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 recognizing 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 the place. Mr. HAWKINS. I would agree with two of the three conditionthat 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 contingencies. 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. 67-906-66- -37 Mr. ROBACK. Well, the situation came about-I mean Comsat knew they were under contingency, the FCC had written them a letter on June 9 Mr. HAWKINS. Right. Mr. ROBACK (continuing). Of 1966 which said, among other things, "We assume that you have, of course, advised the Defense Communications Agency that the furnishing of such service"-referring to the 30 circuits "by your company is contingent upon obtaining necessary authorization from the Commission, which has not yet been applied for." So they knew that there was a contingency, but they did not put any contingency in their bid. What you did was to put a contingency in your bid and only discovered later you made a mistake. Why did you not just leave it out and then the Government would not be worried? Mr. HAWKINS. We were trying to be forthright. Mr. ROBACK. Why did you not just bid the low price so the Govern ment would have a real issue? Mr. HAWKINS. We would not want to do anything that might mislead DCA and therefore we wanted to put the situation clearly on the record. Mr. ROBACK. DCA could take judicial notice that there were all these issues to be resolved at a proper time and there were contingencies, in fact, the whole competitive procurement was a contingency because they never knew whether the FCC would approve any rate upon which they were making an award decision. Mr. HAWKINS. As a matter of fact, our final offer to DCA did exactly what you suggested. Mr. ROBACK. You finally decided to knock out all this business about contingency. Mr. HAWKINS. Yes, right. Mr. ROBACK. But you raised your price when you did it to protect yourself. So you came out at a price offer that was even to Comsat's. You are now both offering $4,000 a month. Mr. HAWKINS. Right. Mr. ROBACK. Per circuit, right? Mr. ROBACK. Instead of keeping that a little bit lower where the Government would have a real price issue. So now the Government figures, "Well now, they are both even, we have to look for another way to knock RCA out of the picture." What did they find! [Laughter.] EQUALIZATION OF DOWN-LINK Mr. HAWKINS. Well, the Government decided to look at the foreign end charges. Mr. ROBACK. They found something else. Mr. HAWKINS. We were lower at the foreign end charges, too. Mr. ROBACK. You were proposing to the Government a larger cost estimate for the termination liability. Mr. HAWKINS. No, we had offered to the Government a lower nonrecurring monthly charge for the foreign terminals. Mr. ROBACK. A lower. Mr. HAWKINS. Yes, lower recurring monthly charges. Mr. ROBACK. Well, you mean you were offering a lower cost to the Government for the down-link. Mr. HAWKINS. The monthly recurring charges; yes. Mr. ROBACK. What is that? That is the cost of the service, is it not? Mr. HAWKINS. That is right. Mr. ROBACK. How could you make an offer of a lower cost of servce than Comsat for that part of the service that the foreign entity would provide? Mr. HAWKINS. Well, this gets into the question of the nature of our foreign arrangements and the understandings that we had at the time. Also there is the further factor that there were no arrangements, even by Comsat, on the Philippine end. Mr. ROBACK. You were making some estimates and you were going to stand by those estimates. Mr. HAWKINS. That is right. Mr. ROBACK. I mean you were taking on some responsibility for what the cost was going to be on the down link. Mr. HAWKINS. We assumed the responsibility for the costs. Mr. HAWKINS. Well Mr. ROBACK. Did you do that as a business risk proposition? Mr. HAWKINS. We certainly did it as a business risk proposition. We also had certain other bases for the action we took. This does get into an area, which is a highly competitive one, relating to the nature of the foreign ararngements that are involved. Up to this point in time Comsat has not disclosed the nature of its foreign arrangements, and it would seem to us it would be manifestly unfair that we should have to disclose ours. Mr. ROBACK. Was this before or after the advice that was given. to you by the DCA that the foreign monthly recurring charges on the down link would, for the purposes of bid evaluation, be equalized? Mr. HAWKINS. This was after. Mr. ROBACK. You mean they told you that afterward, after you made a lower offer or did you make your lower offer later? Mr. HAWKINS. No, they told us before. Mr. ROBACK. Told you before. If you could make a lower offer, there were not any good grounds for their assuming that the charge would be the same whoever was the bidder, was there? Mr. HAWKINS. I am not sure I understood the question. Mr. ROBACK. Well, DCA did not have good grounds for assuming these would be equal because, as they testified to us, they assumed that whoever provided the service, whichever contractor provided the service, the foreign entity was going to charge the same price and they could make that as an assumption. Mr. HAWKINS. That was DCA's assumption. Mr. ROBACK. You cannot necessarily make that assumption? Mr. HAWKINS. That was DCA's assumption. I think there is some question as to whether or not you could make that assumption. Mr. ROBACK. If that assumption had not been made, would you have been the low bidder? Mr. HAWKINS. Yes. Mr. ROBACK. But DCA having made that assumption, that put you out. Then they looked for something else. Mr. HAWKINS. Then there was the question of the foreign cancellation and termination charges and there we were higher. Mr. ROBACK. Why were you higher? Was that also a matter of individual bargaining with the foreign entity? Mr. HAWKINS. This also gets into the area of the nature of the foreign arrangements and also the way in which these charges were calculated. Mr. ROBACK. These charges dealt with what? Did they deal with these transportable stations? Mr. HAWKINS Well, these are 3-year contracts, and the Government wanted to reserve the right to terminate or cancel the service during the period. Fundamentally, the concept was that in the event of termination or cancellation, the Government would be able to termi nate the contract and pay a penalty for termination. Mr. ROBACK. In other words, the foreign entity did not want to be stuck with a ground station being built for that purpose. They wanted to be paid off, is that right? Mr. HAWKINS. Yes. In the case of two of the countries, Thailand and the Philippines, in order to get the service started promptly. transportable ground stations must be put in. Mr. ROBACK. Comsat was proposing to lease those to those countries, right? Mr. HAWKINS. Yes. A transportable ground station costs in the order of a million and a half dollars. It is a substantial expenditure. If this transportable ground station is put in and, within a month or two thereafter, the service is canceled, the entity providing the service would want to have some protection. Mr. ROBACK. That is understandable. We are not arguing, we are trying to understand the process. Mr. HAWKINS. That is the purpose of it. Mr. ROBACK. I am trying to find out why it is that you put in a cancellation liability offer which, according to General Starbird, wis $1,000,000 more than Comsat's. That is a lot of money. Mr. HAWKINS. These are maximums, Mr. Roback. Mr. ROBACK. These are maximums. Mr. HAWKINS. These are maximums, these are not the amount that would actually be paid. Mr. ROBACK. But nevertheless they were used, and I do not know whether they can be used for bid evaluation, but that can be a matter for determination in a proper test-whether maximums can be used in. you know, considering whether the price is comparative or not. Mr. HAWKINS. I do not know what weight should be given to them in an evaluation. But, you see, as long as the service is not terminated or canceled, they are of no consequence. Mr. ROBACK. Why would they be different? And let me ask you, could they be different because you had proposed to lease a different kind of terminal which might cost more and therefore have a high leasing charge and therefore put upon the foreign entity a higher termination estimate? Mr. HAWKINS. It could be on that basis, or it could be a differer" way of calculating those charges. |