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.