Thursday, June 29, 2017

Faceoff: Contract Clause vs Proposal Language

Spinitar was awarded a $165 thousand firm fixed price Army contract to install video conferencing system at Fort Shafter Flats, Hawaii. The solicitation included the clause at FAR 52.212-4 which states in subsection (k) that the contract price includes all applicable Federal, State, and local taxes and duties.

Spinitar's proposal on the other hand included a note that stated the proposed price did not include any applicable sales taxes. Hawaii's GET (general excise tax) tax reimbursement policy implemented for federal purchases will be utilized.

After the work was completed, Spinitar submitted a bill to the Army for $7,624, the amount of Hawaii GET it owed on the contract revenue.

The Army denied the claim, citing the aforementioned FAR clause. Spinitar appealed to the ASBCA (Armed Services Board of Contract Appeals).

Who do you think prevailed, the Government citing FAR 52.212-4 or Spintar citing its initial proposal?

The ASBCA denied Spinitar's appeal. The ASBCA wrote:
We reject [Spinitar's] interpretation as unreasonable. The clauses could not be more clear. They provide that any contract price adjustment for changes in mandated wage rates shall be limited to the changes in the wages, fringe benefits and accompanying changes in social security, unemployment taxes and worker's compensation insurance and shall not include any additional amounts for G&A, overhead or profit on these costs... The contract also clearly states that all Federal, state and local taxes shall be included in a contractor's bid. This state excise tax and any projected increases thereof, should have been included in [Spinitar's] bid.
Don't expect to override a contract clause by slipping contrary provisions into your price proposal.

You can read the full ASBCA decision here.

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