B-153406, APR. 20, 1964

B-153406, APR. 20, 1964

TO THE SECRETARY OF THE ARMY:

WE ARE IN RECEIPT OF A LETTER, WITH ENCLOSURES, DATED MARCH 31, 1964, FROM THE DIRECTOR OF PROCUREMENT, IN RESPONSE TO OUR REQUEST OF FEBRUARY 10, 1964, REGARDING A DECISION BY THE FIRST UNITED STATES ARMY TO EXTEND THE EXPIRATION DATE OF A CERTAIN CONTRACT BEYOND ITS ORIGINAL ONE-YEAR TERM.

THE RECORD FURNISHED THIS OFFICE SHOWS THAT ON DECEMBER 4, 1962, PARGAS OF POTSDAM, INC., WAS AWARDED A ONE-YEAR TERM CONTRACT TO SUPPLY AN INDEFINITE AMOUNT OF LIQUIFIED PETROLEUM GAS TO CAMP DRUM FOR THE PERIOD JANUARY 1 THROUGH DECEMBER 31, 1963. AFTER MAKING AWARD, THE CONTRACTING OFFICER LEARNED THAT THE GOVERNMENT STILL HAD $8,263.44 WORTH OF PROPANE GAS ON HAND. UNFORTUNATELY, HOWEVER, THIS GAS WAS BEING STORED IN TANKS WHICH WERE THE PROPERTY OF HOUSEHOLD GAS SERVICE, INC., OF CLINTON, NEW YORK, THE PRIOR CONTRACTOR. AS PROVIDED IN THE AGREEMENT BETWEEN HOUSEHOLD GAS AND THE GOVERNMENT, THESE TANKS WERE SUPPOSED TO BE REMOVED FROM CAMP DRUM BY DECEMBER 31, 1962. THEREFORE, IN ORDER TO PREVENT TOTAL LOSS OF THIS GAS, THE CONTRACTING OFFICER ENTERED INTO NEGOTIATIONS WITH THE COMPANIES INVOLVED IN AN ATTEMPT TO HAVE THE GAS TRANSFERRED FROM THE TANKS OWNED BY HOUSEHOLD GAS TO THOSE OWNED BY THE PARGAS COMPANY. AFTER CONSIDERABLE DISCUSSION THE CONTRACTING OFFICER DECIDED TO LEASE THE STORAGE TANKS FROM HOUSEHOLD GAS SERVICE, INC., UNTIL SUCH TIME AS THE GAS SUPPLY HAD BEEN FULLY EXHAUSTED AT AN AGREED RENTAL OF $3.54 PER MONTH PER TANK. IN ADDITION, THE CONTRACTING OFFICER FELT IT DESIRABLE TO EXTEND THE CONTRACT TERMINATION DATE TO SEPTEMBER 30, 1964. IT IS OUR UNDERSTANDING THAT THE REASON FOR EXTENDING THE CONTRACT WAS TO COMPENSATE PARGAS FOR ANY LOSS THAT IT MIGHT SUSTAIN AS A RESULT OF THE GOVERNMENT PURCHASING A LESSER QUANTITY OF GAS THAN IT HAD ORIGINALLY ANTICIPATED. PARENTHETICALLY, WE SHOULD LIKE TO NOTE THAT IN ORDER TO PREVENT A RECURRENCE OF THIS SAME PROBLEM, THE AGREEMENT BETWEEN PARGAS AND THE GOVERNMENT WAS FURTHER AMENDED TO PROVIDE THAT AT THE EXPIRATION OF THE CURRENT CONTRACT, CREDIT WOULD BE GIVEN TO THE GOVERNMENT FOR ANY GAS REMAINING IN THE TANKS. BY LETTER DATED DECEMBER 18, 1963, MR. LEONARD W. FERRIS, CHAIRMAN OF THE BOARD OF HOUSEHOLD GAS SERVICE, INC., OBJECTED TO THE ARMY'S POSITION AND POINTED OUT THAT, SINCE PROSPECTIVE BIDDERS WERE INVITED TO INSPECT ALL ASPECTS OF THE PROJECT BEFORE SUBMITTING BIDS, PARGAS HAD AT LEAST CONSTRUCTIVE IF NOT ACTUAL KNOWLEDGE OF THE SITUATION AT THE TIME BIDS WERE SUBMITTED AND, THEREFORE, COULD NOT BE HEARD TO COMPLAIN THAT THEY WERE BEING DEPRIVED OF ANY BUSINESS.

IN THE REPORT SUBMITTED TO OUR OFFICE, DEFICIENCIES IN THE SUBJECT PROCUREMENT ARE RECOGNIZED. SPECIFICALLY IT IS STATED:

"ACTION HAS ALREADY BEEN TAKEN TO INSURE THAT THE CURRENT CONTRACT WITH PARGAS IS AMENDED TO PROVIDE FOR PROPER CONTROL BY THE CONTRACTING OFFICER OVER DELIVERIES; THAT NO GAS SHALL BE DELIVERED EXCEPT PURSUANT TO PROPERLY ISSUED DELIVERED ORDERS, EACH SUCH ORDER TO BE FUNDED FROM THE APPROPRIATE ALLOTMENTS. ALSO, IT IS PLANNED TO HAVE THE ARMY POWER PROCUREMENT OFFICER REVIEW THIS PROCUREMENT SITUATION AND RECOMMEND CLARIFICATION IN CURRENT ARMY REGULATIONS IN THE AR 420 SERIES, ENTITLED "REPAIRS AND UTILITIES," PARTICULARLY WITH RESPECT TO LIQUIFIED PETROLEUM GAS. IT WOULD APPEAR REASONABLE TO BELIEVE THAT THE GOVERNMENT MIGHT RECEIVE BETTER OVER-ALL PRICES IF THE SUPPLIER COULD BE ASSURED OF A REASONABLY LONG-TERM CONTRACT OBVIATING THE EXPENSIVE NECESSITY OF REMOVING AND INSTALLING TANKS ANNUALLY.'

THE CONTRACT AS ADVERTISED AND ENTERED INTO BY THE PARTIES CONTAINED NO PROVISION FOR EXTENSION. WE FIND NO BASIS FOR SANCTIONING THE EXTENSION OF THE ORIGINAL ONE-YEAR TERM CONTRACT IN VIOLATION OF THE REQUIREMENT FOR FORMAL ADVERTISING IN 10 U.S.C. 2304. SEE 20 OP.ATTY.GEN. 207. CONSEQUENTLY, THE PRESENT CONTRACT SHOULD BE TERMINATED AS SOON AS PRACTICABLE, CONSIDERING THE NECESSITY FOR UNINTERRUPTED SERVICE.