B-146494, DEC. 28, 1961

B-146494, DEC. 28, 1961

TO THE SECRETARY OF THE NAVY:

WE ARE ENCLOSING A COPY OF OUR LETTER OF TODAY TO BOGLE, BOGLE AND GATES, ATTORNEYS FOR PENNSALT CHEMICALS CORPORATION, DENYING THAT COMPANY'S PROTEST AGAINST THE AWARD OF CONTRACT NOW-0917-F (FBM) TO AMERICAN POTASH AND CHEMICAL CORPORATION (AMPOT).

YOU WILL NOTE FROM THE ENCLOSURE THAT OUR REVIEW OF THIS MATTER REVEALED SEVERAL ERRORS IN THE ACQUISITION COST AND MARKET VALUE OF GOVERNMENT- OWNED PROPERTY WHICH YOUR DEPARTMENT APPLIED IN DETERMINING THE RENTAL EVALUATION FACTOR APPLICABLE TO BIDS AND OFFERS BY AMPOT. ADDITIONALLY, THE RECORDS OF YOUR DEPARTMENT RELATIVE TO THE PRODUCTION CAPACITY OF PLANT NO. 2 INDICATES THAT THE 36,000,000 POUND PER YEAR FIGURE USED IN COMPUTING THE RENTAL EVALUATION FACTOR MAY BE APPLICABLE ONLY TO PRODUCTION ON A FORCED DRAFT BASIS. IT IS OUR OPINION THAT USE OF A FORCED DRAFT PRODUCTION FIGURE IS ESTABLISHING A RENTAL EVALUATION FACTOR IN THIS CASE IS INAPPROPRIATE. WE THEREFORE RECOMMEND THAT AN IMMEDIATE REVIEW OF THIS MATTER BE INSTITUTED BY YOUR DEPARTMENT WITH A VIEW TO DETERMINING PRODUCTION CAPACITY UNDER NORMAL OPERATING PROCEDURES. IN THE EVENT SUCH REVIEW INDICATES NORMAL PRODUCTION CAPACITY IN AN AMOUNT OTHER THAN 36,000,000 PER YEAR IT IS SUGGESTED THAT THE RENTAL EVALUATION FACTOR BE RECOMPUTED ON THAT BASIS AND APPLIED TO ANY FUTURE BIDS, OFFERS, OR COMMERCIAL PRODUCTION WHILE AMPOT IS IN POSSESSION OF THE HENDERSON FACILITIES UNDER ITS EXISTING FACILITIES CONTRACTS. IN ANY EVENT, AN APPROPRIATE REVISION SHOULD BE MADE TO REFLECT CORRECTION OF THE ERRORS REFERRED TO ABOVE. MR. JAMES H. HAMMOND, ASSISTANT DIRECTOR OF OUR DEFENSE ACCOUNTING AND AUDITING DIVISION, MAY BE CONTACTED IN THE EVENT FURTHER INFORMATION IS NEEDED IN THESE AREAS.

THE PROTEST BY PENNSALT CHEMICALS CORPORATION WAS THE SUBJECT OF A REPORT DATED SEPTEMBER 21, 1961, FROM THE ASSISTANT SECRETARY, INSTALLATIONS AND LOGISTICS, AND THE ENCLOSURES RECEIVED WITH SUCH REPORT ARE RETURNED.