In re Atlantic Richfield Co., B-203607
| Decision Date | 09 December 1981 |
| Docket Number | B-203607 |
| Citation | 61 Comp.Gen. 121 |
| Parties | MATTER OF: ATLANTIC RICHFIELD COMPANY, DECEMBER 9, 1981: |
| Court | Comptroller General of the United States |
Sales - lottery - multiple drawings - subsidiary bids - unfair advantage consideration - natural gas sales statutory requirement that all interested persons be afforded a full and equal opportunity to acquire petroleum products is not satisfied when two subsidiaries of the same parent corporation participate separately in a lottery sale. Distinguished by b-204821, March 16, 1982. Sales - lottery - multiple drawings - subsidiary bids - new lottery recommended recommendation is made that department of energy conduct a new lottery, which includes the prior unsuccessful bidders who are still interested in obtaining an award under the solicitation, but only one of the two subsidiaries of parent corporation which participated in the previous lottery. If the previously successful subsidiary is not selected, its contract should be terminated for the convenience of the government.
The department of energy (DOE) issued invitation for bids (IFB) no. De- fb01-81ra32124 for the sale of natural gas from naval petroleum reserve no. 1, elk hills, California, for 1 year. The sale was divided into two line items. Under line item no 1, the maximum number of awards was seven; for line item no 2 the maximum number was two. The IFB permitted bidders to bid discounts from a price control ceiling, i.e., the "maximum legal price, " set by the federal energy regulatory commission. Award was to be to the highest bidder. In the event of a tie involving more than seven bidders for line item no. 1, or two bidders for line item no. 2, awardees were to be determined for line item no. 2. Each bid, under the respective line items, was for the maximum price and a lottery was conducted.
Atlantic richfield company (arco) has protested the doe's award of two contracts-- one from each line item-- to southern California gas company (southern).
For the reasons which follow, the protest is sustained.
Doe issued the IFB under the naval petroleum reserves production act (reserves act), 10 U.S.C. 7420, et seq. (1976). Subsection 7430(b) of the reserves act requires such sales to be made "at public sales to the highest qualified bidder." Subsection 7430(d) adds that sales made under the authority of the reserves act must be "so structured as to give full and equal opportunity for the acquisition of petroleum by all interested persons, including major and independent oil producers and refiners alike." The IFB stated that sales made under the reserves act were subject to the federal price controls created by the natural gas policy act.
At bid opening arco, a bidder for line item nos. 1 and 2, informed doe's contract specialist who supervised the opening that two of the bidders, southern and pacific lighting gas supply company (GAS supply), were commonly owned and controlled by pacific lighting corporation (pacific). (pacific owns 100 percent of gas supply's voting stock and 93 percent of southern's.) Arco requested that, for the purposes of the lottery, both gas supply's bid and southern's bid be treated as one bid. The contract specialist denied arco's request and included both of the companies as separate bidders in the drawing.
Arco submits that doe's decision gave pacific an unfair advantage since it allowed it to submit two bids through its subsidiaries. Arco believes that the practical effect of permitting both subsidiaries to participate in the lottery as independent bidders was to provide the parent company with two chances out of 10 in the drawing for line item 1 and two chances out of nine for line item 2, as compared with the other bidders' one chance. Arco asserts that doe's action unfairly prejudiced the other bidders. This prejudice could only be remedied, in arco's view, by conducting a new lottery in which "each bidder has the correct (and equal) mathematical probabilities for success." Arco argues that pacific, southern and gas supply are clearly a single "person, " and the activities and basic business policies of the latter two companies are controlled by the former. It is arco's position that:
(it cannot be seriously maintained that permitting one bidder in a lottery twice as many chances as any other constitutes the giving of all parties a "full and equal opportunity" to purchase the gas.
Arco emphasizes that it does not object to the filing of bids by affiliated companies in a truly competitive sale.
In this regard, DOE argues it did conduct a competitive sale, not a lottery, because any bidder could have bid a discount from the maximum legal price. Thus DOE contends that the sale was competitive.
Doe's argument, that this should be viewed strictly as a competitive sale is simply not persuasive. All 10 bidders for line item 1 and...
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