B-167951, APR. 21, 1970

B-167951: Apr 21, 1970

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NOR IS RULE OF UNILATERAL MISTAKE. PERMITTING RESCISSION AND RESTITUTION WHERE MISTAKE IS KNOWN OR SHOULD HAVE BEEN KNOWN BY OTHER PARTY. BLASKY: REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 19. THE PLANNING AND DESIGN OF THE RADIO STANDARDS LABORATORY WAS ACCOMPLISHED UNDER TWO SEPARATE CONTRACTS. BOTH OF WHICH WERE AWARDED TO JAMES M. IT WAS INDICATED THAT APPROXIMATELY $13. IT WAS AGREED. THAT IT IS THE CONTRACTOR'S CONTENTION THAT. 000 WOULD HAVE TO BE USED BECAUSE THE CONSTRUCTION PROJECT WOULD BE "CUT BACK" BY THE BUREAU OF STANDARDS. THE ECC WAS $13. SHOULD HAVE BEEN APPROXIMATELY $735. ITS COMPLETE FILE IN THE MATTER WAS FURNISHED TO US ON A LOAN BASIS. AS FOLLOWS: "DECISIONS OF YOUR OFFICE HAVE HELD THAT WHERE BY REASON OF MUTUAL MISTAKE THE CONTRACT.

B-167951, APR. 21, 1970

CONTRACTS--NEGOTIATION--MISTAKES--FEE ON TWO-PHASE CONTRACTS WHERE PARTIES CONTRACTED FOR FIXED PROFESSIONAL SERVICE FEE FOR DESIGN AND PLANNING OF LABORATORY, BUT ON BASIS OF CONSTRUCTION COST ESTIMATES (ECC) AS TO WHICH, EXCEPT POSSIBLY FOR ITEM OMISSION OR OBVIOUS MATHEMATICAL ERROR, IT WOULD APPEAR THEY CONSCIOUSLY TOOK CHANCE ESTIMATES WOULD APPROXIMATE ECC AT FINAL STAGE, UNDERESTIMATE OF COST AT TIME OF NEGOTIATING DOES NOT CONSTITUTE MUTUAL MISTAKE NOR PROVIDE BASIS FOR CONTRACT REFORMATION TO PERMIT PAYMENT OF ADDITIONAL FEE TO CONTRACTOR, NOR IS RULE OF UNILATERAL MISTAKE, PERMITTING RESCISSION AND RESTITUTION WHERE MISTAKE IS KNOWN OR SHOULD HAVE BEEN KNOWN BY OTHER PARTY, HEREIN APPLICABLE. SEE COMP. GEN. DEC. AND CT. CASES CITED.

TO MR. HAROLD F. BLASKY:

REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 19, 1969, AND TO SUBSEQUENT CORRESPONDENCE, RELATIVE TO A REQUEST THAT CONTRACT NO. GS 00-B -480 (PCCD), DATED JUNE 4, 1965, NEGOTIATED BY THE GENERAL SERVICES ADMINISTRATION WITH JAMES M. HUNTER & ASSOCIATES, BOULDER, COLORADO, FOR THE DESIGN AND PLANNING OF THE NATIONAL BUREAU OF STANDARDS RADIO STANDARDS LABORATORY, BOULDER, COLORADO, BE REFORMED TO PERMIT PAYMENT OF AN ADDITIONAL FEE OF $31,801 FOR PROFESSIONAL SERVICES PERFORMED UNDER THE CONTRACT.

THE PLANNING AND DESIGN OF THE RADIO STANDARDS LABORATORY WAS ACCOMPLISHED UNDER TWO SEPARATE CONTRACTS, BOTH OF WHICH WERE AWARDED TO JAMES M. HUNTER & ASSOCIATES. THE PHASE I CONTRACT, NO. GS-00-B-160 (PCCD), DATED APRIL 16, 1963, REQUIRED THE CONTRACTOR TO PREPARE A SITE PLAN AND TO PERFORM A LONG-RANGE STUDY AND ANALYSIS OF THE ENTIRE BUREAU OF STANDARDS LABORATORIES SITE FOR A TOTAL FEE OF $85,000, INCLUDING AN AMOUNT OF $40,000 FOR THE PREPARATION OF DRAWINGS FOR THE BUILDING THROUGH THE "DIAGRAMMATIC SKETCHES" STAGE. IN ARTICLE II, PARAGRAPH 2 (B) OF THE PHASE I CONTRACT, IT WAS INDICATED THAT APPROXIMATELY $13,265,000 WOULD BE AVAILABLE FOR CONSTRUCTION OF A BUILDING OF APPROXIMATELY 475,000 SQUARE FEET. DURING NEGOTIATIONS OF THE PHASE II CONTRACT, NO. GS-00-B-480 (PCCD), IT WAS AGREED, IN EFFECT, THAT A TOTAL FEE ALLOWANCE OF $493,000 WOULD BE REASONABLE FOR THE THEN CONTEMPLATED PHASE II SERVICES AND FOR THE PREPARATION OF DRAWINGS THROUGH THE "DIAGRAMMATIC SKETCHES" STAGE, AS REQUIRED UNDER THE PHASE I CONTRACT. THE TOTAL FEE OF $493,000, PAYABLE UNDER THE TWO CONTRACTS WITHOUT REGARD TO $45,000 OF THE $85,000 FEE PAYABLE UNDER THE TERMS OF THE PHASE I CONTRACT, REPRESENTS APPROXIMATELY 4.17 PERCENT OF A CONSTRUCTION COST ESTIMATE (ECC) IN THE AMOUNT OF $11,822,000.

YOU STATED IN YOUR LETTER OF SEPTEMBER 19, 1969, THAT IT IS THE CONTRACTOR'S CONTENTION THAT, AT THE TIME OF NEGOTIATING THE PHASE II CONTRACT, THE PARTIES PROCEEDED ON THE BASIS OF "A MUTUALLY MISTAKEN ESTIMATE OF THE ESTIMATED CONSTRUCTION COST OF THE PROJECT," AND THAT THIS MUTUAL MISTAKE OF FACT, DISCOVERED SUBSEQUENT TO AWARD OF THE CONTRACT, ENTITLES THE CONTRACTOR TO A REFORMATION OF THE CONTRACT BY INCREASING THE CONTRACT PRICE TO THE CORRECTED AMOUNT. IN SUPPORT OF THOSE CONTENTIONS, YOU CITED B-165573, APRIL 17, 1969, 48 COMP. GEN. .

YOUR LETTER REFERRED TO THE ABOVE CONSTRUCTION COST BUDGET FIGURE OF $13,265,000 AND TO AN INDICATION AT THE OUTSET OF A NEGOTIATION MEETING HELD AT THE DENVER FEDERAL CENTER, DENVER, COLORADO, ON FEBRUARY 11, 1965, THAT A NEW CONSTRUCTION COST BUDGET FIGURE OF APPROXIMATELY $11,750,000 WOULD HAVE TO BE USED BECAUSE THE CONSTRUCTION PROJECT WOULD BE "CUT BACK" BY THE BUREAU OF STANDARDS. YOU STATED THAT, AS A PRELIMINARY TO NEGOTIATION DISCUSSIONS, THE CONTRACTOR PREPARED ITS NEGOTIATION POSITION ON THE BASIS OF AN ECC IN THE $13,800,000 RANGE, THAT THE ECC OF $11,822,000 DOES NOT INCLUDE A BUDGETED LANDSCAPE COST OF $93,284, AND THAT, AS OF APRIL 28, 1967, THE ECC WAS $13,883,289. YOU CONTENDED, IN EFFECT, THAT THE ECC USED IN THE NEGOTIATION OF FEES PAYABLE UNDER THE PHASE II CONTRACT, WITHOUT REGARD TO THE BUDGETED LANDSCAPE COST, SHOULD HAVE BEEN APPROXIMATELY $735,460 HIGHER THAN THE AMOUNT OF $11,822,000, AND THE COMPUTATION OF THE CLAIM OF $31,801, AS SET FORTH IN THE LETTER, MAY BE SUMMARIZED AS FOLLOWS:

ECC AT FINAL WORK DRAWING STAGE, AS ADJUSTED ON

ACCOUNT OF A CHANGE IN DESIGN $14,139,160

LESS: ECC OF $11,822,000, AS ESCALATED UNDER

AN ESTIMATE MADE IN JANUARY 1968 13,403,700

NET AMOUNT APPLICABLE AS FEE ADJUSTMENT BASIS $ 735,460

ADJUSTED FEE 4.17% OF $735,460 30,676

ADJUSTED FEE ($30,676), PLUS FEE ADJUSTMENT FOR

LANDSCAPING PLANS NOT CONSIDERED IN ECC OF

$11,822,000 ($93,284 4.17%, OR $3,890) $ 34,566

LESS: 8% POST CONSTRUCTION COST SERVICES 2,765

FINAL FEE ADJUSTMENT $ 31,801

WE RECEIVED A REPORT DATED OCTOBER 31, 1969, FROM THE GENERAL SERVICES ADMINISTRATION, AND ITS COMPLETE FILE IN THE MATTER WAS FURNISHED TO US ON A LOAN BASIS. THE REPORT STATES, IN PERTINENT PART, AS FOLLOWS:

"DECISIONS OF YOUR OFFICE HAVE HELD THAT WHERE BY REASON OF MUTUAL MISTAKE THE CONTRACT, AS REDUCED TO WRITING, DOES NOT REFLECT THE ACTUAL AGREEMENT OF THE PARTIES, SUCH MISTAKE IS GROUNDS FOR REFORMING THE WRITTEN INSTRUMENT IF IT CAN BE ESTABLISHED WHAT THE CONTRACT ACTUALLY WAS OR WOULD HAVE BEEN BUT FOR THE MISTAKE. 26 COMP. GEN. 899, AND CASES CITED THEREIN; 30 COMP. GEN. 220. SINCE IN THE PRESENT CASE THERE IS NO ALLEGATION OR EVIDENCE THAT THE CONTRACT DOES NOT CONFORM TO THE REAL INTENTION OF THE PARTIES AT THE TIME OF NEGOTIATIONS, WE DO NOT BELIEVE THERE EXISTS ANY LEGAL BASIS PERMITTING REFORMATION.

"* * * THE PLAN ACCEPTED BY THE GOVERNMENT UNDER THE PHASE I CONTRACT COVERED CONSTRUCTION OF ADMINISTRATIVE, CONFERENCE, LECTURE, AND FOUR LABORATORY AREAS, A POWER PLANT, AND SITE AND APPROACH WORK. THE ECC OF THIS WORK WAS DETERMINED TO BE $13,265,000. HOWEVER, PRIOR TO NEGOTIATIONS FOR THE PHASE II WORK COVERING TENTATIVES THROUGH FINAL WORKING DRAWINGS, THE BUREAU OF STANDARDS REDUCED THE LABORATORY BUILDING BY ONE WING WHICH, TOGETHER WITH OTHER PROGRAM CHANGES, REDUCED THE ECC TO $11,822,000. NEGOTIATIONS WERE CONDUCTED IN THE GENERAL SERVICES ADMINISTRATION'S DENVER, COLORADO, REGIONAL OFFICE FOR THE COMPLETION OF THE DESIGN ON THE BASIS OF THE REDUCED SCOPE OF WORK. DURING THE NEGOTIATIONS, HELD ON FEBRUARY 11, 1965, THE CONTRACTOR AFFIRMATIVELY STATED THAT THE PROJECT COULD BE CONSTRUCTED WITHIN THE REVISED ECC, PROVIDED CONSTRUCTION COSTS REMAINED STABLE. IT IS ALSO NOTED THAT DURING THE NEGOTIATION MEETING THE GOVERNMENT REPRESENTATIVE USED AN ECC OF $11,750,000, APPARENTLY INADVERTENTLY. HOWEVER, THE EXECUTED CONTRACT INCORPORATED BY REFERENCE A DOCUMENT WHICH STATED THE ECC TO BE $11,822,000, AND AS INDICATED IN THE LETTER FROM THE CONTRACTOR'S ATTORNEY, THERE WAS NO MISUNDERSTANDING WITH RESPECT THERETO. ALSO, IT IS POINTED OUT THAT THE ECC DID NOT INCLUDE AN ESTIMATE OF $93,284 FOR LANDSCAPING ALTHOUGH THIS WORK WAS INCLUDED IN THE CONTRACT.

"THE TENTATIVE DRAWINGS WERE SUBMITTED TO GSA ON DECEMBER 10, 1965, AND AS SUBSEQUENTLY REVISED AND APPROVED SHOWED AN ECC OF $12,903,000. THE FINAL WORKING DRAWINGS WERE ACCEPTED ON JANUARY 25, 1968, WITH AN ECC OF $14,590,000. THE COMPUTATIONS SET FORTH ON PAGES 2 AND 3 OF THE SEPTEMBER 19, 1969, LETTER WITH RESPECT THERETO ARE ACCURATE. THESE FIGURES INDICATE THAT AFTER DOWNWARD ADJUSTMENTS ARE MADE FOR INCREASED CONSTRUCTION COSTS DUE TO INFLATION AND AN AREA OVERRUN OF 6,196 SQUARE FEET * * * THE ECC AT THE TIME OF NEGOTIATIONS SHOULD HAVE BEEN $735,460 GREATER THAN THE AMOUNT USED, NAMELY, $11,822,000.

"IT IS NOT POSSIBLE TO DETERMINE FROM A COMPARISON OF THE ECC DEVELOPED AT THE TIME OF NEGOTIATIONS AND THE ECC PREPARED AT THE FINAL WORKING DRAWING STAGE WHERE THE COST DIFFERENCES OCCUR. THE ORIGINAL ECC WAS PREPARED GENERALLY ON THE BASIS OF APPLYING A COST PER SQUARE FOOT TO THE NUMBER OF SQUARE FEET TO BE CONSTRUCTED SINCE MATERIALS, SHAPE OF BUILDING, AND OTHER FACTORS NECESSARY FOR A MORE DETAILED ESTIMATE ARE NOT KNOWN UNTIL THE DESIGN IS DEVELOPED. AT THE FINAL WORKING DRAWING STAGE AND EARLIER STAGES, IT IS POSSIBLE TO DEVELOP A MORE DETAILED ESTIMATE, USING A DIFFERENT AND MORE ACCURATE METHOD OF ESTIMATING. IT IS THE OPINION OF GSA ESTIMATORS THAT THE ORIGINAL ECC DID NOT INCORPORATE THE DEGREE OF SOPHISTICATION AND COMPLEXITY REFLECTED IN THE FINAL WORKING DRAWING STAGE.

"WE BELIEVE THAT THE FOLLOWING OBSERVATIONS ARE RELEVANT TO YOUR CONSIDERATION OF THE CONTRACTOR'S REQUEST FOR REFORMATION. THE CONTRACTOR HAD PREPARED THE PRELIMINARY PLANS AND DIAGRAMATIC DRAWINGS UNDER THE PHASE I CONTRACT AND WAS, PRESUMABLY, THOROUGHLY FAMILIAR WITH THE SCOPE OF THE DESIGN WORK. THE REQUEST FOR REFORMATION IS NOT BASED UPON ANY CHANGES IN THE SCOPE OF WORK AND NO CLAIM IS MADE THAT THE WORK WAS NOT ADEQUATELY DESCRIBED. WHILE A MORE REALISTIC ECC WOULD UNDOUBTEDLY HAVE AFFECTED THE NEGOTIATION, IT CANNOT BE DETERMINED CONCLUSIVELY THE EXTENT THAT THE CONTRACTOR TOOK INTO CONSIDERATION COMPLEXITY AND OTHER FACTORS WHEN THE FEE BASED UPON 4.17% OF THE ECC WAS ACCEPTED. IT IS NOT POSSIBLE UNDER THE CIRCUMSTANCES TO DETERMINE THE PERCENTAGE OF ECC WHICH WOULD HAVE BEEN USED TO DETERMINE THE FIXED FEE IN THE EVENT A HIGHER ECC HAD BEEN USED DURING NEGOTIATIONS. FINALLY, ASSUMING THAT A HIGHER ECC SHOULD HAVE BEEN USED DURING NEGOTIATIONS, AN INCREASE OF $735,460 TO THE ECC USED, AMOUNTS TO AN INCREASE OF 6%. IN THE CIRCUMSTANCE, WE DO NOT BELIEVE THAT A 6% DIFFERENCE BETWEEN TWO ESTIMATES PREPARED AT DIFFERENT TIMES, USING DIFFERENT METHODS OF COMPUTATION, IS EXCESSIVE.

"BY LETTER DATED FEBRUARY 29, 1968, THE CONTRACTOR SUBMITTED TO THE CONTRACTING OFFICER A CLAIM FOR INCREASED FEE ON ACCOUNT OF THE INCREASED ECC. THERE WAS ALSO SUBMITTED A SEPARATE CLAIM FOR CHANGES IN THE SCOPE OF WORK WHICH HAS SINCE BEEN SUCCESSFULLY NEGOTIATED. * * *"

A COPY OF THE ADMINISTRATIVE REPORT WAS FURNISHED TO YOU IN ACCORDANCE WITH YOUR REQUEST. DURING A SUBSEQUENT CONFERENCE, COPIES OF LETTERS WHICH YOU RECEIVED FROM THE CONTRACTOR AND COPIES OF CERTAIN OF THE MATERIAL INCLUDED IN THE ADMINISTRATIVE FILE OF THE CASE WERE EXCHANGED. YOU WERE ALSO ADVISED AT A LATER DATE OF THE SUBSTANCE OF THE OFFICIAL RECORD CONCERNING THE FEBRUARY 11, 1965, CONTRACT NEGOTIATION MEETING. THE QUESTION WAS RAISED BY OUR REPRESENTATIVES AS TO WHETHER THERE WOULD BE ANY BASIS FOR REFORMATION OF THE PHASE II CONTRACT IF THERE HAD BEEN, IN FACT, A "CUT BACK" IN THE ORIGINAL CONSTRUCTION PROJECT AND THE SCOPE OF THE PROJECT AS CONSIDERED DURING THE PHASE II CONTRACT NEGOTIATIONS HAD NOT BEEN CHANGED SUBSTANTIALLY EXCEPT WITH RESPECT TO THE CHANGES INVOLVED IN THE CONTRACTOR'S SEPARATE CLAIM AS TO WHICH IT HAD BEEN REPORTED, IN EFFECT, THAT A SETTLEMENT WOULD BE ACCOMPLISHED IN ACCORDANCE WITH THE "REVISIONS" ARTICLE (ARTICLE IX), OF THE PHASE II CONTRACT.

IT WAS IMPOSSIBLE, BY REFERENCE TO THE OFFICIAL RECORD CONCERNING THE FEBRUARY 11, 1965, CONTRACT NEGOTIATION MEETING, AND TO THE CONTRACT DOCUMENT IN WHICH AN ECC OF $11,822,000 WAS ESTABLISHED, TO VERIFY THE REPORTED "CUT BACK" OF THE CONSTRUCTION PROJECT PRIOR TO THE NEGOTIATION MEETING. IT WAS THEREFORE SUGGESTED THAT WE BE FURNISHED SPECIFIC INFORMATION REGARDING THE "CUT BACK" SINCE IT APPEARED TO BE CONTENDED THAT THE CONSTRUCTION WORK ACTUALLY ACCOMPLISHED WAS EQUIVALENT TO THE AMOUNT OF THE WORK INCLUDED IN THE ORIGINAL ECC OF $13,265,000, WITHOUT CONSIDERATION OF THE CHANGES INVOLVED IN THE CONTRACTOR'S SEPARATE CLAIM.

YOUR ATTENTION WAS INVITED TO THE FACT THAT THE OFFICIAL RECORD OF THE FEBRUARY 11, 1965, CONTRACT NEGOTIATION MEETING INDICATED THAT THE PARTIES HAD CONSIDERED COST ESTIMATES AGGREGATING THE AMOUNT OF $13,266,000 ON FIVE ITEMS OF CONSTRUCTION, CONSISTING OF AN ADMINISTRATIVE WING, A CONFERENCE CENTER, A POWER PLANT, FOUR LABORATORIES AND A LECTURE ROOM. THE ECC OF $11,822,000 WAS THE AGGREGATE OF SIX ITEM ESTIMATES NOT INCLUDING A LECTURE ROOM BUT INCLUDING "MISCELLANEOUS" CONSTRUCTION AND "SITE AND APPROACH WORK." ADVICE WAS REQUESTED PARTICULARLY IN REGARD TO THE APPARENT OMISSION OF A LECTURE ROOM AREA FROM THE PROPOSED CONSTRUCTION PROJECT.

BY LETTER DATED MARCH 2, 1970, YOU ADVISED THAT YOU HAD BEEN INFORMED BY THE CONTRACTOR THAT NO LECTURE ROOM WAS OMITTED BUT WHAT WAS FINALLY OMITTED WAS ONE OF FIVE LABORATORY WINGS THE ESTIMATE FOR WHICH WOULD BE ONE-FIFTH OF $8,872,655 OR $1,774,531, BASED UPON A COST ESTIMATE WHICH HAD BEEN PREPARED UNDER THE PHASE I CONTRACT, COPY OF WHICH WAS ENCLOSED WITH YOUR LETTER. THE TOTAL COST ESTIMATE PREPARED UNDER THE PHASE I CONTRACT WAS $13,257,831. IT COVERED SIX CATEGORIES SIMILAR TO THOSE LISTED IN THE ECC OF $11,822,000, AND THE ESTIMATES FOR EACH CATEGORY CORRESPOND SUBSTANTIALLY WITH THE ESTIMATES INCLUDED IN THE ECC OF $11,822,000, EXCEPT WITH RESPECT TO THE OMISSION OF ONE OF THE FIVE ORIGINAL CONTEMPLATED LABORATORY WINGS OF THE CONSTRUCTION PROJECT.

THERE REMAINS SOME DOUBT REGARDING THE CORRECTION OF THE IMPLICATION IN THE REPORT OF THE GENERAL SERVICES ADMINISTRATION THAT THE ECC OF $11,822,000 DOES NOT INCLUDE AN ESTIMATED AMOUNT FOR LANDSCAPING. THE ECC INCLUDES $950,000 FOR SITE AND APPROACH WORK AND IT WOULD APPEAR THAT THIS WAS A PROJECTION OF THE ESTIMATE OF $941,400 FOR SITE DEVELOPMENT COST WHICH WAS INCLUDED IN THE TOTAL CONSTRUCTION COST ESTIMATE OF $13,257,831 PREPARED IN CONNECTION WITH THE PERFORMANCE OF THE PHASE I CONTRACT. NOTE THAT THE $941,400 ESTIMATE INCLUDES $88,200 FOR GRASSING AND FINE GRADING AND $75,000 FOR TREES AND SHRUBS. YOU CONTENDED IN YOUR LETTER OF MARCH 2, 1970, THAT THE GENERAL SERVICES ADMINISTRATION'S ADMISSION OF ERROR BY STATING THAT THE ECC SHOULD HAVE BEEN $735,460 GREATER THAN THE AMOUNT USED, NAMELY, $11,822,000, CONSTITUTES A BASIS FOR REFORMING THE CONTRACT BECAUSE BOTH PARTIES PROCEEDED ON THE "MISTAKEN ASSUMPTION THAT THERE WOULD BE CUT-BACKS IN THE PROJECT DOWN TO THE $11,822,000 FIGURE." YOU STATED THAT "THIS MUTUAL MISTAKE CONSTITUTES A LEGAL BASIS FOR REFORMATION OF THE CONTRACT," AND THAT YOU "DO NOT READ THE GSA LETTER AS NEGATING THIS BASIC CONTROLLING FACT."

IN A LETTER TO YOU OF NOVEMBER 18, 1969, MR. JAMES M. HUNTER DENIED THE STATEMENT ATTRIBUTED TO HIM IN THE REPORT OF THE GENERAL SERVICES ADMINISTRATION. HOWEVER, THE OFFICIAL RECORD CONCERNING THE FEBRUARY 11, 1965, CONTRACT NEGOTIATION MEETING SHOWS THAT, IN ANSWER TO THE QUESTION WHETHER HIS FIRM COULD DESIGN WITHIN $11,750,000 (ONLY $72,000 LESS THAN THE REVISED ECC OF $11,822,000), HE STATED: "IF IT IS IN '66." IT WOULD THEREFORE APPEAR THAT THE STATEMENT IN THE ADMINISTRATIVE REPORT, INDICATING THAT MR. HUNTER ADVISED THAT THE PROJECT COULD BE CONSTRUCTED WITHIN THE REVISED ECC, PROVIDED CONSTRUCTION COSTS REMAINED STABLE, IS SUBSTANTIALLY CORRECT.

MR. HUNTER STATED IN HIS LETTER OF NOVEMBER 18, 1969, THAT THE CONSTRUCTION INVOLVED A SCIENTIFIC LABORATORY COMPLEX, NOT AN OFFICE BUILDING, AND THAT "SQUARE FOOT COST COMPARISONS ARE RIDICULOUS." MR. HUNTER ALSO TOOK EXCEPTION TO THE STATED BELIEF IN THE REPORT OF THE GENERAL SERVICES ADMINISTRATION THAT A SIX PERCENT DIFFERENCE BETWEEN TWO ESTIMATES PREPARED AT DIFFERENT TIMES, USING DIFFERENT METHODS OF COMPUTATION, IS NOT EXCESSIVE.

THE OFFICIAL RECORD OF THE FEBRUARY 11, 1965, CONTRACT NEGOTIATION MEETING SHOWS THAT THE PARTIES TO THE PHASE II CONTRACT WERE AWARE OF THE FACT THAT THE PROPOSED BUILDING WOULD NOT BE "A NORMAL OFFICE BUILDING," AND THAT A DETAILED COST ESTIMATE, QUANTITY TAKEOFF BY TRADES, WOULD BE REQUIRED AT THE FINAL WORK DRAWING STAGE, WHEREAS THE PARTIES HAD USED A PARAMETER METHOD, UNDER WHICH SQUARE FOOT COST CALCULATIONS WERE MADE, IN ARRIVING AT AN ECC FOR THE PURPOSE OF NEGOTIATING FEES PAYABLE FOR THE PERFORMANCE OF THE PHASE II CONTRACT SERVICES. WE NOTE, IN THE LATTER CONNECTION, THAT THERE IS A RELATIVELY CLOSE RELATIONSHIP BETWEEN THE ECC OF $11,822,000 AND THE COST ESTIMATE OF $13,257,831 PREPARED BY THE CONTRACTOR, AS ADJUSTED TO COMPENSATE FOR THE ELIMINATION OF ONE OF THE FIVE ORIGINALLY CONTEMPLATED LABORATORY WINGS. ALSO, THE CONTRACTOR'S BUILDING COST ESTIMATES AGGREGATING THE AMOUNT OF $10,934,045 WERE ALL COMPUTED BY USING SQUARE FOOTAGE COST RATES. THE APPLIED RATES RANGED FROM $15 TO $50 PER SQUARE FOOT, WITH THE HIGHER RATES HAVING BEEN APPLIED TO THE MORE COMPLICATED TYPES OF CONSTRUCTION, SUCH AS THE CONSTRUCTION OF A POWER PLANT AND GENERAL PURPOSE LABORATORIES. THE OFFICIAL RECORD OF THE FEBRUARY 11, 1965, MEETING ALSO SHOWS THAT, WHEREAS VARIOUS PERCENTAGE RATES WERE DISCUSSED, INCLUDING 5 1/2 PERCENT, 5 1/4 PERCENT AND 3.77 PERCENT, WHAT WAS AGREED UPON AS THE TOTAL FEE PAYABLE FOR THE THEN CONTEMPLATED PHASE II CONTRACT WORK, PLUS THE PREPARATION OF DRAWINGS THROUGH THE DIAGRAMMATIC SKETCHES STAGE UNDER THE PHASE I CONTRACT, WAS THE LUMP SUM AMOUNT OF $493,000, NOT ANY SPECIFIC PERCENTAGE OF THE ESTIMATED CONSTRUCTION COST. MR. HUNTER SUGGESTED A LUMP SUM AMOUNT OF $610,000. ONE OF THE GOVERNMENT'S REPRESENTATIVES INDICATED THAT ABOUT $440,000 WOULD BE REASONABLE AND THE SUM OF $493,000 REPRESENTS A COMPROMISE BETWEEN THE SUMS OF $610,000 AND $440,000.

IT IS APPARENT FROM THE FOREGOING THAT THE PARTIES HAD TAKEN INTO ACCOUNT THE DIFFERENCE BETWEEN THE CONSTRUCTION OF A BUILDING FOR SCIENTIFIC PURPOSES AND THE CONSTRUCTION OF "A NORMAL OFFICE BUILDING." IT IS ALSO APPARENT THAT THE PARTIES REALIZED THAT IT WOULD HAVE BEEN IMPRACTICABLE TO PREPARE A DETAILED COST ESTIMATE, QUANTITY TAKEOFF BY TRADES, BEFORE THE FINAL WORKING DRAWING STAGE, AND THAT THEY CONSCIOUSLY ACCEPTED THE ESTIMATES DERIVED FROM THE USE OF A PARAMETER METHOD OF ESTIMATING CONSTRUCTION COSTS AS THE BASIS FOR ARRIVING AT A FAIR AND REASONABLE COMPENSATION TO BE PAID TO THE CONTRACTOR FOR THE PERFORMANCE OF THE CONTEMPLATED PHASE II CONTRACT SERVICES AND THE PREPARATION OF DRAWINGS THROUGH THE DIAGRAMMATIC SKETCHES STAGE, WHICH HAD BEEN DONE AS A PART OF THE PHASE I CONTRACT PERFORMANCE. IN SUCH CIRCUMSTANCES, THERE WOULD APPEAR TO BE NO VALID BASIS FOR CONSIDERING THAT THE PARTICULAR METHOD OF ESTIMATING CONSTRUCTION COSTS, ADOPTED BY THE PARTIES, WAS RIDICULOUS OR THAT EITHER PARTY WOULD HAVE BEEN IN A POSITION TO MAINTAIN THAT A DIFFERENCE BETWEEN THE ECC AT THE TIME OF THE NEGOTIATION OF THE PHASE II CONTRACT AND THE ECC AT THE FINAL WORK DRAWING STAGE, COMPUTED ON THE BASIS OF QUANTITY TAKEOFF BY TRADES, WOULD AFFECT THE VALIDITY OF THE AGREEMENT MADE IN THE MATTER.

ALTHOUGH THE REPORT OF THE GENERAL SERVICES ADMINISTRATION ADMITS THAT, ON THE BASIS OF COMPUTATIONS MADE DURING THE FINAL WORKING DRAWING STAGE, THE ECC AT THE TIME OF NEGOTIATION SHOULD HAVE BEEN $735,460 GREATER THAN THE AMOUNT USED, NAMELY, $11,822,000, THE REPORT CLEARLY SUGGESTS, AND WE AGREE, THAT THIS IS NOT A RECOGNIZABLE MUTUAL MISTAKE SO FAR AS CONCERNS THE QUESTION WHETHER THERE EXISTS ANY BASIS FOR CONTRACT REFORMATION.

IT WOULD APPEAR THAT THE PARTIES TO THE PHASE II CONTRACT WERE WELL AWARE OF THE POSSIBILITY, IF NOT THE PROBABILITY, THAT AN ECC DEVELOPED WITH THE USE OF A PARAMETER METHOD OF ESTIMATING WOULD NOT BE AS ACCURATE AS AN ECC DEVELOPED AT THE FINAL WORKING DRAWING STAGE WHEN A DETAILED COST ESTIMATE, QUANTITY TAKEOFF BY TRADES, COULD BE PREPARED. IN ANY EVENT, IF THEY BELIEVED THAT THE ECC OF $11,822,000 WAS ACCURATE, SUCH A MUTUAL MISTAKE IN OPINION OR BELIEF, EXCEPT IN REGARD TO OMITTED ITEMS OF CONSTRUCTION, WOULD NOT CONSTITUTE A MUTUAL MISTAKE RECOGNIZABLE AS A BASIS FOR REFORMING THE CONTRACT TO PERMIT PAYMENT OF AN ADDITIONAL FEE TO THE CONTRACTOR. IN THAT CONNECTION, IT HAS BEEN HELD THAT EVERYONE WHO CONTRACTS IN RELIANCE UPON OPINIONS OR BELIEFS CONCERNING THEM KNOWS THAT THESE OPINIONS AND BELIEFS ARE CONJECTURAL, AND MAKES HIS AGREEMENT IN VIEW OF THE WELL-KNOWN FACT THAT THEY MAY TURN OUT TO BE MISTAKEN, AND ASSUMES THE CHANCES THAT THEY WILL DO SO. SEE CHICAGO & N.W. RY. CO. V. WILCOX, 116 F. 913 (1902); UNITED STATES V. GARLAND, 122 F. 2D 118 (1941).

THE FACTS OF B-165573, APRIL 17, 1969, 48 COMP. GEN. , CITED IN YOUR LETTER OF SEPTEMBER 19, 1969, ARE NOT COMPARABLE WITH THE FACTS INVOLVED IN CONNECTION WITH THE NEGOTIATION OF THE PHASE II CONTRACT WITH JAMES M. HUNTER & ASSOCIATES. THE DECISION OF APRIL 17, 1969, CONCERNED AN ERROR IN BID CLAIM AND THERE WAS APPLIED THE WELL ESTABLISHED RULE THAT, IF A MISTAKE IS MADE BY ONE PARTY TO A CONTRACT AND THE MISTAKE IS KNOWN BY THE OTHER PARTY, OR BECAUSE OF ACCOMPANYING CIRCUMSTANCES THE OTHER PARTY HAD REASON TO KNOW OF THE MISTAKE, THE LATTER PARTY HAS NO RIGHT TO TAKE ADVANTAGE OF THE MISTAKE AND THE PARTY MAKING THE MISTAKE HAS THE RIGHT TO RESCISSION AND RESTITUTION. HERE, THE PARTIES CONTRACTED ON THE BASIS OF CONSTRUCTION COST ESTIMATES AS TO WHICH, EXCEPT POSSIBLY FOR THE OMISSION OF ITEMS OR OBVIOUS MATHEMATICAL ERRORS, IT WOULD APPEAR THAT THEY CONSCIOUSLY TOOK THE CHANCE THAT THE ESTIMATES WOULD APPROXIMATE THE ECC AT THE FINAL WORKING DRAWING STAGE WHEN A MORE ACCURATE METHOD OF ESTIMATING COSTS FOR THE CONSTRUCTION PROJECT WAS TO BE USED. FOR THE REASONS ABOVE INDICATED, THE UNDERESTIMATE OF COST AT THE TIME OF NEGOTIATING THE PHASE II CONTRACT WOULD NOT CONSTITUTE GENERALLY A PROPER BASIS FOR REFORMATION OF THE CONTRACT IN ORDER TO PERMIT PAYMENT OF AN ADDITIONAL FEE TO THE CONTRACTOR.

ACCORDINGLY, ON THE PRESENT RECORD, THE CONTRACTOR'S CLAIM IN THE MATTER MUST BE DENIED. HOWEVER, CONSIDERATION WILL BE GIVEN TO ANY ADDITIONAL EVIDENCE WHICH YOU MAY WISH TO SUBMIT IN SUPPORT OF THE CONTENTION THAT, AS THE RESULT OF A MUTUAL MISTAKE, LANDSCAPING COSTS IN THE AMOUNT OF $93,284 WERE NOT INCLUDED IN THE ECC OF $11,822,000.