ÆäÀÌÁö À̹ÌÁö
PDF
ePub

not accept the CAS clause regardless of whether it could or
could not comply with present CAS Board promulgations.
Because Mobil is the only source that can supply our require-
ments in Turkey we are requesting the Board to reconsider
its previous denial and grant a waiver of the CAS clause so
that we can contract with this company.

In the same letter the DOD requested a waiver of the Cost Accounting Standards, Rules and Regulations applicable to a $1,562,200 contract with the Caribbean Gulf Oil Company, a subsidiary of Gulf Oil Trading Company, to supply aviation and diesel fuel to the Navy's McMurdo Station, McMurdo Sound, Antarctica known as "Operation Deep Freeze."

In Secretary Mendolia's letter to the CASB, he attached a December 27, 1974, letter that Gulf Oil Trading Corporation had sent to DFSC which advised the Center that the Caribbean Gulf Oil Company could not possibly comply with the requirements of the Cost Accounting Standards, Rules and Regulations.

WAIVERS AGAIN DENIED

On January 2, 1975, Arthur Schoenhaut, Executive Secretary of the Cost Accounting Standards Board, advised Assistant Secretary of Defense Mendolia that the Board affirmed its earlier decision denying the waiver to Mobil. The Board said, “*** we are not convinced that a useful Disclosure Statement cannot be supplied by Mobil or that Mobil cannot follow other requirements of the Cost Accounting Standards Board."

The Board also denied the request for a waiver on a proposed contract with Caribbean Gulf Oil Company to supply petroleum products in Antarctica. The Board said: "As to the request concerning Caribbean Gulf, the file discloses a declaration by Gulf that it cannot possibly comply with and will not agree to attempt to meet the requirements' of Public Law 91-379. In the absence of specific information, the Board is unable to accept either a declaration of impossibility or an unwillingness to make an effort to comply as a basis for granting a waiver."

X. THE SUBCOMMITTEE ACTS

LETTERS TO GULF AND MOBIL

On January 2, 1974, the same date the Cost Accounting Standards: Board denied waivers to both Gulf and Mobil, Senator Henry M. Jackson, Chairman of the Subcommittee, wrote letters to both companies. In his letters to William P. Tavoulareas, President of the Mobil Oil Company, and to H. I. Goodman, President of Gulf Trading Company, Senator Jackson cited requirements for supplying cost or pricing data and conforming to cost accounting standards in the absence of exemptions or waivers.

Since the CASB had denied the requested waivers, Senator Jackson said that both Gulf and Mobil should now "proceed to supply these vital defense needs without delay in accordance with all legal requirements."

He added:

Failure to do so will result in my urging the Congress to pursue legislative initiatives designed to insure that American corporations which operate under the protection of our flag are responsive to the national interest.

GULF CRITICIZED

In a statement released on January 2, Senator Jackson said that the Gulf Trading Company, a subsidiary of Gulf Oil Corporation, had implicitly threatened to cut off oil supplies to the Navy's "Operation Deepfreeze" in Antarctica unless it was exempted from supplying backup data for its prices as required by law. He added that Mobil Oil Corporation had taken a similar position with regard to supplying our military installations in Turkey. Senator Jackson, terming such action as "nothing short of blackmail", announced that the Permanent Subcommittee on Investigations was investigating the possibility of Gulf, Mobil and other companies cutting off fuel supplies to U.S. military overseas.

Senator Jackson further stated:

I have learned that DOD informed Gulf that its proposed prices were excessive. Accordingly, the requested data becomes even more important in ascertaining whether prices paid by DOD for fuel are fair and reasonable. But Gulf responded with a refusal to supply such data-a take it or leave it proposition. *** The Department of Defense, apparently with its back to the wall, has agreed to waive the Truth in Negotiation Act, which it may unilaterally do under law, and has petitioned the Cost Accounting Standards Board on behalf of Gulf and Mobil to waive its requirements. I had hoped that after our hearing last April on the oil companies' role in the cutoff of oil to our military, when our Sixth Fleet was still on alert after the October Arab-Israeli

War, that we would have seen the last of such questionable
behavior affecting our national security and our foreign
policy. This confidence was apparently unwarranted.

GULF MODIFIES POSITION

On January 3, 1975, after the Jackson statement, Herbert I. Goodman, President of Gulf Oil Trading Company, informed Senator Jackson by letter that his company had agreed to supply the Navy's "Operation Deepfreeze" in Antarctica and enter into a contract with the Department of Defense which included clauses requiring them to supply appropriate cost and pricing data and conform with_cost accounting standards established by the Cost Accounting Standards Board.

Upon receipt of the Gulf letter, Senator Jackson issued a statement praising Gulf for its action but said that "his prodding should never have been necessary in such a matter which affects the national interest and national security."

Senator Jackson said "that he would write all oil companies negotiating with the government for over one billion dollars in business to similarly ask them to contract for the military's immediate needs while complying with all appropriate legal requirements."

Letters were sent to over 60 companies supplying DOD's fuel needs, asking that they enter into contracts with appropriate clauses.

DSA RECEIVES DATA

On January 15, 1975, Arthur Mendolia, Assistant Secretary of Defense, wrote Senator Jackson:

Partly as a result of the assistance which you and your staff have given us on our problems associated with the procurement of petroleum products, we are beginning to achieve some significant progress.

The letter also pointed out that the Defense Supply Agency was now receiving "substantial sales data" from many of the domestic petroleum companies.

Secretary Mendolia said:

DSA's analysis of this and other data already available has led them to the conclusion that many of our proposed contracts for domestic requirements now qualify for an exemption from the aforementioned statutes. [P.L. 87-653 (Truth in Negotiation) and P.L. 91-379 (Cost Accounting Standards Rules and Regulations)] This matter has been discussed fully with DSA, and we agree in the decision to proceed with the award of contracts properly qualifying for exemption. For contracts that do not qualify, we will continue to seek to obtain the cost and pricing data required by P.L. 87-653 and compliance with the Cost Accounting Standards Board regulations. A number of contracts still remain in this category.

CURRENT STATUS OF DATA RECEIVED

In a letter dated March 21, 1974, Dale R. Babione, Deputy Assistant Secretary of Defense (Procurement) advised Mr. Howard Feldman,

Chief Counsel of the Subcommittee that "some sales information" had been supplied to DOD by 47 of the 69 oil companies originally contacted.

Mr. Babione said "this information, together with other available data, enabled DSA to develop a meaningful market analysis which was used as the basis for pricing and which enabled the award of contracts commencing on 19 January 1975."

It was also pointed out by Mr. Babione that procurement of domestic bulk requirements for the January through June 1975 contract period were essentially complete.

"A few partial awards remain to provide 100 percent coverage of all products; however, it is anticipated that these can be processed without difficulty. No critical supply situation exists for any of the products not fully on contract," Babione said.

$32 MILLION SAVING TO DOD

Mr. Babione said the receipt of data from the oil companies "contributed greatly to the establishment of acceptable price ranges which served as a valuable negotiation tool." It was also stated that because of the data supplied, DOD was able to make substantial reductions from the initial offers of the suppliers. This saving, according to Mr. Babione, amounted to more than $32 million dollars for the purchases by the Government for the period January through June 1975.

GAO TO REVIEW DATA

Despite the large savings generated by the Subcommittee's activities, since on many of the contracts contemplated by DOD the cost clauses would not be included, the Subcommittee wanted an independent check to see if such omissions were warranted.

Accordingly, on January 22, 1975, the General Accounting Office was requested in a letter from Senator Jackson to examine data used by DSA in its determination that exemptions were unwarranted. In his letter to Elmer B. Staats, the Comptroller General, Senator Jackson said:

Since this investigation originally arose because DOD said it did not have enough data to exempt the companies from these legal requirements and that they would have to comply with them, it is my position that we must carefully scrutinize the basis for the DOD determinations that the companies are exempt from such requirements.

Accordingly, I would like the General Accounting Office to examine all of the data presently available to the Defense Supply Agency-data upon which it determined that the companies were exempt from the Truth in Negotiations Act and the Cost Accounting Standards Board regulations-to see if such exemptions are appropriate or if additional cost or pricing data is needed. The Department of Defense has informed me that they will cooperate fully in this review.

The Subcommittee has not as yet received the results of the General Accounting Office investigation.

« ÀÌÀü°è¼Ó »