Program for Qualifying Department of Defense (DOD) Brokers

DEPARTMENT OF DEFENSE

Department of the Army

Program for Qualifying Department of Defense (DOD) Brokers

AGENCY: Military Traffic Management Command, DOD.

ACTION: Notice.

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SUMMARY: In previous Federal Register notice (Vol. 62, No. 27, pages

5962-5963) Monday, February 10, 1997, the Headquarters, Military

Traffic Management Command (HQMTMC) announced a request for comments on

the Program for Qualifying Department of Defense (DOD) Brokers.

Comments received were about equally divided in favor and in opposition

to the proposal. By notice published in the Federal Register (Vol. 63,

No. 57, page 14431) Wednesday, March 25, 1998, HQMTMC announced its

decision to test the broker program for a period of one year, beginning

June 1, 1998. The Carrier Qualification Program is being amended to add

qualification standards for brokers and to expand the Basic Agreement

to include brokers. The effect is that brokers will be eligible to

qualify to compete in DOD transportation procurements on the same or

similar terms as other carriers, except shipments requiring

Transportation Protective Service (TPS). Under MTMC's new policy,

brokers, interested in competing for DOD traffic (except TPS shipments)

can apply for qualification by executing the Basic Agreement, and by

complying with the requirements for submission of evidence of insurance

(cargo and public liability), a list of underlying carriers which the

broker intends to use in the movement of DOD shipments, a performance

bond, and other standard requirements. A copy of the Agreement between

MTMC and brokers is available upon request. An analysis of the comments

in opposition to the proposal is set forth below.

FOR FURTHER INFORMATION CONTACT:

Rick Wirtz, MTOP-QQ, Telephone 703-681-6393; Headquarters, Military

Traffic Management Command, ATTN: MTOP-QQ, 5611 Columbia Pike, Falls

Church, Virginia 22041-5050.

SUPPLEMENTARY INFORMATION: The following comments in opposition to the

broker proposal were received from industry:

Comment 1. Several comments object that MTMC's treatment of brokers

in the Basic agreement is inconsistent with the definition of brokers

contained in the ICC Termination Act. Thus, the National Motor Freight

Traffic Association,

[[Page 30480]]

Incorporated (NMFTA) contends that brokers, as defined at 49 U.S.C.

13102(2), legally may not conduct carrier operations or perform

transportation unless independently authorized to do so as a motor

carrier or freight forwarder. Similarly, Monheim & Guilbert object that

MTMC's Basic Agreement (``undertakes to carry and deliver. * * *'')

converts a broker into a carrier, imposes loss and damage liability,

and imposes a public liability insurance requirement. MCD

Transportation, Incorporated, objects to the requirement for cargo

insurance. Green Valley Transportation, Incorporated objects that MTMC

is attempting to redefine a broker as a carrier, in conflict with DOT

regulations. Munitions Carriers Conference contends that cargo

liability and insurance are requirements for carriers, not brokers.

Response 1. These objections reflect concerns about the Department

of Transportation's (DOT) enforcement of the Interstate Commerce Act,

as amended by the ICC Termination Act. The Interstate Commerce Act is a

statute providing for the economic regulation of certain carriers and

brokers by the DOT and the Surface Transportation Board. That statute

established a registration requirement for regulated carriers and

brokers. However, that regulatory statute is not a procurement statute,

and it does not restrict MTMC's transportation procurement authority.

The DOD has the right to make its own arrangements and to contract for

transportation on its own terms. The DOD has the same right in this

regard as any commercial shipper. In exercising its procurement

authority, MTMC has determined that brokers should be eligible to

compete for DOD traffic on the same terms as other carriers. For

example, MTMC has the right to contract with brokers for standards of

cargo liability, without regard to whether any cargo liability is

imposed on brokers by the Interstate Commerce Act. Compliance with

DOT's registration requirements remains, as always, a separate

obligation of regulated carriers and brokers. We will not speculate

whether brokers will violate statues and regulations enforced by other

agencies. Under the Basic Agreement, the broker agrees to comply with

all applicable Federal, State, municipal, and other local laws and

regulations.

Comment 2. The American Movers Conference contends that brokers

might violate the Anti-Kickback Act by collecting commissions from

motor carriers for government business, and that the brokers and motor

carriers might discuss each other's rates in violation of the

Certification of Independent Pricing.

Response 2. We cannot assume that brokers and motor carriers are

going to violate the law when they participate in procurements for DOD

traffic. The potential for illegal kickbacks and price fixing always

exists in every government procurement, without regard to the

participation of brokers. The possibility of illegal activities by

bidders is insufficient basis to exclude brokers from competition.

Comment 3. TRISM Specialized Carriers contends that MTMC's proposal

runs the risk that carriers with an unsatisfactory DOT safety rating

may be employed by brokers to transport DOD shipments, presenting the

possibility of a claim of negligence on the part of MTMC in the event

of an injury or accident.

Response 3. MTMC must defer to the DOT in the enforcement of DOT's

safety ratings and regulations. As a general rule, shippers are not

legally liable for the accidents of carriers hired to transport their

goods. In any case, MTMC's Basic Agreement will require brokers to

purchase a minimum of $1 million public liability insurance.

Comment 4. NMFTA and American Road Line contend that the

qualification requirements for brokers are less onerous than the

requirements for motor carriers, thereby giving brokers an unwarranted

competitive advantage. NMFTA contends this violates the mandate for

full and open competition in the Armed Services Procurement Act.

Response 4. The purpose of the proposed Basic Agreement with

brokers is to enable brokers to compete for DOD traffic. There is no

reason to believe that continued exclusion of brokers form competition

for DOD traffic will somehow contribute to full and open competition.

The qualification requirements set forth in the Basic Agreement for

brokers are identical to those contained in the Basic Agreement for

freight forwarders and shipper agents. It would serve no useful purpose

to impose on brokers our requirements governing vehicles and drivers of

motor carriers, because brokers, unlike motor carriers, generally do

not have vehicles and drivers.

George R. McDonald,

Chief, Qualification Division, ADCSOPS-Quality.

[FR Doc. 98-14854 Filed 6-3-98; 8:45 am]

BILLING CODE 3710-08-M