B-164530, AUG. 27, 1968

B-164530, AUG. 27, 1968

TO MR. KNOTT:

WE REFER TO LETTER OF JUNE 5, 1968, FROM YOUR GENERAL COUNSEL AS FOLLOWS: "THIS LETTER CONCERNS A MISTAKE IN BID ALLEGED AFTER AWARD BY STANDARD OIL COMPANY OF KENTUCKY UNDER CONTRACT NO. GS-04S-14864 (14684) WHICH WAS AWARDED ON AUGUST 29, 1966. "WITH CERTAIN EXCEPTIONS NOT HERE RELEVANT, THE FORMALLY ADVERTISED CONTRACT REQUIRED DELIVERY TO DESIGNATED POINTS IN NAMED STATES DURING THE PERIOD SEPTEMBER 1, 1966 THROUGH AUGUST 31, 1967 OF SUCH QUANTITIES OF GASOLINE AS MAY BE ORDERED (UP TO A MAXIMUM OF 125 PERCENT OF ESTIMATED QUANTITIES) FOR USE BY DEPARTMENTS AND AGENCIES OF THE EXECUTIVE BRANCH OF THE FEDERAL GOVERNMENT, EXCEPT THE DEPARTMENT OF DEFENSE. ITEMS 176 THROUGH 229 OF THE SCHEDULE WERE FOR DELIVERIES TO POINTS IN MISSISSIPPI. STANDARD OIL COMPANY RECEIVED THE AWARD FOR, INTER ALIA, ITEM 177, AN ESTIMATED QUANTITY OF 215,000 GALLONS FOR DELIVERY TO THE GEORGE C. MARSHALL SPACE FLIGHT CENTER (NASA) WHICH IS LOCATED IN HANCOCK COUNTY, MISSISSIPPI. THE DELIVERY POINT OF ITEM 177 WAS DESCRIBED AS FOLLOWS:-BAY ST. LOUIS: 20 MI. NW OF; 16 MI. S. OF PICAYUNE; TEST FACILITY; GEORGE C. MARSHALL SPACE FLIGHT CENTER; NASA); T.T.- "AS NOTED ABOVE, ALL DELIVERIES WERE F.O.B. DESTINATION. THE INITIALS, -T.T.- IN THE ABOVE DESCRIPTION STAND FOR TRANSPORT TRUCK. "THE CONTRACT INCORPORATED GSA FORM 1424 (SEPTEMBER 1964, ED.), SUPPLEMENTAL PROVISIONS (SUPPLY CONTRACT) WHICH INCLUDED AS PARAGRAPH 38, THE STANDARD FEDERAL, STATE, AND LOCAL TAXES CLAUSE REQUIRED BY FPR 1-11.401-1 (B). SUBPARAGRAPH (A) OF THE CLAUSE PROVIDES AS FOLLOWS: "-EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL, STATE, AND LOCAL TAXES AND DUTIES.' ,PARAGRAPH 7 OF THE SPECIAL PROVISIONS ON PAGE 4 OF THE CONTRACT PROVIDES IN SUBPARAGRAPH (C) (2) -ARTICLE 38 OF THE SUPPLEMENTAL PROVISIONS REQUIRES, AMONG OTHER THINGS, THAT ALL APPLICABLE STATE AND LOCAL MOTOR FUEL TAXES BE INCLUDED IN THE CONTRACT PRICE.- "IN A LETTER DATED MARCH 27, 1967, THE CONTRACTOR STATED THAT ITEM 177 HAD BEEN DELIVERED IN HANCOCK COUNTY, MISSISSIPPI, THAT HANCOCK COUNTY HAD A -SEAWALL TAX- OF ?03 PER GALLON ON GASOLINE SALES, AND THAT THIS TAX HAD NOT BEEN INCLUDED IN ITS BID PRICE BECAUSE THE INSTRUCTIONS AS TO POINT OF DELIVERY WERE NOT CLEAR. STANDARD OIL COMPANY POINTED OUT THAT THE SPREAD BETWEEN THE FOUR BIDS ON THIS ITEM WAS ONLY ?01 PER GALLON INDICATING THAT THE SEAWALL TAX WAS ALSO OMITTED BY THE THREE OTHER BIDDERS. STANDARD OIL COMPANY REQUESTED RELIEF FROM THE TAX BURDEN ON THIS ITEM. BY LETTER DATED APRIL 4, 1967, THE CONTRACTING OFFICER POINTED OUT THAT THE INVITATION UNDER WHICH THE CONTRACT WAS AWARDED CLEARLY REQUIRED THE INCLUSION OF ALL APPLICABLE TAXES, AND THAT THE DESCRIPTION OF ITEM 177 CLEARLY PLACED THE LOCATION IN HANCOCK COUNTY. STANDARD OIL COMPANY'S REQUEST FOR RELIEF WAS DENIED. THROUGH INADVERTENCE, THE CONTRACTING OFFICER ADVISED THE CONTRACTOR THAT THE LETTER CONSTITUTED A DECISION CONCERNING A QUESTION OF FACT FROM WHICH THE CONTRACTOR HAD A RIGHT TO APPEAL. BY LETTER OF APRIL 10, 1967, STANDARD OIL COMPANY APPEALED THE DECISION TO THE ADMINISTRATOR OF GENERAL SERVICES CLAIMING REIMBURSEMENT FOR $8,062.92, THE TOTAL OF THE ?03 PER GALLON TAX, TIMES THE 268,764 GALLONS DELIVERED UNDER ITEM 177. ON MOTION OF GOVERNMENT COUNSEL, THE GENERAL SERVICES ADMINISTRATION BOARD OF CONTRACT APPEALS, ON JUNE 26, 1967, DISMISSED THE APPEAL FOR LACK OF JURISDICTION. ATTORNEYS FOR THE CONTRACTOR HAVE FILED A MOTION FOR RECONSIDERATION REITERATING THEIR CONTENTION THAT THE DELIVERY POINT WAS AMBIGUOUS, THAT THE CONTRACTOR IS NOT SEEKING REFORMATION OF THE CONTRACT, AND THAT THE CASE IS PROPERLY COGNIZABLE BY THE BOARD UNDER THE CONSTRUCTIVE CHANGES DOCTRINE. PURSUANT TO AGREEMENT OF THE PARTIES, THE BOARD'S RULING ON THE MOTION FOR RECONSIDERATION IS BEING HELD IN ABEYANCE PENDING SUBMISSION OF THE MATTER TO YOUR OFFICE. "WHILE THERE IS NO REASON TO DOUBT THE CONTRACTOR'S ASSERTION THAT THE ?03 PER GALLON -SEAWALL TAX- WAS OMITTED FROM ITS BID, IT IS WELL SETTLED THAT AFTER A BID HAS BEEN ACCEPTED AND A CONTRACT ENTERED INTO, THE QUESTION IS NOT ONLY WHETHER THE CONTRACTOR MADE A MISTAKE, BUT ALSO WHETHER THE CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN OF THE MISTAKE PRIOR TO ACCEPTANCE SO THAT THE PURPORTED ACCEPTANCE DID NOT RESULT IN A BINDING CONTRACT. 36 COMP. GEN. 27; 39 COMP. GEN. 36; 45 COMP. GEN. 700, AND CASES CITED. SINCE THE CONTRACTOR HAS NOT ALLEGED AND THERE IS NO EVIDENCE TO INDICATE THE CONTRACTING OFFICER WAS ON ACTUAL NOTICE THAT STANDARD OIL COMPANY HAD MADE A MISTAKE PRIOR TO AWARD, THE QUESTION TO BE DECIDED IS WHETHER UNDER ALL THE FACTS AND CIRCUMSTANCES, THE CONTRACTING OFFICER MAY BE CHARGED WITH CONSTRUCTIVE NOTICE OF THE POSSIBILITY THAT STANDARD MADE A MISTAKE. "THE FOUR BIDS RECEIVED ON ITEM 177 WERE AS FOLLOWS:

POSTED MAXIMUM BIDDER PRICE DEDUCTION PRICE HUMBLE .2640 .0443 .2197 GULF

.2830 .0718 .2112 AMERICAN .2405 .0242.2163 STANDARD .2385 .0288 .2097 "IT THUS APPEARS THAT THE DIFFERENCE BETWEEN THE LOWEST AND THE HIGHEST BID WAS ?01 PER GALLON. TRANSLATED INTO PERCENTAGES, STANDARD'S LOW BID OF ?2097 IS 99 PERCENT OF THE NEXT LOW BID OF ?2112 PER GALLON SUBMITTED BY GULF, AND IN EXCESS OF 95 PERCENT OF THE HIGH BID OF ?2197 SUBMITTED BY HUMBLE. WHILE IT MAY BE CONCEDED THAT GASOLINE IS A HIGHLY COMPETITIVE PRODUCT, SUCH A NARROW RANGE OF BIDS IS NOT SUFFICIENT TO CHARGE THE CONTRACTING OFFICER WITH NOTICE OF ERROR PRIOR TO AWARD. SEE 39 COMP. GEN. 36, 39 ID. 405 WHERE A BID 89.6 PERCENT OF THE NEXT LOW BID WAS HELD INSUFFICIENT TO PLACE THE CONTRACTING OFFICER ON NOTICE OF ERROR. THE DECISIONS IN WHICH A DISPARITY IN BID PRICES HAVE BEEN HELD TO CHARGE THE CONTRACTING OFFICER WITH NOTICE OF THE POSSIBILITY OF MISTAKE INVOLVE MUCH GREATER DIFFERENCES. SEE, E.G., 37 COMP. GEN. 706 AND COURT DECISIONS THERE CITED. "HOWEVER, STANDARD OIL COMPANY HAS STATED (LETTER OF APRIL 10, 1967) THAT ITS PRICE INCLUDED ?04 PER GALLON FEDERAL TAX AND ?07 PER GALLON STATE TAX RESULTING IN A NET F.O.B. DESTINATION PRICE (THAT IS EXCLUSIVE OF THESE TAXES) OF ?0997 PER GALLON AND THAT IF THE ?03 SEAWALL TAX HAD BEEN INCLUDED, THE DELIVERED PRICE WOULD HAVE BEEN AN UNREALISTICALLY LOW ?0697 PER GALLON. ACCORDINGLY, STANDARD ARGUES THAT IT SHOULD HAVE BEEN APPARENT THE SEAWALL TAX WAS OMITTED FROM ITS BID. THE FALLACY OF THIS CONTENTION IS THAT THE INVITATION PLACED THE RESPONSIBILITY FOR DETERMINING THE APPLICABILITY OF TAXES ON THE BIDDER, AND THAT THE CONTRACTING OFFICER SIMPLY CANNOT BE EXPECTED TO BE FAMILIAR WITH THE PLETHORA OF STATE AND LOCAL TAXES THAT MIGHT BE APPLICABLE TO A PARTICULAR TRANSACTION. IN THIS CONNECTION, IT SHOULD BE NOTED THAT THE INSTANT INVITATION INVOLVED 364 SEPARATE DELIVERY POINTS IN SEVEN STATES, AND THAT IT WOULD PLACE AN IMPOSSIBLE BURDEN ON THE CONTRACTING OFFICER TO REQUIRE HIM TO BE FAMILIAR WITH TAXES IMPOSED ON SALES OR DELIVERIES BY EACH OF THE LOCAL JURISDICTIONS INVOLVED. SEE 41 COMP. GEN. 289 WHEREIN IT WAS HELD THAT A BID SUBMITTED ON A TAX EXCLUSIVE BASIS WHICH DID NOT IDENTIFY THE CLASSES OR THE AMOUNTS OF EXCLUDED TAXES IN RESPONSE TO AN INVITATION CONTAINING THE STANDARD FEDERAL, STATE, AND LOCAL TAXES CLAUSE MUST BE REJECTED AS NONRESPONSIVE. THE DECISION STATES IN PART -WE DO NOT DEEM IT APPROPRIATE TO IMPOSE UPON THE SEVERAL CONTRACTING OFFICERS THE BURDEN OF EXAMINING INTO THE TAX SITUATION OF EACH BIDDER WHO MAY ELECT TO SUBMIT A BID PRICE ON AN UNSOLICITED TAX-EXCLUDED BASIS, AND OF MAKING UNILATERAL DETERMINATIONS OF THE AMOUNT OF APPLICABLE TAXES WHICH MAY OR MAY NOT BE CORRECT AND ACCEPTABLE TO SUCH BIDDERS.- THE RATIONALE OF THE DECISION WOULD APPEAR TO BE EQUALLY APPLICABLE TO THE INSTANT CASE WHEREIN STANDARD OIL COMPANY SEEKS TO CHARGE THE CONTRACTING OFFICER WITH NOTICE OF ITS ERROR IN OMITTING AN APPLICABLE LOCAL TAX FROM ITS BID BY VIRTUE OF THE FACT ITS BASE BID INCLUSIVE OF THE TAX WOULD HAVE BEEN UNREALISTICALLY LOW. "WHILE THERE IS SUBSTANTIAL AUTHORITY FOR THE PROPOSITION THAT THE CONTRACTING OFFICER IS NOT CHARGEABLE WITH CONSTRUCTIVE NOTICE OF PAST PURCHASING EXPERIENCE (B 120941, AUGUST 13, 1954; SALIGMAN V UNITED STATES, D.C. PA. (1944), 56 F.SUPP. 505, AND 39 COMP. GEN. 36), IT MAY BE APPROPRIATE TO COMPARE THE PRICES RECEIVED FOR DELIVERY TO THE GEORGE C. MARSHALL SPACE FLIGHT CENTER UNDER THE INVITATION FOR THE TERM CONTRACT FOR THE PRIOR YEAR. THE DELIVERY POINT FOR THIS ITEM (177) WAS DESCRIBED IDENTICALLY IN THE PRIOR INVITATION. HOWEVER, THE SPECIAL PROVISIONS OF THE INVITATION PROVIDED THAT BID PRICES WOULD INCLUDE ?04 FEDERAL TAX AND EXCLUDE STATE AND LOCAL TAXES. IN A TAX DATA SHEET ATTACHED TO THE INVITATION, STANDARD OIL COMPANY INDICATED THAT EXCLUDED TAXES FOR MISSISSIPPI INCLUDED ?07 STATE TAX, AND ?02 FOR HANCOCK, HARRISON, AND JACKSON COUNTY SEAWALL TAXES. PRICES RECEIVED FOR ITEM 177 ON THE 1965 INVITATION WERE AS FOLLOWS:

POSTED MAXIMUM BIDDER PRICE

DEDUCTION PRICE GULF .0975 PLUS .0424 $ .1399 AMERICAN .169MINUS .0251 .1439 STANDARD .2130

.0707 .1423 TEXACO .1375 PLUS .0159 .1509 SINCLAIR .1375 PLUS .0207 .1632 HUMBLE .173

MINUS .0245 .1485 "IT THUS APPEARS THAT GULF RAISED ITS PRICE ON THE INVITATION HEREIN BY ?0713, AMERICAN BY ?0724, STANDARD BY ?0674, AND HUMBLE BY ?0712 PER GALLON. THUS, NO BIDDER RAISED ITS PRICE BY THE EXACT AMOUNT OF THE MISSISSIPPI STATE TAX OF ?07 PER GALLON. IT SHOULD BE NOTED, HOWEVER, THAT THE DISPARITY BETWEEN THE LOWEST AND THE HIGHEST BIDS IS ?0233, THAT THE LOW BID OF ?1399 IS APPROXIMATELY 85 PERCENT OF THE HIGH BID OF ?1632, AND APPROXIMATELY 97 PERCENT OF THE NEXT LOW BID OF ?1423. "IN VIEW OF THE FOREGOING, IT IS PROBABLE THAT STANDARD'S CONTENTION THAT NONE OF THE FOUR FIRMS BIDDING ON ITEM 177 OF THE INSTANT INVITATION INCLUDED THE ?03 PER GALLON SEAWALL TAX IN ITS PRICE IS CORRECT. BE THAT AS IT MAY, THE INVITATION CLEARLY PLACED THE RESPONSIBILITY FOR INCLUDING IN BID PRICES ALL APPLICABLE TAXES, THE CONTRACTING OFFICER MAY NOT BE CHARGED WITH NOTICE OF THE APPLICABILITY OF ANY PARTICULAR STATE OR LOCAL TAX, AND THERE WAS NOTHING IN STANDARD'S BID OR IN THE RANGE OF PRICES RECEIVED THAT SHOULD HAVE PLACED THE CONTRACTING OFFICER ON NOTICE THAT STANDARD MADE A MISTAKE. ACCORDINGLY, IT MUST BE HELD THAT STANDARD'S MISTAKE WAS UNILATERAL AND NOT MUTUAL. STANDARD'S REQUEST FOR RELIEF ON THE BASIS OF MISTAKE SHOULD BE DENIED. "IN AN EFFORT TO BRING THIS CASE WITHIN THE CONSTRUCTIVE CHANGES DOCTRINE, AND TO INDUCE THE GSBCA TO REVERSE ITS PREVIOUS DISMISSAL OF STANDARD'S APPEAL, STANDARD'S ATTORNEYS HAVE ALLEGED THAT THERE WAS AN AMBIGUITY AS TO THE DELIVERY POINT FOR ITEM 177 WHICH, REASONABLY INTERPRETED, LED TO THE CONCLUSION THAT THE DESTINATION WOULD NOT BE IN A COUNTY WITH AN UNUSUAL SEAWALL TAX ON GASOLINE. WHILE IT MAY WELL BE THAT THE ADDITION OF - HANCOCK COUNTY- TO THE ITEM DESCRIPTION WOULD HAVE ASSISTED STANDARD AND OTHER BIDDERS IN THE PREPARATION OF THEIR BIDS, IT IS SUBMITTED THAT A DESTINATION, -BAY ST. OUIS: 20 MI. NW OF; 16 MI. S. OF PICAYUNE;- COUPLED WITH THE DESIGNATION -GEORGE C. MARSHALL SPACE FLIGHT CENTER (NASA/- IS PRECISELY STATED, LEAVES NO ROOM FOR INTERPRETATION, AND MAY NOT BE REGARDED AS AMBIGUOUS. IT IS INTERESTING TO NOTE THAT STANDARD HAS NOT ALLEGED A DESTINATION OTHER THAN HANCOCK COUNTY TO WHICH IT CONSIDERED THE GASOLINE WAS TO BE DELIVERED, THAT FOR ALL THAT APPEARS, THE GASOLINE WAS DELIVERED TO THE DESIRED DESTINATION WITHOUT THE NECESSITY OF GUIDANCE OR ADVICE FROM THE CONTRACTING OFFICER OR ANY AUTHORIZED REPRESENTATIVE OF THE CONTRACTING OFFICER, AND THAT STANDARD APPARENTLY HAD NO DIFFICULTY IN CONCLUDING THAT THE IDENTICAL DESCRIPTION IN THE PRIOR YEAR'S INVITATION CALLED FOR DELIVERIES IN HANCOCK COUNTY SINCE IT INCLUDED ?02 FOR SEAWALL TAX ON THE LIST OF EXCLUDED TAXES ON THE TAX DATA SHEET. ACCORDINGLY, NO CHANGE ACTUAL OR CONSTRUCTIVE IS INVOLVED IN THIS CASE, AND YOUR DECISION SHOULD BE DISPOSITIVE OF STANDARD'S REQUEST FOR RELIEF ON THIS STATE OF FACTS UNDER ANY THEORY.'

FOR THE REASONS ADVANCED AND AUTHORITIES CITED IN THE ABOVE LETTER, WE CONCUR IN YOUR GENERAL COUNSEL'S VIEW THAT THE GOVERNMENT MAY NOT PROPERLY BE CHARGED WITH EITHER ACTUAL OR CONSTRUCTIVE NOTICE OF STANDARD'S ALLEGED OMISSION OF THE COUNTY TAX FROM ITS BID PRICE SO AS TO PERMIT AN ADJUSTMENT IN THE CONTRACT PRICE ON THAT BASIS. REGARDING STANDARD'S CONTENTION THAT THE DELIVERY POINT FOR ITEM 177 WAS AMBIGUOUS, SINCE THIS FORMS THE BASIS FOR STANDARD'S MOTION FOR RECONSIDERATION BEFORE THE GENERAL SERVICES ADMINISTRATION BOARD OF CONTRACT APPEALS, GSBCA-2345, WHICH HAS JURISDICTION TO THE EXTENT OF ANY FACTUAL QUESTION WHICH MAY BE INVOLVED THEREIN, WE DO NOT BELIEVE THAT AN EXPRESSION OF OUR VIEWS AS TO THE MERITS OF SUCH CONTENTION WOULD BE PROPER WHILE THE MOTION IS PENDING BEFORE THAT BOARD.