this tax was considered by the contracting officer to be applicable to this procurement, it was concluded that the bids submitted by the "remaining three concerns," including the John Johnson Company, included in their bid prices an appropriate amount to cover the tax. In the evaluation of the bids, the sum of $4.38 was added to each destination price submitted by the Camel Manufacturing Company, thus resulting in the Johnson Company's bid of $58.68 per unit being the lowest bid received on the unrestricted portion of the procurement.

It is reported that subsequent to the evaluation of the bids, the contracting officer determined that the Johnson Company was not a responsible bidder due to poor past performance. However, following issuance of a Certificate of Competency by the Small Business Administration, the unrestricted portion of the procurement was awarded to the John Johnson Company as the lowest bidder at its bid price of $58.68 per unit under date of November 18, 1959. Under date of October 30, 1959, it was administratively concluded that the Federal Manufacturers Excise Tax was not applicable to paulins manufactured from Government-furnished material, this conclusion being based on the fact that the Federal Retailers Excise Tax had been ruled inapplicable in a procurement of duffle bags involving Government-furnished property. The contracting officer thereupon advised the Johnson Company that the tax was considered to be inapplicable to the procurement and information was requested as to the amount of the tax included in the contract price in order that the contract price could be modified accordingly. The Johnson Company replied to the effect that the Internal Revenue Service had ruled that the Federal Manufacturers Excise Tax was not applicable to the supplies purchased under the invitation involved herein and that no amount to cover such tax was included in its bid price.

The Office of the General Counsel, Office of the Quartermaster General, takes the position that the award to the Johnson Company should be canceled for the reason that the award was made to other than the lowest responsible bidder. That office recommended that it be given clearance to (1) cancel the award to the John Johnson Company, (2) to award the unrestricted portion of the procurement to the Camel Manufacturing Company, and (3) to negotiate the setaside portion with the Johnson Company.

It appears that the Johnson Company obtained a ruling from the Internal Revenue Service to the effect that the Federal Manufacturers Excise Tax was not applicable to this procurement and submitted its bid accordingly. In other words, it was entirely proper, under the circumstances, for the Johnson Company to submit a net bid without any reference to taxes-none being applicable. However, since the

bid of the Johnson Company contained no qualification or exclusion of the tax, if applicable, a contract was awarded to that concern as the lowest responsible bidder on the basis of the contracting officer's understanding that the tax was applicable.

Since the bid of the Johnson Company conformed to the invitation and was otherwise proper in all respects, it seems likely that a court would hold that its acceptance in good faith brought into existence a valid obligation binding on the parties. Also, there are certain other aspects of this matter which require consideration. It is reported that while the Johnson Company has not started production, it has incurred costs in the estimated amount of $14,500 in preparing for production. It is reasonable to assume that if the pending contract were canceled the Government would be faced with a claim for at least reimbursement of the contractor's out-of-pocket expenditures. Upon consideration of all the facts and circumstances in this case, we believe that it would be in the best interest of the Government to allow the contract with the Johnson Company to stand.

There remains for consideration the question as to the action to be taken with respect to the set-aside portion of the procurement. The Office of the General Counsel has pointed out that the invitation in this case provided that the set-aside portion would be negotiated first with labor surplus area concerns, which are also small business concerns; secondly, with other labor surplus area concerns; and then with small business concerns not in labor surplus areas; also, that Section 1-804 of the Armed Services Procurement Regulation provides that the set-aside price shall be the highest unit price awarded on the non-setaside portion. It is reported that the Johnson Company would not be interested in the set-aside portion at any price less than the unit price of $58.68 which it submitted on the unrestricted portion.

It is our view that because of the special circumstances in this case, a contract for the set-aside portion should not be required to be awarded at the Johnson price. This view is based upon the fact that the award at the unit price of $58.68 was made as the result of a mistake by the contracting officer. It will be seen that if the requirements of the cited regulation be literally followed with respect to the set-aside portion and an award made at the price fixed by the award to the Johnson Company, the Government stands to take a loss of approximately $8,800-the difference between the unit price of the Johnson Company and the tax exclusive prices quoted by the Camel Manufacturing Company. We believe there is a reasonable basis for holding that the "highest unit price" should represent a unit price arrived at in the regular course of contracting rather than a unit price arrived at through error, as in this case, and should in no event be construed to require an award at a price higher than

that bid by the party entitled to the award. Certainly, the award of a contract for the set-aside portion on the basis of the Johnson Company price would not be in the best interests of the Government; and it is, of course, not obligatory that any award be made of the set-aside.

[B-138900]

Military Personnel-Subsistence-Per Diem-Temporary Duty-Orders From Home to Temporary Duty Station— Califano Case

Per diem payments which were made to members of the uniformed services who were ordered to active duty from home and assigned to a station for temporary duty under orders which contemplated further assignment on the basis of decisions in effect prior to June 19, 1959-the date of 38 Comp. Gen. 849 in which the holding in Califano v. United States, C. Cls. No. 86-58, was accepted as precedent for considering that such members were not in a travel statuswill not be questioned if made administratively before October 1, 1959, but this extension of time from July 1, 1959, to October 1, 1959, in the application of the decision may not be construed as authorizing per diem after September 30, 1959, for temporary duty performed prior to that date. 38 Comp. Gen. 849, modified.

To the Secretary of the Air Force, January 11, 1960:

Reference is made to letter of September 28, 1959, from the Assistant Secretary of the Air Force, PDTATAC Control No. 59-40, requesting that the application of our decision of June 19, 1959, 38 Comp. Gen. 849, to the Secretary of Defense, be deferred until October 1, 1959.

In the decision of June 19, 1959, it was pointed out that in the case of Califano v. United States, C. Cls. No. 86-58, decided March 4, 1959, the Court of Claims held that a travel status cannot exist for a member of the uniformed services in the absence of a designated post of duty away from which travel is being performed, and that orders directing the member in that case to proceed from his home to a station for four months' indoctrination, and further assignment to duty, did not place him in a travel status at that station, since it was the only post of duty he had at that time. We stated in the decision of June 19, 1959, that from the date of that decision we would follow the ruling in the Califano case in any case where a member is ordered to active duty from his home and is assigned to a station for temporary duty, under orders which contemplate a further assignment to duty upon completion of the temporary duty, and that such station would be regarded as the member's designated post of duty. We stated further in that decision that "while in the consideration of claims submitted here for settlement, we will follow the ruling in the Califano case beginning with the date of this decision, per diem payments made

administratively before July 1, 1959, on the basis of our prior decisions will not be questioned, if otherwise proper."

The letter of the Assistant Secretary is in part as follows:

Since 1 July 1955, the Department of Air Force has had in effect a personnel assignment policy under which officer and enlisted members are ordered from their homes to temporary duty pending further orders (TDYPFO) to attend a course of instruction. Under these circumstances, members were considered to be in a temporary duty status and entitled to receive per diem allowances for the entire period of their temporary duty.

In the Department of the Air Force approximately 1,500 members are directly affected by decision B-138900. The members involved were called from home and directed to attend a course of instruction in a TDYPFO status and the personnel assignments were accomplished prior to the date and dissemination of the above decision. All of the members affected have completed or will complete their courses during the months of July, August, and September 1959. However, payments of per diem to these members were discontinued upon receipt of the decision by accounting and finance officers; although prior to receipt of the decision, all members were paid per diem after 1 July 1959.

These payments were made and accepted in good faith and at the time of payment were consistent with prior decisions of your office and established Air Force policy. For this reason, the personnel affected will consider themselves "victims of circumstances" in that they will be deprived of an entitlement which the Department of Air Force fully intended them to have and which they believe is rightfully due them.

In view of the above, it is requested that the application of the decision B-138900, dated 19 June 1959 be deferred until 1 October 1959.

In view of the circumstances as described in the letter of the Assistant Secretary, the concluding paragraph of the decision of June 19, 1959, is changed to provide that per diem payments made administratively before October 1, 1959, on the basis of our prior decisions, will not be questioned, if otherwise proper. Such change in the decision, however, is not to be construed as authorizing the payment of per diem administratively after September 30, 1959, covering periods of temporary duty performed prior to that date. Our decision of June 19, 1959, 38 Comp. Gen. 849, as herein modified, is affirmed.

There are enclosed copies of our letters of today to the Secretary of the Navy and the Secretary of the Army concerning the matter here involved.

[B-138900]

Military Personnel-Subsistence-Per Diem-Temporary Duty-Orders From Home to Temporary Duty Station— Califano Case

The holding in Califano v. United States, C. Cls. No. 86-58, decided March 4, 1959, that a travel status cannot exist for a member of the uniformed services in the absence of a designated post of duty away from which travel is performed, is not limited to cases involving newly inducted or enlisted members, but is for application in any case where a member is ordered from his home and is assigned to a station for temporary duty under orders which contemplate a further assignment to duty upon completion of the temporary

duty, and the orders do not designate a specific permanent cuty station to which the member is to travel to and report for duty upon completion of temporary duty.

Army officers who were in a temporary duty státus pending further orders status from home on or after June 19, 1959-date of Comptroller General's decision 38 Comp. Gen. 849, in which the holding in Califano v. United States (C. Cls. No. 86-58) was accepted as precedent-and who received amendatory orders to designate a first permanent station so as to place the member in a travel status away from a designated post of duty may be paid per diem for such temporary duty from the date of receipt by the member of the amendatory orders. 38 Comp. Gen. 849, modified.

To the Secretary of the Army, January 11, 1960:

In letter of October 2, 1959, from the Assistant Secretary of the Army (Manpower, Personnel and Reserve Forces), it is requested that our decision of June 19, 1959, 38 Comp. Gen. 849, to the Secretary of Defense, be reconsidered and modified in view of the circumstances there presented.

In the decision of June 19, 1959, it was pointed out that in the case of Califano v. United States, C. Cls. No. 86-58, decided March 4, 1959, the Court of Claims held that a travel status cannot exist for a member of the uniformed services in the absence of a designated post of duty away from which travel is being performed, and that orders directing the member in that case to proceed from his home to a station for four months' indoctrination and further assignment to duty did not place him in a travel status at that station, since it was the only post of duty he had at that time. We stated in the decision of June 19, 1959, that from the date of that decision we would follow the ruling in the Califano case in any case where a member is ordered to active duty from his home and is assigned to a station for temporary duty, under orders which contemplate a further assignment to duty upon completion of the temporary duty, and that such station would be regarded as the member's designated post of duty. We stated further, however, that the decision was not to be construed as prohibiting the payment of per diem, in otherwise proper cases, where a member is ordered to active duty from his home, assigned to temporary duty, and the orders designate a specific duty station to which he is to travel to and report for duty upon completion of the temporary duty. The letter of the Assistant Secretary is in part as follows:

Upon being notified of this decision, prompt action was taken by the Department of the Army to terminate per diem payments to all members who had been called to active duty from their homes under orders which assigned them to stations in a temporary duty pending further orders (TDPFO) status. At the same time, since it was and is the policy of the Department of the Army that per diem should be paid in these instances, instructions were issued directing order-issuing authorities to amend all orders of this type-whether or not they had become effective-to name a permanent station. These amendments could not be accomplished as expeditiously as desired for a number of reasons, including: the delayed receipt of this decision; determination of a reasonably firm permanent station; and the administrative necessity that the majority of these amendments be issued by field headquarters.