B-163624, MAR. 15, 1968

B-163624, MAR. 15, 1968

CONTRACTS - MISTAKES - REFORMATION DECISION TO SECRETARY OF THE ARMY HOLDING THAT CONTRACT WITH SECURITY CONSTRUCTION CO. INC. CAN NOT BE REFORMED. CONTRACTOR WHO ACCEPTED CHANGE ORDER AND SEVERAL MONTHS LATER ALLEGES THAT COST OF PARTICULAR ITEM WAS NOT INCLUDED MUST HAVE CONTRACT REGARDED AS ON ACCORD AND SATISFACTION OF ALL MATTERS ARISING OUT OF THE MODIFICATION AND THERE IS NO LEGAL BASIS FOR AUTHORIZING REFORMATION.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER ENGGC-M, DATED FEBRUARY 19, 1968, FROM THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, SUBMITTING FOR OUR DECISION THE QUESTION WHETHER MODIFICATION NO. 4 TO CONTRACT NO. DA-49-080 -ENG-4818 WITH THE SECURITY CONSTRUCTION COMPANY, INC. (SECURITY), MAY BE REFORMED TO PERMIT AN ADDITIONAL PAYMENT THEREUNDER IN THE AMOUNT OF $6,463.78. THE GENERAL COUNSEL HAS RECOMMENDED THAT THE REQUEST FOR RELIEF BE DENIED.

THE CONTRACT WAS AWARDED TO SECURITY ON DECEMBER 31, 1959, IN THE AMOUNT OF $1,941,500. THE CONTRACT WAS FOR THE CONSTRUCTION OF AIRCRAFT MAINTENANCE FACILITIES, NAS AND NASVR HANGAR BUILDINGS, AT JOHN H. TOWERS FIELD, ANDREWS AIR FORCE BASE, MARYLAND. IT IS REPORTED THAT ON JANUARY 12, 1960, THE UNITED STATES ARMY ENGINEER DIVISION, NORTH ATLANTIC (NAD), INSTRUCTED THE DISTRICT ENGINEER TO ACCOMPLISH A NUMBER OF DESIGN REVISIONS AND CLARIFICATIONS UNDER THE CONTRACT SPECIFICATIONS. AMONG THESE WAS THE SUBSTITUTION OF NONFLAMMABLE INSULATING OIL FOR FLAMMABLE INSULATING OIL IN TRANSFORMERS. THESE REVISIONS AND CLARIFICATIONS, TOGETHER WITH OTHERS RECOMMENDED BY THE DISTRICT STAFF, WERE INCORPORATED INTO A DOCUMENT BEARING THE SERIAL NUMBER OF THE INVITATION FOR BIDS AND ACCOMPANIED BY 19 REVISED DRAWINGS AS LISTED THEREIN. ITEM 4E OF SUPPLEMENT NO. 1 COVERED THE DESIRED TRANSFORMER OIL CHANGE. ON APRIL 6, 1960, SECURITY WAS FURNISHED THE ABOVE REVISIONS AND WAS REQUESTED TO SUBMIT A DETAILED COST PROPOSAL. GOVERNMENT ENGINEERS HAD PREPARED A COST ESTIMATE IN THE NET AMOUNT OF $16,326.14 FOR THE CHANGE, INCLUDING AN INCREASE OF $15,991.74 FOR THE TRANSFORMER OIL. HOWEVER, IT WAS SUBSEQUENTLY DISCOVERED THAT THE ESTIMATOR HAD ERRONEOUSLY ASSUMED THAT THE CHANGE WOULD AFFECT 17 TRANSFORMERS WHEN, IN FACT, ALL BUT 3 OF THE TRANSFORMERS WERE OF THE DRY INSULATED TYPE NOT AFFECTED BY THE OIL CHANGEOVER. THE AMOUNT FOR THE TRANSFORMER OIL SUBSTITUTION WAS THEREFORE REDUCED TO $8,413.08, RESULTING IN AN ESTIMATED NET INCREASE FOR THE ENTIRE CHANGE OF $8,747.48.

SECURITY SUBMITTED ITS PROPOSAL ON JUNE 21, 1960, IN THE AMOUNT OF $8,338.02, AND A PRICE BREAKDOWN WAS ATTACHED ENTITLED "GENERAL BREAKDOWN.' HOWEVER, SECURITY DID NOT SPECIFICALLY REFER TO THE CHANGE FOR TRANSFORMER OIL. THEREAFTER, ON OCTOBER 3, 1960, THE GOVERNMENT ACCEPTED SECURITY'S PROPOSAL OF JUNE 21, 1960, AND FORM 2180A, CONTRACTOR DATA, AND ATTACHMENT "A" WERE FORWARDED TO SECURITY ON OR ABOUT JANUARY 12, 1961. ATTACHMENT "A" INCLUDED A SCOPE OF WORK PROVISION AND A SUMMARY OF THE NEGOTIATIONS CULMINATING IN THE ACCEPTANCE OF SECURITY'S PROPOSAL OF JUNE 21, 1960. SECURITY EXECUTED ATTACHMENT "A" TO FORM 2180A ON FEBRUARY 2, 1961, AND ON FEBRUARY 24, 1961, MODIFICATION NO. 4 TO THE CONTRACT, FORMALIZING THIS ACCEPTED PROPOSAL IN THE AMOUNT OF $8,338.02, WAS SENT TO SECURITY.

THE CHANGE ORDER (MODIFICATION NO. 4) WAS ACCEPTED BY SECURITY AND RETURNED TO THE GOVERNMENT ON MARCH 2, 1961. THIS CHANGE ORDER PROVIDED FOR THE FURNISHING OF ALL LABOR AND MATERIAL NECESSARY TO ACCOMPLISH THE CHANGES TO THE CONTRACT DRAWINGS AND SPECIFICATIONS ON SUPPLEMENT NO. 1 DATED FEBRUARY 19, 1960. THE REFERRED-TO SUPPLEMENT NO. 1 INCLUDED THE TRANSFORMER OIL CHANGE IN QUESTION.

ON JUNE 5, 1961, SECURITY SUBMITTED A REQUEST FOR ADDITIONAL COSTS INVOLVED IN THE TRANSFORMER OIL CHANGE IN THE AMOUNT OF $6,463.78. IT IS SECURITY'S POSITION THAT WHEN IT SUBMITTED ITS PRICE QUOTATIONS ON JUNE 21, 1960, IT FAILED TO INCLUDE COSTS COVERING THE CHANGE INTRANSFORMER OIL. SECURITY ALLEGES THAT IT WAS THE UNDERSTANDING OF MR. A. C. SEEMAN, ITS AUTHORIZED REPRESENTATIVE, FOLLOWING A MEETING (WHICH HE DID NOT ATTEND) BETWEEN SUBCONTRACTOR REPRESENTATIVES AND AN ESTIMATOR FOR THE GOVERNMENT, THAT THE TRANSFORMER OIL WOULD BE HANDLED AS A SEPARATE MATTER AND, THEREFORE, THAT IT WAS NOT WITHIN THE PURVIEW OF MODIFICATION NO. 4. THE CONTRACTOR STRESSES THAT ITS COST FOR THE OIL CHANGEOVER WAS NOT INCLUDED IN ITS COST BREAKDOWN AND FEELS THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THIS OMISSION, EVEN THOUGH THE CONTRACTOR HIMSELF WAS NOT AWARE OF IT UNTIL AFTER THE WORK HAD BEEN COMPLETED. HOWEVER, THE CONTRACTING OFFICER HAS REPORTED THAT HE FOUND NO CONCLUSIVE EVIDENCE TO SUPPORT SECURITY'S ALLEGATION THAT A SEPARATE NEGOTIATION WOULD BE CONDUCTED WITH REGARD TO THE ADDITIONAL COSTS FOR THE TRANSFORMER OIL CHANGE. ALSO, THE CONTRACTING OFFICER STATES THAT THE CONTRACTOR'S PROPOSED PRICE FOR THE CHANGEOVER WAS IN LINE WITH THE GOVERNMENT ESTIMATE FOR THAT WORK.

THE CONTRACTOR HAS REQUESTED REFORMATION OF MODIFICATION NO. 4 TO THE CONTRACT WHICH HAS BEEN FULLY PERFORMED TO PROVIDE FOR ADDITIONAL COMPENSATION. HENCE, THE BASIC QUESTION IS WHETHER SECURITY'S ACCEPTANCE OF MODIFICATION NO. 4 CONSUMMATED A BINDING CONTRACT MODIFICATION. DETERMINING WHETHER A MODIFICATION HAS BEEN AGREED UPON, IT IS THE MUTUAL INTENT OF THE PARTIES THAT GOVERNS, AND FOR THIS REASON SUBSTANTIAL AGREEMENT IN ALL MATERIAL RESPECTS MUST BE SHOWN. WHILE A CONTRACT MADE THROUGH MUTUAL MISTAKE AS TO MATERIAL FACTS MAY EITHER BE RESCINDED OR REFORMED, THERE IS A PRESUMPTION OF LAW THAT A WRITTEN INSTRUMENT WAS CAREFULLY PREPARED AND EXECUTED, THAT THE PARTIES KNEW ITS CONTENTS, AND THAT IT SETS FORTH FULLY AND CORRECTLY THEIR FINAL AGREEMENT. 45 AM. JUR., REFORMATION OF INSTRUMENTS, SEC. 112; 76 C.J.S., REFORMATION OF INSTRUMENTS, SEC. 82; 26 COMP. GEN. 899. THE BURDEN IS ON THE PARTY SEEKING REFORMATION TO PRODUCE EVIDENCE SUFFICIENT TO OVERCOME SUCH PRESUMPTION. SECURITY HAS NOT MET THIS BURDEN OF PROOF ON THE RECORD BEFORE US.

THE LANGUAGE OF MODIFICATION NO. 4, ITS ACCEPTANCE BY SECURITY WITHOUT QUESTION AS TO THE SUFFICIENCY OF THE AMOUNT STATED, AND THE ACCEPTANCE OF BENEFITS THEREUNDER LEAD TO THE CONCLUSION THAT THE FOREGOING CIRCUMSTANCES CONSTITUTED AN ACCORD AND SATISFACTION OF ALL MATTERS ARISING OUT OF THE MODIFICATION. SEE CANNON CONSTRUCTION COMPANY V UNITED STATES, 319 F.2D 173; LANGOMA INDUSTRIES V UNITED STATES, 135 F.SUPP. 282. CF. 46 COMP. GEN. 441; 41 ID. 514.

WE THEREFORE FIND NO LEGAL BASIS FOR AUTHORIZING THE REFORMATION OF MODIFICATION NO. 4.