B-159296, AUGUST 16, 1966, 46 COMP. GEN. 145

B-159296, AUGUST 16, 1966, 46 COMP. GEN. 145

VESSELS - PURCHASE, REQUISITION, ETC. - PLATING REMOVAL FOR RETURN TO GOVERNMENT - PROPRIETY OF AWARD. THE AWARD OF A CONTRACT FOR THE PURCHASE OF A CONDEMNED VESSEL STRICKEN FROM THE REGISTER OF NAVAL VESSELS FOR SCRAPPING PURPOSES ONLY, PURSUANT TO 10 U.S.C. 7305, SUBJECT TO THE STRIPPING OF THE PLATING FROM THE VESSEL BY THE PURCHASER, CUTTING IT INTO VARIOUS SIZES, AND RETURNING THE PLATING WITHIN A 2-YEAR PERIOD AFTER AWARD TO THE DEPARTMENT OF THE NAVY FOR TRANSFER TO THE ATOMIC ENERGY COMMISSION UNDER 40 U.S.C. 483 WAS PROPER AS IT IS IN THE BEST INTEREST OF THE GOVERNMENT TO RETAIN TITLE TO AND RECLAIM THE PLATING RATHER THAN TO SELL IT WITH THE VESSEL AND REPURCHASE IT ON THE COMMERCIAL MARKET AT A HIGHER PRICE, OR TO ARRANGE TO HAVE THE PLATING REMOVED AND CUT UNDER A SEPARATE CONTRACT PRIOR TO THE SALE OF THE VESSEL.

TO PECK IRON AND METAL CO; INC; AUGUST 16, 1966:

YOUR LETTER OF MAY 26, 1966, AS SUPPLEMENTED BY YOUR LETTER OF JULY 25, QUESTIONS A CERTAIN PROVISION IN INVITATION FOR BIDS (IFB) NO. 18 6068, ISSUED MAY 31, 1966, BY THE DEFENSE SURPLUS SALES OFFICE (DSSO), DEFENSE SUPPLY AGENCY (DSA), BROOKLYN, NEW YORK, OFFERING FOR SALE FOR SCRAPPING PURPOSES ONLY, PURSUANT TO 10 U.S.C. 7305, THE AIRCRAFT CARRIER AVT-8 (FRANKLIN), A CONDEMNED VESSEL STRICKEN FROM THE REGISTER OF NAVAL VESSELS PURSUANT TO 10 U.S.C. 7304.

THE IFB LISTS VARIOUS ITEMS OF EQUIPMENT AND OTHER PROPERTY ABOARD THE VESSEL, WHICH ARE TO BE STRIPPED BY THE PURCHASER AND RETURNED TO THE GOVERNMENT. AMONG SUCH ITEMS ARE ARMOR PLATING AND STEEL PLATING, SOME OF WHICH IS OBTAINABLE ONLY FROM CONDEMNED NAVAL VESSELS, AND OF SUBSTANTIAL USE TO THE ATOMIC ENERGY COMMISSION (AEC). IN ADDITION TO STRIPPING THE PLATING FROM THE VESSEL, THE PURCHASER IS REQUIRED, UNDER PARAGRAPH 28 OF THE SALE TERMS AND CONDITIONS, TO CUT THE PLATING INTO VARIOUS SIZES FOR THE GOVERNMENT WITHIN A PERIOD OF 2 YEARS FROM THE DATE OF AWARD. IT IS THIS PROVISION WHICH YOU QUESTION. IN THIS CONNECTION, YOUR LETTER READS, IN PART AS FOLLOWS:

* * * WE ARE PROMPTED TO INQUIRE AS TO THE PROPRIETY OF THE SURPLUS SALES OFFICE OF THE DEFENSE SUPPLY AGENCY REQUIRING A SUCCESSFUL BIDDER TO PERFORM WORK ON MATERIAL---TITLE TO WHICH REMAINS WITH THE GOVERNMENT, SINCE UNQUESTIONABLY THE SUCCESSFUL BIDDER WOULD DECREASE HIS PRICE ON THAT MATERIAL WHICH WAS TO REMAIN IN HIS POSSESSION, IN EXCHANGE FOR THE SERVICES PERFORMED FOR THE GOVERNMENT'S BENEFIT. THIS, IN OUR OPINION, RESULTS IN THE DEFENSE LOGISTICS SERVICES CENTER BARTERING SURPLUS EQUIPMENT FOR GOODS AND SERVICES, WHICH WE BELIEVE TO BE CONTRARY TO ACTS CITED AS AUTHORITY FOR THIS PARTICULAR SALE.

IN A REPORT DATED JULY 6, 1966, THE DEFENSE LOGISTICS SERVICES CENTER (DLSC), THE OFFICE WITHIN DSA WHICH IS RESPONSIBLE FOR THE CONDUCT OF SALES OF SURPLUS MILITARY PROPERTY, MAKES THE FOLLOWING PERTINENT STATEMENTS:

HISTORICALLY, THE GOVERNMENT HAS EXERCISED THE RIGHT TO REMOVE USABLE COMPONENTS FROM OTHERWISE UNUSABLE COMBATANT VESSELS PRIOR TO DISPOSITION BY SALE OR OTHERWISE. SUCH ACTION WAS SANCTIONED AS EARLY AS 1910 BY THE ATTORNEY GENERAL OF THE UNITED STATES. (28 OP. ATTY. GEN. 470.) IN THE PRESENT SALE A SIMILAR END RESULT IS SOUGHT: THE GOVERNMENT PROPOSES TO RECOVER SOME USABLE PROPERTY FROM AN OTHERWISE UNFIT VESSEL WHICH IT IS SELLING FOR SCRAPPING PURPOSES. HOWEVER, WHEREAS THE GOVERNMENT REMOVED THE EQUIPMENT WHICH WAS THE SUBJECT OF THE ATTORNEY GENERAL'S OPINION, IT HAS FOR MANY YEARS, AS IN THE SALE OF THE FRANKLIN, REQUIRED A PURCHASER, INCIDENTAL TO HIS SCRAPPING OPERATIONS, TO REMOVE AND RETURN TO THE GOVERNMENT SALVAGEABLE PROPERTY FOR WHICH THE GOVERNMENT HAD A REQUIREMENT.

THIS CENTER SUBMITS THAT IT IS NORMALLY IN THE ECONOMIC AND PRACTICAL INTERESTS OF THE GOVERNMENT TO HAVE THE PURCHASER EFFECT STRIPPING OF GOVERNMENT PROPERTY INCIDENT TO HIS SCRAPPING OPERATIONS. THIS PERMITS THE REMOVAL OF THE REQUIRED PROPERTY IN THE MOST ORDERLY AND EFFICIENT MANNER. SUCH A PROCEDURE ALSO ALLOWS FOR THE MOST EXPEDITIOUS REMOVAL OF THE VESSEL FROM NAVY CONTROL SO AS TO MAKE REQUIRED SPACE AVAILABLE FOR WORK ON OPERATIONAL VESSELS. FOR EXAMPLE, IN THE INSTANT CASE THE PROPERTY TO BE RETURNED TO THE GOVERNMENT IS LOCATED THROUGHOUT THE VESSEL. THE ALTERNATIVE TO ACCOMPLISHING ITS REMOVAL UNDER THE PROPOSED METHOD WOULD NECESSITATE THE REMOVAL OF THE PROPERTY EITHER BY NAVY PERSONNEL OR BY A SERVICE TYPE CONTRACT. SEVERAL SIGNIFICANT DISADVANTAGES OF THE LATTER COURSE OF ACTION ARE IMMEDIATELY APPARENT. THE FIRST PLACE FUNDS OR MANPOWER WOULD BE REQUIRED TO DISASSEMBLE THE VESSEL IN ORDER TO OBTAIN THE REQUIRED PROPERTY. IN SO DOING, SIGNIFICANT QUANTITIES OF USABLE PROPERTY ON BOARD THE VESSEL WOULD, IN ALL PROBABILITY, BE DESTROYED OR REDUCED TO SCRAP IN GAINING ACCESS TO THOSE ITEMS FOR WHICH A REQUIREMENT EXISTS. SECONDLY, THE RESIDUE WOULD HAVE TO BE DISPOSED OF UNDER THE PROVISIONS OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, AND REGULATIONS PROMULGATED PURSUANT THERETO. THIS WOULD REQUIRE THE ACCUMULATION AND SEGREGATION OF THOSE ITEMS OF USABLE EQUIPMENT AND SCRAP GENERATED DURING THE STRIPPING OPERATION, WHICH, IN TURN, WOULD REQUIRE SUBSTANTIAL STORAGE FACILITIES. IF THE STRIPPING WERE PERFORMED BY CONTRACT, AT A CONTRACTOR'S FACILITY, THE COSTS, BOTH DIRECT AND INDIRECT, WOULD BE SUBSTANTIALLY GREATER THAN IF SUCH STRIPPING WERE PERFORMED AT GOVERNMENT FACILITIES. IN VIEW OF THE ABOVE, IT HAS BEEN DETERMINED THAT STRIPPING THE VESSEL PRIOR TO SALE WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT.

UNDER THE PROCEDURE IN EXISTENCE, THE PURCHASER OF A VESSEL IS PERMITTED TO PERFORM A SYSTEMATIC SCRAPPING AND STRIPPING OPERATION. ACTUALLY HE CAN "DECONSTRUCT" THE VESSEL. AS THOSE ITEMS REQUIRED TO BE RETURNED TO THE GOVERNMENT ARE REACHED THEY ARE RETURNED TO GOVERNMENT CONTROL. TITLE TO ALL OTHER PROPERTY VESTS IN THE PURCHASER ON PAYMENT AND IS MARKETED BY THE CONTRACTOR AS HE PROCEEDS WITH THE DISMANTLING OF THE VESSEL. IN THIS CONNECTION, IT IS TO BE NOTED THAT TWO TO THREE YEARS ARE ALLOWED FOR COMPLETION OF THE CONTRACT.

THE CUTTING AND STRIPPING REQUIREMENTS ARE CONSIDERED TO BE "PREPARATION FOR DISPOSAL" WITHIN THE MEANING OF SECTION 611, DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1966, 79 STAT. 863, 875. * *

COMBATANT VESSELS OF THE NAVY HAVE BEEN SOLD UNDER TERMS AND CONDITIONS REQUIREING THE STRIPPING OF USABLE PROPERTY SINCE THIS CENTER WAS ASSIGNED RESPONSIBILITY FOR CONDUCTING SUCH SALES. INFORMATION AVAILABLE TO THIS CENTER INDICATES THAT SUCH PROCEDURES HAVE BEEN IN EFFECT AT LEAST SINCE 1958. (BU-SHIPS INSTRUCTION 4440.23A, DATED 22 OCTOBER 1958, EXHIBIT B.) IT IS BELIEVED THAT SUCH PROCEDURES PRECEDE THE DATE OF THE REFERENCED BU- SHIPS INSTRUCTION.

WHILE IT MAY BE, AS YOU CONTEND, THAT THE PURCHASE PRICE QUOTED ON THE VESSEL ABSENT THE PLATING AFTER CUTTING IS LOWER THAN THE PRICE WHICH WOULD BE QUOTED FOR THE VESSEL WITH THE PLATING, IT IS APPARENT THAT IT IS IN THE BEST INTEREST OF THE GOVERNMENT FOR THE DEPARTMENT OF THE NAVY TO RECLAIM THE PLATING AFTER STRIPPING AND CUTTING BY THE PURCHASER AND TRANSFER IT TO AEC PURSUANT TO 40 U.S.C. 483 RATHER THAN SELL THE PLATING WITH THE VESSEL AND BE COMPELLED TO REPURCHASE THE PLATING SUBSEQUENTLY ON THE COMMERCIAL MARKET AT A HIGHER PRICE OR TO HAVE THE PLATING REMOVED AND CUT UNDER SEPARATE CONTRACT PRIOR TO THE SALE OF THE VESSEL.

HOWEVER THAT MAY BE, WE THINK THERE IS NO QUESTION BUT THAT THE GOVERNMENT PROPERLY MAY RETAIN TITLE TO THE PLATING AND HAVE IT CUT TO ITS REQUIREMENTS AND THAT FUNDS ARE AVAILABLE TO FINANCE SUCH COSTS. SUCH BEING THE CASE, THE SOURCE OF FINANCING THE CONTRACT IS AN INTERNAL GOVERNMENT MATTER. ACCORDINGLY, WE SEE NO LEGAL BASIS FOR OBJECTION TO THE AWARD OF A CONTRACT FOR THE PURCHASE OF THE VESSEL SUBJECT TO SUCH CUTTING REQUIREMENT.

WITH RESPECT TO THE STATEMENTS IN YOUR LETTER OF JULY 25 CONCERNING SIMILAR CASES IN WHICH YOU ALLEGE THAT THE ARMOR AND STEEL PLATING ON GOVERNMENT VESSELS WAS NOT RETURNED TO THE GOVERNMENT AS REQUIRED BY THE TERMS OF THE CONTRACTS OF SALE, YOU ARE ADVISED THAT IF YOU WILL FORWARD TO OUR OFFICE ALL OF THE INFORMATION AND DOCUMENTATION WHICH YOU MAY HAVE CONCERNING SUCH CASES, WE SHALL BE GLAD TO GIVE CONSIDERATION TO SUCH MATTER.