GENERAL ACCOUNTING OFFICE, Hon. DAN R. McGEHEE, House of Representatives. MY DEAR MR. CHAIRMAN: Further reference is made to your letter of November 13, 1943, acknowledged November 15, requesting a report on H. R. 3466, Seventy-eighth Congress, first session, entitled "A Bill for the relief of the Mauger Construction Company", which bill provides as follows: "That the Secretary of the Treasury is authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, to the Mauger Construction Company, Columbus, Ohio, the sum of $7,323.83. Such sum represents reimbursement for the amount of gross sales tax paid by such company to the State of West Virginia in connection with work performed under a Government contract dated May 14, 1941, in the construction of the Cumberland (Maryland) Municipal Airport near Wiley Ford, West Virginia. Due to a misunderstanding of Government instructions, the bid submitted by such company failed to state that if any tax should be levied, the amount of the bid would be increased by the amount of the tax, and, therefore, such company has not received compensation from the United States to cover the amount of such gross sales tax." It appears from the records of this Office that the claim of the Mauger Construction Co., in the amount of $7,323.83, represented as being the additional compensation due it to cover the amount of the gross sales tax required to be paid by it to the State of West Virginia in connection with the performance of contract No. ER-T25ps-6260, dated May 14, 1941, was disallowed by settlement dated September 16, 1942, of this Office and that such settlement was sustained by decision of August 20, 1943. The contention then advanced by the Mauger Construction Co. in support of its claim was premised on the proposition that no amount representing the West Virginia gross sales tax was included in the contract price and that its failure to stipulate in its bid that it should be entitled to additional compensation for such sales taxes as it might be required to pay was due to the circumstance that it was not informed prior to the award as to the precise terms of the addendum to the invitation for bids providing, in pertinent part: "Tax: Bidder is not to include any sales or other tax in h's bid. However, the statement may be made that if any tax is levied, the price bid will be increased by such an amount." But such a theory is inconsistent with the statement contained in the claimant's letter of February 27, 1942, signed by R. Paul Mauger, its president, wherein it was said: "Again I would like to point out, as we have done in previous letters, that our interpretation of your addendum was that we were not to include sales tax, and we did advise you that we did not include sales tax before the project was awarded to us, and it has not been the policy of this company as well as the policy of contractors' offices to write statements on the bid as there is no place provided for same, and the addendum did not require, as we interpreted it, a written statement." Also, particular attention is invited to the following excerpt from the abovementioned decision of August 20, 1943, to the Mauger Construction Co.: "Moreover, even though it should be assumed for present purposes that the terms of the above-mentioned addendum to the invitation for bids here involved did not contemplate that the statement by a bidder 'that if any tax is levied, the price bid will be increased by such an amount' would be in writing and incorporated in his bid-and such an assumption obviously is contrary to a reasonable interpretation of the language of the addendum-it is to be observed that there is nothing in the record tending to indicate that any oral statement to that effect was made to the procurement officer by your representative prior to the time of the acceptance of your bid. Nor is there anything to suggest that the procurement officer then had any reason to suppose that your representative prepared H. Repts., 79-1, vol. 1-88 your bid without a knowledge of the exact contents of the addendum. Hence, it is clear that your bid was accepted on the basis that you were willing to bear the burden of the gross sales tax prescribed by the laws of West Virginia, if it should be levied in connection with the performance of the subject contract, and absorb it in your estimated profit. "Furthermore, the representation in the affidavit dated May 28, 1943, of R. Paul Mauger with respect to his lack of knowledge as to the exact contents of the addendum does not furnish a sufficient basis for the allowance of the instant claim. The addendum was mailed to your home office at Columbus, Ohio, on May 2, 1941, and, according to the contents of your letter of February 18, 1942, it was received there on May 4, 1941-3 days before the submission of your bid. Thus it is apparent that the alleged lack of knowledge on the part of R. Paul Mauger as to the contents of the addendum at the time of the submission of your bid or at the time of the above-mentioned conference of May 12, 1941, was due, not to any fault on the part of the Government, but to the failure of your home office to forward the addendum to him or otherwise advise him with respect thereto." It is a well-settled rule that the extent of the liability of the United States as a party to a contract must be measured by its terms and that there is no obligation on the part of the Government to reimburse a contractor for the amount of a tax or other charge required to be paid by it in connection with the performance of a Government contract and which was not included in its quoted prices unless the contract expressly so provides. And such rule is especially applicable where the failure of a Government contractor to protect itself against the contingency of being required to pay a State tax is directly attributable to its own neglect. Viewing the situation in the instant case in the light most favorable to the claimant, the conclusion is required that the alleged "misunderstanding of Government instructions" referred to in the proposed legislation was nothing more than a unilateral mistake due entirely to the claimant's own negligence and no reason is apparent why the burden of the resulting loss should be assumed by the Government. Consequently, in view of the lack of any liability on the Government, and since the enactment of such legislation would tend to encourage disregard of contractual obligations and carelessness on the part of bidders, rather than that degree of care which should be observed in the submission of bids to the United States, this office does not recommend favorable action on the bill, H. R. 3466. Sincerely yours, LINDSAY C. WARREN, Comptroller General of the United States. APPLICATION MAY 28, 1943. In re Claim 1-079-777. GENERAL ACCOUNTING OFFICE, Claims Division, Washington, D. C. GENTLEMEN: Now comes the Mauger Construction Co. and requests a review of the settlement as of September 16, 1942, wherein the Mauger Construction Co.'s application for the payment of the sum of $7,323.83 was rejected. The basis of the Mauger Construction Co.'s claim is the gross sales tax that said company was compelled to pay to the State of West Virginia in connection with work performed under contract ER-T25 PS-6260. The gross sales tax was not included in its bid, in accordance with instructions issued by the Federal Government. The Government was advised and knew that the bidder did not include any sales tax in its bid, and if the bidder was compelled to pay any tax that its bid would be increased accordingly. Respectfully submitted. MAUGER CONSTRUCTION Co., STATE OF OHIO, AFFIDAVIT OF R. PAUL MAUGER R. Paul Mauger, being first duly cautioned and sworn, says he is now and has been at all times hereinafter mentioned president of the Mauger Construction Co., Columbus, Ohio. Affiant says the Mauger Construction Co. bid on invitation No. 1-3914, contract ER-T25 PS-6260, in re Cumberland Airport. Affiant says that with the assistance of Mr. H. R. Anderson, of the West Virginia Tractor & Equipment Co., he prepared the Mauger Construction Co. bid at the Lord Baltimore Hotel, Baltimore, Md., and that a photostatic copy of the recap bid sheet is hereto attached, marked "Exhibit A" and made a part hereof. Affiant says the last item, to wit: "Sales tax, $8,000," deducted from said bid, was deducted by this affiant after Mr. T. R. Kuhns, of the United States Fidelity & Guaranty Co., informed this affiant that the Government had issued an addendum requesting the sales tax not be included in the bid. The addendum Mr. Kuhns referred to was the fourth paragraph of a letter issued by the Treasury Department dated May 2, 1941. The following is a true copy: "Tax: Bidder is not to include any sales tax or other tax in his bid. However, the statement may be made that if any tax is levied, the price bid will be increased by such an amount." Affiant says that a copy of this letter was mailed to the Mauger Construction Co. at its home office at Columbus, Ohio, but this affiant did not receive said letter or see a copy thereof until his return home. The reason this occurred is as follows: Mr. Mauger left Columbus, Ohio, on Sunday, May 4, for Charleston, W. Va.; left Charleston on Monday, May 5, and arrived in Baltimore late Monday night. May 6 was spent estimating the job in Mr. Mauger's room at the Lord Baltimore Hotel. The letter reached Mr. Mauger's office after he had left the same and he had no knowledge of said letter until his return to Columbus. Affiant says Mr. T. R. Kuhns came to his room at the hotel on the morning of May 12 at approximately 10 a. m., bringing with him a bid bond that was to be used, and was used, as the bond submitted with the Mauger Construction Co. bid, and it was at this time Mr. Kuhns advised Mr. H. R. Anderson and this affiant that the sales tax was not to be included, and due to the lateness of the hour it was impossible for this affiant to go to the Work Projects Administration office and personally check the addendum; but relying upon Mr. Kuhns' information this affiant deducted the sales tax from the bid. The Affiant says the Mauger Construction Co. bid was filed and on May 12, 1941, at 11 a. m., Mr. Mauger was in Mr. Williar's office relative to said bid. following gentlemen were also present at said conference: H. O. Grimes, procurement officer; C. F. Bornefeld, director of operations; E. F. Hovermill, area manager; J. H. Seibert, assistant area manager; and H. R. Anderson, sales manager of the West Virginia Tractor & Equipment Co., Charleston, W. Va. And during that conference Mr. Mauger informed the gentlemen present that the Mauger Construction Co. bid of $373,910 did not include the gross sales tax that might possibly be levied by the State of West Virginia. Mr. Grimes thereupon stated that the sales tax would not be levied by the State of West Virginia-and all of this conversation took place prior to the acceptance of the bid. Affiant says that the Mauger Construction Co. was compelled to and did pay a tax to the State of West Virginia by virtue of this contract, on the dates and in the amounts as follows: Check No. 438, dated Oct. 31, 1941. $3,577. 04 3, 746. 79 R. PAUL MAUGER. ARLINE LEHMAN, Subscribed and sworn to before me this 28th day of May 1943. [SEAL] STATE OF OHIO, Muskingum County, 88: AFFIDAVIT OF T. RAY KUHNS T. Ray Kuhns, 146 Liberty Street, Blairsville, Pa., being first duly cautioned and sworn, says he is a representative of the United States Fidelity & Guaranty Co. of Baltimore, Md. Affiant further says he has been associated with the United States Fidelity & Guaranty Co. of Baltimore, Md., for the last 8 years, as district engineer, working out of the Pittsburgh, Pa., office. Affiant says on the morning of May 12, 1941, he was in the room of R. Paul Mauger at the Lord Baltimore Hotel, Baltimore, Md., and that H. R. Anderson was present, when the question was raised as to whether or not the bid on the Cumberland Airport was to include sales tax. Affiant says that at the request of R. Paul Mauger he went to the Work Projects Administration office at Baltimore and inquired if the bid on the Cumberland Airport was to include West Virginia sales tax, and he was informed by that office that the bid was not to include the sales tax, as an addendum had been issued instructing all bidders not to include the sales tax. Affiant says he immediately returned to R. Paul Mauger's room and in the presence of H. R. Anderson informed Mr. Mauger that the bid was not to include the sales tax. And further affiant saith not. T. RAY KUHNS. Subscribed and sworn to before me this 5th day of May 1943. [SEAL] My commission expires May 19, 1944. E. B. GRAHAM, Notary Public. STATE OF WEST VIRGINIA, County of AFFIDAVIT OF H. R. ANDERSON 88: H. R. Anderson, being first duly cautioned and sworn, says he is president of the West Virginia Tractor & Equipment Co., of Charleston, W. Va. Affiant says he was with R. Paul Mauger, president of Mauger Construction Co., at Baltimore, Md., at the Lord Baltimore Hotel, and assisted Mr. Mauger in the preparation of the Mauger Construction Co.'s bid on the Cumberland airport project; and that a true photostatic copy of said recap bid sheet is hereto attached and made a part hereof. Affiant further says after the bid had been prepared by Mr. Mauger, Mr. T. R. Kuhns of the United States Fidelity & Guaranty Co. informed Mr. Mauger, in the presence of this affiant, that the sales tax was to be deducted from the bid; and immediately Mr. Mauger reduced said bid by the sum of $8,000 as shown by said photostatic copy of the recap bid sheet attached hereto. Affiant further says he was present on May 12, 1941, at 11 a. m. in company with Mr. Mauger, in Mr. Williar's office, relative to said bid and that the following gentlemen were also present at said conference; H. O. Grimes, procurement officer; C. F. Bornefeld, director of operations; E. F. Hovermill, area manager; J. H. Seibert, assistant area manager, and that during that conference Mr. Mauger informed the representative of the Federal Government that the Mauger Construction Co. bid of $373,910 did not include gross sales tax that might possibly be levied by the State of West Virginia. Mr. Grimes thereupon made the statement that the sales tax would not be levied by the State of West Virginia. Affiant says that all of this conversation took place prior to the acceptance of the bid by the Federal Government. H. R. ANDERSON. Sworn to before me and subscribed in my presence this 11th day of April 1943. [SEAL] L. A. WILSON, Notary Public. My commission expires May 29, 1950. JUNE 8, 1943. Re: Mauger Construction Co. Our file No. 56-3116 B Nov. Attorneys at Law, Zanesville, Ohio. (Attention of Mr. E. B. Graham.) GENTLEMEN: Your letter of May 28 addressed to the treasurer of the State of West Virginia has just been transmitted to this office today for reply. In answer thereto I wish to state that the file of the Mauger Construction Co. in this office shows the following: "The Mauger Construction Co.'s check in the amount of $3,577.04 was paid in this office November 3, 1941, and covered tax for the period May 24 to August 25, 1941. Also their check in the amount of $16.91 paid January 5, 1943, covered tax exemption claimed in error on the above period. Their check in the amount of $3,746.79 was paid in this office January 8, 1942, and covered the period September 1 to November 30, 1941. The correspondence in this file does not indicate what job was covered by the returns listed above." For the reason that Mauger Construction Co. did not specify on its tax return or by correspondence what Government project the payment of the abovementioned taxes were for or what part thereof was in payment of Government work I am unable to inform you exactly on what Government contracts taxes have been paid by the Mauger Construction Co. If any part of the checks mentioned above included payment of taxes for Government work please specify the name of the contract or the project and the amount of the tax paid thereon and I shall be glad to prepare official receipts showing payment of the same so that application for reimbursement of these taxes can be made by your client to either the War Department or the Navy Department or any other department of the Government for which the work was performed. The Government ordinarily does not reimburse contractors for taxes unless it is a cost-plus-a-fixed-fee contract providing that if the contractor has to pay State or local taxes the Government will reimburse him. In this respect I am enclosing a directive that was prepared by the War Department under date of April 16, 1942, for the guidance of defense contractors in this State and you may be able to secure some information which will be of assistance to you from this directive. Very truly yours, MAUGER CONSTRUCTION Co., GEO. P. ALDERSON, GENERAL ACCOUNTING OFFICE, Care of E. B. Graham, Esq., Zanesville, Ohio. GENTLEMEN: Reference is made to your letter of July 6, 1943, with enclosures, requesting review of settlement dated September 16, 1942, which disallowed your claim for $7,323.83, represented as being the additional compensation due you to cover the amount of the gross sales tax required to be paid by you to the State of West Virginia in connection with the performance of your contract No. ERT25ps-6260, dated May 14, 1941. The record in the instant case shows that on April 23, 1941, the State procurement officer of the Procurement Division, Treasury Department, at Baltimore, Md., issued an invitation for bids-to be opened May 7, 1941-for the rental to the Federal Works Agency, Work Projects Administration, on a production basis, of the equipment with operating and maintenance personnel and necessary operating materials and accessories required in excavating certain material at the Cumberland (Md.) Municipal Airport near Wiley Ford, W. Va. Said invitation did not contain any provision with respect to the matter of taxes other than the standard clause concerning Federal taxes. However, on May 2, 1941, an addendum was issued to the invitation wherein it was stated, in pertinent part "Tax: Bidder is not to include any sales or other tax in his bid. However, the statement may be made that if any tax is levied, the price bid will be increased by such an amount." In response to the invitation, you submitted a bid dated May 7, 1941, wherein you proposed to furnish the necessary equipment at a rental of $0.278 per cubic yard, or for an estimated total consideration of $373,910, but the bid did not contain any statement in respect to taxes such as was authorized by the terms of the above-mentioned addendum. Upon the opening of the bids on May 7, 1941, your bid was found to be the lowest received and on May 14, 1941, it was accepted and designated as contract No. ER-T25ps-6260. In support of your present request for a review of the above-mentioned settlement you submit the affidavits of your president, R. Paul Mauger, and of two other individuals, H. R. Anderson and T. Ray Kuhns; a photostatic copy of a paper represented to be the "recap bid sheet" on which your bid was based and from which it appears that an item in the amount of $8,000 designated "Sales tax" was deducted from the amount of your bid as previously computed; and a |