BNUMBER:  B-277241.8; B-277241.9 
DATE:  October 21, 1997
TITLE: Aalco Forwarding, Inc., et al., B-277241.8; B-277241.9,
October 21, 1997
**********************************************************************

Matter of:Aalco Forwarding, Inc., et al.

File:     B-277241.8; B-277241.9

Date:October 21, 1997

Alan F. Wohlstetter, Esq., and Stanley I. Goldman, Esq., Denning & 
Wohlstetter; James M. McHale, Esq., Seyfarth, Shaw, Fairweather & 
Geraldson; Thomas M. Auchincloss, Jr., Esq., Leo C. Franey, Esq., and 
Brian L. Troiano, Esq., Rea, Cross & Auchincloss; Richard L. DeWitt, 
Approved Forwarders Inc.; and Arthur R. Heath, A&P Shipping Corp., for 
the protesters.
G. Jerry Shaw, Esq., and Susan E. Shaw, Esq., Shaw, Bransford & 
O'Rourke, for HFS Mobility Services; Brad Effenberger for FAReaching 
Services; L. Clyde Groover, Jr., for Associates Relocation Management 
Co., Inc., intervenors.
Thomas J. Duffy, Esq., Maj. Jonathan C. Guden, and Ramon Morales, 
Esq., Department of the Army, for the agency.
Adam Vodraska, Esq., Guy R. Pietrovito, Esq., and James A. 
Spangenberg, Esq., Office of the General Counsel, GAO, participated in 
the preparation of the decision.

DIGEST

1.  Agency properly determined, based on market research, that 
household goods moving services for military personnel could be 
acquired under Federal Acquisition Regulation part 12 commercial item 
procedures, notwithstanding the inclusion of government-unique 
requirements in the solicitation that are not present in commercial 
contracts for moving services.

2.  Agency properly issued waiver in accordance with Federal 
Acquisition Regulation  sec.  12.302(c) for commercial item solicitation 
requirements that may be inconsistent with customary commercial 
practice where agency followed its procedures and reasonably found 
that the requirements subject to the waiver were legitimate agency 
needs. 

3.  There is no basis to presume that relocation brokers who may be 
awarded contracts for household goods moving services for military 
personnel will violate the Anti-Kickback Act of 1986, 41 U.S.C.  sec.  
51-58, when subcontracting for moving services; violations must be 
determined under the particular facts and circumstances presented by 
each transaction and whether payments have been made to the broker by 
subcontractors for an improper purpose.

DECISION

Aalco Forwarding, Inc. and 118 other firms protest the terms of 
request for proposals (RFP) No. DAMT01-97-R-3001, issued by the 
Military Traffic Management Command (MTMC), Department of the Army, 
for all personnel, equipment, materials, supervision, and other items 
necessary to provide transportation and transportation-related 
services for 50 percent of the eligible Department of Defense (DOD) 
and U.S. Coast Guard sponsored personal property shipments from North 
Carolina, South Carolina, and Florida, to any or all of 13 destination 
regions in the continental United States (CONUS) and/or any or all of 
5 destination regions in Europe.[1]  The solicitation implements a 
pilot program to reengineer DOD's personal property shipping and 
storage program.  The protesters primarily contend that MTMC is 
improperly acquiring the transportation services under part 12 of the 
Federal Acquisition Regulation (FAR), Acquisition of Commercial Items, 
and that the RFP is defective because the inclusion of relocation 
brokers as offerors will violate the Anti-Kickback Act.

The protests are denied.

BACKGROUND

DOD's Personal Property Shipping and Storage Program

A member of the military services or a civilian employee of DOD who is 
ordered to make a permanent change of station or other approved move 
is entitled to ship and/or store, at government expense, an authorized 
amount of household goods and personal effects.  As a result, DOD is 
the nation's largest personal property shipper.  It expends more than 
one billion dollars on more than 650,000 household goods movements 
each year, accounting for approximately 15 percent of the moving 
industry's annual volume.[2]  DOD's current personal property shipping 
and storage program is run centrally by the headquarters office of 
MTMC and administered locally by about 200 military and DOD shipping 
offices around the world.  DOD relies almost exclusively on commercial 
movers, both directly with more than 1,100 moving van companies 
(carriers) and forwarders, and indirectly with thousands more agents 
and owner-operator truckers working for the carriers and forwarders.  

The current program, under which the transportation and related 
services are acquired under government bills of lading, is exempt from 
the procurement laws and regulations, see FAR  sec.  47.000(a)(2), and 
separately regulated.  Under this program, MTMC solicits rates every 6 
months based on a rate baseline from approved carriers or forwarders 
who have agreed to the terms and conditions of MTMC's tender of 
service.  Carriers and forwarders have two chances to file rates 
before the beginning of each rate cycle--an initial rate filing and 
what is referred to as a "me-too" rate filing, in which a carrier or 
forwarder can lower its initially filed rate to that of any other 
carrier or forwarder.  Each local military installation distributes 
its traffic using a traffic distribution roster from which carriers 
are selected by order of rate level and quality score (all shipments 
are scored after each move and carriers are given an overall 
performance score every 6 months). 

In contrast to DOD's current personal property and shipping program, 
the commercial household goods transportation market, as relevant 
here, consists of two distinct sectors.  The first commercial market 
sector is household goods transportation arranged and paid for by 
individual householders under terms and rates published in a tariff 
required by law to be published and available for public inspection.  
49 U.S.C.  sec.  13702 (Supp. I 1995).  This tariff, the Professional 
Movers Nationwide Household Goods Commercial Relocation Tariff 400-L, 
issued by the Household Goods Carriers' Bureau Committee, specifies 
mileage rates for transportation between points in CONUS and separate 
charges for accessorial services as well as terms and conditions for 
the transportation and the other services provided, such as 
limitations on the carrier's liability.  Several volumes of tariff 
exceptions are also published, which are typically special discounted 
rates and other variations of the provisions of the standard tariff 
applicable to the accounts of individual carriers.

The second sector is the national account market, which is for 
household goods transportation arranged and paid for by someone other 
than the householder, usually the householder's employer.  Within the 
national account market, a large number of shippers maintain contracts 
with one or more carriers for their household moves.  These contracts 
generally incorporate the commercial tariff by reference, but also 
provide binding long-term commitments, discounted tariff rates fixed 
for the term of the contract, full replacement liability for lost or 
damaged shipments, and other terms more favorable to the shipper than 
the standard tariff terms. 

The Reengineering Effort

In 1994, the Deputy Commander-in-Chief, U.S. Transportation Command, 
tasked MTMC to reengineer the DOD personal property shipment and 
storage program, based on concerns about the quality of carrier 
performance, the high rates of loss of or damage to household goods 
being transported or stored, and the administrative burden of the 
program.  According to MTMC, because of the "me-too" rate filing 
process and the resulting equal distribution of traffic under the 
current program, there is little incentive for movers to provide high 
quality service.  MTMC also maintains that the amount and number of 
claims filed for loss of or damage to household goods being 
transported or stored exceeds the industry standard for commercial 
shipments.  Further, the current program is administratively 
burdensome for MTMC; for example, a shipping office may have to 
contact many carriers on the distribution roster before finding a 
carrier willing to accept a shipment, and each move involves 
significant amounts of paperwork.  MTMC states that it cannot continue 
to do business under the current program and that DOD must find a 
streamlined, efficient way to move its personnel while ensuring high 
quality moves.  Thus, the principal goals of the reengineering effort 
are to improve the quality of personal property shipment and storage 
services provided to DOD and to simplify the administration of the 
program so as to be able to focus more of the resources of the 
shipping offices towards customer service and away from the 
administrative burdens associated with the current program. 

According to MTMC, an initial review of trade publications indicated 
that various commercial shippers had faced similar service and claims 
problems, and had reengineered their relocation programs to improve 
the quality of service they received and to reduce the number and 
amount of claims, at a reasonable cost.  MTMC decided to identify the 
services provided by the moving industry to commercial shippers and to 
incorporate the business processes commercial shippers were 
successfully using in order to obtain superior service, reduce 
administrative burdens, and adopt better business practices.

To determine commercial practices, the MTMC reengineering team and its 
contractors conducted an industry benchmarking survey of commercial 
shippers, examined commercial contracts, reviewed trade publications, 
and engaged in dialogue with industry, including visits to and 
correspondence with carriers, agents, forwarders, and relocation 
companies, some of which are participating in these protests.  MTMC 
solicited comments from industry on various proposals to reengineer 
its current program during the acquisition planning stage for the 
pilot program, and conducted several industry forums on the 
reengineering effort to obtain further input from industry.

Congressional committees have expressed support for MTMC's 
reengineering effort and agreed that MTMC must pursue a higher level 
of service for the movement of household goods with greater reliance 
on commercial standards of service and business practices.  In 
particular, in 1995, the Committee on National Security of the House 
of Representatives, followed in 1996 by the conference committee on 
the National Defense Authorization Act for Fiscal Year 1996, directed 
DOD to undertake a pilot program to implement commercial business 
practices and standards of service for its movement of household 
goods.[3]  MTMC proceeded to develop a proposed pilot program, which 
ultimately resulted in this solicitation to acquire personal property 
shipping and storage services through the procurement system. 

Because of concerns that the reengineered program could adversely 
affect the moving industry, particularly small moving companies, the 
conference committee on the DOD Appropriations Act for 1996 directed 
DOD to report prior to the implementation of the pilot program on the 
incorporation of requirements that are not standard commercial 
business practices and the potential negative impact of the program on 
small businesses.[4]  MTMC responded that most of the elements of the 
proposed pilot program are based upon commercial business "best 
practices," which it had verified through its industry benchmarking 
survey, and that it thought that the industry could provide the 
required services.  The few government-unique elements of the pilot 
program, MTMC reported, serve compelling government needs and permit 
effective small business participation.  Finding that MTMC's proposed 
pilot program did not satisfactorily address the concerns of small 
moving companies, the House Committee on National Security and the 
Senate Armed Services Committee directed DOD to convene a DOD/industry 
working group to develop a mutually agreeable program to pilot.[5]  

The DOD/industry working group convened and came to a consensus on a 
number of issues in September 1996, including a set of program goals 
and various points of agreement, some of which were subsequently 
formalized in the MTMC Domestic Personal Property Rate Solicitation 
Exception Appendix to the commercial tariff dated January 16, 1997, 
applicable to this solicitation.  However, the DOD/industry working 
group could not reach agreement on the approach to take for the pilot, 
and DOD and industry presented separate pilot program proposals.  
While DOD proposed to contract for the pilot program under the FAR, 
industry proposed to modify the existing non-FAR based program.

The Solicitation

MTMC issued a draft solicitation for its proposed pilot program on 
December 12, 1996, and conducted a pre-solicitation conference on 
January 29, 1997.  Following industry comments, MTMC issued the 
"final" solicitation on March 14, and conducted a pre-proposal 
conference on April 16.  Amendment 0004, effective
May 14, replaced the "final" solicitation in its entirety. 

The solicitation was issued pursuant to the commercial item procedures 
of FAR part 12, and contemplates the award of firm, fixed-price, 
indefinite quantity/indefinite delivery contracts for a period of 
performance of a base year with 2 option years.  The RFP's Schedule of 
Supplies/Services provided that the acquisition will have a minimum 
value of $5,021,000 and a maximum value of $75,000,000 for the entire 
pilot program during the base year.[6]  The RFP allows the government 
to award a single task order contract or to award multiple task order 
contracts for the same or similar services to two or more sources; 
MTMC anticipates making multiple awards for each traffic channel 
(shipments from an origin state to a destination region).[7]  Awards 
for some of the traffic channels are set aside for small business 
concerns.[8]  

The solicitation requires offerors to list in their proposals the 
daily capacity (in pounds) that they are committing to this contract 
for the base year and each option year per traffic lane (shipments 
from an origin shipping office to a destination shipping office) for 
each traffic channel for which offers are submitted.  Each offeror's 
committed daily capacity will be used by the agency to determine the 
number of contracts to be awarded for each traffic channel and to 
obligate the contractors to provide requested services up to their 
committed daily capacities.  Although a minimum committed daily 
capacity is not specified, the RFP states that committed daily 
capacities must be reasonable, based on the historical tonnage 
projections.  An attachment to the RFP provides historical 
monthly/yearly tonnage data and numbers of shipments for each traffic 
lane; the information in the attachment covers 100 percent of the 
eligible traffic for fiscal years 1995 and 1996.[9]  
For all domestic shipments, pricing is requested for the base year and 
each option year for a transportation line item and a 
storage-in-transit (SIT)[10] and SIT-related services line item based 
upon the Professional Movers Nationwide Household Goods Commercial 
Relocation Tariff, STB HGB 400-L in effect as of May 5, 1996, and the 
MTMC Domestic Personal Property Rate Solicitation Exception Appendix 
to the tariff dated January 16, 1997.[11]  For international household 
goods and unaccompanied baggage shipments, single factor rates per net 
hundredweight are solicited for movements from origin to destination; 
unit prices are also requested for various specified accessorial 
services, such as reweigh and SIT, which are not included in the 
transportation single factor rate.  There is no provision for rate 
adjustment during the extended contract period.

The RFP includes FAR  sec.  52.212-2, Evaluation--Commercial Items, which 
provides that the government will award contracts to the responsible 
offerors whose offers represent the best overall value based on an 
integrated assessment of past performance/experience, subcontracting 
plan, and price.  Past performance/experience is a more important 
evaluation factor than the subcontracting plan; combined, these two 
factors are significantly more important than price. 

The RFP also incorporates FAR  sec.  52.212-4, Contract Terms and 
Conditions-Commercial Items (Aug 1996), with authorized deviations and 
addenda.  With regard to compliance with laws unique to government 
contracts, the FAR clause states that the contractor agrees to comply 
with, among other statutes, the Anti-Kickback Act of 1986, 41 U.S.C.  sec.  
51-58 (1994).  Included in the contract clauses in the addenda is FAR  sec.  
52.216-18, Ordering, which provides that personal property shipments 
shall be ordered through task orders; the orders will be placed on a 
rotational basis until the contract minimums for each awardee are 
reached and then issued based upon the contractor's proven value to 
the government.
     
The RFP includes a 21-page performance work statement detailing the 
performance obligations of the contractor.  It requires the contractor 
to furnish facilities, personnel, equipment, materials, documentation, 
supervision, and other items necessary to perform the tasks called for 
in the performance work statement, and requires that all facilities, 
equipment, and materials be consistent with commercial practice to 
prevent deterioration and damage to personal property and to ensure 
timely arrival at destination.  The contractor must establish a 
quality control program and meet certain performance requirements for 
on-time pick-up and delivery, frequency and amount of claims, and 
customer satisfaction.  The agency periodically evaluates the 
contractor's conformance with the performance requirements based on 
the compiled results of a survey completed by each customer after 
every move.

The performance work statement also contains detailed provisions 
regarding the contractor's liability to the customer for loss or 
damage to household goods being transported or stored, as well as 
regarding the contractor's and customer's rights and responsibilities 
in resolving loss or damage claims filed by the customer.  Customers 
generally have 90 calendar days from date of delivery to notify the 
contractor of lost or damaged items.  Customers are to be encouraged 
to file any claim with the contractor first, within 9 months from the 
date of delivery, and the contractor is required to make a good faith 
effort to settle the claim.  If agreement is not reached with the 
contractor, the customer may file a claim with the military claims 
service within 2 years for the unpaid or unresolved portion of the 
claim against the contractor under 31 U.S.C.  sec.  3721(g) (1994).  The 
military claims service will then adjudicate and pay the claim 
pursuant to applicable claims procedures and seek reimbursement from 
the contractor.

PROTEST AND ANALYSIS

Commercial Item

The protesters first contend that the solicitation was wrongfully 
issued as a commercial item acquisition under FAR part 12 and that the 
services being acquired under the solicitation cannot properly be 
considered a commercial item. 

FAR part 12 prescribes policies and procedures unique to the 
acquisition of commercial items and implements the preference 
established by, and the specific requirements in, the Federal 
Acquisition Streamlining Act of 1994 (FASA), 10 U.S.C.  sec.  2377 (1994), 
for the acquisition of commercial items that meet the needs of an 
agency.  FAR part 12 establishes acquisition policies more closely 
resembling those of the commercial marketplace, as well as other 
considerations necessary for proper acquisition planning, 
solicitation, evaluation, and award of contracts for commercial items.  
FAR part 12 specifies the solicitation provisions and clauses to be 
used when acquiring commercial items. 

If this procurement can be conducted under FAR part 12, MTMC will be 
able to take advantage of the more streamlined acquisition procedures 
established by FAR part 12, as to which the provisions of the laws 
listed in FAR  sec.  12.503 and 12.504 and Defense Federal Acquisition 
Regulation Supplement (DFARS)  sec.  212.503 and 212.504 are inapplicable, 
eliminated, or modified.  (For example, for commercial item 
acquisitions, an agency may not require a contractor's submission of 
certified cost or pricing data normally required under the Truth in 
Negotiations Act,
10 U.S.C.  sec.  2306a(a)(B) (Supp. II 1996)).  If the procurement cannot 
properly be conducted under FAR part 12, MTMC could conduct the 
acquisition under FAR
part 15, Contracting by Negotiation; in that case, however, the 
procurement would be subject to the provisions of law inapplicable, 
eliminated, or modified under FAR part 12, and would have to be 
conducted without the benefit of FAR part 12's more streamlined 
procedures.  Alternatively, the protesters would have MTMC continue 
with the current non-FAR based program or some variant thereof, such 
as the alternate pilot proposed by industry for the DOD/industry 
working group.

Relevant to determining the suitability of FAR part 12 to this 
procurement is FAR  sec.  12.101(a), which requires agencies to conduct 
market research pursuant to FAR
part 10 to determine whether commercial items are available that could 
meet the agency's requirements.  According to FAR  sec.  12.202(a), the 
market research as performed under FAR part 10 "is an essential 
element of building an effective strategy for the acquisition of 
commercial items and establishes the foundation for the agency 
description of need" pursuant to FAR part 11 (i.e., the performance 
work statement), the solicitation, and resulting contract.[12]  The 
market research involves obtaining information specific to the item 
being acquired, and should address whether the government's needs can 
be met by items of a type customarily available in the commercial 
marketplace, items of a type customarily available in the commercial 
marketplace with modifications, or items used exclusively for 
governmental purposes; customary practices regarding customizing, 
modifying, or tailoring of items to meet customer needs; and the 
requirements of any laws or regulations unique to the item being 
acquired.  FAR  sec.  10.002(b)(1).  If market research establishes that 
the government's needs can be met by a type of item (including 
services) customarily available in the commercial marketplace that 
would meet the definition of a commercial item at FAR  sec.  2.101, the 
contracting officer is required to solicit and award any resulting 
contract using the policies and procedures in FAR part 12.  FAR  sec.  
10.002 (d)(1), 12.102(a).

Consistent with FASA, FAR  sec.  2.101(f), in relevant part, defines 
"commercial item" with respect to services as follows: 

     Services of a type offered and sold competitively in substantial 
     quantities in the commercial marketplace based on established 
     catalog or market prices for specific tasks performed under 
     standard commercial terms and conditions.

The protesters contend that the "movements of [the household goods of] 
military personnel are not like movements of [the household goods of] 
civilian personnel" and that "[t]here is no commercial item equivalent 
to moving [the household goods of] a military person from one station 
to another."  The protesters allege that international shipments of 
household goods in particular cannot properly be considered a 
"commercial item" because such international shipments are not based 
on established catalog or market prices.  Finally, the protesters 
argue that many of the solicitation's requirements are inconsistent 
with customary commercial practice and depart from standard commercial 
terms and conditions in the moving industry, such that the solicited 
services cannot possibly qualify as a commercial item acquisition 
under FAR part 12.  Instead, the protesters maintain, MTMC has issued 
a solicitation for a custom-designed personal property transportation 
program with unique requirements that are tailored to meet MTMC's 
special needs and that are unavailable as solicited in the commercial 
marketplace.

Determining whether a product or service is a commercial item is 
largely within the discretion of the contracting agency, and such a 
determination will not be disturbed by our Office unless it is shown 
to be unreasonable.  See Canberra Indus., Inc., B-271016, June 5, 
1996, 96-1 CPD  para.  269 at 5; Coherent, Inc., B-270998, May 7, 1996, 96-1 
CPD  para.  214 at 3 (protests of whether an awardee's product is a 
commercial item).  

The record shows that MTMC reasonably concluded, based on its market 
research, including reviews of numerous commercial contracts, that the 
moving services it seeks in reengineering its current program qualify 
as a commercial item because they are the type of services offered and 
sold competitively by the moving industry in substantial quantities to 
commercial shippers, particularly in the national account contract 
market.  In this regard, it is apparent that the services used for the 
movement of the household goods of military personnel, i.e., packing, 
loading, hauling, storage and other accessorial services, and 
delivery, are not services that are unique or provided only to the 
government, but are essentially the same moving services provided in 
the commercial market, in that movers use the same trucks, warehouses, 
ocean or air carriers, crews, packing materials, and other equipment 
to perform both DOD's and the commercial market's household goods 
moving requirements.  The protesters have not persuasively explained 
why the "type" of movement of household goods services performed for 
commercial contractors in substantial quantities is not essentially 
the same in this regard as the type of services being performed for 
the government. 

Moreover, we find unpersuasive the protesters' contention that there 
is no established market price for international shipments.  It is 
true that, unlike for domestic household goods shipments, there is no 
standard tariff for the entire origin-to-destination movement of 
international shipments.  Instead, forwarders price international 
movements on an individual per-shipment basis by adding various 
separately priced components of the move for a lump-sum or "through" 
rate.[13]  However, a copy of a commercial contract for overseas moves 
provided in the agency report shows that the overall price of a 
typical move is based on several component market rates, including 
origin services by the contractor (such as wrapping and packing) 
priced by weight, and transportation and destination services, which 
are not priced in the contract but are "invoiced [to the shipper] at 
prevailing rates."  The conference report accompanying the National 
Defense Authorization Act for Fiscal Year 1996, which added "market 
prices" to the FASA definition of commercial item applicable to 
services, 41 U.S.C. 403(12)(F) (1994),[14] states that market prices 
are current prices that are established in the course of ordinary 
trade between buyers and sellers free to bargain and that can be 
substantiated from sources independent of the offeror.  H.R. Conf. 
Rep. No. 104-450, at 967.  Applying this definition, we find that the 
record evidences that the international shipment charges are based on 
established market prices for specific tasks; while prices may vary 
from shipment to shipment, there are apparently market rates 
established for the component services, which can then be compiled to 
formulate the "through" rate, which is effectively a market price.  
The protesters' contention that there are no established market rates 
for international moving services is also belied by the biennial 
"through" rates submitted to MTMC by participants in the current 
international program.

Further, the protesters do not dispute that the type of moving 
services provided to commercial shippers are performed under standard 
commercial terms and conditions.  In this regard, national account 
contracts typically incorporate by reference the provisions of the 
standard commercial tariff and contain terms and conditions regarding 
rate discounts, carrier liability, etc., that, while more favorable to 
the shipper than the commercial tariff, are considered standard in 
such commercial contracts.

Thus, the agency properly determined that the services constituted a 
commercial item, as defined by FAR  sec.  2.101(f), that must be acquired 
pursuant to FAR part 12.   
Nonetheless, the protesters argue that the solicited services must not 
be procured under FAR part 12, because many of the solicitation's 
requirements are not standard commercial terms and conditions and are 
inconsistent with customary commercial practice.  The protesters have 
identified a variety of requirements that are assertedly not present 
in commercial practice and that, they claim, have changed the nature 
of the services being acquired here to something other than commercial 
services, so that use of FAR part 12 is impermissible.

For example, the protesters contend that the solicitation deviates 
from standard commercial practice by requiring in the Schedule for 
Supplies/Services that offerors "freeze" their rates for a period of 
at least 3 years, which is the possible term of the contracts (base 
year and 2 option years), without an opportunity for price 
adjustments.[15]  The protesters assert that standard commercial 
practice is to use 1-year contracts; that the occasional 2-year 
contract provides for price adjustment due to unforeseen causes such 
as fuel price increases; and that a contract for more than 2 years is 
rare and customarily would have a price adjustment clause.

The protesters argue that the requirement that offerors commit to a 
constant committed daily capacity in pounds for each traffic lane for 
each year is a material deviation from commercial practice because 
commercial shippers do not require household goods carriers to provide 
the same level of service year round (i.e., to commit daily capacity 
for extended periods).  The protesters explain that the demand for 
household goods moving services--both domestic and international--is 
highly seasonal, with over half of annual moves occurring during the 
peak summer moving season.  

The protesters also assert that the loss and damage liability and 
claims handling procedures in the RFP are dramatically different from 
those in commercial practice and contracts:  for example, a claims 
filing period of up to 2 years rather than the commercial standard of 
9 months; loss and/or damage notification up to 90 days after 
delivery; offsets of claims settlements against future invoices; 
customer rather than carrier determination of when full replacement 
instead of repair of a damaged item is necessary; higher contractor 
liability limits than provided in commercial tariffs and 
contracts;[16] and the failure to exempt the contractor from liability 
for loss or damage resulting from certain forces beyond its 
control.[17] 

Finally, the protesters maintain that a variety of other RFP 
requirements are assertedly inconsistent with customary commercial 
practice:  for example, the submission of proposals electronically 
through MTMC's proposal entry software; the use of contractor 
identification cards; a 2-hour response time to customer telephone 
inquiries during non-business hours;[18] minimum performance 
requirements relating to on-time performance, claim frequency and 
average costs per claim; electronic data transmission of shipping and 
other information between the shipper and contractor; the reduction of 
the minimum shipment weight from 1,000 to 500 pounds; different 
reweigh procedures[19]; different SIT procedures[20]; the exclusion of 
charges for certain services normally compensated under the commercial 
tariff, even under contract; and cargo insurance requirements.[21]

Notwithstanding the presence of the various requirements assertedly 
inconsistent with customary commercial practice, we think the 
solicited services still constitute a commercial item.  In this 
regard, as noted, the FAR definition of commercial item speaks in 
terms of services of a "type" offered and sold in the commercial 
marketplace under standard commercial terms and conditions; it does 
not require that the services be identical to what offerors provide 
their commercial customers.  See Morrison Constr. Servs., Inc., 70 
Comp. Gen. 139, 141 (1990), 90-2 CPD  para.  499
at 3; Sletager, Inc., B-237676, Mar. 15, 1990, 90-1 CPD  para.  298 at 3 
(former FAR definition of commercial product, which is similar in many 
respects to the current definition,[22] "focus[ed] on the commercial 
availability of the items or services being procured, not on the 
manner in which they are provided," and "should not be read so 
narrowly as to require that the exact services be provided in the 
exact manner in a commercial setting").

Further, contrary to the protesters' suggestion, there is no 
requirement that all specifications reflect commercial practice.  
Instead, agencies are only required "to the maximum extent 
practicable" to draft specifications to "enable and encourage" 
offerors to propose commercial items.  FAR  sec.  11.002(a)(2)(ii).  
Moreover, FAR part 12 recognizes that the agency has flexibility in 
incorporating terms and conditions, depending on the particular 
customary commercial practice and the agency's requirements.[23]  In 
this regard, while FAR  sec.  12.302(c) provides that the contracting 
officer may not tailor any clause or otherwise include any additional 
terms or conditions in a solicitation or contract for commercial items 
"in a manner that is inconsistent with customary commercial practice 
for the item being acquired," it also provides for waivers of this 
requirement in accordance with agency procedures--indeed, on September 
9, during the course of this protest, MTMC executed a waiver pursuant 
to FAR  sec.  12.302(c) to allow the use of certain provisions in case they 
may be determined to be inconsistent with customary commercial 
practice.[24]

In our opinion, none of the solicitation requirements asserted to be 
inconsistent with customary commercial practices are in themselves or 
in total of such a nature as to transform the type of services sought 
here to something other than a commercial item.  Recognizing that the 
government has some unique requirements and that some provisions 
included in the RFP apparently have no commercial market counterpart, 
we find that there are sufficient common characteristics between 
commercial contracts for household goods moving services and the MTMC 
solicitation to warrant the acquisition of the solicited services as a 
commercial item.  Many of the provisions alleged by the protesters to 
be inconsistent with customary industry practice are in fact similar 
to provisions in commercial household goods movement contracts.  
Specifically, the record establishes that both typical commercial 
contracts and the contracts to be awarded under the MTMC solicitation 
establish long-term binding shipper/mover relationships,[25] 
incorporate the standard commercial tariff (including discounts based 
on the tariff rates), establish higher contractor liability 
limitations for lost or damaged goods than provided in the standard 
tariff (including full replacement value liability coverage), lengthen 
SIT periods, and waive peak moving season charges, among other common 
features.  Further, in our opinion, none of the solicitation 
requirements asserted to be inconsistent with customary commercial 
practice are individually or in total of such a nature as to transform 
the type of services sought here to something other than a commercial 
item.  

The fact that the text of this RFP is far longer and more complicated 
than typical commercial contracts does not mean that the acquired 
services are other than commercial-type services.  Given the unique 
but reasonable government requirements (which many of the carriers 
have had experience with previously under the current DOD program) and 
the very large volume of DOD moves as compared to commercial contracts 
for these services, the length and complexity of the RFP is 
understandable and does not render the services something other than a 
commercial item.  In this regard, FAR  sec.  12.302(a) recognizes that the 
relative volume of government acquisitions in a specific market may 
affect the tailoring of provisions and clauses for acquisition of 
commercial items.

In sum, we find reasonable MTMC's determination that the requested 
services constitute a commercial item and do not find that the 
incorporation into the RFP of the various specifications, terms, and 
conditions necessary to satisfy the government's needs changes the 
fundamental nature of this service type.

Waiver Regarding Deviation From Customary Commercial Practice 

The protesters have challenged the validity of the September 9 waiver 
on both procedural and substantive grounds.  Under FAR  sec.  12.302(c), 
the request for waiver must describe the customary commercial practice 
found in the marketplace, support the need to include a term or 
condition that is inconsistent with that practice, and include a 
determination that use of the customary commercial practice is 
inconsistent with the needs of the government, and must be approved in 
accordance with agency procedures.  While waivers such as this are 
subject to a test of reasonableness, see Lawlor Corp.--Recon., 70 
Comp. Gen. 374, 377 n.1 (1991), 91-1 CPD  para.  335 at 4 n.1, we think the 
protesters have failed to provide a valid basis here to challenge the 
waiver.

First, we see nothing procedurally defective in the granting of the 
waiver.  Specifically, contrary to the protesters' contentions, there 
is no requirement that the request for waiver and the waiver itself be 
different documents.  Nor is there any prohibition in the regulation 
against the granting of waivers following the issuance of the RFP, 
particularly where, as here, the RFP, as amended, will allow potential 
offerors to submit new or revised proposals.  Further, contrary to the 
protesters' contention, FAR  sec.  12.302(d) merely requires that any 
tailoring, as well as any other terms or conditions necessary for 
performance (rather than the waiver itself), be achieved through 
addenda to the solicitation and contract.[26]  Finally, our review of 
the memorandum supporting the waiver shows that all the information 
required by the regulation either was included in the waiver or was 
considered by the authorized official who granted the waiver.[27]  

More fundamentally, however, the protesters claim that the waivers are 
unjustified because the waived requirements concerning claims and loss 
procedures, reweighs, shipment of professional books, committed daily 
capacity, and the possible 3-year duration of the contracts without 
opportunity for price adjustment are not legitimate agency needs and 
are overly restrictive, particularly with regard to small business 
moving companies.[28]  Determination of the agency's minimum needs is 
properly the agency's responsibility; government procurement 
officials, who are familiar with the conditions under which services 
and supplies have been and will be used, are generally in the best 
position to make these determinations.  Materials Management Group, 
Inc., B-261523, Sept. 18, 1995, 95-2 CPD  para.  140 at 2-3.  Our Office 
will not question an agency's determination of its minimum needs, and 
the resulting solicitation requirements, unless the record clearly 
shows that the determination was without a reasonable basis.  Id.  
When a requirement is found to reasonably reflect an agency's minimum 
needs, the agency may include the requirement in a solicitation, even 
if it restricts the ability of small businesses to compete.  See Mills 
Mfg. Corp., B-224005, Dec. 18, 1986, 86-2 CPD  para.  679 at 5.  

MTMC asserts, and the protesters do not persuasively rebut, that the 
government-unique requirements concerning claims and loss procedures, 
reweighing, and the separate weighing of professional items, are not 
only necessary in light of the government's responsibilities to 
service members and civilian employees under the existing claims 
filing statute and to preserve these individuals' weight allowances, 
but that these requirements have been applied to household good moves 
under the current program, in which the protesters participate, for 
many years.  We also note that despite the unique claims and loss 
procedures applicable to moves by service members and civilian 
employees, MTMC has attempted to craft claims procedures more closely 
resembling the commercial standard than its current program, for 
example, by encouraging the expedited direct settlement of claims 
between the customer and contractor. 

With regard to the requirement that contractors specify committed 
daily capacities, while we can find no direct commercial precedent, we 
believe that the agency has reasonably established its need for this 
requirement.  Specifically, the agency has persuasively stated that 
the committed daily capacities are needed to ensure contractor 
availability, especially during the peak moving season, in view of 
past problems under the current program.  In this regard, MTMC 
concluded, based on its industry benchmarking survey and review of 
commercial contracts, that unlike the current program, where carriers 
reportedly occasionally refuse or even turn back shipments during the 
peak moving season, the carrier under a commercial contract is always 
available to move ordered shipments.  Further, given the large size of 
the pilot program compared to commercial contracts, committed daily 
capacities are reasonably necessary under the evaluation scheme to 
determine how many contracts to award per traffic channel and to 
accommodate small business moving companies by slicing the volume of 
shipments into manageable pieces, the size of which offerors determine 
for themselves.

We also think that MTMC has shown that requiring prices to be fixed 
for up to 3 years is a minimum need of the government in order to meet 
the goals of the reengineering of the pilot program to increase 
service quality and reduce administrative burdens.[29]  Unlike the 
current program, the solicitation at issue here establishes long-term 
commitments from the contractors with an emphasis on service quality 
rather than price; requiring contractors to propose long-term fixed 
prices transfers more of the administrative burden and the risks of 
doing business to the contractor.[30]  Given that it is within the 
ambit of administrative discretion to offer to compete a proposed 
contract imposing substantial risks upon the selected contractor and 
reduced administrative burdens upon the agency, we cannot say that the 
agency's determination that it needed long-term fixed rates was 
unreasonable.  See B & P Refuse Disposal, Inc., B-253661, Sept. 16, 
1993, 93-2 CPD  para.  177 at 3; Argus Servs., Inc., B-234016.2, B-234017.2, 
Sept. 12, 1989, 89-2 CPD  para.  227 at 3.[31]

Contrary to the protesters' contentions, we find that the contracting 
officer reasonably exercised her discretion in determining that there 
was insufficient evidence of significant fluctuations in labor or 
material costs, considering market and economic conditions, to warrant 
the need for economic price adjustment and that, since offerors can 
propose separate escalated prices for each option year, there was no 
need to provide for contract price adjustment in the event of changes 
in contractor's established prices.[32]  FAR  sec.  16.203-3; see Master 
Sec., Inc., supra,
at 2.  Indeed, based on MTMC's experience with a former currency 
fluctuation price adjustment program, which it characterizes as having 
been "unworkable" and "detrimental to the government," a MTMC 
economist asserts that any provisions for adjustments to the contract 
rates, including possible downward adjustments for cost decreases when 
other business costs might be increasing, would necessarily be 
arbitrary, unverifiable, anti-competitive, administratively 
burdensome, and harmful for small business.[33]

Finally, the protesters assert that the issuance of the waiver 
contravenes congressional direction to MTMC that the pilot program 
incorporate commercial practices and to report to the cognizant 
committees prior to implementation of the pilot program any program 
elements that are not standard commercial business practices.  
However, the language in the referenced congressional report does not 
require MTMC to utilize solely commercial practices without regard to 
the government's legitimate needs or preclude MTMC from using 
government-unique requirements where, as here, they are reasonably 
determined to be needed under a properly issued waiver pursuant to the 
commercial item procedures of FAR part 12.  See H.R. Conf. Rep. No. 
104-261 at 58.[34] 

Alleged Uncertainty of Requirements

The protesters state that because many of the requirements in the RFP 
which affect the cost of doing business (especially the liability 
exposure and claims handling procedures) are not standard commercial 
practices, the preparation of a rational offer becomes a task full of 
uncertainties not faced when competing for business in the commercial 
market.  As described above, the record evidences that many of the 
requirements, such as full replacement value liability exposure, are 
based on commercial practice and that other disputed requirements, 
such as certain claims procedures cited by the protesters, are based 
on similar requirements in the current DOD program, with which the 
protesters are familiar through their long-standing participation.  In 
any event, there is no legal requirement that a solicitation be 
drafted so as to eliminate all performance uncertainties; the mere 
presence of risk does not render a solicitation improper.  
Lankford-Sysco Food Servs., Inc.; Sysco Food Servs. of Arizona, Inc., 
B-274781, B-275081, Jan. 6, 1997, 97-1 CPD  para.  11 at 3.  To the extent 
that such uncertainties exist, we think they are reasonable here, 
given the protesters' experience in the commercial market and in DOD's 
current program.

Anti-Kickback Act

The protesters object that the RFP allows brokers (identified by the 
agency as relocation companies), such as the intervenors in this bid 
protest, to compete with carriers for award.  Specifically, they argue 
that brokers typically receive commissions or rebates from tariff 
rates from carriers to which they award subcontracts to perform the 
actual moving services.  The protesters argue that such payments 
violate the Anti-Kickback Act of 1986, which the RFP incorporates by 
reference.  The Act prohibits the payment, offer, or solicitation of a 
kickback.  41 U.S.C.  sec.  53.  A "kickback" is defined as:

     money, fee, commission, credit, gift, gratuity, thing of value, 
     or compensation of any kind which is provided, directly or 
     indirectly, to any prime contractor, prime contractor employee, 
     subcontractor, or subcontractor employee for the purpose of 
     improperly obtaining or rewarding favorable treatment in 
     connection with a prime contract or in connection with a 
     subcontract relating to a prime contract.  

41 U.S.C.  sec.  52(2) (emphasis added).

The protesters assert that, because brokers allegedly perform no 
substantial services to earn the payment of commission or rebates, 
these payments can be for no legitimate purpose and must represent 
improper kickbacks.  Accordingly, the protesters contend that brokers 
should not be allowed to compete under the RFP.

We do not agree that the payment of commissions or rebates from tariff 
rates from carriers to brokers under a government contract must per se 
violate the Anti-Kickback Act.  Both the express language of the 
statute and the Act's legislative history specify that the prohibition 
applies to payments or solicitations for payment that are made for an 
"improper" purpose (for example, payments made to a prime contractor 
to induce the award of a subcontract).  See 41 U.S.C.  sec.  52(2); H.R. 
Rep. No. 99-964, at 11-12 (1986).  The record here does not establish 
that commissions or tariff rebates received by brokers can only be for 
an improper purpose such as to violate the Anti-Kickback Act.  While 
the protesters argue that the brokers would not perform substantial 
services to justify the payment of a commission or tariff rebate, the 
brokers here, as prime contractors, will be responsible for the 
contract services, for which they would be entitled to 
compensation.[35]  Also, as asserted by the intervenors, brokers would 
perform contract work, inasmuch as they would be responsible for 
selecting carriers to perform transportation task orders and for 
contract administration, which would include, among other things, 
quality control, performance evaluation, and claims management.

In short, we have no basis to presume, as the protesters would have us 
do, that brokers will engage in conduct prohibited by the Act in the 
performance of a contract or contracts awarded under this RFP.  Such a 
determination would necessarily have to be made under the particular 
facts and circumstances presented by each transaction and address 
whether payments had been made for an improper purpose.  See Marketing 
Consultants Int'l Ltd., 55 Comp. Gen. 554, 558-560 (1975), 75-2 CPD  para.  
384 at 6-8.  

Other Issues

The protesters maintain that the solicitation omitted FAR  sec.  52.203-2, 
Certificate of Independent Price Determination, which is allegedly 
required by FAR  sec.  3.103-1 for solicitations for firm, fixed-priced 
contracts.  The protesters speculate that, because the solicitation 
encourages prospective offerors to enter into teaming arrangements, a 
number of offerors have submitted, or will submit, proposals on their 
own as well as joint proposals with other offerors or as 
subcontractors to other offerors, and thus have disclosed, or will 
disclose, prices to one another, which the protesters contend would 
violate the prohibitions of the Certificate of Independent Price 
Determination, had it properly been included in the solicitation.  
This contention is meritless.  FAR  sec.  12.301(d) provides that 
"notwithstanding prescriptions contained elsewhere in the FAR, when 
acquiring commercial items, contracting officers shall be required to 
use only those provisions and clauses prescribed in this part."  The 
Certificate of Independent Price Determination is not listed as a 
required clause in FAR part 12.  

The protesters finally contend that the clause providing a preference, 
pursuant to 46 U.S.C. app.  sec.  1241(a) (1994), for privately owned 
U.S.-Flag Vessels, improperly authorizes the contracting officer, 
instead of the Military Sealift Command, to waive the requirement that 
contractors use U.S.-flag vessels.  MTMC explains in its agency report 
that this contention is incorrect because the contract clause requires 
the contractor to contact the contracting officer to use a foreign 
flag vessel and does not authorize the contracting officer to waive 
the requirement for contractor use of U.S.-flag vessels.  Since MTMC 
has explained why the contention is incorrect and the protesters do 
not rebut MTMC's explanation, we deem this protest allegation 
abandoned.  See Ares Corp., B-275321, B-275321.2, Feb. 7, 1997, 97-1 
CPD  para.  82
at 13 n.19.

The protests are denied.

Comptroller General
of the United States

1. The firms protesting this solicitation are:  Aalco Forwarding, 
Inc.; AAAA Forwarding, Inc.; Air Van Lines International, Inc.; 
Allstates Worldwide Movers; Aloha Worldwide Forwarders, Inc.; Alumni 
International, Inc.; American Heritage International Forwarding, Inc.; 
American Mopac International, Inc.; American Shipping, Inc.; American 
Vanpac Carriers; American World Forwarders, Inc.; Apollo Forwarders, 
Inc.; Arnold International Movers, Inc.; Astron Forwarding Company; 
BINL Incorporated; Burnham Service Company, Inc.; Cavalier Forwarding, 
Inc.; Classic Forwarding, Inc.; Davidson Forwarding Company; Deseret 
Forwarding International, Inc.; Foremost Forwarders, Inc.; Gateways 
International, Inc.; Global Worldwide, Inc.; Great American 
Forwarders, Inc.; Hi-Line Forwarders, Inc.; International Services, 
Inc.; Island Forwarding, Inc.; Jet Forwarding, Inc.; Katy Van Lines, 
Inc.; Lincoln Moving & Storage; Miller Forwarding, Inc.; Northwest 
Consolidators; North American Van Lines; Ocean Air International, 
Inc.; Senate Forwarding, Inc.; Shoreline International, Inc.; Stevens 
Forwarders, Inc.; Von Der Ahe International, Inc.; Wold International, 
Inc.; Zenith Forwarders, Inc.; Acorn International Forwarding Company; 
AAA Systems, Inc.; A.C.E. International Forwarders; American Red Ball 
International, Inc.; Apex Forwarding Company, Inc.; Armstrong 
International, Inc.; Arpin International Group, Inc.; Art 
International Forwarding, Inc.; Atlas Van Lines International 
Corporation; Coast Transfer Company, Inc.; Crystal Forwarding, Inc.; 
CTC Forwarding Company, Inc.; Diamond Forwarding, Inc.; Dyer 
International, Inc.; Harbour Forwarding Company, Inc.; HC&D Forwarders 
International, Inc.; Jag International, Inc.; The Kenderes Group, 
Inc.; Pearl Forwarding, Inc.; Rainier Overseas, Inc.; Rivers 
Forwarding, Inc.; Ryans's World; Sequoia Forwarding Company, Inc.; A-1 
Relocation, Inc. d/b/a A-1 Movers of America; A-1 Moving & Storage, 
Inc.; Able Forwarders, Inc.; A Columbia Forwarders; Aero Mayflower 
Transit, Inc.; Lile International Companies d/b/a American Movers; 
American Red Ball Transit Co.; Andrews Van Lines, Inc.; Apollo Express 
Van, Inc.; A. Arnold & Son Transfer & Storage Company, Inc.; Paul 
Arpin Van Lines, Inc.; Art and Paul Moving & Storage; Associated 
Forwarding, Inc.; Associated Storage and Van, Inc.; Atlas Van Lines, 
Inc.; Bekins Van Lines Co.; Burnham World Forwarders; Carrier 
Transport International, Inc.; Carlyle Van Lines, Inc.; Coastal Moving 
Company; Conrad Group, Inc.; Davidson Transfer & Storage Co., Inc.; 
Denoyer Brothers Moving & Storage Co.; Door To Door Moving & Storage 
Co.; Exhibit Transport, Inc.; Ferris Warehouse & Storage Co.; Fogarty 
Van Lines, Inc.; Global Van Lines, Inc.; Horne Storage Company, Inc.; 
Lift Forwarders, Inc.; Lynn Moving and Storage, Inc.; A.D. McMullen, 
Inc.; Mid-State Moving & Storage Inc.; Movers Unlimited, Inc.; Nilson 
Van & Storage; North American Van Lines; Northwest Consolidators, 
Inc.; Ogden Transfer & Storage; OK Transfer & Storage, Inc.; Pan 
American Van Lines, Inc.; Riverbend Moving & Storage; Royal 
Forwarding, Inc.; Sells Service, Inc.; South Hills Movers, Inc.; 
Stanley's Transfer Company; Starck Van Lines, Inc.; Star Trans 
International, Inc.; Stearns Forwarders, Inc.; Stearns Moving & 
Storage of Kokomo, Inc.; Stevens Van Lines, Inc.; United Van Lines; 
Von Der Ahe Van Lines, Inc.; Wainwright Transfer Co. of Fayetteville, 
Inc.; Weathers Bros. Transfer Co.-NC.; Approved Forwarders, Inc.; and 
A&P Shipping Corp.

2. The General Services Administration, the second largest personal 
property shipper, manages about 20,000 moves a year.  All other 
shippers individually order far fewer moves.  MTMC asserts that it 
manages more moves than 100 large commercial shippers or 1,000 
average-sized shippers and believes that one of its transportation 
offices may handle more shipments annually than several of the largest 
corporations combined.

3. H.R. Rep. No. 104-131, at 164 (1995); H.R. Conf. Rep. No. 104-450, 
at 762 (1996).

4. H.R. Conf. Rep. No. 104-261, at 58 (1995); H.R. Conf. Rep. No. 
104-344, at 58 (1995).

5. H.R. Rep. No. 104-563, at 268 (1996); S. Rep. No. 104-267, at 270 
(1996).  These House and Senate reports, which accompanied the 
National Defense Authorization Act for Fiscal Year 1997, also 
requested that our Office review and report on MTMC's pilot program, 
as well as any alternative approaches that industry provided.  See 
Defense Transportation: Reengineering the DOD Personal Property 
Program 
(GAO/NSIAD-97-49, Nov. 1996).

6. As indicated above, the contracts to be awarded under the 
solicitation are for 50 percent of the eligible shipments in the test 
area; the orders under the existing program and under the pilot 
program will be randomly allocated on a per shipment basis.  The RFP 
does not suggest that this allocation will be done on a tonnage basis, 
as contended by the protesters.

7. There are 53 traffic channels in the pilot program, 38 domestic and 
15 international.

8. The Small Business Administration (SBA) protested to the agency 
head pursuant to FAR  sec.  19.505 that the RFP did not set aside 
sufficient work for small business concerns and otherwise overly 
restricted the procurement with regard to small business concerns.  
After the agency denied the SBA's protest, the protesters protested to 
our Office that the set-aside decision was unreasonable and that the 
RFP overly restricted competition with regard to small business 
concerns.  These protests will be the subject of a future decision.

9. The protesters contend that they cannot reasonably calculate their 
committed daily capacities because the historical shipping/tonnage 
data included in the RFP may not be an accurate reflection of MTMC's 
actual requirements during the term of the contracts due to such 
occurrences as base closings.  We find reasonable the agency's 
response that the historical information is the best available to the 
government and that MTMC checked beforehand with the military services 
for any adjustments needed to the data due to occurrences such as base 
closings, and was advised that no such occurrences were forecast for 
the term of the pilot program.  

10. SIT is the temporary storage of property in connection with the 
movement of personal property, such as when the shipment arrives at 
destination before the householder.

11. Certain tariff provisions are specifically excluded from 
application under this solicitation.  For example, the tariff's peak 
season (summer) transportation rates are inapplicable.

12. Agencies are required to conduct the appropriate market research 
prior to developing new requirements documents for an acquisition.  
FAR  sec.  10.001(a)(2)(i).

13. For example, in pricing an international shipment, individual 
quotations may be obtained by the forwarder from an agent located at 
the shipment's origin to cover the packing and pick-up of the 
shipment, from a motor carrier or railroad to move the shipment to 
port, from an ocean carrier, and from the agent at the destination 
(who delivers the shipment locally and unpacks it).  The forwarder 
then adds other expenses (such as port charges, fees for container 
leasing, and customs clearance charges), and its overhead and profit 
to the quotations to develop an individual lump sum door-to-door or 
"through" rate for the particular shipment involved.

14. 41 U.S.C. 403(12)(F), as amended by the National Defense 
Authorization Act for Fiscal Year 1996, Pub. L. No. 104-106,  sec.  4204, 
110 Stat. 186, 655 (1996).

15. The protesters also note that the price is to be a percentage of 
an already outdated tariff, while customary industry practice is 
allegedly to allow prices to change as tariff changes are made.  This 
allegation, however, is rebutted by the record, which includes various 
commercial contracts with rates based on the tariff as of a certain 
date without regard to later tariff amendments. 

16. The contractor is required by the performance work statement to 
provide full replacement protection of $3.50 times the net shipment 
weight but limited to a maximum of $63,000 per shipment, including 
disclosed high value items (contractor's liability for undisclosed 
high value items is $250 per pound per article).  The protesters 
assert that these provisions greatly exceed those under customary 
commercial practice and contend that the performance work statement 
requirement that contractors make available additional liability 
coverage for customer purchase is inconsistent with customary 
practice.

17. By incorporating the terms of the commercial tariff, commercial 
contracts generally exclude carriers of international shipments from 
liability for loss or damage to the transported goods from causes 
beyond their control, such as acts of God, an act or omission of the 
shipper, inherent vice of articles shipped, or hostile or warlike 
actions.  As was made clear by question and answer #320 at the 
pre-proposal conference, the RFP and resulting contracts, including 
those for international shipments, also incorporate the terms of the 
commercial tariff in this regard, thus exempting carriers from 
liability for these causes.  

18. The protesters dispute the reasonableness of the performance work 
statement requirement for a 2-hour response time to customer telephone 
inquiries during
non-business hours.  Given the volume of DOD moves and the numerous 
time-zones, including international destinations, through which moves 
may take place, and given the agency's need for high quality, 
responsible service to be provided to the customer, we find no basis 
to find this requirement unreasonable.

19. Under the performance work statement, the contractor must reweigh 
all shipments that exceed the customer's weight allowance, as well as 
those shipments requested by the customer or the ordering officer to 
be reweighed prior to delivery.  The reweigh is the billing weight 
only if lower than the origin weight.  The protesters contend that 
this is contrary to commercial practice where the reweigh is the 
billing weight regardless of whether it is higher or lower than the 
origin weight.

20. The performance work statement reserves the right of the 
government to require, without notice, that contractors receive 
authorization prior to placing shipments into SIT, and requires that 
the complete shipment arrive prior to placement in SIT.  The 
protesters assert that in commercial practice such prior authorization 
is not required and that partial shipments may go directly into 
storage without awaiting other parts of the shipment.

21. FAR  sec.  52.228-9, Cargo Insurance (Jan 1997) (Deviation), was 
included in the RFP.  This clause, as modified, requires that the 
contractor, at its own expense, provide and maintain cargo liability 
insurance of $150,000 per aggregate losses or damages at any one place 
and time, and cargo liability insurance of at least $63,000 per 
shipment, to cover the total value of the property in the shipment.  
The protesters maintain that this clause is superfluous where, as 
here, freight is shipped under rates subject to released or declared 
valuations.  However, the agency explains that the cargo insurance 
provision is needed to provide an added source of recovery of loss and 
damage claims.  For example, if a contractor has four shipments in its 
warehouse at one time, each of which has a released value in excess of 
$50,000, and a fire destroys all four shipments, the contractor's 
total liability for that loss would be more than $200,000.  While the 
solicitation makes the contractor liable for the entire loss, if the 
contractor became insolvent or bankrupt, or went out of business, the 
cargo insurance provision would allow recovery of at least $150,000 of 
the total loss from the insurance company.  The agency report 
indicates that DOD has recovered millions of dollars through similar 
cargo insurance provisions and that the clause is therefore not 
superfluous.  We find the agency's explanation reasonable.

22. The FAR previously defined a commercial product as one sold or 
traded to the general public in the course of normal business 
operations at prices based on established catalog or market prices.  
FAR  sec.  11.001 (FAC 84-5, Apr. 1, 1985).

23. According to FAR  sec.  12.213, it is common practice in the commercial 
marketplace for both the buyer and seller to propose terms and 
conditions written from their particular perspectives.  It states that 
the terms and conditions prescribed in Part 12 seek to balance the 
interests of both the buyer and seller and are generally appropriate 
for use in a wide range of acquisitions.  However, since market 
research may indicate other commercial practices that are appropriate 
for the acquisition of the particular item, FAR  sec.  12.213 states that 
these practices should be considered for incorporation into the 
solicitation and contract if the contracting officer determines them 
appropriate in concluding a business arrangement satisfactory to both 
parties and not otherwise precluded by law or executive order.

24. The RFP requirements that were the subject of the waiver included 
the claims and loss procedures, committed daily capacity, reweighs, 
separate weighing of professional items, the possible 3-year term of 
the contracts without opportunity for price adjustment, and the 
acquisition of both household goods and unaccompanied baggage movement 
services under the same solicitation.  Although the accompanying 
determination stated that the waived requirements were, in the 
agency's view, consistent with customary commercial practice, the 
requirements were waived in case they may be determined to be 
inconsistent with customary commercial practice because, according to 
MTMC, they are essential agency requirements.  As discussed below, we 
deny the protests challenging the propriety of this waiver and the 
reasonableness of the requirements subject to the waiver. 

25. MTMC, in conducting its industry benchmarking survey, discovered 
that most of the shippers had long-term contracts that ran from 12 to 
36 months or more, and that most of the contracts did not allow any 
price adjustments for the duration; this finding is generally 
consistent with the commercial contracts reviewed by the agency and 
included in its report.  While MTMC concedes that the firm prices and 
the term of the contracts to be awarded under the solicitation are "an 
extension of the direction of the commercial marketplace" and may be 
"more favorable" than what corporate shippers typically are able to 
negotiate, we agree with MTMC that there is "ample precedent," at 
least in the domestic commercial marketplace, for increasingly long 
contract terms at fixed rates.

26. Here, the RFP contains addenda, which indicate that certain 
provisions and clauses were tailored and that other terms and 
conditions necessary for performance beyond those minimally required 
by FAR part 12 are included in the solicitation.  

27. We see nothing improper with approval of the waiver by the 
official who did so here.  Under FAR  sec.  12.302(c), waivers are to be 
considered in accordance with agency procedures.  DFARS  sec.  212.302(c) 
provides that the head of the contracting activity (HCA) is the 
approval authority within DOD for waivers under FAR  sec.  12.302(c).  Army 
Federal Acquisition Regulation Supplement (AFARS)  sec.  1.601 in turn 
authorizes the HCA to redelegate his or her contracting authority and 
to appoint a principal assistant responsible for contracting (PARC) 
who, among other things, is responsible for carrying out those 
delegable authorities of the HCA described in the FAR, DFARS, and 
AFARS.  Here, the official who approved the waiver was the PARC, who, 
under these regulations, was authorized to do so.

28. The protesters also challenge the reasonableness of the 
solicitation's bundling of unaccompanied baggage shipments with 
household goods shipments, arguing that this is overly restrictive for 
small business moving companies.  We intend to address this issue in 
the future decision concerning the small business protest issues.

29. The agency has broad discretion concerning the establishment of 
its minimum needs with respect to the number of years for which a 
contract is required.  Kings Point Mfg. Co., Inc., B-220224, Dec. 17, 
1985, 85-2 CPD  para.  680 at 2.

30. While the industry-proposed alternative pilot program may improve 
service quality, as asserted by the protesters, MTMC found it 
insufficient to satisfy the agency's needs because it neither 
establishes long-term commitments with each contractor nor reduces 
administrative burdens, since it essentially continues the current 
program's frequent "me-too" rate submissions and utilization of an 
administratively burdensome traffic distribution process.

31. It has been our view that offerors have the responsibility, in 
offering on a fixed-price contract, to project costs and to include in 
their proposed fixed prices a factor covering any projected costs 
increase; risk is inherent in most types of contracts and offerors are 
expected to allow for that risk in computing their offers.  Master 
Sec., Inc., B-232263, Nov. 7, 1988, 88-2 CPD  para.  449 at 3; Kings Point 
Mfg. Co., Inc., supra, at 4.

32. The protesters allege--as an example of the potential for large 
unforeseen cost increases in international shipments--that certain 
ocean transportation rates recently doubled.  As described above, such 
ocean rates are merely one of several component costs that go into 
determining the "through" rate for an international shipment.  MTMC 
explains that such component cost increases are often offset or 
minimized by reductions in other component costs as well as 
competition and conditions in the marketplace.  Further, MTMC has 
provided evidence that ocean carriers will enter into long-term (up to 
3 years) contracts at lower rates, which suggests that contractors 
should be able to negotiate long-term agreements to lock in fixed 
rates for the duration of the contract, especially given the large 
volume of shipments offered under the MTMC contracts.  Finally, MTMC 
states that under its own contracts with ocean carriers, the 
contracts' price adjustment provisions have seldom been activated, and 
that the "through" rates submitted under the current international 
program, after the referenced ocean carrier rate increases, actually 
decreased.

33. In Household Goods:  Adjustment of DOD's Shipping Rates Based on 
Foreign Currency Fluctuation (GAO/NSIAD-88-154, June 1988), we 
concluded that reinstatement of the former currency fluctuation price 
adjustment program was unwarranted.

34. We also note that the waiver at issue here was executed subsequent 
to MTMC's response to the congressional requests, which mentioned no 
continuing obligation by MTMC to update its responses.  In any event, 
such language in congressional committee reports does not impose 
binding legal requirements on federal agencies.  See LTV Aerospace 
Corp., 55 Comp. Gen. 308, 325-326 (1975), 75-2 CPD  para.  203 at 21-22.

35. In PHH Homequity Corp., B-240145.3, B-241988, Feb. 1, 1991, 91-1 
CPD  para.  100 at 3-4, we found unobjectionable a solicitation for 
relocation services that prohibited relocation services contractors 
from receiving commissions from carriers to provide transportation 
services.  In that case, because the relocation services contractors 
would otherwise be paid by the agency for its services, the agency was 
reasonably concerned that commissions from carriers to relocation 
services contractors could only be for improper purposes as prohibited 
by the Anti-Kickback Act.  Here, the compensation that brokers receive 
for their services will be derived from the difference between the 
government's payment for the transportation services and the broker's 
payment to the carrier/subcontractor.