B-234217, Oct 25, 1990

B-234217: Oct 25, 1990

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Rates and minimum charges will be based on the rates and minimum charges set out in referenced bureau class rate tariffs. Block 16 of the tender was reserved for "Governing Publications. " and was the place for a listing of the publications to which the tender's rates. Charges or services were subject. Appendix A of Tender 1453-C provided that the rates to apply were based on the class rates "as published in the applicable tariffs" and. At the time Tender 1453-C was offered to the government. The only minimum charge on which these shipments of Class C explosives could be based was in the applicable class rate tariff. Which was RMB 583 for purposes of the shipments in issue here. Billed and was paid based on Item 612-1 of Rules Tariff 110-A.

B-234217, Oct 25, 1990

DIGEST: Where carrier's Freight All Kinds (FAK) tender specifies that, except for the noted commodities, rates and minimum charges will be based on the rates and minimum charges set out in referenced bureau class rate tariffs, the carrier cannot except additional commodities from the FAK rating scheme by revising carrier-issued documents also incorporated by reference; instead, and in accordance with the tender's own terms, the carrier can add further exceptions only by amending the tender itself.

Consolidated Freightways, Inc.:

Consolidated Freightways, Inc., requests that we review deduction actions taken by the General Services Administration (GSA) to recover transportation overcharges for Class C explosives. We sustain GSA's actions.

The charges in issue flow from Consolidated's Tender 1453-C, /1/ which offered the government rates for the motor transportation of Freight All Kinds (FAK). /2/ The tender also contained exceptions to its applicability, including Class A and B explosives, so that it included by implication Class C explosives.

Block 16 of the tender was reserved for "Governing Publications," and was the place for a listing of the publications to which the tender's rates, charges or services were subject. Consolidated listed in block 16 four rate tariffs, including Rocky Mountain Tariff Bureau Class Rate Tariff (RMB) 583, and Consolidated's Rules Tariff 110-A. In this respect, as a general matter class rate tariffs set out the rates and minimum charges for various classes of commodities, and rules tariffs set out governing provisions.

Appendix A of Tender 1453-C provided that the rates to apply were based on the class rates "as published in the applicable tariffs" and, in the next sentence, that the minimum charge would be based on the minimum charge "as published in the applicable tariffs."

At the time Tender 1453-C was offered to the government, the only minimum charge on which these shipments of Class C explosives could be based was in the applicable class rate tariff, which was RMB 583 for purposes of the shipments in issue here. Consolidated, however, billed and was paid based on Item 612-1 of Rules Tariff 110-A, which Consolidated added 3 months after Tender 1453-C was issued but before the shipments. Item 612-1 provides for a higher minimum charge specifically applicable to all shipments of Class C explosives.

GSA's audit action is based on the agency's view that RMB 583 sets the minimum charge. GSA notes that Item 612-1 was not added to Rules Tariff 110-A until 3 months after Tender 1453-C was offered to the government. The agency argues:

"Although a carrier by reference may incorporate into a Government rate tender additional rules and transportation-related services and charges published in other tariffs, it seems unreasonable to allow a carrier to change the terms and conditions of the tender by merely supplementing or incorporating new rules into a governing rules tariff."

GSA maintains that Consolidated should have issued a supplement to Tender 1453-C to alert the government to the specific charge for Class C explosives, further arguing:

"... Otherwise, a carrier would be able to change a rules tariff to include a minimum charge on all the commodities listed in the National Motor Freight Classification. This would obviously defeat the purpose of offering reduced rates to the Government based on 'Freight All Kinds.' governing rules tariff is used to incorporate rules or charges that are not covered in the individual tender, but not to change existing terms and conditions already provided by the tender."

As indicated above, when Consolidated filed Tender 1453-C the firm clearly was offering a minimum-charge discount, for Class C and other non- excepted shipments, from one of the class rate tariffs like RMB 583. this respect, we considered the applicability of a class rate tariff versus Consolidated's Rules Tariff 110-A to shipments of Class C explosives in our decision in Consolidated Freightways. Inc., B-230345, June 2, 1989. Block 16 of the tender involved there listed only RMB 583 and the Rules Tariff, and the tender specified in Appendix A that the rates to apply and the minimum charge would be based on the rates and minimum charge in RMB 583. Here, Appendix A refers to the class rates and minimum charge in the "applicable tariffs," and four class rate tariffs are listed with Rules Tariff 110-A in block 16. We concluded that the reference to RMB 583 in Appendix A reflected the clear intention to make RMB 583, as opposed to the Rules Tariff, an integral part of the rates, within the meaning of block 16.

Tender 1453-C was, by its terms, effective for 1 year. Item 20(e) specified that the tender could be canceled or amended on written notice by the carrier of not less than 30 calendar days. Accepting Consolidated's billing basis in effect would permit the carrier to amend its FAK offer by exempting additional items from the FAK rate simply through a post-offering change to a referenced document that was not relevant to the rate at the outset. We do not read Tender 1453-C's cancellation/amendment provision as authorizing a change in charges by that mechanism.

In our view, item 20(e) of the tender requires that any revisions to the offer to add, in effect, exceptions to those commodities already expressly excepted from the FAK rating scheme be accomplished by amending the tender itself. An essential purpose of FAK-based tender like Tender 1453-C is to allow the government to secure a single rate on numerous diverse articles, thereby avoiding the need to classify the articles shipped to calculate a separate rate for each. Milne Truck Lines, Inc., 62 Comp.Gen. 29 (1982); Yellow Freight System, Inc., 61 Comp.Gen. 589, 592 (1982). In recognizing the practice of incorporating by reference provisions of a published tariff (like 110 A) into a rate tender, we have said that the tender should be given meaning in the light of the principal apparent purpose it was intended to serve. Yellow Freight System, Inc., supra, at 591. would be inconsistent with the purpose of Tender 1453-C to require the shipper to break out items included as FAK by the tender's express terms by virtue of an exception the carrier attempts to implement through indirect means.

In sum, Tender 1453-C as offered set the class rate tariffs, not the Rules Tariff, as the baseline for minimum charges for FAK items, and Consolidated's subsequent revision to Rules Tariff 110-A did not effect a revision to the Tender in accordance with the tender's amendment requirements. GSA's audit action, which is based on the position that the charges involved should not have been founded on Consolidated's Rules Tariff 110-A, therefore is sustained.

/1/ Consolidated references several Government Bills of Lading for our review, but only two appear to involve the application of Tender 1453-C. The others concern Tenders 1075-F and 1076-G, which were the subject of our decision in Consolidated Freightways, Inc. - Minimum Charge Applicability, B-230345, June 2, 1989.

/2/ This refers to all types of freight without the need to distinguish or classify the commodities.