BNUMBER:  B-270504
DATE:  March 15, 1996
TITLE:  Sea-Land Service, Inc.

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Matter of:Sea-Land Service, Inc.

File:     B-270504

Date:March 15, 1996

Raymond S. E. Pushkar, Esq., and Michael A. Hopkins, Esq., McKenna & 
Cuneo, for the protester.
Richard S. Haynes, Esq., E. Duncan Hamner, Esq., and Charna J. 
Swedarsky, Esq., Military Sealift Command, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest contention that a contract clause reflecting the statutory 
mandate of the McCumber Amendment to the Cargo Preference Act of 1904, 
10 U.S.C.  sec.  2631 (1994)--restricting shippers dealing with the 
Department of Defense to charges not higher than those charged private 
persons--is ambiguous is denied where the clause at issue merely 
establishes a price ceiling for such services, and shifts some of the 
responsibility for assuring that this ceiling is not breached to the 
potential offeror, who is in the best position to be aware of its own 
commercially available tariffs for such services.    

2.  Liquidated damages provisions in a solicitation are 
unobjectionable where the record shows that the stated amounts 
represent a reasonable assessment of the damges to the government due 
to the contractor's failure to perform, and thus are not punitive, 
excessive, or otherwise unreasonable. 

DECISION

Sea-Land Service, Inc. protests the terms of request for proposals 
(RFP) No. N62387-95-R-8150 ("the Alaska RFP"), issued by the Military 
Sealift Command (MSC) for ocean and intermodal transportation of 
Department of Defense (DOD)  breakbulk and containerized cargo between 
specific points in the continental United States (CONUS) and points in 
the state of Alaska from December 1, 1995, through November 30, 1996.  
Sea-Land protests that the RFP:  (1) is ambiguous in three areas, and 
that the ambiguities prevent potential offerors from preparing a 
reasonable, intelligent estimate of the government's requirements; and 
(2) contains unenforceable penalties in the guise of liquidated 
damages.

We deny the protest.

BACKGROUND

The RFP was issued on September 29, 1995, to obtain rates and services 
for shipping cargo to and from Alaska.  Carriers were invited to 
provide shipping rates for government cargo on their regularly 
scheduled commercial routes in the same vessels and at the same time 
as they ship commercial cargo.  In addition, carriers were invited to 
provide rates for ancillary services, such as loading or unloading 
containers, and equipment charges.  The contracting scheme here 
envisions that accepted rates and charges will be published in MSC's 
"Alaska Container Agreement and Rate Guide."  Using this guide, the 
Army's Military Traffic Management Command books transportation of 
cargo for individual DOD service components with the carrier, whose 
rates offer the lowest overall cost to the government, and who can 
meet the delivery requirements of the cargo. 

The Alaska RFP anticipates multiple awards of fixed-rate, indefinite 
quantity requirements contracts, which do not impose minimum transit 
times, sailing frequencies, or cargo accommodation requirements.  
Rather, the government's orders are placed using the carrier's 
regularly scheduled commercial sailings.  The carriers agree to 
transport such cargo as the government might tender based upon the 
carrier's accepted rates or, if applicable, its lower commercial 
rates, but the RFP does not obligate the carrier to promise the 
government a minimum amount of space in any vessel.

LIMITATION OF GOVERNMENT LIABILITY CLAUSE

One of Sea-Land's five specific challenges to the terms of the 
RFP--i.e., its claim that the RFP's "Limitation of Government 
Liability" clause is ambiguous because it vitiates the consideration 
necessary to make enforceable any contract awarded under this RFP--was 
recently considered and sustained by our Office in a protest brought 
by Sea-Land against the same agency and the same contract clause.  See 
Sea-Land Serv., Inc., B-266238, Feb. 8, 1996, 96-1 CPD  para.  ___.  In 
response to our decision, the agency amended the RFP here to delete 
the "Limitation of Government Liability" clause.  Thus, this basis of 
protest is academic. 

LOWEST PUBLISHED COST CLAUSE

Sea-Land challenges the inclusion of clause H-6.2, which, the 
protester argues, makes uncertain the rates, terms, and conditions 
which will apply to the transportation services ordered by the 
government.  Sea-Land also claims that the clause makes the contract 
unenforceable for lack of consideration.  We disagree on both counts.

Clause H-6.2 provides as follows:

     "Shipment Under Public Tariff Terms and Conditions.  
     Notwithstanding the rates, terms and conditions stated herein, 
     the Government shall be provided transportation from the Carrier 
     on the routes covered herein under the rates, terms and 
     conditions set forth in public tariffs of the Carrier that are 
     available to the public, if such published tariffs provide lower 
     overall costs to the Government than rates, terms and conditions 
     under this contract for comparable commodities."

The issue of the applicable rate for transporting government cargo is 
not a new one.  The Cargo Preference Act of 1904, 10 U.S.C.  sec.  2631 
(1994), and specifically, the so-called McCumber Amendment thereto, 
restricted American shippers dealing with DOD "to charges not higher 
than those made for transporting like goods for private persons."  See 
United States Lines Co. v. United States, 223 F. Supp. 838, 844 
(S.D.N.Y. 1963), aff'd on other grounds, 324 F.2d 97 (2d Cir. 1963); 
Sea-Land Serv., Inc., Armed Services Board of Contract Appeals No. 
46,608, Mar. 2, 1995, 95-1 BCA  para.  27,539.  Accordingly, clause H-6.2 
merely reflects the government's statutory right to ship cargo at 
rates no higher than the carrier's comparable commercial rates. 

We also fail to see any connection between the presence of this clause 
and a lack of consideration for the instant contract, as asserted by 
the protester.  This clause does not alter the underlying obligations 
of the parties with respect to a requirements contract for the 
shipping of cargo, see generally Torncello v. United States, 681 F.2d 
756 (Ct. Cl. 1982); rather, it merely establishes a price ceiling that 
will apply to this contract, even if the parties, through oversight or 
omission, fail to set prices in accordance with the ceiling.  Further, 
since potential offerors are clearly in the best position to be aware 
of their own commercially available tariffs for similar services, 
Sea-Land cannot reasonably claim that this clause makes the terms of 
the contract ambiguous. 

LEASING CLAUSE

Sea-Land also challenges as ambiguous the RFP's leasing clause on the 
grounds that the clause contradicts itself.  Specifically, Sea-Land 
complains that clause H-40 requires carriers to furnish containers, 
flatcars, and chassis (and in the case of non-self-sustaining 
refrigerated containers, a generator set) "for use in connection with 
land and ocean transportation of [g]overnment cargo arranged under 
this agreement."  While the clause provides that "[e]quipment so 
leased may be transported aboard any vessel designated by the 
[g]overnment and may be transported inland by any means available to 
the [g]overnment," it also prohibits the leasing of "containers for 
storage or other purposes unrelated to the furnishing of 
transportation pursuant to this contract, unless otherwise mutually 
agreed between the [g]overnment and the [c]arrier."  According to 
Sea-Land, the provision permitting the agency to transport leased 
equipment by any vessel designated by the government contradicts the 
prohibition on leasing equipment for purposes unrelated to this 
transportation contract.   

As a general rule, a contracting agency must give offerors sufficient 
detail in a solicitation to enable them to compete intelligently and 
on a relatively equal basis.  C3, Inc., B-241983.2, Mar. 13, 1991, 
91-1 CPD  para.  279.  The mere allegation that a solicitation is ambiguous, 
however, does not make it so.  RMS Indus., B-248678, Aug. 14, 1992, 
92-2 CPD  para.  109.  There is no requirement that a competition be based 
on specifications drafted in such detail as to eliminate completely 
any risk or remove every uncertainty from the mind of every 
prospective offeror.  A&C Bldg. and Indus. Maintenance Corp., 
B-230270, May 12, 1988, 88-1 CPD  para.  451.  

The agency explains that the purpose of the clause is to retain 
flexibility to respond to ever-changing and expanding requirements.  
While the agency states that it does not expect to use the clause 
often, it wants to be able to transport a carrier's loaded or unloaded 
container already in transit (or in place ready for transit) in 
another agreement carrier's vessel, or in a government-controlled 
vessel, when there is a need to do so.

Our review of the clause reveals nothing contradictory.  As quoted 
above, the clause begins by acknowledging that there will be a need to 
lease equipment--identified as containers, flatcars, chassis, and in 
some cases, generator sets--in connection with the contract's 
requirement to transport cargo.  Attached to this basic requirement is 
the proviso that, if necessary, the government reserves the right to 
transport a carrier's leased equipment on another carrier's vessel, or 
transport the equipment by some other means selected by the 
government.  A more narrowly drawn provision--addressing storage 
containers only--bars the government from leasing storage containers 
for purposes unrelated to the transportation of cargo pursuant to this 
contract (unless mutually agreed between the parties).  Sea-Land's 
conclusion that the reserved right to use leased equipment to 
transport cargo on another carrier's vessel (or by some other means) 
runs afoul of the more narrowly drawn bar regarding the unrelated 
lease of storage containers, except by mutual agreement, is 
contradicted by the clause itself, which, as indicated, clearly 
defines the respective rights of the parties.

Sea-Land also asserts that the leasing clause violates Federal 
Acquisition Regulation (FAR)  sec.  15.802(c),[1] which bars contracting 
officers from including in a contract price "any amount for a 
specified contingency to the extent that the contract provides for 
price adjustment based upon the occurrence of that contingency."  We 
need not address whether this provision applies under the 
circumstances here since, even assuming that it does, Sea-Land's 
argument is both speculative and premature.  First, we see no basis in 
this record to accept the premise of Sea-Land's argument--that the 
leasing rates are not adequate to compensate the carrier.  The agency 
points out that the leasing rates are based on daily rental charges 
paid under other contracts.  Other than its general assertion to the 
contrary, Sea-Land has not shown that the rates are inadequate.  
Second, it is premature to conclude that carriers will improperly 
inflate their proposed rates to reflect the financial risk allegedly 
imposed by the leasing clause, or that the contracting officer, at 
whom FAR  sec.  15.802(c) is directed, will accept contract prices in 
contravention of that provision.  In sum, we see no basis to conclude 
that inclusion of the leasing rates in the RFP will necessarily lead 
to the submission, and acceptance by the contracting officer, of 
prices in contravention of the FAR.

LIQUIDATED DAMAGES

Under the terms of the Alaska RFP, numerous liquidated damages 
provisions attach to the solicitation's performance requirements.  For 
example, the solicitation stipulates payment of damages when a carrier 
fails to use government-provided automobile interior protection 
devices when shipping service members' privately-owned vehicles (POV), 
RFP  sec.  C-3.3.8.3, or when the carrier fails to ship a POV within 9 
calendar days of receipt of the POV.  RFP  sec.  C-3.7.2.1.[2]  According 
to Sea-Land, the liquidated damages provisions set forth in the RFP 
are punitive, are not warranted in this solicitation, are unreasonably 
linked to interim steps within the transportation process, and are 
unrelated to any actual damages the agency will incur.  Hence, 
Sea-Land contends the liquidated damages provisions of the RFP are 
unenforceable.

FAR  sec.  12.202 specifically authorizes the use of liquidated damages 
provisions where the government reasonably expects to suffer damages 
if the contract is improperly performed and the extent of such damages 
would be difficult to ascertain.  Integrity Management Int'l, Inc., 
B-260595; B-260595.2, June 27, 1995, 95-2 CPD  para.  126.  We review 
allegations that a solicitation's liquidated damages provisions impose 
a penalty because any solicitation providing penalties for inadequate 
performance, in addition to violating applicable procurement 
regulations, could adversely affect competition and unnecessarily 
raise the government's costs.  Environmental Aseptic Servs. Admin. and 
Larson Bldg. Care, Inc., 62 Comp. Gen. 219 (1983), 83-1 CPD  para.  194; 
Aquasis Servs., Inc., B-229723, Feb. 16, 1988, 88-1 CPD  para.  154.  Before 
we will rule that a liquidated damages provision imposes a penalty, 
however, the protester must show that there is no possible 
relationship between the amounts stipulated for liquidated damages and 
losses which are contemplated by the parties.  Integrity Management 
Int'l, Inc., supra.

We turn first to Sea-Land's contention that the liquidated damages 
provisions in this solicitation are punitive, unwarranted, and 
unreasonably linked to interim steps in transportation process.  For 
example, Sea-Land highlights clause C-6 (as modified by amendments 
0002 and 0006) which sets a $30 per day late fee for transportation 
reports required by the solicitation.  According to Sea-Land, the 
agency conceded that this provision was punitive when the contracting 
officer advised potential offerors that a penalty was necessary to 
incentivize carriers to submit these reports in a timely fashion.  

While Sea-Land is correct in its claim that the contracting officer 
used the term "penalty" in discussing this clause, she did so in 
response to a written question from a potential offeror, which 
described the late fee as a penalty.  In addition, the contracting 
officer's mere use of the word "penalty" is not dispositive of whether 
these fees are impermissibly punitive.  The agency explains that the 
reports at issue here are necessary to keep track of and transport a 
large amount of cargo safely and effectively, maintain visibility of 
the cargo, control cargo inventories, and pay carriers in a timely 
manner without disputes.  In addition, in response to the offerors' 
questions, the agency agreed to lower the late fee from $50 to $30 per 
day in amendment 0006.  Given the importance of these reports, the 
clear damage that arises from a carrier's failure to provide them in a 
timely manner, and the relatively minimal amount of the late fee 
involved, we conclude that the fee in this respect is not punitive.

Similarly, with respect to Sea-Land's complaint that some of the 
liquidated damage provisions are unreasonably linked to interim steps 
in the transportation process, the agency explains that its concern is 
not just the final delivery of cargo, but the continued movement of an 
entire cargo transportation system.  As a representative example, we 
see nothing unreasonable about the requirement at clause H-17 
assessing damages against a carrier which fails to load cargo in time 
for a scheduled departure where the government provided the cargo 
within the time constraints set by the carrier.  While Sea-Land 
complains that even if it misses the loading date it might still 
deliver the cargo more quickly than certain other carriers (such as 
barges that have longer transit times), its complaint misses the 
point.  Once a carrier has been selected, the government's interest is 
in knowing that the cargo will be on its way as scheduled.  Given this 
interest, we see nothing unreasonable about the use of liquidated 
damages to ensure that carriers perform as offered.

Finally, we conclude there is nothing unreasonable about the amount of 
damages envisioned by the solicitation, or the relationship between 
the stipulated damages and any actual damages that might be incurred 
by the agency.  For example, the solicitation includes detention rates 
the government must pay for each day it delays a carrier's container 
or equipment beyond the time allowable.  Detention rates are not 
intended to represent a rental or lease rate--rental or lease rates 
for such equipment are lower--but are a form of liquidated damages to 
compensate the carrier for the loss of use of the equipment.  Compare 
RFP  sec.  H-25 with RFP  sec.  H-40 as modified by amendment 0005.  In 
recognition of the role of detention rates in compensating carriers 
for their inability to ship cargo in equipment that has been tied up 
by the government, the agency adopted them as a reasonable assessment 
of damages to the government for the unknown actual value of each day 
that delivery of a container is delayed.  In our view, the agency's 
argument that detention rates are appropriate estimates of damages for 
delay is buttressed by the fact that the actual damages for delayed 
shipment of a service member's possessions differ from one case to the 
next, and cannot be predicted with any certainty.  Given the 
long-standing use of these charges by the carriers against the 
government, we see nothing unreasonable in their use in the opposite 
direction; in both cases, detention rates reduce the potential for 
disputes and permit the cargo shipping system to go forward smoothly 
and without delay.  

The protest is denied. 

Comptroller General
of the United States

1. Sea-Land's protest cites FAR  sec.  15.802(b)(3), however, the 
referenced language is now set forth at FAR  sec.  15.802(c), pursuant to 
changes published in Federal Acquisition Circular No. 90-32, Sept. 18, 
1995.

2. Other RFP requirements covered by liquidated damages provisions are 
found at clauses H-13, H-14, H-17, H-20, H-25.4, and C-6.