B-158458, MAR. 28, 1966

B-158458, MAR. 28, 1966

TO ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION:

IN LETTER GK OF FEBRUARY 2, 1966, WITH ENCLOSURES, THE ASSISTANT GENERAL COUNSEL INDICATED THAT PURSUANT TO AN AGREEMENT WITH COUNSEL FOR KENNEDY ELECTRIC COMPANY, INC., THE MATTER OF THE COLLECTION OF MARYLAND SALES TAX WHICH THE CONTRACTOR DID NOT HAVE TO PAY UNDER CONTRACT NAS 5-5452 WAS BEING FORWARDED TO ASCERTAIN WHETHER OUR OFFICE CONCURS IN THE ADMINISTRATIVE POSITION THAT THE CONTRACTOR SHOULD PAY OVER TO THE GOVERNMENT THE AMOUNT OF THE TAX INVOLVED.

THE CONTRACT REQUIRES THE CONTRACTOR TO FURNISH ALL LABOR, MATERIAL AND EQUIPMENT AND TO PERFORM ALL WORK FOR REVISION OF THE ELECTRICAL SERVICE IN BUILDING 3 AT THE GODDARD SPACE FLIGHT CENTER IN GREENBELT, MARYLAND. THE CONTRACT CONTAINS TWO CLAUSES WHICH ARE RELEVANT TO THE TAX MATTER. CLAUSE 29,"FEDERAL, STATE AND LOCAL TAXES," INSOFAR AS PERTINENT, PROVIDES:

"/A) EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL, STATE AND LOCAL TAXES AND DUTIES.' CLAUSE 29 IS IMPLEMENTED BY CLAUSE ,"MARYLAND SALES AND USE TAXES CLAUSE FOR CONSTRUCTION CONTRACTS PERFORMED IN MARYLAND.' CLAUSE 36, INSOFAR AS PERTINENT, PROVIDES:

"/A) THE MARYLAND SALES AND USE TAXES ON MATERIALS AND SUPPLIES USED IN THE PERFORMANCE OF THIS CONSTRUCTION CONTRACT WITH THE UNITED STATES ARE INCLUDED IN THE CONTRACT PRICE AS STATE TAXES IN EFFECT AND APPLICABLE TO THE PERFORMANCE OF THIS CONTRACT IN ACCORDANCE WITH THE CONTRACT GENERAL PROVISIONS ENTITLED: "FEDERAL, STATE AND LOCAL TAXES.'

"/C) NOTWITHSTANDING ANY OTHER PROVISION OF THE CONTRACT, IT IS HEREBY EXPRESSLY PROVIDED HAT:

"/2) IF THE CONTRACTOR IS NOT REQUIRED TO PAY OR BEAR THE BURDEN, OR OBTAINS A REFUND, IN WHOLE OR IN PART, OF THESE TAXES THE CONTRACT PRICE SHALL BE CORRESPONDINGLY DECREASED OR THE AMOUNT OF SUCH RELIEF SHALL BE PAID TO THE GOVERNMENT, AS DIRECTED BY THE CONTRACTING OFFICER. * * *"

THE INVITATION FOR BIDS UPON WHICH THE CONTRACT IS BASED WAS ISSUED ON SEPTEMBER 9, 1963. IT IS INDICATED THAT CLAUSE 36 WAS INCLUDED IN THE INVITATION BECAUSE ON MARCH 19, 1963, THE MARYLAND COURT OF APPEALS IN COMPTROLLER OF TREAS. V. PITTSBURGH-DES MOINES STEEL COMPANY, 189 A.2D 107, DECLARED THAT THE MARYLAND SALES TAX WAS INAPPLICABLE TO PROJECTS CONSTRUCTED FOR THE FEDERAL GOVERNMENT AND AT THE TIME OF THE ISSUANCE OF THE INVITATION THE STATE'S PETITION FOR REVIEW WAS PENDING BEFORE THE UNITED STATES SUPREME COURT. MOREOVER, IT IS INDICATED THAT THE SUPREME COURT DID NOT DENY THE STATE'S PETITION FOR A WRIT OF CERTIORARI UNTIL OCTOBER 14, 1963, WHICH WAS 6 DAYS AFTER THE BID OPENING. AN AWARD WAS MADE TO KENNEDY ELECTRIC UNDER THE INVITATION ON DECEMBER 18, 1963.

THEREAFTER, EARLY IN 1964, THE CONTRACTING OFFICE INITIATED DEMANDS UPON THE CONTRACTOR FOR A REFUND OF THE MARYLAND SALES TAX. HOWEVER, THE CONTRACTOR HAS CONTINUED TO CONTEND THAT IT SHOULD NOT BE REQUIRED TO MAKE ANY REFUND BECAUSE IT ALLEGES THAT AT THE TIME IT PREPARED ITS BID IT ANTICIPATED IT WOULD NOT HAVE TO PAY ANY SALES TAX AND IT THEREFORE DID NOT INCLUDE THE TAX IN ITS PRICE. DESPITE SUCH REPRESENTATIONS, YOUR AGENCY HAS PERSISTED IN THE CLAIM AGAINST THE CONTRACTOR BECAUSE OF THE LANGUAGE IN CLAUSE 36 WHICH SAYS THAT THE TAX IS INCLUDED IN THE CONTRACT PRICE.

THE CONTRACT IS QUITE SPECIFIC THAT THE MARYLAND SALES TAX IS INCLUDED IN THE CONTRACT PRICE AND THAT, IF THE CONTRACTOR IS NOT REQUIRED TO PAY IT, THE CONTRACT PRICE IS TO BE REDUCED. WHATEVER THE CONTRACTOR'S INTENTION MAY HAVE BEEN REGARDING THE INCLUSION OF THE TAX AT THE TIME IT BID, THERE IS NOTHING IN ITS BID INDICATING AN INTENT CONTRARY TO THE CONTRACT TERMS. FURTHER, THERE IS NO EVIDENCE THAT ANY VIEW CONTRARY TO THAT EXPRESSED IN THE TAX CLAUSE WAS COMMUNICATED TO THE GOVERNMENT BEFORE THE CLAIM WAS MADE FOR A REFUND AFTER AWARD OF THE CONTRACT. THEREFORE, THE WRITTEN CONTRACT MUST BE CONSIDERED TO HAVE VESTED IN THE GOVERNMENT THE RIGHT TO A REFUND IN THIS CASE. IT IS AXIOMATIC THAT NO OFFICER OF THE GOVERNMENT IS AUTHORIZED TO RELINQUISH A VESTED CONTRACT RIGHT. THE PACIFIC HARDWARE AND STEEL CO. V. UNITED STATES, 49 CT.CL. 327; BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 CT.CL. 584, 607; AND UNITED STATES V. AMERICAN SALES CORPORATION, 27 F.2D 389. ACTUALLY, THE SITUATION IS NOT UNLIKE ONE WHERE A CONTRACTOR MAKES AN ERROR IN ITS BID PRICE OF WHICH THE CONTRACTING OFFICER HAS NEITHER ACTUAL NOR CONSTRUCTIVE NOTICE. IN THAT RESPECT, THE COURTS HAVE HELD THAT WHERE AN ERROR IS UNILATERAL, THE CONTRACTOR IS NOT ENTITLED TO ANY REDRESS. EDWIN DOUGHERTY AND M. H. OGDEN V. UNITED STATES, 102 CT.CL. 249, AND SALIGMAN V. UNITED STATES, 56 F.SUPP. 505.

IN THE CIRCUMSTANCES, WE ARE THEREFORE OF THE VIEW THAT RECOVERY OF THE SUBJECT TAXES FROM THE ..END :