Determination Whether FMC Corporation Is Entitled to an Increase in Contract Price

A decision was requested to determine whether a firm was entitled to an increase in contract price to cover the cost of Federal Excise Taxes (FET). The firm mistakenly did not include an amount for FET in its offer price to the Air Force for 24 hydraulic sewer cleaners. The request for proposals advised all offerers that the solicitation and any resultant contract were subject to a provision in the regulations requiring that the price bid must include all applicable federal, state, and local taxes and duties. Therefore, reformation of the contract could not be granted on this basis. When a mistake in bid is alleged after award, relief can be granted only if the mistake was mutual or the contracting officer was on actual or constructive notice of the error prior to award. In this case, the difference between the firm's offered price and the prices offered by other firms was not so great that the contracting officer should have been aware of an error. Thus, it was not permissible for the contract to be corrected on the basis of a mistake alleged after award. It was noted, however, that the regulation which was incorporated into the solicitation provided that, if a contractor should warrant that it did not include an amount for FET in its contract and an Internal Revenue Service ruling takes effect after the contract date so that the contractor must pay the FET, then the contract price can be increased by the amount of the tax. It was suggested that the firm may wish to pursue the matter under this aspect.