_________________________ DENIED: October 19, 1993 _________________________ GSBCA 12031 DIPLOMATIC PAINTING & BUILDING SERVICES CO., INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Enrique Balseiro, Bethesda, MD, counsel for Appellant. Richard R. Butterworth, Jr., Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges NEILL, HYATT, and DeGRAFF. DeGRAFF, Board Judge. Both parties move the Board for summary relief. Because there are no material facts in dispute and because General Services Administration (GSA) is entitled to judgment as a matter of law, GSA's motion for summary relief is granted and the motion of Diplomatic Painting & Building Services Co, Inc. (Diplomatic) is denied. The appeal is consequently denied. Findings of Fact On November 9, 1990, GSA issued an invitation for bids to supply custodial services for a building located in Washington, D.C. The proposed contract was for a one-year term, with four one-year option periods. The invitation explains that the successful bidder would be required to pay its employees the minimum wages and fringe benefits incorporated in a wage determination issued by the Department of Labor, pursuant to the Service Contract Act of 1965, 41 U.S.C. 351-358 (1988). Appeal File, Exhibit 1. Section B of the invitation explains that, if GSA were to exercise any of its options, GSA would adjust the contract price pursuant to clause 552.222-43, Fair Labor Standards Act and Service Contract Act - Price Adjustment (Multiyear and Option Contracts) (June 1986). Clause 552.222-43 provides that, when an option is exercised, "[e]ighty percent of the monthly option price(s) will be adjusted upward or downward based on the percentage increase or decrease in the minimum hourly wages and fringe benefits to be paid under this contract." In order to determine the percentage increase or decrease in the minimum hourly wages and fringe benefits to be paid, the clause provides that GSA will compare the wage determination applicable to the initial contract period with the wage determination applicable to the option period. Finally, the clause provides that upward price adjustments are limited to no more than six percent. The clause does not contain any express limitation upon downward price adjustments. Appeal File, Exhibit 1. Consistent with clause 552.222-43, section B of the invitation directs bidders not to include in their bids any allowance to cover increased costs for which contract price adjustments might be made pursuant to the price adjustment clause. Clause 552.222-43 requires bidders to certify that they have not included in their bids any allowance for increased costs for which a contract price adjustment might be made. The invitation does not prohibit bidders from including in their bids an allowance for downward contract price adjustments. Appeal File, Exhibit 1. Diplomatic was the successful bidder and, on January 30, 1991, the parties entered into contract GS-11P-90-MJC-0071. Appeal File, Exhibit 1. During the initial year of the contract, from February 1, 1991, through January 31, 1992, wage determination 75-0098 was effective. Appeal File, Exhibits 1, 4. On September 17, 1991, the Department of Labor issued wage determination 86-1245. GSA exercised its option for one one-year period, from February 1, 1992, through January 31, 1993, and modified the contract to incorporate the new wage determination for the option period.[foot #] 1 Appeal File, Exhibit 2. The new wage determination required Diplomatic to pay its employees a minimum amount for wages and fringe benefits that is thirty-nine percent less than the minimum amount that wage determination 75-0098 required Diplomatic to pay. Appeal File, Exhibits 2, 4. On February 4, 1992, GSA notified Diplomatic that, due to the thirty-nine percent decrease in applicable minimum wages and fringe benefits, GSA was decreasing Diplomatic's monthly price in accordance with clause 552.222-43 of the contract. Appeal File, ----------- FOOTNOTE BEGINS --------- [foot #] 1 The appeal file does not state the date that GSA exercised this option. ----------- FOOTNOTE ENDS ----------- Exhibit 2. GSA decreased Diplomatic's price from $51,214.07 per month to $35,235.28 per month. Appeal File, Exhibits 2, 4. As a result of GSA's actions, on April 30, 1992, Diplomatic submitted a certified claim to the contracting officer. Diplomatic asserted that GSA's actions were contrary to the terms of the contract which, by reasonable interpretation and by implication, contains a six percent downward adjustment limitation. Diplomatic also asserted that GSA's actions were contrary to its past dealings with the National Archives and Records Administration (Archives).[foot #] 2 Diplomatic asserted that the Department of Labor's wage determination did not accurately reflect prevailing wages in the Washington, D.C. area, and requested that GSA ask the Department of Labor to revise its wage determination. Appeal File, Exhibit 3. On June 17, 1992, the contracting officer issued a decision upon Diplomatic's claim. The decision explains that the contracting officer adjusted the contract price in accordance with contract clause 552.222-43. Attached to the decision is an explanation of the contracting officer's computations. In the decision, the contracting officer states that the parties' contract contains no six percent downward adjustment limitation, and also states that a contract between Diplomatic and another government agency is irrelevant to the interpretation of a contract between Diplomatic and GSA. Appeal File, Exhibit 4. On September 18, 1992, Diplomatic filed its notice of appeal with the Board. We assume that this filing was timely, given that GSA has not argued otherwise.[foot #] 3 GSA filed a motion for summary relief on April 15, 1993. Diplomatic asserted that it needed additional discovery in order to oppose GSA's motion. We denied GSA's motion on May 18, 1993, in order to provide Diplomatic with the opportunity to conduct its discovery. On June 9, 1993, GSA filed a second motion for summary relief. In its motion, GSA asserts that this appeal presents only an issue of contract interpretation and that it is entitled ----------- FOOTNOTE BEGINS --------- [foot #] 2 The National Archives and Records Administration interpreted clause 552.222-43 as containing a limitation upon downward contract price adjustments equal to the clause's express limitation upon upward contract price adjustments. Supplemental Appeal File, Exhibit 1. There is no evidence to suggest that GSA was aware of this interpretation until Diplomatic submitted its claim letter. [foot #] 3 The appeal file contains no evidence to establish when Diplomatic received the contracting officer's decision. ----------- FOOTNOTE ENDS ----------- to prevail. GSA argues that clause 552.222-43 is clear and that it does not include a six percent downward adjustment limitation. In addition, GSA argues that the interpretation of clause 552.222-43 by Archives is not binding upon GSA. GSA also asserts that it has consistently interpreted clause 552.222-43 as containing a limitation upon upward contract price adjustment, and not containing a limitation upon downward contract price adjustments. Attached to GSA's motion is an affidavit from the author of clause 552.222-43, who states that the clause was drafted in order to protect the Government from exorbitant wage increases during the option years of contracts. The author states that the clause has never been interpreted by GSA as limiting downward adjustments to contract price. On June 15, 1993, Diplomatic filed a motion to compel GSA to respond to certain of Diplomatic's discovery requests. GSA agreed to provide Diplomatic with information from GSA's regional offices concerning GSA's interpretation of clause 552.222-43. On June 24, 1993, and July 14, 1993, GSA provided Diplomatic and the Board with declarations signed by persons in each region who know whether, and to what extent, GSA has made downward adjustments to contract prices, based upon clause 552.222-43. The declarations establish that, in regions where downward adjustments have occurred, GSA has not interpreted clause 552.222-43 as containing a limitation upon those adjustments.[foot #] 4 On August 6, 1993, Diplomatic filed its opposition to GSA's motion for summary relief and a cross-motion for summary relief. In its brief, Diplomatic contends that clause 552.222-43 is latently ambiguous, given that GSA and Archives interpret the clause differently; that Archives' interpretation is more fair than GSA's interpretation; that Diplomatic's interpretation of the clause is reasonable; that no meeting of the minds occurred concerning the meaning of the clause because GSA never considered what action it would take if wage determination rates were lowered; and that the contract should be reformed.[foot #] 5 ----------- FOOTNOTE BEGINS --------- [foot #] 4 On July 16, 1993, GSA supplemented its motion for summary relief by submitting these eleven declarations as an exhibit to its motion. [foot #] 5 Diplomatic also asserts that, although the minimum wages and benefits that it is obligated to pay have decreased, its labor-related expenses (payroll taxes, unemployment compensation insurance, worker's compensation insurance, liability insurance) have increased, and Diplomatic claims that it is entitled to payment for these increased expenses. We do not address Diplomatic's assertion because Diplomatic has never submitted a claim to GSA requesting payment for these amounts. ----------- FOOTNOTE ENDS ----------- On August 27, 1993, GSA filed its reply to Diplomatic's opposition to GSA's motion for summary relief and its opposition to Diplomatic's motion for summary judgment. GSA noted that Diplomatic's assertion that the contract should be reformed is based upon cases involving mistakes in bids. GSA also noted that Diplomatic had never before presented any argument concerning mistake in bid. On September 16, 1993, Diplomatic filed its reply to GSA's opposition to Diplomatic's motion for summary relief. Diplomatic asserts that GSA knew or should have known that Diplomatic's bid was based upon a mistaken belief, shared by GSA, that wage determination rates would not be lowered. Diplomatic argues that, due to this mistake, GSA is reaping a windfall and that reformation of the parties' contract is appropriate. Discussion Summary relief is appropriate when there are no genuine issues of material fact in dispute and when the moving party is entitled to judgment as a matter of law. Rule 8(g); CRC Systems, Inc. v. General Services Administration, GSBCA 11173, 93-2 BCA 25,842. We agree with GSA that the issue presented in this appeal is one of contract interpretation and such a question is one of law, not of fact. Further, we agree with GSA's reading of clause 552.222-43. The clause is clear and does not include a six percent downward adjustment limitation. There is simply no reasonable reading of the clause which will permit us to conclude that it is ambiguous or that it incorporates any limitation upon downward adjustments. Given the express limitation upon upward adjustments and the pointed lack of any such limitation upon downward adjustments, a reasonable contractor could not have inferred that any limitation upon downward adjustments existed. Hills Materials Co. v. Rice, 982 F.2d 514 (Fed. Cir. 1992). We also agree with GSA that, if Diplomatic takes issue with the wage determination, it must present its case to the Department of Labor. JL Associates, Inc. v. General Services Administration, GSBCA 11922, 93-3 BCA 25,939. We do not find any of Diplomatic's arguments convincing. The interpretation of clause 552.222-43 by Archives does not influence the outcome of this appeal. Diplomatic had no reason to assume that GSA would interpret the clause in a manner consistent with another government agency and in a manner inconsistent with the terms of the clause itself. Similarly, Diplomatic had no reason to suppose that GSA would be bound by another government agency's interpretation of the clause. Evidence of how Archives viewed the clause at issue does not establish that there was a course of dealing between GSA and Diplomatic. The fact that Archives had, upon one occasion, interpreted the clause in a particular manner does not establish a trade practice. Mission Van and Storage, Inc., GSBCA 7386, 85- 1 BCA 17,814, aff'd reconsideration, 85-2 BCA 18,032. We also reject Diplomatic's argument that GSA is reaping a windfall and that Archives' interpretation of clause 552.222-43 is more fair than is GSA's interpretation. Diplomatic has offered no evidence to support its allegation that GSA is reaping a windfall. As for what is fair, Diplomatic's and Archives' interpretation of the clause could easily achieve a result that is unfair to the Government: As Diplomatic reads the clause, even though it was entitled to reduce its workers' wages and fringe benefits by thirty-nine percent, GSA was entitled to reduce a portion of the contract price by only six percent. According to the Department of Labor's determination, Diplomatic could have substantially reduced wages and fringe benefits and still been able to hire workers to perform the contract. It is not unfair to require Diplomatic to pass through to GSA the benefit of the Department of Labor's determination or, if Diplomatic believes that the Department of Labor's determination is wrong, to require Diplomatic to complain to the Department of Labor. Finally, we do not agree that the contract should be reformed to include a six percent limitation upon downward price adjustments. If both parties entered into this contract relying upon a mistaken belief as to a basic fact, the contract could be reformed in order to make its terms conform to the true state of the facts. The purpose of reformation is to give effect to the true agreement of parties, and reformation is not appropriate unless there is convincing evidence that the parties agreed to be bound in accordance with the terms that Diplomatic seeks to establish. Atlas Corp. v. United States, 895 F.2d 745 (Fed. Cir.), cert. denied, 498 U.S. 811 (1990). If, as Diplomatic asserts, there was no meeting of the minds, then reformation is definitely not appropriate. As for Diplomatic's assertion that the parties were mistaken in their belief concerning whether wage determination rates would decrease, there is no evidence that either party held any particular belief concerning what might happen to wage determination rates. There is also no evidence that GSA ever agreed to a six percent limitation upon contract price reductions. The contract clause at issue anticipated that wage determination rates might decrease and the clause expressly assigns to Diplomatic the risk of a decrease. We have no basis for reassigning the risk that Diplomatic assumed when it entered into the contract. Decision For the reasons stated above, GSA's motion for summary relief is GRANTED and Diplomatic's motion for summary relief is DENIED. The appeal is consequently denied. ___________________________ MARTHA H. DeGRAFF Board Judge We concur: __________________________ ___________________________ EDWIN B. NEILL CATHERINE B. HYATT Board Judge Board Judge