B-244340, Sep 17, 1991

B-244340, Sep 17, 1991

DIGEST: Even assuming that protester's decision to not file a protest following receipt of oral information that may have formed the basis of its protest was reasonable because the agency led protester to believe that there was only a slight possibility that its bid "may be" rejected as nonresponsive, and that agency had not reached a final decision concerning its bid, protest to the General Accounting Office is untimely where initial agency- level protest against rejection of bid was filed more than 10 working days after protester received written notice of the rejection.

Attorneys

Coranco, Inc.:

Coranco, Inc. protests the rejection of its low bid and the award of a contract to Gallenstein & Associates, Inc., under invitation for bids (IFB) No. 1010-82HW-91, issued by the Agricultural Research Service (ARS), Department of Agriculture, for the replacement or removal and disposal of underground fuel storage tanks at ARS' Meat Animal Research Center in Clay Center, Nebraska. ARS rejected Coranco's bid as nonresponsive because, although the IFB required that bid prices include all applicable federal, state, and local taxes, the protester included the phrase "Sales Tax Not Included" in its bid. The protester contends that its bid was improperly rejected because the notation merely indicated that in accordance with state law, ARS would be exempt from paying Nebraska sales tax on goods incorporated into the project.

We dismiss the protest.

Coranco submitted the apparent low bid at bid opening on April 30, 1991. Written immediately next to its bid price, Coranco inserted the phrase, "Sales Tax Not Included." During a telephone conversation on May 1, the contracting officer informed the protester that the notation "may" have rendered Coranco's bid nonresponsive. /1/ In a May 8 letter, received by Coranco on May 10, the contracting officer rejected Coranco's bid, specifically explaining that the notation rendered the protester's bid nonresponsive. By separate letter dated May 21, received by Coranco on May 22, ARS informed Coranco of the award to Gallenstein and again explained that its bid had been rejected because the notation rendered Coranco's bid nonresponsive. On May 28, Coranco filed a written agency- level protest with the contracting officer, objecting to the rejection of its bid. After ARS denied that protest in a letter received by Coranco on May 31, Coranco filed this protest in our Office on June 5. The agency has suspended performance of the contract pending resolution of this protest.

A protest concerning other than an alleged solicitation impropriety must be filed within 10 working days after the basis of protest is known or should have been known. Bid Protest Regulations, 4 C.F.R. Sec. 21.2(a)(2) (1991). In this regard, a protester's receipt of oral information forming the basis of its protest is sufficient to start the 10-day time period running; written notification is not required. Swafford Indus., B-238055, Mar. 12, 1990, 90-1 CPD Para. 268, aff'd, B-238055.2, July 30, 1990, 90-2 CPD Para. 79. Our Regulations further provide that a matter initially protested to the contracting agency will be considered only if the initial protest to the agency was filed within the time limits for filing a protest with our Office. Tandy Constr., Inc., B-238619, Feb. 22, 1990, 90-1 CPD Para. 206.

To be timely under our Regulations, Coranco's agency-level protest would have to have been filed by May 15, within 10 working days from May 1, when it first learned of the basis of its protest during the telephone conversation with ARS. Since Coranco did not file its written /2/ agency- level protest until May 28, its protest was untimely filed.

Even assuming that Coranco reasonably decided to not file a protest following receipt of the agency's oral notification because, by informing the firm that its bid "may be" nonresponsive, ARS arguably led Coranco to believe that there was only a slight possibility that its bid might be rejected and that ARS had not reached a final decision, Coranco's agency- level protest was nevertheless untimely since Coranco did not protest to ARS in writing until May 28, more than 10 working days after May 10 when it received the agency's notice rejecting its bid. /3/

The protest is dismissed.

The Honorable J. Robert Kerrey

United States Senator

Senator Kerrey:

This responds to your letters dated June 10 and July 26, 1991, concerning a bid protest by Coranco, Inc. challenging the rejection of its bid as nonresponsive and the award of a contract to Gallenstein Associates, Inc., under invitation for bids (IFB) No. 1010-82HW-91. The IFB was issued by the Agricultural Research Service (ARS), Department of Agriculture, for the replacement or removal and disposal of underground fuel storage tanks at ARS' Meat Animal Research Center, Clay Center, Nebraska. ARS rejected the bid as nonresponsive because Coranco qualified its bid by inserting the statement "Sales Tax Not Included" next to its bid price.

Enclosed is a copy of our decision of today dismissing Coranco's protest as untimely filed. Nevertheless, in response to your request, we will address the issues Coranco raises.

The IFB incorporated by reference Federal Aquisition Regulation (FAR) Sec. 52.229-3, the standard taxes clause, which provides that bid prices include all applicable federal, state, and local taxes. Unless otherwise specified in the IFB, the inclusion of the standard taxes clause constitutes notice to all bidders that bids will be evaluated on a tax- included basis. The George Sollitt Constr. Co., B-190743, Sept. 25, 1978, 78-2 CPD Para. 224. The submission of a bid on a tax excluded basis is viewed as evidence of the bidder's belief, absent definite information to the contrary, that taxes may be assessed, and of the bidder's unwillingness to assume responsibility for payment of such taxes at the bid price. NASCO Prods. Co., B-192116, Nov. 27, 1978, 78-2 CPD Para. 364. Nevertheless, the bid still may be considered if the class and amount of the tax are specified elsewhere in the bid, because such information permits all bids to be evaluated on an equal basis. J & W Welding and Fabrication, B-209430, Jan. 25, 1983, 83-1 CPD Para. 92. Absent such information, the bid cannot be evaluated on an equal basis with other bids, and must be rejected as nonresponsive. Trail Equip. Co., B-206975, Apr. 20, 1982, 82-1 CPD Para. 366.

The facts here are analogous to those in The Bruce Corp., B-231171, June 24, 1988, 88-1 CPD Para. 610, in which we denied a protest of ARS' proposed rejection of The Bruce Corporation's low bid as nonresponsive. The IFB in that case solicited bids for the construction of an ARS facility also located in Clay Center, Nebraska, and incorporated by reference the standard tax clause involved here, requiring that bid prices include all applicable taxes. ARS proposed to reject The Bruce Corporation's bid as nonresponsive because the bidder inserted the phrase "Tax Not Included" in its bid.

We explained that since Bruce's bid did not clearly define the amount or class of tax to be excluded, at a minimum its bid was ambiguous as to what taxes were excluded, and therefore could not be evaluated on an equal basis with the other bids. We found that by submitting its bid on a tax- excluded basis in response to an IFB that contained the standard tax clause, without specifically identifying the class and amount of tax that had been excluded, Bruce effectively prevented a comparison of its bid with that its competitors. We therefore concluded that Bruce's bid was properly rejected as nonresponsive.

Here, as in The Bruce Corp., the phrase "Sales Tax Not Included," with no indication elsewhere in the bid as to which sales tax or what amount is excluded, at a minimum rendered Coranco's bid ambiguous. The notation could reasonably be interpreted as an indication that sales taxes may later be assessed, and of the bidder's unwillingness to assume responsibility for payment of such taxes at its bid price. /4/ Further, despite Coranco's assertions to the contrary, nowhere in its bid did the protester define the amount or class of tax excluded (e.g., state or local sales tax). By submitting a bid on a tax-excluded basis in response to an IFB that contained the standard taxes clause, without specifically identifying the class and amount of tax that was excluded, Coranco effectively prevented a comparison of its bid on an equal basis with the other bids. Coranco's bid was therefore properly rejected as nonresponsive.

In your letter, you suggest that when reviewing bids submitted in response to solicitations issued by federal agencies, contracting officers should be aware of state law provisions, such as the state sales tax exemption involved here, that could save taxpayer dollars. We note that while nearly all of the states and numerous localities impose taxes, the applicability of state and local taxes varies among the states and from one locality to another. The burden is thus appropriately placed on bidders to ascertain whether and to what extent any taxes apply to a particular contract because they generally are more familiar with the applicability of state and local taxes than contracting officers. See Tumpane Servs. Corp., B-220465, Jan. 28, 1986, 86-1 CPD Para. 95.

Additionally, contracting officers are generally not sufficiently familiar with the bidders' commercial operations to arrive at definite conclusions concerning the applicability of local and state taxes to a particular contract. It would be inappropriate to impose on contracting officers the burden of examining the tax consequences of entering into a contract with each bidder who may elect to submit a bid in response to a solicitation. See J & W Welding and Fabrication, supra. While agencies are certainly not precluded from identifying in a solicitation a particular tax that they believe will apply to a contract, they are not required to do so. See Ameriko Maintenance Co., B-242303, Mar. 21, 1991, 91-1 CPD Para. 314. Given the numerous different classes and variations of local, and state taxes, and the diverse exemption/exclusion provisions, we think that the responsibility to determine the applicability and impact of a particular tax on bid price properly rests with each prospective bidder, not with the contracting agencies.

Finally, you note that award to Gallenstein may result in additional cost to the government on this contract. Coranco's nonresponsive bid may not be accepted, however, even though it would result in monetary savings to the government, since acceptance of a nonresponsive bid would compromise the integrity of the competitive bidding system. Industrial Structures, Inc., 64 Comp.Gen. 768 (1985), 85-2 CPD Para. 165.

Copies of the decisions cited herein are provided for your reference.

Sincerely yours,

The Honorable J. James Exon

Senator Exon:

This responds to your letters dated June 26 and August 7, 1991, regarding a bid protest by Coranco, Inc. challenging the rejection of its bid as nonresponsive under invitation for bids (IFB) No. 1010-82HW 91. The IFB was issued by the Agricultural Research Service (ARS), U.S. Department of Agriculture, for the replacement or removal and disposal of underground fuel storage tanks at ARS' Meat Animal Research Center, Clay Center, Nebraska. ARS rejected the bid as nonresponsive because Coranco included the statement "Sales Tax Not Included" in its bid.

Enclosed is a copy of our decision of today dismissing the protest.

Sincerely yours,

/1/ In a May 6 letter, apparently submitted in response to the telephone conversation, the protester explained its notation. According to Coranco, approximately $72,573 of its bid attributable to materials and equipment would normally be subject to a 5 percent sales tax, totaling approximately $3,628; Coranco was required to omit sales taxes applicable to projects involving Nebraska state and other government entities; and Coranco "assumed this to also be the case with" ARS contracts.

/2/ Since Federal Acquisition Regulation (FAR) Sec. 33.101 provides for written protest objections only, we need not address Coranco's arguments concerning oral objections against the rejection of its bid that may have been raised with the agency on its behalf prior to Coranco filing its written protest. See Clean Air, Inc.-- Second Recon., B-242582.4, May 20, 1991, 91-1 CPD Para. 481.

/3/ While Coranco states that the agency did not advise it of the 10-day filing requirement, prospective contractors are on constructive notice of our Regulations since they are published in the Federal Register and Code of Federal Regulations. Chapman Smidt Hardware, Inc.-- Recon., B-237888.2, Jan. 8, 1990, 90-1 CPD Para. 35. In addition, we note that section L.8 of the IFB, "Service of Protest," directed bidders to part 33 of the FAR, which sets out the requirements for filing an agency-level protest, including the 10-day filing requirement, and refers to our Regulations as well.

/4/ In fact, in Coranco's post-bid opening explanation letterto the contracting officer, the protester suggested "either acquiring a tax exemption certificate for the job or modifying its bid price to reflect sales tax," suggesting that, absent the exemption Certificate, Coranco anticipated that sales taxes would be applicable to the project and that it intended ARS to reimburse the firm for those taxes.