B-159868, NOVEMBER 7, 1967, 47 COMP. GEN. 223

B-159868, NOVEMBER 7, 1967, 47 COMP. GEN. 223

BIDS - COMPETITIVE SYSTEM - SUBCONTRACTORS - ANTITRUST IMMUNITY THE FIXING OF PRICES AND ALLOCATION OF THE COAL SOLD TO EUROPEAN PRIME CONTRACTORS BY AN AMERICAN EXPORT ASSOCIATION OF SUBCONTRACTORS CLAIMING WEBB-POMERENE BY AN AMERICAN EXPORT ASSOCIATION OF SUBCONTRACTORS CLAIMING WEBB/POMERENE ACT, 15 U.S.C. 61-65, IMMUNITY TO THE ANTITRUST LAWS IS RESTRICTIVE OF THE COMPETITIVE NEGOTIATION REQUIRED BY PARAGRAPH 3-102 (C) OF THE ARMED SERVICES PROCUREMENT REGULATION, AS THE REQUIREMENT IS NOT DEPENDENT UPON OR SUBJECT TO THE ANTITRUST LAWS AND, NOTWITHSTANDING THE CONTRACT AWARDED IS A FIXED PRICE CONTRACT, THE CONTROL EXERCISED BY THE ARMY OVER EVERY ASPECT OF THE PROCUREMENT EXTINGUISHED THE DISTINCTION BETWEEN PRIME AND SUBCONTRACTORS AND THE GOVERNMENT ULTIMATELY BEARING THE EXCESSIVE SUBCONTRACTING COSTS HAS BEEN PREJUDICED BY THE NONCOMPETITIVE ACTIVITIES OF THE SUBCONTRACTORS. HOWEVER, ALTHOUGH THE CONTRACT IS VOIDABLE AT THE OPTION OF THE GOVERNMENT, PRACTICAL REASONS PRECLUDE DISTURBING THE AWARD, BUT FUTURE COAL PROCUREMENTS SHOULD BE ON A FULLY COMPETITIVE BASIS.

TO THE SECRETARY OF THE ARMY, NOVEMBER 7, 1967:

REFERENCE IS MADE TO A LETTER DATED MAY 17, 1967, FROM THE ACTING DIRECTOR OF PROCUREMENT POLICY AND REVIEW, FURNISHING OUR OFFICE WITH A REPORT ON THE PROTEST BY GINSBURG AND FELDMAN, ATTORNEYS FOR INDEPENDENT MINERS AND ASSOCIATES, UNDER REQUEST FOR PROPOSALS (RFP) NO. DAJA37-67-R- 0248, ISSUED BY THE UNITED STATES ARMY PROCUREMENT CENTER, FRANKFURT, GERMANY, FOR THE PROCUREMENT OF COAL FOR USE BY THE ARMY AT EUROPEAN BASES DURING FISCAL YEAR 1968. THE PRIMARY BASIS OF THE PROTEST IS DIRECTED TO THE FACT THAT THE RFP IS, BY ITS TERMS, RESTRICTIVE F COMPETITION. SIMILAR PROTEST WAS FILED BY DELLUMBER HANDELMEATSCHAPPIJ, THE EUROPEAN IMPORTER FOR COAL MINED BY THE INDEPENDENT MINERS, WITH REGARD TO THE PROCUREMENT OF COAL FOR USE AT EUROPEAN BASES DURING FISCAL YEAR 1966. THAT PROTEST WAS CONSIDERED IN OUR DECISION B-157145 DATED MAY 3, 1966.

THE NATURE AND HISTORY OF THIS PROCUREMENT WERE SET FORTH IN OUR EARLIER DECISION AND THEREFORE NEED NOT BE RESTATED IN DETAIL HERE. FOR THE PURPOSES OF THIS DECISION, IT IS SUFFICIENT TO NOTE THAT, FOR POLICY REASONS, COAL FOR USE BY THE ARMY IN EUROPE HAS BEEN PROCURED SINCE 1962 IN EUROPE FROM EUROPEAN PRIME CONTRACTORS, WHO ARE REQUIRED BY THE TERMS OF THE ANNUAL RFPS TO SUPPLY ONLY AMERICAN COAL PROCURED FROM AMERICAN EXPORTERS, WHO IN TURN BUY FROM AMERICAN MINES. SINCE THE BEGINNING OF THIS PROCUREMENT IN 1962, THE ANTHRACITE EXPORT ASSOCIATION (AEA), WHICH IS COMPOSED OF MEMBERS OF THE "BIG 6" AMERICAN MINES, AND THE ASSOCIATION'S COMMON EXPORT COMPANY, FORESTON COAL COMPANY (FORESTON/--ALL OF WHOM ARE POTENTIAL FIRST OR SECOND TIER SUBCONTRACTORS TO THE PRIME OFFEROR--HAVE JOINED TOGETHER TO FIX PRICES AND ALLOCATE SHARES OF COAL TO BE SUPPLIED THROUGH FORESTON UNDER THE AUTHORITY OF THE WEBB-POMERENE ACT, 15 U.S.C. SECTIONS 61 65. THIS STATUTE PROVIDES IMMUNITY FROM THE ANTITRUST STATUTES IN THE CASE OF ASSOCIATIONS ENTERED INTO FOR THE SOLE PURPOSE OF ENGAGING IN EXPORT TRADE. AND, IN THIS REGARD, WE NOTE THAT A SUIT HAS BEEN FILED BY THE DEPARTMENT OF JUSTICE AGAINST AEA IN NOVEMBER 1965, ALLEGING THAT THE PRICE FIXING AND COAL ALLOCATION PRACTICES ENGAGED IN BY AEA ARE NOT PROTECTED BY THE WEBB-POMERENE ACT AND THAT THEREFORE SUCH PRACTICES ARE PROHIBITED BY THE ANTITRUST LAWS.

WE STATED IN OUR EARLIER DECISION ON THE 1966 FISCAL YEAR PROCUREMENT THAT: "* * * IN BID PROTEST CASES OUR OFFICE IS PRIMARILY CONCERNED WITH DETERMINING WHETHER THE AWARD OF A GOVERNMENT CONTRACT WILL BE, OR HAS BEEN, MADE IN ACCORDANCE WITH THE REQUIREMENTS OF APPLICABLE PROCUREMENT LAWS AND REGULATIONS. OUR OFFICE IS NOT DIRECTLY CONCERNED WITH ENFORCEMENT OF THE ANTITRUST LAWS, AND ANY QUESTION ARISING WITH REGARD TO VIOLATION OF SUCH LAWS IS PROPERLY FOR CONSIDERATION BY THE DEPARTMENT OF JUSTICE.'

THE DECISION CONCLUDED THAT THERE WAS NO STATUTORY OR REGULATORY PROHIBITION AGAINST THE AWARD OF GOVERNMENT CONTRACTS TO FIRMS WHICH HAVE BEEN CHARGED WITH, BUT NOT CONVICTED OF, VIOLATIONS OF THE ANTITRUST LAWS.

THE CURRENT PROTEST DOES NOT CHALLENGE THE VALIDITY OF THIS PROPOSITION. RATHER, IT IS NOW CONTENDED THAT, IRRESPECTIVE OF ANY ANTITRUST VIOLATIONS, THE PRICE FIXING AND COAL ALLOCATION PRACTICES OF AEA VIOLATE THE MANDATE IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-102 (C) WHICH REQUIRES THAT NEGOTIATED PROCUREMENTS BE ON A COMPETITIVE BASIS "TO THE MAXIMUM PRACTICAL EXTENT," AND THAT THE PROPRIETY OF THESE PRACTICES THEREFORE IS COGNIZABLE BY OUR OFFICE. ACCORDINGLY, THE INDEPENDENT MINERS HAVE REQUESTED THAT THE RFP BE APPROPRIATELY AMENDED TO ASSURE ADEQUATE COMPETITION. WE ARE ADVISED THAT AWARD OF A CONTRACT UNDER THE INSTANT RFP WAS MADE ON JULY 7, 1967.

THE PROVISIONS OF THE FISCAL YEAR 1968 RFP WHICH ARE PERTINENT TO OUR CONSIDERATION OF THE PROTEST ARE SET OUT BELOW: "SP-8 CERTIFICATE OF INDEPENDENT PRICE DETERMINATION

"1. EACH PRIME OFFEROR SHALL REQUIRE ALL TIERS OF SALES AGENTS AND PROSPECTIVE US SUPPLIERS OF PREPARED COAL HEREUNDER TO SUBMIT THE FOLLOWING CERTIFICATE, WHICH THE PRIME OFFEROR MUST SUBMIT TO THE CONTRACTING OFFICER WITH HIS OFFER:

"/A) BY SUBMISSION OF THIS PROPOSAL, I CERTIFY, AND IN THE CASE OF A JOINT PROPOSAL, EACH PARTY THERETO CERTIFIES AS TO ITS OWN ORGANIZATION, THAT IN CONNECTION WITH THIS PROCUREMENT:

"/1) THE PRICES IN THIS PROPOSAL HAVE BEEN ARRIVED AT INDEPENDENTLY, WITHOUT CONSULTATION, COMMUNICATION, OR AGREEMENT, FOR THE PURPOSE OF RESTRICTING COMPETITION, AS TO ANY MATTER RELATING TO SUCH PRICES WITH ANY OTHER OFFEROR OR WITH ANY COMPETITOR;

"/2) UNLESS OTHERWISE REQUIRED BY LAW, THE PRICES WHICH HAVE BEEN QUOTED IN THIS PROPOSAL HAVE NOT BEEN KNOWINGLY DISCLOSED BY THE OFFEROR AND WILL NOT KNOWINGLY BE DISCLOSED BY THE OFFEROR DIRECTLY OR INDIRECTLY TO ANY OTHER OFFEROR OR COMPETITOR AT THE SAME SUBCONTRACT TIER; AND

"/3) NO ATTEMPT HAS BEEN MADE OR WILL BE MADE BY THE OFFEROR SIGNING THIS CERTIFICATE TO INDUCE ANY OTHER PERSON OR FIRM TO SUBMIT OR NOT TO SUBMIT A PROPOSAL FOR THE PURPOSE OF RESTRICTING COMPETITION.

"/B) EACH PERSON SIGNING THIS PROPOSAL CERTIFIES THAT:

"/1) HE IS THE PERSON IN THE OFFEROR'S ORGANIZATION RESPONSIBLE WITHIN THAT ORGANIZATION FOR THE DECISION AS TO THE PRICES BEING OFFERED HEREIN AND THAT HE HAS NOT PARTICIPATED, AND WILL NOT PARTICIPATE, IN ANY ACTION CONTRARY TO (A) (1) THROUGH (A) (3) ABOVE; OR

"/2) (I) HE IS NOT THE PERSON IN THE OFFEROR'S ORGANIZATION RESPONSIBLE WITHIN THAT ORGANIZATION FOR THE DECISION AS TO THE PRICES BEING OFFERED HEREIN, BUT THAT HE HAS BEEN AUTHORIZED IN WRITING TO ACT AS AGENT FOR THE PERSONS RESPONSIBLE FOR SUCH DECISION IN CERTIFYING THAT SUCH PERSONS HAVE NOT PARTICIPATED, AND WILL NOT PARTICIPATE, IN ANY ACTION CONTRARY TO (A) (1) THROUGH (A) (3) ABOVE, AND AS THEIR AGENT DOES HEREBY SO CERTIFY; AND

"/II) HE HAS NOT PARTICIPATED, AND WILL NOT PARTICIPATE, IN ANY ACTION CONTRARY TO (A) (1) THROUGH (A) (3) ABOVE.

SIGNED--------

"2.A PROPOSAL WILL NOT BE CONSIDERED FOR AWARD WHERE (B) ABOVE HAS BEEN DELETED OR MODIFIED. WHERE (A) (1), (A) (2), OR (A) (3) OF THE CERTIFICATE HAS BEEN DELETED OR MODIFIED, THE PROPOSAL WILL NOT BE CONSIDERED FOR AWARD UNLESS THE OFFEROR, WHO IS REQUIRED TO SIGN THE CERTIFICATE, FURNISHED WITH HIS PROPOSAL A SIGNED STATEMENT WHICH SETS FORTH IN DETAIL THE CIRCUMSTANCES OF THE DISCLOSURE. WHERE ANY TIER SUBCONTRACTOR HAS DELETED OR MODIFIED (A) (1), (A) (2), OR (A) (3) OF THE CERTIFICATE, THE PRIME OFFEROR WILL SUBMIT THE CERTIFICATE TO THE CONTRACTING OFFICER AS SOON AS PRACTICABLE AFTER RECEIPT FROM THE PROSPECTIVE SUBCONTRACTOR. THE CONTRACTING OFFICER WILL THEN FORWARD THE CERTIFICATE TO THE ASSISTANT SECRETARY OF THE ARMY (I AND L) OR HIS DESIGNEE, WHO WILL DETERMINE WHETHER (I) TO ACCEPT THE PROPOSAL AS BEING IN THE BEST INTEREST OF THE GOVERNMENT, OR (II) TO REJECT THE PROPOSAL IF HE DETERMINES THAT THE DELETION OR MODIFICATION IN THE CERTIFICATE WAS MADE BECAUSE OF ACTIVITIES CONSTITUTING UNLAWFUL RESTRICTION OF COMPETITION. "SP-21 COMPETITION IN SUBCONTRACTING

A. ALL OFFERORS SHALL SELECT SUBCONTRACTORS (INCLUDING SUPPLIERS OF PREPARED COAL) ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICAL EXTENT CONSISTENT WITH THE OBJECTIVES AND REQUIREMENTS OF THE PROCUREMENT. AS A MINIMUM, THE PRIME OFFEROR SHALL SOLICIT ALL KNOWN RESPONSIBLE US COAL EXPORT FIRMS AND SALES AGENCIES INTERESTED IN PARTICIPATING IN THIS PROCUREMENT, AND SHALL REQUIRE SUCH EXPORT FIRMS AND SALES AGENCIES TO SOLICIT THE MAXIMUM NUMBER OF RESPONSIBLE SUPPLIERS OF PREPARED COAL CONSISTENT WITH THE ORGANIZATIONAL STRUCTURE OF THE EXPORT FIRM OR SALES AGENCY. THIS REQUIREMENT IS NOT INTENDED TO REQUIRE OR ENCOURAGE ANY FIRM TO SOLICIT OR INTERFERE WITH THE BUSINESS RELATIONSHIPS OF ANY COMPETING ORGANIZATION WHICH HAS ESTABLISHED LEGAL AND PROPER FRANCHISE ARRANGEMENTS, OR ANY OTHER RECOGNIZED EXCLUSIVE AGENCY ARRANGEMENTS, WITH ITS CLIENTS OR MEMBERS. WHEN A SOLICITATION IS ISSUED AND THE INDIVIDUAL OR FIRM TO WHICH IT IS ISSUED REFUSES TO GIVE A QUOTATION, THE FIRM ISSUING THE SOLICITATION SHALL MAKE A RECORD OF THE SOLICITATION, INCLUDING THE DATE, THE FIRM SOLICITED, AND THE GROUNDS GIVEN (IF ANY) FOR THE REFUSAL TO GIVE A QUOTATION. THIS RECORD SHALL THEN BE TRANSMITTED TO EACH SUCCESSIVELY HIGHER TIER OF PROSPECTIVE SUBCONTRACTORS UP TO THE PRIME OFFEROR, WHO SHALL THEN PROVIDE SUCH RECORD TO THE CONTRACTING OFFICER.

"B. EACH PRIME OFFEROR AGREES TO INSERT THE ABOVE SUBPARAGRAPH A IN ALL OF HIS SOLICITATION, AND TO REQUIRE EACH TIER OF PROSPECTIVE SUBCONTRACTORS TO INSERT THE SAME PROVISION IN THEIR SOLICITATIONS. "NOTE: A LIST OF KNOWN US COAL EXPORT FIRMS AND SALES AGENCIES IS ATTACHED AS APPENDIX A, DATED MARCH 67, TO THE REQUEST FOR PROPOSALS. THE LIST FURNISHED IS NOT TO BE CONSIDERED AS LIMITING THE OFFEROR TO THE FIRMS APPEARING THEREON, NOR DOES THE FURNISHING OF A LIST CONSTITUTE AN APPROVAL OF THE SOURCES AS SUBCONTRACTORS. IF OFFERORS DO NOT SOLICIT ALL FIRMS ON THE LIST FURNISHED, REASONS FOR NOT DOING SO WILL BE FURNISHED THE CONTRACTING OFFICER IN WRITING WHEN SUBMITTING THEIR PROPOSALS. OFFERORS NOT INCLUDING REASONS FOR NON-SOLICITATION WILL NOT BE CONSIDERED FOR AWARD. "SP-25 SUBCONTRACTING-ALL TIERS "EXCEPT AS OTHERWISE PROVIDED IN THE CONTRACT, THE CONTRACTOR SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE CONTRACTING OFFICER, PLACE ANY SUBCONTRACT HEREUNDER WHICH AMOUNTS TO $100,000, OR ITS EQUIVALENT IN LOCAL CURENCY, OR MORE, OR WHICH, TOGETHER WITH CURRENT SUBCONTRACTS WITH THE SAME SUBCONTRACTOR, WILL AGGREGATE $100,000, OR ITS EQUIVALENT IN LOCAL CURRENCY, OR MORE; NOR SHALL THE CONTRACTOR OR ANY SUBCONTRACTOR PERMIT LOWER TIER SUBCONTRACTORS TO PLACE SUBCONTRACTS OR PURCHASE ORDER HEREUNDER UNLESS THE LOWER TIER SUBCONTRACTORS AGREE TO OBTAIN THE PRIOR WRITTEN CONSENT OF THE CONTRACTING OFFICER FOR THE PLACEMENT OF SUCH SUBCONTRACTS OR PURCHASE ORDERS WHICH AMOUNT TO $100,000, OR ITS EQUIVALENT IN LOCAL CURRENCY, OR MORE, OR WHICH WITH CURRENT SUBCONTRACTS WITH THE SAME SUBCONTRACTOR WILL AGGREGATE $100,000, OR ITS EQUIVALENT IN LOCAL CURRENCY, OR MORE. SUBCONTRACTS REQUIRING SUBMISSION TO THE CONTRACTING OFFICER FOR APPROVAL PURSUANT TO THE ABOVE CLAUSE WILL BE MAILED OR OTHERWISE FURNISHED THE CONTRACTING OFFICER SO AS TO REACH HIM NOT LATER THAN 30 DAYS AFTER DATE OF AWARD OF PRIME CONTRACT.'

THE PROTESTANTS CONTEND SPECIFICALLY THAT THE COMPETITIVE NEGOTIATION CONTEMPLATED BY ASPR 3-102 (C) IS FRUSTRATED BY THE INCLUSION OF CLAUSES SP-8 AND 21, QUOTED ABOVE, AND BY CLAUSE SP-3, WHICH PERMITS AN "ALL OR NONE" QUANTITY DISCOUNT. IT IS ALSO CONTENDED THAT UNDULY RESTRICTIVE SPECIFICATIONS WITH REGARD TO ASH AND FUSION TEMPERATURES VIOLATE ASPR 1- 1801 (A) WHICH REQUIRES THAT SPECIFICATIONS STATE ONLY THE MINIMUM NEEDS OF THE GOVERNMENT. THE PROTESTANTS POINT OUT THAT OUR MAY 3, 1966, DECISION CONSIDERED THIS POINT AND CONCLUDED THAT ADEQUATE INFORMATION FOR THE DRAFTING OF SPECIFICATIONS DID NOT EXIST AND THAT TESTS SHOULD BE PERFORMED IN ORDER TO ASSURE THAT THE ARMY SPECIFICATIONS STATED ONLY THE MINIMUM NEEDS OF THE GOVERNMENT. THE PROTESTANTS FURTHER POINT OUT THAT TO DATE THE TESTS HAVE NOT BEEN PERFORMED, EVEN THOUGH ONE PROCUREMENT HAS BEEN EFFECTED AND A SECOND FISCAL YEAR PROCUREMENT IS IN PROCESS. WE ARE THEREFORE REQUESTED TO ,DETERMINE THE ASPR 1-1201 (A) ISSUE ON THE FAIRLY SUBSTANTIAL RECORD BEFORE YOU.'

PARAGRAPH SP-8 REQUIRES THAT ALL TIERS OF SUBCONTRACTORS SUBMIT A CERTIFICATE OF INDEPENDENT PRICE DETERMINATION, AND, IF PORTIONS OF THE CERTIFICATE ARE DELETED OR MODIFIED, TO SUBMIT A STATEMENT DETAILING ANY DISCLOSURE OF PRICE INFORMATION. IN CASES WHERE SUCH STATEMENTS ARE SUBMITTED IN LIEU OF THE COMPLETED CERTIFICATE, THE ASSISTANT SECRETARY OF THE ARMY (INSTALLATIONS AND LOGISTICS) IS REQUIRED TO REJECT THE PROPOSAL IF HE DETERMINES THAT THE DELETION OR MODIFICATION WAS MADE "BECAUSE OF ACTIVITIES CONSTITUTING UNLAWFUL RESTRICTION OF COMPETITION.' THE PROTESTANTS MAINTAIN, AND WE AGREE, THAT THE INSERTION OF THE WORD "UNLAWFUL" IN THIS CLAUSE RENDERS IT INEFFECTIVE IN THE CASE OF PRICE DISCLOSURES BY AEA SO LONG AS IT CAN CLAIM ANTITRUST EXEMPTION UNDER THE WEBB-POMERENE ACT. THE PROTESTANTS ADVISE THAT THE AGENCY FOR INTERNATIONAL DEVELOPMENT (AID) HAS DEVELOPED A CERTIFICATE OF INDEPENDENT PRICE DETERMINATION WHICH SPECIFICALLY PRECLUDES PRICE DISCLOSURE BY A S- CALLED "WEBB-POMERENE ASSOCIATION" AND THEY URGE THAT THE ARMY IS REQUIRED BY ASPR 3-102 (C) TO INSERT A SIMILAR CERTIFICATE IN THE CURRENT RFP TO ASSURE ADEQUATE AND EFFECTIVE PRICE COMPETITION.

THE ABOVE-QUOTED CERTIFICATE OF INDEPENDENT PRICE DETERMINATION WAS INCLUDED IN THE SOLICITATIONS FOR FISCAL YEARS 1967 AND 1968. IN RESPONSE THERETO, THE MEMBERS OF AEA SUBMITTED STATEMENTS WHEREIN THEY ADMITTED PRICE FIXING AND ALLOCATION PRACTICES UNDER THE WEBB-POMERANS EXEMPTION. A REPRESENTATIVE SAMPLE OF THE STATEMENTS SUBMITTED IS SET OUT BELOW: "THE UNDERSIGNED IS A MEMBER OF THE UNINCORPORATED ANTHRACITE EXPORT ASSOCIATION, WHICH WAS DULY ORGANIZED IN 1952 FOR THE SOLE PURPOSE OF ENGAGING IN EXPORT TRADE, AS PROVIDED IN THE EXPORT TRADE ACT (TITLE 15 U.S. CODE, 862), AND WHICH IS ACTUALLY ENGAGED SOLELY IN SUCH EXPORT TRADE. THE ASSOCIATION HAS DULY FILED WITH THE FEDERAL TRADE COMMISSION THE ANNUAL STATEMENTS REQUIRED BY LAW AND HAS NOT FAILED TO FURNISH TO THAT COMMISSION ANY REQUIRED INFORMATION AS TO ITS ORGANIZATION, BUSINESS, CONDUCT, PRACTICES OR OTHER MATTERS.

"IN OFFERING ANTHRACITE COAL IN CONNECTION WITH THE U.S. ARMY'S REQUEST FOR PROPOSALS DAJA37-67-R-0248, THE UNDERSIGNED HAS BEEN AND IS ACTING AS A MEMBER OF SUCH ASSOCIATION, IN CONJUNCTION WITH OTHER SUCH MEMBERS. AGREEMENTS MADE AND ACTS DONE BY THIS UNINCORPORATED ASSOCIATION, I.E. ITS MEMBERS, IN THE COURSE OF EXPORT TRADE ARE SPECIFICALLY EXEMPTED BY THE AFORESAID FEDERAL STATUTE FROM THE FEDERAL ANTITRUST LAWS, WITHIN CERTAIN STATED LIMITATIONS. OBSERVING THOSE LIMITATIONS, MEMBERS OF THE ASSOCIATION, INCLUDING THE UNDERSIGNED, ACTING SOLELY AS SUCH MEMBERS, HAVE ENTERED INTO CONSULTATIONS, DISCLOSURES AND AGREEMENTS BETWEEN THEMSELVES IN RESPECT OF QUANTITIES, PRICES AND RELATED MATTERS IN CONNECTION WITH THE AFORESAID PROPOSED EXPORT TRANSACTION. SOLELY BECAUSE OF SUCH ACTIONS, TAKEN WITHIN THE FRAMEWORK OF THE ASSOCIATION AND BELIEVED TO BE PERMITTED BY LAW, THE UNDERSIGNED HAS MODIFIED (A) (1), (A) (2) AND (A) (3) OF THE CERTIFICATE OF INDEPENDENT PRICE DETERMINATION BEING FURNISHED ON ITS BEHALF IN CONNECTION WITH THE AFORESAID ARMY PROCUREMENT.'

THE MAY 17, 1967, LETTER FROM THE ACTING DIRECTOR OF PROCUREMENT POLICY AND REVIEW STATES THAT THE "CERTIFICATE OF INDEPENDENT PRICE DETERMINATION" CLAUSE CONTAINED IN ASPR 1-115 WAS ADOPTED, AS ABOVE QUOTED, FOR USE IN THE EUROPEAN COAL PROCUREMENT, BUT THAT IT WAS DETERMINED THAT THE FACTUAL ISSUE AS TO WHETHER OR NOT WEBB-POMERENE SUBCONTRACTOR SOURCES ACTUALLY RESTRICTED COMPETITION WAS "ONE OF THE MAJOR ELEMENTS OF THE LITIGATION IN THE DISTRICT COURT OF ENNSYLVANIA" AND THAT THE CLAUSE SHOULD THEREFORE BE WORDED SO AS TO ALLOW CONSIDERATION OF PROPOSALS FROM SUBCONTRACTORS CLAIMING WEBB-POMERENE IMMUNITY.

OUR UNDERSTANDING OF THE WEBB-POMERENE ISSUE IN LITIGATION IS THAT THE QUESTION IS NOT WHETHER WEBB-POMERENE ACTIVITY RESTRICTS COMPETITION, BUT RATHER, WHETHER THE RESTRICTION OF COMPETITION RESULTING FROM THE ADMITTED PRICE DISCLOSURE AND COAL ALLOCATION PRACTICES OF THE "BIG 6" IS IN FACT PROTECTED AND COUNTENANCED BY THE WEBB-POMERENE EXEMPTION. IT MAY BE FAIRLY STATED THAT DISCLOSURE OF PRICES AND ALLOCATIONS AMONG COMPETITORS CAN HAVE NO OTHER RESULT BUT TO RESTRICT COMPETITION. SUCH DISCLOSURES OR ALLOCATIONS ARE ADMITTED IN THE STATEMENTS ACCOMPANYING THE INDEPENDENT PRICE CERTIFICATES SUBMITTED BY THE "BIG 6.' THE INSERTION OF THE WORD "UNLAWFUL" IN THE CURRENT CERTIFICATE OF INDEPENDENT PRICE DETERMINATION APPEARS TO US TO BE A TACIT ADMISSION THAT WEBB-POMERENE ACTIVITY DOES, IN FACT, HAVE THE EFFECT OF RESTRICTING COMPETITION.

WITH REGARD TO THE PENNSYLVANIA LITIGATION, WE HAVE BEEN INFORMALLY ADVISED BY DEPARTMENT OF JUSTICE REPRESENTATIVES THAT A STIPULATION OF FACTS HAS BEEN FILED WITH THE COURT WHEREIN IT IS STIPULATED THAT THE LITIGATION IS LIMITED TO THE SINGLE QUESTION AS TO WHETHER THE WEBB POMERENE ACT IMMUNIZES THE PRICE FIXING AND ALLOCATION PRACTICES OF AEA FROM THE APPLICATION OF SECTION 1 OF THE SHERMAN ACT. WE ALSO HAVE BEEN INFORMALLY ADVISED BY DEPARTMENT OF JUSTICE REPRESENTATIVES THAT NO CONFLICT WOULD EXIST IF OUR OFFICE EXERCISED ITS JURISDICTION TO DETERMINE WHETHER THESE PRACTICES CONSTITUTED IMPROPER RESTRICTIONS ON COMPETITION FOR THE AWARD OF A GOVERNMENT CONTRACT.

THE QUESTION FOR DECISION, THEREFORE, IS THE ONE RAISED BY THE PROTESTANTS, I.E., WHETHER THE PRICE FIXING AND ALLOCATION PRACTICES OF AEA ARE PATENTLY INCONSISTENT WITH AND IN DEROGATION OF THE REQUIREMENT OF ASPR 3-102 (C) THAT NEGOTIATED PROCUREMENTS BE ON A COMPETITIVE BASIS "TO THE MAXIMUM PRACTICAL EXTENT.'

GENERALLY SPEAKING, THE PROVISIONS OF ASPR AND THE MILITARY PROCUREMENT STATUTE RELATE TO DEALINGS BETWEEN THE GOVERNMENT AND BIDDERS OR OFFERORS AND/OR ITS PRIME CONTRACTORS AND, THEREFORE, DO NOT APPLY TO DEALINGS BETWEEN SUCH PRIMARY PARTIES AND THEIR SUBCONTRACTORS. B-150103, APRIL 23, 1963; 41 COMP. GEN. 424. HOWEVER, THOSE CASES RECOGNIZE THAT IN THE CASE OF PRIME CONTRACTS PROVIDING FOR COST REIMBURSEMENT WHERE SUBCONTRACTING COSTS ARE BORNE BY THE GOVERNMENT, SUBCONTRACTS SHOULD NOT BE APPROVED WHERE THEIR EXECUTION WOULD BE PREJUDICIAL TO THE INTERESTS OF THE GOVERNMENT. WHILE THE CONTRACT IN THE INSTANT CASE IS A FIXED-PRICE CONTRACT, THE RATIONALS APPLIED IN COST-TYPE CONTRACTS IS APPLICABLE HERE BECAUSE, IN THIS PARTICULAR CASE, THE PRICES QUOTED TO THE PRIME CONTRACTOR BY THE AMERICAN COAL EXPORTER BEAR A DIRECT AND SUBSTANTIAL RELATION TO THE PRICES QUOTED TO THE GOVERNMENT BY THE OFFERORS AND ARE, THEREFORE, ULTIMATELY BORNE BY THE GOVERNMENT. THIS IS SO BECAUSE THE FIXED PRICE TO THE GOVERNMENT IS COMPOSED BASICALLY OF THE COST OF COAL TO THE PRIME CONTRACTOR, THE COST OF TRANSPORTATION, AND THE PRIME CONTRACTOR'S HANDLING COSTS. THE COST OF OCEAN TRANSPORTATION, AS OPPOSED TO THE COST OF INLAND TRANSPORTATION AFTER ACCEPTANCE IN EUROPE, CAN FAIRLY BE EXCLUDED FROM ANY CONSIDERATION OF RELATIVE COST FACTORS BECAUSE IT WILL BE THE SAME AT ANY GIVEN TIME FOR ALL PROSPECTIVE CONTRACTORS. THE COST OF INLAND TRANSPORTATION AND THE INCIDENTAL HANDLING COSTS COMPRISE BUT A SMALL PERCENTAGE OF THE TOTAL COST, WITH THE RESULT THAT THE PRICE OF COAL MAY BE SAID TO DIRECTLY DETERMINE THE PRICE QUOTED BY THE PROSPECTIVE PRIME CONTRACTOR. FOR EXAMPLE, IN THE 1966 PROCUREMENT, THE AVERAGE PRICE PER METRIC TON, EXCLUSIVE OF OCEAN TRANSPORTATION, PAID TO THE PRIME CONTRACTOR BY THE GOVERNMENT WAS APPROXIMATELY $23.00 WHILE THE AVERAGE PRICE PER METRIC TON PAID TO FORESTON BY THE PRIME CONTRACTOR WAS APPROXIMATELY $18.00 OR ROUGHLY 78 PERCENT OF THE TOTAL PRICE. SIMILARLY, IN THE 1964 PROCUREMENT THE PERCENTAGE WAS APPROXIMATELY 75 PERCENT, AND IN 1965 IT WAS APPROXIMATELY 77 PERCENT.

ADDITIONALLY, WHILE UNDER THE CONTRACT THE GOVERNMENT DOES NOT TAKE TITLE TO THE COAL UNTIL IT IS INSPECTED AND ACCEPTED IN EUROPE, THE CONTROL EXERCISED BY THE ARMY OVER EVERY ASPECT OF THE PROCUREMENT, FROM THE MINE TO ULTIMATE DESTINATION, POINTS UP THE OVERRIDING IMPORTANCE TO THE GOVERNMENT OF THE "SUBCONTRACT" COST OF COAL TO SUCH AN EXTENT THAT THE USUAL LINES OF DISTINCTION BETWEEN PRIME AND SUBCONTRACT TIERS BECOME RELITIVELY UNIMPORTANT. MANY OF THE CONTROLS EXERCISED BY THE ARMY ARE THOSE WHICH NORMALLY WOULD BE CONSIDERED TO BE INDICATIONS OF OWNERSHIP. FOR EXAMPLE, (1) OCEAN TRANSPORTATION OF COAL PROCURED UNDER THE INSTANT CONTRACT, AS WELL AS UNDER SEVERAL PRECEDING CONTRACTS, IS ACCOMPLISHED BY THE MILITARY SEA TRANSPORTATION SERVICE (MSTS), ALTHOUGH ASPR 1-1404 SPECIFICALLY RESERVES THE USE OF MSTS TO THE TRANSPORTATION OF MATERIALS AND SUPPLIES ALREADY OWNED BY THE GOVERNMENT; (2) NO SHIPPER'S EXPORT DECLARATION FORMS, WHICH ARE GENERALLY REQUIRED OF EXPORTERS BY 15 CFR 30.1 FOR USE BY THE DEPARTMENT OF COMMERCE, WERE FILED, ALTHOUGH THE ONLY APPLICABLE EXEMPTION TO THE FILING REQUIREMENT APPLIES TO COMMODITIES CONSIGNED TO THE UNITED STATES ARMED FORCES FOR EXCLUSIVE USE AS OPPOSED TO COMMODITIES NOT SO CONSIGNED BUT DESTINED FOR THE ULTIMATE USE OF THE ARMED FORCES; AND (3) THE PAYMENT OF CUSTOM DUTIES AND TAXES WAS EXEMPTED UNDER A PROVISION OF THE STATUS OF FORCES AGREEMENTS WHICH PERMITS DUTY FREE IMPORT OF PROVISIONS AND SUPPLIES TO BE USED BY UNITED STATES FORCES RATHER THAN UNDER THE ANNUAL DUTY FREE ALLOWANCE FOR U.S. SOURCE COAL WHICH WOULD BE FOR APPLICATION ABSENT THE GOVERNMENT CONTROL OF THE COAL. FINALLY, THE GOVERNMENT APPROVED THE SOURCES OF THE MINED COAL, PRESCRIBED STRINGANT SPECIFICATIONS FOR THAT COAL, AND RESERVED THE RIGHT TO INSPECT THE COAL DURING ITS TRANSPORTATION PHASE.

WE THINK THAT THE ABOVE ASPECTS OF THIS PROCUREMENT REASONABLY ESTABLISH THAT THE NOMINAL PRIME AND FIRST TIER SUBCONTRACTORS ARE, IN REALITY, MERE CONDUITS PROVIDING COAL DISTRIBUTION SERVICES TO THE GOVERNMENT. IN VIEW OF THE SPECIAL NATURE OF THIS PROCUREMENT, IT IS OUR OPINION THAT THE STRICT APPLICATION OF THE GENERAL RULE THAT THE PROVISIONS OF ASPR AND THE PROCUREMENT STATUTE DO NOT APPLY TO SUBCONTRACT MATTERS WOULD BE INAPPROPRIATE IN THIS SITUATION.

THE UNDERLYING POLICY OF THE MILITARY PROCUREMENT STATUTE AND ASPR AS EXPRESSED IN ASPR 1-300.1, 3-102 (C), AND 3-802.2 IS THAT REASONABLE PRICES MAY BE OBTAINED ONLY WHEN THERE IS SECURED THE MAXIMUM COMPETITION POSSIBLE UNDER THE CIRCUMSTANCES OF THE PARTICULAR PROCUREMENT. PARTICULAR, ASPR 3-102 (C) PROVIDES, IN PERTINENT PART:

"NEGOTIATED PROCUREMENTS SHALL BE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICAL EXTENT. WHEN A PROPOSED PROCUREMENT APPEARS TO BE NECESSARILY NONCOMPETITIVE, THE PURCHASING ACTIVITY IS RESPONSIBLE NOT ONLY FOR ASSURING THAT COMPETITIVE PROCUREMENT IS NOT FEASIBLE, BUT ALSO FOR ACTING WHENEVER POSSIBLE TO AVOID THE NEED FOR SUBSEQUENT NONCOMPETITIVE PROCUREMENTS. THIS ACTION SHOULD INCLUDE BOTH EXAMINATION OF THE REASONS FOR THE PROCUREMENT BEING NONCOMPETITIVE AND STEPS TO FOSTER COMPETITIVE CONDITIONS FOR SUBSEQUENT PROCUREMENTS, * * *"

CLEARLY, AD DISCUSSED ABOVE, THERE CAN BE NO COMPETITION WHERE PRICES ARE DISCLOSED AND ALLOCATIONS ARE MADE BETWEEN COMPETITORS. THE "BIG 6" PRODUCERS AND THEIR EXPORT COMPANY, FORESTON, ARE THE ONLY OFFERORS WHO ARE CAPABLE OF OFFERING THE ENTIRE QUANTITY REQUESTED BY THE RFP. IN OUR OPINION, THE INESCAPABLE CONCLUSION TO BE DRAWN FROM THIS SITUATION IS THAT THE GOVERNMENT IS DEPRIVED OF A COMPETITIVE PRICE AT THE PRIME CONTRACT LEVEL BECAUSE OF THE NONCOMPETITIVE ACTIVITIES OF THE PROSPECTIVE SUBCONTRACTORS. THE STATED PURPOSE OF THE ARMY IN INSERTING THE CERTIFICATE OF INDEPENDENT PRICE DETERMINATION CLAUSE AS WELL AS THE COMPETITION IN SUBCONTRACTING CLAUSE IN THE LAST TWO ANNUAL RFPS WAS "TO OBTAIN MAXIMUM COMPETITION.' BUT NO ,COMPETITION" HAS RESULTED IN VIEW OF THE WEBB POMERENE ACTIVITY WHICH HAS BEEN PERMITTED BY THE TERMS OF SUCH CLAUSES. IT IS OUR OPINION THAT THE AWARD OF COAL SUBCONTRACTS TO PRODUCERS ENGAGED IN WEBB-POMERENE ACTIVITY WAS, AND IS, PREJUDICIAL TO THE INTERESTS OF THE GOVERNMENT BECAUSE OF THE NONCOMPETITIVE NATURE OF THAT PERMISSIVE ACTIVITY. THE ARMED SERVICES PROCUREMENT REGULATION-- WHICH HAS BEEN ACCORDED THE FORCE AND EFFECT OF LAW- REQUIRES "MAXIMUM PRICE COMPETITION.' CLEARLY, THIS REQUIREMENT IS NOT DEPENDENT UPON OR SUBJECT TO THE ANTITRUST LAWS. HENCE, IT IS OUR VIEW THAT THE ACTION OF THE CONTRACTING OFFICER IN APPROVING SUBCONTRACTS CONTAINING ADMISSIONS OF PRICE FIXING AND ALLOCATION PRACTICES WAS IMPROPER AND RENDERED THE AWARD SUSPECT.

WE CANNOT CONCLUDE, HOWEVER, THAT THE AWARD IN THE INSTANT CASE IS VOID AB INITIO SINCE THE CONTRACTING OFFICER ACTED IN GOOD FAITH IN RELIANCE UPON THE ADVICE AND RECOMMENDATIONS OF AUTHORIZED OFFICIALS OF YOUR DEPARTMENT. ACCORDINGLY, WE CONCLUDE THAT THE RESULTING CONTRACT IS VOIDABLE AT THE OPTION OF THE GOVERNMENT. IN THIS REGARD, WE ARE ADVISED THAT SUBSTANTIAL COSTS HAVE ALREADY BEEN INCURRED IN THE INITIAL STAGES OF THIS CONTRACT; THAT THERE ARE NO SUBSTANTIAL RESERVES OF COAL ON HAND IN EUROPE; AND THAT BECAUSE OF THE COMPLICATED ARRANGEMENTS NECESSARY TO ASSURE TIMELY SHIPMENTS OF COAL TO EUROPEAN BASES, ANY DELAY IN IMPLEMENTING THE INSTANT CONTRACT WOULD SERIOUSLY JEOPARDIZE TIMELY RECEIPT OF COAL FOR USE DURING THE 1967-68 WINTER. IN VIEW OF THESE PRACTICAL CONSIDERATIONS, WE AGREE THAT THE INTERESTS OF THE GOVERNMENT REQUIRE THAT THE AWARD NOT BE DISTURBED. HOWEVER, WE FEEL THAT IT IS IMPERATIVE THAT IMMEDIATE STEPS BE TAKEN TO ASSURE THAT FUTURE COAL PROCUREMENTS OF THIS NATURE ARE ON A FULLY COMPETITIVE BASIS. IT IS OUR OPINION THAT THE CERTIFICATE OF INDEPENDENT PRICE DETERMINATION AND THE COMPETITION IN SUBCONTRACTING CLAUSES SHOULD BE REDRAFTED TO PRECLUDE ANY WEBB-POMERENE ACTIVITY IN CONNECTION WITH SUCH FUTURE COAL PROCUREMENTS.

WITH REGARD TO THE SPECIFICATIONS FOR ASH CONTENT AND FUSION TEMPERATURE, WE AGAIN REQUEST, AS WE DID IN OUR DECISION OF MAY 3, 1966, B-157145, THAT THE TESTS NOW BEING PERFORMED BY THE BUREAU OF MINES TO DETERMINE THE MINIMUM ACCEPTABLE SPECIFICATIONS BE EXPEDITED AND THAT THE TEST RESULTS BE TAKEN INTO CONSIDERATION IN DETERMINING THE GOVERNMENT'S ACTUAL MINIMUM REQUIREMENTS FOR FUTURE ANTHRACITE PROCUREMENTS.

IN THIS REGARD, AND POINTING UP THE COMPELLING NEED FOR EXPEDITION OF THE TESTS, AND AUDIT OF THE HISTORY OF THIS PROCUREMENT RECENTLY COMPLETED BY THE GENERAL ACCOUNTING OFFICE HAS DISCLOSED THAT IN ADDITION TO THE 2,876 METRIC TONS ACCEPTED UNDER THE FISCAL YEAR 1967 CONTRACT WITH AN ASH CONTENT IN EXCESS OF 9.75 PERCENT MENTIONED IN THE MAY 17, 1967, LETTER FROM THE ACTING DIRECTOR OF PROCUREMENT POLICY AND REVIEW, 539,181 METRIC TONS AMOUNTING TO APPROXIMATELY 55 PERCENT OF THE TOTAL TONNAGE RECEIVED WERE ACCEPTED IN FISCAL YEAR 1965 WITH AN ASH CONTENT IN EXCESS OF 9.75 PERCENT. SIMILARLY, 402,249 METRIC TONS AMOUNTING TO APPROXIMATELY 45 PERCENT OF THE TOTAL TONNAGE RECEIVED WERE ACCEPTED IN FISCAL YEAR 1966 WITH AN ASH CONTENT IN EXCESS OF 9.75 PERCENT. IN FACT, THE AUDIT ALSO DISCLOSES THAT PRICE PREMIUMS WERE PAID ON THIS HIGH ASH CONTENT COAL IN SOME INSTANCES BECAUSE THE REV CHARACTERISTICS OF THE COAL WERE SUFFICIENTLY IN EXCESS OF THESE REQUIRED BY THE SPECIFICATIONS TO WARRANT PAYMENT OF A PREMIUM UNDER THE TERMS OF THE CONTRACT. IT SEEMS CLEAR, THEREFORE, THAT RPU CHARACTERISTICS ARE MORE IMPERTENT THAN ASH CONTENT AND THAT COAL CONTAINING ASH IN EXCESS OF 9.75 PERCENT COULD BE SATISFACTORILY USED SO LONG AS IT IS ACCEPTABLE FROM A RPU STANDPOINT. EXPERIENCE IN THIS PROCUREMENT HAS SHOWN THIS TO BE THE CASE, IT IS SUGGESTED THAT SERIOUS CONSIDERATION BE GIVEN TO RELAXING AT LEAST THE ASH CONTENT REQUIREMENT BEFORE THE COMPLETION OF THE BUREAU OF MINES TEST.

ON THE QUESTION OF THE "ALL OR NONE" QUANTITY DISCOUNT, THE PROTESTANTS CONTEND THAT SINCE ONLY ONE OFFEROR CAN QUOTE ON THE ENTIRE COAL REQUIREMENT, AN OFFER OF AN "ALL OR NONE" QUANTITY DISCOUNT RESULTS IN HIGHER RATHER THAN LOWER PRICES TO THE GOVERNMENT BECAUSE ITS ULTIMATE EFFECT "IS TO ELIMINATE EXPETITION IN THE PROCUREMENT, THUS INCREASING THE COST OF THE PROCUREMENT IN THE LONG RUN.' THE PROTESTANTS ALSO CONTEND THAT THE APPLICATION OF AN "ALL OR NONE" DISCOUNT CAN SERVE TO INCREASE THE COST IN AN INDIVIDUAL INSTANCE BECAUSE A DISCOUNT NOT RELATED TO COST ECONOMIES OFFERED BY THE ONLY PRODUCER CAPABLE OF SUPPLYING THE ENTIRE QUANTITY COULD RESULT IN A HIGHER PRICE BEING PAID ON ALL BLOCKS THAN THE PRICE WHICH WOULD BE MADE POSSIBLE BY ACCEPTING A LOWER PRICE OFFERED BY A SMALL PRODUCER ON SOME BLOCKS COUPLED WITH A PARTIAL DISCOUNT FROM THE LARGE PRODUCER ON THE REMAINING BLOCKS. IN SUPPORT OF THIS CONTENTION, THE PROTESTANTS PRESENT A HYPOTHETICAL EXAMPLE SHOWING HOW A LOWER OFFER ON ONLY A PORTION OF THE TOTAL REQUIREMENT CAN BE DEFEATED BY THE APPLICATION OF THE "ALL OR NONE" DISCOUNT. OUR MAY 3, 1966, DECISION STATED IN THIS REGARD:

"WE HAVE HELD THAT UNDER FORMALLY ADVERTISED BIDDING CONDITIONS AN "ALL OR NONE" BID SUBMITTED IN RESPONSE TO INVITATION FOR BIDS FOR DEFINITE QUANTITIES MAY BE CONSIDERED EVEN THOUGH THERE IS NO PROVISION THEREFORE IN THE INVITATION AND THAT AN AWARD OF ALL LOTS TO ONE BIDDER, WHERE NO MORE ADVANTAGEOUS PRICE MAY BE OBTAINED OTHERWISE, IS NOT OBJECTIONABLE. 35 COMP. GEN. 383 AND CASES CITED THEREIN. COMPARE 41 COMP. GEN. 455. HARDLY NEED BE EMPHASIZED THAT, ALL OTHER THINGS BEING EQUAL, IF SUCH RESULTS ARE PERMISSIBLE IN FORMALLY ADVERTISED PROCUREMENTS THEY MAY CERTAINLY BE PERMITTED IN NEGOTIATED PROCUREMENTS.'

WHILE THE HYPOTHETICAL EXAMPLE SHOWS HOW, UNDER THE CONDITIONS STIPULATED, THE APPLICATION OF AN "ALL OR NONE" DISCOUNT COULD COST THE GOVERNMENT MORE MONEY, WE FEEL THAT ANY DETERMINATIONS BY OUR OFFICE OF POSSIBLE SAVINGS TO BE GAINED BY ELIMINATING THE DISCOUNT WOULD, ON THE BASIS OF THE RECORD BEFORE US, BE AT BEST CONJECTURAL. THEREFORE, WE CANNOT CONCLUDE THAT A MORE ADVANTAGEOUS PRICE COULD BE OBTAINED BY ELIMINATION OF THE DISCOUNT. HOWEVER, WE NOTE THAT THE DEPARTMENT OF JUSTICE, IN A LETTER DATED MAY 20, 1966, ADDRESSED TO MAJOR GENERAL JOHN A. GOSHORN, DIRECTOR OF PROCUREMENT, IS ALSO HIGHLY CRITICAL OF THE "ALL OR NONE" DISCOUNT ON THE GROUND THAT ITS NET RESULT IS HIGHER RATHER THAN LOWER PRICES. IN VIEW OF THIS, WE SUGGEST THAT THE PRACTICE OF PERMITTING SUCH A DISCOUNT FROM THE ONLY BIDDER CAPABLE OF SUPPLYING THE ENTIRE COAL REQUIREMENT BE THOROUGHLY REVIEWED, AND IF IT IS DETERMINED THAT SUCH PRACTICE COULD RESULT IN HIGHER PRICES, THE "ALL OR NONE" DISCOUNT SHOULD BE ELIMINATED.

IN ACCORDANCE WITH THE FOREGOING CONSIDERATIONS, WE CONCLUDE THAT FUTURE RFPS SHOULD CONTAIN EFFECTIVE AND MEANINGFUL CERTIFICATES OF INDEPENDENT PRICE DETERMINATION AND COMPETITION IN SUBCONTRACTING CLAUSES. ALSO, CONSIDERATION SHOULD BE GIVEN TO REVISING THE COAL SPECIFICATIONS TO REFLECT WHAT EXPERIENCE HAS APPARENTLY SHOWN TO BE THE MINIMUM NEEDS OF THE GOVERNMENT.