B-126246, MAR. 28, 1956

B-126246, MAR. 28, 1956

TO THE HONORABLE, THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A REPORT DATED FEBRUARY 17, 1956, FROM THE ASSISTANT SECRETARY OF THE NAVY (MATERIAL), FURNISHED IN RESPONSE TO A REQUEST FROM THIS OFFICE DATED DECEMBER 12, 1955, FOR INFORMATION AND THE VIEWS OF YOUR DEPARTMENT RELATIVE TO THE CLAIM OF R. ZOPPO COMPANY, INC., FOR AN ADDITIONAL PAYMENT UNDER CONTRACT NO. NOY-73769 DATED JUNE 29, 1953.

THE TERMS OF THE CONTRACT REQUIRED THE CONTRACTOR TO FURNISH THE MATERIALS AND PERFORM THE WORK FOR THE CONSTRUCTION OF SEWERS, PUMPING STATIONS, FORCE MAINS, AND OUTFALL SEWER, AT THE UNITED STATES NAVAL BASE, NEWPORT, RHODE ISLAND, FOR A CONSIDERATION OF $976,817, THE WORK TO BE COMPLETED BY SEPTEMBER 29, 1954. IT APPEARS THAT COMPLETION OF THE CONTRACT WORK REQUIRED MORE ROCK EXCAVATION THAN ORIGINALLY CONTEMPLATED AND THE CONTRACTOR REQUESTED PAYMENT OF $47 PER CUBIC YARD FOR THE ADDITIONAL ROCK EXCAVATION. PURSUANT TO CONTRACT PROVISIONS, THE MATTER WAS CONSIDERED BY THE BOARD ON CHANGES CONSISTING OF TWO GOVERNMENT MEMBERS AND ONE REPRESENTATIVE OF THE CONTRACTOR. THE CONTRACTOR SUBMITTED A FINAL COMPROMISE PRICE OF $32.50 PER CUBIC YARD BUT THE TWO GOVERNMENT MEMBERS OF THE BOARD SUBMITTED A REPORT RECOMMENDING $24 PER CUBIC YARD, WHICH REPORT WAS NO SIGNED OR AGREED TO BY THE OTHER MEMBER. THE CHIEF OF THE BUREAU OF YARDS AND DOCKS APPROVED THE PRICE OF $24 PER CUBIC YARD. BY LETTER OF JULY 27, 1954, THE CONTRACTOR WAS REQUESTED TO SUBMIT AN INVOICE AT THAT PRICE "AS A PARTIAL PAYMENT FOR THE ABOVE QUANTITY (2777.13 CUBIC YARDS) AT $24.00 PER CUBIC YARD AS APPROVED" AND TO PROCESS ANY ADDITIONAL CLAIM UNDER THE ,DISPUTES" CLAUSE, IT BEING STATED IN THE LETTER THAT THE DECISION OF THE BUREAU OF YARDS AND DOCKS "DOES NOT PRECLUDE YOUR RIGHT OF APPEAL.' IN ITS LETTER OF JULY 28, 1954, SUBMITTING THE REQUESTED INVOICE, THE CONTRACTOR STATED:

"THIS IS A REQUEST FOR PARTIAL PAYMENT BASED ON THE UNIT PRICE OF $24.00 IN ACCORDANCE WITH A MAJORITY VOTE OF THE BOARD OF CHANGES. THIS DOES NOT PRECLUDE MY RIGHT OF APPEAL FOR ADDITIONAL REIMBURSEMENT ON THIS ITEM.'

BY LETTER DATED AUGUST 18, 1954, THE CONTRACTOR APPEALED THE DECISION OF THE BOARD ON CHANGES. UNDER DATE OF AUGUST 23, 1954, THE BUREAU OF YARDS AND DOCKS SUBMITTED TO THE CONTRACTOR FOR ACCEPTANCE CHANGE "C" WHICH PROVIDED:

"IT IS DIRECTED THAT YOU REMOVED APPROXIMATELY 2806 CUBIC YARDS OF LEDGE ENCOUNTERED IN TRENCH EXCAVATION IN EXCESS OF THE CONTRACTUAL QUANTITIES SPECIFIED, ALL AS DIRECTED BY THE OFFICER IN CHARGE. THE CONTRACT PRICE IS INCREASED IN THE AMOUNT OF $67,344.00 THEREFOR AND EXTENSION OF THE CONTRACT COMPLETION DATE IS NOT REQUIRED BY REASON OF THIS CHANGE.

"IN CONNECTION WITH THE WORK CONTAINED ABOVE, AN ADJUSTMENT IN THE CONTRACT PRICE WILL BE MADE IN ACCORDANCE WITH THE CONTRACT PROVISIONS IN THE EVENT OF AN UNDERRUN OR OVERRUN OF THE 2806 CUBIC YARDS SPECIFIED UP TO 25 PERCENT VARIATION FOR THE PRICE OF $24.00 FOR EACH CUBIC YARD OF UNDERRUN OR OVERRUN.

"EXCEPT AS HEREIN MODIFIED, THE TERMS AND PROVISIONS OF THE BASIC CONTRACT SHALL REMAIN IN FULL FORCE AND EFFECT.'

THE CONTRACTOR ACCEPTED CHANGE "C" AUGUST 26, 1954, WITHOUT RESERVATION.

THROUGHOUT THE ENTIRE TRANSACTION, THE CONTRACTOR HAS EXPRESSED ITS INTENTION TO PRESS ITS CLAIM FOR PAYMENT OF AN AMOUNT IN ADDITION TO THE $24 PER CUBIC YARD APPROVED BY THE BUREAU OF YARDS AND DOCKS. IN ITS LETTER OF NOVEMBER 29, 1955, TO THIS OFFICE, THE CONTRACTOR STATES:

"ON AUGUST 18, 1954, WE FORWARDED OUR FORMAL APPEAL IN ACCORDANCE WITH THE NAVY REQUIREMENTS (COPY OF LETTER-ENCLOSURE NO. 3). ABOUT THIS TIME, WE RECEIVED THE CHANGE ORDER AND WE FELT THAT THIS WAS IN REPLY TO OUR REQUEST OF JULY 28, 1954. WE SIGNED THIS CHANGE ORDER TO EXPEDITE OUR PARTIAL PAYMENT, FEELING THAT WE HAD PRESERVED OUR RIGHTS IN OUR LETTER OF JULY 28, 1954.'

ALSO, IN THE REPORT OF FEBRUARY 17, 1956, FROM YOUR DEPARTMENT, IT IS STATED:

"THE PRIOR CORRESPONDENCE INDICATES THAT THE CONTRACTOR HAD REPEATEDLY RESERVED HIS CLAIM FOR ADDITIONAL REIMBURSEMENT; HIS SIGNATURE ON THE CHANGE WAS APPARENTLY IN THE MISTAKEN BELIEF THAT HIS APPEAL RIGHTS WERE PRESERVED. THE NAVAL AUTHORITIES WERE AWARE OF THE CONTRACTOR'S INTENTION TO APPEAL AND TO SEEK ADDITIONAL COMPENSATION AND WOULD HAVE ACCEPTED THE CHANGE ORDER WITH AN EXCEPTION RESERVING THE CONTRACTOR'S RIGHTS TO APPEAL. ON RECONSIDERING THE CONTRACTOR'S CLAIM FOR COMPENSATION, THE DEPARTMENT OF THE NAVY NOW CONSIDERS THAT A PRICE OF $32.50 PER CUBIC YARD FOR THE ROCK REMOVAL IS REASONABLE AND ITS EARLIER FINDING OF $24.00 PER CUBIC YARD WAS IN ROR.'

IT IS WELL ESTABLISHED THAT A MUTUAL MISTAKE FORMS A SUFFICIENT BASIS FOR REFORMING A WRITTEN INSTRUMENT IF IT CAN BE ESTABLISHED CLEARLY WHAT THE CONTRACT ACTUALLY WAS OR WOULD HAVE BEEN BUT FOR THE MISTAKE. 30 COMP. GEN. 220; 26 ID. 899; 20 ID. 533. IN THE INSTANT MATTER IT IS CLEAR THAT THE CONTRACTOR INTENDED TO RESERVE ITS CLAIM FOR PAYMENT OF AN ADDITIONAL AMOUNT FOR THE ROCK EXCAVATION AND THOUGHT THAT SUCH RESERVATION WAS PROPERLY MADE, BELIEVING ITS ACCEPTANCE OF THE CHANGE ORDER TO BE EFFECTIVE ONLY AS A BASIS FOR THE PARTIAL PAYMENT REQUESTED IN THE LATTER OF JULY 28, 1954. IT APPEARS, ALSO, THAT THE AGENTS OF THE GOVERNMENT WERE AWARE OF THE CONTRACTOR'S INTENTION AND EITHER SHARED THE BELIEF THAT THE CONTRACTOR'S RIGHT TO PRESS ITS CLAIM WAS DULY RESERVED OR AT LEAST WERE WILLING TO ACCEPT SUCH RESERVATION. IN THE REPORT OF FEBRUARY 17, 1956, FROM YOUR DEPARTMENT, IT IS STATED THAT A PRICE OF $32.50 PER CUBIC YARD FOR THE ROCK REMOVAL IS REASONABLE--- THAT BEING ALSO THE FINAL COMPROMISE PRICE SUBMITTED BY THE CONTRACTOR--- AND THAT THE EARLIER FINDING OF $24 PER CUBIC YARD WAS IN ERROR.

IN VIEW OF THE FOREGOING, IT MAY BE REGARDED AS SATISFACTORILY ESTABLISHED THAT THIS MATTER INVOLVES SUCH A MUTUAL MISTAKE AS TO WARRANT A MODIFICATION OF CHANGE "C" BY SUBSTITUTING $32.50 FOR $24 AS THE PRICE TO BE PAID FOR THE ROCK EXCAVATION COVERED BY CHANGE "C," AND THIS OFFICE WILL NOT OBJECT TO THE EXECUTION OF A SUPPLEMENTAL AGREEMENT MODIFYING CHANGE "C" ACCORDINGLY.

A REFERENCE TO THIS DECISION SHOULD ACCOMPANY THE PROPOSED SUPPLEMENTAL AGREEMENT.