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B-169094 1 (1970-05-06)

handle is hein.gao/gaobabkrw0001 and id is 1 raw text is: ..... - a '-.- 1 to be released outside the Cew_3 4a Accounting Office except on the basis of specific approval by the Office of Legislative Liaison, a record of which is kept by the Distribution Section, Publications Branch,, AS COMPTROLLER GENERAL OF THE UNITED STATES 74 WASHINGTON. D C 20548547 B- 169094 RELEASED MAY 6 1970 Dear Senator Tydings: Your communication of February 27, 1970, requested information on a decision by the Maritime Administration, Department of Com- merce, to offer foreign ship dismantlers an opportunity to bid on the sale of surplus vessels. A-nclosed was a letter dated February 11, 1970, to you from The Boston Metals Company, Baltimore, Maryland, suggesting that this Office determine (1) the fair market price for a surplus vessel where scrapping is limited to a domestic ship disman- tler and (2) the foreign sales price that would have to be established to equal the overall economic benefit to the U.S. economy if the vessel were sold domestically. A fair price for a surplus vessel can sometimes be determined by competitive bidding. This price, however, may be influenced by such factors as the dismantler's demand for vessels and the number of ves- sels which Maritime decides to offer in any given period. Although the supply of surplus vessels is currently very large, the number of domes- tic vessel dismantlers is limited and their demand for surplus vessels is relatively small. Therefore, although competitive bidding is usually considered an appropriate method of establishing fair market prices, it does not appear that competitive bidding is necessarily a valid method under these circumstances. Another method of determining a fair price of a vessel to be sold for scrapping is the end product method whereby an estimate of the quantity and quality of scrap metal which can be derived from scrap- ping the vessel is made and a value based on the market price of such scrap metal is established. To this would be added the value of any equipment and machinery which could be sold separately rather than scrapped. This value is then reduced by the dismantler's average cost of operations attributable to ship-dismantling operations and a reason- able profit. This method is probably not precise and would entail ob- taining engineering estimates and having access to the books and records of a representative group of dismantlers. LC (o~em

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