Request for Contract Reformation

The Interracial Council for Business Opportunity (ICBO) requested reformation of its contract with the Department of Commerce to increase the Federal share which was due to ICBO under the cost sharing agreement. The contract was a cost-reimbursement-type contract which called for partial reimbursement of allowable costs incurred by ICBO. The language in the contract provided that, in order to qualify for reimbursement of the maximum Federal share, ICBO had to incur allowable costs under the contract in an amount equal to 75 percent of the ICBO operating budget for each year of the contract period. During 1974, ICBO did not meet the contractual spending objective. ICBO argued that an unforeseen, nationwide, economic recession prevented it from spending 75 percent of its operating budget. ICBO asked that the contract be reformed based upon equitable considerations. A written contract is presumed to express the intention of the parties to it and, if clear on its face, it will be enforced as written. In this case, the contract was clear as to the amounts to be paid to ICBO in the event that the contract objective was not met. Where a Government contract contains an express stipulation as to the amount of compensation to be paid, and there is no price adjustment clause, no basis exists for an increase in contract price even when performance in accord with the contract terms has become unprofitable. The fact that an unforeseen recession occurred did not empower GAO to reform the contract based upon equitable considerations. Accordingly, the ICBO request for reformation of its contract was denied.