B-127142, APR. 2, 1956

B-127142, APR. 2, 1956

TO SOUTH CAROLINA ELECTRIC AND GAS COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 14, 1956, RELATIVE TO OUR SETTLEMENT OF MARCH 1, 1955, WHICH DISALLOWED YOUR CLAIMS FOR $18,925.45 AND $312.12, ALLEGED TO BE DUE FOR ELECTRIC SERVICE FURNISHED UNDER CONTRACTS NOS. NOY/7/71518 AND NOY/U/23934 ENTERED INTO BETWEEN YOUR COMPANY AND THE DEPARTMENT OF THE NAVY, UNITED STATES NAVAL BASE, CHARLESTON, SOUTH CAROLINA. IN ADDITION TO THE PROTEST OF THE SETTLEMENT, IT IS REQUESTED THAT, IN THE EVENT THE DISALLOWANCE IS SUSTAINED, A HEARING BE GRANTED BEFORE THE APPROPRIATE PERSON OR BODY TO RESOLVE THE MATTER SATISFACTORILY TO BOTH CONTRACTING PARTIES.

IT IS THE ESTABLISHED PRACTICE THAT CLAIMS PRESENTED TO OUR OFFICE NECESSARILY MUST BE SETTLED ON THE BASIS OF THE WRITTEN RECORD AND IT FOLLOWS THAT THE SUBSTANCE OF ANY MATTERS PRESENTED ORALLY MUST BE REDUCED TO WRITING TO RECEIVE CONSIDERATION IN THE SETTLEMENT OF THE CLAIM. EXAMINATION OF THE CLAIM DISCLOSED THAT YOUR CONTENTIONS ORIGINALLY WERE SET FORTH IN YOUR LETTER DATED SEPTEMBER 16, 1954, WITH ENCLOSURES, TO OUR OFFICE WHICH INCLUDED YOUR INVOICE STATEMENTS OF THE ADDITIONAL COSTS IN QUESTION. THESE CONTENTIONS, WHILE FULLY CONSIDERED BY THE ADMINISTRATIVE OFFICE AND OUR OFFICE IN THE SETTLEMENT OF YOUR CLAIM, ARE, WITH SOME AMPLIFICATION, AGAIN PRESENTED IN YOUR LETTER OF FEBRUARY 14, 1956. NEVERTHELESS, YOU ARE FREE TO PRESENT ANY ADDITIONAL EVIDENCE OR DOCUMENTS BELIEVED PERTINENT TO YOUR CLAIM OR, IF YOU SO DESIRE, YOU MAY CALL AT OUR OFFICE, LOCATED AT 441 G STREET, N.W., ANY TIME DURING REGULAR WORKING HOURS, 8:15 A.M. TO 4:15 P.M., MONDAY THROUGH FRIDAY. HOWEVER, FOR REASONS HEREINAFTER SET FORTH, THERE APPEARS TO BE NO PROPER BASIS FOR ALLOWANCE OF YOUR CLAIM.

IT APPEARS YOUR CONTENTION THAT THE "CONTRACT DEMAND" PROVISIONS CONTAINED UNDER PARAGRAPH 3 (A), AT PAGE 6 OF CONTRACT NOY/U/71518, FOLLOWING "RATE B" ARE EQUALLY APPLICABLE TO "RATE A" AND THAT YOUR MINIMUM BILLINGS UNDER "RATE A," REFLECTING THE ADDITIONAL AMOUNT CLAIMED, REPRESENTS A PROPER CONTRACT CHARGE. A CAREFUL REVIEW HAS BEEN MADE OF THE PRIOR NEGOTIATIONS BETWEEN THE CONTRACTING PARTIES TO DETERMINE THEIR INTENTIONS WITH RESPECT TO THE APPLICATION OF THE DEMAND CHARGES SET FORTH IN THE NEGOTIATED CONTRACT, PARTICULARLY THE MATTER OF RATES REPORTEDLY DISCUSSED BY THE RESPECTIVE REPRESENTATIVES ON FEBRUARY 12 AND 13, 1953, OR JUST PRIOR TO THE EXECUTION OF THE FIRM CONTRACT.

THE ADMINISTRATIVE REPORTS DISCLOSE THAT PRIOR TO 1952 THE POWER REQUIREMENTS FOR THE CHARLESTON NAVAL SHIPYARD OVER AND ABOVE THE CAPACITY OF THE GOVERNMENT-OWNED PLANT WERE SUPPLIED BY YOUR COMPANY UNDER THE TEN PREVAILING 10-YEAR STANDBY EMERGENCY CONTRACT, WITHOUT A DEMAND CHARGE. AT YOUR REQUEST EARLY IN 1952 NEGOTIATIONS WERE INITIATED WITH THE ADMINISTRATIVE OFFICIALS FOR THE PURPOSE OF ESTABLISHING A FIRM POWER AGREEMENT TO REPLACE THE EMERGENCY EXCHANGE TYPE OF CONTRACT. AT THIS TIME, THE PARTIES WERE ON NOTICE THAT A SUBSTANTIAL INCREASE IN THE POWER LOAD WAS CONTEMPLATED. IN ANTICIPATION OF A COMPLEMENTARY FIRM CONTRACT YOU ENTERED INTO CONTRACT NOY/U/23934, SUPERSEDING THE 10-YEAR AGREEMENT, UNDER WHICH YOU CONTINUED TO FURNISH THE EMERGENCY STANDBY SERVICE WITHOUT DEMAND CHARGE. AT THIS STAGE OF THE NEGOTIATIONS THE REPORTS CLEARLY EVIDENCE A MUTUAL UNDERSTANDING THAT A CONTRACT DEMAND CHARGE WOULD BECOME EFFECTIVE WHEN THE ANTICIPATED INCREASED GOVERNMENT DEMAND LOAD WAS REACHED. SUCH UNDERSTANDING IS REFLECTED IN THE DISCUSSION OF SEVERAL RATES IN AN EFFORT TO EXTEND TO THE GOVERNMENT SOME SPECIAL CONSIDERATION FOR HIGH LOAD FACTOR OPERATION. IT APPEARS THAT "RATE B," AS ANNOUNCED IN THE FIRM CONTRACT, WAS DESIGNED FOR THE PARTICULAR PURPOSE AND THAT "RATE A" WAS INCLUDED AS AN ALTERNATIVE TO "RATE B" TO GIVE THE GOVERNMENT THE BENEFIT OF THE LOWEST AVAILABLE RATE DURING THE PERIOD OF THE ANTICIPATED LOAD GROWTH, OR UNTIL THE DEMANDS OF THE NAVAL BASE REACHED APPROXIMATELY 1500 KVA. IT IS REPORTED THAT THEREAFTER IT WAS INTENDED AND UNDERSTOOD THAT THE GOVERNMENT WOULD PURCHASE THE BASE LOAD POWER UNDER "RATE B.'

ALTHOUGH YOU HAVE DISPUTED THE ADMINISTRATIVE INTERPRETATION OF THE CONTRACT WITH RESPECT TO THE APPLICATION OF THE CONTRACT DEMAND TO "RATE A," IT IS INDICATED THAT THE GENERAL WORDING AS TO THE MINIMUM BILLING DEMAND MAY HAVE BEEN INCORPORATED IN THE PRESENT CONTRACT BY REASON OF THE FACT THAT YOUR PUBLISHED POWER AND RATE SCHEDULE CONTAINED SIMILAR PROVISIONS. REGARDLESS OF THIS FACT, HOWEVER, IT IS REPORTED BY THE CHIEF, BUREAU OF YARDS AND DOCKS, THE CONTRACTING OFFICER, IN HIS FOURTH ENDORSEMENT OF SEPTEMBER 16, 1954, AS FOLLOWS:

"3. THE LANGUAGE AND THE DESIGN OF THE CONTRACT WAS CHOSEN AS A RESULT OF THIS BACKGROUND OF THE NEGOTIATIONS. ATTENTION IS INVITED TO THE FACT THAT RATES "A" AND "B" STAND ALONE. THE CONTRACT DEMAND PROVISION IS A PART OF RATE "B" ONLY. THIS FORMAT AND DESIGN OF PARAGRAPH 3 (A) PRECLUDES AN INTERPRETATION THAT IT APPLIES TO RATE "A.' IF THAT HAD BEEN THE INTENT, IT WOULD HAVE BEEN SET OUT SEPARATELY WITH A LETTER DESIGNATION AS A SUBPARAGRAPH UNDER PARAGRAPH 3.

"4. THIS CONTRACT WAS PREPARED IN ROUGH DRAFT FORM DURING THE NEGOTIATIONS AND WAS REVIEWED BY THE CONTRACTOR'S REPRESENTATIVES. THAT TIME THE QUESTION OF THE APPLICATION OF THE CONTRACT DEMAND TO RATE "A" WAS SPECIFICALLY RAISED BY MR. ALLAN C. MUSTARD AND THE BUREAU'S REPRESENTATIVES POINTED OUT ITS EFFECT AS EXPLAINED ABOVE. THIS WAS FULLY UNDERSTOOD BY THE CONTRACTOR AND THE CONTRACT WAS ACCEPTED AND EXECUTED WITHOUT FURTHER OBJECTION. TO NOW PLACE ON THIS AGREEMENT THE INTERPRETATION SOUGHT BY THE CONTRACTOR WOULD TORTURE ITS PLAIN MEANING AND WOULD COMPLETELY IGNORE THE NEGOTIATIONS.

ORDINARILY, A CONTRACT REPRESENTS THE FINAL UNDERSTANDING OF THE PARTIES THERETO AND RESORT MAY NOT BE HAD TO WHAT WAS CONSIDERED IN NEGOTIATING THE CONTRACT. HOWEVER, WHERE, AS HERE, THERE IS AN AMBIGUITY IN THE CONTRACT, THE DOUBT AS TO THE INTENTION OF THE PARTIES MUST BE RESOLVED BY CONSIDERING THE NEGOTIATIONS. AS INDICATED ABOVE, THE QUESTION OF THE APPLICATION OF THE CONTRACT DEMAND TO "RATE A" WAS RAISED BY ONE OF YOUR REPRESENTATIVES WHEN THE ROUGH DRAFT OF THE CONTRACT FORM WAS UNDER DISCUSSION WITH GOVERNMENT REPRESENTATIVES AND IT WAS POINTED OUT THAT THE CONTRACT DEMAND WAS APPLICABLE TO "RATE B" ONLY. ALTHOUGH YOUR RECENT LETTER DOES NOT DEAL WITH THIS PHASE OF THE MATTER, YOU HAVE PRESENTED OTHER REASONS FOR YOUR POSITION SUCH AS A REQUEST BY GOVERNMENT OFFICIALS TO ELIMINATE THE WORDS "CONTRACT DEMAND" FROM THE DISPUTED CONTRACT PROVISION. HOWEVER, SUCH A REQUEST MAY BE VIEWED EITHER AS AN ATTEMPT TO CLARIFY AN AMBIGUOUS PROVISION OR TO EFFECT A COMPLETE CHANGE. IN ANY EVENT IT HAS LONG BEEN THE RULE OF THE ACCOUNTING OFFICERS, IN CASES OF DISPUTED QUESTIONS OF FACT, TO ACCEPT THE ADMINISTRATIVE VERSION OF THE FACTS IN THE ABSENCE OF CONCLUSIVE EVIDENCE TO SHOW THAT THE FACTS AS REPORTED ARE ERRONEOUS.

ACCORDINGLY, ON THE PRESENT RECORD, THE SETTLEMENT OF MARCH 1, 1955, IS SUSTAINED.