B-227865.4, Dec 15, 1988, 88-2 CPD 594

B-227865.4, Dec 15, 1988, 88-2 CPD 594

PROCUREMENT - Competitive Negotiation - Contract awards - Transportation contracts - Propriety DIGEST: Protest against contract award of ocean transportation services for military preference cargo on the ground that awardee, a U.S. flag carrier, violated its certificate of independent price determination because of a cooperative working agreement with two foreign flag carriers, which includes a restriction in the charter arrangements of the awardee's vessels to those foreign flag carriers on the carriage of preference cargo, is denied where the Maritime Administration specifically required enforcement of the restriction in granting its approval of the charters under the Shipping Act of 1916, 46 U.S.C. App. Sec. 808 (Supp. III 1985), and the Federal Maritime Commission declined to investigate the agreement under the Shipping Act of 1984, 46 U.S.C. App. Sec. 1709 (Supp. III 1985).

Topgallant Group, Inc:

Topgallant Group, Inc. protests the award of a contract to 8ea-Land Service, Inc. under request for proposals (RFP) No. N00033-87-R-2200, issued by the Military Sealift Command (MSC) for less than shipload ocean and intermodal container transportation services for the period October 1, 1988 through March 31, 1989. Topgallant contends that Sea Land's proposal should have been rejected because Sea-Land engaged in conduct contrary to the certificate of independent price determination included in the RFP and executed by Sea-Land, and the Shipping Act of 1984, 46 U.S.C. App. Sec. 1709 (Supp. III 1985).

We deny the protest.

The RFP was issued on May 20 and initial offers were submitted on July 6. Best and final offers were received on July 28 and contracts, called "shipping agreements," were awarded for various designated trade routes to all technically acceptable, responsible carriers, including Topgallant and Sea-Land, on August 15.

The DOD cargo is to be carried in the same ships as commercial cargo also carried by the shipper. The cargo booking procedures in the shipping agreements provide that the low cost carrier for each route meeting the storage and delivery requirements will receive the DOD shipment. If that carrier does not have adequate space on its ship at the time of booking, the government will attempt to book the cargo with the next lowest cost carrier, and so on in order of rate favorability until a booking is accepted. Under the shipping agreements awarded here, Topgallant and Sea- Land compete for bookings on two trade routes, on both of which Sea-Land is low offeror.

The focus of Topgallant's protest is a cooperative working agreement Sea- Land entered into with P&O Containers Trans Freight Lines, Limited (TFL) and Nedlloyd Lijnen, B.V. (Nedlloyd), two foreign flag carriers. The agreement between Sea-Land, TFL and Nedlloyd stems from the acquisition by Sea-Land of 12 large U.S. flag containerships formerly operated by another shipping company. The agreement covers ocean common carrier services in the north European-U.S. and Mediterranean U.S. trade routes and includes the two trade routes on which Topgallant and Sea-Land compete for bookings under this RFP. The agreement provides, among other things, that the parties will withdraw their existing vessels from these trade routes, replace them with the 12 containerships acquired by Sea-Land, and not add commercial capacity except by mutual agreement. The agreement also provides that TFL and Nedlloyd will each time charter one ship from Sea- Land, but that these chartered vessels will remain U.S. flagged and U.S. crewed. The agreement further provides that the three carriers will also cross charter space among themselves, and agree on vessel itineraries, stowage plans, service frequency, port calls, and related matters.

By chartering space on U.S. flag vessels, TFL and Nedlloyd ordinarily would have gained eligibility to compete for carriage of U.S. military and other government preference cargoes, including the cargo involved here, which are reserved to U.S. flag vessels. However, Article 5(i) of the agreement restricts TFL and Nedlloyd from using the vessels chartered from Sea-Land for carriage of such preference cargo, as covered by this RFP, but does allow them to use other U.S. flag vessels not subject to the agreement to carry such cargo. Nevertheless, TFL and Nedlloyd are also precluded by Article 5(h) from adding any commercial capacity in the trade routes covered by the agreement except by mutual agreement of all the parties. Therefore, if TFL and Nedlloyd should choose to use other U.S. flag vessels not covered by the agreement to carry preference cargo in competition with Sea-Land, they would have to do so without carrying any commercial cargoes on such vessels, unless they first added those vessels to the agreement, which we view under the terms of the agreement as requiring Sea-Land's approval.

Topgallant contends that the August 15 contract award to Sea-Land violates Sea-Land's certificate of independent price determination because of the restrictions on TFL and Nedlloyd in Article 5(i) of the cooperative working agreement. The certificate of independent price determination is generally required to be included in all solicitations. Federal Acquisition Regulation (FAR) Sec. 3.103-1 (FAC 84-5). The purpose of the certification is to aid in enforcement of the antitrust laws and to assure that offerors do not collude among themselves to set prices or to restrict competition by inducing others not to bid. Columbus Marble Works, Inc., B-193754, Aug. 21, 1979, 79-2 CPD Para. 138. Normally, if a contracting officer suspects a certificate of independent price determination to be false, he is required to report the situation to the Department of Justice for prosecution under the antitrust laws. See FAR Secs. 3.103-2 (b)(3); 3.303(a) (FAC 84-5).

However, the antitrust laws generally do not apply to the kind of cooperative working agreements involved here, or to activities undertaken pursuant to such agreements, that have been filed with Federal Maritime Commission (FMC) under the Shipping Act of 1984. See 46 U.S.C. App. Sec. 1706. Instead, the Shipping Act of 1984 itself includes a list of prohibited acts which are aimed at restricting anticompetitive behavior. See 46 U.S.C. App. Sec. 1709. Further, FMC is given principal and initial authority to enforce all those prohibitions in the Act and may open an investigation on its own into such agreements and may bring suit in the U.S. District Court for the District of Columbia to enjoin operation of such agreements. See 46 U.S.C. App. Secs. 1705(g) and (h) and 1710(c); H.R. Conf. Rep. No. 600, 98th Cong. 2d Sess. at 29 (1984). In addition, any party may file a complaint with FMC alleging a violation of the Act. See 46 U.S.C. App. Sec. 1710.

Prior to issuance of this RFP, the cooperative working agreement was filed by Sea-Land on February 12 with FMC for review under the Shipping Act of 1984, /1/ and application was made to the Maritime Administration (MARAD) of the Department of Transportation for approval under the Shipping Act of 1916 of the charter arrangements contained in the agreement concerning the U.S. flag vessels owned by Sea-Land. /2/

On March 23, while the cooperative agreement was still being reviewed by FMC, MARAD approved the charter arrangements of Sea-Land's vessels to TFL and Nedlloyd with several conditions, one being that none of the vessels chartered to TFL and Nedlloyd by Sea-Land be used to carry preference cargo, in effect the same restriction contained in Article 5(i) of the agreement. MARAD considered enforcement of this restriction to be in furtherance of its responsibility under the Shipping Act of 1916 to maintain and promote a U.S. citizen-owned merchant fleet. MARAD's action, however, did not affect TFL and Nedlloyd's ability to use other U.S. flag vessels not subject to the agreement to carry preference cargo.

Although FMC had considered the restrictions contained in the agreement to constitute possible violations of sections 10(b)(12) and 10(c)(6) of the Shipping Act of 1984, on May 11, FMC determined, in light of MARAD's actions and other considerations, not to institute its own investigation of the agreement. MSC, the contracting agency here, felt that Sea-Land's cooperative working agreement did include such anti-competitive restrictions in violation of the Shipping Act of 1984 and had requested that FMC open the investigation. However, when FMC declined to open an investigation, MSC did not go forward on its own and file a complaint with FMC under section ll(a) of the Act. See 46 U.S.C. App. Sec. 1710. Nor did Topgallant, the protester, file such a complaint. The agreement by its own terms became effective on March 28.

Subsequently, following issuance of this RFP and Sea-Land's submission of its proposal, the MSC contracting officer, on August 10, requested Sea- Land to explain why Article 5(i) of the cooperative working agreement should not be considered a violation of Sea-Land's certificate of independent pricing executed by Sea-Land or, in the alternative, whether its certificate should be changed to reflect the agreement. The paragraph of the certificate about which MSC was primarily concerned reads: "The offeror certifies that ... no attempts have been made or will be made by the offeror to induce any other concern to submit or not to submit an offer for the purpose of restricting competition." FAR Sec. 52.2032(a)(3) (FAC 84-5).

On August 12, Sea-Land responded to MSC's query, arguing that the agreement did not violate the certificate of independent pricing. Sea Land also pointed out that MARAD had specifically required enforcement of Article 5(i), and that FMC had decided not to institute an investigation of the agreement under the Shipping Act of 1984. Subsequently, in making an award to Sea-Land on August 15, the MSC contracting officer specifically found that Sea-Land did not violate its certificate of independent price determination given (1) MARAD's requirement that Article 5(i) of the agreement be enforced; (2) FMC's decision not to investigate the agreement under the Shipping Act of 1984,; and (3) the absence of evidence of "collusion" or intent to mislead by Sea-Land.

We find the MSC contracting officer's determination that Sea-Land did not violate its certificate of independent price determination to be reasonable. In approving the cooperative working agreement's time charter arrangements to TFL and Nedlloyd, MARAD specifically required enforcement of the restrictions in Article 5(i) of the agreement on carriage of preference cargo by TFL and Nedlloyd, the same provision which the MSC contracting officer had questioned as a possible violation of Sea-Land's certificate of independent pricing. /3/ Further, after reviewing the agreement including Article 5(i), FMC declined to open an investigation into the matter. As indicated above, FMC is the agency empowered to review cooperative working agreements, such as the one here, for possible violations of the Shipping Act of 1984, and MARAD is the agency empowered by the Shipping Act of 1916 to determine the acceptability of the time charter arrangements such as those contained in the agreement here. Given the positions taken by MARAD and FMC, the agencies with the primary administrative responsibility and expertise in this area, it appears that Sea-Land's agreement is not viewed as being contrary to the applicable statutory restrictions on anti-competitive activity. Accordingly, we are unable to conclude on this record that the contracting officer erred in concluding that there was no violation of Sea-Land's certificate of independent price determination.

Topgallant also argues that pursuant to our bid protest jurisdiction under the Competition in Contracting Act of 1984 (CICA), 31 U.S.C. Sec. 3551 et seq. (Supp. IV 1986), to determine whether an award complies with statute or regulation, we should enforce the anti-competitive prohibitions of the Shipping Act of 1984 and find that SeaLand's agreement violates those prohibitions. However, our bid protest jurisdiction under CICA to determine whether an award violates a "procurement statute or regulation" does not include enforcement of statutes such as the Shipping Act of 1984, a statute regulating activity in the shipping industry. See 31 U.S.C. Sec. 3552 (Supp. IV 1986). As we indicated above, FMC is given principal and initial authority to enforce all the prohibitions of that Act and review the propriety of cooperative working agreements including Sea- Land's agreement with TFL and Nedlloyd.

The protest is denied.

/1/ Filing with FMC is required by section 5 of the Shipping Act of 1984, 46 U.S.C. App. Sec. 1704(a).

/2/ Any proposal to time charter U.S. flag ships to foreign firms, such as TFL and Nedlloyd, must first be approved by MARAD, pursuant to section 9 of the Shipping Act of 1916,

/3/ In its comments on the agency report, the protester argues for the first time that MARAD exceeded its authority under section 9 of the Shipping Act of 1916 by placing such a condition on its approval of the charter arrangements. However, approval of such charters is a matter assigned under the law to MARAD and is not a matter within our jurisdiction. See B-194528, June 26, 1986 (Letter to Senator Bill Bradley and other members of Congress stating that the General Accounting Office lacks jurisdiction over MARAD's approval of charters under section 9 of the Shipping Act of 1916).