B-168828, MARCH 2, 1970, 49 COMP. GEN. 530

B-168828: Mar 2, 1970

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NOR IS THE RETROACTIVE MODIFICATION OF THE CONTRACT SUBJECT TO THE REGULATION THAT TIMBER SALE CONTRACTS MAY BE MODIFIED ONLY WHEN THE MODIFICATION APPLIES TO THE UNEXECUTED PORTIONS OF A CONTRACT AND WILL NOT BE INJURIOUS TO THE UNITED STATES. 1970: REFERENCE IS MADE TO A LETTER (2430) DATED JANUARY 15. THE RIO BEAVER TIMBER SALE WAS AWARDED TO THE KETCHIKAN PULP COMPANY (KETCHIKAN). THE FOREST SERVICE APPRAISED THE TERRAIN ON WHICH THE TIMBER SALE WAS LOCATED AND DETERMINED THE SLOPE OF THE AREA TO BE 42 PERCENT. IN COMPUTING THE NEW RATES A 30-PERCENT SLOPE FACTOR WAS ERRONEOUSLY USED. THE REDETERMINED STUMPAGE RATES ARE GREATER THAN THEY SHOULD BE AND KETCHIKAN IS PAYING MORE FOR THE TIMBER THAN WAS CONTEMPLATED.

B-168828, MARCH 2, 1970, 49 COMP. GEN. 530

CONTRACTS -- MISTAKES -- GOVERNMENT'S FAULT -- CORRECTION AN ERROR MADE IN THE SLOPE PERCENTAGE FACTOR USED IN COMPUTING REDETERMINED STUMPAGE RATES UNDER A TIMBER SALE CONTRACT MAY BE CORRECTED RETROACTIVELY AND THE CONTRACTOR CREDITED WITH THE OVERPAYMENT THAT RESULTED FROM THE GOVERNMENT'S UNILATERAL ERROR, AS NO DISAGREEMENT EXISTS CONCERNING THE CORRECT SLOPE PERCENTAGE TO SUBJECT THE CORRECTION TO THE LIMITATIONS OF THE DISPUTES CLAUSE OF THE CONTRACT, NOR IS THE RETROACTIVE MODIFICATION OF THE CONTRACT SUBJECT TO THE REGULATION THAT TIMBER SALE CONTRACTS MAY BE MODIFIED ONLY WHEN THE MODIFICATION APPLIES TO THE UNEXECUTED PORTIONS OF A CONTRACT AND WILL NOT BE INJURIOUS TO THE UNITED STATES, AS AN EXCEPTION TO THE RULE THAT A CONTRACT MAY NOT BE MODIFIED EXCEPT IN THE GOVERNMENT'S INTEREST MAY BE MADE TO CORRECT A UNILATERAL ERROR BY THE GOVERNMENT.

TO THE SECRETARY OF AGRICULTURE, MARCH 2, 1970:

REFERENCE IS MADE TO A LETTER (2430) DATED JANUARY 15, 1970, WITH ENCLOSURE, FROM THE DEPUTY CHIEF OF THE FOREST SERVICE REQUESTING OUR OPINION ON A PROPOSED AMENDMENT TO A TIMBER SALE CONTRACT WHICH WOULD EFFECT A DOWNWARD ADJUSTMENT OF STUMPAGE RATES RETROACTIVE TO APRIL 1, 1969.

ON MAY 10, 1966, THE RIO BEAVER TIMBER SALE WAS AWARDED TO THE KETCHIKAN PULP COMPANY (KETCHIKAN). THE CONTRACT, AS AMENDED, REQUIRED THAT STUMPAGE RATES BE REDETERMINED AS OF APRIL 1, 1969. PREPARATORY TO REDETERMINING THE RATES, THE FOREST SERVICE APPRAISED THE TERRAIN ON WHICH THE TIMBER SALE WAS LOCATED AND DETERMINED THE SLOPE OF THE AREA TO BE 42 PERCENT. HOWEVER, IN COMPUTING THE NEW RATES A 30-PERCENT SLOPE FACTOR WAS ERRONEOUSLY USED. AS A RESULT OF THIS ERROR, THE REDETERMINED STUMPAGE RATES ARE GREATER THAN THEY SHOULD BE AND KETCHIKAN IS PAYING MORE FOR THE TIMBER THAN WAS CONTEMPLATED.

TO RECTIFY THIS ERROR, WHICH IT ADMITS WAS ITS FAULT, THE FOREST SERVICE PLANS TO AMEND THE CONTRACT IN THE MANNER ABOVE INDICATED AND TO GIVE KETCHIKAN CREDIT FOR THE AMOUNTS ALREADY OVERPAID. THE DELAY IN AMENDING THE CONTRACT PRIOR TO THIS TIME IS APPARENTLY ATTRIBUTABLE TO THE BELIEF HELD BY THE FOREST SERVICE THAT, SINCE THE ERROR WAS NOT DISCOVERED BY KETCHIKAN UNTIL AFTER THE TIME FOR APPEAL PRESCRIBED BY REGULATION (36 CFR 211.30) HAD EXPIRED, IT WAS PRECLUDED FROM TAKING REMEDIAL ACTION.

IN THIS CONNECTION, SUBSECTION B8.5 OF THE TIMBER SALE CONTRACT ENTITLED "DISPUTES" PROVIDES IN PERTINENT PART:

EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED, IT IS THE INTENT OF THIS CONTRACT THAT PURCHASER AND FOREST SERVICE SHALL AGREE UPON THE INTERPRETATION AND PERFORMANCE OF THIS CONTRACT. UPON FAILURE TO REACH AN AGREEMENT ON A QUESTION OF FACT, THE DECISION OF THE FOREST SERVICE SHALL PREVAIL WITHIN THE LIMITATIONS OF LAW (41 U.S.C. 321, 322) AND SUBJECT TO APPEAL UNDER THE REGULATIONS OF THE SECRETARY OF AGRICULTURAL (36 C.F.R. 211.20 ET SEQ.).

THE DISPUTES CLAUSE OBVIOUSLY CONTEMPLATED APPEALS IF, AND ONLY IF, THE PARTIES FAILED TO AGREE ON QUESTIONS OF FACT. HOWEVER, WE PERCEIVE NO DISAGREEMENT IN THIS CASE SINCE BOTH THE GOVERNMENT AND THE CONTRACTOR ACCURATELY ASCERTAINED THE PERCENTAGE OF SLOPE AND HAVE NEVER DISAGREED IN THE MATTER. SINCE THE ERRONEOUS STUMPAGE RATES RESULTED SOLELY FROM THE GOVERNMENT'S NEGLIGENT USE OF AN ERRONEOUS SLOPE PERCENTAGE IN ITS COMPUTATION OF REDETERMINED RATES, WE BELIEVE THAT RECTIFICATION OF THE ERROR IS NOT SUBJECT TO THE LIMITATIONS OF THE DISPUTES CLAUSE OF THE CONTRACT.

IN VIEW OF 36 CFR 221.16, A RETROACTIVE MODIFICATION OF THE CONTRACT WOULD APPEAR TO BE OBJECTIONABLE. THAT REGULATION PROVIDES:

(A) TIMBER SALE CONTRACTS MAY BE MODIFIED ONLY WHEN THE MODIFICATION WILL APPLY TO UNEXECUTED PORTIONS OF THE CONTRACT AND WILL NOT BE INJURIOUS TO THE UNITED STATES. MODIFICATIONS PERMITTED BY THIS SECTION MAY BE MADE BY THE OFFICER APPROVING THE SALE, BY HIS SUCCESSOR, OR BY HIS SUPERIOR.

HOWEVER, WE DO NOT BELIEVE THAT THE CORRECTIVE ACTION PROPOSED FALLS SQUARELY WITHIN THE PURVIEW OF THIS PROVISION. WHAT IS INVOLVED HERE IS A CORRECTION OF A UNILATERAL ERROR MADE BY THE FOREST SERVICE IN AN INTERNAL COMPUTATION OF TIMBER RATES WHICH WAS NOT CONTRIBUTED TO OR CAUSED BY ANY ACT OF THE CONTRACTOR. WHILE, AS A GENERAL RULE, A CONTRACT MAY NOT BE MODIFIED EXCEPT IN THE GOVERNMENT'S INTERESTS, WE BELIEVE AN EXCEPTION TO THE RULE PROPERLY MAY BE MADE TO CORRECT A UNILATERAL ERROR OF THE GOVERNMENT TO PROVIDE FOR THE PAYMENT OF PROPER REDETERMINED RATES IN ACCORDANCE WITH THE STANDARD METHODS OF THE FOREST SERVICE AS CONTEMPLATED BY SECTION B3.31 OF THE CONTRACT. A CONTRACTOR WHO IS CONTRACTUALLY BOUND TO A RATE DETERMINATION IS ENTITLED TO HAVE SUCH DETERMINATION MADE UPON A CORRECT FACTUAL BASIS AND, IF SUCH DETERMINATION IS ARRIVED AT BY APPLICATION OF DATA WHICH IS NOT FACTUALLY ACCURATE, THE RATE DETERMINATING AGENCY SHOULD MAKE SUCH ADJUSTMENTS AS MAY BE NECESSARY TO REFLECT THE PROPER APPLICATION OF CORRECT DATA BASED ON ITS STANDARD RATE METHODS.

ACCORDINGLY, THE SCHEDULED RATE DETERMINATION OF MAY 6, 1969, EFFECTIVE APRIL 1, 1969, SHOULD BE ADJUSTED TO REFLECT THE CORRECT SLOPE PERCENTAGE FIGURE AND SUCH CORRECTED STUMPAGE RATE SHOULD BE REGARDED AS EFFECTIVE ON AND AFTER APRIL 1, 1969, IN THE ADMINISTRATION OF THE CONTRACTOR'S TIMBER SALES ACCOUNT.