B-140448, SEPTEMBER 3, 1959, 39 COMP. GEN. 157

B-140448: Sep 3, 1959

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WHICH LIMITS THE AMOUNT OF THE CONSTRUCTION DIFFERENTIAL SUBSIDY WHICH MAY BE APPROVED WHEN A VESSEL IS CONSTRUCTED IN A PACIFIC COAST SHIPYARD TO 50 PERCENT OF THE COST OF THE VESSEL TO THE FEDERAL MARITIME BOARD. ONLY ONE-HALF OF THAT PORTION OF THE BID PRICE WHICH WAS IN EXCESS OF A 50 PERCENT CONSTRUCTION DIFFERENTIAL BY LIMITING THE SUBSIDY TO A MAXIMUM OF 50 PERCENT OF THE PACIFIC COAST COST. WAS A SUBSTITUTE FOR AUTHORITY TO BUILD VESSELS IN FOREIGN SHIPYARDS AND DOES NOT APPLY TO THE PACIFIC COAST PREFERENCE DIFFERENTIAL PROVISIONS IN SECTION 502 (D). 1959: REFERENCE IS MADE TO A LETTER DATED AUGUST 11. HAVE BEEN RECEIVED AND OPENED. THAT THE LOWEST RESPONSIVE BID WAS SUBMITTED BY BETHLEHEM SPARROWS POINT SHIPYARD.

B-140448, SEPTEMBER 3, 1959, 39 COMP. GEN. 157

MARITIME MATTERS - CONSTRUCTION DIFFERENTIAL SUBSIDIES - PACIFIC COAST PREFERENCE - FOREIGN YARD CONSTRUCTION COST THE LEGISLATIVE HISTORY OF THE AMENDMENT TO SECTION 502 (D) OF THE MERCHANT MARINE ACT, 1936, 46 U.S.C. 1152 (D), WHICH LIMITS THE AMOUNT OF THE CONSTRUCTION DIFFERENTIAL SUBSIDY WHICH MAY BE APPROVED WHEN A VESSEL IS CONSTRUCTED IN A PACIFIC COAST SHIPYARD TO 50 PERCENT OF THE COST OF THE VESSEL TO THE FEDERAL MARITIME BOARD, INDICATES THAT THE SIX PERCENT PACIFIC COAST DIFFERENTIAL IN SECTION 502 (D) SHOULD CONTINUE TO APPLY EVEN THOUGH THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENT WHEN COMPUTED ON THE BASIS OF THE PACIFIC COAST BID BUT THAT THEN THE GOVERNMENT WOULD ABSORB, AS CONSTRUCTION DIFFERENTIAL SUBSIDY, ONLY ONE-HALF OF THAT PORTION OF THE BID PRICE WHICH WAS IN EXCESS OF A 50 PERCENT CONSTRUCTION DIFFERENTIAL BY LIMITING THE SUBSIDY TO A MAXIMUM OF 50 PERCENT OF THE PACIFIC COAST COST. THE AUTHORITY GRANTED TO THE FEDERAL MARITIME BOARD UNDER SECTION 502 (B) OF THE MERCHANT MARINE ACT, 1936, 46 U.S.C. 1152 (B), TO NEGOTIATE FOR THE CONSTRUCTION OF VESSELS WHEN THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENT OF THE VESSEL COST, WAS A SUBSTITUTE FOR AUTHORITY TO BUILD VESSELS IN FOREIGN SHIPYARDS AND DOES NOT APPLY TO THE PACIFIC COAST PREFERENCE DIFFERENTIAL PROVISIONS IN SECTION 502 (D), 46 U.S.C. 1152 (D), UNTIL SUCH TIME AS THE LOW PACIFIC COAST BID FOR THE CONSTRUCTION OF PACIFIC COAST VESSELS, WHICH MUST BE WITHIN SIX PERCENT OF THE LOW ATLANTIC COAST BID, EXCEEDS 212 PERCENT OF THE COST OF BUILDING IN A FOREIGN SHIPYARD.

TO THE FEDERAL MARITIME BOARD, SEPTEMBER 3, 1959:

REFERENCE IS MADE TO A LETTER DATED AUGUST 11, 1959, FROM BOARD MEMBER THOMAS E. STAKEM ADVISING THAT BIDS FOR THE CONSTRUCTION OF TWO NEW CARGO SHIPS BY PACIFIC FAR EAST LINES, INC., HAVE BEEN RECEIVED AND OPENED, AND THAT THE LOWEST RESPONSIVE BID WAS SUBMITTED BY BETHLEHEM SPARROWS POINT SHIPYARD, INC., AN ATLANTIC COAST SHIPYARD, IN AN AMOUNT WHICH WILL RESULT IN A CONSTRUCTION DIFFERENTIAL OF APPROXIMATELY 51 PERCENT WHEN COMPUTED UNDER THE PROVISIONS OF SECTION 502 (B) OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, 46 U.S.C. 1152 (B). HOWEVER, SINCE PACIFIC FAR EAST LINES HAS ITS PRINCIPAL PLACE OF BUSINESS ON THE PACIFIC COAST AND INTENDS TO OPERATE THE SHIPS IN FOREIGN TRADE FROM PORTS ON THE PACIFIC COAST, AND SINCE THE SECOND LOW RESPONSIBLE BID HAS BEEN SUBMITTED BY BETHLEHEM STEEL COMPANY, A PACIFIC COAST SHIPYARD, IN AN AMOUNT WHICH IS WITHIN TWO PERCENT OF THE LOW BID SUBMITTED BY BETHLEHEM SPARROWS POINT SHIPYARD AND WILL RESULT IN A CONSTRUCTION DIFFERENTIAL OF APPROXIMATELY 53 PERCENT, OUR OPINION IS REQUESTED AS TO WHETHER THE BOARD IS REQUIRED, UNDER THE PROVISIONS OF SECTION 502 (D) OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, 46 U.S.C. 1152 (D), TO APPROVE THE PACIFIC COAST BID SUBMITTED BY BETHLEHEM STEEL COMPANY, OR WHETHER THE PROVISIONS OF SECTION 502 (B), WHICH PERMIT NEGOTIATION WHEN THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENT OF THE CONSTRUCTION COST OF THE VESSEL, BECOMES APPLICABLE UNDER THESE CIRCUMSTANCES.

AS ORIGINALLY ENACTED, SECTION 502 (D) PROVIDED IN PERTINENT PART AS FOLLOWS:

(B) IN CASE A CONSTRUCTION SUBSIDY IS APPLIED FOR UNDER THIS TITLE BY AN APPLICANT WHO HAS AS HIS PRINCIPAL PLACE OF BUSINESS A PLACE ON THE PACIFIC COAST OF THE UNITED STATES * * * TO AID IN THE CONSTRUCTION RECONDITIONING OF A VESSEL TO BE OPERATED IN FOREIGN TRADE * * * FROM PORTS ON THE PACIFIC COAST OF THE UNITED STATES, AND THE AMOUNT OF THE BID OF THE SHIPBUILDER ON THE PACIFIC COAST WHO IS THE LOWEST RESPONSIBLE BIDDER ON SUCH COAST FOR SUCH CONSTRUCTION OR RECONDITIONING DOES NOT EXCEED THE AMOUNT OF THE BID OF THE SHIPBUILDER ON THE ATLANTIC COAST OF THE UNITED STATES WHO IS THE LOWEST RESPONSIBLE BIDDER THEREFOR BY MORE THAN 6 PERCENTUM OF THE AMOUNT OF THE BID OF SUCH ATLANTIC COAST SHIPBUILDER, THE COMMISSION SHALL * * * APPROVE SUCH PACIFIC COAST BID, AND IN SUCH CASE NO PAYMENT SHALL BE MADE TO AID IN SUCH CONSTRUCTION OR RECONDITIONING UNLESS THE APPLICANT ACCEPTS THE BID OF SUCH PACIFIC COAST SHIPBUILDER AND AGREES TO DESIGNATED AND CONTINUE AS THE HOME PORT OF THE VESSEL TO BE CONSTRUCTED OR RECONDITIONED A PORT ON THE PACIFIC COAST.

THE LEGISLATIVE HISTORY OF THIS SECTION MAKES IT ADEQUATELY CLEAR THAT THE INTENT AND PURPOSE OF THE SECTION WAS TO PROMOTE THE DEVELOPMENT AND OPERATION OF SHIPBUILDING FACILITIES ON THE PACIFIC COAST, AND THAT THE 6 PERCENT DIFFERENTIAL ESTABLISHED BY THIS SECTION WAS INTENDED TO REQUIRE A CONTRACT AWARD TO ANY PACIFIC COAST SHIPBUILDER WHO SUBMITTED A BID FOR THE CONSTRUCTION OF VESSELS TO BE OPERATED FROM PACIFIC COAST PORTS IN AN AMOUNT WHICH WAS NOT MORE THAN 6 PERCENT IN EXCESS OF THE LOWEST RESPONSIBLE ATLANTIC COAST BID. MOREOVER, UNDER THE ORIGINAL PROVISIONS OF SECTION 502 (D), IT WAS APPARENT THAT, SO LONG AS THE AMOUNT OF A PACIFIC COAST BID WAS WITHIN 6 PERCENT OF THE LOWEST RESPONSIBLE ATLANTIC COAST BID AND WAS IN AN AMOUNT WHICH DID NOT RESULT IN A CONSTRUCTION DIFFERENTIAL IN EXCESS OF 50 PERCENT, THE FULL COST OF THE DIFFERENCE BETWEEN THE ATLANTIC AND PACIFIC COAST BIDS COULD BE ABSORBED BY THE GOVERNMENT AS CONSTRUCTION DIFFERENTIAL SUBSIDY. IT WAS NOT CLEAR, HOWEVER, WHETHER THE GOVERNMENT SHOULD CONTINUE TO ABSORB THE FULL COST OF SUCH DIFFERENCE WHERE THE PACIFIC COAST BID RESULTED IN A CONSTRUCTION DIFFERENTIAL IN EXCESS OF 50 PERCENT. THE LACK OF EXPRESSION OF CONGRESSIONAL INTENT IN SUCH CIRCUMSTANCES APPEARS TO HAVE BEEN ONE OF THE INADEQUACIES OF THE ACT REFERRED TO BY THE MARITIME COMMISSION IN ITS " ECONOMIC SURVEY OF THE AMERICAN MERCHANT MARINE," WHICH WAS CONDUCTED UNDER THE PROVISIONS OF SECTION 201 OF THE ACT AND TRANSMITTED TO THE CONGRESS ON NOVEMBER 10, 1937. SEE PAGE 68 OF THE ABOVE SURVEY REPORT, AND PAGES 4 AND 11 OF SENATE REPORT NO. 1618, TO ACCOMPANY S. 3078, 75TH CONGRESS. AS A RESULT, THE COMMISSION RECOMMENDED THAT SECTION 502 (D) BE AMENDED BY ADDING A SENTENCE WHICH WOULD READ AS FOLLOWS:

NOTHING IN THIS SECTION SHALL BE CONSTRUED AS AUTHORIZING THE COMMISSION TO APPROVE A CONSTRUCTION DIFFERENTIAL IN EXCESS OF 50 PERCENTUM OF THE CONSTRUCTION COST OF THE VESSEL PAID BY THE COMMISSION.

THE AMENDMENT WAS ENACTED WITHOUT CHANGE BY PUBLIC LAW 705, 75TH CONGRESS.

CONCERNING THE PURPOSE AND INTENT OF THIS AMENDMENT, IT IS STATED AS FOLLOWS AT PAGE 19 OF HOUSE REPORT NO. 2168, TO ACCOMPANY H.R. 10315, 75TH CONGRESS:

THE PROPOSED AMENDMENT CLARIFIES THE MEANING OF THE SECTION AND MAKES IT CONSISTENT WITH OTHER PROVISIONS OF TITLE V. AT THE PRESENT THERE IS NO SPECIFIC LIMITATION ON THE AMOUNT OF CONSTRUCTION DIFFERENTIAL SUBSIDY WHICH MAY BE AWARDED IN CASES WHERE THE VESSEL IS BUILT IN A YARD ON THE PACIFIC COAST. THE AMENDMENT MAKES IT CLEAR THAT THE LIMIT IS 50 PERCENT OF THE COST OF THE VESSEL TO THE COMMISSION.

THE PURPOSE AND INTENT IS FURTHER CLARIFIED AT PAGE 11 OF SENATE REPORT NO. 1618, TO ACCOMPANY S. 3078, 75TH CONGRESS, AS FOLLOWS:

THE PRESENT SECTION DOES NOT MAKE IT CLEAR WHETHER THE COMMISSION IS LIMITED TO A DIFFERENTIAL OF 50 PERCENT IN ALL CASES OR WHETHER IT CAN GO ABOVE 50 PERCENT BY THE 6 PERCENT PROVIDED FOR PACIFIC COAST PORTS. LINE WITH THE RECOMMENDATION OF THE MARITIME COMMISSION, THE COMMITTEE BELIEVES THAT THE DIFFERENTIAL SHOULD BE LIMITED TO 50 PERCENT, AND THE CHANGE IS DRAWN TO ACCOMPLISH THAT PURPOSE.

FROM THE ABOVE, IT IS APPARENT THAT BOTH THE MARITIME COMMISSION, IN PROPOSING THE AMENDMENT TO SECTION 502 (D), AND THE CONGRESS IN ENACTING SUCH AMENDMENT TO SECTION 502 (D), AND THE CONGRESS IN ENACTING SUCH AMENDMENT, WERE ANTICIPATING SITUATIONS WHERE PACIFIC COAST BIDS FOR THE CONSTRUCTION OF VESSELS TO BE OPERATED FROM PACIFIC COAST PORTS WOULD BE SUBMITTED IN AMOUNTS WHICH, WHILE WITHIN 6 PERCENTUM OF THE LOW ATLANTIC COAST BID AS CONTEMPLATED BY SECTION 502 (D), WOULD STILL RESULT IN A CONSTRUCTION DIFFERENTIAL IN EXCESS OF 50 PERCENT IF SUCH DIFFERENTIAL WAS COMPUTED ON THE AMOUNT OF THE PACIFIC COAST BID.

IT IS EQUALLY APPARENT THAT, WHEN THESE CIRCUMSTANCES OCCURRED, THE 6 PERCENT DIFFERENTIAL WAS INTENDED TO HAVE CONTINUING APPLICATION, BUT THE GOVERNMENT WOULD THEN ABSORB, AS CONSTRUCTION-DIFFERENTIAL SUBSIDY, ONLY ONE-HALF OF THAT PORTION OF THE BID PRICE WHICH WAS IN EXCESS OF A 50 PERCENT CONSTRUCTION DIFFERENTIAL, BY LIMITING THE SUBSIDY TO A MAXIMUM OF 50 PERCENT OF THE PACIFIC COAST COST.

IN VIEW OF THE ABOVE, IT IS OUR OPINION THAT THE ABOVE AMENDMENT TO SECTION 502 (D) OPERATED BOTH TO INDICATE A CONGRESSIONAL INTENTION THAT SECTION 502 (D) SHOULD CONTINUE TO APPLY EVEN THOUGH THE CONSTRUCTION DIFFERENTIAL EXCEEDED 50 PERCENTUM WHEN COMPUTED ON THE BASIS OF THE PACIFIC COAST BID, AND TO CLARIFY THE AMOUNT OF CONSTRUCTION DIFFERENTIAL SUBSIDY THE GOVERNMENT WOULD PAY UNDER THAT SECTION WHERE THE AMOUNT OF A PACIFIC COAST BID RESULTED IN A CONSTRUCTION DIFFERENTIAL IN EXCESS OF 50 PERCENT.

THERE REMAINS FOR CONSIDERATION THE QUESTION OF WHEN, IF EVER, THE NEGOTIATION AUTHORITY WHICH IS CONTAINED IN SECTION 502 (B) MAY BE EXERCISED IN VESSEL CONSTRUCTION TO WHICH THE PROVISIONS OF SECTION 502 (D) ARE APPLICABLE.

SECTION 502 (B) PROVIDES IN PERTINENT PART AS FOLLOWS:

* * * THE CONSTRUCTION DIFFERENTIAL APPROVED BY THE SECRETARY SHALL NOT EXCEED 33 1/3 PERCENTUM OF THE CONSTRUCTION COST OF THE VESSEL * * * EXCEPT THAT IN CASES WHERE THE COMMISSION POSSESSES CONVINCING EVIDENCE THAT THE ACTUAL DIFFERENTIAL IS GREATER THAN THAT PERCENTAGE, THE COMMISSION MAY APPROVE AN ALLOWANCE NOT TO EXCEED 50 PERCENTUM OF SUCH COST * * *. WHERE THE COMMISSION FINDS THAT THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENTUM OF SUCH COST, THE COMMISSION MAY NEGOTIATE AND CONTRACT ON BEHALF OF THE APPLICANT TO BUILD SUCH VESSEL IN A DOMESTIC SHIPYARD AT A COST WHICH WILL REDUCE THE CONSTRUCTION DIFFERENTIAL TO 50 PERCENTUM OR LESS. * * *

THE FINAL SENTENCE OF SECTION 502 (B), AS QUOTED ABOVE, WAS ALSO ADDED TO THE ORIGINAL ACT BY PUBLIC LAW 705, 75TH CONGRESS. HOWEVER, THIS AMENDMENT WAS IN THE FORM OF A CONFEREES' SUBSTITUTE FOR A RECOMMENDATION BY THE MARITIME COMMISSION THAT APPLICANTS FOR CONSTRUCTION DIFFERENTIAL SUBSIDY BE PERMITTED TO BUILD IN FOREIGN SHIPYARDS "WHERE THE COMMISSION FINDS THAT THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENTUM OF SUCH (THE CONSTRUCTION) COST.' SINCE THERE DOES NOT APPEAR TO BE ANY RECORDED EXPLANATION OF THE FACTORS WHICH INFLUENCED THE CONFEREES TO SUBSTITUTE NEGOTIATION AUTHORITY FOR THE PROPOSED AUTHORITY TO BUILD FOREIGN, OR OF THE MANNER AND CIRCUMSTANCES IN WHICH THE NEGOTIATION AUTHORITY WAS INTENDED TO OPERATE, WE BELIEVE IT IS LOGICAL TO ASSUME THAT IT WAS INTENDED TO OPERATE IN THE SAME CIRCUMSTANCES UNDER WHICH THE PROPOSED AUTHORITY TO BUILD FOREIGN WOULD HAVE BEEN APPLICABLE.

THE HISTORY OF THE PROPOSAL TO AUTHORIZE CONSTRUCTION IN FOREIGN SHIPYARDS MAKES IT CLEAR THAT SUCH PROPOSAL WAS INTENDED TO ASSURE DOMESTIC SHIPYARDS PROTECTION FROM FOREIGN COMPETITION AS LONG AS DOMESTIC CONSTRUCTION COSTS DID NOT EXCEED FOREIGN CONSTRUCTION COSTS BY MORE THAN 100 PERCENT, AND TO ASSURE OPERATORS OF UNITED STATES FLAG VESSELS THAT THEY WOULD BE AFFORDED THE SAME CONSTRUCTION PARITY WITH THEIR FOREIGN COMPETITORS IF DOMESTIC CONSTRUCTION COSTS EXCEEDED 100 PERCENT OF FOREIGN CONSTRUCTION COSTS THAT THEY WERE AFFORDED BY THE PROVISIONS OF TITLE V WHILE THE CONSTRUCTION DIFFERENTIAL DID NOT EXCEED THAT FIGURE. SEE PAGES 64-65 OF THE ECONOMIC SURVEY OF THE AMERICAN MERCHANT MARINE; PAGES 19-22, SENATE HEARINGS ON S. 3078, 75TH CONGRESS; PAGES 9-10, SENATE REPORT NO. 1618, TO ACCOMPANY S. 3078, 75TH CONGRESS; AND PAGE 6472, CONGRESSIONAL RECORD, 75TH CONGRESS, 3D SESSION. WE FIND NO REFERENCE IN SUCH HISTORY TO THE PROVISIONS OF SECTION 502 (D) OR TO THE EFFECT, IF ANY, WHICH THE PROPOSED AUTHORITY TO BUILD FOREIGN WAS INTENDED TO HAVE UPON THE 6 PERCENT PACIFIC COAST DIFFERENTIAL AUTHORIZED BY THAT SECTION. HOWEVER, IT IS APPARENT THAT SUCH AUTHORITY WAS NOT INTENDED TO APPLY SO LONG AS AN AMERICAN SHIPYARD WAS READY, WILLING, AND ABLE TO CONSTRUCT A VESSEL AT A PRICE WHICH WAS LESS THAN TWICE THE FOREIGN CONSTRUCTION COST. ACCORDINGLY, WE BELIEVE THAT WHERE THE LOW ATLANTIC COAST BID ON A VESSEL TO BE OPERATED FROM PACIFIC PORTS WAS LESS THAN TWICE THE FOREIGN CONSTRUCTION COST, AND THE LOW PACIFIC COAST BID WAS WITHIN 6 PERCENT OF THE ATLANTIC COAST BID BUT MORE THAN TWICE THE FOREIGN CONSTRUCTION COST, THE AUTHORIZATION TO BUILD FOREIGN WOULD NOT HAVE APPLIED. TO CONSTRUE THE PROPOSAL TO AUTHORIZE FOREIGN CONSTRUCTION UNDER SUCH CIRCUMSTANCES WOULD HAVE RESULTED IN FOREIGN CONSTRUCTION OF PACIFIC COAST VESSELS WHILE ATLANTIC COAST SHIPYARDS WERE WILLING TO CONSTRUCT SUCH VESSELS AT PRICES LESS THAN TWICE THE FOREIGN COST, AND WOULD HAVE DEPRIVED PACIFIC COAST SHIPYARDS OF THE BENEFITS AND PROTECTION INTENDED BY THE 6 PERCENT DIFFERENTIAL IN SECTION 502 (D).

IN VIEW THEREOF, IT IS OUR OPINION THAT THE PROPOSED AUTHORITY TO BUILD FOREIGN "WHERE THE COMMISSION FINDS THAT THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENTUM OF SUCH COST" WAS NOT INTENDED TO NULLIFY THE 6 PERCENT DIFFERENTIAL GRANTED PACIFIC COAST SHIPYARDS BY SECTION 502 (D), AND THAT THE TERM "SUCH COST" IN THE PART OF THE PROPOSAL TO BUILD FOREIGN QUOTED ABOVE DID NOT REFER TO THE AMOUNT OF THE PACIFIC COAST BID WHERE THE PROVISIONS OF SECTION 502 (D) APPLIED. THUS, WHERE THE LOW ATLANTIC COAST BID ON A PACIFIC COAST VESSEL WOULD HAVE RESULTED IN A CONSTRUCTION DIFFERENTIAL OF 50 PERCENT, AND THE LOW PACIFIC COAST BID EXCEEDED THE ATLANTIC COAST BID BY EXACTLY 6 PERCENT, THE AUTHORITY TO BUILD FOREIGN WOULD NOT HAVE APPLIED, SINCE SUCH APPLICATION WOULD HAVE DEPRIVED THE PACIFIC COAST SHIPYARDS OF THE PROTECTION AND BENEFITS INTENDED BY SECTION 502 (D). HAVING SO CONCLUDED, WE CAN SEE NO JUSTIFICATION FOR HOLDING THAT WHERE, AS IN THE INSTANT CASE, THE LOW ATLANTIC COAST BID RESULTS IN A CONSTRUCTION DIFFERENTIAL OF 51 PERCENT, BUT THE LOW PACIFIC COAST BID IS IN AN AMOUNT WHICH IS LESS THAN SIX PERCENT HIGHER THAN AN AMOUNT WHICH WOULD RESULT IN A DIFFERENTIAL OF 50 PERCENT, THE MERE FACT THAT THE ATLANTIC COAST BID EXCEEDS THE 50 PERCENT LIMITATION SHOULD OPERATE TO DEPRIVE THE PACIFIC COAST SHIPYARD OF A CONTRACT AWARD TO WHICH IT WOULD OTHERWISE HAVE BEEN ENTITLED UNDER SECTION 502 (D) IF THE ATLANTIC COAST BID HAD RESULTED IN ONE PERCENT LOWER DIFFERENTIAL.

AS INDICATED ABOVE, THE AMENDMENT TO SECTION 502 (B) WHICH ADDED AUTHORITY TO NEGOTIATE "WHERE THE COMMISSION FINDS THAT THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENTUM OF SUCH COST" WAS SUBSTITUTED BY CONFEREES OF THE TWO HOUSES OF CONGRESS FOR A PROPOSAL TO AUTHORIZE FOREIGN CONSTRUCTION UNDER THE SAME CIRCUMSTANCES, AND IN THE ABSENCE OF DEFINITE INFORMATION TO THE CONTRARY WE MUST ASSUME THAT THE NEGOTIATION AUTHORITY WAS A SUBSTITUTE FOR THE PROPOSED AUTHORITY TO BUILD FOREIGN, TO BE APPLIED IN THE SAME CIRCUMSTANCES. IN VIEW OF OUR CONCLUSIONS AS SET OUT ABOVE, IT IS THEREFORE OUR OPINION THAT THE AUTHORITY IN SECTION 502 (B) TO NEGOTIATE WHERE THE CONSTRUCTION DIFFERENTIAL EXCEEDS 50 PERCENTUM DOES NOT APPLY WHERE SECTION 502 (D) IS ALSO APPLICABLE UNTIL SUCH TIME AS THE LOW PACIFIC COAST BID EXCEEDS 212 PERCENT OF THE FOREIGN COST. SINCE RECEIPT OF YOUR SUBMISSION, WE HAVE BEEN INFORMALLY ADVISED THAT THE PACIFIC COAST BID IN THIS INSTANCE IS UNDER THE LIMIT INDICATED ABOVE. THE BASIS OF THAT INFORMATION IT THEREFORE APPEARS THAT THE BID IS FOR ACCEPTANCE AND THAT NEGOTIATION IS NOT PERMISSIBLE.