¶ … businesses, the delivery of cargo or freight is often determined by the lowest cost provider. The provider who can offer the best value at the lowest prices garners the most business. The same is true regarding government contracts and freight orders. In the case of Sea-Land Service, Inc., they were in competition with both international and domestic shipping firms. What complicated this issue, Sea-Land contends, was the ambiguous and discriminatory nature of the business dealings surrounding potential delivery (1). Additionally Sea-Land disputes the methods of determining a "fair" and "reasonable" price.
To begin, Sea Land Service Inc. is a shipping and containerization company. It was established in 1960 and now exists as Horizon Lines Inc. As a publicly traded company. Sea-Land has a long and storied history which includes shipping numerous containers' in the Vietnam War, to various contracts with the U.S. government. One such potential contract was with the Department of Defense in early 1993 (3). Traditionally, the DOD enters into contracts on a cost basis. The suppliers who can delivery the predetermined amount of goods and services at the lowest costs usually are awarded the contract. In many instances, multiple awards are given in the delivery amount in question is too large for a single carrier, or if the multiple routes are needed. Additionally, the contract winner's names and amounts are published in the Worldwide Container Agreement and Rate Guide. The contract in question however is unique in regards to Sea-Land who contented that the DOD departed from the traditional worldwide agreement approach which created a difficulty...
The DOD contends that through this method, better rates, better delivery quality and better overall service can be obtained. Sea Land counters by stating this method makes it difficult to identify the commercial contracts or rates MSC intends to use in its evaluation of other services contracts (2). Thus, this single party negotiation process is discriminatory in nature. Finally Sea-Land believes that much of the language within the new agreements are ambiguous and do not present themselves to fair interpretation.
I agree with the initial decision regarding Sea Land Service Inc. As stated in the document, the Military Sealift Command (MSC) is making a substantial monetary commitment and should be compensated accordingly. As such, they have the right to demand better rates through means other than those of the worldwide agreement. Likewise, Sec. 15.805-2 authorizes the contracting officer to select whatever price analysis techniques will ensure a fair and reasonable price (5). This is exactly, what the MSC is doing by using a single party negotiation system. There is no requirement that the government disclose a government offers by competitors. Further, in such instances as price competition, competitor disclosure is not needed in order to place a bid. If other competitor offers were disclosed, competitors would simply base their price off of the bid as oppose to their own costs, required rates of return and so forth.
To take the opposing view,…
