B-169094(2), AUG 13, 1971

B-169094(2): Aug 13, 1971

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PROTESTANT CONTENDS THAT MAR AD'S ACTIONS WERE UNFAIR AND DISCRIMINATORY. WERE IN VIOLATION OF THE PREFERENCE PROVISIONS OF SECTIONS 5 AND 6. BELIEVES THAT THE LANGUAGE OF THE STATUTES IS A CLEAR INDICATION OF A CONGRESSIONAL INTENT TO VEST IN MAR AD CONSIDERABLE DISCRETION IN THE DISPOSAL OF SURPLUS VESSELS. TO BARRETT KNAPP SMITH SCHAPIRO & SIMON: FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF UNION MINERALS AND ALLOYS CORPORATION AGAINST REJECTION BY THE MARITIME ADMINISTRATION (MARAD) OF ITS HIGH BIDS FOR 15 GOVERNMENT-OWNED SURPLUS VESSELS FROM THE NATIONAL DEFENSE RESERVE FLEET. YOU CONTEND THAT REJECTION OF UNION MINERALS' BIDS WAS UNFAIR AND DISCRIMINATORY. YOU ALSO CONTEND THAT MARAD'S OFFERING OF VESSELS TO CITIZENS AT ACCELERATED RATES EFFECTIVELY PRECLUDES CITIZENS FROM ABSORBING THE VESSELS AND IS IN DEROGATION OF THE REQUIRED PREFERENCE.

B-169094(2), AUG 13, 1971

BID PROTEST - SALE OF SURPLUS GOVERNMENT-OWNED VESSELS DENIAL OF PROTEST ON BEHALF OF UNION MINERALS AND ALLOYS CORPORATION AGAINST THE REJECTION BY THE MARITIME ADMINISTRATION (MAR AD) OF THEIR HIGH BIDS FOR 15 GOVERNMENT-OWNED SURPLUS VESSELS FROM THE NATIONAL DEFENSE RESERVE FLEET. PROTESTANT CONTENDS THAT MAR AD'S ACTIONS WERE UNFAIR AND DISCRIMINATORY, AND WERE IN VIOLATION OF THE PREFERENCE PROVISIONS OF SECTIONS 5 AND 6, MERCHANT MARINE ACT OF 1920, AND SECTION 809, MERCHANT MARINE ACT OF 1936. THE COMP. GEN. BELIEVES THAT THE LANGUAGE OF THE STATUTES IS A CLEAR INDICATION OF A CONGRESSIONAL INTENT TO VEST IN MAR AD CONSIDERABLE DISCRETION IN THE DISPOSAL OF SURPLUS VESSELS. IN THESE CIRCUMSTANCES, GAO CAN PERCEIVE OF NO BASIS UPON WHICH IT CAN BE CONCLUDED THAT THERE HAS BEEN AN ABUSE OF THIS DESCRETION.

TO BARRETT KNAPP SMITH SCHAPIRO & SIMON:

FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF UNION MINERALS AND ALLOYS CORPORATION AGAINST REJECTION BY THE MARITIME ADMINISTRATION (MARAD) OF ITS HIGH BIDS FOR 15 GOVERNMENT-OWNED SURPLUS VESSELS FROM THE NATIONAL DEFENSE RESERVE FLEET.

YOU CONTEND THAT REJECTION OF UNION MINERALS' BIDS WAS UNFAIR AND DISCRIMINATORY, AND THAT THE PROPOSED SALE OF THESE VESSELS TO FOREIGNERS WOULD BE IN DEROGATION OF THE PREFERENCE TO BE AFFORDED UNITED STATES CITIZENS UNDER SECTIONS 5 AND 6 OF THE MERCHANT MARINE ACT OF 1920, 46 U.S.C. 864 AND 865, AND SECTION 809 OF THE MERCHANT MARINE ACT OF 1936, 46 U.S.C. 1213, CITING IN THIS REGARD OUR DECISION B-169094, SEPTEMBER 4, 1970, 50 COMP. GEN. . IN ADDITION TO THE SPECIFIC PROTEST RELATED TO THE 15 VESSELS, YOU ALSO CONTEND THAT MARAD'S OFFERING OF VESSELS TO CITIZENS AT ACCELERATED RATES EFFECTIVELY PRECLUDES CITIZENS FROM ABSORBING THE VESSELS AND IS IN DEROGATION OF THE REQUIRED PREFERENCE.

SEVEN OF THE VESSELS INVOLVED IN THIS PROTEST ARE LOCATED IN THE MOBILE, ALABAMA RESERVE FLEET AND WERE OFFERED FOR SALE ON NOVEMBER 3 AND DECEMBER 1, 1970, UNDER INVITATIONS FOR BIDS NO. PD-X-890 AND NO. PD-X-892, RESPECTIVELY. FIVE OF THESE VESSELS CONTAINED CONCRETE BALLAST. THE TWO VESSELS NOT CONTAINING CONCRETE BALLAST WERE EACH PAIRED WITH A VESSEL WITH BALLAST AND BIDS REQUIRED ON EACH PAIR. UNION MINERALS BID $32,351.54, EACH, ON TWO OF THE VESSELS WITH BALLAST AND $30,612.54 ON THE OTHER, AND $71,765.08 ON EACH PAIR. THE PRICE FOR EACH PAIR CONSISTED OF $30,612.54 FOR THE VESSEL WITH BALLAST AND $41,152.54 FOR THE VESSEL WITHOUT BALLAST. UNION MINERALS' BID UNDER PD-X-892 FOR A SINGLE VESSEL WITHOUT BALLAST IN THE AMOUNT OF $41,152.54 WAS ACCEPTED. THE REMAINING EIGHT VESSELS, ALL WITH BALLAST, INVOLVED IN THE PROTEST ARE LOCATED IN THE JAMES RIVER RESERVE FLEET AND WERE OFFERED ON JANUARY 12, 1971, UNDER INVITATION FOR BIDS NO. PD-X-895. UNION MINERALS WAS THE ONLY BIDDER ON THESE 8 VESSELS AND ITS BID OF $30,511.54, EACH, WAS REJECTED AS TOO LOW. FOUR OF THE VESSELS FROM THE MOBILE RESERVE FLEET HAVE NOW BEEN OFFERED TO FOREIGN BIDDERS UNDER PD-X-897, AND YOU ANTICIPATE THE SAME ACTION WITH RESPECT TO THE 8 VESSELS IN THE JAMES RIVER RESERVE FLEET.

YOU STATE THAT IN THE PAST MARAD'S MINIMUM DOMESTIC PRICE FOR THE TYPE VESSEL INVOLVED WITHOUT BALLAST HAS BEEN APPROXIMATELY $40,000; THAT HANDLING A VESSEL WITH BALLAST AND REMOVING THE BALLAST THEREFROM INCREASES SCRAPPING COSTS FROM $10,000 TO $14,000; THAT UNION MINERALS' PRICE FOR THE VESSELS WITH BALLAST WAS REDUCED ACCORDINGLY; AND THAT MARAD'S REFUSAL TO MAKE ANY ALLOWANCE FOR THIS ADDITIONAL COST IS DISCRIMINATORY. IN SUPPORT OF YOUR CONTENTION CONCERNING THE EXTRA COST INVOLVED WHERE A VESSEL CONTAINS BALLAST, YOU HAVE SUBMITTED THE AFFIDAVIT OF JACK P. HECHT, MANAGER OF OPERATIONS AT UNION MINERALS' SHIP SCRAPPING FACILITY AT PANAMA CITY, FLORIDA. ACCORDING TO MR. HECHT, THE SCRAPPING OF VESSELS WITH CONCRETE BALLAST REQUIRES TWO EXTRA DAYS. HE ESTIMATES THE DAILY LABOR COST OF RUNNING THE YARD AT $3,500 AND OVERHEAD AND SUPPLY COSTS AT 100 PERCENT OF THE LABOR COST, FOR DAILY OPERATING COSTS OF $7,000, FOR TOTAL ADDITIONAL COSTS OF ABOUT $14,000 FOR TWO DAYS. THESE FIGURES ARE BASED NOT ONLY ON THE LABOR AND OVERHEAD RATES FOR THE 11 MAN CREW ENGAGED IN THE ACTUAL BALLAST REMOVAL OPERATION, BUT INCLUDE SUCH FIGURES FOR THE ENTIRE YARD CREW OF 155 MEN.

YOU ALSO CONTEND THAT IN THE PAST MARAD HAS RECOGNIZED THAT ADDITIONAL COSTS OF MORE THAN $10,000 ARE INVOLVED WHEN A VESSEL CONTAINS CONCRETE BALLAST. IN THIS CONNECTION, YOU POINT OUT THAT ON MAY 13, 1970, UNDER PD -X-865, MARAD AWARDED TWO VESSELS CONTAINING CONCRETE TO UNION MINERALS AT A COMBINED PRICE OF $61,202.08, AS COMPARED WITH A PRICE OF $43,217.54 FOR THE AWARD TO UNION MINERALS OF A SINGLE VESSEL OF THE SAME TYPE WITHOUT CONCRETE. YOU NOTE THAT THE PRICE FOR EACH VESSEL CONTAINING CONCRETE WAS $12,616 LESS THAN THE PRICE OF THE ONE VESSEL WITHOUT CONCRETE. ALSO, YOU POINT OUT THAT UNDER THE SAME INVITATION MARAD AWARDED TWO SHIPS CONTAINING CONCRETE TO SOUTHERN SCRAP AT A COMBINED PRICE OF $63,777.76, SOME $12,000 LESS PER VESSEL THAN THE PRICE FOR A COMPARABLE VESSEL WITHOUT CONCRETE. IN ADDITION, YOU REFER TO A MEMORANDUM DATED NOVEMBER 19, 1969, FROM THE ACTING CHIEF, OFFICE OF SHIP OPERATIONS, TO THE ADMINISTRATOR, FROM WHICH YOU QUOTE THE STATEMENT, "IT IS OUR JUDGMENT THAT THE MINIMUM ACCEPTABLE BID IN THE PRESENT DOMESTIC MARKET IS $40,000 PER UNBALLASTED LIBERTY SHIP."

YOU ALSO TAKE ISSUE WITH THE $40,000 FLOOR PRICE, CONTENDING THAT WHILE THIS MINIMUM PRICE HAS REMAINED CONSTANT THROUGHOUT 1970 AND 1971, CHANGING CONDITIONS IN THE MARKET AND THE STATUTORY PREFERENCE REQUIREMENT DICTATES A SUBSTANTIAL REDUCTION. THE CHANGING CONDITIONS REFERRED TO ARE THE ACCELERATED RATE OF DISPOSAL, RAPID DEPRESSION OF SCRAP PRICES BEGINNING IN 1971, AND INCREASED DOMESTIC LABOR RATES. YOU ALSO POINT OUT THAT NO FLOOR PRICE HAS BEEN ESTABLISHED FOR SALES TO FOREIGNERS. FURTHER, YOU CONTEND THAT MARAD HAS DISCRIMINATED AGAINST DOMESTIC FIRMS BY REFUSING TO PERMIT THEM EXTENSIONS OF TIME IN WHICH TO TAKE DELIVERY OF VESSELS FROM THE HUDSON RIVER FLEET, THEREBY DISCOURAGING BIDS, AND GRANTING FOREIGN FIRMS EXTENSIONS AFTER THEY WERE SUCCESSFUL BIDDERS FOR THOSE VESSELS.

IT IS MARAD'S POSITION THAT UNITED STATES CITIZENS ARE BEING GRANTED PREFERENCE CONSONANT WITH APPLICABLE STATUTES AND ITS ADMINISTRATIVE RESPONSIBILITY WITH RESPECT TO THE NATIONAL DEFENSE RESERVE FLEET. THE INCREASED RATE OF SCRAP SALES FROM THE RESERVE FLEET IS SAID TO BE A MATTER OF NECESSITY. IT IS MARAD'S GOAL TO DISPOSE OF THE SURPLUS SHIPS AS SOON AS POSSIBLE IN ORDER TO REDUCE THE SUBSTANTIAL COSTS OF MAINTENANCE OF VESSELS NO LONGER NEEDED AND TO AVOID THE SUBSTANTIAL EXPENSE WHICH WILL RESULT FROM THEIR SINKING. IT IS REPORTED THAT THE FREQUENCY OF HOLING INCIDENTS IS SHARPLY INCREASING BECAUSE OF THE DISCONTINUATION OF PRESERVATION WORK, THE LACK OF UNDERBODY CATHODIC PROTECTION, AND UNFAVORABLE WATER CONDITIONS. IN THIS CONNECTION, MARAD CITES 23 CASES OF UNDERWATER CORROSION DAMAGE TO THE SURPLUS VESSELS IN THE HUDSON AND JAMES RIVER FLEETS.

WITH REGARD TO WHETHER IT HAS EXERTED "DILIGENT EFFORTS" TO AFFORD CITIZENS PREFERENCE, MARAD POINTS OUT THAT THE SURPLUS VESSELS SOLD FROM THE RESERVE FLEETS HAVE, WITHOUT EXCEPTION, BEEN OFFERED FIRST AND EXCLUSIVELY TO DOMESTIC SHIPBREAKERS, AND NO BIDS FROM THE DOMESTIC FIRMS HAVE BEEN REJECTED WHEN THE PRICES OFFERED ARE CONSIDERED FAIR, EVEN THOUGH SUBSTANTIALLY HIGHER PRICES COULD BE OBTAINED FROM FOREIGN FIRMS. IT IS MARAD'S POSITION THAT WHAT CONSTITUTES FAIR PRICES ON THE DOMESTIC MARKET IS A MATTER FOR IT TO DETERMINE IN LIGHT OF THE SCRAP MARKET GENERALLY. IN THIS CONNECTION, MARAD POINTS OUT THAT BASED UPON ITS REVIEW OF THE DOMESTIC SCRAP MARKET A "FLOOR PRICE" OF $40,000, HAS BEEN ESTABLISHED FOR LIBERTY SHIPS AND CONTINUING SALES AT THIS PRICE INDICATE THE REASONABLENESS OF THIS FIGURE. MARAD ALSO CITES AN INCREASE FROM $31.54 IN 1966 TO $43.36 IN 1970 IN SCRAP EXPORT PRICES WITHOUT A COMMENSURATE INCREASE IN DOMESTIC BIDS AS INDICATING DOUBT AS TO THE VALIDITY OF A MINIMUM ACCEPTABLE PRICE OF ONLY $40,000. THEREFORE, IT IS REPORTED THAT A MINIMUM PRICE RELATED TO SCRAP EXPORT PRICES IS NOW BEING DEVELOPED. IT HAS NOT BEEN CONSIDERED NECESSARY TO ESTABLISH A FLOOR PRICE FOR FOREIGN SALES AS THE PRICES RECEIVED HAVE BEEN FROM TWO TO TWO AND ONE-HALF TIMES MORE THAN THE DOMESTIC SALES PRICES.

MARAD STATES THAT IT HAS FROM TIME TO TIME GRANTED BOTH DOMESTIC AND FOREIGN FIRMS EXTENSIONS IN TAKING DELIVERY OF VESSELS. AS AN EXAMPLE, IT IS REPORTED THAT UNION MINERALS WAS GRANTED AN EXTENSION OF ABOUT 5 MONTHS BEYOND THE CONTRACT DELIVERY DEADLINE TO WITHDRAW 16 VESSELS FROM THE HUDSON RIVER FLEET. THE LAST GROUP OF 16 VESSELS IN THE HUDSON RIVER FLEET WERE SOLD TO A FOREIGN FIRM ON DECEMBER 23, 1970. THE VESSELS WERE NOT REMOVED WITHIN THE TIME ALLOWED. HOWEVER, IT IS REPORTED THE PURCHASER IS BEARING THE FULL COST OF CUSTODY AND MAINTENANCE OF THE VESSELS THAT REMAIN AT THE SITE.

WITH REGARD TO YOUR CITATION OF SALES UNDER PD-X-865 AS INDICATING RECOGNITION BY MARAD THAT ADDITIONAL COSTS OF MORE THAN $10,000 ARE INVOLVED WHEN VESSELS CONTAIN CONCRETE BALLAST, IT IS MARAD'S POSITION THAT THE SALE WAS CONSUMMATED AT A FIGURE BELOW THE FLOOR PRICE NOT IN RECOGNITION OF AN ALLOWANCE FOR CONCRETE BALLAST, BUT BECAUSE AN IMPENDING HAZARD NECESSITATED EXPEDITIOUS REMOVAL OF THE VESSELS. THEY WERE SOLD PRIOR TO THE 1970 HURRICANE SEASON BECAUSE THEY WERE LOCATED ABOVE A RAILROAD BRIDGE AND THE UNRELIABLE CONDITION OF THEIR MOORINGS CONSTITUTED A SERIOUS THREAT TO THE BRIDGE. MARAD ALSO REPORTS THAT UNION MINERALS PURCHASED 25 CONCRETE BALLASTED VESSELS FOR OVER $40,000 EACH DURING THE PERIOD FROM FEBRUARY 1968 TO JULY 1970. MARAD ACKNOWLEDGES THAT ALTHOUGH IT IS TRUE UNION MINERALS' BID OF $30,511.54 FOR 8 CONCRETE BALLASTED VESSELS UNDER PD-X-895 WAS REJECTED, IT IS NOT MENTIONED THAT IT ALSO BID $30,511.54 FOR 3 UNBALLASTED VESSELS AND $20,511.54 FOR THE 12TH VESSEL UNDER THE OFFERING.

MARAD DOES NOT CONCEDE THAT THERE SHOULD BE ANY ALLOWANCE FOR BALLAST. FURTHERMORE, IT TAKES ISSUE WITH YOUR CLAIM OF $10,000 TO $14,000 ADDITIONAL COSTS FOR HANDLING VESSELS WITH BALLAST. MARAD SAYS THAT THROUGH INFORMAL DISCUSSIONS WITH SCRAPPERS OTHER THAN UNION MINERALS IT HAS BEEN ADVISED THAT THE COST TO REMOVE POURED CONCRETE BALLAST IS ABOUT $10 PER TON, OR $1,800 TO $2,000 TO REMOVE THE AVERAGE 180 TO 200 TONS OF BALLAST IN A LIBERTY VESSEL. IN CONTRAST WITH THESE FIGURES, MARAD POINTS OUT THAT YOUR CLAIM OF A COST OF $10,000 TO $14,000 AMOUNTS TO $50 TO $70 PER TON. HOWEVER, IT IS MARAD'S POSITION THAT BASED ON THE INFORMATION IN MR. HECHT'S AFFIDAVIT OF APRIL 16, 1971, THE RATE FOR UNION MINERALS' REMOVAL OF BALLAST IS ABOUT $8 PER TON, OR ABOUT $1400 TO $1600 TO REMOVE THE AVERAGE 180 TO 200 TONS OF BALLAST. ACCEPTING UNION MINERALS' STATEMENT THAT IT TAKES AN 11 MAN CREW TWO DAYS TO REMOVE THE BALLAST, MARAD HAS CONVERTED THIS TO 176 MANHOURS. USING THE LABOR RATE OF $4 PER HOUR PLUS 100 PERCENT FOR OVERHEAD, THE HOURLY RATE IS $8 FOR A TOTAL OF $1,408. ASSUMING 180 TONS, THE RATE PER TON WOULD BE ABOUT $8.

IN DECISION B-169094, SEPTEMBER 4, 1970, 50 COMP. GEN. , THE ISSUE WAS WHETHER CITIZENS OF THE UNITED STATES WERE ENTITLED TO A PREFERENCE IN THE SALE FOR SCRAPPING OF GOVERNMENT-OWNED SURPLUS VESSELS FROM THE NATIONAL DEFENSE RESERVE FLEET. WE CONCLUDED THEREIN THAT UNDER SECTIONS 5 AND 6 OF THE 1920 ACT AND SECTION 809 OF THE 1936 ACT THERE IS A LEGAL REQUIREMENT FOR SUCH PREFERENCE. THE QUESTION HERE IS WHETHER THE ANTICIPATED SALE TO FOREIGN FIRMS OF THE 15 VESSELS FOR WHICH UNION MINERALS' BIDS WERE REJECTED IS IN VIOLATION OF THE LEGAL REQUIREMENT FOR PREFERENCE; AND WHETHER THE RATE AT WHICH THESE VESSELS ARE BEING DISPOSED OF EFFECTIVELY DENIES CITIZENS OF THE UNITED STATES THE LEGAL PREFERENCE TO WHICH THEY ARE ENTITLED.

SECTION 6 OF THE 1920 ACT AUTHORIZES AND EMPOWERS MARAD TO SELL TO ALIENS, AT SUCH PRICES AND ON SUCH TERMS AND CONDITIONS AS IT MAY DETERMINE, NOT INCONSISTENT WITH THE PROVISIONS OF SECTION 5, IF AFTER DILIGENT EFFORT IT HAS BEEN UNABLE TO SELL, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF SECTION 5, SUCH VESSELS TO CITIZENS OF THE UNITED STATES. SECTION 5 AUTHORIZES AND DIRECTS MARAD TO SELL, CONSISTENT WITH GOOD BUSINESS METHODS, THE DESIGNATED VESSELS AT SUCH PRICES AND ON SUCH TERMS AND CONDITIONS AS IT MAY PRESCRIBE. WITH REGARD TO FIXING THE SALES PRICE THE STATUTE PROVIDES THAT MARAD SHALL TAKE INTO CONSIDERATION, AMONG OTHER THINGS, THE PREVAILING DOMESTIC AND FOREIGN MARKET PRICE OF, THE AVAILABLE SUPPLY OF, THE DEMAND FOR VESSELS, AND ANY OTHER FACTS OR CONDITIONS THAT WOULD INFLUENCE A PRUDENT, SOLVENT BUSINESS MAN IN THE SALE OF SIMILAR VESSELS OR PROPERTY WHICH HE IS NOT FORCED TO SELL.

ALTHOUGH THE LEGISLATIVE HISTORY OF FOREGOING STATUTES PROVIDES NO ASSISTANCE IN THEIR INTERPRETATION, WE BELIEVE THE LANGUAGE OF THE STATUTES IS A CLEAR INDICATION OF A CONGRESSIONAL INTENT TO VEST IN MARAD CONSIDERABLE DISCRETION IN THE DISPOSAL OF SURPLUS VESSELS. WHILE SECTION 6 OF THE 1920 ACT CONDITIONS SALES TO FOREIGNERS UPON FIRST MAKING A "DILIGENT EFFORT" TO SELL TO CITIZENS, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF SECTION 5, NO WHERE IS "DILIGENT EFFORT" DEFINED. THE ONLY SPECIFIC CONDITION OF SECTION 5 RELATES TO THE FIXING OF A SALE PRICE, WHICH IS TO INCLUDE CONSIDERATION OF VARIOUS FACTORS. NEITHER SECTION INCLUDES ANY RESTRICTION OR GUIDELINE AS TO THE RATE OF DISPOSAL. IN VIEW THEREOF, WE DO NOT BELIEVE IT WOULD BE PROPER FOR OUR OFFICE TO OBJECT TO MARAD'S CURRENT PROGRAM OF DISPOSAL OF SURPLUS VESSELS IN THE ABSENCE OF A CLEAR INDICATION THAT SUCH ACTION WAS ARBITRARY OR CAPRICIOUS. IN THE CIRCUMSTANCES, HOWEVER, WE PERCEIVE OF NO BASIS UPON WHICH WE COULD PROPERLY CONCLUDE THAT THERE HAS BEEN AN ABUSE OF THE DISCRETION PERMITTED. MARAD HAS STATED A SOUND BASIS FOR ACCELERATING THE RATE OF DISPOSAL, AND WE WOULD NOT BE JUSTIFIED IN ASSUMING IN THE ABSENCE OF SUFFICIENT PROOF THAT THIS IS A SUBTERFUGE TO PERMIT IT TO SELL TO FOREIGNERS. WE BELIEVE MARAD'S POLICY OF FIRST OFFERING CITIZENS THE EXCLUSIVE OPPORTUNITY TO BUY THE VESSELS AT A MINIMUM PRICE IS CONSISTENT WITH THE DILIGENT EFFORT REQUIRED. OF COURSE, WE BELIEVE THE FLOOR PRICE FOR SALES TO CITIZENS SHOULD BE DETERMINED ON A CURRENT BASIS AND INCLUDE CONSIDERATION OF ALL RELEVANT FACTORS, INCLUDING THOSE SPECIFIED IN SECTION 5. IN THIS REGARD, WE FEEL THAT A REASONABLE ALLOWANCE FOR THE COST OF REMOVAL OF BALLAST IS A RELEVANT FACTOR. HOWEVER, WE ARE UNABLE TO CONCLUDE THAT REJECTION OF UNION MINERALS' BIDS OF ALMOST $10,000 BELOW THE FLOOR PRICE WAS ARBITRARY OR CAPRICIOUS. AS INDICATED PREVIOUSLY, MARAD IS REEXAMINING THE FLOOR PRICE IN LIGHT OF CURRENT CONDITIONS. ARE SUGGESTING IN OUR LETTER OF TODAY TO THE ADMINISTRATOR, COPY ENCLOSED, THAT THIS REVIEW INCLUDE CONSIDERATION OF A PROPER ALLOWANCE FOR REMOVAL OF BALLAST.

ACCORDINGLY, YOUR PROTEST IS DENIED.