Request for Contract Reformation

A contractor asked for reformation of a Department of Commerce cost-reimbursement contract on the grounds of mutual mistake since the contract as executed does not reflect the intentions of the parties. The purpose of the contract was to further the Department of Commerce's minority business enterprise program. The contractor was to operate a comprehensive national business venture development program for minority entrepreneurs in the field of cable television and telecommunications. According to the contract, the contractor could only be reimbursed for its indirect costs at a maximum rate of 33 percent of its total direct costs. The firm claimed that the figure of 33 percent was a temporary ceiling subject to later adjustment when the actual indirect costs became known. Thus, when it became apparent that the 33-percent rate would be inadequate to reimburse the contractor for its actual indirect costs, the contracting officer agreed to revise the allowable indirect cost rate upward to 42.8 percent of the total direct costs. However, the contractor still disputed the disallowance of certain salary adjustments and therefore, appealed the contracting officer's final decision to the Department of Commerce Appeals Board. The Government's answer to the appeal not only opposed the requested relief but also challenged the authority of the contracting officer to alter the indirect cost rate of 33 percent without a compensating benefit to the Government. Thus, the 33-percent rate was reinstated. The contractor disagreed with the reinstatement of the 33-percent rate and argued that its contract was transformed from a cost-reimbursement contract to a cost-sharing contract. Accordingly, the contractor contended that there has been a mutual mistake which requires reformation of the contract to make it clear that the 33-percent rate was merely a provisional rate. GAO held that: (1) this was a matter for settlement by the procedures set out in the disputes clause which is contained in standard Government contracts; and (2) it no longer reviewed Board of Contract Appeals decisions absent of a showing of fraud or bad faith. Therefore, the protest was not reviewed.