[Federal Register Volume 63, Number 107 (Thursday, June 4, 1998)]
[Notices]
[Pages 30479-30480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14854]


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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