B-140450, SEP. 2, 1959

B-140450: Sep 2, 1959

Additional Materials:

Contact:

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

 

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

ADMINISTRATION: REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 10. WHICH WAS ENTERED INTO AS THE RESULT OF NEGOTIATION UNDER THE PROVISIONS OF SECTION 302 (C) (9) OF PUBLIC LAW 152. THAT IS TO SAY. - LONG PRIOR TO THE DATE WHEN THE CONTRACT HERE INVOLVED WAS ENTERED INTO. ADVISED THE CONTRACTOR THAT THE SALE OF THE EQUIPMENT COVERED BY THIS CONTRACT WAS SUBJECT TO THE FEDERAL EXCISE TAX. THE CONTRACTOR ADMITS THE RECEIPT OF THIS RULING BY THE INTERNAL REVENUE SERVICE BUT MERELY STATES THAT THEY NEGLECTED TO INCLUDE SUCH TAX IN THEIR BIDS ON WHICH THE INSTANT CONTRACT IS BASED. IT WAS STATED IN YOUR LETTER THAT THE RULING BY THE INTERNAL REVENUE WAS NOT PUBLISHED AND WAS NEVER BROUGHT TO THE KNOWLEDGE OF THE GENERAL SERVICES ADMINISTRATION.

B-140450, SEP. 2, 1959

TO THE HONORABLE FRANKLIN FLOETE, ADMINISTRATOR, GENERAL SERVICES, ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 10, 1959, WITH ENCLOSURES, RELATING TO A MISTAKE IN BID ALLEGED BY PITNEY-BOWES, INC., AFTER THE AWARD OF CONTRACT NO. GS-00S-18265, DATED APRIL 14, 1958, FOR FURNISHING CERTAIN ENVELOPE OPENING MACHINES, ENVELOPE SEALING MACHINES, AND ENVELOPE STUFFING MACHINES DURING THE PERIOD JULY 1, 1958, THROUGH JUNE 30, 1959, AND WHICH WAS ENTERED INTO AS THE RESULT OF NEGOTIATION UNDER THE PROVISIONS OF SECTION 302 (C) (9) OF PUBLIC LAW 152, 81ST CONGRESS, AS AMENDED. UPON THE BASIS OF THE FACTS SET FORTH IN YOUR LETTER AND THE ENCLOSURES THERETO, YOU REQUEST PERMISSION TO AMEND THE CONTRACT AS REQUESTED IN THE CONTRACTOR'S LETTER OF APRIL 2, 1959, THAT IS TO SAY, BY AMENDING THE CONTRACT SO AS TO PROVIDE FOR PAYMENT OF THE APPLICABLE EXCISE TAX.

THE RECORD SHOWS THAT BY LETTER OF MAY 22, 1957--- LONG PRIOR TO THE DATE WHEN THE CONTRACT HERE INVOLVED WAS ENTERED INTO--- THE CHIEF OF THE EXCISE TAX BRANCH, INTERNAL REVENUE SERVICE, ADVISED THE CONTRACTOR THAT THE SALE OF THE EQUIPMENT COVERED BY THIS CONTRACT WAS SUBJECT TO THE FEDERAL EXCISE TAX. IN THE LETTER OF MAY 22, 1959, TO YOUR AGENCY, THE CONTRACTOR ADMITS THE RECEIPT OF THIS RULING BY THE INTERNAL REVENUE SERVICE BUT MERELY STATES THAT THEY NEGLECTED TO INCLUDE SUCH TAX IN THEIR BIDS ON WHICH THE INSTANT CONTRACT IS BASED.

IT WAS STATED IN YOUR LETTER THAT THE RULING BY THE INTERNAL REVENUE WAS NOT PUBLISHED AND WAS NEVER BROUGHT TO THE KNOWLEDGE OF THE GENERAL SERVICES ADMINISTRATION; THAT SINCE THE TAX HAD NOT BEEN INCLUDED IN PREVIOUS CONTRACTS AND SINCE THE RULING WAS UNPUBLISHED THE CONTRACTING OFFICER COULD NOT BE EXPECTED TO BE ON NOTICE OF ITS APPLICABILITY. YOU POINT OUT, ALSO, THAT THE CONTRACT ITSELF IS SUBJECT TO THE PROVISIONS OF GSA FORM 281C, SECTION 19 (B) OF WHICH STATES THAT "EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL TAXES IN EFFECT ON THE CONTRACT DATE.' HOWEVER, YOU INDICATE THAT, IN YOUR VIEW, THIS IS AN EXCEPTIONAL CASE IN THAT THE FACTUAL SITUATION AND THE EVIDENCE OF THE CORRECT PRICE CAN BE SO CLEARLY ESTABLISHED, AND YOU REQUEST AUTHORITY TO AMEND THE CONTRACT ON THE BASIS OF THE "EXTREME EQUITABLE CONSIDERATIONS" INVOLVED.

THE PRIMARY QUESTION FOR CONSIDERATION IN THIS CASE IS NOT WHETHER THE CONTRACTOR MADE AN ERROR IN ITS BID, AS ALLEGED, BUT RATHER WHETHER THE ACCEPTANCE OF THE BID CONSUMMATED A VALID AND BINDING OBLIGATION ON THE PARTIES. FROM WHAT HAS BEEN SAID ABOVE IT SEEMS CLEAR THAT BIDS WERE DESIRED ON THE BASIS OF A FIXED PRICE WHICH WOULD INCLUDE ALL APPLICABLE TAXES IN EFFECT AT THE TIME. THE CONTRACTOR ADMITTED THAT IT WAS AWARE OF THE APPLICATION OF THE TAX TO THE EQUIPMENT HERE INVOLVED, AND THE ONLY EXPLANATION FOR THE MISTAKE IS THAT IT SIMPLY NEGLECTED TO INCLUDE THE AMOUNT OF SUCH TAX IN THE BID.

IT APPEARS CLEAR FROM THE RECORD IN THIS CASE THAT THE ALLEGED MISTAKE WAS IN NO WAY CAUSED OR CONTRIBUTED TO BY THE GOVERNMENT. ANY ERROR THAT MAY HAVE BEEN MADE WAS UNILATERAL--- NOT MUTUAL--- AND, THEREFORE, DOES NOT ENTITLE THE CONTRACTOR TO RELIEF. SEE UNITED STATES V. SABIN METALS CORPORATIONS, 158 F.SUPP. 683, AFFIRMED 253 F.2D 956; ALSO, SEE 20 COMP. GEN. 652, AND 26 ID. 415.

WHILE WE HAVE IN CERTAIN INSTANCES APPROVED CORRECTION OF SUPPLY SCHEDULE CONTRACTS TO PERMIT ADDITION OR CORRECTION OF APPLICABLE FEDERAL EXCISE TAXES, IN THOSE CASES THE ERROR WAS ALLEGED WITH REASONABLE PROMPTNESS. IN THIS CASE THE CONTRACTOR WAITED FOR TWO YEARS BEFORE BRINGING THE ERROR TO THE ATTENTION OF YOUR AGENCY, DURING WHICH TIME ONE ANNUAL CONTRACT HAD FULLY EXPIRED AND THE SECOND HAD RUN FOR MORE THAN NINE MONTHS. ALTHOUGH YOU STATE THAT SOME DELIVERIES AND PAYMENTS UNDER THE LAST CONTRACT HAVE NOT BEEN COMPLETED, WE DO NOT FEEL THAT AMENDMENT SHOULD NOW BE MADE, SINCE THERE IS NO CLEAR SHOWING OF MUTUAL MISTAKE.

IN RESPONSE TO YOUR REQUEST, THE ENCLOSURES TO YOUR LETTER ARE RETURNED HEREWITH.