B-156842, JUN. 11, 1965

B-156842: Jun 11, 1965

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- "/1) RESULTS IN THE CONTRACTOR BEING REQUIRED TO PAY OR BEAR THE BURDEN OF ANY SUCH FEDERAL EXCISE TAX OR DUTY OR INCREASE IN THE RATE THEREOF WHICH WOULD NOT OTHERWISE HAVE BEEN PAYABLE ON SUCH TRANSACTIONS OR PROPERTY. WARRANTS IN WRITING THAT NO AMOUNT FOR SUCH NEWLY IMPOSED FEDERAL EXCISE TAX OR DUTY OR RATE INCREASE WAS INCLUDED IN THE CONTRACT PRICE AS A CONTINGENCY RESERVE OR OTHERWISE. ANY SUCH FEDERAL EXCISE TAX OR DUTY WHICH WOULD OTHERWISE HAVE BEEN PAYABLE ON SUCH TRANSACTIONS OR PROPERTY OR WHICH WAS THE BASIS OF AN INCREASE IN THE CONTRACT PRICE. IS REQUIRED TO PAY OR BEAR THE BURDEN OF. ANY SUCH FEDERAL EXCISE TAX OR DUTY. "/C) NO ADJUSTMENT PURSUANT TO PARAGRAPH (B) ABOVE WILL BE MADE UNDER THIS CONTRACT UNLESS THE AGGREGATE AMOUNT THEREOF IS OR MAY REASONABLY BE EXPECTED TO BE OVER $100. "/D) AS USED IN PARAGRAPH (B) ABOVE.

B-156842, JUN. 11, 1965

TO MR. CHARLES C. CAMPBELL, MANAGER, UNITED STATES ATOMIC ENERGY COMMISSION:

YOUR TELEGRAM OF MAY 21, 1965, REQUESTS, IN YOUR CAPACITY AS CONTRACTING OFFICER, AN ADVANCE DECISION BY OUR OFFICE CONCERNING THE PROPRIETY OF AWARD OF A CONTRACT FOR CERTAIN DRY CLEANING SERVICES FOR THE FISCAL YEAR 1966 TO THE LOW BIDDER IN THE CIRCUMSTANCES SET FORTH BELOW.

YOU STATE THAT BY INVITATION FOR BIDS ISSUED APRIL 23, THE LOS ALAMOS AREA OFFICE (LOS ALAMOS, NEW MEXICO), ATOMIC ENERGY COMMISSION, SOLICITED BIDS FOR THE PERFORMANCE OF THE SERVICES IN QUESTION. THE INVITATION INCLUDED THE STANDARD FORM OF TAX CLAUSE PRESCRIBED BY FEDERAL PROCUREMENT REGULATION (FPR) 1-11.401/C), AS FOLLOWS:

"/C) CONTRACT CLAUSE.

FEDERAL, STATE, AND LOCAL TAXES

"/A) EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL, STATE, AND LOCAL TAXES AND DUTIES.

"/B) NEVERTHELESS, WITH RESPECT TO ANY FEDERAL EXCISE TAX OR DUTY ON THE TRANSACTIONS OR PROPERTY COVERED BY THIS CONTRACT, IF A STATUTE, COURT DECISION, WRITTEN RULING, OR REGULATION TAKES EFFECT AFTER THE CONTRACT DATE, AND---

"/1) RESULTS IN THE CONTRACTOR BEING REQUIRED TO PAY OR BEAR THE BURDEN OF ANY SUCH FEDERAL EXCISE TAX OR DUTY OR INCREASE IN THE RATE THEREOF WHICH WOULD NOT OTHERWISE HAVE BEEN PAYABLE ON SUCH TRANSACTIONS OR PROPERTY, THE CONTRACT PRICE SHALL BE INCREASED BY THE AMOUNT OF SUCH TAX OR DUTY OR RATE INCREASE: PROVIDED, THAT THE CONTRACTOR IF REQUESTED BY THE CONTRACTING OFFICER, WARRANTS IN WRITING THAT NO AMOUNT FOR SUCH NEWLY IMPOSED FEDERAL EXCISE TAX OR DUTY OR RATE INCREASE WAS INCLUDED IN THE CONTRACT PRICE AS A CONTINGENCY RESERVE OR OTHERWISE; OR

"/2) RESULTS IN THE CONTRACTOR NOT BEING REQUIRED TO PAY OR BEAR THE BURDEN OF, OR IN HIS OBTAINING A REFUND OR DRAWBACK OF, ANY SUCH FEDERAL EXCISE TAX OR DUTY WHICH WOULD OTHERWISE HAVE BEEN PAYABLE ON SUCH TRANSACTIONS OR PROPERTY OR WHICH WAS THE BASIS OF AN INCREASE IN THE CONTRACT PRICE, THE CONTRACT PRICE SHALL BE DECREASED BY THE AMOUNT OF THE RELIEF, REFUND, OR DRAWBACK, OR THAT AMOUNT SHALL BE PAID TO GOVERNMENT, AS DIRECTED BY THE CONTRACTING OFFICER. THE CONTRACT PRICE SHALL BE SIMILARLY DECREASED IF THE CONTRACTOR, THROUGH HIS FAULT OR NEGLIGENCE OR HIS FAILURE TO FOLLOW INSTRUCTIONS OF THE CONTRACTING OFFICER, IS REQUIRED TO PAY OR BEAR THE BURDEN OF, OR DOES NOT OBTAIN A REFUND OR DRAWBACK OF, ANY SUCH FEDERAL EXCISE TAX OR DUTY.

"/C) NO ADJUSTMENT PURSUANT TO PARAGRAPH (B) ABOVE WILL BE MADE UNDER THIS CONTRACT UNLESS THE AGGREGATE AMOUNT THEREOF IS OR MAY REASONABLY BE EXPECTED TO BE OVER $100.

"/D) AS USED IN PARAGRAPH (B) ABOVE, THE TERM "CONTRACT DATE" MEANS THE DATE SET FOR THE BID OPENING, OR IF THIS IS A NEGOTIATED CONTRACT, THE DATE OF THIS CONTRACT. AS TO ADDITIONAL SUPPLIES OR SERVICES PROCURED BY MODIFICATION TO THIS CONTRACT, THE TERM "CONTRACT DATE" MEANS THE DATE OF SUCH MODIFICATION.

"/E) UNLESS THERE DOES NOT EXIST ANY REASONABLE BASIS TO SUSTAIN AN EXEMPTION, THE GOVERNMENT, UPON REQUEST OF THE CONTRACTOR, WITHOUT FURTHER LIABILITY, AGREES, EXCEPT AS OTHERWISE PROVIDED IN THIS CONTRACT, TO FURNISH EVIDENCE APPROPRIATE TO ESTABLISH EXEMPTION FROM ANY TAX WHICH THE CONTRACTOR WARRANTS IN WRITING WAS EXCLUDED FROM THE CONTRACT PRICE. ADDITION, THE CONTRACTING OFFICER MAY FURNISH EVIDENCE TO ESTABLISH EXEMPTION FROM ANY TAX THAT MAY, PURSUANT TO THIS CLAUSE, GIVE RISE TO EITHER AN INCREASE OR DECREASE IN THE CONTRACT PRICE. EXCEPT AS OTHERWISE PROVIDED IN THIS CONTRACT, EVIDENCE APPROPRIATE TO ESTABLISH EXEMPTION FROM DUTIES WILL BE FURNISHED ONLY AT THE DIRECTION OF THE CONTRACTING OFFICER.

"/F) THE CONTRACTOR SHALL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF MATTERS WHICH WILL RESULT IN EITHER AN INCREASE OR DECREASE IN THE CONTRACT PRICE, AND SHALL TAKE ACTION WITH RESPECT THERETO AS DIRECTED BY THE CONTRACTING OFFICER.'

THE FIVE BIDS RECEIVED WERE OPENED ON MAY 18, AS SCHEDULED IN THE INVITATION. THE LOW BID IN THE AMOUNT OF $7,770, WAS SUBMITTED BY CORBETT CLEANING COMPANY. THE REMAINING BIDS WERE AS FOLLOWS:

TABLE

WALDO SALAZAR $ 9,225

SANTA FE ELECTRIC LAUNDRY CO. 10,280

MASTER DRY CLEANERS 10,992

MAX L LOPEZ 12,195

THE LOW BID, AS INDICATED IN YOUR TELEGRAM, INCLUDES THE FOLLOWING QUALIFICATION:

"THE PRICES QUOTED HEREIN INCLUDE THE NEW MEXICO EMERGENCY SCHOOL TAX/LAWS 1935 CMM CHAPTER 73 AS AMENDED) AT THE CURRENT RATE OF THREE PERCENT (3 PERCENT) PD

"IF THE RATE OF THAT TAX APPLICABLE TO THIS CONTRACT SHOULD BE CHANGED CMM THE CONTRACT PRICE SHALL BE INCREASED OR DECREASED ACCORDINGLY PD

"IF THE COUNTY OF LOS ALAMOS OR ANY SUCCESSOR LOCAL GOVERNMENT SHOULD ENACT A SALES TAX CMM THE PRICE HEREIN BID SHALL BE INCREASED BY THE AMOUNT OF THAT TAX PD"

YOU STATE THAT SINCE THE STATE SCHOOL TAX (A SALES TAX) IS ON THE VENDOR, THERE IS NO CONSTITUTIONAL QUESTION AS TO ITS APPLICABILITY TO THE CONTRACT SERVICES; ALSO, WHILE THE COUNTY OF LOS ALAMOS COULD ENACT A SIMILAR SALES TAX THAT WOULD LIKEWISE APPLY TO THE CONTRACT SERVICES, SUCH TAX, WHICH BY NEW MEXICO LAW IS LIMITED TO ONE PERCENT, WOULD AMOUNT TO $77.70, OR AN INCREASE IN THE LOW BID TO ONLY $7,847.70.

YOU FURTHER STATE THAT TAXES OF THE TYPE INVOLVED HAVE INCREASED GRADUALLY BY NOT MORE THAN ONE OR TWO PERCENT PER YEAR, AND THAT AS OF JUNE 1964, THE HIGHEST STATE SALES TAX ACCORDING TO "STATE TAX REVIEW," VOL. 25, NO. 26, PARAGRAPHS 4-5, WAS ONLY FIVE PERCENT. THEREFORE, YOU CONTEND, IT IS NOT LIKELY THAT THERE WOULD BE A REVISION OF THE NEW MEXICO STATUTES WHICH WOULD PERMIT IN ONE YEAR A COMBINED STATE AND COUNTY SALES TAX EQUIVALENT TO THE 18.8 PERCENT DIFFERENTIAL BETWEEN THE LOW BID AND THE SECOND LOW BID OF $9,225. ACCORDINGLY, IT IS YOUR POSITION THAT THE LOW BID WOULD REMAIN LOW AND THAT THE QUALIFICATION IN THE BID SHOULD BE WAIVED AS A MINOR INFORMALITY. IN THIS CONNECTION, YOU CONTEND THAT NOTWITHSTANDING THE RULING IN 41 COMP. GEN. 289 RELATIVE TO THE NONRESPONSIVENESS OF A TAX EXCLUDED BID WHICH FAILS TO IDENTIFY THE CLASS AND AMOUNT OF TAXES EXCLUDED, THE BID IS PRECISE ENOUGH TO PERMIT EVALUATION AS WAS THE BID CONSIDERED IN 37 COMP. GEN. 864.

IN 37 COMP. GEN. 864, THE INVITATION FOR BIDS REQUIRED THE CONTRACT PRICE TO INCLUDE ALL APPLICABLE FEDERAL TAXES. THE LOW BIDDER, BEING UNCERTAIN AS TO THE APPLICABILITY OF A FEDERAL EXCISE TAX, SHOWED IN ITS BID A BASIC PRICE, THE AMOUNT OF THE FEDERAL EXCISE TAX, WHICH THE INTERNAL REVENUE SERVICE SUBSEQUENTLY HELD TO BE INAPPLICABLE TO THE EQUIPMENT OFFERED BY THE BIDDER, AND A TOTAL BID PRICE. NOTING THAT THE INVITATION DID NOT REQUIRE THE CONTRACT PRICE TO INCLUDE INAPPLICABLE FEDERAL TAXES, WE HELD THAT THE BID, WHICH CLEARLY SET FORTH THE BASIC PRICE APART FROM THE EXCISE TAX, WAS CAPABLE OF EVALUATION WITHOUT THE TAX, WAS THEREFORE RESPONSIVE, AND THAT EVALUATION OF THE BID ON SUCH BASIS WOULD NOT PREJUDICE THE RIGHTS OF OTHER BIDDERS. THERE WAS NEVER ANY QUESTION REGARDING THE AMOUNT OF THE EXCISE TAX.

IN THE CASE YOU PRESENT, THE MATTER OF THE APPLICABILITY OF THE SALES TAX IS NOT IN DOUBT, BUT THE AMOUNT OF THE TAX EXCLUDED FROM THE BID IS NOT ASCERTAINABLE. ACCORDINGLY, OUR DECISION IN 37 COMP. GEN. 864 IS NOT FOR APPLICATION IN THE CIRCUMSTANCES.

IN 41 COMP. GEN. 289, THE INVITATION FOR BIDS, AS IN THE INSTANT CASE, INCLUDED THE STANDARD FEDERAL, STATE AND LOCAL TAXES CLAUSE. THE BID IN QUESTION SPECIFICALLY STATED THAT IT DID NOT INCLUDE ANY SALES OR EXCISE TAX. THE ARGUMENT WAS ADVANCED THAT THE AMOUNT OF ANY TAXES THAT MIGHT BE ASSESSED WOULD BE INSIGNIFICANT AS COMPARED TO THE DIFFERENCE BETWEEN THE BID IN QUESTION AND THE NEXT HIGHER BID. WE POINTED OUT THAT UNDER THE APPLICABLE PROCUREMENT STATUTE, THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AND THE FEDERAL PROCUREMENT REGULATIONS ISSUED PURSUANT THERETO, BIDS ARE REQUIRED TO COMPLY WITH THE REQUIREMENTS OF THE ADVERTISED INVITATION FOR BIDS AND A BIDDER MAY NOT CONDITION A BID SO AS TO RECEIVE A COMPETITIVE ADVANTAGE OVER OTHER BIDDERS. THEREFORE, THE SUBMISSION OF A BID PRICE ON A TAX-EXCLUDED BASIS UNDER THE INVITATION INVOLVED MUST, IN THE ABSENCE OF DEFINITE INFORMATION TO THE CONTRARY, BE CONSIDERED AS EVIDENCE OF THE BIDDER'S BELIEF THAT SUCH TAXES MAY BE ASSESSED AGAINST ITS PERFORMANCE OF THE CONTRACT AND OF ITS UNWILLINGNESS TO ASSUME PAYMENT OF SUCH TAXES AT ITS BID PRICE. ACCORDINGLY, WE HELD THAT THE BID, NOT HAVING INDICATED THE AMOUNT OF THE TAXES EXCLUDED FROM THE BID PRICE, WAS INCAPABLE OF EVALUATION ON AN EQUAL BASIS WITH THE OTHER BIDS SUBMITTED AND THEREFORE WAS NONRESPONSIVE.

THE INSTANT CASE IS SOMEWHAT ANALOGOUS TO 41 COMP. GEN. 289. WHILE THE LOW BIDDER INDICATES THAT ITS BID PRICE INCLUDES THE STATE SALES TAX AT THE CURRENT THREE PERCENT RATE, IT EXCLUDES FROM THE BID PRICE AN INDETERMINABLE AMOUNT TO COVER A POSSIBLE INCREASE IN THE STATE SALES TAX, OR A COUNTY SALES TAX, OR BOTH. THESE ARE RISKS WHICH ARE REQUIRED BY THE TAX CLAUSE OF THE IFB TO BE ASSUMED BY ALL BIDDERS SUBJECT TO THE STATE STATUTES. ACCEPTANCE OF THE LOW BID THEREFORE WOULD GIVE THE LOW BIDDER A COMPETITIVE ADVANTAGE OVER OTHER BIDDERS. SINCE THE BID IS INCAPABLE OF EVALUATION ON AN EQUAL BASIS WITH THE REMAINING BIDS, THE RULE IN 41 COMP. GEN. 289 COULD REQUIRE THAT IT BE REJECTED AS NONRESPONSIVE.

AS TO THE PROPRIETY OF WAIVER OF THE BID QUALIFICATION AS A MINOR INFORMALITY, FPR 1-2.405 RESTRICTS SUCH ACTION TO THOSE MINOR INFORMALITIES OR DEFECTS OF FORM WHICH HAVE AT MOST ONLY A TRIVIAL OR NEGLIGIBLE EFFECT ON QUALITY, QUANTITY OR PRICE OF THE ARTICLES OFFERED AND WAIVER OF WHICH WOULD NOT BE PREJUDICIAL TO OTHER BIDDERS. SINCE THE QUALIFICATION WOULD IMPOSE ON THE GOVERNMENT RATHER THAN ON THE BIDDER THE BURDEN OF AN INCREASE IN THE TAXES REFERRED TO, CONTRARY TO THE TERMS OF THE INVITATION, IT CONSTITUTES A CONDITION GOING TO THE SUBSTANCE OF THE BID AND REJECTION OF THE BID IS REQUIRED UNDER FPR 1 2.404-2/B) (5). HAVE HELD THAT THE CITED REGULATION CANNOT IN ANY CASE JUSTIFY THE WAIVER OF AN EXCEPTION DELIBERATELY TAKEN BY A BIDDER TO THE TERMS OF THE INVITATION. B-155827, FEBRUARY 25, 1965.