Entitlement to Additional Compensation Under Fixed-Price Contract

B-195821: Nov 14, 1979

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An agency requested a decision as to whether a contractor could be paid additional compensation under a construction contract. The invitation for bids (IFB) provided by the contracting agency included a drawing bearing an incorrect legend, which led the contractor to believe that the horizontal pipe runs it agreed to replace were twice as long as the scale indicated on the drawings. Although a warning which stated that the contractor shall check and verify all dimensions and existing conditions, the contractor failed to do this. After discovering its error, the contractor notified the procuring agency and submitted an estimate for the additional cost to be incurred due to the discrepancy. The total amount of the contract after addition of the cost incurred due to the discrepancy was slightly lower than the next lowest bid received in the initial procurement. When a mistake is alleged after award of a contract, GAO will grant relief only if the mistake was mutual or the contracting officer was on actual or constructive notice of a unilateral error prior to award. In this case, it was clear that there existed a mutual mistake of material fact. GAO believed that reformation of the contract was appropriate, but that the exact amount that should be added to the contract price was unclear since the contractor's estimate of additional costs did not contain a sufficient explanation of costs. The contracting agency was, therefore, advised to further verify the appropriate amount to be paid before reforming the contract.