B-224093, OCT 15, 1986, OFFICE OF THE GENERAL COUNSEL

B-224093, OCT 15, 1986, OFFICE OF THE GENERAL COUNSEL

PROCUREMENT - COMPETITIVE NEGOTIATION - PREFERRED PRODUCTS/SERVICES - DOMESTIC PRODUCTS - APPLICABILITY DIGEST: 1. THE RESTRICTIONS OF THE BUY AMERICAN ACT DO NOT APPLY TO DEPARTMENT OF DEFENSE PURCHASES OF SUPPLIES MINED, PRODUCED, OR MANUFACTURED IN CANADA. THEREFORE, ALLEGATION THAT THE CONTRACT AWARDEE, A CANADIAN FIRM, WILL NOT MANUFACTURE THE CONTRACT ITEMS AT ITS FLORIDA SUBSIDIARY, CONTRARY TO THE CERTIFICATION MADE IN ITS OFFER, PROVIDES NO VALID LEGAL BASIS TO OBJECT TO AWARD. PROCUREMENT - COMPETITIVE NEGOTIATION - SMALL BUSINESS SET-ASIDES - FOREIGN BUSINESSES - ELIGIBILITY 2. A FOREIGN BUSINESS ENTITY MAY QUALIFY FOR AWARD UNDER A TOTAL SMALL BUSINESS SET-ASIDE WHEN IT HAS A PLACE OF BUSINESS LOCATED IN THE UNITED STATES AND MAKES A SIGNIFICANT CONTRIBUTION TO THE UNITED STATES ECONOMY, AND WHEN THE FIRM, INCLUDING ITS AFFILIATES, MEETS THE SMALL BUSINESS SIZE STANDARD APPLICABLE TO THE PROCUREMENT.

THE HONORABLE ED ZSCHAU:

HOUSE OF REPRESENTATIVES

505 WEST OLIVE AVENUE

SUITE 125

SUNNYVALE, CA 94086

THIS RESPONDS TO YOUR LETTER OF AUGUST 15, 1986, ON BEHALF OF CXR TELCOM CORPORATION (CXR) CONCERNING AWARD OF A CONTRACT TO NAVTEL, INC., UNDER REQUEST FOR PROPOSALS NO. F41608-85-R-4375, A 100-PERCENT SMALL BUSINESS SET-ASIDE ISSUED BY THE DEPARTMENT OF THE AIR FORCE. THE CONTRACT IS FOR THE SUPPLY OF TELEPHONE TEST SETS.

CXR BELIEVES THAT THE AWARD TO NAVTEL, A CANADIAN FIRM, IS CONTRARY TO THE PROVISIONS OF THE BUY AMERICAN ACT AND THE RESTRICTION OF THE PROCUREMENT TO SMALL BUSINESS FIRMS. IN THIS REGARD, CXR PRINCIPALLY ALLEGES THAT NAVTEL'S FLORIDA SUBSIDIARY DOES NOT HAVE THE MANUFACTURING CAPACITY TO MEET THE REQUIREMENTS OF THE SOLICITATION, EVEN THOUGH NAVTEL CERTIFIED IN ITS OFFER THAT THE FLORIDA PLANT WOULD BE THE PLACE OF CONTRACT PERFORMANCE.

ON THE RECORD PRESENTED BY CXR, WE FIND NO IMPROPRIETY IN THE AWARD OF THIS CONTRACT TO NAVTEL.

ALTHOUGH THE BUY AMERICAN ACT CREATES A PREFERENCE FOR THE ACQUISITION OF DOMESTIC END PRODUCTS OVER FOREIGN END PRODUCTS, THAT PREFERENCE IS NOT ABSOLUTE. FEDERAL ACQUISITION REGULATION (FAR), 48 C.F.R. SECS. 25.102(A), 25.103 (1985). BECAUSE IT IS THE POLICY OF THE DEPARTMENT OF DEFENSE TO COORDINATE CLOSELY THE MATERIAL PROGRAMS OF CANADA AND THE UNITED STATES AND TO ASSURE CANADA "A FAIR OPPORTUNITY" TO SHARE IN THE PRODUCTION OF MILITARY EQUIPMENT AND MATERIAL, PURCHASES OF SUPPLIES MINED, PRODUCED, OR MANUFACTURED IN CANADA ARE SPECIFICALLY EXEMPT FROM THE RESTRICTIONS OF THE BUY AMERICAN ACT. DEPARTMENT OF DEFENSE SUPPLEMENT TO THE FAR, 48 C.F.R. SEC. 225.7101(A) (1985).

THEREFORE, EVEN IF THE ITEMS IN QUESTION WILL BE MANUFACTURED IN CANADA RATHER THAN IN FLORIDA, AS CXR ALLEGES, THE AWARD TO NAVTEL WOULD NOT BE CONTRARY TO THE BUY AMERICAN ACT.

TO THE EXTENT CXR ALLEGES THAT THE FLORIDA PLANT LACKS THE REQUISITE MANUFACTURING CAPACITY AND THAT NAVTEL'S OFFERED PRICE (SOME 3.6 PERCENT LOWER THAN CXR'S) IS UNREALISTIC, THESE ISSUES REPRESENT CHALLENGES TO NAVTEL'S RESPONSIBILITY AS A PROSPECTIVE CONTRACTOR. WE POINT OUT, HOWEVER, THAT THE AIR FORCE'S AWARD TO NAVTEL, BY REGULATION, IS A DETERMINATION THAT THE FIRM IS RESPONSIBLE WITH RESPECT TO THAT CONTRACT. FAR, 48 C.F.R. SEC. 9.105-2(A)(1). OUR OFFICE DOES NOT REVIEW BID PROTESTS CHALLENGING AFFIRMATIVE DETERMINATION OF RESPONSIBILITY ABSENT A SHOWING OF POSSIBLE FRAUD OR BAD FAITH OR AN ALLEGATION THAT DEFINITIVE RESPONSIBILITY CRITERIA WERE MISAPPLIED, WHICH IS NOT THE CASE HERE.

IN ADDITION, THERE IS NO LEGAL BASIS FOR THE ASSERTION THAT THE AWARD TO NAVTEL IS CONTRARY TO THE RESTRICTION OF THE PROCUREMENT TO SMALL BUSINESS FIRMS. UNDER THE SMALL BUSINESS ADMINISTRATION'S REGULATIONS, A FOREIGN BUSINESS ENTITY MAY QUALIFY FOR AWARD UNDER A SMALL BUSINESS SET-ASIDE WHEN THE FIRM HAS A PLACE OF BUSINESS LOCATED IN THE UNITED STATES AND MAKES A "SIGNIFICANT CONTRIBUTION" TO THE UNITED STATES ECONOMY THROUGH THE PAYMENT OF TAXES AND/OR THE USE OF AMERICAN PRODUCTS AND LABOR, AND WHEN THE FIRM, INCLUDING ITS AFFILIATES, MEETS THE SMALL BUSINESS SIZE STANDARD APPLICABLE TO THE PROCUREMENT. 13 C.F.R. SECS. 121.3(B), 121.5 (1986). THE AIR FORCE HAS ADVISED US THAT THE NUMBER OF NAVTEL EMPLOYEES APPEARS TO BE WELL WITHIN THE SIZE STANDARD FOR THIS ACQUISITION.

WE TRUST THIS INFORMATION WILL BE HELPFUL TO YOU IN RESPONDING TO YOUR CONSTITUENT'S CONCERNS. COPIES OF THE PERTINENT REGULATIONS HAVE BEEN PROVIDED FOR YOUR CONVENIENCE.