B-150807, SEP. 3, 1963

B-150807, SEP. 3, 1963

TO THE GOLDEN EAGLE REFINING COMPANY, INC:

WE HAVE FURTHER CONSIDERED THE MATTER OF THE PROCUREMENT OF PETROLEUM STORAGE FACILITIES AT PORTLAND, OREGON, AND RICHMOND, CALIFORNIA, WHICH WAS THE SUBJECT OF OUR DECISION OF APRIL 22, 1963, TO YOU DENYING YOUR PROTEST FOR THE REASONS STATED THEREIN. BY LETTER DATED MAY 1, 1963, YOU RAISED ADDITIONAL QUESTIONS CONCERNING THE PROCUREMENTS OF STORAGE FACILITIES, AND ADVISED THAT HAD INFORMATION BEEN FURNISHED WITH THE REQUEST FOR PROPOSALS RELATING TO THE SIGNIFICANT FACTOR OF THE TRANSPORTATION COSTS INVOLVED, THE APPLICATION OF ESTABLISHED RATES TO YOUR PROPOSAL WOULD HAVE RESULTED IN SAVINGS TO THE GOVERNMENT IN EXCESS OF $20,000 DURING FISCAL YEAR 1963.

IN REPORT DATED JUNE 10, 1963, THE DEFENSE SUPPLY AGENCY (DSA) STATES THAT AT THE TIME THE PROPOSALS OF GOLDEN EAGLE AND TIME OIL WERE BEING EVALUATED IN APRIL 1962 FOR THE FISCAL YEAR 1963 PROCUREMENT AT PORTLAND, THE GOVERNMENT BUYER ATTEMPTED TO DETERMINE THE TRANSPORTATION RATES FROM GOLDEN EAGLE'S FACILITY AT VANCOUVER, WASHINGTON, AND TIME OIL'S PORTLAND FACILITY TO PORTLAND INTERNATIONAL AIRPORT AND KINGSLEY FIELD, OREGON. THE BUYER UNDERSTOOD THAT THE RATES APPLICABLE TO TIME OIL WERE IN THE DEFENSE PETROLEUM SUPPLY CENTER (DPSC) FILES BUT THAT NO RATES WERE ON FILE WHICH WOULD HAVE APPLIED TO GOLDEN EAGLE. THE BUYER FURTHER UNDERSTOOD THAT IF THESE RATES HAD BEEN ON FILE THEY WOULD HAVE BEEN HIGHER THAN THE PORTLAND RATES BECAUSE OF DISTANCE AND LOCATION. THEREFORE, THE BUYER COMPARED THE ANNUAL TANKAGE USE CHARGE OF $46,915 FOR TIME OIL AND $51,000 FOR GOLDEN EAGLE, WHICH REPRESENTED A DIFFERENCE OF $4,085 IN FAVOR OF TIME OIL. TO THIS DIFFERENCE WAS ADDED THE AMOUNT OF $7,464 REPRESENTING A REDUCTION IN TIME OIL'S FISCAL YEAR 1962 CONTRACT PRICE, CONTINGENT UPON THE ACCEPTANCE OF TIME OIL'S FISCAL YEAR 1963 PROPOSAL. BASED ON THIS EVALUATION AND THE BUYER'S UNDERSTANDING THAT TRANSPORTATION RATES FROM VANCOUVER, WASHINGTON, WOULD BE GREATER THAN THOSE FROM PORTLAND, OREGON, THE 1963 FISCAL YEAR CONTRACT WAS AWARDED TO TIME OIL.

HOWEVER, IT NOW HAS BEEN DETERMINED BY DSA THAT THIS EVALUATION DID NOT INCLUDE ALL FACTORS FOR CONSIDERATION, SUCH AS THE CHARGES FOR RECEIPT AND SHIPMENT OF PETROLEUM PRODUCTS APPLICABLE TO BOTH PROPOSALS AND A WHARFAGE CHARGE SPECIALLY APPLICABLE TO GOLDEN EAGLE'S PROPOSAL. ALSO, THE BUYER'S UNDERSTANDING CONCERNING TRANSPORTATION RATES WAS INCORRECT SINCE THE RATES THEN APPLICABLE TO BOTH PROPOSALS WERE THE SAME. THE 1963 PROPOSAL THEREFORE WAS RE-EVALUATED WITH THE FOLLOWING RESULT:

TABLE

TIME OIL GOLDEN EAGLE ANNUAL USE CHARGE (85,300 BBLS. REQUIRED)

TIME OIL OFFERED 85,300 BBLS. $46,915.00

GOLDEN EAGLE OFFERED 100,000 BBLS. $51,000.00 PRODUCT ESTIMATED FOR RECEIPT DURING CONTRACT PERIOD: 409,000 BBLS. ADDITIONAL CHARGE FOR PRODUCT RECEIVED IN EXCESS OF OFFEROR'S FREE ALLOWANCE:

TIME OIL: 164,000 BBLS. AT $0.035

PER BBL. 5,740.00

GOLDEN EAGLE: 9,000 BBLS. AT $0.02

PER BBL. 180.00 PRODUCT ESTIMATED FOR SHIPMENT DURING CONTRACT PERIOD: 409,000 BBLS. ADDITIONAL CHARGE FOR PRODUCT SHIPPED IN EXCESS OF OFFEROR'S FREE ALLOWANCE:

TIME OIL: 164,000 BBLS. AT $0.035

PER BBL. 5,740.00

GOLDEN EAGLE: 9,000 BBLS. AT $0.042

PER BBL. 378.00 WHARFAGE CHARGE

TIME OIL NO CHARGE

GOLDEN EAGLE: 409,000 BBLS.

$0.0075 PER BBL. 3,067.50 REDUCTION IN FY 62 CONTRACT PRICE:

TIME OIL: FROM $0.90 PER BBL. PER YEAR

TO $0.55 PER BBL. PER YEAR FOR APRIL,

MAY AND JUNE 1962 (85,300 BBLS.) LESS 7,464.00 --------

TOTAL $50,931.00 $54,625.50

THE DSA STATES THAT IT NOW APPEARS THAT FURTHER NEGOTIATIONS WITH BOTH OFFERORS SHOULD HAVE BEEN CONDUCTED SINCE BOTH PROPOSALS WERE WITHIN COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED (ASPR 3 805.1). AGREE THAT THIS WOULD HAVE BEEN PROPER.

WE ALSO AGREE WITH DSA THAT THE WHARFAGE CHARGE FACTOR PROPERLY SHOULD BE INCLUDED IN THE EVALUATION OF YOUR PROPOSAL SINCE IT WAS A CHARGE FIXED BY LOCAL AUTHORITY AND THEREFORE NOT NEGOTIABLE.

WITH REGARD TO THE FREIGHT RATES THE DSA REPORTS THAT A STUDY REVEALS THAT THE ACTUAL RATES IN EFFECT IN APRIL 1962 WERE CHANGED IN JANUARY-- FEBRUARY 1963, AND THESE RATES, AS CHANGED, ARE THOSE WHICH WERE USED IN EVALUATING THE ORIGINAL PROPOSALS. THE RATES IN EFFECT AT THE TIME OF THE APRIL 1962 EVALUATION WERE THE SAME FOR BOTH FACILITIES. WHILE THE WRONG FREIGHT RATES WERE USED IN THE ORIGINAL EVALUATION IT DOES NOT APPEAR THAT YOU WERE PREJUDICED SINCE AS INDICATED ABOVE THE USE OF THE PROPER RATES DO NOT MAKE YOU THE LOW OFFEROR.

THUS, WHILE IT APPEARS THAT THE EVALUATION OF THE PROPOSALS AS ORIGINALLY MADE MAY HAVE BEEN QUESTIONABLE, INASMUCH AS THE CONTRACT FOR THE FISCAL YEAR 1963 NOW HAS BEEN COMPLETED OUR OFFICE IS PRECLUDED FROM TAKING ANY CORRECTIVE ACTION AT THIS TIME.

ON APRIL 1, 1963, REQUEST FOR PROPOSALS NO. DSA 6-63-N-238 WAS SENT TO 120 PROSPECTIVE OFFERORS FOR THE FURNISHING OF PETROLEUM STORAGE FACILITIES IN THE PORTLAND, OREGON, AREA, FOR THE PERIOD JULY 1, 1963, TO JUNE 30, 1964. THREE PROPOSALS WERE RECEIVED AT THE DUE DATE OF APRIL 26, 1963, AND WERE EVALUATED AS FOLLOWS:

TABLE

TIME OIL GOLDEN EAGLE INLAND EMPIRE ANNUAL USE CHARGE (85,300 BBLS. REQUIRED)

TIME OIL OFFERED 85,300 BBLS. $46,915.08

GOLDEN EAGLE OFFERED 100,000

BBLS. $47,880.00

INLAND EMPIRE OFFERED

110,000 BBLS. $107,400.00 PRODUCT ESTIMATED FOR RECEIPT DURING CONTRACT PERIOD: 437,000 BBLS. ADDITIONAL CHARGE FOR PRODUCT RECEIVED IN EXCESS OF OFFEROR'S FREE ALLOWANCE:

TIME OIL--- NONE ----------

GOLDEN EAGLE--- NONE ----------

INLAND EMPIRE: 107,000 BBLS. 2,140.00 PRODUCT ESTIMATED FOR SHIPMENT DURING CONTRACT PERIOD: 437,000 BBLS. ADDITIONAL CHARGE FOR PRODUCT SHIPPED IN EXCESS OF OFFEROR'S FREE ALLOWANCE:

TIME OIL--- NONE ----------

GOLDEN EAGLE--- NONE ----------

INLAND EMPIRE: 107,000 BBLS.

$0.035 PER BBL. 3,745.00 WHARFAGE CHARGE

TIME OIL--- NONE ----------

GOLDEN EAGLE: 437,000 BBLS.

AT $0.0075 PER BBL. $3,277.50

INLAND EMPIRE: 437,000 BBLS.

AT $0.10 PER TON 5,257.11 TRANSPORTATION OF REMAINING INVENTORY (ESTIMATED AT 25,000 BBLS.) FROM TIME OIL TERMINAL TO OFFEROR'S TERMINAL, BY BARGE:

TIME OIL: NOT APPLICABLE ----------

GOLDEN EAGLE: $0.08316 PER BBL. 2,079.00

INLAND EMPIRE: $0.08316 PER BBL. 2,079.00 TRANSPORTATION OF STORED FUEL BY TANK TRUCK TO PORTLAND INTERNATIONAL AIRPORT (ESTIMATED AT 262,000 BBLS.)

TIME OIL: AT $0.00347 PER GAL. 38,213.03

GOLDEN EAGLE: AT $0.00660

PER GAL. 72,681.84

INLAND EMPIRE: AT $0.00660

PER GAL. 72,681.84 TRANSPORTATION OF STORED FUEL BY TANK TRUCK TO KINGSLEY FIELD (ESTIMATED AT 174,800 BBLS.)

TIME OIL: AT $0.03102 PER

GAL. 227,736.43

GOLDEN EAGLE: AT $0.04059

PER GAL. 297,995.54

INLAND EMPIRE: AT $0.04059

PER GAL. 297,995.54

TOTAL $312,864.54 $423,913.88 $491,298.49

THE INCLUSION OF THE $2,079 FIGURE IN THE EVALUATION OF GOLDEN EAGLE'S AND INLAND EMPIRE'S PROPOSALS, AS PROVIDED IN PARAGRAPH 16 OF THE ADDITIONAL TERMS AND CONDITIONS OF THE REQUEST FOR PROPOSALS, REPRESENTED A COST WHICH THE GOVERNMENT WOULD HAVE HAD TO BEAR TO TRANSFER ABOUT 25,000 BARRELS OF PETROLEUM PRODUCTS FROM TIME OIL'S TANKS TO THE SUCCESSFUL OFFEROR'S FACILITY. THIS QUANTITY WAS REQUIRED TO BE KEPT IN STORAGE AS BASIC INVENTORY AGAINST WHICH SHIPMENTS MAY NOT ORDINARILY BE MADE TO THE USING ACTIVITIES. IN THIS CONNECTION, WE NOTE THAT GOLDEN EAGLE OFFERED AS PART OF ITS PROPOSAL AS FOLLOWS:

"* * * IN ORDER THAT THE EVALUATION NEED NOT TAKE INTO ACCOUNT COSTS FOR HANDLING AND TRANSPORTING APPROXIMATELY 25,000 BARRELS OF GOVERNMENT OWNED PRODUCT FROM ITS PRESENT LOCATION (PORTLAND, OREGON) TO GOLDEN EAGLE'S VANCOUVER, WASHINGTON TERMINAL, GOLDEN EAGLE HEREWITH OFFERS THE FACILITY (100,000 BARREL STORAGE) * * * THE MARINE TERMINAL TANKS AND THEIR OPERATION FOR THE MONTH OF JUNE, 1963 AT A COST TO THE GOVERNMENT OF $1.00. SINCE AVERAGE MONTHLY MOVEMENTS ARE APPROXIMATELY 36,000 BARRELS PER MONTH THIS SHOULD NOT NECESSITATE ANY MOVEMENT OF PRODUCT FROM PORTLAND, OREGON, TO VANCOUVER, WASHINGTON.'

TIME OIL'S FISCAL YEAR 1963 CONTRACT FOR THE STORAGE OF PETROLEUM PRODUCTS OBLIGATED THE CONTRACTOR TO PROVIDE STORAGE FACILITIES THROUGH JUNE 30, 1963, AND ALSO OBLIGATED THE GOVERNMENT TO UTILIZE THOSE FACILITIES FOR THE STORAGE OF GOVERNMENT PETROLEUM PRODUCTS THROUGH JUNE 30, 1963. THUS, THE MOVEMENT OF ANY SUCH PRODUCTS INTO YOUR FACILITIES DURING THE MONTH OF JUNE 1963 WOULD HAVE BEEN A BREACH OF THE 1963 CONTRACT ON ACCOUNT OF WHICH THE GOVERNMENT WOULD HAVE BEEN LEGALLY LIABLE IN DAMAGES TO TIME OIL. WE, THEREFORE, ARE OF THE OPINION THAT THIS OFFER COULD NOT HAVE BEEN CONSIDERED BY THE GOVERNMENT. IN VIEW THEREOF AND SINCE THIS $2079 CHARGE WAS A PROPER NEGOTIATION EVALUATION FACTOR WHICH AFFECTED THE ULTIMATE COST TO THE GOVERNMENT, IT WAS FOR CONSIDERATION IN DETERMINING THE MOST ADVANTAGEOUS OFFER, PRICE AND OTHER FACTORS CONSIDERED.

THE TRANSPORTATION RATES USED IN THE FISCAL YEAR 1964 EVALUATION WERE THOSE IN EFFECT ON APRIL 26, 1963, AS FOLLOWS:

TABLE

PORTLAND, OREGON, TO PORTLAND INTERNATIONAL AIRPORT:

$0.0525 CWT. OR $0.00347 PER GALLON.

AUTHORITY: PACIFIC INLAND TARIFF BUREAU TARIFF 13-C,

MF-I.C.C. NO. 122.

*VANCOUVER, WASHINGTON, TO PORTLAND INTERNATIONAL

AIRPORT: $0.075 CWT. OR $0.00495 PER GALLON.

AUTHORITY: PACIFIC INLAND TARIFF BUREAU TARIFF

13-C, MF-I.C.C. NO. 122

PORTLAND, OREGON, TO KINGSLEY FIELD, OREGON:

$0.47 CWT. OR $0.03102 PER GALLON.

AUTHORITY: PACIFIC INLAND TARIFF BUREAU U.S.

GOVERNMENT QUOTATION NO. 89-N.

*VANCOUVER, WASHINGTON, TO KINGSLEY FIELD, OREGON:

$0.605 CWT. OR $0.03993 PER GALLON.

AUTHORITY: (A) SECTION 1 AND (B) SECTION 4, OF

PACIFIC INLAND TARIFF BUREAU TARIFF 13-C, MF-I.C.C.

NO. 122.

(*THESE RATES DIFFER SOMEWHAT FROM THOSE SHOWN ABOVE IN THE EVALUATION. THE APPROXIMATE DIFFERENCE OF $23,000 IN GOLDEN EAGLE'SFAVOR HAS NO SIGNIFICANT EFFECT ON THE COMPETITIVE STANDINGS.)

YOUR LETTER OF MAY 1, 1963, STATES THAT HAD THE "RATES NOW FILED WITH THE PACIFIC INLAND TARIFF BUREAU OUT OF VANCOUVER, WASHINGTON, BY COMMON CARRIER TO THOSE TWO POINTS" BEEN USED, A SAVINGS IN EXCESS OF $20,000 WOULD HAVE BEEN REALIZED FOR FISCAL YEAR 1963. WE HAVE VERIFIED THESE RATES WITH THE FOLLOWING RESULT. RATES OF $0.03119 PER GALLON FROM VANCOUVER, WASHINGTON, TO KINGSLEY AND $0.00363 PER GALLON FROM VANCOUVER TO PORTLAND INTERNATIONAL AIRPORT WERE AUTHORIZED BY THE PACIFIC INLAND TARIFF BUREAU U.S. GOVERNMENT QUOTATION NO. 89-N, EFFECTIVE MAY 2, 1963. SUCH RATES WERE NOT FILED OR PUBLISHED AT THE TIME YOUR PROPOSAL FOR FISCAL YEAR 1963 WAS EVALUATED NOR ON THE DATE (APRIL 26, 1963) THE PROPOSALS FOR FISCAL YEAR 1964 WERE DUE AT THE PROCUREMENT OFFICE. THE USE OF SUCH RATES WERE EXPRESSLY EXCLUDED FROM CONSIDERATION IN THE EVALUATION OF PROPOSALS BY THE PROVISIONS OF ASPR 1-1313.1 WHICH PROVIDES:

"TO AFFORD PROPER ANALYSIS AND CONSIDERATION OF TRANSPORTATION FACTORS, THE CONTRACTING OFFICER SHALL CONSIDER TRANSPORTATION RATES AND RELATED COSTS IN THE EVALUATION OF F.O.B. ORIGIN BIDS AND PROPOSALS. THE BEST AVAILABLE TRANSPORTATION RATES AND RELATED COSTS IN EFFECT OR TO BECOME EFFECTIVE PRIOR TO THE EXPECTED DATE OF INITIAL SHIPMENT AND ON FILE OR PUBLISHED AT THE DATE OF THE BID OPENING, SHALL BE USED IN THE EVALUATION. HOWEVER, TRANSPORTATION RATES AND RELATED COSTS FILED OR PUBLISHED AFTER THE BID OPENING, OR THE DATE PROPOSALS ARE DUE, SHALL NOT BE USED IN THE EVALUATION UNLESS THEY COVER TRAFFIC FOR WHICH NO APPLICABLE TRANSPORTATION RATE OR RELATED COST WAS IN EXISTENCE ON THE BID OPENING OR THE DATE PROPOSALS WERE DUE.' WE HAVE ALSO ASCERTAINED THAT THE DATE OF APRIL 24, 1963, APPEARING IN U.S. GOVERNMENT QUOTATION NO. 89- N WAS THE PROPOSED TARIFF DOCKET DATE AND NOT THE FILING OR PUBLISHING DATE THEREOF.

AN EXAMINATION OF THE FOREGOING EVALUATION OF THE 1964 PROCUREMENT REVEALS THAT THE PROPOSALS OF GOLDEN EAGLE AND INLAND EMPIRE WERE NOT WITHIN COMPETITIVE RANGE OF TIME OIL'S PROPOSAL, PRICE AND OTHER FACTORS CONSIDERED. HENCE, NO REQUIREMENT EXISTED UNDER 10 U.S.C. 2304 (G), AS AMENDED BY PUBLIC LAW 87-653, OR ASPR 3-805.1 (A), TO CONDUCT WRITTEN OR ORAL DISCUSSIONS WITH THESE OFFERORS. THIS IS ESPECIALLY TRUE WHERE THE ANNUAL USE CHARGE OF GOLDEN EAGLE IN THE AMOUNT OF $47,880--- AS OPPOSED TO TIME OIL'S $46,915.08--- WAS REQUIRED TO BE CONSIDERED IN THE EVALUATION OF THE PROPOSAL IN THE LIGHT OF THE NON-NEGOTIABLE AMOUNTS AMOUNTING TO MORE THAN $5,000.

IN VIEW OF THE FOREGOING, WE WOULD NOT BE JUSTIFIED IN QUESTIONING THE AWARD OF THE CONTRACTS.