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FEBRUARY 13, 1945.—Committed to the Committee of the Whole House and
ordered to be printed
Mr. McGEHEE, from the Committee on Claims, submitted the
(To accompany H. R. 1842)
The Committee on Claims, to whom was referred the bill (H. R. 1842) for the relief of Mauger Construction Co., having considered the same, report favorably thereon without amendment and recommend that the bill do pass.
A similar bill was favorably reported by this committee in the Seventy-eighth Congress.
The facts will be found fully set forth in House Report No. 1102, Seventy-eighth Congress, which is appended hereto and made a part of this report.
(H. Rept. No. 1102, 78th Cong., 2d sess.) The purpose of the proposed legislation is to appropriate the sum of $7,323.83 to the Mauger Construction Co., Columbus, Ohio, in full settlement of all claims against the United States for 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, Md., Municipal Airport near Wiley Ford, W. Va.
H. Repts., 79-1, vol. 1--46
STATEMENT OF FACTS
It appears that this claim grew out of bids on April 23, 1941. The State procurement office of the Procurement Division, Treasury Department, at Baltimore, Md., issued an invitation for bids to be opened on May 7, 1941, for the construction of the Cumberland Municipal Airport near Wiley Ford, W. Va. Mr. Mauger, president of this company, secured the assistance of several men there, one of whom was Mr. H. R. Anderson, president of the West Virginia Tractor & Equipment Co. Present at the hotel at the time this bid was being considered were H. 0. Grimes, procurement officer; C. F. Bornefeld, director of operations; E. F. Hovermill, area manager; and J. H. Seibert, assistant area manager.
-The Treasury Department had issued, and they admit that they had issued, an addendum to all bids of this type, which reads as follows:
“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."
To show the sincerity of Mr. Mauger at the time this bid was made, it was necessary that he bring in and furnish a bond for the construction of this airport, 80 he brought in a Mr. Kuhns, who was a representative of the United States Fidelity & Guaranty Co. In order to satisfy himself that this bid did not include any sales tax, he went to the Work Projects Administration office at Baltimore and made further inquiry, and was told there that it was not to be included. Evidence in the case shows photostatic copy of the bid which was submitted to the Government and accepted, the last item of which shows a deduction of sales tax of $8,000 in the bid.
After the bid was made and the work completed, the State of West Virginia charged him, and he paid it under date of October 31, 1941, in the amount of $3,577.04, sales tax, On December 29, 1942, the amount of $3,746.79 was paid.
In the adverse report from the Comptroller General he bases his opinion solely on one fact, which your committee thinks is very unfair, fundamentally, that no agent, or officer or representative of the Government is authorized to alter, modify, add to or subtract from a contract. He also states further in his report that the contractor was negligent inasmuch as he did not write in with pen or some other way that part of this at the bottom of the contract.
No better evidence could a court want than a photostatic copy of his original bid, which included the $8,000 estimated sales tax, and then to show that at the bottom of this, the last item, he deducted the same amount, $8,000, under the advice of one of the Office of Procurement men.
This was a customary bid, as had always been used heretofore. It was changed on May 2, and sent to his Columbus office. He was then in Baltimore and had no knowledge of the change at all. He makes an affidavit to that effect and tells why he did not have any knowledge of it, because he left Columbus on May 4 for Charleston, W. Va.; left Charleston on May 5 and arrived in Baltimore late on the night of the 6th. He states: “The whole entire day was spent in estimating the job in a room at the Lord Baltimore Hotel.” Then is when the Office of Procurement, through Mr. Grimes, the procurement officer, and all these other men, who were directly in charge, informed him that under a new rule of the Treasury Department which had theretofore not been in effect, and which was in his Columbus office, received by his Columbus office on May 4, sales tax should not be included, so there was no negligence on his part so far as he is concerned.
The Treasury Department deducted the $8,000 also. He was led to believe by the four men, the only men in charge of this work in Baltimore, that if there was a sales tax he would be either reimbursed or he could increase his bid to that amount.
It is the opinion of your committee that the Mauger Construction Co. should be reimbursed in the amount of $7,323.83, and favorable consideration to the proposed legislation is recommended.
Appended hereto is the report from the Comptroller General of the United States, together with other pertinent evidence.
GENERAL ACCOUNTING OFFICE,
Washington, November 23, 1943.
Hon. Dan R. McGEHEE,
Chairman, Committed ouse 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, 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 Manger Construction Co. in support of its claim was premised on the proposition that no amount representing the West Virginia gross sales tax was incluided 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 aith 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 represer ative pri 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 your bid without a knov ledge 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.
"Furtherniore, 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.
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 cor led to pay any tax that its bid would be increased dingly. Respectfully submitted.
MAUGER CONSTRUCTION Co.,
AFFIDAVIT OF R. PAUL MAUGER STATE OF Ohio,
Franklin County, ss: 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 a ldendum 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.
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. 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 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 Check No. 749, dated Dec. 29, 1941.
3, 746. 79
R. PAUL MAUGER. 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.