B-143985, DEC. 27, 1960

B-143985: Dec 27, 1960

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INC.: REFERENCE IS MADE TO YOUR LETTERS DATED SEPTEMBER 12 AND SEPTEMBER 29. YOUR LETTERS EXPRESS THE OPINION THAT THE AWARD TO HAWAIIAN AIRLINES WILL RESULT IN THE EXPENDITURE OF APPROXIMATELY $138. WE HAVE ASKED THE SECRETARY OF THE AIR FORCE FOR A REPORT ON THE FACTS AND CIRCUMSTANCES SURROUNDING THIS PROCUREMENT. THE THIRD AND FIFTH OF THESE COURSES OF ACTION WERE AS FOLLOWS: "3. "/4) GIVING PREFERENCE IN THE MOVEMENT OF MATS TRAFFIC TO THOSE COMMERCIAL CARRIERS: (A) WHO ARE EFFECTIVELY COMMITTED TO THE CIVIL RESERVE AIR FLEET (CRAF) PROGRAM. (B) WHOSE FACILITIES AND EQUIPMENT ARE MOST ADVANTAGEOUS TO THE EMERGENCY NEEDS OF THE DEPARTMENT OF DEFENSE. OR (C) WHO ARE DEMONSTRATING A WILLINGNESS AND ABILITY TO ACQUIRE UNCOMPROMISED CARGO AIRCRAFT.

B-143985, DEC. 27, 1960

TO NORTHWEST AIRLINES, INC.:

REFERENCE IS MADE TO YOUR LETTERS DATED SEPTEMBER 12 AND SEPTEMBER 29, 1960, ADVISING OF THE ACTION TAKEN BY THE DEPARTMENT OF THE AIR FORCE ON SEPTEMBER 2 IN CONTRACTING WITH HAWAIIAN AIRLINES, INC., FOR THE ONE-WAY TRANSPORTATION OF 1008 PASSENGERS FROM TRAVIS AIR FORCE BASE TO TACHIKAWA, JAPAN, DURING NOVEMBER AND DECEMBER, 1960, AT A RATE OF $344.92 PER PASSENGER. IN VIEW OF YOUR PROPOSAL TO TRANSPORT THESE PASSENGERS FROM SEATTLE TO TOKYO AT A COST OF $208 PER PASSENGER, AND THE FACT THAT THE ADDITIONAL COST OF AIR TRANSPORTATION FROM TRAVIS AIR FORCE BASE TO SEATTLE WOULD NOT EXCEED $51.45 PER PASSENGER, YOUR LETTERS EXPRESS THE OPINION THAT THE AWARD TO HAWAIIAN AIRLINES WILL RESULT IN THE EXPENDITURE OF APPROXIMATELY $138,015 MORE THAN WOULD BE REQUIRED IF YOUR PROPOSAL HAD BEEN ACCEPTED.

PURSUANT TO YOUR REQUEST THAT THIS OFFICE INTERVENE IN THE MATTER, WE HAVE ASKED THE SECRETARY OF THE AIR FORCE FOR A REPORT ON THE FACTS AND CIRCUMSTANCES SURROUNDING THIS PROCUREMENT, TOGETHER WITH COPIES OF THE DOCUMENTS PERTINENT TO THE PROCUREMENT. THESE INDICATE THAT ON JULY 23, 1958, THE PRESIDENT ASKED THE DEPARTMENT OF DEFENSE TO MAKE A STUDY OF THE MILITARY ROLE PERFORMED BY MATS IN PEACE AND WAR. THAT REQUEST RESULTED IN PUBLICATION IN FEBRUARY 1960 OF A REPORT ENTITLED "THE ROLE OF MILITARY AIR TRANSPORT SERVICE IN PEACE AND WAR," WHICH INCLUDED A STATEMENT OF NINE PRESIDENTIALLY APPROVED COURSES OF ACTION TO BE FOLLOWED BY THE DEPARTMENT OF DEFENSE. THE THIRD AND FIFTH OF THESE COURSES OF ACTION WERE AS FOLLOWS:

"3. THAT MATB ROUTINE CHANNEL TRAFFIC (REGULARLY SCHEDULED, FIXED ROUTES) OPERATIONS BE REDUCED ON AN ORDERLY BASIS, CONSISTENT WITH ASSURED COMMERCIAL AIRLIFT CAPABILITY AT REASONABLE COST, AND CONSISTENT WITH ECONOMICAL AND EFFICIENT USE, INCLUDING REALISTIC TRAINING, OF THE MATS CAPACITY RESULTING FROM THE PROVISIONS OF PARAGRAPH 1 ABOVE.

"5. THAT, WITH RESPECT TO SERVICES OVERSEAS AND TO FOREIGN COUNTRIES, COMMERCIAL AUGMENTATION AIRLIFT PROCUREMENT POLICIES AND PRACTICES BE BETTER ADAPTED TO THE LONG-RANGE DEPARTMENT OF DEFENSE REQUIREMENTS, SO AS TO ENCOURAGE AND ASSIST IN SOUND ECONOMIC GROWTH, DEVELOPMENT, AND MAINTENANCE OF AN INCREASED AIR CARGO CAPABILITY; THAT THERE BE EXPLORED THE FEASIBILITY OF:

"/1) EXPANDING THE PROVISIONS OF PARAGRAPH 3 ABOVE TO APPLY TO OTHER MATS OPERATIONS IN ADDITION TO ROUTINE CHANNEL TRAFFIC;

"/2) (A) PROCURING COMMERCIAL CARGO AIRLIFT ONLY FROM AIR CARRIERS, AS DEFINED IN SECTION 101 (3) OF THE FEDERAL AVIATION ACT OF 1958, AND INCREASING THE AMOUNT OF SUCH AIRLIFT OBTAINED AT TARIFF RATES FILED WITH THE CIVIL AERONAUTICS BOARD AS DISTINGUISHED FROM AIRLIFT OBTAINED THROUGH THE PRACTICE OF ADVERTISING FOR BIDS,

(B) REQUIRING THAT ALL CARGO CARRIED BY COMMERCIAL CARRIERS BE SO MOVED;

"/3) ENTERING INTO LONGER TERM CONTRACTS FOR MATS TRAFFIC; AND

"/4) GIVING PREFERENCE IN THE MOVEMENT OF MATS TRAFFIC TO THOSE COMMERCIAL CARRIERS:

(A) WHO ARE EFFECTIVELY COMMITTED TO THE CIVIL RESERVE AIR FLEET (CRAF) PROGRAM;

(B) WHOSE FACILITIES AND EQUIPMENT ARE MOST ADVANTAGEOUS TO THE EMERGENCY NEEDS OF THE DEPARTMENT OF DEFENSE; OR

(C) WHO ARE DEMONSTRATING A WILLINGNESS AND ABILITY TO ACQUIRE UNCOMPROMISED CARGO AIRCRAFT;

AND THAT LEGISLATION BE SOUGHT IF NECESSARY TO PERMIT ACCOMPLISHMENT OF ANY OF THE FOREGOING CONSIDERED DESIRABLE.'

THE REPORT OF THE SECRETARY OF THE AIR FORCE STATES THAT THE AIR FORCE ESTABLISHED THREE CATEGORIES OF COMMERCIAL AUGMENTATION AIRLIFT, DESIGNATED AS CATEGORIES A, B, AND C, TO MEET THE OBJECTIVES SPECIFIED ABOVE. THE AIR FORCE PROGRAM OF IMPLEMENTATION WAS APPROVED BY THE DEPUTY SECRETARY OF DEFENSE IN JUNE 1960, HOWEVER, IT BECAME OBVIOUS THEREAFTER THAT THE NEW PROGRAM WOULD DIFFER SO GREATLY FROM PROCUREMENTS PREVIOUSLY MADE BY MATS THAT EXTENSIVE NEGOTIATION WOULD BE NECESSARY BEFORE AIRLIFT BASED COMPLETELY ON THE NEW POLICY COULD BE PROCURED. ADDITIONALLY, IN JUNE 1960, THE CIVIL AERONAUTICS BOARD HAD INDICATED AN INTEREST IN THE MINIMUM RATES TO BE PROVIDED UNDER FUTURE MATS CONTRACTS. FACED WITH THIS NEED FOR NEGOTIATION BEFORE THE CATEGORY A PROGRAM COULD BE PUT INTO EFFECT, AND WITH A SIMILAR NEED FOR NEGOTIATION BEFORE CATEGORIES B AND C COULD BE PUT INTO EFFECT, THE DEPARTMENT OF THE AIR FORCE DECIDED TO PLACE INTERIM CONTRACTS COVERING ITS REQUIREMENTS FOR THE PERIOD FROM OCTOBER 1 THROUGH DECEMBER 31, 1960. OFFERS TO FURNISH NECESSARY SERVICES DURING THIS PERIOD WERE THEREFORE REQUESTED PURSUANT TO THE TERMS OF CALL CONTRACTS WHICH HAD BEEN ESTABLISHED WITH VARIOUS INTERESTED CARRIERS. THE PROPOSAL OF NORTHWEST AIRLINES DATED AUGUST 11, 1960, APPEARS TO HAVE BEEN SUBMITTED IN RESPONSE TO THIS REQUEST.

THE RECORDS OF THE AIR FORCE INDICATE THAT THE PROPOSAL SUBMITTED BY NORTHWEST AIRLINES WAS NOT CONSIDERED RESPONSIVE TO THE REQUEST FOR PROPOSALS, PRIMARILY BECAUSE THE REQUEST SPECIFIED TRAVIS AIR FORCE BASE AND TACHIKAWA AIR BASE AS POINTS OF ORIGIN AND DESTINATION WHILE NORTHWEST'S PROPOSAL OFFERED SERVICES FROM SEATTLE TO TOKYO. SECONDARY CONSIDERATIONS INCLUDED THE BELIEF THAT INSUFFICIENT TIME WAS AVAILABLE TO PERMIT THE DIVERSION OF PASSENGERS FROM TRAVIS TO SEATTLE; THAT NORTHWEST'S OFFER PROPOSED USE OF BOTH JET AND PISTON TYPE AIRCRAFT; AND SUCH PROPOSAL FAILED TO GUARANTEE EXPANDED CAPACITY IN THE EVENT OF AN EMERGENCY. ADDITIONALLY, IT APPEARS THAT IN COMPARING THE PRICES OFFERED BY NORTHWEST CONSIDERATION WAS ALSO GIVEN TO THE FACT THAT ACCEPTANCE OF NORTHWEST'S PROPOSAL WOULD REQUIRE THE INCURRENCE OF ADDITIONAL COSTS IN TRANSPORTING PASSENGERS FROM TOKYO INTERNATIONAL AIRPORT TO TACHIKAWA AIR BASE, AS WELL AS FROM TRAVIS TO SEATTLE, AND THAT NORTHWEST, AT THE TIME OF MAKING ITS PROPOSAL, HAD NOT NEGOTIATED WITH THE GOVERNMENT THE ARRANGEMENTS NECESSARY TO ASSURE PROPER CARE OF PASSENGERS AT CIVIL AIRPORTS WHERE MILITARY FACILITIES ARE NOT AVAILABLE.

IN VIEW THEREOF, AND IN VIEW OF THE FACT THAT THE RATES PROPOSED BY OTHER OFFERORS WERE UNACCEPTABLE TO THE CIVIL AERONAUTICS BOARD, A NEW REQUEST FOR OFFERS WAS ISSUED ON AUGUST 25, 1960. THIS REQUEST COVERED 13 SEPARATE ITEMS, ITEM 10 OF WHICH WAS FOR THE CARRIAGE OF 1014 PASSENGERS FROM TRAVIS TO TACHIKAWA DURING NOVEMBER AND DECEMBER 1960. WE UNDERSTAND THAT, ALTHOUGH NORTHWEST AIRLINES WAS REQUESTED TO SUBMIT PROPOSALS UNDER THIS REQUEST, IT FAILED TO DO SO. A CONTRACT FOR THE SERVICES COVERED BY ITEM 10 WAS THEREFORE NEGOTIATED, PURSUANT TO 10 U.S.C. 2304 (A) (16), WITH HAWAIIAN AIRLINES ON SEPTEMBER 2, 1960, AT A PRICE OF $344.92 PER PASSENGER.

IT IS OUR UNDERSTANDING THAT, AS A RESULT OF NEGOTIATIONS ON OCTOBER 25, 1960, THE AIR FORCE DID REACH A SUBSTANTIVE AGREEMENT WITH NORTHWEST AIRLINES ON A CATEGORY A ARRANGEMENT FOR A SIX MONTHS TEST PERIOD BEGINNING JANUARY 1, 1961. WE ARE ADVISED THAT THIS ARRANGEMENT PERMITS THE GOVERNMENT TO USE AVAILABLE JET CAPACITY FULLY BEFORE PLACING PASSENGERS ON PISTON TYPE AIRCRAFT; PROVIDES FOR PASSENGERS REPORTING DIRECTLY TO NORTHWEST PERSONNEL AT CIVIL AIRPORTS; AND REQUIRES NORTHWEST TO ASSUME FULL RESPONSIBILITY FOR SUCH PASSENGERS FROM TIME OF DEPARTURE.

WITH RESPECT TO PROCUREMENT OF THE SERVICES TO BE PERFORMED DURING THE FINAL MONTHS OF 1960, THE REPORT FROM THE DEPARTMENT OF THE AIR FORCE TO THIS OFFICE POINTS OUT THAT, BECAUSE THE REQUEST FOR PROPOSALS WAS INTENDED TO MEET INTERIM REQUIREMENTS (INCLUDING EMERGENCY GUARANTEES) DURING THE PERIOD WHILE CATEGORY A, B, AND C PROGRAMS WERE BEING ESTABLISHED WITH THE AIR TRANSPORTATION INDUSTRY, THIS REQUEST CALLED FOR OFFERS OF GUARANTEED EXPANDED CAPACITY DURING PERIODS OF EMERGENCY AND ALL CONTRACTS AWARDED PURSUANT TO THE REQUEST FOR PROPOSALS PROVIDE FOR 100 PERCENT EXPANSION IN THE EVENT OF SUCH EMERGENCY. IT IS THEREFORE THE POSITION OF THE DEPARTMENT THAT THE RELATIONSHIP BETWEEN THIS PROCUREMENT AND THE LONG-RANGE REQUIREMENTS OF THE DEPARTMENT OF DEFENSE WHICH HAVE BEEN ESTABLISHED IN ACCORDANCE WITH THE COURSES OF ACTION APPROVED BY THE PRESIDENT AND REFERRED TO ABOVE, ARE SUFFICIENT TO JUSTIFY NEGOTIATION UNDER 10 U.S.C. 2304 (A) (16).

UNDER THE PROVISIONS OF 10 U.S.C. 2304 (A) (16) THE SECRETARY OF THE AIR FORCE (OR HIS DESIGNEE) IS AUTHORIZED TO NEGOTIATE CONTRACTS IFHE DETERMINES THAT IT IS IN THE INTEREST OF NATIONAL DEFENSE TO HAVE A SUPPLIER AVAILABLE FOR FURNISHING SERVICES IN CASE OF A NATIONAL EMERGENCY. THE LEGISLATIVE HISTORY OF THIS AUTHORITY CLEARLY INDICATES THAT PRICE TO THE GOVERNMENT NEED NOT BE CONSIDERED A CONTROLLING FACTOR IN AWARDING CONTRACTS THEREUNDER; THAT IT MIGHT BE EXPECTED THAT THE GOVERNMENT WOULD BE REQUIRED TO PAY MORE FOR SERVICES OBTAINED IN FURTHERANCE OF THIS OBJECTIVE; AND THAT THE VALIDITY OF CONTRACTS NEGOTIATED AND AWARDED UNDER THIS AUTHORITY SHOULD NOT BE SUBJECT TO QUESTION EITHER BY THE GENERAL ACCOUNTING OFFICE OR BY THE COURTS. VIEW OF THE CIRCUMSTANCES SURROUNDING THIS PROCUREMENT, AS OUTLINED ABOVE, WE ARE UNABLE TO CONCLUDE THAT THE DETERMINATION TO NEGOTIATE CONTRACTS FOR THE INVOLVED SERVICES UNDER THE AUTHORITY CONTAINED IN 10 U.S.C. 2304 (A) (16) WAS IMPROPER. NEITHER WOULD IT NECESSARILY APPEAR THAT PRICE IS TO BE CONSIDERED THE CONTROLLING FACTOR IN DETERMINING THE OFFEROR WITH WHOM A CONTRACT IS TO BE NEGOTIATED UNDER THIS AUTHORITY. IN VIEW THEREOF, AND IN VIEW OF THE CLEARLY EXPRESSED CONGRESSIONAL INTENTION THAT THE VALIDITY OF CONTRACTS AWARDED UNDER THIS AUTHORITY SHALL NOT BE QUESTIONED, IT WOULD APPEAR THAT THERE IS NO JUSTIFIABLE BASIS UPON WHICH ANY FURTHER ACTION MAY BE TAKEN BY THIS OFFICE.

ACCORDINGLY, YOUR REQUEST THAT THIS OFFICE TAKE CORRECTIVE ACTION, BASED UPON THE PREMISE THAT THE CONTRACT AWARDED TO HAWAIIAN AIRLINES WILL RESULT IN THE UNNECESSARY EXPENDITURE OF PUBLIC FUNDS, MUST BE DENIED.