BNUMBER:  B-265880
DATE:  December 19, 1995
TITLE:  Resource Recovery International Group, Inc.

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Matter of:Resource Recovery International Group, Inc.

File:     B-265880

Date:     December 19, 1995

Michael Deal for the protester.
Matthew Pausch, Esq., Defense Logistics Agency, for the agency.
Paul E. Jordan, Esq., and Paul Lieberman, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Although solicitation for sale of former naval vessel for scrap 
involves the removal and proper disposal of hazardous materials, the 
Service Contract Act does not apply because the proposed contract is 
not principally for services.

2.  Protest that domestic scrapping requirement, as condition of sale 
of former naval vessel, is unduly restrictive is denied where agency 
presents a reasonable explanation in support of the condition and 
protester fails to show that the requirement is clearly unreasonable. 

DECISION

Resource Recovery International Group, Inc. (RRI) protests the terms 
of the invitation for bids (IFB) covering Sale No. 31-5179, issued by 
the Defense Reutilization and Marketing Service (DRMS), Defense 
Logistics Agency (DLA), for the sale of the ex-U.S.S. Oriskany for 
scrap.[1]  RRI contends that the solicitation is flawed for various 
reasons.

We deny the protest.

The IFB sought bids to purchase the ex-U.S.S. Oriskany, a World War II 
era aircraft carrier which is no longer in active service and has been 
stricken from the U.S. Naval Register.  Award was to be made to the 
responsive, responsible bidder submitting the highest acceptable bid.  
The awardee is required to scrap and demilitarize the vessel in the 
United States or its territories.  Scrapping is to be accomplished by 
dismantlement and mutilation of the hull and superstructure in such a 
manner that no considerable part of the vessel is left intact or 
undisturbed.  Title to the scrap, parts, and/or components available 
for removal vests in the purchaser at the time when the scrap/property 
is physically removed from the vessel.  As a further condition of the 
sale, the purchaser assumes responsibility for proper removal and 
disposal of all hazardous materials present on board or produced as 
part of the scrapping process.  These hazardous materials include 
asbestos, sodium chromate, polychlorinated biphenyls (PCB) and others.  
Although the government remains a co-generator of any PCB waste (see 
Toxic Substances Control Act, 15 U.S.C.  2601 et seq. (1994)), the 
purchaser is responsible both for ascertaining the extent to which 
local, state, and federal statutes and regulations apply to this and 
other hazardous materials and for compliance with the law in the 
disposal of those materials.  The IFB provided a survey of locations 
of the hazardous materials, including asbestos and PCBs, but expressly 
disclaimed any warranty as to the completeness of these surveys.  

RRI did not bid, and instead filed this protest prior to bid opening.  
Three responsive bids were submitted by the September 6 bid opening 
date.  The high bidder was Pegasus, Inc.  DRMS awarded Pegasus the 
contract on September 29.  Performance of the contract has been stayed 
pending this decision.

RRI contends that this IFB is actually a solicitation for hazardous 
waste remediation and disposal services, rather than a sale.  In the 
protester's view, the scrap represents the payment for these services 
and the purchase price is "merely" an adjustment.  RRI thus argues 
that the IFB is flawed because it does not contain provisions of the 
Federal Acquisition Regulation (FAR) associated with service 
contracts.  The only provision identified by the protester is that 
associated with the Service Contract Act of 1965, 41 U.S.C.  351 et 
seq. (1988). 

The Service Contract Act requires federal contractors performing 
service contracts entered into by the United States to pay minimum 
wages and fringe benefits, as determined by the Secretary of Labor.  
If a contracting officer believes that a proposed contract "may be 
subject to" the Service Contract Act, he is required to notify the 
Department of Labor (DOL) of the agency's intent to make a service 
contract so that DOL can provide the appropriate wage determination.  
29 C.F.R.  4.4 (1995).  If the agency does not believe a contract may 
be subject to the Service Contract Act, then there is no duty on its 
part to notify DOL or to include Service Contract Act provisions in 
the solicitation.  53 Comp. Gen. 412 (1973); Tenavision, Inc., 
B-231453, Aug. 4, 1988, 88-2 CPD  114.  When a protester 
challenges an agency's decision that the Service Contact Act does not 
apply to a particular procurement, the determination to be made is 
whether the agency acted reasonably.  Id.   

The Service Contract Act is applicable to contracts, the "principal 
purpose" of which is to furnish services through service employees.  
41 U.S.C.  351.  Here, while the solicitation imposes conditions on 
the sale of the ex-U.S.S. Oriskany, including removal and proper 
disposal of hazardous materials, the principal purpose of the contract 
clearly is for the sale of surplus material.  In this regard, the 
record reflects that the value of the scrap well exceeds the cost of 
hazardous material disposal and the purchase price of the vessel.  
While RRI argues that remediation costs would exceed the costs of 
domestic scrapping, the vessel's appraised value was $600,000 and the 
highest bid submitted exceeded $1.2 million.  Thus, we think the 
agency reasonably concluded that the principal purpose of the contract 
was a sale and not hazardous material remediation.

RRI next contends that the scrap warranty, which requires that 
scrapping be done within the United States, is unreasonable.  
According to the protester, the better approach would be a so-called 
"hybrid scrapping," which would require some domestic scrapping, but 
would allow export of the hull for final scrapping.  Since overseas 
prices for scrap steel are higher, bids for this hybrid scrapping 
would be higher, resulting in increased revenue for the government.

The determination of the agency's minimum needs and the best method of 
accommodating them are primarily within the agency's discretion and, 
therefore, we will not question such a determination unless the record 
clearly shows that it was without a reasonable basis.  CardioMetrix, 
B-257408, Aug. 3, 1994, 94-2 CPD  57; RMS Indus., B-247233; B-247234, 
May 1, 1992, 92-1 CPD  412.

The domestic-only scrapping requirement is reasonable.  The agency 
explains that its scrapping requirement represents a valid minimum 
need of the government.  See NR Vessel Corp., B-250925, Feb. 11, 1993, 
93-1 CPD 128.  It is Navy policy to require the scrapping of hulls of 
combatant ships as a condition of sale and scrapping is to be 
accomplished in the United States whenever practicable to ensure 
effective and permanent demilitarization.  OPNAVINST 4770.5F,  712 
(Scrapping Policy).  This policy also guards against the possibility 
that a ship on which men have served, fought, or died may fall into 
undesirable hands or be used for an objectionable purpose.  Id.  While 
the Navy is investigating the potential for use of hybrid scrapping, 
it is requiring domestic scrapping until its investigation is 
complete.  

The Navy's position also reflects its concerns regarding its 
responsibility in the proper disposal of PCB wastes.  For hybrid 
scrapping to be feasible, a contractor must remove all regulated PCBs 
from the hull so that it can be exported in compliance with these 
regulations.  The Environmental Protection Agency has issued proposed 
revisions to the PCB regulations which would allow export of vessels 
containing PCBs if certain conditions are met.  However, these 
conditions are onerous in the Navy's opinion.  For example, to export 
a vessel with PCB on board, a contractor must obtain a certification 
from the receiving country that it has received accurate and complete 
information about the waste, consents to receive it, and has adequate 
disposal facilities.  Given the difficulty in identifying the precise 
locations of PCB wastes on decommissioned vessels, the Navy believes 
this requirement may be unachievable.  Until these and other 
considerations are resolved, the Navy has determined not to allow 
hybrid scrapping of its vessels.  

The Navy's concerns with permitting other than domestic-only scrapping 
appear reasonable on their face, and RRI has not shown otherwise.  
Apart from expressing its view that hybrid scrapping would result in 
higher revenues for the government, RRI has not demonstrated that the 
Navy's policy is unduly restrictive of competition; other than 
affecting the potential income from the sale of scrap, RRI has not 
shown that the warranty in any way limits its ability to bid on the 
vessel.  In this regard, we note that the only restriction is on where 
the scrapping is accomplished; there is no restriction on exporting 
the scrap steel once it is separated from the vessel.  While the 
protester argues that the agency allowed it to use hybrid scrapping on 
another vessel (the ex-U.S.S. Bennington) under a prior sales 
contract, the mere fact that the Navy previously allowed this method 
does not show that the current provision is unreasonable; each sale is 
a separate transaction and just as what happens under one procurement 
does not determine the propriety of what occurs under another 
procurement, see Komatsu Dresser Co., B-251944, May 5, 1993, 93-1 CPD  
369, neither does action under a prior sale control what is to happen 
under a subsequent sale.[2]  Under these circumstances, we find no 
basis for objecting to the agency's requirement for domestic-only 
scrapping.  

RRI also contends that the solicitation is flawed because it does not 
adequately identify the type and quantity of all hazardous materials.  
We disagree.  

Although a procuring agency must provide sufficient detail in a 
solicitation to permit competition on a relatively equal basis, the 
solicitation need not be so detailed as to remove any uncertainty from 
the minds of prospective bidders or to eliminate every performance 
risk.  J&J Maintenance, Inc., B-248915, Oct. 8, 1992, 92-2 CPD  232.  
Rather, risks are inherent in contracts, and bidders are expected to 
use their professional expertise and business judgment in taking these 
risks into account in computing their bids.  See United Terex, Inc., 
B-245606, Jan. 16, 1992, 92-1 CPD  84.    

Here, the agency took sufficient steps to ensure competition on an 
equal basis.  DRMS explains that it has identified as much of the 
hazardous material as possible and disclosed it to potential bidders.  
Specifically, DRMS had surveys conducted of hazardous materials and 
made them available to prospective bidders.  These surveys included a 
143-page asbestos survey of each compartment on the vessel, 
identifying type and condition of asbestos, and a PCB survey 
identifying classes of materials containing PCBs (liquid and solid) 
and sample amounts for some 158 separate items.  DRMS also provided an 
opportunity for bidders to examine the vessel prior to submitting 
bids.  While the protester believes that the agency should have done 
more in identifying hazardous materials, there is no basis for finding 
that the agency's efforts were inadequate or unreasonable.  There 
certainly is nothing inherently objectionable in the government's 
requiring bidders to assume the risk of complete identification of 
hazardous materials and compliance with applicable laws and 
regulations governing removal, transport, and disposal of hazardous 
wastes.[3]   

The protest is denied.

Comptroller General 
of the United States

1. We consider this protest under 4 C.F.R.  21.11 (1995).  DLA, by 
letter dated January 13, 1987, has agreed to our considering bid 
protests involving its surplus property sales.  See Consolidated 
Aeronautics, B-225337, Mar. 27, 1987, 87-1 CPD  353.  

2. Moreover, we note that the hybrid scrapping permitted under the 
earlier contract was accomplished pursuant to a modification to that 
contract and was not based on a specific allowance for this method in 
the solicitation.  The propriety of that modification has been 
challenged in pending court litigation by Schnitzer Steel Industries, 
Inc., another bidder on the sale of the ex-U.S.S. Bennington (Civil 
Action No. 94-2737, U.S. District Court for the District of Columbia).  

3. The protester also argues that the agency's failure to identify 
these materials violates 10 U.S.C.  7311 (1994).  This statute, which 
concerns contracts for work on naval vessels other than new 
construction, requires the Navy to identify the types and amounts of 
hazardous wastes that must be removed and to do so in sufficient 
detail to allow the contractor to comply with applicable laws 
governing hazardous waste.  By its terms, this statute is inapplicable 
to this solicitation.  Not only is the ex-U.S.S. Oriskany no longer a 
"naval vessel," the contract is for sale of the vessel and not for 
"work" on the vessel.  Sales of vessels are governed by 10 U.S.C.  
7305, which does not contain any comparable hazardous waste 
identification requirement.