B-136307, JUNE 30, 1958, 37 COMP. GEN. 864

B-136307: Jun 30, 1958

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1958: REFERENCE IS MADE TO LETTER FROM THE ASSISTANT SECRETARY OF THE AIR FORCE DATED JUNE 10. OF THE BID SCHEDULE PROVIDES: (A) ALL BIDDERS UNDER THIS INVITATION FOR BIDS WILL BE REQUIRED TO SUBMIT TO THE GOVERNMENT THE DESCRIPTIVE LITERATURE LISTED BELOW. SINCE DESCRIPTIVE LITERATURE IS REQUIRED FOR EVALUATING BIDS. WHICH WILL BE REQUIRED FOR EVALUATION PURPOSES IS AS FOLLOWS: (1) OUTLINE DRAWINGS OF THE OVERALL EQUIPMENT ITEM AND MAJOR COMPONENTS THEREOF SHOWING SIZE. IN NO CASE WILL AN AWARD BASED ON THE FOREGOING DATA CONSTITUTE A WAIVER OF THE REQUIREMENTS OF THE SPECIFICATION AS TO ACCEPTANCE. (B) FAILURE OF A BIDDER TO HAVE FURNISHED DESCRIPTIVE LITERATURE WILL RESULT IN REJECTION OF THAT BID. * * * THE 13 BIDS WHICH WERE RECEIVED IN RESPONSE TO THE INVITATION WERE OPENED ON MAY 8.

B-136307, JUNE 30, 1958, 37 COMP. GEN. 864

BIDS - EVALUATION - TAX INCLUSION OR EXCLUSION A BIDDER WHO, IN RESPONSE TO AN INVITATION REQUIRING THE CONTRACT PRICE TO INCLUDE ALL APPLICABLE FEDERAL TAXES, SUBMITS A BID SHOWING SEPARATELY THE BASIC PRICE, THE AMOUNT OF THE FEDERAL EXCISE, AND THE TOTAL PRICE BECAUSE OF THE DOUBT AS TO THE APPLICABILITY OF THE TAX TO THE TYPE OF EQUIPMENT TO BE FURNISHED HAS SUBMITTED A DEFINITE, COMPLETE, RESPONSIVE BID WHICH MAY BE EVALUATED ON THE BASIS OF THE BASIC PRICE, EXCLUSIVE OF THE FEDERAL EXCISE TAX, WHICH HAS BEEN DETERMINED BY THE INTERNAL REVENUE SERVICE TO BE INAPPLICABLE TO THE TYPE OF EQUIPMENT OFFERED.

TO THE SECRETARY OF THE AIR FORCE, JUNE 30, 1958:

REFERENCE IS MADE TO LETTER FROM THE ASSISTANT SECRETARY OF THE AIR FORCE DATED JUNE 10, 1958, REQUESTING A DECISION CONCERNING THE BID OF THE HEIL CO. SUBMITTED IN RESPONSE TO INVITATION FOR BIDS NO. 33-600-58 173, ISSUED BY HEADQUARTERS, AIR MATERIEL COMMAND, ON MARCH 25, 1958, FOR FURNISHING 5,000-GALLON CAPACITY AIRCRAFT REFUELER TRUCKS.

THE INVITATION FOR BIDS CONTAINS STANDARD FORM 32," GENERAL PROVISIONS ( SUPPLY CONTRACT).' CLAUSE 10 OF THESE GENERAL PROVISIONS," FEDERAL, STATE, AND LOCAL TAXES" AS MODIFIED BY CLAUSE 40 (C) OF THE ADDITIONAL GENERAL PROVISIONS ADDED BY THE AIR FORCE, PROVIDES IN PART:

10 (B) FEDERAL TAXES.--- EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL TAXES IN EFFECT ON THE CONTRACT DATE.

NO OTHER PROVISION IN THE INVITATION RELATES TO THE MANNER IN WHICH FEDERAL, STATE, OR LOCAL TAXES SHALL BE TAKEN INTO ACCOUNT BY THE BIDDERS IN THEIR BIDS.

CLAUSE II, PAGE 5, OF THE BID SCHEDULE PROVIDES:

(A) ALL BIDDERS UNDER THIS INVITATION FOR BIDS WILL BE REQUIRED TO SUBMIT TO THE GOVERNMENT THE DESCRIPTIVE LITERATURE LISTED BELOW. SUCH LITERATURE SHALL BE SUBMITTED WITH THE BIDS AND SHALL CONFORM IN EVERY RESPECT WITH THE REQUIREMENTS OF THE INVITATION FOR BIDS. SINCE DESCRIPTIVE LITERATURE IS REQUIRED FOR EVALUATING BIDS, NONCONFORMING LITERATURE SHALL RESULT IN REJECTION OF THAT BID. THE DESCRIPTIVE LITERATURE RELATIVE TO DESIGN APPROACHES, ETC., WHICH WILL BE REQUIRED FOR EVALUATION PURPOSES IS AS FOLLOWS:

(1) OUTLINE DRAWINGS OF THE OVERALL EQUIPMENT ITEM AND MAJOR COMPONENTS THEREOF SHOWING SIZE, ARRANGEMENT OF PARTS, WEIGHT, AND ANY OTHER PHYSICAL FEATURES OF A MAJOR NATURE.

(2) SCHEMATIC DIAGRAMS FOR THE OVERALL EQUIPMENT ITEMS SHOWING CONTROLS, PROTECTIVE DEVICES, VALVES, GAUGES, AND OTHER COMPONENTS, INCLUDING IDENTIFICATION OF KNOWN COMMERCIAL MAJOR COMPONENTS BY NAMEPLATE OR CATALOG RATING THEREOF.

(3) EXPLAIN COMPLIANCE WITH THE FOLLOWING SIGNIFICANT REQUIREMENTS AS SET FORTH IN THE FOLLOWING PARAGRAPHS OF SPECIFICATION MIL-T-26192, PARTICULARLY AS TO QUALITATIVE CHARACTERISTICS, OPERATIONAL SUITABILITY, AND MAINTAINABILITY: (1) PARAGRAPHS 3.4 THROUGH 3.20.7. IN NO CASE WILL AN AWARD BASED ON THE FOREGOING DATA CONSTITUTE A WAIVER OF THE REQUIREMENTS OF THE SPECIFICATION AS TO ACCEPTANCE, INSPECTION, TESTING, OR ANY OTHER PROVISIONS OF THE SPECIFICATION.

(B) FAILURE OF A BIDDER TO HAVE FURNISHED DESCRIPTIVE LITERATURE WILL RESULT IN REJECTION OF THAT BID. * * *

THE 13 BIDS WHICH WERE RECEIVED IN RESPONSE TO THE INVITATION WERE OPENED ON MAY 8, 1958, AS SCHEDULED. ON THE BASIS OF THE NUMBER OF REFUELER TRUCKS DECIDED UPON TO BE PURCHASED AND THE OTHER ITEMS, THE LOWEST BIDDER IS EITHER CONSOLIDATED DIESEL ELECTRIC CORPORATION OR THE HEIL CO., DEPENDING UPON WHETHER OR NOT THE FEDERAL EXCISE TAX SHOWN IN HEIL'S BID IS CONSIDERED IN THE EVALUATION.

THE BID OF CONSOLIDATED DIESEL ELECTRIC CORPORATION IS NOT CONDITIONED IN ANY MANNER WITH RESPECT TO THE PRICES QUOTED. THE HEIL CO.'S BID QUOTES PRICES WHICH ARE BROKEN DOWN INTO A BASIC PRICE, FEDERAL EXCISE TAX ON THE TRUCK CHASSIS, FEDERAL EXCISE TAX ON THE TRUCK BODY AND A TOTAL OF THE THREE ITEMS. FOR EXAMPLE, THE QUOTATION ON ITEM IIB, 200 TO 300 REFUELERS, IS SET FORTH AS FOLLOWS:

UNIT PRICE

$16,555.00

832.50 F.E.T. CHASSIS

205.22 F.E.T. BODY

$17,592.72 (B)

A LETTER OF TRANSMITTAL FROM THE HEIL CO. WHICH ACCOMPANIED ITS BID EXPLAINED THIS BREAKDOWN AS FOLLOWS:

THE FEDERAL EXCISE TAXES ARE SEPARATELY QUOTED DUE TO THE QUESTION OF THEIR APPLICABILITY.

THE HEIL BID WAS ACCOMPANIED BY THE DESCRIPTIVE LITERATURE REQUIRED AS SET FORTH ABOVE. THE DESCRIPTIVE LITERATURE SHOWS THAT HEIL CONTEMPLATES USING A CHASSIS AND ENGINE MANUFACTURED BY GENERAL MOTORS CORPORATION. " TECHNICAL PROPOSAL, TRUCK CHASSIS ONLY" APPARENTLY PREPARED BY GENERAL MOTORS CORPORATION DESCRIBES THE CHASSIS AND RELATED EQUIPMENT OFFERED. ALSO INFORMATION FURNISHED COVERS DATE ON THE TANK AND PUMPING SYSTEM.

BY TELEGRAM OF MAY 16 AND LETTER OF MAY 19, 1958, THE HEIL CO. REQUESTED THE CONTRACTING OFFICER TO DISREGARD THE FEDERAL EXCISE TAXES SET FORTH IN ITS BID AS THE INTERNAL REVENUE SERVICE HAD RULED THAT THE TAX WAS NOT APPLICABLE. IT WAS EXPLAINED THAT HEIL HAD UNSUCCESSFULLY ATTEMPTED TO SECURE A RULING ON THE APPLICABILITY OF THE FEDERAL EXCISE TAXES PRIOR TO SUBMITTING ITS BID AND WAS UNABLE TO DO SO, AND THAT, WHILE HEIL REALIZED THAT THE FEDERAL EXCISE TAXES INVOLVED WERE GENERALLY RULED TO BE INAPPLICABLE TO VEHICLES NOT INTENDED FOR HIGHWAY USE, SINCE TWO CHASSIS MANUFACTURERS HAD QUOTED PRICES ON THE TRUCK CHASSIS INCLUDING THAT TAX, HEIL CONSIDERED IT NECESSARY TO SECURE A RULING ON THE APPLICABILITY OF THE TAX FROM THE INTERNAL REVENUE SERVICE BEFORE EXCLUDING THE TAX IN VIEW OF THE LARGE AMOUNT INVOLVED. BY LETTER OF MAY 20, 1958, HEIL FORWARDED A PHOTOSTAT OF A TELEGRAM RECEIVED BY GENERAL MOTORS CORPORATION FROM THE CHIEF, FEDERAL TAX BRANCH, INTERNAL REVENUE SERVICE, DATED MAY 16, 1958, STATING THAT "SINCE MAXIMUM CAPACITY OF SPECIALLY DESIGNED REAR AXLE EXCEEDS LEGAL HIGHWAY LIMITS AND SINCE IN OTHER RESPECTS, AS OUTLINED BY YOU, THIS CHASSIS HAS BEEN SPECIALLY DESIGNED FOR OFF-HIGHWAY USE, WE RULE THAT SUCH CHASSIS IS NOT TAXABLE UNDER CODE SECTION 4061.' A COPY OF A TELETYPE DATED MAY 13, 1958, FROM GENERAL MOTORS CORPORATION TO THE INTERNAL REVENUE SERVICE WHICH IS THE BASIS FOR THE RULING OF MAY 16, 1958, WAS FURNISHED THIS OFFICE BY GENERAL MOTORS CORPORATION. SAID TELETYPE SETS FORTH FEATURES OF THE CHASSIS WHICH ARE IN ACCORDANCE WITH HEIL'S BID. SUBSEQUENTLY, AT OUR SUGGESTION TO HEIL, GENERAL MOTORS CORPORATION OBTAINED A LETTER DATED JUNE 16, 1958, FROM THE CHIEF, EXCISE TAX BRANCH, INTERNAL REVENUE SERVICE, CONFIRMING THE TELEGRAPHIC RULING OF MAY 16. SAID LETTER IS, IN PART, AS FOLLOWS:

UNDER THE PROVISIONS OF REV. RUL. 57-440, I.R.B. 1958-8, PAGE 6, THE MANUFACTURERS EXCISE TAX IMPOSED BY CODE SECTION 4061 (A) (1) SHALL NOT APPLY TO SALES BY THE MANUFACTURER OF ANY ARTICLE, REGARDLESS OF WIDTH, WHICH IS DESIGNED OR ADAPTED BY THE MANUFACTURER FOR PURPOSES PREDOMINANTLY OTHER THAN THE TRANSPORTATION OF PERSONS OR PROPERTY ON THE HIGHWAY EVEN THOUGH INCIDENTAL HIGHWAY USE MAY OCCUR.

YOUR CHASSIS MODEL FMW-559E IS INTENDED TO BE SOLD TO THE HEIL COMPANY, MILWAUKEE, WISCONSIN, IN CONNECTION WITH U.S. AIR FORCE INVITATION FOR BID NO. 33-600-58-173. IT HAS A REAR TANDEM AXLE WITH A MAXIMUM CAPACITY OF 46,000 POUNDS, WHEREAS YOU STATE THAT THE MAXIMUM LEGAL LIMIT IN ANY STATE IS 42,000 POUNDS OR LESS. ALSO, THE FRAME IS REINFORCED IN A MANNER THAT IS NOT NECESSARY ON A STANDARD HIGHWAY TYPECHASSIS. THERE ARE ALSO OTHER DESIGN FEATURES NOT ORDINARILY INCORPORATED IN A HIGHWAY TYPE CHASSIS.

FOR THE REASONS STATED ABOVE WE RULE THAT YOUR CHASSIS MODEL FMW 559E IS NOT TAXABLE UNDER CODE SECTION 4061 WHEN SOLD BY YOU. OUR TELEGRAPHIC RULING OF MAY 16, 1958, IS AFFIRMED. THIS RULING APPLIES ONLY WHERE THE CHASSIS MANUFACTURER BUILDS THE SPECIALLY DESIGNED CHASSIS FOR SALE TO THE CONTRACT BIDDER.

WHERE A CONTRACT BIDDER BUYS A STANDARD HIGHWAY TYPE CHASSIS FROM THE CHASSIS MANUFACTURER AND CONVERTS IT INTO A SPECIALLY DESIGNED CHASSIS BY MAKING THE MODIFICATION HIMSELF, THE MANUFACTURERS EXCISE TAX APPLIES TO THE SALE OF THE STANDARD HIGHWAY TYPE CHASSIS. IN SUCH A CASE THE LAW DOES NOT PROVIDE FOR A CREDIT OR REFUND OF THE TAX PAID BY THE CHASSIS MANUFACTURER BY REASON OF THE OPERATIONS PERFORMED BY THE CONTRACT BIDDER IN MAKING SUCH CONVERSION.

A MEMORANDUM DATED JUNE 3, 1958, BY THE ASSISTANT TO STAFF JUDGE ADVOCATE, CONCERNING THE APPLICABILITY OF THE FEDERAL EXCISE TAX INVOLVED, IS AS FOLLOWS:

THE TRUCK TANK UNIT AF/S32R-2 IS DESIGNED TO MILITARY SPECIFICATION (MIL- T-26192, 13 NOV 57) COVERING A 5,000 GALLON CAPACITY FUEL SERVING TANK TRUCK. THIS CONSISTS OF A 6 X 4 TRUCK CHASSIS MODIFIED TO MEET THE REQUIREMENTS SET FORTH IN THE SPECIFICATION. THE VEHICLE IS TO BE DESIGNED PRIMARILY FOR THE PURPOSE OF SERVICING ALL TYPES OF USAF AIRCRAFT WITH AEROMATIC OR JET AIRCRAFT FUEL. THE FUEL CAPACITY OF THE TRUCK IS 5,000 GALLONS WHICH AIR FORCE ENGINEERING PERSONNEL STATE IS A HIGH CAPACITY FUEL SUPPLY FOR A VEHICLE OF THIS TYPE SINCE TANK TRUCKS USED OVER THE HIGHWAYS ARE USUALLY OF THE SEMI-TRAILER TYPE WHEN THEY HAVE THIS CAPACITY. AS A RESULT OF THE HIGH FUEL CAPACITY AND THE LOADING OF THE WHEELS, THE TRUCK REQUIRED A BOGIE (TANDEM) TYPE REAR WHEEL ASSEMBLY. HEIL'S PROPOSAL IS FOR A TINKEN MODEL SPHD. GOVERNMENT ENGINEERING PERSONNEL STATE THAT THIS IS NOT THE USUAL REAR AXLE SUPPLIED WITH THE GMC CHASSIS PROPOSED TO BE SUPPLIED BY HEIL. THE DRAWING SUPPLIED BY HEIL SHOWS A TOTAL TRUCK WEIGHT LOADING ON THE REAR WHEELS, INCLUDING "PAY LOAD," OF 46,510 POUNDS. PER AXLE THIS EXCEEDS 18,000 POUNDS WHICH IS MORE WEIGHT THAN IS PERMISSIBLE ON HIGHWAYS OF 31 STATES WHO LIMIT THE AXLE WEIGHT TO 18,000 POUNDS; AND FOR THE REMAINING 17 STATES, IT EXCEEDS THE 21,000/22,000 WEIGHT LIMITS PER AXLE, SINCE EACH AXLE OF THE BOGIE ASSEMBLY WOULD BEAR THE WEIGHT OF 23,255 POUNDS. SINCE THE TRUCK CHASSIS AND THE TANK PLACED THEREON ARE DESIGNED AND ADAPTED PRIMARILY FOR THE SPECIAL PURPOSE OF REFUELING AIRCRAFT ON GOVERNMENT RUNWAYS AND ARE THEREFORE NOT PREDOMINANTLY DESIGNED FOR TRANSPORTATION OF PERSONS OR PROPERTY ON THE HIGHWAYS AND THE DESIGN PRECLUDES SUCH USE UNDER ORDINARY CIRCUMSTANCES, IT IS READILY DETERMINABLE, IN VIEW OF THE RULINGS CONTAINED IN REVENUE RULING 57-440 ( IRB 1957-40) AND THE REVISION IRB 1958-8 (24 FEB 58), THAT FEDERAL EXCISE TAX IMPOSED BY SECTION 4061, IRC 1954, IS NOT APPLICABLE TO THIS VEHICLE.

IN VIEW OF THE METHOD OF PRODUCTION CONTEMPLATED BY HEIL, AS DISCLOSED IN THE INFORMATION SUBMITTED WITH HEIL'S BID, AND AS SET FORTH IN THE ABOVE- QUOTED MEMORANDUM, IT APPEARS CLEAR THAT THE CHASSIS TO BE FURNISHED TO HEIL BY GENERAL MOTORS CORPORATION AND THE BODY INVOLVED ARE NOT A ,STANDARD HIGHWAY TYPE" AND, THEREFORE, THEY ARE NOT SUBJECT TO THE FEDERAL EXCISE TAX ON AUTOMOBILE CHASSIS AND BODIES IMPOSED BY SECTION 4061 OF THE INTERNAL REVENUE CODE OF 1954, 26 U.S. CODE 4061.

CONSOLIDATED DIESEL ELECTRIC CORPORATION AND GARY STEEL PRODUCTS PROTEST THE CONSIDERATION OF HEIL'S BID ON ANY BASIS OTHER THAN THE TOTAL AMOUNT, INCLUDING THE FEDERAL EXCISE TAX. IN SUPPORT THEREOF, REFERENCE IS MADE TO THE PROVISION OF THE INVITATION TO THE EFFECT THAT THE BID PRICES MUST INCLUDE ALL APPLICABLE FEDERAL TAXES IN EFFECT ON THE DATE SET FOR THE OPENING OF THE BIDS. ALSO, REFERENCE IS MADE TO VARIOUS DECISIONS OF THIS OFFICE WITH RESPECT TO THE EVALUATION OF BIDS INVOLVING STATE AND FEDERAL TAXES.

THE MAJORITY OF THE CASES REFERRED TO INVOLVE, INSOFAR AS FEDERAL TAXES ARE CONCERNED, SITUATIONS EXISTING UNDER LAWS WHERE IT WAS UP TO THE BIDDER TO DETERMINE WHETHER HE WOULD PAY THE TAX OR REQUEST A TAX EXEMPTION CERTIFICATE. UNDER THE PRESENT LAW, HOWEVER, THE BIDDER HAS NO OPTION OR CONTROL AND THE APPLICABILITY OF FEDERAL TAXES IS NOT CHANGED BECAUSE THE SALE IS TO THE UNITED STATES. THERE CAN BE NO QUESTION THAT, IF THE FEDERAL EXCISE TAXES HERE INVOLVED WERE IN FACT APPLICABLE OR OF DOUBTFUL APPLICABILITY, THE TAX WOULD BE REQUIRED TO BE INCLUDED IN EVALUATING THE BID. 20 COMP. GEN. 752. THAT DECISION, HOWEVER, DOES NOT HOLD THAT A TAX WHICH IS INAPPLICABLE MUST BE INCLUDED IN EVALUATING THE BID. THE PROTESTANTS ALSO ALLEGE THAT TO CONSIDER HEIL'S BID WITHOUT THE TAX WOULD BE UNFAIR TO OTHER BIDDERS AND WOULD PERMIT HEIL TO CHANGE OR MAKE AN ELECTION AFTER THE BIDS WERE OPENED.

APPARENTLY THERE WAS CONSIDERABLE CONFUSION AMONG THE VARIOUS BIDDERS AS TO THE APPLICABILITY OF THE TAX SINCE FOUR OF THE BIDDERS QUOTED THE TAX SEPARATELY. HOWEVER, AS STATED IN THE ASSISTANT SECRETARY'S LETTER, THE BID SUBMITTED BY HEIL DOES NOT TAKE ISSUE WITH ANY OF THE TERMS OR CONDITIONS OF THE INVITATION NOR DOES IT OFFER AN ALTERNATE PROPOSAL TO THE INVITATION. THE QUESTION WHICH IT PRESENTS IS WHETHER IT SHOULD BE EVALUATED AS INCLUDING OR EXCLUDING THE FEDERAL EXCISE TAX SEPARATELY QUOTED. THE ELEMENTS OF THE BID PRICE ATTRIBUTABLE TO FEDERAL EXCISE TAXES WHICH MIGHT HAVE BEEN APPLICABLE ARE CLEARLY SET FORTH FROM THE BASIC PRICE AND IT APPEARS CLEAR FROM HEIL'S LETTER TRANSMITTING ITS BID THAT IT INTENDED THE BID PRICE TO EXCLUDE THOSE AMOUNTS ATTRIBUTABLE TO FEDERAL EXCISE TAXES IF THE TAX WAS NOT APPLICABLE AND TO INCLUDE THEM IF APPLICABLE. THE BASIS ON WHICH HEIL INSTRUCTED ITS BID TO BE COMPUTED IS DEPENDENT ONLY UPON A DETERMINATION WHETHER THE FEDERAL EXCISE TAX IN QUESTION IS APPLICABLE. SINCE THE INFORMATION SUBMITTED BY HEIL WITH ITS BID DISCLOSED THE TYPE OF CHASSIS AND BODY WHICH IT PROPOSED TO FURNISH, THE APPLICABILITY OF THE TAX IS SOMETHING OVER WHICH HEIL HAD NO CONTROL WHATSOEVER. A DETERMINATION OF THE PROPER METHOD OF COMPUTING HEIL'S BID DOES NOT REQUIRE RESORT BACK TO HEIL FOR FURTHER EXPLANATION. THE DETERMINATION CAN BE MADE ENTIRELY ON THE BASIS OF THE BID AS SUBMITTED. HEIL'S BID AS SUBMITTED CLEARLY SHOWS ITS BID PRICE IF THE FEDERAL EXCISE TAXES ARE NOT APPLICABLE AND THE BID OTHERWISE IS DEFINITE, COMPLETE AND RESPONSIVE. UNDER THE CIRCUMSTANCES IT IS NOT BELIEVED THAT TO CONSIDER HEIL'S BID AS EXCLUSIVE OF THE FEDERAL EXCISE TAXES IS PREJUDICIAL TO OTHER BIDDERS.

ACCORDINGLY, YOU ARE ADVISED THAT SINCE IT APPEARS CLEAR FROM HEIL'S BID AS SUBMITTED THAT THE FEDERAL EXCISE TAXES ON THE CHASSIS AND BODY ARE NOT APPLICABLE, THE BID OF THE HEIL CO. MAY BE EVALUATED ON THE BASIC PRICE, EXCLUSIVE OF THE TAXES.