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FDA and USDA inspection of imported food has become complicated because of extensive use of containerized shipments. For example, a container might arrive in San Francisco and remain unopened until it arrived at Denver, so the port of entry effectively becomes Denver. FDA officials stated that only 6-1/2 percent of all food lots entering the United States are inspected, and that only 43 inspectors, who are also responsible for drugs, cosmetics, and product safety, are engaged in this entire activity. These 43 inspectors cover primarily nine major ports of entry: New York, Newark, Houston, New Orleans, Miami, San Francisco, San Diego, the Los Angeles area, and Seattle.31

ble to fill the requirement. When the food specification contains special requirements, they increase production costs and reduce competition.

Packaging requirements are specified without adequate consideration of commercial packaging methods.

The Walsh-Healey Act has varied applications for Federal agencies and programs. These different applications are costly and unduly complicate the process.

PRODUCTS AND SERVICES OF REGULATED INDUSTRIES

Conclusions

The scope and substance of the food market is of such importance that it demands constant attention at the highest levels of Government to assure that all operations are consistent with the everchanging national interest, as determined by Congress.

Food acquisition systems for Federal agency use, and those established to further socioeconomic objectives, overemphasize initial price of a food product without sufficient consideration of total cost to provide the product to the user.

Current procurement reporting systems do not provide industry, Congress, or the executive branch with the data on food procurement needed for effective evaluation of the total system.

Federal inspection and acceptance procedures governing food procurements for Government use should be more closely coordinated with Federal and State procedures governing food procurements for public use.

The resources involved in the inspection of food in interstate commerce could be utilized more effectively if each food processor were required to have a quality assurance program.

Many food products are purchased by the Government using Government specifications when a suitable commercial product is availa

The products and services of regulated industries include those provided by industries normally under Federal, State, and local government regulation and those provided by State, municipal, and other local government units (such as sewer and water authorities).

The special characteristics of the products and services of regulated industries are that:

• Prices are not set by competition, and participation in the market is restricted. • Procurements are necessarily sole source. • Procurements are made from State or local governments that provide products or control producers.

The products and services involved include: Energy

Transportation Electricity

Air passenger charter Gas

Air cargo charter Steam

Air passenger space Chilled water

Air cargo space Sanitation

Bus carriage Water

Rail cargo space
Sewer

Rail passenger space
Garbage collection
Other

Truck common carriage
Communication

Truck contract carriage Telephone

Water passenger charter Telegraph

Water cargo charter Radio

Water passenger space Other

Water cargo space Government procurement from regulated industries is generally not subject to rules governing similar purchases by industry and the general public. 32 The policy has been to accom

91 Ibid., pp. 12, 16.

32 ASPR 5–801.

modate to regulatory body requirements ** insofar as the general laws governing procurement will permit.

Recommendation 18. Encourage procuring activities, when it is deemed in the best interests of the Government, to purchase supplies or services from public utilities by accepting the commercial forms and provisions that are used in the utilities' sales to industry and the general public, provided the service contract provisions are not in violation of public law. Recommendation 19. Review transportation procurement techniques to determine whether more innovative procurement methods are warranted when alternative sources and modes are available.

Except for transportation, most procurements of regulated services include a requirement for physical connection of the user's equipment to the regulated industry's system. The cost of connection can be borne separately or covered partially or wholly by the rates paid for the service. For new facilities, the connection agreement and construction required for obtaining service must be coordinated with the overall construction program. The connection may be made under the general construction contract, under a separate contract, or by the regulated supplier.

The lack of data on Federal procurement by agency and product (discussed in Chapter 2) also applies to procurement from regulated industries. Federal agencies spend more than $1.4 billion a year on Government bills of lading and transportation requests alone.34 The total Federal procurement of regulated products and services is estimated to exceed $6 billion annually. This estimate does not account for (1) the products and services of the Tennessee Valley Authority (TVA), Bonneville Power Administration (BPA), or similar Government utility operations that buy and transfer services or Federal installations that produce their own regulated industry services, (2) transportation procured as part of FOB destination price procurements, or (3) use of the U.S. Postal Service.

The Government has numerous regulatory programs; for example, in the fields of communications (Federal Communications Commission), energy (Federal Power Commission), air transportation (Civil Aeronautics Board), commercial interstate surface transportation (Interstate Commerce Commission), and sea transportation (Federal Maritime Commission).

The Government has no major regulatory program in the field of sanitation. This does not take into account the long-term programs of the Environmental Protection Agency (EPA) and other Federal programs to combat water pollution.

The States generally supplement the Federal regulation of energy, communication, and transportation. State regulation is important in the fields of energy and communication where there is a large volume of intrastate transactions. State regulation does not appear to be of primary importance in the sanitation services and transportation industries. Local regulation is of major importance only in the field of sanitation. Sanitation services are often provided by a local government and are paid for through service fees or general taxation.

The Federal Property and Administrative Services Act of 1949 (FPASA) gives GSA the basic responsibility for management of the Government's effort to provide "an economical and efficient system for ... transportation and traffic management, ... management of public utility services, . .. and representation before Federal and State regulatory bodies.” In July 1972, GSA transferred responsibility for these functions to its Federal Supply Service from its Transportation and Communication Services. Programs have been developed to advise and assist Federal agencies in obtaining regulated industry services, to develop areawide requirements contracts for utilities, and to represent the Government as a consumer before State and Federal regulatory bodies.

DOD is the largest user of regulated industry services. Pursuant to the provisions of FPASA, the Secretary of Defense has exempted DOD from the transportation aspects of the act. He has reached agreements 35 governing the relationship of GSA with DOD in the procure

23 See extensive regulatory power of the Interstate Commerce Commission (ICC), 49 U.S.C. 1-22 (1970).

* See Chapter 2, table 3.

35 FPR 1-4.402 (b): FPMR 101-35.102 (a).

ment and management of utility and communications services. This allows DOD to procure services for its own needs except when GSA areawide contracts will satisfy DOD requirements.36 These agreements assign to GSA the overall responsibility for coordinating the Government's representations before regulatory bodies but with the understanding that DOD will represent the military services where they are the major Government party concerned.37

GSA enters into areawide contracts with various utilities for furnishing services to Federal agencies. GSA areawide contracts provide that the utility, upon execution of an authorized Government order, will furnish the services involved in accordance with the supplier's rate schedules specified in the areawide contract.

Unless it is determined that more advantageous services are available, each agency in the area covered by a GSA areawide contract must procure utility services according to the contract. However, when it is in the best interests of the Government, an agency may negotiate special rates under an areawide contract or under a separate contract. 38

In addition, GSA has special statutory authority to enter into long-term contracts for utility services for periods not exceeding ten years.39 On its own initiative or upon request by an agency, GSA will negotiate or assist in the negotiation of a long-term contract if one is justified.40

When advantageous to the Government (in terms of economy, efficiency, or service), consolidated purchase, joint use, or cross-service by one agency for another is used to procure utility services. In the absence of a GSA areawide or a long-term contract, agencies may procure utility services and facilities independently. This is handled in three ways:

• When the utility rates are fixed or adjusted by a Federal, State, or other public regulatory body, such procurements may be effected by formal contracts or by simple procurement

documents, such as Government purchase orders or other written requests for service. • When the utility rates are not fixed or adjusted by a Federal, State, or other public regulatory body, a formal contract must be used. 2 • In any event, if the cost of annual service exceeds $50,000, or the connection charge, termination liability, or facilities charge esceeds $5,000, it must be cleared with GSA. This does not apply if the agency has established a clearance with GSA based on having a technically qualified in-house staff capable of handling the matter. The services of GSA are available to agencies to effect contracts or agreements as necessary. 43

For telecommunication services, GSA will enter into areawide, general-purpose, and special-purpose contracts for Federal agencies. If GSA has an areawide contract, it must be used by all agencies in the area unless a generalor special-purpose contract is deemed by GSA, in consultation with the agency concerned, to be in the best interests of the Government." Certain operational telecommunication systems (for example, air traffic, biomedical, satellite tracking) have been exempted from this provision.45

For transportation, GSA offers traffic service to all Federal agencies, 46 but the agencies procure their own transportation on a Government bill of lading (GBL) or Government transportation request (GTR). GSA conducts negotiations on behalf of all Federal agencies for the establishment or modification of classi. fications, ratings, charges, services, and the rules and regulations pertaining thereto,"i except that the agencies may be granted authority to negotiate for freight rates or services. *

101

DOD Transportation Operations

The Military Traffic Management and Terminal Service (MTMTS), a major command of he Army, is the DOD single manager for military traffic, land transportation, and comnon-user ocean terminals. It is one of three ingle-manager organizations established to provide transportation service for DOD. The Military Airlift Command (MAC) provides nilitary and contract air movement services, including operation of air terminals. The Miliary Sealift Command (MSC) provides ocean shipping services using fleet and commercial shipping.

36 FPR 1-4.407.

37 "Statement of Areas of Understanding Between the Department of Defense and the General Services Administration in the Matter of Procurement of Utility Services (Power, Gas, Water)," Federal Register, Dec. 1, 1950, p. 8227, and Federal Register, Feb. 7, 1957, p. 871.

28 FPR 1-4.407.
39 40 U.S.C. 481 (1970) and FPR 1-4.408.
40 Ibid.

41 FPR 1-4.410-2.
42 FPR 1-4.410-3.
43 FPR 1-4.411-1.
# FPMR 101-35.402-1.
45 FPMR 101-35.102 (b).
46 FPMR 101-40.1.
13 FPMR 101-40.305-1.

FPMR 101-40.305-3.

Personal property shipments handled by MTMTS worldwide represent the largest segment of DOD's peacetime transportation budget. More than 1.1 million shipments having a total weight of close to 1.2 million tons were made during fiscal 1971.49 | Passenger traffic in the continental United States (CONUS) reached a peak of 7.2 million passengers in 1967 but declined to about 5.6 million in 1971.50 Air and bus travel have almost completely replaced rail travel. At present, MTMTS manages movements of ten or more people, but this is being changed to apply to movements involving six or more people.

Inland cargo traffic in CONUS, with the exception of movements of less than 10,000 pounds, is given conventional traffic management support (for example, rates, routing) by MTMTS. Fiscal 1971 volume was about 23 million tons. Cargo transhipped through CONUS ports totaled more than 13 million tons, of which 11 million tons were export cargo.51

The Commission did not review procurement of ocean shipping services since a joint study was being conducted by the Department of Commerce, the Department of Defense, and the Federal Maritime Commission.52

that are appropriate and reasonable for the services required, but there is no provision for acceptance of commercial forms.

The broad range and nature of Government requirements and the variations in rate-setting methods preclude the Government from relinquishing its prerogative of rate negotiation. For transportation services and possibly other utilities, opportunities often exist for consideration of alternative or competitive means of fulfilling requirements. The Government should avail itself of every opportunity to compete its requirements when savings based on total costs can be achieved.

Industry concern over the Government's reluctance to accept the forms and provisions used by industry appears to have merit. In most cases, Federal Procurement Regulations authorize use of simple procurement documents if the annual cost of the service is under $10,000, but the regulations do not indicate that use of standard industry forms is acceptable. Many service transactions would be simplified if commonly used industrial forms were accepted by the Government. Such a policy might encourage public utilities to modify their forms to conform with legal requirements necessary to make them acceptable to Government activities.

Conclusions

Regulation and Documentation

Representatives of the transportation industry frequently question the Government exemption from automatic acceptance of rates and commercial forms that have been approved by a public utility commission. Government procedures provide for acceptance of rate schedules

The special characteristics of regulated industries appear to justify the statutory and regulatory exceptions to processes normally used in the procurement of commercial products.

The Government's requirements for services of regulated industries appear to need special consideration in regulatory plans. A statutory requirement for the Government to comply with State and local regulatory requirements is not feasible.

Transportation costs can be reduced through greater consideration of competitive sources and modes.

Administrative costs in the procurement of regulated services can be reduced for both Government and industry by judicious Government acceptance of the forms and provisions used in ordinary commerce.

* U.S. Military Traffic Management and Terminal Service, MTMTS Progress Report Fiscal Year 1971, July 31, 1971.

80 Ibid.

61 Ibid. ** Sealift Procurement and National Security (SPANS), Aug. 2, 1972.

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