DOE Contracts To Demonstrate Coal Liquefaction Adequately Protect Government Interests

PLRD-81-49: Published: Aug 17, 1981. Publicly Released: Sep 21, 1981.

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GAO was asked to evaluate the negotiation and award of the Department of Energy's (DOE) two contracts for the Solvent Refined Coal Liquefaction Demonstration projects. The objective of the review was to determine if the contracts adequately consider and protect the Government's interest, and to review the contract provisions related to contractor rights and liabilities, patents, and revenue and royalty sharing.

Although the contracts are unique and there are no criteria for measuring some of their provisions, GAO believes that the contracts adequately protect the Government's interest particularly when considering that the primary objective of DOE was to facilitate commercialization of the processes. The contracts are awarded in accordance with established Federal and DOE procurement policies and regulations. Further, DOE structured the contracts to provide incentives for the contractors to pursue the successful completion of the projects. The contractors will share the projects' costs and have the potential for receiving royalties from the sale of licenses to the processes. The Government, on the other hand, may recover 2.5 times its investment through revenue sharing, sale of the plants, and royalty sharing if the projects are sufficiently profitable.

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