B-135913, JULY 23, 1958, 38 COMP. GEN. 64

B-135913, JULY 23, 1958, 38 COMP. GEN. 64

CONTRACTS - NEGOTIATION - HIGHWAY MAIL TRANSPORTATION SERVICES NEGOTIATION OF A HIGHWAY MAIL TRANSPORTATION CONTRACT WITH A RAILROAD COMPANY, WHICH HAS BEEN FURNISHING SIMILAR MAIL SERVICE BY RAIL BUT WHICH HAS PETITIONED THE STATE RAILROAD COMMISSION FOR PERMISSION TO DISCONTINUE RAIL PASSENGER SERVICE BETWEEN THE CITIES FURNISHED MAIL SERVICE, IS WITHIN THE DISCRETION VESTED IN THE POSTMASTER GENERAL UNDER 39 U.S.C. 541A TO PERMIT RAIL COMPANIES TO PROVIDE MAIL TRANSPORTATION BY MOTOR VEHICLE IN LIEU OF SERVICE BY TRAIN, AND IN THE ABSENCE OF ANY EVIDENCE OF ABUSE OF THIS ADMINISTRATIVE DISCRETION IN OBTAINING THE SERVICES AT A SUBSTANTIALLY REDUCED COST UNDER NEGOTIATION PROCEDURES THE ACTION IS NOT SUBJECT TO OBJECTION.

TO WILSON, WOODS AND VILLALON, JULY 23, 1958:

REFERENCE IS MADE TO YOUR LETTER OF MAY 27, 1958, PROTESTING ON BEHALF OF CERTAIN HIGHWAY POST OFFICE OPERATORS, AGAINST THE PRACTICE OF THE POST OFFICE DEPARTMENT OF NEGOTIATING WITH RAILROAD COMPANIES FOR HIGHWAY MAIL TRANSPORTATION SERVICES RATHER THAN BY COMPETITIVE BID PROCEDURES. PARTICULAR, YOU INVITE ATTENTION TO THE CASE INVOLVING THE TEXAS AND NEW ORLEANS RAILROAD COMPANY WHICH HAS PETITIONED THE TEXAS RAILROAD COMMISSION FOR PERMISSION TO DISCONTINUE PASSENGER SERVICE BETWEEN DALLAS AND HOUSTON, TEXAS, AND WHICH HAS NEGOTIATED WITH THE DEPARTMENT FOR IN LIEU HIGHWAY SERVICE BETWEEN THOSE CITIES.

OUR REVIEW OF THIS MATTER DISCLOSES THAT IN AUGUST 1957, THE RAILROAD ADVISED THE POST OFFICE DEPARTMENT THAT IT HAD PETITIONED THE TEXAS RAILROAD COMMISSION TO DISCONTINUE PASSENGER TRAIN SERVICE ( TRAINS 17 AND 18) BETWEN DALLAS AND HOUSTON, TEXAS, BUT THAT IT WAS INTERESTED IN RETAINING THE HIGHWAY TRANSPORTATION OF ALL THE MAIL CARRIED ON THESE TRAINS. THE COMPANY BELIEVED IT COULD PERFORM THIS SERVICE AT LESS COST TO THE GOVERNMENT BY HIGHWAY RATHER THAN BY RAIL TRANSPORTATION WHICH AMOUNTED TO ABOUT $454,100 ANNUALLY.

THE DEPARTMENT'S DALLAS REGIONAL OFFICE DEVELOPED A SUBSTITUTE HIGHWAY SERVICE PLAN WHICH WAS BELIEVED WOULD PROVIDE EQUAL OR BETTER SERVICE TO THE AREA INVOLVED. THE REPLACEMENT SERVICE WOULD CONSIST OF A COMBINED HIGHWAY POST OFFICE ( HPO) AND TRUCK OPERATION, PLUS LOADING, UNLOADING, SEPARATION, AND TRANSFER, AT AVAILABLE EXISTING RAILROAD FACILITIES AT DALLAS, FORT WORTH, AND HOUSTON, TEXAS, AND AT INTERMEDIATE POINTS EN ROUTE. IN OCTOBER 1957, THE COMPANY MADE AN INITIAL OFFER OF $420,000 PER ANNUM TO PERFORM THIS SERVICE BY HIGHWAY TRANSPORTATION, HOWEVER THE POSITION OF THE DEPARTMENT WAS THAT THIS SERVICE COULD BE OBTAINED FOR A SUBSTANTIALLY LOWER FIGURE FROM OTHER HIGHWAY OPERATORS. FURTHER NEGOTIATIONS WITH THE RAILROAD INVOLVED THE POSSIBILITY OF COMMINGLING FREIGHT, MAIL AND EXPRESS SERVICES. HOWEVER, STUDIES DISCLOSED THAT RAILROAD FREIGHT SCHEDULES ARE NOT SUITABLE FOR MAIL MOVEMENTS AND, HENCE, COMMINGLING SERVICES WOULD NOT BE FEASIBLE.

BASED ON EXTENSIVE NEGOTIATIONS WITH THE COMPANY IN MARCH 1958, AN INFORMAL AGREEMENT WAS REACHED WHEREBY THE COMPANY WOULD BE ALLOWED $330,000 A YEAR FOR THE TRANSPORTATION OF MAIL BY HIGHWAY SERVICE. UNDERSTAND THAT A FORMAL CONTRACT WILL BE EXECUTED AT A LATER DATE. THE AGGREGATE, THE DEPARTMENT ESTIMATES THAT ITS SUBSTITUTE HIGHWAY SERVICE PLAN FOR THE AREA WILL RESULT IN ANNUAL NET SAVINGS OF $138,800, A REDUCTION IN ANNUAL COSTS FROM $622,300 FOR PRESENT SERVICE TO $483,500 FOR PROPOSED SERVICE.

WE HAVE BEEN ADVISED THAT THE $330,000 FIGURE IS BASED ON COMPUTED COMPETITIVE COSTS THAT THE DEPARTMENT WOULD HAVE INCURRED FOR THE SERVICE IF IT WERE NOT AWARDED TO THE RAILROAD. THESE ESTIMATES ARE AS FOLLOWS: TRANSPORTATION:

HIGHWAY POST OFFICE (197,647.5 MILES

AT $0.26 PER MILE/-------------------- $51,388

TRACTOR-TRAILERS (796,874.2 MILES

AT $0.22 PER MILE/-------------------- 175,312

$226,700

CHRISTMAS RUSH----------------------------------- 10,500

237,200 TERMINAL HANDLING:

HOUSTON--------------------------------17,609

DALLAS ANNEX-------------------------- 37,558

CHRISTMAS RUSH------------------------- 6,000

61,167 SHUTTLE COSTS:

HOUSTON-------------------------------- 5,475

FORT WORTH---------------------------- 7,300

CHRISTMAS RUSH------------------------- 2,200

14,975 FACILITY ADDITION: DALLAS------------ ---------* 15,000

328,342 ALTERNATE RAIL VALUE----- ------------------------- 1,658

$330,000

THE ESTIMATED TRANSPORTATION COST OF $226,700 IS BASED ON THE "GOING" AVERAGE MILEAGE RATES OF 26 CENTS AND 22 CENTS FOR THE USE OF HPO'S AND TRACTOR-TRAILERS, RESPECTIVELY, IN THE DALLAS REGION.

THE RATE USED FOR THE HPO SERVICE WAS BASED ON AN AVERAGE RATE OF 25.22 CENTS A MILE PAID ON HIGHWAY POST OFFICE ROUTES OPERATING IN THE DALLAS REGION WITH A TOTAL ANNUAL MILEAGE OF 950,504, AS FOLLOWS:

ANNUAL AVERAGE

HIGHWAY POST OFFICE RUNS ANNUAL COST MILEAGE RATE PER

MILE 3-C: DENNISON & DALLAS---------------- $16,260.08 52,634.40 $0.30892 21 C:

WACO & CUERO-------------------------)

WACO & DUBLIN------------------------) 50,663.56 206,918.40 .24484 27-C:

BEEVILLE & MCALLEN-------------------)

HOUSTON & BEEVILLE-------------------)

SAN ANTONIO & CORPUS CHRISTI-------) 89,524.96 357,012.70 .25076 67-C: AMARILLO & ROSWELL-------------- 40,360.02 160,490.50.25147

SHREVEPORT & HOUSTON------------ 42,914.38 173,448.00 .24741

TOTAL---------------------------------- $239,723.00 950,504.00 ?25220

THE RATE FOR TRACTOR-TRAILER SERVICE IS BASED ON AN AVERAGE OF 18 CENTS PER MILE PAID FOR 30 AND 35-FOOT SEMI-TRAILERS USED ON TRUCK ROUTES OPERATING IN TEXAS. THE 18-CENT RATE WAS ADJUSTED TO 22 CENTS PR MILE FOR THE LARGER SIZE 40-FOOT SEMI-TRAILERS TO BE UTILIZED FOR THIS SERVICE.

THE TRANSPORTATION ITEM OF $10,500 REPRESENTS THE ESTIMATED COST OF ADDITIONAL TRIPS BY TRACTOR-TRAILERS THAT WOULD BE NECESSARY FOR THE DELIVERY OF CHRISTMAS MAIL. THE AMOUNTS FOR TERMINAL HANDLING ($61,167) AND SHUTTLE COSTS ($14,975) REPRESENT ESTIMATED COSTS REQUIRED FOR THESE SERVICES IRRESPECTIVE OF THE CONTRACTOR PERFORMING THE SERVICE--- RAILROAD OR HIGHWAY OPERATOR.

THE FACILITY ADDITION COST OF $15,000 REPRESENTS A 10-YEAR AMORTIZATION OF A $150,000 EXPENDITURE THAT WOULD BE REQUIRED OF THE DEPARTMENT TO EXPAND THE DALLAS POSTAL FACILITIES. HOWEVER, THIS FACILITY ADDITION WOULD NOT BE NECESSARY IF THE CONTRACT IS AWARDED TO THE COMPANY SINCE IT WOULD CONTINUE TO USE ITS FACILITIES AT DALLAS WHICH ARE ADJACENT TO THE POSTAL FACILITIES. THE ALTERNATE RAIL VALUE ITEM OF $1,658 APPEARS TO HAVE BEEN USED TO ROUND OUT THE ESTIMATE TO $330,000.

THE ACT OF FEBRUARY 15, 1933, 39 U.S.C. 541A, AUTHORIZES THE POSTMASTER GENERAL, IN HIS DISCRETION, TO PERMIT RAILROAD COMPANIES TO PROVIDE MAIL TRANSPORTATION BY MOTOR VEHICLE OVER HIGHWAYS, IN LIEU OF SERVICE BY TRAIN, AT A RATE OF COMPENSATION NOT IN EXCESS OF THAT ALLOWABLE FOR SIMILAR SERVICE BY RAILROAD. WE HAVE PREVIOUSLY HAD OCCASION TO CONSIDER THE APPLICABILITY OF THAT STATUTE TO THE NEGOTIATION BY THE POSTMASTER GENERAL OF CONTRACTS WITH RAILROADS OF CONTRACTS FOR HIGHWAY POSTAL SERVICE AND REACHED THE CONCLUSION THAT WE COULD NOT PROPERLY OBJECT TO SUCH ACTION.

WHILE, AS A GENERAL RULE, OUR OFFICE BELIEVES THAT THE SOLICITATION OF COMPETITIVE BIDS, AS DISTINGUISHED FROM NEGOTIATION PROCEDURES, IS IN THE BEST INTERESTS OF THE GOVERNMENT, CONSIDERING ALL OF THE ADVANTAGES WHICH FLOW FROM COMPETITION, OUR PRESENT REVIEW OF THIS MATTER DOES NOT DISCLOSE ANY ABUSE OF THE ADMINISTRATIVE DISCRETION VESTED IN THE POSTMASTER GENERAL, OR HIS DELEGATES, BY 39 U.S.C. 541A. IN VIEW OF THE DEPARTMENT'S EFFORTS TO OBTAIN THE REQUIRED SERVICES AT A SUBSTANTIALLY REDUCED FIGURE UNDER AUTHORIZED NEGOTIATION PROCEDURES AND WITHIN THE FRAMEWORK OF THE DEPARTMENT'S ANNOUNCED POLICY TO AVOID THE DIVERSION OF MAIL FROM ANY TRANSPORTATION MEDIA, WE ARE OF THE OPINION THAT THE ACTIONS THUS FAR TAKEN ARE NOT SUBJECT TO QUESTION BY OUR OFFICE ON THE BASIS OF THE INFORMATION DEVELOPED.

AS WILL BE NOTED, OUR REVIEW WAS CONFINED TO AN EXAMINATION OF THE NEGOTIATIONS WITH THE TEXAS AND NEW ORLEANS RAILROAD COMPANY AND SINCE EACH CASE MUST BE CONSIDERED SOLELY ON ITS OWN MERITS, NOTHING HEREIN SHOULD BE REGARDED AS CONTROLLING AS TO ANY OTHER SIMILAR CASES WHICH MAY ARISE IN THE FUTURE.