B-126733, MAR. 9, 1956

B-126733: Mar 9, 1956

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FEDERAL MARITIME BOARD: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 20. WHICH IS NOW OPERATING ON TRADE ROUTE 29 BETWEEN CALIFORNIA AND THE FAR EAST UNDER AN OPERATING SUBSIDY CONTRACT. YOU ESTIMATE COMPLETION OF THE PROPOSED WORK ON THIS VESSEL WILL TAKE NINE MONTHS AND ADVISE THAT THE VESSEL WILL BE REPLACED DURING SUCH PERIOD BY A VICTORY SHIP WITH 30 PERCENT LESS CZRRYING CAPACITY AND SUBSTANTIALLY LESS EARING CAPACITY. 000 WAS WELL AS LOSS OF THE VESSEL'S SERVICES FOR AN ADDITIONAL 22 DAYS DURING WHICH THE GOLDEN MARINER WOULD BE OUT OF SERVICE IF WORK IS PERFORMED ON THE ATLANTIC COAST. IT IS THE OPINION OF THE BOARD THAT THE INVITATION FOR BIDS SHOULD REQUIRE THE BIDDER TO AGREE TO PERFORM THE WORK ON THE PACIFIC COAST.

B-126733, MAR. 9, 1956

TO THE HONORABLE CLARENCE G. MORSE, CHAIRMAN, FEDERAL MARITIME BOARD:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 20, 1956, RELATIVE TO AN APPLICATION BY THE PACIFIC FAR EAST LINE, INC., FOR CONSTRUCTION DIFFERENTIAL SUBSIDY AID FOR RECONSTRUCTING AND RECONDITIONING WORK TO BE PERFORMED UPON THE S.S. GOLDEN MARINER, WHICH IS NOW OPERATING ON TRADE ROUTE 29 BETWEEN CALIFORNIA AND THE FAR EAST UNDER AN OPERATING SUBSIDY CONTRACT. YOU ESTIMATE COMPLETION OF THE PROPOSED WORK ON THIS VESSEL WILL TAKE NINE MONTHS AND ADVISE THAT THE VESSEL WILL BE REPLACED DURING SUCH PERIOD BY A VICTORY SHIP WITH 30 PERCENT LESS CZRRYING CAPACITY AND SUBSTANTIALLY LESS EARING CAPACITY. FOR THOSE REASONS, AND TO AVOID AN ESTIMATED MOVING COST OF MORE THAN $100,000 WAS WELL AS LOSS OF THE VESSEL'S SERVICES FOR AN ADDITIONAL 22 DAYS DURING WHICH THE GOLDEN MARINER WOULD BE OUT OF SERVICE IF WORK IS PERFORMED ON THE ATLANTIC COAST, IT IS THE OPINION OF THE BOARD THAT THE INVITATION FOR BIDS SHOULD REQUIRE THE BIDDER TO AGREE TO PERFORM THE WORK ON THE PACIFIC COAST, AND YOU INQUIRE WHETHER WE WOULD CONCUR IN A PROPOSAL TO DETERMINE THE CONSTRUCTION-DIFFERENTIAL SUBSIDY UPON THE BASIS OF THE LOWEST RESPONSIBLE BID RECEIVED UNDER SUCH INVITATION.

SECTION 505 (A) OF THE MERCHANT MARINE ACT, 1936, 46 U.S.C. 1155, REQUIRES DUE ADVERTISEMENT FOR COMPETITIVE BIDS PRIOR TO DETERMINATION OF A CONSTRUCTION-DIFFERENTIAL SUBSIDY, AND THE LEGISLATIVE HISTORY OF THIS ACT ESTABLISHES BEYOND ANY REASONABLE DOUBT THAT THE CONGRESS INTENDED SUCH PROVISION TO AFFORD ALL DOMESTIC SHIPYARDS AN EQUAL OPPORTUNITY TO COMPETE. WHILE IT IS ASSUMED THAT SHIPYARDS ON THE ATLANTIC AND GULF COASTS WILL BE GIVEN AN EQUAL OPPORTUNITY WITH THOSE ON THE PACIFIC COASTS TO SUBMIT BIDS IN THE INSTANT CASE, IT IS OBVIOUS THAT THE PROPOSED RESTRICTION WOULD EFFECTIVELY LIMIT BIDDING TO SHIPYARDS LOCATED ON THE PACIFIC COAST. IN THIS CONNECTION IT SHOULD BE NOTED THAT SECTION 12/A) OF H.R. 7854, 74TH CONGRESS, 1ST SESSION, CONTAINED THE FOLLOWING PROVISION.

"NO CONTRACT FOR THE BUILDING OF A NEW VESSEL, OR FOR THE RECONDITIONING, RECONSTRUCTION, OR REPAIR OF ANY OTHER VESSEL, WHERE THE COST THEREOF SHALL EXCEED $100,000, SHALL BE MADE BY THE CORPORATION WITH ANY PRIVATE SHIPBUILDER, EXCEPT AFTER DUE ADVERTISEMENT AND UPON SEALED COMPETITIVE BIDS:

PROVIDED, THAT THE ADVERTISEMENT FOR BIDS SHALL SPECIFY THAT THE VESSEL IS TO BE BUILT OR THE WORK IS TO BE DONE ON THE ATLANTIC, GULF, OR PACIFIC COASTS OF THE UNITED STATES, AS THE CASE MAY BE.'

THE SPONSOR OF THIS BILL ADVISED THE HOUSE COMMITTEE ON MERCHANT MARINE AND FISHERIES DURING HEARINGS ON H.R. 7521, 74TH CONGRESS, (PAGE 686), THAT ITS PROVISIONS WERE BEINGS SUBMITTED FOR CONSIDERATION BY THE COMMITTEE, AND IT MUST THEREFORE BE ASSUMED THAT FAILURE TO INCLUDE THE ABOVE-QUOTED PROVISION IN THE MERCHANT MARINE ACT, 1936, EVIDENCES CONGRESSIONAL REJECTION OF THE PRINCIPLE EMBODIED THEREIN. SECTION 5009, SUTHERLAND ON STATUTORY CONSTRUCTION. ADDITIONALLY, THE PROVISIONS OF SECTION 504 OF THE ACT, 46 U.S.C. 1154, UNDER WHICH IT IS UNDERSTOOD APPLICATION HAS BEEN MADE IN THE INSTANT CASE, PERMIT ACCEPTANCE OF THE APPLICANT OF OTHER THAN THE LOWEST RESPONSIBLE DOMESTIC BID IF THE BID WHICH THE APPLICANT PREFERS TO ACCEPT IS CONSIDERED BY THE BOARD AS FAIR AND REASONABLE. HOWEVER, IT IS SPECIFICALLY PROVIDED THAT THE AMOUNT OF CONSTRUCTION-DIFFERENTIAL SUBSIDY IN SUCH CASE IS TO BE DETERMINED UPON THE BASIS OF THE LOWEST RESPONSIBLE DOMESTIC BID. IN THE INSTANT CASE, IF PERFORMANCE OF THE WORK IS NOT LIMITED TO THE PACIFIC COAST SHIPYARDS, BIDS SUBMITTED BY RESPONSIBLE EAST AND GULF COAST SHIPYARDS MIGHT WELL BE LOWER THAN BIDS SUBMITTED BY WEST COAST SHIPYARDS. IN VIEW THEREOF, TO ELIMINATE FROM CONSIDERATION SUCH LOWER EAST OR GULF COAST BIDS WOULD HAVE THE EFFECT OF INCREASING THE CONTRACTION-DIFFERENTIAL SUBSIDY BEYOND THE AMOUNT OTHERWISE ALLOWABLE BY LAW.

ACCORDINGLY, IT IS OUR OPINION THAT AN INVITATION FOR BIDS CONTAINING THE PROPOSED RESTRICTION WOULD CIRCUMVENT THE REQUIREMENT FOR COMPETITIVE BIDDING AS CONTEMPLATED BY THE MERCHANT MARINE ACT, 1936, AND IT FOLLOWS THAT BIDS SUBMITTED THEREUNDER WOULD NOT BE A PROPER BASIS FOR DETERMINATION OF THE CONSTRUCTION-DIFFERENTIAL SUBSIDY.