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DCA PROCEDURES

Mr. RoBACK. You say that it is a customary thing to have RFP's or long-haul service!

Mr. HAWKINS. Yes. It is DCA's established practice to send {FP's to the carriers, inviting them to bid on particular circuits, or aore than one circuit. Mr. ROBACK. Are there different prices for the same service bid?

People keep telling me that for the same service, you have got to la ve the same rate; otherwise, it is discriminatory.

Now, I gather if the bids with price variations are permissive, then t is up to the FCC to take the low price and make it the universal ariff; is that right?

Mr. HAWKINS. Well, I think I can answer your question by saying this, that in the last couple of years or so, there have been, I think, over 60 procurements by DCA of long-haul communications services. Most of these have been out in the Pacific area, because the cables are newer there.

But there also have been some procurements in the Atlantic area. The way this works is that DCA puts out an RFP to the carriers.

Mr. ROBACK. I thought they used a CSA and a master contract?

Mr. HAWKINS. Well, we have a master contract, but that master contract provides for the issuance of CSA's covering individual circuits as they may be ordered.

Now, the reason for the procedure is that the CSA procedure makes it simple to order an additional circuit, because then we do not have to execute a detailed contract.

What usually happens is that, where DCA is seeking to obtain a circuit from an existing facility, there is a tariff already on file with the FCC and, since all the carriers, for competitive reasons, obviously, have to have competitive rates, there are occasions where the carriers bid in accordance with their tariff.

There have also been cases where there have been variations in the bidding, and DCA has awarded the circuits to the lowest bidder.

Mr. ROBACK. Then, does that low bid become a tariff for the service?

Mr. HAWKINS. The carrier then files a tariff in accordance with its particular bid.

Mr. ROBACK. Have you been a frequent bidder on services, and have you been awarded contracts on a price basis?

Mr. HAWKINS. We have been a frequent bidder on circuits. I suspect there have been a few cases where we have been the lower bidder and got the business on that basis.

Mr. RoBACK. You say in your statement that this procurement is a benchmark. Does that mean- -or do you mean if Comsat is allowed to get this one, they will get them all?

Mr. Hawkins. It is benchmark, because we are in the process of determining what the procedure will be for the future. If Comsat does get this one, it sems to be pretty clear they will have a mighty good chance of getting the next one, too.

I might say, Mr. Roback, that at this point Comsat has got 100 percent of the Government's satellite business.

Mr. ROBACK. Well, after all, they are the company that was set up to provide it. There is nothing surprising about that, is there? You cannot provide any satellite service directly.

Mr. HAWKINS. But we can certainly provide it with Comsat functioning as a carriers' carrier.

RCA PROTEST

Mr. ROBACK. I understand that that is what the issue is.

Now, you say you protested the award. You made a protest after or before the award ?

Mr. HAWKINS. Before the award had actually been made.
Mr. ROBACK. You protested the proposed award.
Mr. HAWKINS. Yes.

Mr. ROBACK. You were given to understand that the award would be made to Comsat.

Mr. HAWKINS. That is right. DCA informed us that it proposed to definitize the contract with Comsat.

Mr. ROBACK. You protested to DCA.

Mr. Hawkins. Yes. We protested to DCA in a letter, which I believe was dated July 8. We said that if DCA did not agree with our protest, we asked that our protest letter be forwarded to the Comptroller General.

Mr. ROBACK. Then, DCA denied your protest.
Mr. HAWKINS. Yes.

Mr. ROBACK. And, then, responsive to your request, conveyed the protest to the Comptroller General.

Mr. HAWKINS. Yes.
Mr. ROBACK. When was that, on the 12th of July?
Mr. HAWKINS. Yes.

Mr. ROBACK. Now, the Comptroller General also had before him then or shortly thereafter a protest from ITT.

Mr. HAWKINS. Yes.

Mr. ROBACK. And the grounds of the protest from ITT were that the Defense Department had no business making a contract without getting an authorization; in effect, that this service could be provided only on approval from the FCC. It was the narrow legal issue of whether they could make a contract. You are familiar generally with that?

Mr. HAWKINS. I am familiar generally with it. I do not believe I ever actually saw the ITT protest, but that is generally my understanding.

Mr. ROBACK. You are familiar with the fact that the Comptroller General said, in effect, in his opinion, that there is no reason under the procurement laws why DCA could not make a contract with Comsat. What happens to that contract when it gets to the FCC is another matter which will be decided when it gets there.

Mr. HAWKINS. Yes, I read that. Mr. ROBACK. In other words, ITT posed the issue on a legal ground of whether the contract could be made. You posed the issue on the merits of the offer, that is to say, you wanted an adjudication of the proposal.

What happened to your protest?

Mr. HAWKINS. Well, in the interests of brevity I have not gone into details of each of the protests. We really protested on two grounds. We protested on the same ground that ITT did, but we also protested

on the merits of the award, namely, that we felt we were the lower bidder.

Now, as of this moment, the Comptroller General has not yet ruled on this second point, although he has it under consideration.

Mr. ROBACK. In other words, the issue is open as to whether the contract that DCA made with Comsat is a valid contract, from the standpoint of the Comptroller General's opinion?

Mr. HAWKINS. That is still open, yes, sir.
Mr. ROBACK. Have you conferred with the Comptroller General ?
Mr. HAWKINS. Yes, and the Comptroller General-

Mr. ROBACK. Have you submitted supplementary material to your original protest?

Mr. HAWKINS. The Comptroller General has asked us for additional comments which are in the process of being prepared. I anticipate those will probably be submitted, hopefully, this

week, or as soon as possible. I think you are probably familiar, Mr. Roback, with the general procedure whereby the Comptroller General requests corments, and also a procedure which gives the parties an opportunity to hold a conference.

Mr. ROBACK. Do you get to see the views of the Defense Department?

Mr. HAWKINS. Yes.
Mr. ROBACK. And then you are allowed to comment on them?
Mr. HAWKINS. Yes.

Mr. RoBACK. I have a copy of the original protest letter. That is to say, I have a copy of the DCA letter that was conveyed to the Defense Department along with the protest in response to your request, and I had a chance to look at it. Have you commented on it, that is, to the Comptroller General?

Mr. HAWKINS. Well, this is the letter which we are now in the process of preparing and expect to submit to the Comptroller General, hopefully, later this week or early next.

In fact, let me clarify one point, Mr. Roback. There are two letters from DCA. One is dated July 12, 1966. We actually received a copy of that letter only on September 6.

There is another letter of-it is undated, but I think it was about August 15, which we received on August 17.

(The correspondence referred to in the discussion appear at the end or Mr. Hawkins' testimony, pp. 581-607.)

Mr. ROBACK. Well, the letter of the DCA, the first letter was dated July 12.

Mr. HAWKINS. Yes. Mr. ROBACK. General Starbird, in conveying that letter, said that DOD intended to deny the protest

Mr. HAWKINS. Yes.

Mr. ROBACK (continuing). Which they already did on that day, and also he says that this is an urgent matter and he wants expeditious action from the Comptroller General. But now, it is about 2 months later, and they have not gotten any decision. So, apparently, the Comptroller General was not carried away by the plea of urgency.

Mr. HAWKINS. Well, the Comptroller General did promptly rule on the first point, namely, the point that had been raised by ITT.

Mr. ROBACK. But, you see, he cannot rule on that and just leave aside the other arguments.

Mr. HAWKINS. Yes.

Mr. ROBACK. Conceivably, that is to say, he could rule they could enter into a contract, but he does not necessarily have to rule that the contract is valid or acceptable.

Mr. HAWKINS. Well, that is right.

CONTINGENCY IN PROPOSALS

Mr. ROBACK. I do not know whether he could. He probably has less leeway to object because this is a negotiated contract.

In any case, General Starbird was trying to, in a sense, rebut your protest, conveying his views to the Comptroller General, and in conveying his views, one of the big issues was whether your low bid-you had a low bid, but the trouble with the low bid, so far as the Defense Department was concerned, was that it was contingent upon a decision that would award you ownership in the Hawaiian earth station.

Mr. HAWKINS. Yes.

Mr. ROBACK. Now, General Starbird made the point that, he cited this decision of the FCC on the docket which gave the ownership, or rather stated the general policy of permitting the initial stations to be built and operated by Comsat, and he cited in addition the authorization that the FCC granted for construction of the station at Paunalu.

Mr. HAWKINS. That is right.

Mr. ROBACK. And he said in his conveyance to the Comptroller General that this permit gave Comsat the right to operate the station for the interim period. You take issue with that?

Mr. HAWKINS. Yes. What we take issue with there, is this: If you look at the proposals, and even assuming for a moment and l'ecognizing there was a contingency in RCA's proposal, there is also a contingency in Comsat's proposal.

As a matter of fact, I would think, if anything, there is a larger contingency in Comsat's proposal, because at that point the Commission's authorized user decision had already come down.

Mr. ROBACK. As a matter of fact, there are all sorts of contingencies—the whole thing is contingent because no final decision has been made about anything, so far as FCC is concerned.

Mr. HAWKINS. Well, the entire arrangement is certainly subject to the Commission's regulatory decision. It is up to the FCC.

Mr. ROBACK. There has been no final decision about the earth stations, or whether the Government can be an authorized user for this particular service, or whether the tariff is acceptable, and one thing or another, and so you are saying there are contingencies all over ile place.

Mr. HAWKINS. I would agree with two of the three conditions that you referred to, the first and the third, but not the second point you made.

Mr. ROBACK. What was the second point I made?

Mr. HAWKINS. You referred to three, earth station ownership, authorized user, and the rate.

Now, it is true the Commission has not yet passed upon the rate: it is true the Commission has not yet passed upon the question of ultimate ground station ownership; but it is our position that the Commission has passed on the authorized user question.

Mr. ROBACK. Well, I know there is an opinion, but what I mean is whether in this case, for purposes of 30 circuits to the Far East, the Government is an authorized user. Has that been passed on? I thought that was a matter pending before the Commission. Why is there a petition for reconsideration?

Mr. HAWKINS. Well, I think that the Commission has passed on that, because otherwise there would not be any need for a petition for reconsideration.

Mr. RoBACK. If I understand it correctly, the FCC has not passed finally on whether this contract can be carried through.

Mr. HAWKINS. The Commission has made a final decision on the authorized user question.

Mr. ROBACK. But the authorized user question says:
“We have got to look at these things case by case."
Now, this case is still to be looked at, is it not!

Mr. Hawkins. Well, the authorized user decision says definitely that Comsat could provide services directly to the Government only in unique and exceptional circumstances.

Mr. ROBACK. But it would have to make a finding and order presumably, or some kind of a determination on whether these are unique circumstances. I do not think that we ought to quarrel about that. I mean, there is not any finding of that sort. That issue, according to the testimony we were given, is still before the Commission.

You do not understand that to be the case?
Mr. HAWKINS. Well, I think-
Mr. ROBACK. You are sounding now like your counsel.
Just tell us what the situation is.

Mr. HAWKINS. The Commission has not passed upon the application which Comsat has filed to provide the service, and presumably, if it could be established that these are unique and exceptional circumstances, it would

come within the framework of the policy. Mr. ROBACK. That is all I was trying to say.

Mr. HAWKINS. I really think, and I do not mean to disagree, but we are basically talking about what kind of factual showing might ultimately be made.

Mr. ROBACK. But the fact that there was a contingency or a number of contingencies would not necessarily resolve the issue of whether your offer was to be considered acceptable on a conventional basis. The Government is always throwing out bids because of contingencies. You wanted to hook into your bid a decision or a determination on the ground station issue.

Mr. HAWKINS. Just so our position will be clear, Mr. Roback, we are not saying that there were not contingencies. In fact, there were eontingencies.

Mr. Roback. You did not want your contingencies to be singled out as a basis for rejecting a bid.

Mr. HAWKINS. Absolutely.
Mr. ROBACK. All right, that is understandable.

Mr. HAWKINS. As a matter of fact, Mr. Roback, we think that RCA has the lowest noncontingent offer of anybody at this point.

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