E5-7460. Procurement of Commodities for Foreign Donation

AGENCY:

Commodity Credit Corporation, USDA.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would adopt new procedures to be used by the Commodity Credit Corporation (CCC) in the evaluation of bids in connection with the procurement of commodities for donation overseas. In general, CCC proposes to amend the existing regulations to provide for the simultaneous review of commodity and ocean freight offers when evaluating lowest-landed cost options in connection with the procurement of commodities. This proposed rule would enhance bidding opportunities for potential vendors while allowing CCC to more efficiently acquire commodities.

DATES:

Comments on this proposed rule must be received on or before January 17, 2006 in order to be assured consideration. Comments on the information collections in this proposed rule must be received by February 14, 2006 in order to be assured consideration.

ADDRESSES:

CCC invites interested persons to submit comments on this proposed rule and on the collection of information. Comments may be submitted by any of the following methods:

• E-Mail: Send comments to [e-mail].
• Fax: Submit comments by facsimile transmission to: [phone].
• Mail: Send comments to: Director, Commodity Procurement Policy & Analysis Division, Farm Service Agency, United States Department of Agriculture (USDA), Rm. 5755-S, 1400 Independence Avenue, SW., Washington, DC 20250-0512.
• Hand Delivery or Courier: Deliver comments to the above address.
• Federal Rulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting comments.

Comments on the information collection requirements of this rule must also be sent to the addresses listed in the Paperwork Reduction Act section of this Notice. Comments may be inspected in the Office of the Director, Commodity Procurement Policy & Analysis Division, Rm. 5755-S, 1400 Independence Avenue, SW., Washington, DC, between 8 a.m. and 4:30 p.m., Monday through Friday, except holidays.

FOR FURTHER INFORMATION CONTACT:

Richard Chavez, phone: [phone]; E-Mail: [e-mail].

SUPPLEMENTARY INFORMATION:

Background

The Kansas City Commodity Office (KCCO), within the Farm Service Agency, U.S. Department of Agriculture, procures agricultural commodities on behalf of CCC for donation overseas under various food aid authorities. These authorities include Title II of the Agricultural Trade Development and Assistance Act of 1954 (Pub. L. 480), which is administered by the U.S. Agency for International Development (USAID), and the Food for Progress and the McGovern-Dole International Food for Education and Child Nutrition Programs, which are administered by the Foreign Agricultural Service within USDA. Currently, KCCO follows a two-step ocean freight bid evaluation process in connection with the purchase of commodities for these programs. First, KCCO issues a public invitation soliciting bids for the sale of commodities and requests that ocean carriers provide indications of available freight rates to KCCO. These “indications” of rates are not offers to KCCO. In fact, KCCO does not contract for ocean transportation for the donated commodities. Ocean transportation contracting is done by the Cooperating Sponsors (grantee organizations or foreign governments receiving the commodities) or by USAID in the case of some Title II, P.L. 480 shipments.

At this point, KCCO evaluates commodity bids together with the freight rate indications to identify the combination which would most likely result in the lowest-landed cost, i.e., the lowest combined cost of commodities and freight to destination. CCC will purchase the commodities to be donated overseas on that basis. Lowest-landed cost is calculated on the basis of U.S.-flag rates for that quantity of the commodities being purchased that is determined necessary and practical to meet cargo preference requirements, i.e., the tonnage required to be shipped on U.S.-flag vessels. Although KCCO does not contract for freight, the freight costs are borne by the U.S. government from the same accounts as the commodity costs. Therefore, purchasing on the basis of lowest-landed cost will reduce outlays and maximize the use of funds.

KCCO's commodity purchase determines the point at which the commodity is delivered to the carriers. However, as stated above, the freight rates used for this lowest-landed cost evaluation were not firm, fixed offers. Therefore, a second step is currently necessary that involves the Cooperating Sponsors or USAID issuing invitations for firm freight offers. KCCO will notify the Cooperating Sponsors or USAID of the location of the commodity as determined in its commodity bid evaluation and the Cooperating Sponsors or USAID will issue ocean freight invitations that will lead to actual freight bookings by the Cooperating Sponsors or USAID on firm, fixed ocean rates.

This two-step process has been in place for many years and was designed at the time that processed commodities were shipped at ocean carrier tariff rates that could be readily identified. Now, as rates are “submitted rates” and not tied to tariffs the process is exceedingly cumbersome and time-consuming, typically requiring 80 man hours each month to analyze the first-step indications. Additionally, the process does not guarantee that commodities will be actually purchased and shipped on the basis of lowest-landed cost. One reason for this is that the Maritime Administration, within the Department of Transportation, prioritizes U.S.-flag ocean service for purposes of cargo preference and assigns a higher priority to service that uses only U.S.-flag vessels to the final discharge point. The current two-step process often results in commodities being purchased at locations based upon indications of service available from U.S.-flag carriers that have a lower priority. These port locations may not be cost-effective for the higher priority vessels, which can then “trump,” or displace, the rate of the lower priority vessels and secure the cargo at a substantially higher rate.

CCC proposes to add clarity to the commodity bid evaluation process by eliminating the two-step process. A major constraint to revising this two-step process has been that computer resources available to KCCO have been unable to analyze the large number of variables that comprise modern government commodity procurements and the complexities of cargo preference compliance. These include the many contract priorities that are mandated by law as well as the shear volume of possible commodity and freight cost variables that result from a national bidding system. KCCO is now in the process of updating its computer bid-evaluation systems that would be able to accommodate a more unified one-step bid evaluation. The procurement for commodities using firm, fixed ocean rates to determine lowest-landed cost would be the most efficient method of procurement. Under such a system, the cargo preference requirements would be determined initially and not subject to a change of carriers. This should reduce the ocean freight costs considerably because the tonnage would be consolidated by the carriers' bids and by allowing lowest-landed cost and cargo preference requirements to determine the U.S. delivery points. The delivery time from call forward issuance to delivery abroad could be reduced because the current freight evaluation process would be streamlined.

The new procedures would apply to processed and bulk commodities and cover the assistance programs identified above. Under the proposed system, KCCO would issue invitations for commodity bids and Cooperating Sponsors or USAID would issue separate invitations for freight offers at approximately the same time. Freight invitations may call for bids to be submitted to the donee organizations or USAID via an Internet-based bid entry system maintained by CCC approximately 3 days prior to the time for receipt of commodity bids. Such a process would speed data input and evaluation as compared to the transmittal of written offers. Offers of commodities and freight would be invited on a “bid-point” basis, i.e., a point where the transfer of care and custody of the commodity from the vendor to the ocean carrier takes place. This point of transfer may include one or more terminals included under the specific bid point designation. CCC believes this specificity is desirable because a more general offer that designates a port area can have additional transfer costs once a specific terminal is named. CCC should be able to identify these extra costs at the time the bids are evaluated as it may impact on true lowest-landed cost calculations. The submitted freight offers will be reviewed by the donee organization, AID, and/or USDA prior to bid evaluation in order to determine the availability of service for commodities and destinations. Furthermore, this proposed bid evaluation process will be more efficient because ocean carriers are expected to offer quantity increments that are the most economical for them.

After commodity offers are received, KCCO would evaluate the offers on the basis of lowest-landed cost by a comparison with offered freight rates. KCCO would award the commodity bid on that basis and notify the Cooperating Sponsor of the bid accepted. The Cooperating Sponsor would be required to book freight at the rate KCCO used for the lowest-landed cost determination, or a lower rate, except in circumstances where, in the opinion of the Contracting Officer and the applicable program agency's representative, extenuating circumstances (such as internal strife at the foreign destination or urgent humanitarian conditions threatening the lives of persons at the foreign destination) preclude such awards, or efficiencies and cost-savings lead to the use of different types of ocean services such as multi-trip voyage charters, indefinite delivery/indefinite quantity (IDIQ), delivery Cost and Freight (C & F), delivery Cost Insurance and Freight (C I F), and indexed ocean freight costs.

Executive Order 12866

This proposed rule is issued in conformance with Executive Order 12866. This rule has been determined to be not significant and, therefore, it has not been reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not applicable to this rule because CCC is not required by 5 U.S.C. 553 or any other provision of law to publish a notice of proposed rulemaking with respect to the subject matter of this rule.

Environmental Evaluation

The environmental impacts of this rule have been considered consistent with the provisions of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council on Environmental Quality (40 CFR parts 1500-1508), and the FSA regulations for compliance with NEPA, 7 CFR part 799. FSA concluded that the rule requires no further environmental review because it is categorically excluded. No extraordinary circumstances or other unforeseeable factors exist which would require preparation of an environmental assessment or environmental impact statement.

Executive Order 12988

This proposed rule has been reviewed in accordance with Executive Order 12988. The provisions of this rule preempt State laws to the extent such laws are inconsistent with the provisions of this proposed rule.

Executive Order 12372

This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the notice related to 7 CFR part 3014, subpart V, published at 48 FR 29115 (June 24, 1983).

Unfunded Mandates Reform Act of 1995

This rule contains no Federal mandates under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for State, local, and tribal governments or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

Title: Procurement of Processed Agricultural Commodities for Donation.

OMB Control Number: 0560-NEW.

Type of Request: New Information Collection Package.

Abstract: The information collected under OMB Control Number 0560-NEW is needed in the evaluation of bids in connection with the procurement of commodities for donation overseas. This information is submitted by steamship lines, or their respective agents, and collected by the Kansas City Commodity Office (KCCO). This reporting requirement imposed on the public by the regulations at 7 CFR part 1496 is necessary to effectively administer the Title II, Pub. L. 480 program. This proposed rule will reduce information requirements which are imposed on the public by eliminating the need for steamship lines, or their respective agents, to provide indications of available freight rates to KCCO before submitting a final fixed ocean freight offer. The procurement of commodities using firm fixed ocean rates to determine the lowest-landed cost would be the most efficient method of procurement. The revisions to 7 CFR part 1496 proposed in this rule will adopt new procedures to be used by the Commodity Credit Corporation (CCC) in the evaluation of bids in connection with the procurement of commodities for donation overseas.

Estimate of Burden:

Respondents: Steamship Lines an/or their agents.

Estimated Number of Respondents: Approximately 15.

Estimated Number of Responses per Respondent: Approximately 8.

Estimated Total Annual Burden on Respondents: 15 hours.

Topics for comments include but are limited to the following: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimated burden including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. Comments regarding these issues should be sent to the Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503 and to the Director, Commodity and Procurement Policy & Analysis Division, Farm Service Agency, United States Department of Agriculture (USDA), Rm. 5755-S, 1400 Independence Avenue, SW., Washington, DC 20250-0512.

Comments regarding paperwork burden will be summarized and included in the request for OMB approval. All comments will also become a matter of public record.

Government Paperwork Elimination Act

FSA is committed to compliance with the Government Paperwork Elimination Act, which requires Federal Government agencies to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. The KCCO is now in the process of updating its computer bid-evaluation systems that would accommodate a more unified one step bid evaluation. Freight invitations would call for bids to be submitted through a web-based entry system.

Most of the information collections required by this rule are fully implemented for the public to conduct business with FSA electronically. However, a few may be completed and saved on a computer, but must be printed, signed and submitted to FSA in paper form.

Executive Order 12612

This rule does not have sufficient Federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in this rule will not have a substantial direct effect on States or their political subdivisions, or on the distribution of power and responsibilities among the various levels of government.

List of Subjects in 7 CFR Part 1496

• Agricultural commodities
• Exports
• Foreign aid

Accordingly, CCC proposes to amend 7 CFR part 1496 as follows:

PART 1496—PROCUREMENT OF PROCESSED AGRICULTURAL COMMODITIES FOR DONATION UNDER TITLE II, PUB. L. 480

1. The authority citation for part 1496 is revised to read as set forth above:

Authority: 7 U.S.C. 1431(b); 1721-1726a; 1731-1736g-2; 1736o; 1736o-1; 15 U.S.C. 714b and 714c; 46 U.S.C. App. 1241(b), and 1241(f).

2. The heading for part 1496 is revised to read as set forth above:

PART 1496—PROCUREMENT OF COMMODITIES FOR FOREIGN DONATION

3. Section 1496.1 is revised to read as follows:

§ 1496.1

General statement.

This subpart sets forth the policies, procedures and requirements governing the procurement of agricultural commodities by CCC to be donated for assistance overseas under title II of the Agricultural Trade Development and Assistance Act of 1954 (Pub. L. 480); the Food for Progress Act of 1985; the McGovern-Dole International Food for Education and Child Nutrition Program; and any other program under which CCC is authorized to provide agriculture commodities for assistance overseas.

4. In § 1496.2, paragraph (a) is amended by removing the last sentence and paragraph (b) is revised to read as follows:

§ 1496.2

Administration.

* * * * *

(b) Purchases are made to fulfill commodity requests received from AID in the administration of Public Law 480 and from a grantee organization receiving commodities under the other authorities set forth in § 1496.1 of this part.

5. In § 1496.4, the first sentence is revised to read as follows:

§ 1496.4

Issuance of invitations.

From time to time, CCC will issue invitations to purchase or process agricultural products for utilization in the foreign assistance programs enumerated in § 1496.1 of this part. * * *

6. In § 1496.5, paragraph (b) is revised, paragraph (c) is removed and reserved, and paragraph (d) is revised as follows:

§ 1496.5

Consideration of bids.

* * * * *

(b) Availability of ocean service.

(1) In determining lowest-landed cost as specified in paragraph (a) of this section, CCC will use vessel rates offered in response to invitations issued by AID or grantee organizations receiving commodities under the authorities set forth in section 1496.1 of this part. If CCC or AID, in the case of title II, Public Law 480, determines that it is not practicable to evaluate lowest-landed cost on the basis of a competitive ocean freight bid process, CCC may use other methods of soliciting freight rates that CCC or AID may approve for the foreign assistance programs that they respectively administer.

(2) In order to be considered in lowest-landed cost commodity bid evaluations, ocean freight rates must be submitted to grantee organizations or AID in response to an invitation for bids issued by grantee organizations or AID. All such freight invitations for bids must:

(i) Specify a closing time for the receipt of offers and state that late offers will not be considered;

(ii) Provide that offers are required to have a canceling date no later than the last contract lay day specified in the invitation for bids;

(iii) Provide the same deadline for receipt of offers from both U.S. flag vessel and non-U.S. flag vessels; and

(iv) Must be received and opened prior to receipt of offers for the sale of commodities to CCC. The extent to which offered rates may be made public will depend upon regulations or guidelines applicable to the specific foreign assistance program involved.

(3) CCC may require donee organizations or USAID to specify in their freight invitations that the ocean carriers submit bids electronically through a web based system maintained by CCC. In the event of any discrepancy between information furnished to CCC electronically and the written offers submitted to grantee organizations or AID, the offers submitted to the grantee organization or AID will prevail. Copies of all written freight offers received in response to invitations for bids must be promptly furnished to CCC and CCC may require the grantee organization or it shipping agent to submit a written certification that all non-electronic offers received were transmitted to CCC.

(c) [Reserved]

(d) Port performance.

(1) CCC may contact any port prior to bid evaluation to determine the port's cargo handling capabilities including the adequacy of the port to receive, accumulate, handle, store, and protect the cargo. Factors which will be considered in this determination will include, but not be limited to, the adequacy of building structures, proper ventilation, freedom from insects and rodents, cleanliness, and overall good housekeeping and warehousing practices. CCC will require that capacity information be submitted electronically by the port and or the terminal prior to bid evaluation.

(2) If CCC determines that: A port is congested; facilities are overloaded; a vessel would not be able to dock and load cargo without delay; labor disputes or lack of labor may prohibit the loading of the cargo onboard a vessel in a timely manner; or other similar situation exists that may adversely affect the ability of CCC to have the commodity delivered in a timely manner, CCC may consider the use of another coastal range or port. In considering another combination of commodity offers and vessel rate offers, CCC will adhere as closely as possible to the principal of lowest-landed cost.

* * * * *

7. Section 1496.7 is revised to read as follows:

§ 1496.7

Final contract determinations.

(a) Commodity awards. (1) Invitations for the procurement of commodities and the evaluation of bids submitted in response to such invitations shall be performed as provided in the Federal Acquisition Regulations (FAR) and Department of Agriculture's procurement regulations set forth in Title 48 of the Code of Federal Regulations (the AGAR).

(2) If more than one bid for the sale of commodities is received and more than one delivery point has been designated in such bids, in order to achieve a combination of a freight rate and commodity award that produces the lowest-landed cost for the delivery of the commodity to the foreign destination, CCC may evaluate bids submitted for the sale of commodities on a delivery point by delivery point basis. In such cases, all bids submitted with respect to a specific delivery point will be evaluated under the provisions of the FAR, AGAR, and the solicitation, and CCC will determine the lowest bid for each delivery point.

(b) Combination of bids. CCC will determine which combination of commodity bids and bids for ocean freight rate result in the lowest-landed cost of delivery of the commodity to the foreign destination. CCC will award the contract for the purchase of the commodity that results in the lowest-landed cost unless the Contracting Officer determines that extenuating circumstances preclude such awards, or efficiency and cost-savings justify use of a different type of ocean service. Examples of extenuating circumstances may include, but are not limited to, internal strife at the foreign destination or urgent humanitarian conditions threatening the lives of persons at the foreign destination. Other types of services may include, but are not limited to, multi-trip voyage charters, indefinite delivery/indefinite quantity (IDIQ), delivery Cost and Freight (C & F), delivery Cost Insurance and Freight (C I F), and indexed ocean freight costs. Before contracts are awarded for other than a lowest-landed cost, the Contracting Officer shall consult with the applicable program agencies, and set forth, in writing, the reasons the contracts should be awarded on other than a lowest-landed cost.

(c) Notification of awards. (1) The party submitting the accepted commodity procurement bid will be notified of the acceptance of the bid by CCC.

(2) AID or the grantee organization, or its shipping agent, will be notified of the vessel freight rate used in determining the commodity contract award. The grantee organization or AID will be responsible for finalizing the charter or booking contract with the vessel representing the freight rate so used.

Signed at Washington, DC, on December 6, 2005.

Teresa C. Lasseter,

Executive Vice President, Commodity Credit Corporation.