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PLRD-82-103 1 (1982-07-29)

handle is hein.gao/gaobabmoa0001 and id is 1 raw text is: R ... UNITED STATES GENERAL ACCOUNTING OFFICE by the OfficO 0 PROCUREMENT. LOGISTICS, AND READINESS DIVISION JULY 2,1982 B-208141 The Honorable Gordon J. Humphrey Chairman, Subcommittee on Preparedness Committee on Armed Services 119301 United States Senate Dear Mr. Chairman: Subject: Defense Fuel Supply Center's Procedures for Exchanging Naval Petroleum Reserve Crude Oil for Fuel Products (GAO/PLRD-82-103) On January 6, 1982, you asked us to review the Defense Fuel Supply Center's (DFSC's) procedures for administering exchange contracts. These contracts, which deviate from normal procure- ments, require contractors to purchase a predetermined amount of Naval Petroleum Reserve (NPR) crude oil for every barrel of petro- leum product they sell to the Department of Defense (DOD). You expressed concern about whether the Federal Government is receiving the optimum return for the sale of its crude oil through these exchange contracts, which are new to DFSC. We found no problems with DFSC's contracting procedures. More- over, our review of 22 oil companies indicated that the Federal Government is currently receiving a fair return for its crude oil. We discussed our observations with your Office on May 21, 1982, and this report summarizes the results of our review. OBJECTIVES, SCOPE, AND METHODOLOGY Our objectives were to determine (1) if DFSC has been using suitable procedures in its exchange contracts and (2) if the Federal Government has been receiving optimum value for the NPR crude oil. We made our review primarily at DOD's DFSC in Cameron Station, Alexandria, Virginia. We interviewed officials at DFSC, DOD, the Department of Energy, and NPR in Elk Hills, California, and con- sulted with officials from the oil industry--the Independent Refiners Association of California, the American Petroleum Insti- tute, and publishers of an oil publication. (942151)

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