B-199049.2, JAN 4, 1983

B-199049.2: Jan 4, 1983

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DIGEST: CONTRACTOR IS ENTITLED TO RELIEF FROM ACTUAL DAMAGES CAUSED BY MEETING HOSPITAL'S ENERGY NEEDS WHERE CONTRACTING AGENCY BASED ITS ESTIMATES OF ENERGY REQUIREMENTS ON OTHER THAN THE BEST INFORMATION REASONABLY AVAILABLE. THE CONTRACTOR WAS OBLIGATED TO SUPPLY THE HOSPITAL'S COOLING AND HEATING NEEDS. NOTWITHSTANDING THE FACT THAT IN PRIOR YEARS LESS THAN THE ESTIMATED QUANTITY OF CHILLED WATER AND STEAM WAS REQUIRED. COMPENSATION TO BE PAID UNDER THE CONTRACT WAS PEGGED TO A FORMULA LINKED TO THE ESTIMATED ENERGY REQUIREMENTS. THE BASIS FOR LONE STAR'S CLAIM FOR DAMAGES IS THAT IN THE PERFORMANCE OF THE CONTRACT IT HAS CERTAIN FIXED COSTS WHICH IT PRORATED OVER THE ESTIMATED LEVELS OF ENERGY CONSUMPTION AND.

B-199049.2, JAN 4, 1983

DIGEST: CONTRACTOR IS ENTITLED TO RELIEF FROM ACTUAL DAMAGES CAUSED BY MEETING HOSPITAL'S ENERGY NEEDS WHERE CONTRACTING AGENCY BASED ITS ESTIMATES OF ENERGY REQUIREMENTS ON OTHER THAN THE BEST INFORMATION REASONABLY AVAILABLE.

LONE STAR ENERGY COMPANY:

BY LETTER DATED FEBRUARY 8, 1982, COUNSEL FOR LONE STAR ENERGY COMPANY (LONE STAR) REQUESTED RECONSIDERATION OF OUR DECISION IN LONE STAR ENERGY COMPANY, B-199049, AUGUST 7, 1980, 80-2 CPD 98, IN WHICH WE DETERMINED THAT LONE STAR'S REQUIREMENTS CONTRACT TO SUPPLY CHILLED WATER AND STEAM TO THE AUDIE MURPHY MEMORIAL VETERANS HOSPITAL IN SAN ANTONIO, TEXAS, SHOULD NOT BE REFORMED.

FOR THE REASONS DISCUSSED BELOW, OUR OFFICE NO LONGER OBJECTS TO THE SETTLEMENT OF LONE STAR'S CLAIM PROPOSED BY THE VETERANS ADMINISTRATION (VA).

IN 1976, LONE STAR AND THE VA RENEWED AND MODIFIED THE 1971 REQUIREMENTS CONTRACT. THE CONTRACTOR WAS OBLIGATED TO SUPPLY THE HOSPITAL'S COOLING AND HEATING NEEDS, WHICH THE SPECIFICATIONS STATED TO BE "APPROXIMATELY 11,632 THOUSAND TON-HOURS OF CHILLED WATER" AND "APPROXIMATELY 110,000 MILLION B.T.U. OF STEAM." THE CONTRACT MODIFICATION EXTENDED PERFORMANCE FROM MAY 1, 1976, UNTIL APRIL 30, 1979.

NOTWITHSTANDING THE FACT THAT IN PRIOR YEARS LESS THAN THE ESTIMATED QUANTITY OF CHILLED WATER AND STEAM WAS REQUIRED, THE RECORD INDICATES THAT IN 1976, KEY CONTRACTING OFFICIALS AT THE VA EXPECTED THAT DEMAND WOULD NOT ONLY MEET THE ESTIMATED REQUIREMENTS, BUT POTENTIALLY WOULD EVEN SURPASS THE ESTIMATES. ACCORDINGLY, COMPENSATION TO BE PAID UNDER THE CONTRACT WAS PEGGED TO A FORMULA LINKED TO THE ESTIMATED ENERGY REQUIREMENTS. DUE TO EFFECTIVE CONSERVATION MEASURES IMPLEMENTED BY THE VA IN EARLY 1977, HOWEVER, ENERGY USAGE IN THE HOSPITAL DROPPED OFF TO DRAMATICALLY LESS THAN THE ANTICIPATED AMOUNTS, THEREBY PROMPTING LONE STAR'S CLAIM.

THE BASIS FOR LONE STAR'S CLAIM FOR DAMAGES IS THAT IN THE PERFORMANCE OF THE CONTRACT IT HAS CERTAIN FIXED COSTS WHICH IT PRORATED OVER THE ESTIMATED LEVELS OF ENERGY CONSUMPTION AND, BUT FOR THE FAULTY ESTIMATES THE CHARGE PER UNIT OF CHILLED WATER AND STEAM WOULD HAVE BEEN HIGHER.

IN ITS EARLIER SUBMISSION, DATED MAY 29, 1980, THE VA STATED THAT IT CONCURRED WITH THE CONTRACTOR'S BELIEF THAT THE 1976 AGREEMENT WAS "ENTERED INTO BY THE PARTIES IN THE LIGHT OF A MUTUAL MISTAKE." BECAUSE THE RECORD FAILED TO SHOW, HOWEVER, THAT THE GOVERNMENT DID NOT BASE ITS ESTIMATE "ON ALL RELEVANT INFORMATION THAT *** WAS REASONABLY AVAILABLE TO IT" (WOMACK V. UNITED STATES, 389 F.2D 793, 801 (1968)), WE FOUND THAT THERE WAS "NO BASIS UPON WHICH TO PERMIT REFORMATION OF THE CONTRACT." LONE STAR ENERGY COMPANY, SUPRA.

IN ITS RECONSIDERATION REQUEST, LONE STAR HAS SUBMITTED NEW EVIDENCE INDICATING THAT AN AGENCY WIDE ENERGY CONSERVATION PROGRAM WAS BEING STUDIED AND IMPLEMENTED PRIOR TO THE 1976 MODIFICATION AGREEMENT. AFFIDAVITS FROM LONE STAR PERSONNEL INDICATE THAT THEY WERE NOT AWARE OF THE CONSERVATION PROGRAM AND THAT IF THEY HAD BEEN, THEY WOULD HAVE NEGOTIATED MORE FAVORABLE RATES. THE VA, BY RECENT LETTER TO OUR OFFICE, HAS INDICATED THAT IT HAD PLANS - PRIOR TO THE RENEWAL/MODIFICATION OF LONE STAR'S CONTRACT IN 1976 - FOR AN "AGGRESSIVE" ENERGY CONSERVATION PROGRAM AT THE SAN ANTONIO HOSPITAL AND THAT THE GOVERNMENT NEGOTIATORS "DID NOT TAKE INTO CONSIDERATION THIS ENERGY CONSERVATION PROGRAM IN ESTABLISHING THE FORMULA FOR REIMBURSEMENT FOR THE ENERGY TO BE PURCHASED." VA STATES THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THIS WIDELY IMPLEMENTED PROGRAM AND SHOULD HAVE TAKEN THE PROGRAM INTO ACCOUNT BEFORE ESTIMATING THE HOSPITAL'S ENERGY NEEDS. THE VA HAS ALSO INDICATED THAT IT WAS THE ENERGY CONSERVATION EFFORTS, IMPLEMENTED IN EARLY 1977, WHICH WERE RESPONSIBLE FOR THE SAN ANTONIO HOSPITAL'S DECREASED ENERGY REQUIREMENTS.

IN LIGHT OF THIS NEW EVIDENCE THAT THE ESTIMATES OF THE REQUIREMENTS WERE NOT BASED ON THE BEST INFORMATION REASONABLY AVAILABLE, WE MODIFY OUR EARLIER DECISION AND FIND THAT THERE IS A BASIS FOR RELIEF. SEE INPUT DATA, B-179809, FEBRUARY 21, 1974, 74-1 CPD 87. ACCORDINGLY, THE CLAIM MAY BE SETTLED AS PROPOSED BY VA.