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092583 1 (1971-09-21)

handle is hein.gao/gaobacwlj0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 DEFENSE DIVISION Lt. General Wallace H. Robinson, Jr. SEP 2 1 1971 Director, Defense Supply Agency Attention: DSAH-CK Cameron Station Alexandria, Virginia 22314 Dear General Robinson: The General Accounting Office has reviewed the pricing and adminis- tration of seven petroleum supply contracts awarded by the overseas Fuel Division of the Defense Fuel Supply Center, Defense Supply Agency, Alexandria, Virginia (DFSC) to the Asiatic Petroleum Corporation. The contracts, totaling about (384 million, covered the supply, storage and transportation of petroleum products in Southeast Asia for the years 1967 to 1970 (see appendix). Under the contracts, Asiatic delivered JP-4 fuel, aviation gasoline, motor gasoline and diesel fuel to Vietnam and Thailand for Goveriinent use. The contract pr.ces were negotiated on the basis that Asiatic would buy crude oil in the Persian Gulf or Caribbean areas, ship it to Singapore for refining, and from there ship it to Vietnam and Thailand facilities for storage and distribution to the various military services. Contract prices were stated in terms of gallons, except for miscel- laneous charges. In negotiating the prices of the first five contracts, DFSC contracting officials determined that the fuel prices were based on adequate competition or on market prices and did not request cost or pric- ing data. For pricing the last two contracts, DFSC requested certified cost or pricing data for certain cost elements added to the fuel prices such as overhead, storage and inland transportation. Asiatic provided such data only for the last contract. Cost or pricing data, however, were not requested by DFSC for the product portion nor the ocean transportation charges on the basis that market prices were used to determine that contract prices were reason- able. OPPORTUNITIES FOR IMPROVING PRICE NEGOTIATIONS FOR OCEAN TRANSPORTATION Ocean transportation from the source of crude oil to contractor facilities in Singapore, prior to deliver to Vietnam or Thailand, accounts for a substantial portion of total costs to the Government under these contracts. This cost was included in the per-gallon product 50TH ANNIVERSARY 1921-1971

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