Partial Set-Asides for Domestic Bulk Fuel by Defense Fuel Supply Center

NSIAD-89-112: Published: Mar 23, 1989. Publicly Released: Mar 23, 1989.

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Pursuant to a congressional request, GAO reviewed the Defense Fuel Supply Center's (DFSC) domestic bulk-fuel procurement to determine its compliance with Small Business Act and the Federal Acquisition Regulation (FAR) set-aside programs.

GAO found that: (1) DFSC received formal approval to deviate from the standard FAR partial set-aside procedures in 1960; (2) under the special procedures, DFSC requested large and small business suppliers to bid for its fuel needs, used a computer model to evaluate bids and calculate bulk-fuel prices, and offered small businesses the opportunity to accept or reject the set-aside portions at the calculated price; (3) the special procedures allowed small businesses to receive set-aside prices that were equal to or higher than the prices they would receive under standard FAR procedures; (4) the special procedures also allowed DFSC to cover its requirements without resoliciting if eligible small businesses could not satisfy the set-aside requirement; (5) DFSC procured about $4.2 billion in petroleum, other fuel products, and related services during fiscal year (FY) 1987, of which small businesses supplied about 27 percent, which was near the DFSC small business participation goal of 29 percent; (6) DFSC awarded domestic fuel contracts to 24 small businesses for $433 million in FY 1987, representing 18 percent of all of businesses to which it awarded contracts; (7) the DFSC small business participation goal for FY 1988 was 21 percent, largely due to the declining number of operable small refineries; and (8) no other agency was allowed to deviate from the standard FAR procedures for small business set-asides. GAO believes that DFSC domestic bulk-fuel procurement procedures were consistent with the applicable federal procurement and small business laws and regulations.

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