Transportation of Government-Owned Jet Fuel by Pipeline

B-197687: Mar 21, 1980

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GAO was asked whether it concurred with the opinion that the Defense Acquisition Regulations (DAR) would not apply to the transportation of government-owed jet fuel by pipelines, where the pipeline company submits a proposed Tender of Service, and government bills of lading (GBL's) are issued as the procurement document. The proposal was made for the purpose of avoiding the legal opinion where the transportation of petroleum products was viewed as a bilateral contract requiring the application of DAR. The proposed method is being considered for widespread application throughout the United States. GAO stated that, since this request involves no existing pipeline company or specific contract or agreement, and was not presented by the head of the agency, their opinion must be regarded as advisory only. GAO centered its comments on the question of whether the Tender of Service would constitute a continuing offer which would ripen into a contract upon issuance of the GBL's for the transportation of individual shipments. GAO believes that the legal authority under which the Tender of Service could be made cannot be relied upon as procurement authority. Its application presumes the general applicability of lawfully published tariff rates and merely permits a reduction in those rates to the government. Further, the exception to DAR and the specific common carrier exception contemplates the bona fide publication and filing of generally applicable tariff rates, which provides some assurance of reasonableness and a standard for determining the validity of any offered rate reductions. The services described do not appear to be susceptible to the use of GBL's. Additionally, the DAR authority to negotiate transportation services furnished by commercial carriers does not authorize the use of rate tenders. GAO would not express a legal opinion as to the legal efficacy of the proposal in other respects, or to the practicalities obviously involved.