B-105908, APRIL 10, 1963, 42 COMP. GEN. 563

B-105908: Apr 10, 1963

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IS A COST INCURRED BY THE ADMINISTRATION IN CARRYING OUT ITS NORMAL DUTIES AND FUNCTIONS TO PROTECT THE INTEREST OF THE UNITED STATES FOR WHICH THE APPROPRIATIONS OF OTHER AGENCIES ARE NOT AVAILABLE IN THE ABSENCE OF EXPRESS STATUTORY LANGUAGE. THE ATOMIC ENERGY COMMISSION IS NOT REQUIRED TO REIMBURSE PART OF THE LITIGATION EXPENSES INCURRED BY THE ADMINISTRATION TO TEST THE CONSTITUTIONALITY OF THE TAX. THE ATOMIC ENERGY COMMISSION IS OF THE VIEW THAT ITS APPROPRIATIONS ARE NOT AVAILABLE FOR SUCH PURPOSE AND IN THIS CONNECTION REFERS TO 31 U.S.C. 628. THE ACTING ADMINISTRATOR STATES THAT THE BASIS FOR FEDERAL SUPPLY SCHEDULE CONTRACTS AND FOR REIMBURSEMENT IN THIS AND SIMILAR CASES IS FOUND IN SECTION 201 (A) (3) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949.

B-105908, APRIL 10, 1963, 42 COMP. GEN. 563

COURTS - COSTS - AGENCY PARTICIPATION THE COST OF LITIGATION UNDERTAKEN BY A CONTRACTOR AT THE REQUEST OF A GENERAL SERVICES ADMINISTRATION CONTRACTING OFFICER TO TEST THE CONSTITUTIONALITY OF A STATE TAX AS IT AFFECTS THE IDAHO TAX ON GASOLINE SECURED BY THE ATOMIC ENERGY COMMISSION THROUGH FEDERAL SUPPLY SCHEDULE CONTRACTS ENTERED INTO PURSUANT TO SECTION 201 (A) (3) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 40 U.S.C. 481 (A) (3), WHICH AUTHORIZES THE ADMINISTRATION TO PROCURE AND SUPPLY PERSONAL PROPERTY FOR THE USE OF EXECUTIVE AGENCIES, IS A COST INCURRED BY THE ADMINISTRATION IN CARRYING OUT ITS NORMAL DUTIES AND FUNCTIONS TO PROTECT THE INTEREST OF THE UNITED STATES FOR WHICH THE APPROPRIATIONS OF OTHER AGENCIES ARE NOT AVAILABLE IN THE ABSENCE OF EXPRESS STATUTORY LANGUAGE, AND THE OUTCOME OF THE LITIGATION ESTABLISHING PRECEDENTS APPLICABLE TO THE PURCHASES OF ALL ORDERING AGENCIES IN THE TAXING STATE, THE ATOMIC ENERGY COMMISSION IS NOT REQUIRED TO REIMBURSE PART OF THE LITIGATION EXPENSES INCURRED BY THE ADMINISTRATION TO TEST THE CONSTITUTIONALITY OF THE TAX.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, APRIL 10, 1963:

LETTER OF JANUARY 10, 1963, FROM THE ACTING ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, CONCERNS REIMBURSEMENT FOR LITIGATION EXPENSES INCURRED BY YOUR ADMINISTRATION IN CONNECTION WITH TESTING THE CONSTITUTIONALITY OF A STATE TAX, PARTICULARLY AS IT AFFECTS THE IDAHO TAX ON GASOLINE SECURED BY THE ATOMIC ENERGY COMMISSION THROUGH FEDERAL SUPPLY SCHEDULE CONTRACTS.

WE UNDERSTAND THAT PURSUANT TO THE PROVISIONS OF FEDERAL SUPPLY SCHEDULE CONTRACTS THE CONTRACTING OFFICER (AN EMPLOYEE OF YOUR ADMINISTRATION) DIRECTED THE CONTRACTOR TO LITIGATE THE CONSTITUTIONALITY OF THE IDAHO GASOLINE TAX AS IT APPLIED TO CERTAIN SALES TO THE UNITED STATES, AND AGREED TO REIMBURSE THE CONTRACTOR FOR THE EXPENSES INVOLVED AND DID SO. SINCE THE ATOMIC ENERGY COMMISSION PURCHASED GASOLINE UNDER THE CONTRACTS, THE GENERAL SERVICES ADMINISTRATION REQUESTED THAT THE COMMISSION REIMBURSE IT FOR PART OF THE LITIGATION COSTS. THE ATOMIC ENERGY COMMISSION IS OF THE VIEW THAT ITS APPROPRIATIONS ARE NOT AVAILABLE FOR SUCH PURPOSE AND IN THIS CONNECTION REFERS TO 31 U.S.C. 628. THIS CODE SECTION PROVIDES THAT EXCEPT AS OTHERWISE AUTHORIZED BY LAW, APPROPRIATIONS MUST BE APPLIED SOLELY TO THE OBJECTS FOR WHICH RESPECTIVELY MADE, AND NO OTHERS.

THE ACTING ADMINISTRATOR STATES THAT THE BASIS FOR FEDERAL SUPPLY SCHEDULE CONTRACTS AND FOR REIMBURSEMENT IN THIS AND SIMILAR CASES IS FOUND IN SECTION 201 (A) (3) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, APPROVED JUNE 30, 1949, CH. 288, 63 STAT. 383, AS AMENDED, 40 U.S.C. 481 (A) (3), WHICH PROVIDES THAT THE ADMINISTRATOR OF THE GENERAL SERVICES ADMINISTRATION (GSA) SHALL PROCURE AND SUPPLY PERSONAL PROPERTY FOR THE USE OF EXECUTIVE AGENCIES IN THE PROPER DISCHARGE OF THEIR RESPONSIBILITIES. HE EXPLAINS THAT MANY OF THE FUNCTIONS PERFORMED BY GSA UNDER SECTION 201, 40 U.S.C. 481, ARE NOT FINANCED UNDER GSA APPROPRIATIONS, AND THAT IT SEEMS CLEAR THAT THE BASIC FISCAL RESPONSIBILITY, AS WELL AS ANY RECOVERIES OBTAINED, REMAIN INHERENTLY THOSE OF THE ORDERING AGENCIES.

THE ACTING ADMINISTRATOR STATES THAT SECTIONS 205 AND 208 (C) OF THE ABOVE-CITED ACT, 40 U.S.C. 486 AND 5 U.S.C. 630H (C), RESPECTIVELY, ALSO APPEAR IN POINT AS REPRESENTING THE OVERALL BROAD HISTORIC PATTERN UNDER WHICH GSA WAS EXTENDED VERY FULL AUTHORITY AND DISCRETION IN THE FIELD OF GOVERNMENT PROCUREMENT. HE REFERS TO A GSA REGULATION (GSA I-II-303.03A) AS BEING OF PARTICULAR APPLICATION IN THAT IT POINTS OUT NORMAL AREAS WHERE THE ORDERING OFFICES SHOULD ACT, ALTHOUGH THE REGULATION IS SILENT ON TAX MATTERS. THE ACTING ADMINISTRATOR ALSO MAKES REFERENCE TO 29 COMP. GEN. 36 AND STATES THAT THE AUTHORITY OF USING AGENCIES TO ACT IN THE AREA CONCERNED IS SUPPORTED BY THAT DECISION. HE EXPLAINS THAT THE COMMENTS IN OTHER CASES, NAMELY 28 COMP. GEN. 706 AND 31 COMP. GEN. 251, INDICATE THAT THERE IS NO REQUIREMENT FOR ACTIVE PARTICIPATION IN LITIGATION BY THE CONTRACTING AGENCY. HE ALSO REFERS TO CERTAIN PROVISIONS OF TITLE 7 OF THE GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL WHICH HE FEELS HAVE AN INDIRECT BEARING ON THE PROBLEM.

THE ACTING ADMINISTRATOR STATES THAT YOUR ADMINISTRATION BELIEVES THAT THE PARALLEL BETWEEN THE MAKING OF PRICE ADJUSTMENTS WITH CONTRACTORS AND TAX ADJUSTMENTS WITH TAXING AGENCIES IS CLOSE ENOUGH TO PERMIT ACTION BY THE USING AGENCIES IN BOTH CASES, ALTHOUGH YOUR ADMINISTRATION BELIEVES THAT IN VIEW OF THE OVERRIDING NATURE OF THE GSA RESPONSIBILITY AND THE WORDING OF THE GENERAL PROVISIONS OF THE CONTRACTS THAT THE CONTRACTING OFFICER SHOULD ALWAYS BE CONSULTED. IN THIS CONNECTION, OUR ATTENTION IS CALLED TO SECTION 19 (D) OF GSA FORM 281C WHICH MAKES PROVISION FOR DIRECTION BY THE CONTRACTING OFFICER BUT REQUIRES THAT THE GOVERNMENT AGREE TO REIMBURSE THE CONTRACTOR FOR SUCH EXPENSES. IT IS EXPLAINED THAT YOUR ADMINISTRATION BELIEVES THE DISTINCTION CLEARLY SHOWN BETWEEN THE CONTRACTING OFFICER AND THE GOVERNMENT DEMONSTRATES THE INTENT OF THE CONTRACT THAT USING AGENCIES REIMBURSE THE CONTRACTING AGENCY.

THE ACTING ADMINISTRATOR STATES THAT IT IS THE BELIEF OF YOUR ADMINISTRATION THAT THERE IS NO RESTRICTION, EITHER EXPRESS OR IMPLIED, AGAINST REIMBURSEMENT IN CASES LIKE THE PRESENT. HE REQUESTS A DECISION AS TO WHETHER REIMBURSEMENT IN SUCH INSTANCES MIGHT NOT BE PROPER, EITHER BY AGREEMENT OR ON REQUEST FROM THE CONTRACTING AGENCY.

SECTION 201 (A) (3) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, REQUIRES THAT THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, PROCURE AND SUPPLY PERSONAL PROPERTY FOR THE EXECUTIVE AGENCIES. THUS, THIS SECTION IMPOSES A DUTY ON THE GENERAL SERVICES ADMINISTRATION TO PROCURE AND SUPPLY PERSONAL PROPERTY FOR THE EXECUTIVE AGENCIES OF THE GOVERNMENT. PRESUMABLY IN FULFILLMENT OF THAT DUTY YOUR ADMINISTRATION EXECUTES FEDERAL SUPPLY SCHEDULE CONTRACTS UNDER WHICH CONTRACTORS AGREE TO SUPPLY ITEMS OF PERSONAL PROPERTY AT CERTAIN PRICES FOR A SPECIFIED PERIOD OF TIME TO GOVERNMENT AGENCIES PLACING ORDERS FOR SUCH ITEMS UNDER THE PARTICULAR CONTRACT. THUS, THE AWARD AND GENERAL ADMINISTRATION OF FEDERAL SUPPLY CONTRACTS ARE PART OF THE NORMAL DUTIES AND FUNCTIONS OF YOUR ADMINISTRATION.

IN AWARDING AND ADMINISTERING GENERALLY FEDERAL SUPPLY SCHEDULE CONTRACTS IT IS THE RESPONSIBILITY OF THE GENERAL SERVICES ADMINISTRATION TO PROTECT THE FINANCIAL INTEREST OF THE UNITED STATES. ACCORDINGLY, IT IS THE DUTY OF THE GENERAL SERVICES ADMINISTRATION TO HAVE LITIGATED, IF POSSIBLE, THE CONSTITUTIONALITY OF A STATE SALES TAX WHERE NECESSARY IF IT IS DETERMINED BY THE ADMINISTRATOR TO BE IN THE BEST INTEREST OF THE UNITED STATES TO DO SO. COSTS INCURRED IN CARRYING OUT THE NORMAL DUTIES AND FUNCTIONS OF AN AGENCY WOULD BE PAYABLE BY SUCH AGENCY AND ANOTHER AGENCY'S APPROPRIATIONS WOULD NOT BE AVAILABLE TO PAY SUCH COSTS IN THE ABSENCE OF EXPRESS STATUTORY LANGUAGE.

WHILE SECTION 201 (A) (3) TOGETHER WITH SECTIONS 205 AND 208 (C) OF THE ABOVE-CITED ACT VEST BROAD AUTHORITY IN THE ADMINISTRATOR OF GSA, WE FOUND NOTHING IN THE SAID SECTIONS WHICH EITHER AUTHORIZES OR REQUIRES ANOTHER FEDERAL AGENCY TO REIMBURSE GSA FOR COSTS INCURRED BY IT IN CARRYING OUT ITS NORMAL FUNCTIONS AND DUTIES.

IT IS TRUE THAT SECTION 205 OF THE CITED ACT PROVIDES, AMONG OTHER THINGS, THAT THE ADMINISTRATOR MAY DELEGATE (WITH CERTAIN EXCEPTIONS) ANY AUTHORITY VESTED IN HIM BY THE ACT TO THE HEAD OF ANY OTHER AGENCY. ALSO PROVIDES THAT THE ADMINISTRATOR MAY DESIGNATE AND AUTHORIZE ANY EXECUTIVE AGENCY TO PERFORM ANY FUNCTION VESTED IN THE GENERAL SERVICES ADMINISTRATION OR IN THE ADMINISTRATOR, PROVIDED THAT THE HEAD OF THE AGENCY CONCERNED CONSENTS TO SUCH DESIGNATION OR ASSIGNMENT OF FUNCTIONS OR DELEGATION OF AUTHORITY OR PROVIDED THE PRESIDENT DIRECTS IT. SECTION 205 FURTHER PROVIDES THAT WHEN A FUNCTION IS TRANSFERRED OR ASSIGNED TO AN EXECUTIVE AGENCY THE ADMINISTRATOR MAY WITH THE APPROVAL OF THE DIRECTOR OF THE BUREAU OF THE BUDGET PROVIDE FOR THE TRANSFER OF APPROPRIATE PERSONNEL, RECORDS, PROPERTY AND ALLOCATED FUNDS TO THE AGENCY TO WHICH THE FUNCTION IS ASSIGNED. HOWEVER, IN THE ABSENCE OF A SHOWING THAT THE FUNCTION OF AWARDING AND ADMINISTERING FEDERAL SUPPLY SCHEDULE CONTRACTS HAS BEEN TRANSFERRED TO ANOTHER AGENCY, THAT FUNCTION REMAINS IN THE GENERAL SERVICES ADMINISTRATION.

MOREOVER, THE RESPONSIBILITIES PLACED ON THE ORDERING AGENCIES BY THE CITED GSA REGULATION (GSA I-II-303.03A) CONCERN THE CONTRACTOR'S PERFORMANCE IN CONNECTION WITH THE SPECIFIC PURCHASE ORDER PLACED BY THE ORDERING AGENCY RATHER THAN THE GENERAL ADMINISTRATION OF THE CONTRACT. FOR EXAMPLE, THE PRICE ADJUSTMENT RESPONSIBILITY PLACED ON THE ORDERING AGENCY BY THE REGULATION CONCERNS PRICE ADJUSTMENT IN CONNECTION WITH NONCONFORMING SUPPLIES OR SERVICES FURNISHED IN CONNECTION WITH A SPECIFIC PURCHASE ORDER PLACED AGAINST THE FEDERAL SUPPLY SCHEDULE CONTRACT. ALSO, TERMINATION BY THE ORDERING OR PURCHASING AGENCY INVOLVES ONLY THE PURCHASE ORDER OF SUCH AGENCY.

THE DECISIONS OF THE COMPTROLLER GENERAL AND THE PROVISIONS OF TITLE 7 OF THE GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL CITED IN THE ACTING ADMINISTRATOR'S LETTER, IN EFFECT, INVOLVE ONLY THE SPECIFIC PURCHASE ORDERS PLACED BY AN ORDERING AGENCY. THERE IS NOTHING IN EITHER THE CITED DECISIONS OR IN THE PROVISIONS OF TITLE 7 WHICH IMPLIES THAT IF GSA PURSUANT TO THE CONTRACT PROVISIONS REQUESTS A CONTRACTOR TO LITIGATE THE CONSTITUTIONALITY OF A STATE SALES TAX, AS THE TAX APPLIES TO PURCHASES UNDER A FEDERAL SUPPLY SCHEDULE CONTRACT, AND AGREES TO REIMBURSE THE CONTRACTOR THE COSTS OF SUCH LITIGATION, THE USING AGENCIES, I.E. THE AGENCIES PLACING PURCHASE ORDERS, ARE AUTHORIZED OR REQUIRED TO REIMBURSE GSA A PART OR ALL OF SUCH COSTS.

LITIGATION TO DETERMINE THE CONSTITUTIONALITY OF A STATE SALES OR GASOLINE TAX AS IT AFFECTS SALES TO THE UNITED STATES UNDER FEDERAL SUPPLY SCHEDULE CONTRACTS ESTABLISHES PRECEDENTS APPLICABLE TO PURCHASES OF ALL ORDERING AGENCIES IN THE TAXING STATE AND MAY ESTABLISH PRECEDENTS WHICH HAVE A BEARING IN OTHER STATES WHERE A SIMILAR SITUATION ARISES. THUS, THERE IS A DISTINCTION BETWEEN MATTERS WHICH GENERALLY AFFECT ONLY AN ORDERING AGENCY AND THOSE WHICH ARE OF GENERAL CONCERN AND WOULD AFFECT ALL ORDERING AGENCIES.

SECTION 19 (D) OF GSA FORM 281C REFERRED TO IN THE ACTING ADMINISTRATOR'S LETTER READS AS FOLLOWS:

(D) EVIDENCE OF EXEMPTION.--- THE GOVERNMENT AGREES, UPON REQUEST OF THE CONTRACTOR, TO FURNISH A TAX-EXEMPTION CERTIFICATE OR OTHER SIMILAR EVIDENCE OF EXEMPTION WITH RESPECT TO ANY DIRECT TAX NOT INCLUDED IN THE CONTRACT PRICE PURSUANT TO THIS CLAUSE; AND THE CONTRACTOR AGREES, IN THE EVENT OF THE REFUSAL OF THE APPLICABLE TAXING AUTHORITY TO ACCEPT SUCH EVIDENCE OF EXEMPTION, (I) PROMPTLY TO NOTIFY THE CONTRACTING OFFICER OF SUCH REFUSAL, (II) TO CAUSE THE TAX IN QUESTION TO BE PAID IN SUCH MANNER AS TO PRESERVE ALL RIGHTS TO REFUND THEREOF, AND (III) IF SO DIRECTED BY THE CONTRACTING OFFICER, TO TAKE ALL NECESSARY ACTION, IN COOPERATION WITH AND FOR THE BENEFIT OF THE GOVERNMENT, TO SECURE A REFUND OF SUCH TAX (IN WHICH EVENT THE GOVERNMENT AGREES TO REIMBURSE THE CONTRACTOR FOR ANY AND ALL REASONABLE EXPENSES INCURRED AT ITS DIRECTION.)

THE FACT THAT THE LANGUAGE USED IN SECTION 19 (D) PROVIDES FOR DIRECTION BY THE "CONTRACTING OFFICER" AND REIMBURSEMENT BY THE "GOVERNMENT" TO THE CONTRACTOR FOR THE EXPENSES INVOLVED, DOES NOT REQUIRE THE CONCLUSION THAT THE USE OF THE TERMS "CONTRACTING OFFICER" AND "GOVERNMENT" DEMONSTRATE THE INTENT OF THE CONTRACT THAT USING AGENCIES MIGHT REIMBURSE THE CONTRACTING AGENCY. THESE TWO TERMS ARE USED NUMEROUS TIMES THROUGHOUT FORM 281C AS WELL AS IN STANDARD FORM 32 AND IT IS THE USUAL TERMINOLOGY IN ALL GOVERNMENT CONTRACTS.

WE NOTE THAT GSA FORM 281C HAS BEEN CANCELED BY FSS P 2800.8, CH. 9, DATED JULY 19, 1962, AND THERE IS NOW INCORPORATED BY REFERENCE IN FEDERAL SUPPLY SCHEDULE CONTRACTS GSA FORM 1424, DATED MAY 1962. IN CONNECTION WITH FEDERAL, STATE AND LOCAL TAXES, PARAGRAPH 24 (E) (1) AND (2) OF THE LATTER FORM PROVIDES AS FOLLOWS:

(E) (1) THE CONTRACTOR SHALL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF ALL MATTERS PERTAINING TO FEDERAL, STATE, AND LOCAL TAXES AND DUTIES THAT REASONABLY MAY RESULT IN EITHER AN INCREASE OR DECREASE IN THE CONTRACT PRICE.

(2) WHENEVER AN INCREASE OR DECREASE IN THE CONTRACT PRICE MAY BE REQUIRED UNDER THIS CLAUSE, THE CONTRACTOR SHALL TAKE ACTION AS DIRECTED BY THE CONTRACTING OFFICER, AND THE CONTRACT PRICE SHALL BE EQUITABLY ADJUSTED TO COVER THE COSTS OF SUCH ACTION, INCLUDING ANY INTEREST,PENALTY, AND REASONABLE ATTORNEY'S FEES.

UNDER THE QUOTED PROVISIONS THE CONTRACT PRICE IS REQUIRED TO BE EQUITABLY ADJUSTED TO REFLECT THE COST OF LITIGATION INCURRED BY THE CONTRACTOR PURSUANT TO THE DIRECTION OF THE CONTRACTING OFFICER. APPEARS THAT THE LANGUAGE OF THE CLAUSE MAY HAVE BEEN INTENDED TO PERMIT THE CHARGING OF LEGAL FEES TO ORDERING AGENCIES AS A PART OF AN ADJUSTED CONTRACT UNIT PRICE. APART FROM THE PRACTICAL DIFFICULTIES WHICH WOULD BE INVOLVED IN ATTEMPTING TO DO THIS, IT IS OUR OPINION, FOR THE REASONS HEREINBEFORE STATED, THAT SUCH ACTION WOULD BE IMPROPER. WE BELIEVE THAT ANY UPWARD EQUITABLE PRICE ADJUSTMENT EFFECTED UNDER THE PRESENT CLAUSE WOULD HAVE TO BE IN THE FORM OF A LUMP-SUM PAYMENT TO THE CONTRACTOR TO BE MADE BY GSA RATHER THAN THE ORDERING AGENCIES.

IN LIGHT OF THE FOREGOING IT IS OUR VIEW THAT AN AGENCY'S APPROPRIATIONS ARE NOT AVAILABLE TO REIMBURSE THE GENERAL SERVICES ADMINISTRATION AMOUNTS PAID TO A CONTRACTOR FOR COSTS THE CONTRACTOR INCURRED IN TESTING THE CONSTITUTIONALITY OF A STATE SALES TAX AT THE REQUEST OF A GSA CONTRACTING OFFICER PURSUANT TO A PROVISION IN A FEDERAL SUPPLY SCHEDULE CONTRACT.