B-164808, AUGUST 21, 1968, 48 COMP. GEN. 93

B-164808: Aug 21, 1968

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BIDS - EVALUATION - TAX INCLUSION OR EXCLUSION AN ATTACHMENT TO A LOW BID STATING THE PRICES QUOTED INCLUDED PROVISIONS FOR PAYMENT OF THE THEN CURRENT STATE OF WASHINGTON BUSINESS AND OCCUPATION TAX BUT THAT "NO PROVISION HAS BEEN MADE FOR THE PAYMENT OF ANY OTHER WASHINGTON TAX" IS CONSIDERED PART OF THE BID. THE BID SUBMITTED ON A TAX-EXCLUDED BASIS REGARDING FUTURE INCREASES IN THE BUSINESS TAX OR NEWLY IMPOSED STATE TAXES IS NONRESPONSIVE TO THE INVITATION WHICH CONTAINED A TAX CLAUSE REQUIRING THE CONTRACT PRICE TO INCLUDE ALL APPLICABLE TAXES AND PROVIDED FOR AN ADJUSTMENT IN THE CONTRACT PRICE ONLY IN THE EVENT OF CHANGES IN THE FEDERAL EXCISE TAX OR DUTY AND NOT FOR CHANGES IN STATE OR LOCAL TAXES.

B-164808, AUGUST 21, 1968, 48 COMP. GEN. 93

BIDS - EVALUATION - TAX INCLUSION OR EXCLUSION AN ATTACHMENT TO A LOW BID STATING THE PRICES QUOTED INCLUDED PROVISIONS FOR PAYMENT OF THE THEN CURRENT STATE OF WASHINGTON BUSINESS AND OCCUPATION TAX BUT THAT "NO PROVISION HAS BEEN MADE FOR THE PAYMENT OF ANY OTHER WASHINGTON TAX" IS CONSIDERED PART OF THE BID, AND THE BID SUBMITTED ON A TAX-EXCLUDED BASIS REGARDING FUTURE INCREASES IN THE BUSINESS TAX OR NEWLY IMPOSED STATE TAXES IS NONRESPONSIVE TO THE INVITATION WHICH CONTAINED A TAX CLAUSE REQUIRING THE CONTRACT PRICE TO INCLUDE ALL APPLICABLE TAXES AND PROVIDED FOR AN ADJUSTMENT IN THE CONTRACT PRICE ONLY IN THE EVENT OF CHANGES IN THE FEDERAL EXCISE TAX OR DUTY AND NOT FOR CHANGES IN STATE OR LOCAL TAXES.

TO WILLIAM E. BROWN, AUGUST 21, 1968:

REFERENCE IS MADE TO YOUR LETTER OF JULY 22, 1968, REGARDING THE PROTEST OF THE WESTINGHOUSE ELECTRIC CORPORATION AGAINST THE AWARD OF A CONTRACT TO ALLIS-CHALMERS UNDER INVITATION FOR BIDS DS-6608.

THE SUBJECT INVITATION--- THE SECOND STEP OF A TWO-STEP PROCUREMENT--- SOLICITED BIDS TO FURNISH, INSTALL AND TEST THREE GENERATORS AND PROVIDE SPARE PARTS FOR THE GRAND COULEE THIRD POWERPLANT. TWO BIDS WERE RECEIVED FROM THE ELIGIBLE BIDDERS UNDER THE FIRST STEP. ALLIS CHALMERS BID $22,286,000 WITH A WARRANTED EFFICIENCY OF 98.65 PERCENT FOR THE GENERATORS. WESTINGHOUSE BID $22,044,000 WITH A WARRANTED EFFICIENCY OF 98.37 PERCENT. PARAGRAPH B-7A (2) OF THE INVITATION SPECIAL REQUIREMENTS PROVIDED THAT THERE WOULD BE DEDUCTED FROM EACH BID PRICE $6,000 PER GENERATOR FOR EACH 1/100 OF 1 PERCENT THE WARRANTED EFFICIENCY EXCEEDED 98.25 PERCENT. IN ACCORDANCE THEREWITH, $720,000 WAS DEDUCTED FROM THE ALLIS-CHALMERS BID PRICE AND $216,000 WAS DEDUCTED FROM THE WESTINGHOUSE BID PRICE. AS A RESULT, THE ALLIS CHALMERS BID WAS EVALUATED AT $21,566,000, WHEREAS THE WESTINGHOUSE BID WAS EVALUATED AT $21,828,000. ON THAT BASIS, ALLIS-CHALMERS WAS THE LOW EVALUATED BIDDER.

IN A LETTER ATTACHED TO THE ALLIS-CHALMERS BID, IT WAS STATED:

ENCLOSED HEREWITH IS ONE (1) COMPLETED SET OF STANDARD FORM 33,BIDDING SCHEDULE, WARRANTED CHARACTERISTICS AND FORM TITLED, "REPRESENTATIONS BY OFFEROR PURSUANT TO THE -BUY AMERICAN- ACT.' THIS DATA CONSTITUTES ALLIS- CHALMERS FORMAL OFFER TO FURNISH, INSTALL AND TEST THE GENERATORS REQUIRED UNDER SOLICITATION NO. DS-6608.

THIS ENCLOSED PRICE DATA, TOGETHER WITH THE FOLLOWING, COMPRISE OUR COMPLETE OFFER.

(A) BUREAU OF RECLAMATION LETTER OF JANUARY 19, 1968, TO ALL PROSPECTIVE OFFERORS.

(B) BUREAU OF RECLAMATION SOLICITATION NO. DS-6608, ISSUED TOGETHER WITH AMENDMENTS NOS. 1, 2 AND 3.

(C) ALLIS-CHALMERS LETTER OF APRIL 1, 1968, AND ITS ACCOMPANYING TECHNICAL PROPOSAL NO. 26-61-021.

(D) BUREAU OF RECLAMATION LETTER OF MAY 17, 1968, COMMENTING ON THE ALLIS -CHALMERS TECHNICAL PROPOSAL.

(E) ALLIS-CHALMERS LETTER OF MAY 28, 1968, REVISING OUR TECHNICAL PROPOSAL.

(F) BUREAU OF RECLAMATION LETTER OF JUNE 6, 1968, APPROVING THE ALLIS- CHALMERS TECHNICAL PROPOSAL.

WE WOULD LIKE TO POINT OUT THAT IN ACCORDANCE WITH PARAGRAPH A-9, PAGE 3, SPECIAL CONDITIONS OF SOLICITATION DS-6608, OUR PRICED QUOTATION INCLUDES PROVISIONS FOR PAYMENT TO THE STATE OF WASHINGTON THE "BUSINESS AND OCCUPATION" TAX IN THE AMOUNT OF 0.44 PERCENT ON THE GROSS PROCEEDS OF SALE. NO PROVISION HAS BEEN MADE FOR THE PAYMENT OF ANY OTHER WASHINGTON STATE TAX.

PARAGRAPH A-9 OF THE INVITATION SPECIAL CONDITIONS CITED IN THE LAST PARAGRAPH OF THE ALLIS-CHALMERS LETTER PROVIDES:

A-9. 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 DISCRETION 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.

WESTINGHOUSE CONTENDS THAT THE LAST PARAGRAPH OF THE ALLIS-CHALMERS LETTER RENDERS THE ALLIS-CHALMERS BID NONRESPONSIVE OR, AT LEAST, MAKES IT SUBJECT TO AN UNLIMITED UPWARD EVALUATION.

IN RESPONSE TO THE WESTINGHOUSE PROTEST, YOU CONTEND THAT THE LETTER ATTACHED TO THE ALLIS-CHALMERS BID WAS NOT PART OF THE BID. YOU POINT OUT THAT THE LETTER STATED WHICH SUBMITTALS COMPRISED THE COMPLETE BID AND THAT THERE WAS NO COUNTER-REFERENCE TO THE LETTER IN THE BID. EVEN IF THE LETTER IS CONSIDERED A PART OF THE BID, YOU DISAGREE WITH THE CONTENTION THAT THE LAST PARAGRAPH IN THE LETTER PLACES THE GOVERNMENT IN A POSITION WHERE IT CANNOT REASONABLY EVALUATE THE ALLIS CHALMERS BID OR THAT THE INTENT IS TO IMPOSE UPON THE GOVERNMENT THE BURDEN OF ANY OTHER TAX NOW OR HEREAFTER ASSESSED BY THE STATE OF WASHINGTON. YOU STATE THE LAST PARAGRAPH IN THE ALLIS-CHALMERS LETTER WAS PURELY INFORMATIONAL, ANTICIPATING POSSIBLE REQUESTS BY ALLIS CHALMERS TO THE CONTRACTING OFFICER FOR EXEMPTION EVIDENCE UNDER PARAGRAPH "E" OF THE TAX CLAUSE. YOU STATE THAT IT SEEMED TO BE MORE APPROPRIATE TO FURNISH THE INFORMATION WITH THE BID RATHER THAN AFTER AWARD OF A CONTRACT WHEN IT MIGHT BE SUSPECT AS A SELFSERVING DECLARATION MADE TO REDUCE COSTS OF PERFORMANCE WITHOUT BENEFIT TO THE GOVERNMENT. YOU CONTEND THAT THE DECISION AT 41 COMP. GEN. 289 RELIED UPON BY WESTINGHOUSE AS A BASIS FOR REJECTION OF THE ALLIS-CHALMERS BID IS DISTINGUISHABLE ON THE FACTS AND IS NOT FOR APPLICATION. YOU SUGGEST THAT THERE IS FOR CONSIDERATION B-147073, FEBRUARY 6, 1962, WHICH INVOLVED A SITUATION WHERE THE BIDDER STATED IN THE BID THAT THE PRICE DID NOT INCLUDE ANY STATE OR CITY SALES TAX, BUT WAS CONSIDERED RESPONSIVE BECAUSE THE STATE AND CITY SALES TAXES WERE NOT APPLICABLE TO THE CONTRACT. IN THAT CONNECTION, YOU POINT OUT THAT THE WASHINGTON STATE SALES AND USE TAXES ARE NOT APPLICABLE TO GOVERNMENT PROCUREMENTS AS EVIDENCED BY RULE 190 OF THE WASHINGTON STATE TAX REGULATIONS.

IN VIEW OF THE FACT THAT THE ALLIS-CHALMERS LETTER QUOTED ABOVE WAS ATTACHED TO THE COMPANY'S BID; THAT IT EXPRESSLY REFERRED TO THE TAX CLAUSE; AND THAT THE LAST PARAGRAPH IN THE LETTER UNDERTOOK TO EXPLAIN WHICH TAXES WERE AND WERE NOT INCLUDED IN THE "PRICED QUOTATION," THERE WOULD SEEM TO BE NO DOUBT BUT THAT THE LETTER SHOULD BE CONSIDERED A PART OF THE BID. 37 COMP. GEN . 410; 38 ID. 508.

IT IS STATED THAT THE LAST PARAGRAPH IN THE ALLIS-CHALMERS LETTER WAS INCLUDED SO THAT, IF EVIDENCE OF EXEMPTION FROM TAXATION IS REQUESTED AFTER AWARD AS PROVIDED IN PARAGRAPH "E" OF THE TAX CLAUSE, THERE WOULD BE NO QUESTIONS AS TO THE TAXES EXCLUDED FROM THE BID PRICE. IF THIS WAS THE INTENDED PURPOSE OF THE STATEMENT IN THE LETTER IT IS NOT UNDERSTOOD WHY SIMILAR PRECAUTION WAS NOT CONSIDERED APPROPRIATE TO PROTECT AGAINST ANY SUBSEQUENT QUESTION BEING RAISED CONCERNING CONTINGENCY RESERVE FOR "NEWLY IMPOSED FEDERAL EXCISE TAX OR DUTY OR RATE INCREASE" AS REFERRED TO IN THE PROVISO OF PARAGRAPH B (1) OF THE TAX CLAUSE. IN ANY EVENT, THE RESPONSIVENESS OF A BID MUST BE DETERMINED ON THE BASIS OF THE BID AS SUBMITTED. ANY INTENTION WHICH WAS NOT COMMUNICATED BY THE BID AND THE ACCOMPANYING LETTER IS NOT FOR CONSIDERATION. IT IS THEREFORE OUR VIEW THAT THE STATEMENT IN THE LETTER MUST BE VIEWED AS EXPRESSING THE CONDITIONS AND LIMITATIONS THE WORDS THEMSELVES CONVEY RATHER THAN AN UNEXPRESSED INTENTION NOT REASONABLY CONTEMPLATED BY THE USE OF SUCH LANGUAGE.

THE TAX CLAUSE PROVIDES THAT THE CONTRACT PRICE INCLUDES ALL APPLICABLE TAXES AND PROVIDES FOR AN ADJUSTMENT IN THE CONTRACT PRICE ONLY IN THE EVENT OF CHANGES IN THE FEDERAL EXCISE TAX OR DUTY. THE TAX CLAUSE DOES NOT PROVIDE FOR ANY ADJUSTMENT IN THE CONTRACT PRICE TO COMPENSATE FOR CHANGES IN STATE OR LOCAL TAXES. THE STATEMENT THAT NO PROVISION HAS BEEN MADE FOR THE PAYMENT OF ANY OTHER WASHINGTON STATE TAX IS INCONSISTENT WITH THE RESPONSIBILITY IMPOSED BY THE TAX CLAUSE. WHILE THE TAX CLAUSE REQUIRES THE CONTRACTOR TO BEAR THE RISK OF ALL STATE TAXES, PRESENT AND FUTURE, ALLIS-CHALMERS HAS BID, IN EFFECT, ON THE BASIS THAT IT HAS MADE PROVISION ONLY FOR THE BUSINESS AND OCCUPATION TAX "IN THE AMOUNT OF 0.44 PERCENT ON THE GROSS PROCEEDS OF SALE.' ACCORDINGLY, IRRESPECTIVE OF WHETHER ANY OTHER STATE TAXES APPLY AT THE PRESENT TIME, ALLIS-CHALMERS MUST BE DEEMED TO HAVE BID ON A TAX-EXCLUDED BASIS SO FAR AS CONCERNS ANY FUTURE INCREASE IN THE BUSINESS AND OCCUPATION TAX OVER 0.44 PERCENT AND ANY FUTURE STATE TAXES WHICH MIGHT BE IMPOSED IN CONNECTION WITH THE PERFORMANCE OF THE CONTEMPLATED CONTRACT.

OUR OFFICE DOES NOT CONSIDER THE DIFFERENCES IN THE PARTICULAR FACTS BETWEEN THIS CASE AND 41 COMP. GEN. 289 AS BEING SO SIGNIFICANT AS TO REQUIRE A DIFFERENT RESULT THAN THAT REACHED IN THE CITED DECISION. FOR THE REASONS STATED, IT IS OUR VIEW THAT, AS WAS THE SITUATION WITH RESPECT TO THE BID QUESTIONED IN THAT CASE, ALLIS-CHALMERS BID WAS SUBMITTED ON A TAX-EXCLUDED BASIS. IN THAT CONNECTION, AT PAGE 293 OF THE CITED DECISION, IT WAS STATED:

WE MUST THEREFORE CONCLUDE THAT WHERE, AS IN THE INSTANT CASE, THE INVITATION FOR BIDS INCLUDES THE STANDARD FEDERAL, STATE AND LOCAL TAXES CLAUSE, AND NO PROVISION IS OTHERWISE MADE IN THE INVITATION FOR THE EVALUATION OF TAX-EXCLUDED BID PRICES AND THE AWARD OF A CONTRACT ON THAT BASIS, A BID WHICH IS SUBMITTED ON A TAX-EXCLUDED BASIS, WITHOUT SPECIFICALLY IDENTIFYING THE CLASSES AND AMOUNTS OF TAXES WHICH HAVE BEEN EXCLUDED, MUST BE CONSIDERED NONRESPONSIVE TO THE INVITATION. * * *

IN B-147073, FEBRUARY 6, 1962, THE TAXES EXCLUDED WERE IDENTIFIED IN THE BID AS THE "STATE OR CITY SALES TAX" AND THEREFORE THE BID MET THE REQUIREMENT IN 41 COMP. GEN. 289 THAT THE EXCLUDED TAXES BE SPECIFICALLY IDENTIFIED. WHILE IT MAY BE THAT THE WASHINGTON STATE SALES AND USE TAXES ARE NOT APPLICABLE TO GOVERNMENT PROCUREMENTS, NOWHERE IN THE ALLIS- CHALMERS BID ARE THESE TAXES IDENTIFIED AS THE ONLY TAXES EXCLUDED FROM THE CONTRACT PRICE. THUS, B-147073 IS NOT APPLICABLE HERE.

IN VIEW OF THE FOREGOING, WE CONCLUDED THAT THE ALLIS-CHALMERS BID IS NONRESPONSIVE TO THE INVITATION AND SHOULD BE REJECTED.