B-152123, OCT. 10, 1963

B-152123, OCT. 10, 1963

TO MR. RICHARD E. FELL:

REFERENCE IS MADE TO YOUR LETTER OF JULY 24, 1963, AND TO LETTERS OF AUGUST 8 AND SEPTEMBER 4, 1963, FROM LORD, BISSELL AND BROOK PROTESTING THE AWARD OF A CONTRACT FOR COMMERCIAL SUPPORT SERVICES AT WASHINGTON NATIONAL AIRPORT UNDER INVITATION BNCA63-5.

THE FEDERAL AVIATION AGENCY ADMINISTRATOR HAS FURNISHED OUR OFFICE A REPORT ON YOUR PROTEST. INSOFAR AS PERTINENT, THE REPORT IS AS FOLLOWS:

"BUTLER'S PROTEST ARGUES THAT THE AWARD OF THE CONTRACT TO PAGE AIRWAYS WOULD BE UNLAWFUL BECAUSE THE PAGE PROPOSAL IS ECONOMICALLY UNSOUND, BECAUSE THE CONTRACT WOULD VIOLATE FAA POLICY AGAINST GRANT OF AN EXCLUSIVE RIGHT FOR THE CONDUCT OF AN AERONAUTICAL ACTIVITY AT A PUBLIC AIRPORT, AND BECAUSE IT WOULD RESULT IN A MONOPOLY OF GENERAL AVIATION SERVICES AT ALL MAJOR AIRPORTS IN THE WASHINGTON, D.C. METROPOLITAN AREA.

"WITH RESPECT TO THE ARGUMENT THAT THE PAGE PROPOSAL IS ECONOMICALLY UNSOUND, IT IS OBVIOUS THAT PAGE OFFERS TO RETURN TO THE GOVERNMENT AN ANNUAL AMOUNT SUBSTANTIALLY IN EXCESS OF THAT WHICH BUTLER PROPOSES. DURING 1962, UNDER ITS EXPIRED CONTRACT, THE GOVERNMENT RECEIVED $98,835.28 FROM BUTLER. UNDER THE STIMULUS OF COMPETITIVE BIDDING, BUTLER INCREASED ITS OFFER TO $183,385.08 (USING 1962 BUSINESS VOLUME AS AN ESTIMATE), WHILE THE PROPOSAL MADE BY PAGE WOULD RETURN TO THE GOVERNMENT, IN ADDITION TO FIXED RENTAL FEES OF APPROXIMATELY $58,000, THE SUM OF $341,032.41. WITH RESPECT TO SALES OF AVIATION FUEL, BUTLER, UNDER ITS EXPIRED CONTRACT, PAID TO THE FAA ONE-HALF (1/2 CENT) CENT PER GALLON, ITS BID FOR A RENEWED CONTRACT CALLED FOR A PAYMENT OF 2.875 CENTS PER GALLON ON SALES IN EXCESS OF 2,250,000 GALLONS, WHILE PAGE OFFERED A PAYMENT TO THE GOVERNMENT OF 8 1/8 CENTS PER GALLON WHILE SELLING AT THE SAME PRICE.

"DURING PRE-AWARD DISCUSSIONS WITH REPRESENTATIVES OF PAGE AIRWAYS, THEY WERE ADVISED OF THE DIFFERENCES BETWEEN THEIR OFFER AND THOSE OF OTHER COMPETITORS AND WERE QUESTIONED AS TO THE COMPANY'S ABILITY TO MAINTAIN A PROFITABLE OPERATION DESPITE THE PAYMENT OFFERED TO THE GOVERNMENT. OFFICIALS OF THE AGENCY WERE ASSURED THAT THE PROPOSAL WAS SOUND IN EVERY RESPECT AND THAT THE COMPANY WAS SATISFIED THAT THE AWARD OF A CONTRACT ON THE BASIS OF ITS PROPOSAL WOULD BE PROFITABLE.

"THE FAA IS UNDER OBLIGATION TO CONGRESS TO OPERATE WASHINGTON NATIONAL AIRPORT ON A SELF-SUSTAINING BASIS, IF POSSIBLE. TO THIS END, IT HAS APPROXIMATELY 180 CONCESSION CONTRACTS OUTSTANDING. IN THESE CONTRACTS THE AGENCY MUST BE CONCERNED NOT ONLY WITH THE QUALITY OF SERVICE OFFERED TO THE PUBLIC BUT WITH THE FINANCIAL RETURN TO THE GOVERNMENT. BUTLER ADVANCES NO EVIDENCE OF PAGE'S INABILITY TO PERFORM; ITS CONCLUSION IS BASED ONLY ON THE FACT THAT BUTLER ITSELF COULD NOT PERFORM PROFITABLY UNDER SUCH A CONTRACT. IN VIEW OF THE GOVERNMENT'S OBLIGATION TO OPERATE THE AIRPORT ON A SELF-SUSTAINING BASIS, IT IS ENTITLED TO A REASONABLE OPPORTUNITY TO ASCERTAIN WHETHER THE FIXED BASE OPERATION CAN BE CONDUCTED ON THE PRESENT TERMS. SIMILARLY, PAGE IS ENTITLED TO AN OPPORTUNITY TO SHOW THAT IT CAN SO PERFORM.

"SECOND, BUTLER REFERS TO THE AGENCY POLICY AGAINST THE GRANTING OF "EXCLUSIVE RIGHTS" TO CONDUCT AIRPORT AERONAUTICAL ACTIVITIES. ESSENTIALLY, THAT POLICY DECLARES THAT AN EXCLUSIVE RIGHT SHOULD NOT BE GRANTED FOR THE CONDUCT OF ANY AERONAUTICAL ACTIVITY ON AN AIRPORT RECEIVING FEDERAL FUNDS. AFTER NOTING THAT "THE OPPORTUNITY TO ENGAGE IN AERONAUTICAL ACTIVITIES SHOULD BE MADE AVAILABLE TO AT LEAST MORE THAN ONE PARTY," THE POLICY STATEMENT PROVIDES THAT "CARE SHOULD BE EXERCISED TO AVOID A DOCTRINAIRE INSISTENCE ON THIS POLICY WHEN IT WOULD BE OBVIOUSLY OR PROBABLY IMPRACTICAL TO ENFORCE IT.' CONSIDERATIONS, SUCH AS LACK OF AVAILABLE GROUND TO LOCATE AND CONDUCT THE ACTIVITY, SAFETY HAZARDS AND INSUFFICIENT VOLUME OF BUSINESS, ARE SPECIFICALLY CITED AS CIRCUMSTANCES MAKING THE APPLICATION OF THE POLICY UNREASONABLE OR IMPRACTICAL. BUTLER CONCEDES THAT "SPACE AND FACILITY LIMITATIONS AT NATIONAL PRECLUDE ANY OTHER OPERATOR . . . . THE POLICY DECLARATION CONTEMPLATES SUCH SITUATIONS.' (COPY OF AGENCY ORDER OA5250.1, JULY 17, 1962, ENCLOSED AS EXHIBIT E).

"THE ADMINISTRATOR'S STATEMENT OF JULY 17, 1962, ON EXCLUSIVE RIGHTS, RATHER THAN INITIATING OR EXPRESSING A NEW POLICY, REAFFIRMED AND CLARIFIED THE AGENCY'S POSITION ON A MATTER LONG OF CONCERN TO THE FEDERAL AVIATION AGENCY. INDEED, THE SAME CONSIDERATIONS OF POLICY AND PRACTICAL APPLICATION THAT ARE CURRENTLY BEFORE US WERE BEFORE US DURING THE PERIOD FROM 1949 TO THE PRESENT, WHEN BUTLER AVIATION COMPANY, THE PRESENT COMPLAINANT, WAS THE ONLY OPERATOR PROFIDING THE AERONAUTICAL SERVICES AT THE WASHINGTON NATIONAL AIRPORT. THE PHYSICAL CONSIDERATIONS OF SPACE AND AREA PREVENTED THIS AGENCY THEN, AND PREVENT US NOW, FROM MAKING MULTIPLE AWARDS FOR THE PERFORMANCE OF AERONAUTICAL SERVICES AT THE AIRPORT.

"THE AGENCY HOPES THAT FUTURE TRANSFER OF AVIATION ACTIVITIES FROM WASHINGTON NATIONAL TO DULLES OR TO MILITARY BASES WILL FREE SPACE AND HANGAR FACILITIES SUFFICIENT TO ACCOMMODATE ANOTHER FIXED-BASE OPERATOR. SIMILARLY, THE AGENCY INTENDS TO HAVE AN ADDITIONAL FIXED BASE OPERATOR AT DULLES, WHEN ITS BUSINESS VOLUME BECOMES SUFFICIENT TO SUPPORT IT. IN ANTICIPATION OF THIS, THE CONTRACTS AT BOTH WASHINGTON NATIONAL AND DULLES SPECIFICALLY PROVIDE THAT THE CONTRACTOR'S RIGHT TO PROVIDE SERVICES IS NOT EXCLUSIVE, AND RESERVE TO THE GOVERNMENT THE RIGHT TO GRANT TO OTHERS "RIGHTS AND PRIVILEGES UPON THE AIRPORT WHICH ARE IDENTICAL IN WHOLE OR IN PART TO THOSE GRANTED TO THE CONTRACTOR.'

"WHILE THE EXISTENCE OF ONE FIXED-BASE OPERATOR FACILITY AT WASHINGTON NATIONAL IS NOT THE OPTIMUM DESIRABLE SITUATION, IT SHOULD BE NOTED THAT THIS SITUATION WAS NOT CREATED BY THE AWARD TO PAGE, AND WOULD NOT BE ALLEVIATED OR ALTERED BY TRANSFER OF THE AWARD TO BUTLER. IN EITHER EVENT, CIRCUMSTANCES WILL REQUIRE CONTINUANCE, FOR THE TIME BEING, OF THE ONE-FACILITY SITUATION WHICH EXISTED DURING THE PAST PERIOD IN WHICH BUTLER WAS THE SOLE OPERATOR.

"FINALLY, BUTLER ARGUES THAT AN AWARD TO PAGE AIRWAYS AT WASHINGTON NATIONAL "WOULD RESULT IN A MONOPOLY OF SUCH GENERAL AVIATION SERVICES AND FACILITIES AT ALL MAJOR AIRPORTS IN THE WASHINGTON, D.C. METROPOLITAN AREA TO THE PREJUDICE OF THE USERS OF THESE SERVICES AND FACILITIES, BECAUSE PAGE AIRWAYS IS ALREADY THE SOLE OPERATOR OF SUCH SERVICES AND FACILITIES AT DULLES.'

"IT SHOULD BE POINTED OUT AT THE BEGINNING THAT THERE IS NO GOVERNMENTAL OR AGENCY POLICY REQUIRING A DISPERSION OF AERONAUTICAL BUSINESS OPPORTUNITY WITHIN SELECTED GEOGRAPHICAL AREAS. BUTLER WOULD CREATE SUCH A POLICY, FOR THE WASHINGTON, D.C. AREA ALONE. THE PRESENT AGENCY POLICY AGAINST EXCLUSIVE RIGHTS IS DESIGNED TO ASSURE THAT USERS OF AERONAUTICAL SERVICES AT ANY GIVEN AIRPORT HAVE A CHOICE OF COMPETING SERVICES AT THAT AIRPORT, WHENEVER VOLUME OF BUSINESS AND OTHER CIRCUMSTANCES PERMIT. NEITHER THE AGENCY POLICY, NOR THE LAW ON WHICH IT IS BASED, ATTEMPTS TO DICTATE THE MANNER IN WHICH AIRPORT AERONAUTICAL SERVICES AFFORDED IN ANY GEOGRAPHIC AREA SHOULD BE DISTRIBUTED. EVEN IF THE AGENCY WERE EMPOWERED BY LAW TO REQUIRE A DISPERSION OF AERONAUTICAL BUSINESS OPPORTUNITY IN GEOGRAPHIC AREAS, THE AREA SELECTED BY BUTLER WOULD BE AN UNNATURAL ONE. ALTHOUGH IT WOULD INCLUDE DULLES AND WASHINGTON NATIONAL, IT WOULD NOT INCLUDE FRIENDSHIP AIRPORT WHICH IS APPROXIMATELY THE SAME DISTANCE FROM WASHINGTON NATIONAL AS IS DULLES. THE OBVIOUS REASON FOR AVOIDING THIS NATURAL AREA OF AVIATION ACTIVITY IS THAT A THIRD OPERATOR, PAN MARYLAND AIRWAYS, INC., HAS THE CONTRACT AT FRIENDSHIP AND THUS THERE IS NO "MONOPOLY" IN THE AREA. IN ADDITION, THERE ARE A LARGE NUMBER OF SMALLER FIELDS IN THE AREA, AT WHICH AERONAUTICAL SERVICES ARE FURNISHED BY OPERATORS OTHER THAN PAGE. IT IS OF FURTHER INTEREST TO NOTE THAT BUTLER CONTEMPLATES AN AGENCY ANTI-MONOPOLY POLICY FOR THE WASHINGTON AREA ALONE, NOT A NATIONAL ONE WHICH WOULD INCLUDE, FOR EXAMPLE, CHICAGO, WHERE BUTLER IS THE OPERATOR AT O-HARE, MIDWAY AND MIEGS FIELD.

"THE PROMULGATION OF GOVERNMENT OR AGENCY POLICY AT THIS TIME WHICH WOULD BAR PAGE FROM BIDDING ON THE CONTRACT AT WASHINGTON NATIONAL WOULD BE MOST INEQUITABLE. PAGE BID ON THE LESS-LUCRATIVE CONTRACT AT DULLES WHILE BUTLER DECLINED. PAGE DID SO IN GOOD FAITH, WITH NO REASON TO ANTICIPATE THAT IT WOULD BE PENALIZED FOR SO DOING OR THAT BUTLER WOULD BE REWARDED FOR REFUSING TO BID.

"BUTLER ARGUES "THAT THE FAA'S CREATION OF SUCH A MONOPOLY" IN THE WASHINGTON, D.C. AREA WOULD EFFECTIVELY DENY WASHINGTON AVIATION THE BENEFITS OF COMPETITION IN SUCH SERVICES. IN ANSWER TO THIS WE SHOULD POINT OUT THAT THE RATES WHICH MAY BE CHARGED BY PAGE IN ITS ACTIVITIES AT WASHINGTON NATIONAL ARE, BY CONTRACT, SPECIFICALLY SUBJECT TO THE REVIEW AND WRITTEN APPROVAL OF THE GOVERNMENT. THE INVITATIONS FOR PROPOSALS TO THE BIDDERS SET FORTH THE RATES THEN CHARGED BY BUTLER, WITH THE FURTHER STATEMENT THAT THE GOVERNMENT RETAINED THE RIGHT TO REVIEW AND APPROVE THE SCHEDULE OF RATES AND CHARGES TO BE ESTABLISHED BY THE SELECTED OPERATOR. IN ITS PROPOSAL, WHICH HAS BEEN INCORPORATED IN THE CONTRACT BETWEEN THE PARTIES, PAGE AGREED TO RETAIN BUTLER'S PRIOR PRICE SCHEDULE. THE CONTRACT REITERATES THE GOVERNMENT'S RIGHT OF REVIEW AND APPROVAL OF THE CONTRACTOR'S CHARGES AND FEES AND FURTHER PROVIDES THAT THEY SHALL BE "COMPARABLE WITH THOSE AT OTHER MAJOR AIRPORTS.' PAGE'S CONTRACT AT DULLES CONTAINS SIMILAR PROVISIONS. IN THESE CIRCUMSTANCES PAGE DOES NOT HAVE A MONOPOLIST'S ABILITY TO CONTROL AND MANIPULATE PRICES WHICH IT MAY CHARGE AND THE USERS OF THE SERVICES WILL BE UNDER NO DISADVANTAGE.'

IT SEEMS CLEAR FROM THE ABOVE REPORT THAT THE AWARD OF THE CONTRACT TO PAGE WILL RESULT IN THE BEST FINANCIAL RETURN TO THE GOVERNMENT AND, WHILE IT IS CONTENDED THAT THE PROPOSAL UPON WHICH IT IS BASED IS ECONOMICALLY UNSOUND, THE COMPANY IS SATISFIED THAT IT WILL BE ABLE TO PERFORM PROFITABLY. IT IS TRUE THAT THE ADMINISTRATOR HAS PRESCRIBED A GENERAL POLICY AGAINST EXCLUSIVE RIGHTS, BUT THE POLICY CONTAINS EXCEPTIONS WHICH ENCOMPASS THE IMMEDIATE SITUATION. FURTHER, THE ADMINISTRATOR IS NOT UNMINDFUL OF THE EXCLUSIVE SITUATION THAT NOW EXISTS AND HAD EXISTED DURING THE 14 YEARS OF YOUR COMPANY'S INCUMBENCY, AND HE HAS ADVISED THAT THE AGENCY IS HOPEFUL AND OPTIMISTIC THAT IT WILL SUCCEED DURING THE TERM OF THE PRESENT CONTRACT IN PROVIDING A SECOND BASE OPERATOR AT WASHINGTON NATIONAL AIRPORT. AS TO THE ALLEGATIONS RELATIVE TO VIOLATIONS OF THE ANTITRUST LAWS AND MONOPOLISTIC PRACTICES, THE DEPARTMENT OF JUSTICE IS CHARGED WITH THE ADMINISTRATION OF LAWS PERTAINING TO THOSE ACTIVITIES AND THOSE MATTERS ARE MORE PROPERLY FOR THE ATTENTION OF THAT DEPARTMENT.

UPON RECEIPT OF THE SEPTEMBER 4 LETTER CONTENDING THAT THERE IS NO DISPUTE AS TO THE AVAILABILITY OF SPACE FOR A SECOND BASE OPERATOR TO DUPLICATE SOME OF THE ACTIVITIES AT WASHINGTON NATIONAL AIRPORT, OUR OFFICE SOLICITED VERIFICATION OF THIS FACT FROM THE FEDERAL AVIATION AGENCY AND THE ADMINISTRATOR OF THE AGENCY HAS ADVISED THAT IT IS CURRENTLY UNABLE TO PROVIDE SPACE FOR OTHER THAN THE PRESENT BASE OPERATOR AND THAT AS SOON AS HE IS SURE THAT MULTIPLE FIXED BASE OPERATORS WILL BE ABLE TO OPERATE PROPERLY ON ADEQUATE SPACE AND UNDER SAFE CONDITIONS, A SECOND OPERATOR WILL BE SELECTED.

IN VIEW OF THE FOREGOING, WE SEE NO LEGAL BASIS UPON WHICH OUR OFFICE COULD PROPERLY OBJECT TO THE AWARD THAT WAS MADE.