B-15341, MARCH 18, 1941, 20 COMP. GEN. 533

B-15341, MARCH 18, 1941, 20 COMP. GEN. 533

CONTRACTS - COST PLUS - MODIFICATION WITH RESPECT TO CONTRACTOR'S FIXED FEE A COST-PLUS-A-FIXED-FEE CONSTRUCTION CONTRACT MAY BE MODIFIED TO PROVIDE FOR AN INCREASE IN THE FIXED FEE IN CONSIDERATION OF THE CONTRACTOR'S PERFORMANCE OF THE MECHANICAL WORK, INSTEAD OF SUBLETTING IT, WHERE THE CONTRACT IS NOT DEFINITE AS TO THE PART OF THE WORK TO BE PERFORMED BY SUBCONTRACTORS, THE NEGOTIATIONS PRECEDING THE CONTRACT INDICATE THAT THE FEE WAS BASED ON SUBLETTING THE MECHANICAL WORK, AND THE PROPOSED MODIFICATION WILL ACCOMPLISH A SUBSTANTIAL SAVING TO THE GOVERNMENT BY ELIMINATING A PART OF THE SUBCONTRACTOR'S PROFIT FROM THE COST OF THE WORK.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, MARCH 18, 1941:

I HAVE YOUR LETTER OF MARCH 4, 1941, AS FOLLOWS:

THERE IS TRANSMITTED HEREWITH A LETTER FROM W. E. KIER CONSTRUCTION COMPANY, SAN DIEGO, CALIFORNIA, DATED JANUARY 27, 1941, IN WHICH REQUEST IS MADE FOR AN UPWARD ADJUSTMENT OF THE FIXED-FEE DUE UNDER CONTRACT NO. W 6504 QM-1. THIS CONTRACT HAS BEEN PLACED IN THE FILES OF THE GENERAL ACCOUNTING OFFICE THROUGH REGULAR CHANNELS.

THE BASIS OF THE REQUEST FOR ADJUSTMENT OF THE FIXED-FEE BY THE W. E. KIER CONSTRUCTION COMPANY IS THAT DURING THE NEGOTIATIONS WHICH LEAD UP TO THE CONTRACT, THE NEGOTIATORS ACTING ON BEHALF OF THE GOVERNMENT INFORMED MR. W. E. KIER, SENIOR PARTNER, AND MR. E. L. KIER, JR., PARTNER OF THE W. E. KIER CONSTRUCTION COMPANY THAT ONE FACTOR ENTERING INTO THE DETERMINATION OF THE FIXED-FEE OFFERED ON THE ORIGINAL ESTIMATED AMOUNT OF CONSTRUCTION AUTHORIZED BY CONTRACT NO. W 6504 QM-1 WAS THE AMOUNT OF WORK WHICH THE CONTRACTOR PROPOSED TO DO HIMSELF AND THAT WHICH HE PROPOSED TO SUBLET.

PROSPECTIVE CONTRACTORS, PRIOR TO NEGOTIATIONS, ARE GIVEN COPIES OF " QUESTIONNAIRE CONCERNING FIXED-FEE CONTRACT NEGOTIATIONS" (SEE INCLOSURE NO. 1) AND ARE REQUESTED TO SUPPLY THE DESIRED INFORMATION BY ANSWERING ALL QUESTIONS FULLY. THE DATE THUS SECURED FROM W. E. KIER CONSTRUCTION COMPANY WAS USED IN NEGOTIATING THE CONTRACT.

THE FOLLOWING PERTINENT QUESTIONS AND ANSWERS APPEAR IN THE " QUESTIONNAIRE" RECEIVED RELATIVE TO THE CONTRACT HEREIN DISCUSSED:

QUESTION 10.--- " ON THIS PROJECT ARE PROSPECTIVE CONTRACTORS PREPARED TO HANDLE ALL PHASES OF CONSTRUCTION WITH OWN FORCES? " PROSPECTIVE CONTRACTOR ANSWERED," YES, IF IT IS AGREED WITH THE GOVERNMENT THAT THEIR BEST INTERESTS MAY BE SERVED.'

QUESTION 11 OF THIS QUESTIONNAIRE STATED," IF PROSPECTIVE CONTRACTOR IS NOT PREPARED AND EQUIPPED TO HANDLE ALL ITEMS OF CONSTRUCTION WITH OWN FORCES, WHAT ITEMS OF WORK ON THIS PROJECT WOULD HAVE TO BE SUBLET? " TO THIS QUESTION THE CONTRACTOR ANSWERED, " PLUMBING, HEATING, ELECTRICAL, AND POSSIBLY OTHER MINOR MECHANICAL WORK SUCH AS REFRIGERATION; HOWEVER, WE PREFER TO DO ALL WORK WITH OUR OWN FORCES.'

IT WAS DEVELOPED DURING THE NEGOTIATIONS THAT THE CONTRACTOR HAD ON SOME JOBS PERFORMED THE MECHANICAL WORK WITH HIS OWN FORCES. AT THE TIME OF THE NEGOTIATIONS, THE CONTRACTOR'S REPRESENTATIVES STATED THAT THEY WERE NOT FAMILIAR ENOUGH WITH THE REQUIREMENTS OF THE SPECIFICATIONS, PLANS, AND THE ORGANIZATION, MECHANICS, ETC., TO TELL DEFINITELY WHETHER THEY WOULD WANT TO UNDERTAKE AND BE JUSTIFIED IN UNDERTAKING THE INSTALLATION OF ALL THE MECHANICAL WORK. BECAUSE OF THIS UNCERTAINTY, THE GOVERNMENT'S NEGOTIATORS AGREED TO FIGURE THE FEE ON THE BASIS OF THE CONTRACTOR SUBLETTING THE MECHANICAL ITEMS AND INFORMED THE CONTRACTOR'S REPRESENTATIVES THAT IN THE EVENT IT WAS LATER FOUND REASONABLE AND TO THE BEST INTEREST OF THE GOVERNMENT FOR THE CONTRACTOR TO DO THE MECHANICAL WORK, AN EQUITABLE ADJUSTMENT WOULD THEN BE MADE IN THE AMOUNT OF THE FEE UPWARDLY. THE FOLLOWING IS TAKEN FROM PAGE 5 OF TRANSCRIPT OF THE NEGOTIATIONS: "* * * WE WILL BE AGREEABLE, HOWEVER, TO FIGURING YOUR FEE ON THE BASIS OF YOUR COMPANY SUBLETTING PLUMBING, HEATING, AND ELECTRICAL WORK AND SUCH SPECIALIZED MECHANICAL WORK AS REFRIGERATION AND IN THE EVENT THAT YOU FIND IT REASONABLE AND TO THE BEST INTEREST OF THE GOVERNMENT TO DO THIS WORK YOURSELVES AND YOU LATER CHANGE SO THAT YOU DO THIS WORK YOURSELVES, AN EQUITABLE ADJUSTMENT WILL BE MADE IN THE AMOUNT OF THE FEE UPWARDLY. NOW, IS THERE ANY QUESTION IN EITHER OF YOUR MINDS AS TO WHAT THE GOVERNMENT WILL DO IN CASE YOU DO THE WORK YOURSELVES THAT YOU NOW CONTEMPLATE MAY BE NECESSARY TO DO BY SUBCONTRACT WORK?

THE FEE OFFERED BY THE GOVERNMENT AND ACCEPTED BY THE CONTRACTOR WAS $100,076 AND REPRESENTED 4.55 PERCENT OF THE ESTIMATED CONSTRUCTION COST. THE FOLLOWING QUOTATION IS TAKEN FROM PAGE 13 OF THE TRANSCRIPT OF THE NEGOTIATIONS: " GENTLEMEN, ON THE BASIS OF OUR DISCUSSION HERE AND THE QUESTIONNAIRE WAS FILLED IN BY YOU, THE GOVERNMENT IS PREPARED TO OFFER YOU A FEE IN THE AMOUNT OF $100.076. THIS FEE REPRESENTS 4.55 PERCENT. IN THE EVENT THAT YOU DO THE PLUMBING, HEATING, AND ELECTRICAL WORK, AS PREVIOUSLY ADVISED YOU, THE AMOUNT OF THIS FEE WILL BE REVISED UPWARDLY. ARE YOU GENTLEMEN PREPARED TO ACCEPT THE GOVERNMENT'S OFFER? " COPIES OF THE TRANSCRIPT OF NEGOTIATIONS AND THE QUESTIONNAIRE ARE ATTACHED FOR YOUR INFORMATION.

MECHANICAL ITEMS ON THIS TYPE PROJECT ARE ESTIMATED TO BE 26.6 PERCENT OF THE TOTAL CONSTRUCTION COST. THE FIXED-FEE OFFER TO W. E. KIER CONSTRUCTION COMPANY AT THE TIME CONTRACT NO. W 6504 QM-1 WAS NEGOTIATED WAS COMPUTED AS FOLLOWS:

CHART

SUMMARY OF COST BASED ON PRIME CONTRACTOR SUBLETTING MECHANICAL WORK

ON FIXED-FEE BASIS ESTIMATED COST OF PROJECT (CONTRACT AMOUNT/ ---------- ----- $2,199,472 PRIME CONTRACTOR'S FEE AT 4.55 PERCENT (CONTRACT

AMOUNT/----------------------------------------------- 100,076

2,299,548 ASSUMED MECHANICAL SUBCONTRACTOR'S FEE ON 26.6 PERCENT

OF $2,199,472 EQUAL $585,059 AT 4.55 PERCENT---------- 26,620

THE FEE ON THIS CONTRACT IS THE MINIMUM FEE OFFERED FOR THIS TYPE OF PROJECT BASED ON THE PROSPECTIVE CONTRACTOR SUBLETTING THE MECHANICAL ITEMS. THE REASON FOR USING THE MINIMUM FEE IS THAT IT IS RECOGNIZED THAT A HIGHER PERCENTAGE WILL HAVE TO BE PAID SUBCONTRACTORS TO INDUCE THEM TO TAKE THE RELATIVELY SMALL AMOUNT OF WORK. HAD THE PROSPECTIVE CONTRACTOR AT THE TIME OF NEGOTIATIONS BEEN DEFINITELY SURE THAT HE WOULD DO ALL THE SO-CALLED MECHANICAL WORK HIMSELF AND NOT SUBJECT IT, THE GOVERNMENT WOULD HAVE OFFERED HIM A FEE 10 PERCENT HIGHER THAN 4.55 PERCENT OR 5 PERCENT AMOUNTING TO $109,503, A DIFFERENCE OF $9,427. THIS 10 PERCENT INCREASE IS REGARDED AS A LESSER FEE THAN WOULD HAVE TO BE PAID BY SUBLETTING. THIS HAS BEEN THE STANDARD PRACTICE ON THIS TYPE OF PROJECT.

THE BENEFIT ACCRUING TO THE GOVERNMENT BECAUSE OF THE PRIME CONTRACTOR DOING THE SPECIALIZED MECHANICAL TRADES WITH HIS OWN FORCES IS ESTIMATED AS FOLLOWS:

CHART

SUMMARY OF COST BASED ON PRIME CONTRACTOR PERFORMING MECHANICAL WORK

AND RECEIVING ADJUSTED FEE ESTIMATED COST OF PROJECT (INCLUDING FIXED FEE/------------ $2,299.548 ASSUMED REVISED PRIME CONTRACTOR'S FEE AT 5 PERCENT-------- 109,503 FIXED FEE ON MECHANICAL WORK BASED ON SUBLETTING

MECHANICAL WORK--------------------------------------- 26,620 FIXED FEE ON MECHANICAL WORK BASED ON PRIME CONTRACTOR

PERFORMING MECHANICAL WORK AND RECEIVING ADJUSTMENT

FOR SAME---------------------------------------------- 9,427

SAVING TO GOVERNMENT---------------------------- 17,193

UNDER THE FOREGOING FACTS, THE EQUITIES ARE IN FAVOR OF THE CONTRACTOR FOR AN UPWARD ADJUSTMENT OF FIXED FEE. THE NEGOTIATIONS SPEAK FOR THEMSELVES AND INDICATE THAT IT WAS THE MUTUAL INTENTION OF THE PARTIES TO ADJUST THE FIXED FEE ON THE BASIS OF THE AMOUNT OF WORK SUBLET SHOULD IT EXCEED THE AMOUNT TENTATIVELY STATED.

CONVERSELY, IT MIGHT BE STATED THAT IN THE EVENT THE CONTRACTOR SHOULD SUBLET WORK IN EXCESS OF THAT AGREED TO IN THE NEGOTIATIONS, HIS FEE SHOULD BE REVISED DOWNWARD. HOWEVER, THE GOVERNMENT RESERVES THE RIGHT TO PRESCRIBE THE FORM AND APPROVE IN WRITING ALL SUBCONTRACTS IN ARTICLE V, SECTION 1, SUBSECTION (D):

"/D) ENTER INTO NO SUBCONTRACT FOR ANY PORTION OF THE WORK, EXCEPT IN THE FORM PRESCRIBED BY THE SECRETARY OF WAR, NOR WITHOUT THE WRITTEN APPROVAL OF THE CONTRACTING OFFICER. SUBCONTRACTS ARE DEFINED AS CONTRACTS ENTERED INTO BY THE CONTRACTOR WITH OTHERS WHICH INVOLVE THE PERFORMANCE, WHOLLY OR IN PART AT THE SITE OF THE WORK, OF SOME PART OF THE WORK DESCRIBED IN ARTICLE I HEREOF.'

AS A MATTER OF ADMINISTRATION OF THE CONTRACT THE CONSTRUCTING QUARTERMASTER IS INSTRUCTED TO APPROVE NO SUBCONTRACTS WHERE AN ATTEMPT IS MADE TO SUBLET WORK IN EXCESS OF THAT AGREED TO BE SUBLET IN THE NEGOTIATIONS. THE GOVERNMENT IS THEREFORE IN A POSITION TO CONTROL EXCESSIVE SUBCONTRACTING OF WORK, BUT POWERLESS TO REWARD A CONTRACTOR WHEN CONDITIONS CHANGE AFTER THE NEGOTIATION PERIOD AND SUCH CONTRACTOR FINDS IT POSSIBLE TO DO MORE OF THE WORK THAN ORIGINALLY INTENDED, WITH HIS OWN FORCES, UNLESS YOUR OFFICE FINDS IT POSSIBLE TO ALLOW AN UPWARD REVISION OF FIXED FEE UNDER THE CIRCUMSTANCES ABOVE SET OUT.

IN ARRIVING AT YOUR DECISION ON THIS MATTER, IT IS SUGGESTED THAT YOU BEAR IN MIND THE NECESSITY FOR CLOSE RELATIONSHIP AND CONTINUAL HARMONY BETWEEN THE GOVERNMENT AND THE CONTRACTOR. IT MIGHT BE SAID THE TWO CONTRACTING PARTIES ARE PARTNERS FOR THE PURPOSE OF CONSTRUCTING A REPLACEMENT CENTER. IN FACT, WHAT THE GOVERNMENT IS REALLY CONTRACTING FOR IS THE SERVICES OF THE CONTRACTOR, SINCE ALL COSTS EXCEPT THE CONTRACTOR'S ADMINISTRATIVE EXPENSES AND OVERHEAD ARE REIMBURSABLE. THEREFORE TO INSURE THE UNINTERRUPTED AND HARMONIOUS SERVICES OF THE CONTRACTOR, NO INEQUITIES SHOULD STAND IN THE WAY OF THE PARTIES, AND FULL FAITH AND CREDIT SHOULD BE GIVEN TO THE INTENT OF THE NEGOTIATIONS, IF YOUR OFFICE BELIEVES THIS CAN BE DONE CONSISTENTLY WITH THE TERMS OF THE CONTRACT.

INASMUCH AS THE REQUEST OF W. E. KIER CONSTRUCTION COMPANY IS IN THE NATURE OF A CLAIM FOR AN INDEFINITE AMOUNT, IT IS REQUESTED THAT A DECISION BE RENDERED AS TO THE LEGALITY OF SUCH AN ADJUSTMENT, NOTWITHSTANDING THE FACT NO METHOD OF IMPLEMENTING UPWARD OR DOWNWARD REVISIONS IN THE RATE OF FIXED-FEE BECAUSE OF INCREASES OR DECREASES IN THE AMOUNT OF SUBCONTRACT WORK AUTHORIZED SUBSEQUENT TO THE DATE OF THE CONTRACT WAS INCORPORATED IN THE FORMAL INSTRUMENT AT THE TIME OF ITS EXECUTION.

DUE TO THE GREAT IMPORTANCE YOUR DECISION WILL HAVE UPON OTHER SIMILAR CONTRACTS BEING PERFORMED IN CONNECTION WITH THE NATIONAL DEFENSE PROGRAM, IT IS REQUESTED THAT IMMEDIATE CONSIDERATION BE GIVEN TO THIS MATTER. THE RETURN OF ALL INCLOSURES IS ALSO REQUESTED.

THE CONTRACT IN QUESTION, WHICH IS NUMBERED W-6594-QM-1, IS FOR THE CONSTRUCTION OF A REPLACEMENT CENTER, INCLUDING NECESSARY BUILDINGS, TEMPORARY STRUCTURES, UTILITIES AND APPURTENANCES THERETO, AT SAN DIEGO, CALIF., IN CONSIDERATION FOR WHICH THE CONTRACTOR IS TO RECEIVE REIMBURSEMENT OF COSTS, AS DEFINED IN THE CONTRACT, PLUS A STIPULATED FIXED FEE. INCLUDED AMONG THE ITEMS FOR WHICH THE CONTRACTOR IS TO RECEIVE REIMBURSEMENT OF ITS COST, AS STATED IN ARTICLE II, PARAGRAPH 1 (B), ARE:

ALL SUBCONTRACTS MADE IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT.

ALSO, IN ARTICLE V OF THE CONTRACT, THE CONTRACTOR AGREES THAT HE WILL---

(C) UNLESS THIS PROVISION IS WAIVED IN WRITING BY THE CONTRACTING OFFICER, REDUCE TO WRITING EVERY CONTRACT IN EXCESS OF TWO THOUSAND DOLLARS ($2,000) MADE BY HIM FOR THE PURPOSE OF THE WORK HEREUNDER FOR SERVICES, MATERIALS, SUPPLIES, MACHINERY, OR EQUIPMENT, OR FOR THE USE THEREOF; INSERT THEREIN A PROVISION THAT SUCH CONTRACT IS ASSIGNABLE TO THE GOVERNMENT; MAKE ALL SUCH CONTRACTS IN HIS OWN NAME, AND NOT BIND OR PURPORT TO BIND THE GOVERNMENT OR THE CONTRACTING OFFICER THEREUNDER. PURCHASES IN EXCESS OF $500 SHALL BE MADE OR PLACED WITHOUT THE PRIOR APPROVAL OF THE CONTRACTING OFFICER.

(D) ENTER INTO NO SUBCONTRACT FOR ANY PORTION OF THE WORK, EXCEPT IN THE FORM PRESCRIBED BY THE SECRETARY OF WAR, NOR WITHOUT THE WRITTEN APPROVAL OF THE CONTRACTING OFFICER. SUBCONTRACTS ARE DEFINED AS CONTRACTS ENTERED INTO BY THE CONTRACTOR WITH OTHERS WHICH INVOLVE THE PERFORMANCE, WHOLLY OR IN PART AT THE SITE OF THE WORK, OF SOME PART OF THE WORK DESCRIBED IN ARTICLE I HEREOF.

IT IS PROVIDED IN PARAGRAPH 2 OF ARTICLE I OF THE CONTRACT THAT THE CONTRACTING OFFICER MAY BY WRITTEN ORDER MAKE CHANGES IN OR ADDITIONS TO THE DRAWINGS AND SPECIFICATIONS, ISSUE ADDITIONAL INSTRUCTION, REQUIRE ADDITIONAL WORK, OR DIRECT THE OMISSION OF WORK COVERED BY THE CONTRACT, AND THAT IF SUCH CHANGES CAUSE A MATERIAL INCREASE OR DECREASE IN THE AMOUNT OR CHARACTER OF THE WORK, OR IN THE TIME REQUIRED FOR PERFORMANCE, AN EQUITABLE ADJUSTMENT IN THE AMOUNT OF THE FIXED FEE SHALL BE MADE AND THE CONTRACT MODIFIED IN WRITING ACCORDINGLY. HOWEVER, IT DOES NOT APPEAR THAT THERE IS HERE INVOLVED SUCH A CHANGE IN THE SPECIFICATIONS OR WORK COVERED BY THE CONTRACT, AS IS CONTEMPLATED IN ARTICLE I OF THE CONTRACT.

WHILE, UNDER THE USUAL FORM OF LUMP-SUM CONTRACT, THE GOVERNMENT MAY NOT BE DIRECTLY CONCERNED WHETHER A GREATER OR LESSER PORTION OF WORK BE SUBCONTRACTED, IN THIS TYPE OF CONTRACT, WHEREIN THE GOVERNMENT UNDERTAKES TO BEAR THE COST OF THE WORK, IT IS A MATTER OF CONCERN, FOR IT MAY BE SAFELY ASSUMED THAT EACH SUBCONTRACT FOR WHICH THE CONTRACTOR MUST BE REIMBURSED WILL CONTAIN SOME MARGIN OF PROFIT IN ADDITION TO THAT ALLOWED THE CONTRACTOR AS A FIXED FEE; AND THAT THE SUBCONTRACTING OF WORK, NOT CONTEMPLATED TO BE SO PERFORMED WHEN THE CONTRACT WAS MADE AND THE CONTRACTOR'S FEE WAS FIXED, WILL RESULT IN AN INCREASE IN THE COST TO THE GOVERNMENT BY REASON OF AN UNANTICIPATED PYRAMIDING OF PROFITS. CONVERSELY, THE PERFORMANCE BY THE CONTRACTOR OF WORK WHICH WAS TO BE SUBCONTRACTED MIGHT BE EXPECTED TO RESULT IN A LESSER COST. IT IS EVIDENT THAT CONTRACT NO. W-6594-QM-1 CONTEMPLATES THAT SOME PART OF THE WORK MAY BE SUBCONTRACTED, BUT NEITHER ARTICLE V, SUBSECTION 1 (D), NOR ANY OTHER PART OF THE CONTRACT, THROWS ANY LIGHT ON THE QUESTION OF THE PRECISE AMOUNT OR PORTIONS OF WORK WHICH THE CONTRACTOR WILL PERFORM. THIS QUESTION BECOMES PERTINENT IN DETERMINING WHETHER, IN AGREEING TO PERFORM THE MECHANICAL WORK ITSELF RATHER THAN BY SUBCONTRACT, THE CONTRACTOR HAS UNDERTAKEN SOMETHING WHICH IT WAS NOT ALREADY BOUND TO DO, AND SUCH AS WILL SERVE AS CONSIDERATION FOR A VALID AGREEMENT REVISING THE FIXED FEE.

IT HAS BEEN SAID THAT PREVIOUS NEGOTIATIONS, ORAL OR OTHERWISE, BECAME MERGED IN THE EXECUTED INSTRUMENT, AND ARE NOT MATERIAL TO IT. IT IS RECOGNIZED, HOWEVER, THAT SUCH A WRITTEN INSTRUMENT MUST BE CONSTRUED TO GIVE EFFECT TO THE INTENTION OF THE PARTIES THERETO, AS EVIDENCED BY THE LANGUAGE USED; AND IF THAT LANGUAGE IS PLAIN AND UNAMBIGUOUS, CONSTRUCTION IS NOT REQUIRED. BUT IF THE LANGUAGE IS AMBIGUOUS IN ANY RESPECT, THEN RESORT PROPERLY MAY BE HAD TO SURROUNDING CIRCUMSTANCES AND FACTS TO DETERMINE THE CONTRACT WHICH THE PARTIES HAVE MADE FOR THEMSELVES. UNITED STATES V. BETHLEHEM STEEL COMPANY, 205 U.S. 105; UNITED STATES V. PECK, 102 U.S. 64.

IT BECOMES APPARENT FROM AN EXAMINATION OF THE RECORD OF PRIOR NEGOTIATIONS THAT THE CONTRACT CONTEMPLATED THE SUBLETTING OF THE MECHANICAL WORK HERE INVOLVED; THAT THE STIPULATED FEE WAS FIXED WITH THAT IN VIEW; THAT THE CONTRACTOR COULD NOT BE REQUIRED TO UNDERTAKE SUCH WORK ITSELF RATHER THAN BY SUBCONTRACT, IN THE ABSENCE OF A SUPPLEMENTAL AGREEMENT TO DO SO; AND THAT A SUPPLEMENTAL AGREEMENT SUCH AS CONTEMPLATED BY YOU WILL BE IN THE INTEREST OF THE GOVERNMENT AND ACCOMPLISH A SUBSTANTIAL SAVING BY THE ELIMINATION OF A PORTION OF THE SUBCONTRACTOR'S PROFIT FROM THE COST OF THE WORK.

IF THE MATTER BE VIEWED IN ANOTHER LIGHT, IT SEEMS APPARENT THAT THE CONTRACT, AS REDUCED TO WRITING, DID NOT REFLECT THE ACTUAL CONTRACT ON WHICH THE PARTIES HAD PREVIOUSLY AGREED AND ATTEMPTED TO NEGOTIATE, BY REASON OF A MUTUAL MISTAKE IN OMITTING THEREFROM A PROVISION UNDERTAKING TO REVISE THE STIPULATED FIXED FEE IN THE EVENT THE CONTRACTOR UNDERTOOK TO PERFORM THE MECHANICAL WORK. SUCH A MISTAKE FORMS THE USUAL 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. SEE POOLE ENGINEERING AND MACHINE CO. V. UNITED STATES, 58 CT.1CLS. 9; HYGIENIC FIBRE CO. V. UNITED STATES, 59 ID. 598; MORGAN V. UNITED STATES, ID. 650; CHICAGO, WILMINGTON AND FRANKLIN COAL CO. V. UNITED STATES, ID. 708; ORDNANCE ENGINEERING CORP. V. UNITED STATES, 62 ID. 204; U.S. CARTRIDGE CO. V. UNITED STATES, 62 ID. 214; ACKERLIND V. UNITED STATES, 240 U.S. 531; ELLIOTT V. SACKETT, 108 U.S. 132; SNELL V. INSURANCE CO., 98 U.S. 85. COMPARE EMERY V. UNITED STATES, 13 F./2D) 658.

THERE APPEARS TO BE NO ROOM FOR DOUBT WHAT THE AGREEMENT WAS IN THIS RESPECT, AS UNDERSTOOD BOTH BY THE WAR DEPARTMENT AND BY THE CONTRACTOR, AND AS INDICATED IN THE RECORD OF PREVIOUS NEGOTIATIONS. ACCORDINGLY, THIS OFFICE IS NOT REQUIRED TO OBJECT TO THE EXECUTION OF A SUPPLEMENTARY AGREEMENT, REVISING THE CONTRACTOR'S FIXED FEE IN CONFORMITY WITH YOUR ABOVE-QUOTED LETTER, IN CONSIDERATION OF PERFORMANCE BY THE CONTRACTOR OF THE MECHANICAL WORK RATHER THAN SUBCONTRACTING SUCH WORK. IT MAY BE SUGGESTED, HOWEVER, THAT THERE BE INCORPORATED IN FUTURE CONTRACTS OF THIS NATURE APPROPRIATE PROVISIONS REFLECTING ALL MATERIAL MATTERS WHICH HAVE BEEN AGREED UPON IN THE NEGOTIATIONS PRECEDING THE EXECUTION OF THE WRITTEN CONTRACT.