B-179585, MAR 27, 1974

B-179585: Mar 27, 1974

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CONTRACT PRICE MAY BE REFORMED ON BASIS OF MUTUAL MISTAKE TO REFLECT SYSTEM PRICE OMITTED FROM TOTAL CONTRACT PRICE BECAUSE OF MATHEMATICAL ERROR SINCE IT IS CLEAR FROM RECORD THAT BOTH GOVERNMENT AND CONTRACTOR INTENDED TO INCLUDE OMITTED AMOUNT IN TOTAL CONTRACT PRICE. WAS FOR A PROPOSAL. WAS SUBMITTED TO THE DEFENSE CONTRACT ADMINISTRATION SERVICE REGION. THE REPORT NOTED THAT ALTHOUGH FOXBORO CLAIMED THAT MOST OF THE ITEMS INVOLVED WERE CATALOGUE ITEMS AND THEREFORE EXEMPTED UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-807.1(B)(2). THE PROPOSAL WAS THEN MODIFIED TO CONFORM WITH THESE REQUIREMENTS AND IT WAS DETERMINED THAT FOXBORO'S PRICING DATA WAS ACCEPTABLE AS A BASIS FOR NEGOTIATION.

B-179585, MAR 27, 1974

CONTRACT PRICE MAY BE REFORMED ON BASIS OF MUTUAL MISTAKE TO REFLECT SYSTEM PRICE OMITTED FROM TOTAL CONTRACT PRICE BECAUSE OF MATHEMATICAL ERROR SINCE IT IS CLEAR FROM RECORD THAT BOTH GOVERNMENT AND CONTRACTOR INTENDED TO INCLUDE OMITTED AMOUNT IN TOTAL CONTRACT PRICE.

TO THE FOXBORO COMPANY:

THE FOXBORO COMPANY (FOXBORO) CLAIMS THAT IT MADE A MISTAKE IN ITS "BID" WHICH LED TO CONTRACT NO. DACA45-73-C-0192, ON MARCH 12, 1973 WITH THE DISTRICT ENGINEER, CORPS OF ENGINEERS, UNITED STATES ARMY ENGINEER DISTRICT, OMAHA.

THE SOLICITATION, A SOLE SOURCE PROCUREMENT, WAS FOR A PROPOSAL, ON A FIRM FIXED PRICE BASIS, FOR FURNISHING ITEMS AND SERVICES FOR A REMOTE DIGITAL CONTROL SYSTEM FOR THE THREE TNT LINES, JOLIET AAP. FOXBORO'S PROPOSAL, IN THE AMOUNT OF $1,392,023, WITH BACK-UP MATERIAL, WAS SUBMITTED TO THE DEFENSE CONTRACT ADMINISTRATION SERVICE REGION, BOSTON, FOR REVIEW AND AUDIT. THE AUDIT REPORT RECOMMENDED SOME DELETIONS FROM THE PROPOSED PRICE. IN ADDITION, THE REPORT NOTED THAT ALTHOUGH FOXBORO CLAIMED THAT MOST OF THE ITEMS INVOLVED WERE CATALOGUE ITEMS AND THEREFORE EXEMPTED UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-807.1(B)(2), FROM THE REQUIREMENT FOR THE SUBMISSION OF CERTIFIED COST OR PRICING DATA, THAT THE FIRM HAD NOT COMPLIED WITH THE REQUIREMENTS OF ASPR 3-807.3(J) REGARDING THE USE OF DD FORM 533-7 "CLAIMS FOR EXEMPTION FROM SUBMISSION OF CERTIFIED COST OR PRICING DATA" FOR THE APPLICABLE PORTIONS OF THE PROPOSAL. THE PROPOSAL WAS THEN MODIFIED TO CONFORM WITH THESE REQUIREMENTS AND IT WAS DETERMINED THAT FOXBORO'S PRICING DATA WAS ACCEPTABLE AS A BASIS FOR NEGOTIATION, WHICH RESULTED IN THE MARCH 12 AWARD.

SUBSEQUENTLY, ON MAY 1, 1973, FOXBORO ALLEGED THAT IT MADE A MISTAKE IN BID BY INADVERTENTLY OMITTING $47,715 FOR THE DIGITAL OUTPUT SYSTEM FROM ITS TOTAL CONTRACT PRICE. THE MISTAKE OCCURRED ON FOXBORO'S WORKSHEET NO. 400.0A. THIS WORKSHEET AND WORKSHEET NO. 400.0B SUMMARIZE THE COST OF THE VARIOUS SUBSYSTEMS WHICH COMPRISE ITEM 0001 OF THE SOLICITATION "DIGITAL EQUIPMENT AND INSTALLATION." EACH OF THE SUBSYSTEMS IS PRICED BY COMPONENT AND THE TOTAL COST OF EACH SUBSYSTEM IS EXTENDED TO A SEPARATE COLUMN AND TOTALED ON THE BOTTOM OF THE WORKSHEET. IN ARRIVING AT A SUBTOTAL FOR THE 6 SUBSYSTEMS ON WORKSHEET NO. 400.0A THE $47,715 FOR DIGITAL OUTPUT SUBSYSTEM WAS OMITTED FROM THE SUBTOTAL PRICE ON THE BOTTOM OF THE PAGE. THIS ERROR WAS CARRIED OVER TO THE NEXT PAGE ON WORKSHEET NO. 400.0B.

THE DISTRICT ENGINEER CONCLUDES THAT THIS IS A SIMPLE CASE OF MUTUAL MISTAKE ON THE PART OF BOTH PARTIES. HE FEELS THAT FOXBORO INTENDED TO INCLUDE THE AMOUNT OF $47,715 FOR THE DIGITAL OUTPUT SYSTEM IN ITS PROPOSAL; THAT THE GOVERNMENT INTENDED TO PAY FOXBORO THIS AMOUNT (LESS 4 PERCENT DISCOUNT) FOR THE SYSTEM; AND THAT A MISTAKE BOTH BY FOXBORO AND THE GOVERNMENT CAUSED OMISSION OF SUCH AMOUNT FROM THE PRICE. RECOMMENDS THAT THE CONTRACT BE REFORMED TO REFLECT "THE INTENT OF BOTH PARTIES *** THAT THE DIGITAL OUTPUT MODULES BE INCLUDED IN THE CONTRACT AND BE PAID FOR."

ON THE OTHER HAND, CORPS COUNSEL BELIEVES THAT THE ALLEGED MISTAKE WAS UNILATERAL ON THE PART OF THE CONTRACTOR AND THAT THE CONTRACTOR'S REQUEST FOR CORRECTION BE DENIED. IN THIS REGARD, HE STATES THAT THE GOVERNMENT WAS NOT AND SHOULD NOT BE CHARGED WITH NOTICE OF THE ERROR SINCE THE DIFFERENCE IN THE FINAL NEGOTIATED TOTAL PRICE OF ONLY ABOUT 13 PERCENT AS COMPARED TO THE GOVERNMENT ESTIMATE IS NOT SO GREAT AS TO BE CONSTRUED AS CONSTRUCTIVE NOTICE TO THE GOVERNMENT. IN ADDITION, HE ASSERTS THAT A DECISION TO CORRECT WOULD PLACE AN IMPOSSIBLE BURDEN ON THE DCAA TO NOT ONLY PERFORM AN AUDIT TO DETERMINE ACCEPTABLE COSTS BUT ALSO TO DISCOVER ALL MISTAKES ARISING IN THE PREPARATION OF PROPOSALS FOR NEGOTIATED PROCUREMENTS.

WE DO NOT DISAGREE WITH COUNSEL'S POSITION CONCERNING THE 13 PERCENT DIFFERENCE BETWEEN THE GOVERNMENT'S ESTIMATE AND THE TOTAL PRICE. FURTHERMORE, IT HAS BEEN OUR POSITION THAT GOVERNMENT AUDITORS PERFORMING A PRICE ANALYSIS OF AN OFFEROR'S COST PROPOSAL GENERALLY SHOULD BE UNDER NO DUTY TO DISCOVER ALL MISTAKES ARISING IN THE PREPARATION OF THE PROPOSAL. B-176772, MAY 23, 1973. HOWEVER, WE AGREE WITH THE DISTRICT ENGINEER THAT RELIEF SHOULD BE GRANTED IN THIS CASE ON THE THEORY OF MUTUAL MISTAKE.

IT IS WELL ESTABLISHED THAT WHERE BY REASON OF MUTUAL MISTAKE A 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. HERE THE RECORD INDICATES THAT THE PARTIES INTENDED TO INCLUDE THE AMOUNT OF $47,715 (LESS 4 PERCENT DISCOUNT) FOR THE DIGITAL OUTPUT SYSTEM IN THE TOTAL CONTRACT PRICE AND BELIEVED THAT THE CONTRACT PRICE SO PROVIDED. ACTUALLY, BECAUSE OF A MATHEMATICAL ERROR, THE SUBSYSTEM PRICE WAS OMITTED FROM THE TOTAL PRICE. IN OUR VIEW THE FACTS CLEARLY SHOW THAT THE TOTAL CONTRACT PRICE, WHICH DID NOT INCLUDE ANY AMOUNT FOR THE DIGITAL OUTPUT SYSTEM, DID NOT REFLECT THE ACTUAL INTENT OF THE CONTRACTING PARTIES. IN THIS CONNECTION, WE HAVE RECOGNIZED THAT OMITTED ITEMS OR OBVIOUS MATHEMATICAL ERRORS COULD SUPPORT A CLAIM OF MUTUAL MISTAKE. B-139993, JULY 7, 1951; B-167951, APRIL 21, 1970.

ACCORDINGLY, THE CONTRACT SHOULD BE REFORMED TO INCREASE THE CONTRACT BY $47,715 LESS THE 4 PERCENT DISCOUNT APPLICABLE TO THE ITEM.