B-168570, JUN. 19, 1970

B-168570: Jun 19, 1970

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BIDS WERE SUBSEQUENTLY REEVALUATED TO INCLUDE TRANSPORTATION COSTS FROM SEGREGATED TANKAGE AND CONTRACTS CHANGED TO REFLECT LOWEST LAID-IN COST TO GOVERNMENT. SHOULD BE TREATED AS EVALUATION FACTORS AS TO ITEMS WHERE GOVERNMENT WAS TO BARGE FUEL AT ITS OWN EXPENSE FROM ORIGIN TO GOVERNMENT-LEASED STORAGE FOR TRANSHIPMENT TO DESTINATION. IS REJECTED SINCE SUCH COSTS ARE CONSIDERED SPECULATIVE OR UNREALISTIC AS RELATED TO BID EVALUATION AND CONCEPT OF FAIRNESS TO ALL BIDDERS AND TO GOVERNMENT. CONSIDERATION OF SUCH FACTORS IS BELIEVED UNWARRANTED. INSURANCE BIDDER'S CONTENTION THAT CARGO INSURANCE OUGHT TO HAVE BEEN CONSIDERED AS EVALUATION FACTOR. WHERE GOVERNMENT WAS TO BARGE FUEL AT ITS OWN EXPENSE FROM SUPPLIER'S ORIGIN TO GOVERNMENT-LEASED STORAGE FOR TRANSHIPMENT TO DESTINATION.

B-168570, JUN. 19, 1970

BIDS--EVALUATION ERRONEOUS WHERE BIDDER CONTENDED THAT DEFENSE FUEL SUPPLY CENTER DID NOT CONSIDER AS EVALUATION FACTOR COST OF MAINTAINING SEGREGATED TANKAGE FOR TERMINATING ANTI-ICING INHIBITED PRODUCT ALONG WITH UNINHIBITED PRODUCT UNDER DFSC INVITATION FOR FUEL, AND CONTRACTING OFFICER CONCEDED THAT AT BID EVALUATION DATE DFSC OVERLOOKED FACT THAT NAVY ITEMS REQUIRED SEGREGATED TANKAGE NOT THEN AVAILABLE, BIDS WERE SUBSEQUENTLY REEVALUATED TO INCLUDE TRANSPORTATION COSTS FROM SEGREGATED TANKAGE AND CONTRACTS CHANGED TO REFLECT LOWEST LAID-IN COST TO GOVERNMENT. BIDS--EVALUATION-- PROPRIETY--CRITERIA OF EVALUATION BIDDER'S CONTENTION THAT TERMINAL OPERATING AND THRU-PUT COSTS, AS WELL AS INTRANSIT BARGING AND TERMINAL EVAPORATION LOSS COSTS, SHOULD BE TREATED AS EVALUATION FACTORS AS TO ITEMS WHERE GOVERNMENT WAS TO BARGE FUEL AT ITS OWN EXPENSE FROM ORIGIN TO GOVERNMENT-LEASED STORAGE FOR TRANSHIPMENT TO DESTINATION, IS REJECTED SINCE SUCH COSTS ARE CONSIDERED SPECULATIVE OR UNREALISTIC AS RELATED TO BID EVALUATION AND CONCEPT OF FAIRNESS TO ALL BIDDERS AND TO GOVERNMENT, AND ABSENT FIRM BASIS FOR COMPUTING EVALUATION DIFFERENTIALS WITH REASONABLE CERTAINTY, CONSIDERATION OF SUCH FACTORS IS BELIEVED UNWARRANTED. SEE COMP. GEN. DECS. CITED. BIDS--EVALUATION--INSURANCE BIDDER'S CONTENTION THAT CARGO INSURANCE OUGHT TO HAVE BEEN CONSIDERED AS EVALUATION FACTOR, WHERE GOVERNMENT WAS TO BARGE FUEL AT ITS OWN EXPENSE FROM SUPPLIER'S ORIGIN TO GOVERNMENT-LEASED STORAGE FOR TRANSHIPMENT TO DESTINATION, IS REJECTED, SINCE GOVERNMENT IS SELF INSURER, AND UNLESS EXPRESSLY PROVIDED FOR BY STATUTE, APPROPRIATED FUNDS ARE NOT AVAILABLE FOR PURCHASE OF INSURANCE TO COVER LOSS OF OR DAMAGE TO GOVERNMENT PROPERTY. SEE COMP. GEN. DECS. CITED.

TO COASTAL STATES PETROCHEMICAL COMPANY:

WE REFER TO YOUR PROTEST BY TELEGRAM AND LETTER OF DECEMBER 23, 1969, AS SUPPLEMENTED BY SUBSEQUENT CORRESPONDENCE, CONCERNING PROCUREMENT BY THE DEFENSE FUEL SUPPLY CENTER (DFSC), DEFENSE SUPPLY AGENCY (DSA), OF REQUIREMENTS FOR JP-4 AIRPLANE JET FUEL, WITH AND WITHOUT ANTI-ICING INHIBITOR, FOR THE DEPARTMENTS OF THE AIR FORCE, ARMY, AND NAVY, THE COAST GUARD, THE FEDERAL AVIATION AGENCY, AND THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION. THE PROCUREMENT WAS ADVERTISED UNDER INVITATION FOR BIDS (IFB) DSA600-70-B-0061, ISSUED AUGUST 19, 1969, WITH A BID OPENING DATE OF OCTOBER 16, 1969, AND YOUR PROTEST RELATES TO THE EVALUATION OF THE BIDS, THE PROPRIETY OF CERTAIN BID MODIFICATIONS AFTER BID OPENING, AND THE PLACEMENT OF ORDERS BY DFSC AGAINST A CONTRACT AWARDED TO YOU UNDER THE IFB.

THE FUEL REQUIREMENTS WERE SET FORTH IN 368 ITEMS WITH A TOTAL ESTIMATED QUANTITY OF MORE THAN TWO BILLION GALLONS, A SUBSTANTIAL PORTION OF WHICH WAS SET ASIDE FOR AWARD TO SMALL BUSINESS. PERMISSIBLE METHODS OF DELIVERY, WHEN OFFERED, INCLUDED TANKER, BARGE, TANK CAR, TRANSPORT TRUCK, AND PIPELINE.

EVALUATION PROVISIONS OF THE IFB PERTINENT TO YOUR PROTEST READ, IN PART, AS FOLLOWS:

"SHIPPING POINTS) USED IN EVALUATION OF F.O.B. ORIGIN BIDS

(OR PROPOSALS) (1968 JUNE)

"(A) IF MORE THAN ONE SHIPPING POINT OR PLANT IS DESIGNATED BY THE BIDDER (OR OFFEROR) AND HE FAILS TO INDICATE THE QUANTITY PER SHIPPING POINT OR PLANT PRIOR TO BID OPENING (OR THE CLOSING DATE SPECIFIED FOR RECEIPT OF PROPOSALS), THE GOVERNMENT WILL EVALUATE THE BID (OR PROPOSAL) ON THE BASIS OF DELIVERY OF THE ENTIRE QUANTITY FROM THE POINT OR PLANT WHERE COST OF TRANSPORTATION IS MOST FAVORABLE TO THE GOVERNMENT.

"(B) IF THE BIDDER (OR OFFEROR), PRIOR TO BID OPENING (OR THE CLOSING DATE SPECIFIED FOR RECEIPT OF PROPOSALS), FAILS TO INDICATE ANY SHIPPING POINT OR PLANT, THE GOVERNMENT WILL EVALUATE THE BID (OR PROPOSAL) ON THE BASIS OF DELIVERY FROM THE PLANT AT WHICH THE CONTRACT WILL BE PERFORMED, AS INDICATED IN THE BID OR PROPOSAL. IF NO SUCH PLANT IS INDICATED IN THE BID (OR PROPOSAL), THEN THE BID (OR PROPOSAL) WILL BE EVALUATED ON THE BASIS OF DELIVERY FROM THE CONTRACTORS BUSINESS ADDRESS INDICATED ON STANDARD FORM 33 OR OTHER BID (PROPOSAL) FORM.

"(C) IF THE BIDDER (OR OFFEROR) UTILIZES A SHIPPING POINT OTHER THAN THAT WHICH HAS BEEN USED BY THE GOVERNMENT AS A BASIS FOR THE EVALUATION OF BIDS (OR PROPOSALS), ANY INCREASE OF TRANSPORTATION COSTS SHALL BE BORNE BY THE CONTRACTOR AND ANY SAVINGS SHALL REVERT TO THE GOVERNMENT.

"EVALUATION OF OFFERS (DFSC MAY 1968)

"(A) OFFERORS ARE REQUESTED TO OFFER ON ALL OR ANY PART OF THE PRODUCTS LISTED HEREIN, AND ON THE METHODS OF DELIVERY THE OFFEROR'S FACILITIES WILL PERMIT. THE ARMED SERVICES PREFER TO USE GOVERNMENT OWNED RAILROAD TANK CARS AND/OR TO ARRANGE FOR TRANSPORT TRUCKS FOR DELIVERY TO USING ACTIVITY (DESTINATIONS) FROM ORIGIN, WHETHER IT BE REFINERY, TERMINAL OR BULK PLANT, UNLESS THE DESTINATION PRICE OFFERED BY OFFEROR IS LOWER THAN THE ORIGIN PRICE PLUS COMMERCIAL OR NEGOTIATED GOVERNMENT RATES. EVEN THOUGH OFFERS ARE MADE ON A DESTINATION BASIS, OFFERS COVERING DELIVERY ON AN ORIGIN BASIS AT CONTRACTOR'S REFINERY, TERMINAL AND/OR BULK PLANT ARE REQUESTED AND SHOULD BE INCLUDED IN SPACES PROVIDED. THE GOVERNMENT RESERVES THE RIGHT TO AWARD, AS THE INTEREST OF THE GOVERNMENT MAY REQUIRE, ON THE BASIS OF ORIGIN DELIVERY AT REFINERY, TERMINAL AND/OR BULK PLANT OR ON THE BASIS OF DESTINATION DELIVERY.

"(B) WHEN REQUIREMENTS ARE INDICATED AS ALTERNATE DELIVERY IN THE SCHEDULE, EVALUATION WILL BE MADE ON THE COST OF DELIVERY DIRECT FROM OFFEROR'S REFINERY, TERMINAL, OR BULK PLANT AND ALTERNATELY ON THE COST OF BULK WATER OR PIPELINE LIFTINGS FROM REFINERIES, TRANSPORTATION TO THE GOVERNMENT CONTROLLED TERMINALS INDICATED, AND TRANSPORTATION FROM THE TERMINAL TO USING ACTIVITY. AWARDS WILL BE MADE IN WHOLE OR PART ON EITHER BASIS, BUT NOT ON BOTH. *** "

THE CUSTOMARY PROVISIONS RELATING TO LATE BID MODIFICATIONS WERE INCLUDED IN THE CLAUSE PRESCRIBED BY ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2 -306, ENTITLED "LATE OFFERS AND MODIFICATIONS OR WITHDRAWALS (1968 DEC)," WHICH DO NOT PERMIT MODIFICATION OF BIDS AFTER AWARD UNLESS THE MODIFICATION MAKES AN OTHERWISE SUCCESSFUL OFFER MORE FAVORABLE TO THE GOVERNMENT.

ON OCTOBER 16, 1969, BIDS WERE OPENED AS SCHEDULED. YOU BID ON NINE ITEMS, AND ON DECEMBER 19, 1969, YOU WERE AWARDED CONTRACT DSA600-70-D 0791, WHICH COVERED ORIGIN DELIVERY AT YOUR CORPUS CHRISTI (TEXAS) PLANT, BASED ON USE OF TANKER, OF A TOTAL QUANTITY OF 33,100,000 GALLONS FOR THE AIR FORCE AND A TOTAL QUANTITY OF 8,900,000 GALLONS FOR DFSC, AS WELL AS DESTINATION DELIVERY AT LAREDO AIR FORCE BASE, LAREDO, TEXAS, BASED ON USE OF TRANSPORT TRUCK, OF 2,600,000 GALLONS AND DESTINATION DELIVERY AT THE NAVAL AIR STATION, KINGSVILLE, TEXAS, BASED ON USE OF PIPELINE, OF 4,900,000 GALLONS.

IN YOUR PROTEST TELEGRAM AND LETTER OF DECEMBER 23, 1969, YOU REFERRED TO ITEMS 174, 176 AND 183/184. ITEM 174 WAS FOR 30,800,000 GALLONS OF UNINHIBITED FUEL FOR THE NAVAL AIR STATION, CHASE FIELD, BEEVILLE, TEXAS; ITEM 176 FOR 34,500,000 GALLONS OF UNINHIBITED FUEL FOR THE NAVAL AIR STATION, KINGSVILLE; AND ITEMS 183/184 FOR 9,200,000 GALLONS (EACH) OF FUEL WITH ANTI-ICING INHIBITOR FOR CITADEL/BERGSTROM AIR FORCE BASE, VINSON, TEXAS (ITEM 183, CITADEL PLTM, AUSTIN, TEXAS, IS A COMMON CARRIER PIPELINE CONNECTION PROVIDING AN ALTERNATE ORIGIN DELIVERY POINT FOR BERGSTROM OTHER THAN BY DIRECT DELIVERY TO BERGSTROM).

WITH RESPECT TO THE ABOVE ITEMS, YOU CHARGED THAT DFSC HAD IGNORED CERTAIN FACTORS OR VALUED THEM AT UNREALISTICALLY LOW FIGURES IN EVALUATING THE BIDS WITH THE RESULT THAT THE GOVERNMENT IS NOT BUYING THE FUEL AT THE LOWEST LAID-IN COST. SPECIFICALLY, YOU ASKED, IN THOSE CASES WHERE THE GOVERNMENT IS TO BARGE THE PRODUCT AT GOVERNMENT EXPENSE FROM A SUPPLIER'S ORIGIN TO GOVERNMENT LEASED STORAGE FOR TRANSSHIPMENT BY TANK CAR, TANK TRUCK OR PIPELINE TO A DESTINATION BASE, WHAT VALUE IS ASSIGNED TO (1) INTRANSIT BARGING LOSS; (2) COST OF CARGO INSURANCE; (3) COST OF WHARFAGE AND DOCKAGE AT RECEIVING TERMINAL; (4) TERMINAL THRUPUT COST; (5) TERMINAL EVAPORATION LOSS; (6) COST OF MAINTAINING SEGREGATED TANKAGE FOR TERMINALING OF ANTI-ICING INHIBITED PRODUCT ALONG WITH UNINHIBITED PRODUCT; AND (7) COST OF INHIBITOR AND INJECTION IF ONLY UNINHIBITED FUEL IS TERMINALED. YOU ALSO ASKED, IN CASES IN WHICH THE PRODUCT IS MOVED TO THE DESTINATION BASE IN MULTI-UNIT INCREMENTS (TANK CAR OR TANK TRUCK) AS OPPOSED TO BULK MOVEMENTS (PIPELINE, BARGE, OR TANKER), WHAT IS THE COST OF PREPARING THE ADDITIONAL DOCUMENTS (MANIFESTS, BILLS OF LADING, INVOICES, PAYMENT CHECKS, ETC.), AND WHAT IS THE TIME VALUE OF MONEY ON THE ADDITIONAL INVENTORIES REQUIRED TO ACCOMPLISH TRANSSHIPMENT. YOU THEREFORE REQUESTED THAT DFSC REEVALUATE THE ITEMS IN QUESTION.

IN A REPORT DATED FEBRUARY 5, 1970, THE CONTRACTING OFFICER CONCEDES THAT THE FACTORS IDENTIFIED ABOVE BY NUMBERS (6) AND (7) HAVE A DIRECT BEARING ON THE DELIVERED COST OF THE END PRODUCT. ORIGIN DELIVERIES FOR THE ITEMS YOU QUESTION, IT IS STATED, WOULD ENTAIL MOVEMENT INTO THE AIR FORCE PETROLEUM RETAIL DISTRIBUTION STATION (TERMINAL) AT HOUSTON BY BARGE AND RESHIPMENT VIA COMMON CARRIER (TRANSPORT TRUCK OR TANK CAR) TO FINAL DESTINATIONS. AIR FORCE REQUIREMENTS, ACCORDING TO THE REPORT, NORMALLY ARE FOR FUEL WITH ANTI-ICING INHIBITOR TO MEET CONDITIONS OF HIGH ALTITUDE FLYING, A FACTOR WHICH PRESENTS NO CRITICAL PROBLEM TO THE NAVY. EVALUATING THE BIDS, HOWEVER, DFSC STATES THAT IT OVERLOOKED THE FACT THAT THE REQUIREMENTS FOR THE NAVAL AIR STATIONS AT CHASE FIELD AND KINGSVILLE WERE FOR UNINHIBITED FUEL THUS NECESSITATING SEGREGATED TANKAGE, WHICH WAS NOT AVAILABLE AT THE AIR FORCE TERMINAL AT HOUSTON; FURTHER, DFSC WAS NOT AWARE OF THE LACK OF SEGREGATED TANKAGE UNTIL AFTER THE AWARD FOR THE CHASE FIELD REQUIREMENTS, AND TWO OTHER REQUIREMENTS NOT INVOLVED IN YOUR PROTEST, HAD BEEN MADE ON THE BASIS OF LIFTING AT ORIGIN FROM REFINERIES ALONG THE UNITED STATES GULF COAST.

EVALUATION OF THE NECESSARY TRANSPORTATION CHARGES ON THESE REQUIREMENTS IN ACCORDANCE WITH THE EVALUATION PROVISIONS OF THE IFB RESULTED IN CHANGES IN THE CONTRACTS TO REFLECT AWARDS BASED ON THE LOWEST LAID-IN COST TO THE GOVERNMENT. THE TOTAL OVERALL INCREASE IN COST TO THE GOVERNMENT, WITH ADJUSTMENT FOR TRANSPORTATION, WAS $18,884. THE CORRECTION MADE WITH RESPECT TO THE REQUIREMENTS FOR CHASE FIELD ENURED TO YOUR BENEFIT IN THAT YOUR CONTRACT WAS AMENDED UNDER DATE OF DECEMBER 30, 1969, TO INCLUDE 9,824,000 GALLONS OF FUEL AT ?116045 PER GALLON FOR DESTINATION PIPELINE DELIVERY TO CHASE FIELD WITH AN INCREASE IN THE ESTIMATED CONTRACT PRICE OF $1,140,026.08 AND A REVISED TOTAL OF $5,961,459.68. THE OTHER ITEMS LISTED IN YOUR PROTEST DO NOT APPEAR TO HAVE BEEN AFFECTED BY THE REEVALUATION OF THE BIDS.

AS TO THE OTHER FACTORS WHICH YOU CITED IN YOUR PROTEST, THE CONTRACTING OFFICER FURNISHED A DETAILED REPORT EXPLAINING WHY HE BELIEVES THAT THE DEVELOPMENT OF COST FIGURES FOR SUCH FACTORS IS NOT FEASIBLE, AND THAT IT COULD ONLY RESULT IN THE USE OF HIGHLY SPECULATIVE AMOUNTS FOR BID EVALUATION. A COPY OF THAT REPORT WAS FURNISHED YOU, AND WILL NOT BE REPEATED HERE SINCE WE BELIEVE THE PRINCIPAL POINTS OF CONTENTION ARE SET OUT IN YOUR LETTER DATED MARCH 4, 1970, TAKING ISSUE WITH VARIOUS EXPLANATIONS AND VIEWS PRESENTED IN THE REPORT WHICH WILL BE CONSIDERED HEREINAFTER.

ON THE MATTER OF INTRANSIT AND TERMINAL LOSSES, YOU STATED YOUR VIEW THAT A LOSS OF UP TO .005 PERCENT, WHICH YOU CLAIM DFSC ACKNOWLEDGES, IS NOT NEGLIGIBLE. IN SUPPORT OF THIS PREMISE YOU STATED THAT A CURRENT IFB REQUESTS OFFERS ON 96,330,000 GALLONS OF JP-4 JET FUEL FOR DELIVERY TO HOUSTON AFPRDS AND THAT BASED ON A COST OF $0.092 PER GALLON THE INTRANSIT AND TERMINAL LOSSES WOULD AMOUNT TO OVER $177,200 A YEAR. AS TO THE FACTOR OF INSURANCE, YOU MAINTAINED THAT THE MORE TIMES A PRODUCT IS HANDLED BETWEEN ORIGIN AND DESTINATION, THE HIGHER THE LOSS FACTOR AND THE GREATER THE PROBABILITY OF ACCIDENT.

WITH RESPECT TO WHARFAGE, DOCKAGE AND TERMINAL THRUPUT COSTS, YOU CLAIMED THAT THE USE OF OFF-BASE FUEL TERMINALS IS NOT FREE AND THEREFORE THE COST OF OPERATING SUCH TERMINALS IS A SIGNIFICANT COST THAT SHOULD BE USED IN EVALUATION OF BIDS. AS AN EXAMPLE, YOU STATED THAT CITADEL IS A CONTRACTOR OWNED AND OPERATED FACILITY, FOR WHICH THE CONTRACTING OFFICER HAS CLAIMED THAT COST DETERMINATION IS NOT FEASIBLE; HOWEVER, YOU CLAIMED THAT DFSC HAS PREVIOUSLY ADVISED YOU THAT DFSC USES A COST FACTOR OF $0.002738 PER GALLON FOR THRUPUT AND DE ICER INJECTION IN EVALUATING BIDS FOR BERGSTROM TRANSSHIPPED VIA CITADEL. YOU THEREFORE URGED THAT IF THE OWNER-OPERATOR CAN DETERMINE THE COST OF OPERATING A TERMINAL, THE GOVERNMENT CAN DO LIKEWISE FOR ITS OWN FACILITIES. FURTHER, USING THE OPERATING CHARGE OF $0.002738 PER GALLON COMPUTED BY CITADEL AS A REASONABLE APPROXIMATION OF A TERMINAL OPERATING COST, YOU CONTENDED THAT THE CURRENT REQUESTED REQUIREMENT OF 96,330,000 GALLONS FOR HOUSTON AFPRDS FOR THE NEXT SIX MONTHS WOULD REPRESENT AN ANNUAL COST OF ABOUT $527,500. IN ADDITION, YOU STATED THAT THERE IS A WHARFAGE CHARGE OF $0.03 PER GROSS REGISTERED TON FOR MOVEMENTS OF PRODUCT INTO AND OUT OF THE TERMINAL BY MARINE EQUIPMENT.

FINALLY, YOU CLAIMED THAT THERE IS NOTHING MORE READILY ASCERTAINABLE TO THE GOVERNMENT THAN THE AMOUNT PAID EACH MONTH FOR TANK RENTAL OR UTILITIES, AS SALARY OF THE MAN LOADING TRUCKS AT GOVERNMENT-OWNED FACILITIES, OR TO AN INDEPENDENT CONTRACTOR WHO HANDLES THE ENTIRE OPERATION.

THE CONTRACTING OFFICER, AFTER CONSIDERING THE POINTS RAISED IN YOUR LETTER OF MARCH 4, ISSUED A SUPPLEMENTAL REPORT DATED APRIL 9, 1970. THE SUPPLEMENTAL REPORT CALLS ATTENTION TO THE FACT THAT IN JET FUEL SOLICITATIONS SUCH AS THE IFB IN QUESTION OFFERS ARE SOLICITED FOR DELIVERIES AT ORIGIN, DELIVERIES TO TERMINALS, AND DIRECT DELIVERY TO BASES. ACCORDINGLY, THE CONTRACTING OFFICER STATES, THE QUESTION OF MONETARY VALUES TO BE ASSIGNED TO TERMINAL OPERATIONS ALSO INVOLVES OFFERS TO DELIVER F.O.B. ORIGIN, THE SUPPLIERS' REFINERIES OR BULK STORAGE TERMINALS, FROM WHENCE THE GOVERNMENT MOVES THE PRODUCT EITHER DIRECT TO DESTINATION OR INTO GOVERNMENT TERMINALS FOR SUBSEQUENT SHIPMENT TO DESTINATION. FURTHER, THE CONTRACTING OFFICER URGES THAT WHILE DFSC DOES NOT CONTEND THAT ANY COST INCURRED IN THE JET FUEL PROCUREMENT PROGRAM IS NEGLIGIBLE OR INSIGNIFICANT IN THE LITERAL SENSE, DFSC DOES MAINTAIN THAT THE COSTS YOU LIST (WITH THE EXCEPTION OF THE TWO FACTORS (6) AND (7) PREVIOUSLY CONSIDERED) ARE SPECULATIVE OR UNREALISTIC AS RELATED TO THE EVALUATION OF BIDS AND THE CONCEPT OF FAIRNESS TO ALL BIDDERS AND TO THE GOVERNMENT AS WELL.

IN FURTHER JUSTIFICATION OF THE POSITION OF DFSC THAT SUCH COST FACTORS SHOULD NOT BE APPLIED IN EVALUATION OF BIDS UNDER THIS OR SIMILAR IFB'S, THE CONTRACTING OFFICER MAKES THE FOLLOWING COMMENTS ON CERTAIN STATEMENTS IN YOUR LETTER OF MARCH 4: "3. DEFENSE FUEL SUPPLY CENTER HAS NOT ACKNOWLEDGED THAT INTRANSIT AND TERMINAL LOSSES OF .005% ARE NORMAL. FOR CERTAIN INVENTORY AND ACCOUNTING PURPOSES INDUSTRY AND GOVERNMENT CONSIDER LOSSES FROM ZERO TO .005% TO BE ACCEPTABLE. IN PARTICULAR CASES, LOSSES COULD BE LESS THAN .001%. THE EXTENT OF LOSS IS DEPENDENT ON A HOST OF VARIABLE CONDITIONS SUCH AS TYPE OF TRANSPORT, SIZE OF SHIPMENT, TYPE OF STORAGE TANKS, SEASONAL TEMPERATURES, LENGTH OF STORAGE TIME AND DISTANCE TRANSPORTED. CONSEQUENTLY, IT IS UTTERLY INFEASIBLE TO DEVELOP AN AVERAGE OR A MINIMUM COST FIGURE FOR APPLICATION ACROSS THE BOARD. "4. USE OF SPECIFIC FACTORS INVOLVES THE FOLLOWING CONSIDERATIONS. EACH SEMI ANNUAL SOLICITATION INCLUDES IN EXCESS OF 300 CONSUMER DESTINATIONS OR BASES IN ADDITION TO THE APPROXIMATELY 36 GOVERNMENT-CONTROLLED TERMINALS PLUS COMMON CARRIER PIPELINE (INTERMEDIATE) TERMINALS. EACH IS CAPABLE, WITH FEW EXCEPTIONS, OF RECEIVING PRODUCT BY MORE THAN ONE METHOD OF TRANSPORTATION AND EACH TERMINAL WILL HAVE VARYING TYPES OF STORAGE TANKS. IN ADDITION, AGAINST EACH SOLICITATION FOR JP-4 JET FUEL, IN EXCESS OF 80 INDIVIDUAL OFFERS ARE RECEIVED. A MAJOR PORTION OF THESE OFFERS ARE ON AN ORIGIN DELIVERY BASIS AND MAY INCLUDE OFFERS FOR DIRECT DELIVERY TO SPECIFIED USING DESTINATIONS. A CONSIDERABLE NUMBER OF ORIGIN BIDS WILL ALSO OFFER DELIVERIES AT MULTIPLE ORIGIN POINTS. THE DEFENSE FUEL SUPPLY CENTER MAINTAINS THAT APPLICATION OF A SPECIFIC LOSS FACTOR TO ONE PARTICULAR MOVEMENT OF PRODUCT WOULD REQUIRE USE OF A SPECIFIC FACTOR FOR EVERY VARIATION OR COMBINATION OF VARIANTS. THE POSSIBLE NUMBER OF INDIVIDUAL COMBINATIONS OF MOVEMENTS, STORAGE AND SUBSEQUENT MOVEMENTS IN EACH PROCUREMENT EVALUATION IS BEYOND PRESENT ESTIMATE. DEVELOPMENT OF SPECIFIC LOSS FACTORS WOULD REQUIRE CONSIDERABLE STUDY, AND IT IS BELIEVED THAT THEIR APPLICATION WOULD BECOME AN INTOLERABLE ADMINISTRATIVE BURDEN.

"5. COASTAL STATES' 4 MARCH LETTER ASSUMES, FOR THE PURPOSE OF ILLUSTRATION, THAT THE ENTIRE QUANTITY OF 96,330,000 GALLONS OF JP-4 JET FUEL INCLUDED IN THE CURRENT SOLICITATION AS ITEM 174 FOR THE AIR FORCE PETROLEUM RETAIL DISTRIBUTION STATION (AFPRDS) AT HOUSTON WILL PASS THROUGH HOUSTON. THIS QUANTITY OF FUEL IS A CUMULATIVE TOTAL OF THE ESTIMATED REQUIREMENTS FOR 9 SEPARATE AIR BASES (ALSO SHOWN IN THE SOLICITATION SCHEDULE AS ITEMS 175 THROUGH 183) WHICH CAN BE SERVED FROM HOUSTON. AS STATED IN THE ORIGINAL REPORT ON THIS PROTEST, REQUIREMENTS ARE ADVERTISED IN THIS FASHION TO INCREASE THE POTENTIAL AREA OF COMPETITION. THE ENTIRE 96,330,000 GALLONS WILL NOT (AND PROBABLY COULD NOT) MOVE THROUGH THE HOUSTON TERMINAL AFTER EVALUATION AND AWARDS. APPROXIMATELY THE SAME QUANTITY WAS CONSIDERED IN EVALUATION FOR MOVEMENT THROUGH THE HOUSTON TERMINAL DURING THE LAST PROCUREMENT FOR JANUARY - JUNE 1970. AWARDS BASED ON SUCH MOVEMENT WERE MADE FOR ONLY 20,000,000 GALLONS. DURING THE PREVIOUS SIX MONTHS A TOTAL OF 448,160 BARRELS (18,822,720 GALLONS) WAS ACTUALLY PUT THROUGH THE TERMINAL. CONSEQUENTLY ANY TOTAL COST ASSUMPTIONS BASED ON MOVEMENT OF 96,330,000 GALLONS THROUGH THE HOUSTON TERMINAL YIELDS A DISTORTED PICTURE.

"6. COASTAL STATES' 4 MARCH LETTER, ON THE FOURTH LINE OF PAGE TWO, REFERS TO A FIGURE OF $0.002738 PER GALLON FOR THRU-PUT AND INJECTION OF ANTI-ICING ADDITIVE AT CITADEL PIPELINE TERMINAL AS A COST FACTOR FOR TERMINAL OPERATION AND CONCLUDES THAT A SIMILAR COST FACTOR CAN BE DEVELOPED FOR THE HOUSTON TERMINAL. CITADEL PIPELINE TERMINAL IS INCLUDED IN SOLICITATIONS AS AN ALTERNATE POINT OF DELIVERY FOR THE JET FUEL REQUIREMENTS OF BERGSTROM AIR FORCE BASE. HOWEVER, THERE IS A TOTALITY OF DISTINCTION BETWEEN THE TWO TERMINALS. THE HOUSTON TERMINAL IS UNDER ANNUAL CONTRACT TO THE GOVERNMENT FOR 260,000 BARRELS OF STORAGE (2 TANKS OF 130,000 BARRELS EACH) AND 1,040,000 BARRELS OF THRU-PUT AT A FIXED ANNUAL PRICE. THE CITADEL PIPELINE TERMINAL, HOWEVER, IS NOT CONTRACTED FOR OR LEASED BY GOVERNMENT. CITADEL OPERATES AS A COMMON CARRIER BY PIPELINE AND OWNS 4 MILES OF PIPELINE RUNNING FROM AUSTIN, TEXAS, TO BERGSTROM AIR FORCE BASE. IT HAS PIPELINE CONNECTION WITH THE CASA PIPELINE RUNNING TO CORPUS CHRISTI. ITS ONLY REVENUE IS GENERATED WHEN PRODUCT IS DELIVERED BY CONTRACTORS BY PIPELINE FOR MOVEMENT INTO BERGSTROM AIR FORCE BASE. CONSEQUENTLY, THE .002738 PER GALLON IS A TRANSPORTATION CHARGE. THERE IS NO COMPARISON BETWEEN A COMMON CARRIER TRANSPORTATION RATE AND ANY THRU PUT COST INCLUDED IN A CONTRACT FOR 260,000 BARRELS OF STORAGE AND 1,040,000 BARRELS OF THRU-PUT (MOVEMENT OF PRODUCT INTO AND OUT OF STORAGE) WITHOUT CHARGE BEYOND THE ANNUAL CONTRACT PRICE.

"7. COASTAL'S 4 MARCH LETTER REFERS TO A WHARFAGE CHARGE OF $0.03 PER GROSS REGISTERED TON FOR MOVEMENT OF PRODUCT INTO AND OUT OF HOUSTON TERMINAL BY MARINE EQUIPMENT. THIS IS NOT A WHARFAGE CHARGE. IT IS A DOCKAGE CHARGE WHICH IS ASSESSED TO AND PAID BY THE DELIVERING VESSEL. ALLOWANCE FOR THIS IS INCLUDED IN THE TRANSPORTATION RATES USED IN EVALUATION OF BIDS. WHARFAGE, IF ANY IS REQUIRED, IS APPURTENANT TO THE TERMINAL FACILITIES AND ITS USE IS INCLUDED IN THE CONTRACT PRICE.

"8. IN DETERMINING WHETHER GOVERNMENT-CONTROLLED TERMINAL THRU-PUT COSTS ARE SIGNIFICANT OR HAVE A REALISTIC RELATION IN BID EVALUATION FOR PRODUCT WE MUST CONSIDER THE FUNCTION OF THE GOVERNMENT-CONTROLLED TERMINALS IN THE PROCUREMENT AND DISTRIBUTION OF AVIATION FUELS.

"A. FUNCTIONALLY MOST OF THE TERMINALS ARE REQUIRED TO HOLD WAR RESERVE MOBILIZATION STOCKS WHICH MAY NOT BE USED EXCEPT IN EVENT OF SUCH AN EMERGENCY UPON PROPER AUTHORIZATION. PETROLEUM STOCKS CANNOT BE HELD INDEFINITELY WITHOUT DETERIORATION IN QUALITY. CONSEQUENTLY, STOCKS MUST BE ROTATED BY ISSUANCE FOR USE AND REPLENISHMENT.

"B. OPERATIONAL FLYING BY DEPARTMENT OF DEFENSE FLUCTUATES ACCORDING TO WEATHER CONDITIONS, CURRENT TRAINING PROGRAMS, AND EMERGENCIES OF A LESSER NATURE THAN IS REQUIRED TO ISSUE WAR RESERVE STOCKS. TO HELP MEET THESE OPERATIONAL SURGES AND DECLINES IN FUEL DEMAND, CONTRACTS ARE OF THE INDEFINITE QUANTITY, CALL TYPE VARIETY. HOWEVER, TO KEEP CONTRACT PRICES REASONABLE, IT IS ESSENTIAL NOT TO OBLIGATE CONTRACTORS TO MAKE DELIVERIES ON UNREASONABLY SHORT NOTICE. THEREFORE, IT IS ALSO DESIRABLE TO MAINTAIN OPERATIONAL STOCKS IN ADDITION TO WAR RESERVE STOCKS TO HELP MEET SWINGS IN DEMANDS. OBVIOUSLY, HAVING WAR RESERVE STOCK TERMINALS, IT IS SIMPLE ECONOMICS TO INCLUDE OPERATIONAL RESERVE CAPACITY.

"C. SUPPLY OF OPERATIONAL STOCKS FROM CENTRALIZED TERMINALS MINIMIZES THE CONSTRUCTION OF COSTLY STORAGE FACILITIES AT INDIVIDUAL BASES. IT ALSO SUPPLEMENTS DELIVERIES SCHEDULED DIRECT FROM CONTRACTOR TO USING BASES AND MINIMIZES SHARP FLUCTUATIONS IN ORDERS PLACED ON CONTRACTORS. SINCE RESERVE AND OPERATIONAL STOCKS ARE COMMINGLED, ROTATION OF WAR RESERVE STOCKS BECOMES RELATIVELY SIMPLE.

"D. WITHOUT MARINE TERMINALS OF THIS NATURE GOVERNMENT WOULD BE UNABLE TO REALIZE THE ECONOMY INHERENT IN ORDERING TANKER LOAD QUANTITIES AT ORIGIN FROM U. S. GULF AND CARIBBEAN REFINERS.

"9. IF IT MAY NOW BE CONCEDED THAT GOVERNMENT-CONTROLLED TERMINALS ARE ESSENTIAL, THEN THE FOLLOWING CONCLUSIONS ARE IN ORDER:

"A. EACH TERMINAL WILL HAVE A COST TO GOVERNMENT BASED ON THE FACILITIES IN EACH TERMINAL. THERE WILL ALSO BE A THRU-PUT COST SINCE WAR RESERVE STOCKS MUST BE ROTATED AND OPERATING STOCKS MUST BE DELIVERED.

"B. SINCE THESE CAPITAL FACILITIES ARE IN EXISTENCE AND MUST THRU PUT PRODUCT, ANY ANCILLARY USE IS AN ECONOMIC BENEFIT TO GOVERNMENT. IN THE PROCUREMENT PHASE, THEIR INCLUSION AS ALTERNATE DELIVERY POINTS FOR DESTINATION DELIVERY OFFERS INCREASES COMPETITION BY INTERESTING LOCAL REFINERS HAVING LIMITED DELIVERY EQUIPMENT. USE OF THESE TERMINALS FOR THE ROUTING OF PRODUCT IS ALSO AN ESSENTIAL CONSIDERATION IN EVALUATION OF ORIGIN OFFERS AS TO TRANSPORTATION COSTS TO DETERMINE ULTIMATE LAID DOWN PRICES.

"C. TO ESTABLISH A THRU-PUT COST FACTOR FOR EVALUATION OF ORIGIN OR DELIVERY-TO-TERMINAL OFFERS AGAINST OFFERS TO DELIVER DIRECT TO DESTINATION, WOULD REQUIRE ARBITRARY GUESSES AS TO (I) HOW MUCH TERMINAL THRU-PUT IS OR WILL BE ROTATION OF WAR RESERVE STOCKS, AND (II) HOW MUCH IS OR WILL BE ISSUANCE OF OPERATIONAL STOCKS. CONJECTURALLY, THE BALANCE WILL BE SIMPLE THRU-PUT OF PRODUCT FORTUITOUSLY PRICED AT ORIGIN, OR TO TERMINALS, WHEN EVALUATED AGAINST OFFERS FOR DIRECT DELIVERY TO BASES.

"D. SINCE THE TERMINALS REPRESENT AN EXPENSE TO GOVERNMENT THAT WILL NOT GO AWAY, IT WOULD BE THE HEIGHT OF FOLLY TO DETER GOVERNMENT FROM RECEIVING THE FULLEST POSSIBLE BENEFIT FROM THIS ANCILLARY USE BY ESTABLISHING A PENALTY IN THE FORM OF A THRU-PUT COST EVALUATION FACTOR.

"E. ON FIRST IMPRESSION, USE OF SUCH AN EVALUATION FACTOR APPEARS TO BE THE PROPER THING TO DO. IN THE CIRCUMSTANCES OUTLINED IT WOULD ONLY PERMIT AN INTERESTED COMPETING SUPPLIER TO BE LESS COMPETITIVE THAN BEFORE AND INCREASE OVERALL COSTS TO GOVERNMENT. THE GOVERNMENT SHOULD NOT BE PENALIZED FOR MAKING THE FULLEST USE OF ITS CAPITAL ASSETS.

"10. THE SPECULATIVENESS AND DIFFICULTY INHERENT IN THE USE OF TERMINAL THRU-PUT COSTS IN BID EVALUATION WAS PREVIOUSLY SUMMARIZED IN PARAGRAPHS 8A AND B ON PAGE 4 OF THE ORIGINAL REPORT IN THIS MATTER. IT IS THE DEFENSE FUEL SUPPLY CENTER POSITION THAT APPLICATION OF A MINIMAL UNIFORM COST FACTOR FOR EACH OF SOME 30 ODD INDIVIDUAL TERMINAL FACILITIES WOULD BE UNREAL. THE GOVERNMENT FILLED A BONA FIDE NEED IN OBTAINING THESE FACILITIES WHERE THEY ARE LOCATED. THERE IS NO RULE OF LAW, PROCUREMENT POLICY, OR OTHER SOUND REASON WHICH WOULD REQUIRE GOVERNMENT TO SHORE UP THE COMPETITIVE ADVANTAGE OF A LOCAL REFINER, ABSENT SMALL BUSINESS CONSIDERATIONS, BY ASSESSING ITSELF PENALTY ON THE USE OF SUCH A FACILITY TO BRING IN LOW COST PRODUCT FOR LOCAL DISTRIBUTION.

"11. APPLICATION OF THRU-PUT COST FACTORS, BASED ON COST ACCOUNTING FOR EACH TERMINAL, WOULD REQUIRE THE STATEMENT IN EACH SOLICITATION OF A SEPARATE FACTOR FOR EACH TERMINAL. THIS ALSO WOULD PRODUCE SPECULATIVE AND ARBITRARY RESULTS. AS INDICATED, THE STORAGE AND PETROLEUM SERVICE CONTRACTS GENERALLY PROVIDE FOR STORAGE OF A STATED CAPACITY AND THRU-PUT OF 4 TIMES THE STORAGE CAPACITY PER YEAR FOR A FIXED PRICE. THRU-PUT IN EXCESS OF THIS QUANTITY, IF REQUIRED, IS NORMALLY PROVIDED FOR IN THE CONTRACTS AT A STATED PRICE PER BARREL FOR INPUT AND FOR OUTPUT. HOWEVER, THE QUANTITY OF FUEL WHICH WILL MOVE THROUGH A TERMINAL IN ANY GIVEN PERIOD IS NOT KNOWN.

"12. REQUIREMENTS ARE SOLICITED FOR USING DESTINATIONS. DEPENDENT ON MARKET PRICES IN DIFFERENT MARKETING AREAS, FOR PRODUCT AND TANKER TRANSPORTATION, THE QUANTITIES PROCURED EACH SIX MONTHS WHICH ARE SUSCEPTIBLE OF BEING HANDLED THROUGH GIVEN TERMINALS WILL VARY. A THRU PUT FACTOR PREDICATED ON THE MINIMUM QUANTITY WOULD NOT RECOVER COSTS IF THIS QUANTITY IS EXCEEDED. A THRU-PUT COST PREDICATED ON A MAXIMUM QUANTITY WOULD FURTHER DISTORT THE EVALUATION PROCESS AND PRECLUDE AWARDS WITHIN THE MINIMUM ON THE BASIS OF LOWEST LAID DOWN COST TO GOVERNMENT. IT WOULD BE ADMINISTRATIVELY IMPOSSIBLE TO INCLUDE FOR EACH TERMINAL SEVERAL COST FACTORS TO BE APPLIED DEPENDENT ON INCREMENTAL QUANTITIES UNDER EVALUATION. THIS WOULD RESULT IN ALLOCATING ONE COST FACTOR TO REFINER A'S PRODUCT AT ORIGIN AND THE SECOND FACTOR TO REFINER B'S PRODUCT AT B'S ORIGIN POINT, YET PRODUCT OFFERED BY BOTH REFINERS MAY PRICE OUT FAVORABLY FOR ROUTING THROUGH MORE THAN ONE TERMINAL TO DIFFERENT GROUPS OF AIR BASES.

"13. A FURTHER CONSIDERATION IS THE FACT THAT THRU-PUT COST FACTORS FOR VARIOUS TERMINALS COULD VARY IN EXCESS OF 100%. EACH TERMINAL IS A DIFFERENT COMPLEX OF FACILITIES AND EACH OWNER-OPERATOR WILL COST AND PRICE HIS REQUIRED REVENUE RETURN DIFFERENTLY. SUCH VARIATIONS IN FACTORS FROM ONE TERMINAL TO THE NEXT WOULD BE DIFFICULT TO JUSTIFY TO PROTESTING REFINERS WHO CONSIDER THEIR BIDS HAVE BEEN PREJUDICED BY USE OF INCORRECT COSTS."

AS TO THE CARGO INSURANCE FACTOR, SINCE THE GOVERNMENT IS ITS OWN INSURER AND SINCE NO SUCH EXPENSE IS INVOLVED IT WOULD SEEM, AT LEAST, QUESTIONABLE TO ALLOW AN EVALUATION ADVANTAGE FOR DIRECT DELIVERY ON THE BASIS OF NONEXISTENT SAVINGS IN INSURANCE FOR THE GOVERNMENT. SEE B- 152743, DECEMBER 5, 1963, AND 39 COMP. GEN. 145 (1959) AND DECISIONS CITED THEREIN FOR APPLICATION OF THE ESTABLISHED RULE THAT UNLESS EXPRESSLY PROVIDED FOR BY STATUTE APPROPRIATED FUNDS ARE NOT AVAILABLE FOR THE PURCHASE OF INSURANCE TO COVER LOSS OF OR DAMAGE TO GOVERNMENT PROPERTY.

WITH RESPECT TO DOCKAGE CHARGES, IT APPEARS THAT THIS FACTOR HAS BEEN CONSIDERED IN MAKING THE AWARDS IN LIGHT OF THE FACT THAT DOCKAGE CHARGES ARE INCLUDED IN THE TRANSPORTATION RATES WHICH ARE USED IN THE EVALUATION OF THE BIDS. AS TO WHARFAGE CHARGES, THE RECORD INDICATES THAT NO SUCH CHARGES WILL BE ASSESSED AS A SEPARATE EXPENSE INASMUCH AS WHARFAGE SERVICES ARE INCLUDED IN THE CONTRACT PRICE WHICH THE GOVERNMENT PAYS FOR THE TERMINAL FACILITIES MAINTAINED FOR THE STORAGE OF WAR RESERVE STOCKS.

CONCERNING ALLOWANCE FOR INTRANSIT AND TERMINAL EVAPORATION LOSSES, WE BELIEVE THAT THE CONTRACTING OFFICER'S SUPPLEMENTAL REPORT PROVIDES A PERSUASIVE RESPONSE TO YOUR CONTENTION. IN THE ABSENCE OF A FIRM BASIS FOR COMPUTING EVALUATION DIFFERENTIALS WHICH WOULD REFLECT SUCH COSTS WITH REASONABLE CERTAINTY, WE ARE UNABLE TO CONCLUDE THAT CONSIDERATION OF SUCH FACTORS IN THE EVALUATION OF BIDS IS WARRANTED IN LINE WITH PRINCIPLES ENUNCIATED IN PRIOR DECISIONS OF OUR OFFICE. SEE PARAGRAPH 12 OF THE CONTRACTING OFFICER'S REPORT OF FEBRUARY 5, 1970, CITING 33 COMP. GEN. 108 (1953), 35 ID. 282 (1955), 36 ID. 380 (1956), 45 ID. 59 (1965), 47 ID. 233 (1967), B-159188, AUGUST 26, 1966, AND B 159750, JANUARY 11, 1967. ON THE MATTER OF TERMINAL OPERATING AND THRU-PUT COSTS, THE GOVERNMENT ADMITTEDLY DOES PAY SUCH COSTS INCIDENT TO THE USE OF THE TERMINALS. AS THE RECORD SHOWS, HOWEVER, THESE COSTS ARE INCLUDED IN THE CONTRACT PRICES WHICH THE GOVERNMENT PAYS FOR THE USE OF THE TERMINALS FOR WAR RESERVE STOCK STORAGE PURPOSES. FURTHER, THERE IS NOTHING OF RECORD TO INDICATE THAT A PROPER AMOUNT CAN BE DESIGNATED AS INCREASED TERMINAL OPERATING AND THRU-PUT COSTS THAT MAY BE DIRECTLY ATTRIBUTED TO THE ANCILLARY USE OF THE FACILITIES FOR THE STORAGE OF OPERATIONAL STOCKS BETWEEN THE POINTS OF ORIGINAL SHIPMENT AND THE ULTIMATE DESTINATIONS. IN ADDITION, THE REPORTED FACTS EVIDENCE THAT THIS PRACTICE BY DFSC IS BENEFICIAL TO THE GOVERNMENT IN THAT IT PERMITS ROTATION OF THE WAR RESERVE STOCKS AS OUTLINED BY THE CONTRACTING OFFICER AND THEREBY ELIMINATES COSTLY DETERIORATION OF THE WAR RESERVE STOCKS. IN THE CIRCUMSTANCES, WE ARE UNABLE TO CONCLUDE THAT DFSC'S DETERMINATION, THAT TERMINAL OPERATING AND THRU-PUT EXPENSES ARE TOO SPECULATIVE FOR ESTABLISHMENT AS EVALUATION FACTORS, IS ARBITRARY OR UNSUPPORTED BY THE RECORD.

WITH RESPECT TO THE ISSUE OF BID MODIFICATIONS, YOU SUBMITTED TO THE CONTRACTING OFFICER ON JANUARY 26, 1970, A TELEGRAPHIC REQUEST THAT YOUR BID BE AMENDED TO PROVIDE FOR PIPELINE DELIVERY DIRECTLY TO BERGSTROM AIR FORCE BASE. THE CONTRACTING OFFICER DENIED YOUR REQUEST PURSUANT TO ASPR 2-305 ON THE BASIS THAT IT WAS A LATE BID MODIFICATION, ACCEPTANCE OF WHICH WOULD BE PREJUDICIAL TO OTHER BIDDERS ON THE BERGSTROM REQUIREMENTS WHOSE CONTRACTS WERE AWARDED ON THE EVALUATION OF THE LOWEST LAID-IN COST UNDER THE OFFERS RECEIVED ON OPENING DATE, OCTOBER 16, 1969. IN A TELEGRAM DATED FEBRUARY 10, 1970, YOU CHARGED THAT THE DENIAL OF YOUR REQUEST WAS INCONSISTENT WITH THE ACTION OF THE CONTRACTING OFFICER IN PERMITTING SIGNAL OIL & GAS COMPANY (SIGNAL) TO MAKE A CHANGE IN DELIVERY METHOD UNDER THE CONTRACT WHICH WAS AWARDED TO SIGNAL FOR THE BERGSTROM REQUIREMENTS. IN A RESPONSE BY TELEGRAM OF FEBRUARY 12, THE CONTRACTING OFFICER ADVISED YOU THAT SIGNAL WAS THE LOW INITIAL BIDDER ON ALL OF THE DESTINATIONS AWARDED TO SIGNAL; THEREFORE, THE AMENDMENT TO SIGNAL'S CONTRACT, WHICH WAS MADE UNDER THE CHANGES CLAUSE, DID NOT ALTER THE EVALUATION OF BIDS AND AWARD PATTERN AS WOULD THE LATE MODIFICATION WHICH YOU PROPOSED.

THE CONTRACTING OFFICER'S DENIAL OF YOUR REQUEST WAS IN ACCORD WITH THE LATE BID PROVISIONS OF THE IFB, WHICH ARE PRESCRIBED IN ASPR 2-306 AND DO NOT PERMIT CONSIDERATION OF ANY MODIFICATIONS OF BIDS AFTER AWARD, OTHER THAN BY THE SUCCESSFUL BIDDER. AS PROVIDED IN THE IFB, A VALID CONTRACT WAS AWARDED TO THE RESPONSIBLE BIDDER WHO HAD SUBMITTED THE LOW RESPONSIVE BID BY THE TIME SPECIFIED, AND THERE IS NO PROVISION IN THE IFB, OR UNDER THE APPLICABLE PRINCIPLES OF COMPETITIVE BIDDING AND THE PERTINENT STATUTES AND REGULATIONS RELATING THERETO, THAT AUTHORIZES THE GOVERNMENT TO CANCEL A CONTRACT, WHICH WAS AWARDED IN ACCORDANCE WITH THE TERMS OF THE SOLICITATION, FOR THE PURPOSE OF ACCEPTING A MORE FAVORABLE OFFER WHICH WAS NOT SUBMITTED IN CONFORMANCE WITH THOSE TERMS. SIGNAL, ON THE OTHER HAND, WAS ALREADY IN RECEIPT OF A VALID CONTRACT BASED ON ITS LOW INITIAL BID, AND THE CHANGE IN QUESTION CAME WITHIN THE PURVIEW OF THE CHANGES CLAUSE IN THE CONTRACT (STANDARD FORM 32, PARAGRAPH 2), WHICH ALLOWS AN EQUITABLE PRICE ADJUSTMENT FOR INCREASED COSTS CAUSED BY THE CONTRACT CHANGE.

IN LIGHT OF THE FOREGOING, IT IS APPARENT THAT THERE WAS NO DISCRIMINATION AGAINST YOU WITH RESPECT TO THE MODIFICATIONS IN QUESTION.

WITH REGARD TO THE PLACEMENT BY DFSC OF ORDERS AGAINST YOUR CONTRACT, YOU COMPLAINED IN A TELEGRAM DATED JANUARY 26, 1970, THAT THE NAVY HAD NOT PLACED ANY ORDER FOR JANUARY DELIVERY AGAINST THE 9,824,000 GALLONS FOR CHASE FIELD WHICH HAD BEEN ADDED TO YOUR CONTRACT BY THE AMENDMENT OF DECEMBER 30, 1969; THAT THE NAVY CLAIMED THAT DFSC HAD NOT ADVISED NAVY OF THE AWARD TO YOU IN SUFFICIENT TIME FOR THE NAVY TO RESCHEDULE THE JANUARY REQUIREMENTS WITHOUT CONSIDERABLE INCONVENIENCE; AND THAT THE NAVY HAD ALSO ELECTED TO TAKE ABOUT 680,000 GALLONS OF FUEL FOR KINGSVILLE NAVAL AIR STATION AGAINST THE CONTRACT FOR THE PRIOR PERIOD BUT NOTHING IN JANUARY AGAINST THE NEW CONTRACT (WHICH INCLUDES 4,900,000 GALLONS FOR KINGSVILLE). YOU ALSO COMPLAINED THAT THE AIR FORCE HAD MADE LIFTINGS ON JANUARY 16 WHICH HAD BEEN SCHEDULED FOR JANUARY 1 TO 5, WHICH YOU CLAIMED WAS IN CONFLICT WITH ASSURANCE RECEIVED FROM THE DEPARTMENT OF DEFENSE THAT EVERY EFFORT WOULD BE MADE TO ACCELERATE LIFTINGS UNDER YOUR CURRENT CONTRACT TO MITIGATE INVENTORY PROBLEMS AND LOSSES INCIDENT TO REALLOCATION OF FUEL DURING THE PREVIOUS DELIVERY PERIOD.

THE RECORD MADE AVAILABLE TO OUR OFFICE BY DSA INCLUDES A COPY OF A TELEGRAM ADDRESSED TO YOU BY DFSC IN ACKNOWLEDGMENT OF YOUR TELEGRAM OF JANUARY 26. DFSC'S TELEGRAM INFORMED YOU THAT THE NAVY ORDERS FOR THE JANUARY 1970 CHASE FIELD REQUIREMENTS HAD NECESSARILY BEEN PLACED EARLY IN DECEMBER 1969, PRIOR TO THE AWARD ON DECEMBER 30 OF THE CHASE FIELD REQUIREMENTS TO YOU, AND THAT BARRING ANY CHANGES IN REQUIREMENTS THE NAVY INTENDED TO LIFT THE QUANTITY COVERED BY YOUR CONTRACT FOR CHASE FIELD DURING THE CONTRACT PERIOD. DFSC FURTHER STATED THAT THE ORDER OF 680,000 GALLONS PLACED IN DECEMBER 1969 FOR DELIVERY TO KINGSVILLE NAVAL AIR STATION WAS IN ACCORDANCE WITH THE PROVISIONS OF YOUR PREVIOUS CONTRACT AND HAD BEEN ACCEPTED BY YOU; HOWEVER, SINCE THE DECEMBER ORDER INCLUDED JANUARY REQUIREMENTS, THE NAVY DID NOT INTEND TO PLACE ANY ORDERS AGAINST YOUR NEW CONTRACT FOR JANUARY. AS TO THE AIR FORCE LIFTINGS, DFSC ADVISED YOU THAT THE DELAY IN JANUARY WAS DUE TO TANKER SLIPPAGE; THAT THE LIFTING OF 8,776,740 GALLONS WHICH WAS MADE ON OR ABOUT JANUARY 16 EXCEEDED YOUR RATABLE SHARE OF 5,516,666 GALLONS BY APPROXIMATELY 3,260,074 GALLONS; AND THAT WHILE NO LIFTINGS WERE SCHEDULED FOR FEBRUARY IN LIGHT OF THE JANUARY OVERLIFT, EVERY EFFORT WOULD BE MADE TO SCHEDULE A CARGO IN EARLY MARCH. IT WOULD APPEAR, THEREFORE, THAT THIS MATTER HAS BEEN RESOLVED.

FOR THE REASONS STATED, YOUR PROTEST IS DENIED.