B-127862, MAY 24, 1956

B-127862: May 24, 1956

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED MAY 7. WERE BASED. THE CORPORATION REQUESTS AN INCREASE IN THE CONTRACT PRICE OF EACH CONTRACT TO COVER THE 3 PERCENT FEDERAL TRANSPORTATION TAX APPLICABLE TO THE RAILROAD FREIGHT COST WHICH ALLEGEDLY WAS NOT INCLUDED IN THE CORPORATION'S QUOTATIONS. MORE THAN A MONTH AFTER THE TWO CONTRACTS WERE ENTERED INTO. IT IS CLAIMED THAT THE OMISSION WAS INTENTIONAL BECAUSE OF THE BELIEF THAT THE SHIPMENTS WOULD BE ON GOVERNMENT BILLS OF LADING AND THAT. THE CORPORATION STATES THAT AT THE TIME OF ITS BID IT WAS OF THE OPINION THAT MATERIAL PURCHASED BY THE CORPS OF ENGINEERS WAS EXEMPT FROM THE TAX IN QUESTION. THE CONTRACTOR NOW CONCEDES THAT ITS UNDERSTANDING IN THAT REGARD WAS ERRONEOUS AND THAT THE PAYMENT OF A FEDERAL TRANSPORTATION TAX IN THE APPROXIMATE AMOUNTS OF $1.

B-127862, MAY 24, 1956

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED MAY 7, 1956, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY (LOGISTICS), RELATIVE TO ALLEGED ERRORS IN THE PRICES QUOTED BY THE COLUMBIA-GENEVA STEEL DIVISION, UNITED STATES STEEL CORPORATION, FOR STEEL PILING ON WHICH CONTRACTS NOS. DA 45-164-CIVENG-56- 98, DATED JANUARY 11, 1956, AND DA-45-164-CIVENG-56 99, DATED JANUARY 13, 1956, WERE BASED. THE CORPORATION REQUESTS AN INCREASE IN THE CONTRACT PRICE OF EACH CONTRACT TO COVER THE 3 PERCENT FEDERAL TRANSPORTATION TAX APPLICABLE TO THE RAILROAD FREIGHT COST WHICH ALLEGEDLY WAS NOT INCLUDED IN THE CORPORATION'S QUOTATIONS.

BY LETTER OF FEBRUARY 17, 1956, MORE THAN A MONTH AFTER THE TWO CONTRACTS WERE ENTERED INTO, THE CONTRACTOR ADVISED OF AN ERROR IN FIGURING ITS DELIVERED PRICE FOR THE PILING IN THAT IT FAILED TO INCLUDE THE APPLICABLE 3 PERCENT FEDERAL TRANSPORTATION TAX. IT IS CLAIMED THAT THE OMISSION WAS INTENTIONAL BECAUSE OF THE BELIEF THAT THE SHIPMENTS WOULD BE ON GOVERNMENT BILLS OF LADING AND THAT, THEREFORE, THE TAX WOULD NOT APPLY. FURTHERMORE, THE CORPORATION STATES THAT AT THE TIME OF ITS BID IT WAS OF THE OPINION THAT MATERIAL PURCHASED BY THE CORPS OF ENGINEERS WAS EXEMPT FROM THE TAX IN QUESTION. HOWEVER, THE CONTRACTOR NOW CONCEDES THAT ITS UNDERSTANDING IN THAT REGARD WAS ERRONEOUS AND THAT THE PAYMENT OF A FEDERAL TRANSPORTATION TAX IN THE APPROXIMATE AMOUNTS OF $1,931, IN CONNECTION WITH CONTRACT NO. DA-45-164-CIVENG-56-98, AND $734, UNDER CONTRACT NO. DA-45-164-CIVENG-56-99, IS REQUIRED. BY REASON THEREOF, IT REQUESTS THAT THE CONTRACT PRICES OF THE CONTRACTS BE INCREASED SO AS TO INCLUDE THE APPLICABLE TRANSPORTATION TAX.

BOTH THE CONTRACT FIRST CITED ABOVE, WHICH RESULTED FROM THE ACCEPTANCE OF THE CONTRACTOR'S BID OF $328,825, AND THE OTHER CONTRACT IN THE AMOUNT OF $138,102.95, WHICH WAS NEGOTIATED, EXPRESSLY PROVIDE IN CLEAR AND UNEQUIVOCAL LANGUAGE THAT THE CONTRACTOR IS TO DELIVER, F.O.B. DESTINATION, THE SPECIFIED QUANTITY OF STEEL PILING, THAT TITLE IS TO PASS TO THE GOVERNMENT AFTER INSPECTION AND ACCEPTANCE AT DESTINATION, AND THAT THE SHIPMENTS ARE TO BE PREPAID AND MADE AT THE CONTRACTOR'S EXPENSE. THEREFORE, THE CONTRACTOR IS LEGALLY OBLIGATED UNDER THE TERMS OF THE CONTRACT TO ASSUME ALL COST OF TRANSPORTATION, INCLUDING, AS PROVIDED UNDER PARAGRAPH 10 OF THE GENERAL PROVISIONS, THE APPLICABLE FEDERAL TRANSPORTATION TAX.

WHEN THE CONTRACTOR'S BID ON WHICH CONTRACT NO. DA-45-164-CIVENG-56 98 IS BASED WAS ACCEPTED, THE CONTRACTING OFFICER HAD NO REASON TO SUSPECT THAT THE CONTRACTOR HAD NOT INCLUDED THE APPLICABLE TRANSPORTATION TAX. LIKEWISE, WHEN THE SECOND CONTRACT WAS BEING NEGOTIATED THE CONTRACTING OFFICER APPARENTLY DID NOT KNOW OR HAVE ANY REASON TO SUSPECT THAT THE CONTRACTOR HAD ANY ERRONEOUS OPINIONS AS TO THE APPLICABILITY OF THE TAX LAWS OR THE PERTINENT PROVISIONS OF THE CONTRACT WITH RESPECT TO THE FEDERAL TRANSPORTATION TAX APPLICABLE TO THE SHIPMENTS HERE INVOLVED. SINCE THERE IS NOTHING OF RECORD TO INDICATE ANY BAD FAITH IN THE TRANSACTION ON THE PART OF THE GOVERNMENT, THE INSTANT CONTRACTS ARE VALID AND BINDING.

THE PURPOSE OF THE WRITTEN CONTRACT WAS TO MAKE CERTAIN THE RIGHTS AND OBLIGATIONS OF THE PARTIES, AND IS PRESUMED, IN LAW, TO EXPRESS THE FINAL UNDERSTANDING OF THE PARTIES THERETO. SEE BRAWLEY V. UNITED STATES, 96 U.S. 168, 173; SIMPSON V. UNITED STATES, 172 U.S. 372, 379. IT IS WELL SETTLED, OF COURSE, THAT WHERE A CONTRACT CONTAINS AN EXPRESS PROVISION AS TO THE BASIS ON WHICH PAYMENT SHALL BE MADE, SUCH PROVISION IS CONCLUSIVE ON THE PARTIES AND MEASURES THE AMOUNT OF RECOVERY FOR PERFORMANCE. SEE 13 C.J. 585, AND THE NUMEROUS CASES THERE CITED. ALSO, IT IS WELL SETTLED THAT NO AGENT OR OFFICER OF THE GOVERNMENT HAS THE AUTHORITY TO MODIFY THE TERMS OF A CONTRACT SO AS TO GIVE AWAY OR SURRENDER THE BENEFITS ACCRUING TO THE GOVERNMENT UNDER A VALID CONTRACT TO THE PREJUDICE OF THE INTERESTS OF THE UNITED STATES. SEE PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 C.CLS. 327; BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 C.CLS. 584, 607.

ACCORDINGLY, NO LEGAL BASIS APPEARS FOR RELEASING THE CONTRACTOR FROM ITS OBLIGATION TO FURNISH THE MATERIAL CALLED FOR UNDER THE CONTRACTS AT THE PRICES SPECIFIED THEREIN.

THE PAPERS WITH THE EXCEPTION OF A COPY OF THE CONTRACTING OFFICER'S FINDINGS OF FACT DATED APRIL 13, 1956, AND ONE OF THE SEVERAL COPIES OF THE OTHER DOCUMENTS FORWARDED WITH YOUR LETTER OF MAY 7, 1956, ARE RETURNED.