DENIED:  February 9, 2009 
CBCA 1110 
B & M CILLESSEN CONSTRUCTION CO., INC., 
Appellant, 
v. 
DEPARTMENT OF HEALTH AND HUMAN SERVICES, 
Respondent. 
Seth V. Bingham of Miller Stratvert P.A., Farmington, NM, counsel for Appellant. 
Nigel F. Gant, Office of the General Counsel, Department of Health and Human
 
Services, Dallas, TX, counsel for Respondent.
 
Before Board Judges HYATT , DRUMMOND , and SHERIDAN . 
SHERIDAN , Board Judge. 
This appeal arises out of contract HHSI161200700014C, for the renovation and 
construction of an expansion to the Chinle Comprehensive Health Care Center (Chinle 
Center) in Chinle, Arizona, which was awarded to B & M Cillessen Construction Co., Inc. 
(Cillessen) by the Indian Health Service (IHS), Department of Health and Human Services. 
Cillessen seeks $131,481 in increased taxes.  Based on the findings and application of the law 
set forth below, we deny the appeal. 
The appeal was submitted on the written record pursuant to Board Rule 19. The record 
considered by the Board in issuing this decision consists of the pleadings, the appeal file 
(exhibits 1 through 44) , appellant’s Rule 19 submission; respondent’s Rule 19 submission, and 
appellant’s Rule 19 reply. 

  
 
  
 
   
 
  
     
       
      
  
      
  
   
  
 
 
     
 
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Background 
On December 7, 2006, IHS issued a notice that they would be  soliciting offers for the 
expansion and renovation of the Chinle Center.  Appeal File, Exhibit 1.  The notice informed 
potential offerors that IHS intended to award a firm fixed-price construction typ contract. 
Id. Solicitation HHSI161200700014C was issued on January 11, 2007, informing 
prospective offerors this was to be a negotiated procurement in which IHS was using a 
“competitive formal best value source selection process” in accordance with Federal 
Acquisition Regulation (FAR) part 15 “to ensure selection of the source evidencing the best 
overall capability to perform the work in a manner most advantageous to the Government, 
as determined by evaluation of proposals in accordance with the established criteria.”  Id., 
Exhibit 5 at 1, 61.
1   The solicitation also notified prospective offerors that IHS intended to 
award a firm fixed-price construction type contract.  Id. at 55. 
Prospective offerors were warned in section H-5 of the solicitation that, prior to 
submitting prices, they should check with the Tribal Tax Office to determine the appropriate 
taxes to include in their proposals: 
The Tribal Organization within the area of this contract may levy taxes.  The 
contractor must contact the Tribal Tax Office to determine the appropriate 
taxes to be included in the proposed price. 
Appeal File, Exhibit 5 at 29.  Contractors were cautioned to inquire and seek clarification 
concerning possible ambiguities in the solicitation.  Id .  The solicitation also noted that 
several FAR clauses would be incorporated by reference into the contract.  Among the 
clauses to be incorporated by reference was FAR 52.229-3.  Id . at 36.
2 
1 Prospective offerors were provided instructions on this procurement through FAR 
52.215-1, Instructions to Offerors-Competitive Acquisition (Jan. 2004), which was 
incorporated by reference into the solicitation.  Appeal File, Exhibit 5 at 55.  In this type of 
competitive procurement, the Government first ranks the responsible offerors.  After a pool 
of qualified offerors is determined, the Government considers the price proposals from that 
pool of offerors.  This type of competitive  procurement is sometimes referred to as a “two-
step procurement.”
2   FAR 52.229-3 is required to be inserted in solicitations and contracts except “(b) 
In a noncompetitive contract . . . the contracting officer may insert the clause at 52.229-4 
Federal, State, and Local Taxes (State and Local Adjustments), instead of the clause at 
52.229-3, if the price would otherwise include an inappropriate contingency for potential 

  
  
     
 
  
  
 
    
 
  
3 CBCA 1110 
FAR 52.229-3 Federal, State, and Local Taxes (April 2006) provides,  inter alia , that: 
(a) As used in this clause-­
All applicable Federal, State, and local taxes and duties, means all taxes and 
duties, in effect on the contract date, that the taxing authority is imposing and 
collecting on the transactions or property covered by this contract. 
Contract date, means the date set for bid opening or, if this is a negotiated 
contract or a modification, the effective date of this contract or modification. 
. . . . 
(b) The contract price includes all applicable Federal, State, and local taxes 
and duties. 
48 CFR 52.229-3 (2006) (emphasis added). 
Mr. William Obershaw, the chief of the contracting office at IHS Division of 
Engineering Services in Dallas, Texas, was the senior contracting officer responsible for 
administering the Chinle Center project.  Appeal File, Exhibit 19.  On February 1, 2007, a 
pre-proposal conference was held to, among other things, “improve the understanding of 
Government requirements and industry capabilities.”  Id., Exhibit 8.  Written materials for 
the conference informed prospective offerors that they “ha[d] a duty to inquire and seek 
clarification concerning possible ambiguities and/or discrepancies.”  Id. at 7.  Contractors 
were also warned that “[u]nless otherwise provided in this contract, the contract price 
includes all applicable Federal, State, and local taxes and duties.”  Id. at 16.  Price proposals 
were to be submitted in a separate sealed envelope, and were to include “the cost of new 
materials, labor and equipment, as well as taxes (State, Tribal and TERO [Tribal 
Employment Rights Office]), insurance & bonds, overhead and profit.”  Id. at 28.  Again, the 
potential offerors were told that IHS “intend[ed] to award a firm fixed-price construction 
type contract to the responsive and responsible offeror whose proposal conforms to the 
requirements of the solicitation and will provide the best value to the Government.”  Id. at 
29.  
Believing that a tribal tax would be levied on the construction associated with the 
Chinle Center, on February 7, 2007, Ms. Rose Coburn, Cillessen’s Corporate Secretary, 
post-award changes(s) in State or local taxes.”  49 CFR 29.401-3 (2003). 

 
 
 
 
     
      
 
 
  
 
   
     
   
 
 
  
        
4CBCA 1110 
contacted Ms. Mary Etsitty, the Executive Director of the Navajo Tax Commission, to ask 
about taxes.  The Chinle Center is within the Navajo Nation, and Ms. Coburn was informed 
that a Navajo Business Activities Tax (NBAT) was required to be paid on the gross receipts 
received from the construction of the center. Appeal File, Exhibit 30; Complaint ¶ 14.  Ms. 
Etsitty told Ms. Coburn that as of February 7 the applicable NBAT rate was three percent. 
Appeal File, Exhibit 40.  However, at that time she also told Ms. Coburn that an increase to 
a four percent NBAT, to be effective July 1, 2007, was currently being considered.  Id .; see 
also id ., Exhibit 38.
3 
The pre-solicitation notice was modified several times to extend the original deadline 
for proposals from February 22 to March 14, 2007.  Appeal File, Exhibits 2-4.  Cillessen 
submitted its proposal for the Chinle Center project on March 14, 2007. Id., Exhibit 10.  
On March 28, 2007, the Navajo Tax Commission approved an increase in the NBAT, 
from three percent to four percent, to be effective July 1, 2007.  Appeal File, Exhibit 25.  A 
news release to that effect was issued by the Navajo Nation on March 30, 2007.  Id . 
A source selection board was appointed, and the members individually reviewed and 
ranked the five firms which had submitted proposals on the Chinle Center project.  Appeal 
File, Exhibits 13, 14.  As Cillessen was rated as the most qualified responsive and 
responsible offeror, and also had proposed a significantly lower price for the project than the 
second most qualified firm, the selection board elected to not conduct further negotiations 
with the offerors.  Appeal File, Exhibit 14. They recommended award of the contract to 
Cillessen.  Id . 
3   In a letter dated March 20, 2008, to Ms. Amy Alderman at the Navajo Tax 
Commission, Ms. Coburn remembered her conversation with Ms. Etsitty as: 
[Ms. Etsitty] stated [the tax increase from three to four percent] had not been 
voted on as yet, but there could be a tax increase to [four percent] if the tax 
commission did approve it.  She also stated we would receive written 
notification one to two months prior to the increase.  When I asked about 
contracts that would be existing, if and when the tax was increased, she stated 
there would have to be provisions made [for the NBAT] to remain at the [three 
percent]. 
Appeal File, Exhibit 40.  

 
    
      
      
  
  
 
       
 
      
    
  
    
  
 
   
  
  
     
5 CBCA 1110 
Cillessen was notified that it was being considered for the award of the Chinle Center 
project on April 4, 2007, and asked to confirm its offer.  Appeal File, Exhibit 15.  Cillessen 
confirmed its offer that same day. Appeal File, Exhibit 16.  Via letter dated April 10, 2007, 
Cillessen was informed that it was awarded contract HHSI161200700014C, in the amount 
of $12,298,000, for the expansion and renovation of the Chinle Center. Id. Exhibit, 17.  The 
Standard Form 33 shows the effective date of award as April 11, 2007.  Id ., Exhibit 18.  A 
pre-construction conference was held on May 16, 2007, where the notice to proceed was 
issued and Cillessen was authorized to begin work on May 17, 2007.  Id., Exhibit 21.  The 
project was required to be completed within 459 calendar days, and a completion date was 
established as August 17, 2008.  Id . 
On July 27, 2007, Cillessen forwarded to the contracting officer a request for an 
equitable adjustment (REA) seeking an increase of $131,481 to the contract amount due to 
the increase in the NBAT.  Appeal File, Exhibit 24.  Cillessen informed the contracting 
officer that the one percent increase applied to the gross receipts on the contract after July 
1, 2007.  Id. Appellant’s Vice President, Mr. Jeffrey Cillessen, wrote Mr. Obershaw on July 
30, 2007, representing “we were unaware of the tax increase or potential increase at the time 
of our proposal.  Had we been aware we would have asked for clarification prior to our 
submission of bid.”  Id., Exhibit 28. 
Mr. Obershaw responded on July 30, 2007, denying an equitable adjustment for the 
NBAT increase.  Appeal File, Exhibit 26. Further correspondence culminated in Mr. 
Obershaw writing Cillessen on July 31, 2007, suggesting that if Cillessen was still in 
disagreement with the Government’s decision to deny the REA, it should proceed under the 
disputes procedures set forth in FAR 52.233-1 (Alt. 1).  Id., Exhibit 29.  The claim was 
resubmitted with proper certification,  and on February 21, 2008, the contracting officer 
issued a final decision denying the claim.  Id ., Exhibits 36, 37. 
Discussion 
The issue before us is whether appellant should be able to pass on to the Government 
a one percent Navajo Nation tax increase that occurred after appellant had submitted its 
proposal, but before the contract was awarded.  
Appellant asserts that it properly bid the project and is entitled to “an automatic 
increase” or “an equitable adjustment” in the contract price to cover a $131,481 increase in 
the NBAT.  Appellant argues that FAR regulations support an adjustment to the contract 
price. Alternatively, appellant posits the contract price should be reformed based on mutual 
or unilateral mistake. 

      
 
 
 
     
    
    
 
 
 
 
    
     
 
        
6CBCA 1110 
Respondent replies that this was a competitive procurement properly conducted 
pursuant to FAR 52.215-1 that resulted in a firm fixed-price contract.  Respondent argues 
that appellant is not entitled to an equitable adjustment to compensate it for the increase in 
the tax rate under the terms of the contract, under applicable FAR provisions, or based on 
mistake. 
In this fixed-price contract the risk of applicable increased state, local, and tribal taxes 
fell on the contractor.  It is well-settled that in a firm fixed-price contract, the contractor 
assumes the risk of all increased costs except as specifically provided for in the contract.  HLI 
Lordship Industries, Inc. , VABCA 1785, 86-3 BCA ¶ 19,182, at 97,026 (1985) (citing ITT 
Arctic Services, Inc. v. United States , 524 F.2d 680 (Ct. Cl. 1975); McNamara Construction 
of Manitoba, Ltd. v. United States , 509 F.2d 1166 (Ct. Cl. 1975); Sperry Rand Corp. v. 
United States , 475 F.2d 1168 (Ct. Cl. 1973).  FAR 52.229-3 clearly and unequivocally places 
responsibility squarely on prospective contractors to include all applicable taxes in their bids 
or proposals.  Hunt Construction Corp. v. United States , 281 F.3d 1369, 1372-73 (Fed. Cir. 
2002) (cited for authority in Robertson & Penn, Inc. , ASBCA 55622, 08-2 BCA ¶ 33,921, 
at 167,859); see also Fields Roof Service, Inc. , VABCA 3147, 90-3 BCA ¶ 23,232. 
FAR 52.229-3 was properly incorporated by reference into the contract.
4  The clause 
specified that the “contract price includes all applicable Federal, State, and local taxes and 
duties.”  48 CFR 52.229-3(b).  “All applicable Federal, State, and local taxes” referred to “all 
taxes and duties, in effect on the contract date,” with “contract date” defined as “the date set 
for bid opening or, if this is a negotiated contract . . . the effective date of this contract. ” 48 
CFR 52.229-3(a) (emphasis added).  
Under FAR 52.229-3, a contractor is responsible for making sure it includes the 
appropriate taxes in its bid or proposal.  Gibson Motor & Machine Service, Inc. , ASBCA 
24363, 80-1 BCA ¶ 14,442, at 71,202 (“the duty of determining tax applicability is on the 
bidder”); see also Turner Construction Co. v. General Services v. General Services 
Administration,  92-3 BCA ¶ 25, 115. To fulfill this responsibility, prospective contractors 
are responsible for conducting a sufficient investigation to ascertain the existence or 
nonexistence of taxes.  GarCom, Inc. , ASBCA 55034, 06-1 BCA ¶ 33,146 (2005).  Based 
on the terms of the contract and the facts before us, appellant assumed the risk for paying all 
taxes that were applicable to the contract as of the contract’s effective date, which for this 
procurement was the date of award, April 10, 2007.  Appellant may not pass on to the 
Government the consequences of its own failure to raise the fact of the tax rate increase prior 
4   FAR 52.229-3 was required to be used in the contract pursuant to the prescription 
contained at FAR 29.401-3(a). 

 
 
   
       
   
 
 
                 
  
  
  
 
     
       
   
 
  
 
 
  
     
   
     
 
 
7CBCA 1110 
to award. 5 
Appellant also asserts it is entitled the $131,481 increase because FAR 52.229-3(c) 
provides that “the contract price shall be increased by the amount of any after-imposed 
Federal tax that was not included in the contract price,” provided certain conditions are met. 6 
This argument fails for two reasons: the increase was neither an after-imposed tax nor a 
federal tax.  The tax rate increase was not after-imposed since it was made known to the 
public on March 30, 2007. Also, FAR 52.229-3 has been consistently interpreted to deny 
contractors recovery for after-imposed state, local, and tribal taxes.  Cannon Structures, Inc. , 
IBCA 3968-98, 99-1 BCA ¶ 30,236; Professional Services Unified, Inc. , ASBCA 48883, 
96-1 BCA ¶ 28,073 (1995);  Walker Equipment v. International Boundary and Water 
Commission, GSBCA 11572-IBWC, 93-3 BCA ¶ 25,954; MIDCON of New Mexico, Inc. , 
ASBCA 37249, 90-1 BCA ¶ 22,621; Northwest Piping, Inc. , IBCA 2611-A, 89-2 BCA ¶ 
21,794; Humphrey Construction, Inc. , IBCA 2266, et al., 87-2 BCA ¶ 19,923. 
We also find no merit in appellant’s argument that the clause contained at FAR 
52-229-4 should apply to this contract.  FAR 52-229-4 may be used for noncompetitive 
contracts at the discretion of a contracting officer.  48 CFR 29.401-3(b).  Unlike FAR 
52.229-3, which only provides relief from after-imposed federal  taxes, FAR 52-229-4 allows 
contractors to recoup after-imposed federal, state, and local taxes that it is required to pay.
 48 CFR 52.229-4.  As we noted earlier, FAR 52.229-3 was the appropriate clause to use in 
this contract.  Appellant has provided no facts or justification to apply FAR 52.229-4 to this 
contract. 
Finally, appellant has provided no compelling facts supporting its argument alleging 
unilateral or mutual mistake.  We conclude that any failure on the part of appellant to 
5   Here, appellant began the process of ascertaining the applicable taxes, but its 
investigation fell short.  Being fully aware it was responsible for paying the applicable 
NBAT, and that a rate increase was under active consideration, appellant apparently failed 
to check back to see whether there had been a rate increase or verify that the rate increase 
would not apply to receipts from the contract. The tax rate was increased, and a press release 
issued giving notice of the increase, prior to appellant confirming its proposal.  However, 
whether or not appellant acted prudently when it failed to follow-up on the proposed increase 
is not dispositive to this decision because under the terms of the contract appellant still had 
the responsibility for paying the applicable taxes.
6   To obtain relief from after-imposed federal  taxes, a contractor must warrant in 
writing that “no amount for such newly imposed Federal . . . tax . . . or rate increase was 
included in the contract price, as a contingency reserve or otherwise.”  48 CFR 52.229-3(c). 

    
 
  
  
 
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8 CBCA 1110 
ascertain the appropriate amount of NBAT for which it was responsible under the contract 
was a mistake in judgment.  When appellant elected not to raise the tax increase with the 
Government prior to award it compounded its error in judgment.  Contractual relief is not 
available for errors in judgment.  Satyadev Duggirala v. General Services Administration, 
CBCA 463, 07-1 BCA ¶ 33,489, at 165,999 (citing McClure Electrical Constructors v. 
Dalton, 132 F.3d 709 (Fed. Cir. 1997)). 
After considering the facts and each of the arguments propounded by appellant, we 
are not persuaded that the costs it incurred as a result of the NBAT rate increase should be 
passed on to the Government. 
Decision 
The appeal is DENIED . 
PATRICIA J. SHERIDAN 
Board Judge 
We concur: 
CATHERINE B. HYATT JEROME M. DRUMMOND 
Board Judge Board Judge