A-83932, MARCH 8, 1937, 16 COMP. GEN. 832

A-83932: Mar 8, 1937

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ADVERTISING - BIDS - EVALUATION - CONSIDERATION OF FEDERAL EXCISE TAX WHERE BIDS ARE SUBMITTED BY TWO MANUFACTURERS IN CONNECTION WITH THE PURCHASE OF AN AUTOMOBILE. IS AUTHORIZED. WERE RECEIVED UNDER BID INVITATION U.S.D.I. THERE IS ALSO ENCLOSED A COPY OF THE BID INVITATION AND A COPY OF THE ABSTRACT OF BIDS. YOUR ATTENTION IS DIRECTED TO THE FACT THAT ON THE BASIS OF INSTRUCTIONS RECEIVED FROM YOUR OFFICE THE REO MOTOR CAR COMPANY OF LANSING. THIS BIDDER INDICATED IN HIS BID THAT HIS PRICE WAS EXCLUSIVE OF FEDERAL EXCISE TAX IN THE AMOUNT OF $19.03 PER UNIT. THE ONLY OTHER BID RECEIVED WAS THAT OF THE DIAMOND T. THE NET DELIVERED COST TO THE GOVERNMENT UNDER THAT BID WOULD HAVE BEEN $2.

A-83932, MARCH 8, 1937, 16 COMP. GEN. 832

ADVERTISING - BIDS - EVALUATION - CONSIDERATION OF FEDERAL EXCISE TAX WHERE BIDS ARE SUBMITTED BY TWO MANUFACTURERS IN CONNECTION WITH THE PURCHASE OF AN AUTOMOBILE, ONE INCLUDING, THE OTHER EXCLUDING, FEDERAL EXCISE TAX, BUT BOTH STATING THE EXACT AMOUNT OF THE TAX INVOLVED, BID EVALUATION TAKING SAID TAX INTO CONSIDERATION, IS AUTHORIZED, THERE BEING NO NEGOTIATION NECESSARY WITH THE BIDDERS TO DETERMINE THE TAX AMOUNT AND CONSEQUENTLY NO BASIS FOR COMPLAINT BY BIDDERS. 15 COMP. GEN. 1030, DISTINGUISHED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, MARCH 8, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF FEBRUARY 13, 1937, WITH INCLOSURES, AS FOLLOWS:

THE ENCLOSED TWO BIDS COVERING THE PROPOSED PURCHASE OF TWO HEAVY DUTY TRUCKS FOR THE INDIAN SERVICE AT GALLUP, NEW MEXICO, WERE RECEIVED UNDER BID INVITATION U.S.D.I. NO. 2119 ISSUED JANUARY 12, FOR OPENING JANUARY 22. THERE IS ALSO ENCLOSED A COPY OF THE BID INVITATION AND A COPY OF THE ABSTRACT OF BIDS.

YOUR ATTENTION IS DIRECTED TO THE FACT THAT ON THE BASIS OF INSTRUCTIONS RECEIVED FROM YOUR OFFICE THE REO MOTOR CAR COMPANY OF LANSING, MICHIGAN, WOULD BE CONSIDERED THE LOW BIDDER, THIS COMPANY OFFERING THE TWO TRUCKS F.O.B. LANSING, MICHIGAN, FOR $2,270, WHICH AFTER CONSIDERING TIME DISCOUNT AND ESTIMATED FREIGHT ON GOVERNMENT BILL OF LADING, AMOUNTS TO A NET DELIVERED COST OF $2,515.86. THIS BIDDER INDICATED IN HIS BID THAT HIS PRICE WAS EXCLUSIVE OF FEDERAL EXCISE TAX IN THE AMOUNT OF $19.03 PER UNIT. THE ONLY OTHER BID RECEIVED WAS THAT OF THE DIAMOND T. MOTOR TRUCK SALES, WASHINGTON, D.C., OFFERING TWO TRUCKS F.O.B. CHICAGO, ILL., IN THE AMOUNT OF $2,260, WHICH AMOUNTS TO A NET DELIVERED COST OF $2,520.16 AFTER CONSIDERING TIME DISCOUNT AND ESTIMATED FREIGHT ON GOVERNMENT BILL OF LADING. THIS BIDDER STATED IN HIS PROPOSAL THAT THE BID PRICE INCLUDED FEDERAL EXCISE TAX IN THE AMOUNT OF $21.95 PER UNIT.

THE DEPARTMENT WISHES TO POINT OUT THAT IF THE DIAMOND T MOTOR TRUCK SALES HAD EXCLUDED THE FEDERAL EXCISE TAX FROM THE BID PRICE, THE NET DELIVERED COST TO THE GOVERNMENT UNDER THAT BID WOULD HAVE BEEN $2,476.26 AS AGAINST THE REO NET COST OF $2,515.86, MAKING A NET SAVING TO THE GOVERNMENT OF $39.60 FOR THE TWO TRUCKS. IF THE DIAMOND T MOTOR TRUCK SALES' BID HAD BEEN SUBMITTED EXCLUSIVE OF THE FEDERAL TAX, THE TWO BIDS RECEIVED WOULD HAVE BEEN ON EXACTLY THE SAME BASIS INSOFAR AS THE TAX IS CONCERNED; I.E., THE AWARD TO EITHER BIDDER WOULD HAVE REQUIRED THE ISSUANCE OF A TAX EXEMPTION CERTIFICATE, FORM 1094. IT SEEMS OBVIOUS TO THE DEPARTMENT IN THIS INSTANCE THAT THE INTERESTS OF THE GOVERNMENT REQUIRE THAT THE PURCHASE BE MADE FROM THE DIAMOND T MOTOR TRUCK SALES AT THE NET PRICE EXCLUSIVE OF FEDERAL EXCISE TAX, AND THAT AN EXEMPTION CERTIFICATE BE FURNISHED THE CONTRACTOR TO COVER THE EXCLUDED TAX WHICH WOULD BE SHOWN IN THE CONTRACT, AND ALSO AS A MATTER OF RECORD ON THE ORDER.

THE DECISION OF THE COMPTROLLER GENERAL, A-67600, DATED JANUARY 7, 1936, TO THE SECRETARY OF THE NAVY, AND THE DECISION OF THE COMPTROLLER GENERAL, A-71669, DATED MAY 26, 1936, TO THIS DEPARTMENT, BOTH APPEAR TO FORBID THE AWARD TO THE DIAMOND T MOTOR TRUCK SALES IN THIS INSTANCE AS OUTLINED IN THE PRECEDING PARAGRAPH. IN DECISION A 67600, IT WAS STATED THAT WHETHER A BID SUBMITTED INCLUDES OR EXCLUDES THE TAX IS OF CONCERN TO THE DEPARTMENT INVOLVED ONLY FOR THE PURPOSE OF DETERMINING WHICH IS THE LOWEST BID AND WHETHER THE SUCCESSFUL BIDDER WILL BE ENTITLED TO A CERTIFICATE FOR THE PURPOSE OF OBTAINING ABATEMENT OR REFUND OF THE TAX, AND THAT FOR THE PURPOSE OF AWARD, BIDS ARE TO BE EVALUATED AS MADE. THE ACTION WHICH, IN THE PRESENT INSTANCE, APPEARS ENTIRELY IN ACCORDANCE WITH THE INTERESTS OF THE GOVERNMENT, WAS CRITICIZED UNDER SOMEWHAT SIMILAR CIRCUMSTANCES BY THE COMPTROLLER GENERAL, THE DIFFERENCE BEING THAT IN THE PRESENT CASE THE TAX INCLUDED IS DISCLOSED IN THE BID, WHEREAS IN THE PURCHASE CRITICIZED, THE BIDDER WAS ASKED AFTER BIDS WERE OPENED WHETHER THE BID PRICE INCLUDED A TAX. THIS DEPARTMENT WAS LED TO BELIEVE IT IMPROPER EVEN TO CONSIDER THE POSSIBILITY OF DEDUCTING THE DISCLOSED AMOUNT OF EXCISE TAX WHEN INCLUDED IN A BID PRICE SO AS TO ARRIVE AT A NET BID PRICE EXCLUSIVE OF TAX.

WITH PARTICULAR REFERENCE TO THE FACTS INVOLVED IN DECISION A-71669, THE DEPARTMENT WISHES TO RECORD THE FACT THAT CASH BIDS WERE INVITED BUT NONE RECEIVED FOR THE OLD AUTOMOBILE, EVIDENCING THAT THE USED CAR WAS OF VERY LITTLE VALUE AND ACCORDINGLY, THE CRITICISM OF THE COMPTROLLER GENERAL IN THAT RESPECT AS TO THE ACTION TAKEN BY THE CONTRACTING OFFICER, SEEMS UNWARRANTED.

IN THE PRESENT INSTANCE IT APPEARS TO THE DEPARTMENT THAT ANY AWARD STRICTLY IN ACCORDANCE WITH THE DECISIONS A-67600 AND A-71669 MUST BE MADE TO THE REO MOTOR CAR COMPANY AND IN THAT EVENT, THE CONTRACTING OFFICER FOR THE DEPARTMENT WILL BE FORCED TO CERTIFY THAT THE BID OF THE DIAMOND T MOTOR TRUCK SALES WAS THE LOW BID BY THE AMOUNT OF $39.60, BUT WAS NOT ACCEPTED BECAUSE OF SPECIFIC INSTRUCTIONS OF THE COMPTROLLER GENERAL OF THE UNITED STATES IN DECISIONS A-67600 AND A 71669.

IN VIEW OF THE FACTS HERE REVEALED AND ALL THE CIRCUMSTANCES, IT IS REQUESTED THAT YOU REVIEW THE DECISIONS ABOVE-MENTIONED TO THE END THAT THEY BE EITHER CONFIRMED OR SUPERSEDED FOR THE GUIDANCE OF THE DEPARTMENT IN THIS AND FUTURE SIMILAR CASES.

PLEASE RETURN THE ENCLOSED BIDS WITH YOUR DECISION.

THE DECISION TO YOU OF MAY 26, 1936, 15 COMP. GEN. 1030, HAD REFERENCE TO TWO BIDS, ONE FROM THE MANUFACTURER OF THE AUTOMOBILE OFFERED, WHO STATED THAT ITS PRICE DID NOT INCLUDE THE EXCISE TAX, THE OTHER BID APPARENTLY FROM A DEALER, NOT A MANUFACTURER, WHOSE BID WAS SILENT AS TO WHETHER THE PRICE BID WAS INCLUSIVE OR EXCLUSIVE OF THE EXCISE TAX. AFTER BIDS WERE OPENED AND BID PRICES MADE PUBLIC, THE PURCHASING OFFICER REQUESTED THE HIGH BIDDER--- THE DEALER--- TO STATE "WHETHER OR NOT THE TAX WAS INCLUDED IN ITS BID, AND IF SO, IN WHAT AMOUNT.' THE BIDDER REPLIED THAT THE TAX WAS INCLUDED IN THE AMOUNT OF $16.50. THE PURCHASING OFFICER DEDUCTED $16.50 FROM THE HIGH BID, BRINGING IT SLIGHTLY ($4.81) BELOW THE GROSS DELIVERED PRICE OF THE LOW BID, AND AWARDED THE CONTRACT TO THE DEALER ON THAT BASIS, WITHOUT REFERENCE TO THE FACT THAT IN ADDITION TO THE AMOUNT OF MONEY PAID FOR THE NEW AUTOMOBILE, THE CONTRACTOR RECEIVED A USED VEHICLE WHICH, WHILE NOW STATED TO HAVE BEEN OF SLIGHT VALUE, WAS TRADED IN ON A VALUATION BY THE BIDDER OF $100--- AS AGAINST AN APPARENT DIFFERENCE OF $4.81 BETWEEN THE TWO BIDS RECEIVED.

IT WAS HELD THAT UPON THE FACTS THERE PRESENTED, THE ACTION OF THE CONTRACTING OFFICER WAS, IN EFFECT, A NEGOTIATION WITH THE HIGH BIDDER AFTER THE BIDS WERE OPENED AND PRICES KNOWN, GIVING SAID BIDDER AN OPPORTUNITY TO CUT ITS PRICE BELOW THAT OF ITS COMPETITOR, AND THAT SUCH PROCEDURE WAS NOT PROPER. THE RULE THAT CONTRACTING OFFICERS ARE NOT AUTHORIZED TO NEGOTIATE WITH BIDDERS AFTER BIDS ARE OPENED AND PRICES ARE PUBLIC IS TOO WELL ESTABLISHED, HAS BEEN TO LONG HONORED IN ITS OBSERVANCE, AND IS SUPPORTED BY REASONS TOO SALUTARY TO REQUIRE ARGUMENT IN ITS SUPPORT AT THIS TIME.

YOUR INSTANT SUBMISSION PRESENTS NO FACTS REQUIRING OR JUSTIFYING A MODIFICATION OF THAT DECISION.

THE SITUATION HERE PRESENTED DIFFERS MATERIALLY FROM THE ONE THERE CONSIDERED. IN THIS INSTANCE, EACH BIDDER IS THE MANUFACTURER OF THE VEHICLE IT OFFERS; EACH BID SHOWS UPON ITS FACE THE AMOUNT OF EXCISE TAX INVOLVED IN THE PRICE BID, WHETHER INCLUDED OR EXCLUDED; AND EVALUATION OF THE BIDS AS PRESENTED, AND FOR PURPOSE OF AWARD, INVOLVES NO NEGOTIATION WITH A BIDDER AND AFFORDS NO OPPORTUNITY FOR ONE BIDDER TO TAKE ADVANTAGE OF THE PUBLICATION OF PRICES ARBITRARILY TO REDUCE ITS PRICE TO THE DETRIMENT OF A COMPETITOR. IT IS MERELY A MATTER OF ARITHMETICAL COMPUTATION TO DETERMINE WHICH IS ACTUALLY THE LOW BID AND WHETHER THE CONTRACTOR WILL BE ENTITLED TO A TAX EXEMPTION CERTIFICATE. UPON SUCH FACTS, THERE WOULD APPEAR NO BASIS FOR COMPLAINT BY ANY OTHER BIDDER THAT INJUSTICE HAD BEEN DONE.

ACCORDINGLY, THE PROPOSED ACTION OF MAKING THE AWARD TO THE DIAMOND T MOTOR CAR CO. AT ITS BID PRICE LESS THE AMOUNT SPECIFIED IN ITS BID AS INCLUDED FOR EXCISE TAX, AND WITH ISSUANCE OF TAX EXEMPTION CERTIFICATE, IS AUTHORIZED, IF OTHERWISE PROPER.