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quantity of asphalt required, the source of the asphalt, and the
unit rate of the asphalt charged by the supplier. Using his or
her best judgment, the estimator filled in the equipment and
labor columns. To fill in the materials column, the estimator
called an asphalt supplier to determine the unit rate for the
asphalt. This rate was then entered into the materials column;
petitioner did not increase the estimated cost of the asphalt.
After each column was completed, the column totals were summed
and combined to arrive at a total direct expense. The total
direct expense was then increased by either 20 or 25 percent to
recover overhead expenses and to make a profit on the job.
The proposal sent to the customer contained a lump-sum bid;
it did not break out the various costs making up the bid.
Petitioner used two or three asphalt suppliers during the years
at issue and generally would not adjust its bids to compete with
an opposing paving contractor. If accepted, the proposal formed
the basis of the contract between petitioner and the customer.2
Once the contract was signed, petitioner obtained the
asphalt to be used in the paving job. Petitioner never acquired
asphalt from a supplier without a signed contract with a
customer.
2 When a job exceeded the scope of the original contract,
petitioner charged the customer on a time and materials basis.
The record is sparse with respect to the specific computation of
the time and materials charge. In any event, it appears that
this type of charge was uncommon.
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Last modified: May 25, 2011