGEMENT PROSPECTUS WERE HIGHER THAN THE CURRENT TIMBER MARKET, SUCH BIDDER WOULD HAVE INCLUDED AN AMOUNT IN HIS BID ON THE CONSTRUCTION CONTRACT SUFFICIENT TO COMPENSATE HIM FOR POSSIBLE LOSSES ON HIS TIMBER TRANSACTION.

REFORMATION OF A CONTRACT BASED ON MUTUAL MISTAKE IS ONLY JUSTIFIED WHEN THE CONTRACT AS REDUCED TO WRITING DOES NOT REFLECT THE AGREEMENT OF BOTH PARTIES. 39 COMP. GEN. 363, 365 (1959), AND 30 ID. 220, 221 (1950). THE RECORD, WE FIND NO BASIS TO CONCLUDE THAT THE CONTRACTOR AND THE BUREAU OF PUBLIC ROADS MUTUALLY INTENDED THAT THE TIMBER APPRAISAL PRICES WERE TO BE CONSIDERED IN ARRIVING AT A PRICE FOR THE CONSTRUCTION CONTRACT WITHOUT THE BENEFIT OF AN INDEPENDENT APPRAISAL OF THE TIMBER MARKET OR THAT THE BUREAU OF PUBLIC ROADS INTENDED THAT THE TIMBER COULD BE DISPOSED OF AT A REASONABLE COST UNDER CURRENT MARKET CONDITIONS.