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089551 1 (1976-08-25)

handle is hein.gao/gaobacvox0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE O ss WASHINGTON REGIONAL OFFICE FIFTH FLOOR 803 WEST BROAD STREET rALLS CHURCH, VIRGINIA 22,046 Lt. General W W. Vaughan AUG25 1978 Director, Defense Supply Aqency <'o Cameron Station Alexandria, Viiginia 22314 Dear General Vaughan The General Accounting Office has recently completed several reviews of the Defense Fuel Supply Center's (DFSC) practices in awarding and administering petroleum fuel contracts and have issued reports to the Congress contain- ing certain matters of interest to them. In addition to the matters reported to the Congress, we found other matters which we believe needed corrective action We discussed these matters with DFSC officials at the completion of our review, and they concurred in our conclusions and recommen- dations We subsequently met with DFSC officials in February 1976, and found that corrective action has been taken The matters we discussed with DFSC officials and identified in this report are that DFSC (1) paid an addi- tional $560,000 by allowing contractors to base economic price adjustments on a product other than the product being purchased and (2) did not seek price reductions from contractors in return for granting product specification waivers. BACKGROUND The DFSC is responsible for procuring petroleum products for the Department of Defense (DOD) and other Federal agencies It buys about one-third of a billion barrels annually and until 1973 bought most domestic products under formally advertised contracts. However, by late 1973, traditional suppliers were not interested in furnishing all the Government's requirements either by competitive bidding or through negotiations and DFSC had to make arrangements with the Department of the Interior to obtain the needed products under mandatory allocations pursuant to the Defense Production Act of 1950 (DPA), as amended The De a the Interior then issued

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