B-159467, OCT. 10, 1966

B-159467, OCT. 10, 1966

TO PANELEAD INTERNATIONAL:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE PROCUREMENT OF PREFABRICATED AND PRE-ENGINEERED STRUCTURES BY THE DEPARTMENT OF DEFENSE DURING THE PAST 2 YEARS AND, IN PARTICULAR, THE RECENT PROCUREMENT OF THESE STRUCTURES BY B. B. MCCORMICK AND SONS, INCORPORATED, SUBCONTRACTOR OF THE PRIME CONTRACTOR UNDER AIR FORCE CONTRACT NO. 62/111/-714. THIS CONTRACT CALLS FOR DELIVERY AND ERECTION OF THESE STRUCTURES AT A CONSTRUCTION SITE IN SOUTHEAST ASIA FOR HOUSING THE CONSTRUCTION CONTRACTOR'S EMPLOYEES.

PROPOSALS FOR THESE CAMP FACILITIES WERE SOLICITED FROM FIVE FIRMS. TWO PROPOSALS WERE NOT EVALUATED AS ONE WAS CONSIDERED UNREASONABLY HIGH AND THE OTHER WAS NONRESPONSIVE. THE REMAINING THREE PROPOSALS WERE EVALUATED ON THE BASIS OF COST OF THE CAMPS AT DOCKSIDE, AIR FREIGHT COST FOR THE 80 TO 100-MAN TEMPORARY CAMP FROM DOCKSIDE TO THE CONSTRUCTION SITE, AND SURFACE FREIGHT COST AND ERECTION COST FOR THE APPROXIMATELY 700-MAN CAMP. EVALUATED ON THIS BASIS, THE THREE PROPOSALS WERE AS FOLLOWS:

NORTHLAND CAMPS, INC. $1,374,151

PANELFAB 2,147,306

PORTA-CAMP, INC. 2,403,635 IN ADDITION, DELIVERY AND ERECTION TIME WERE CONSIDERED IN THE VALUATION AND IT WAS DETERMINED THAT NORTHLAND OFFERED THE SHORTEST DELIVERY TIME, AND ERECTION TIME AT LEAST AS SHORT AS THE OTHER OFFERERS. THE GENERAL LAYOUT OF THE CAMP AND COMFORT FOR THE WORKERS WERE ALSO CONSIDERED. BASED ON THESE FACTORS, THE NORTHLAND OFFER WAS CONSIDERED THE MOST ADVANTAGEOUS AND AWARD WAS MADE TO IT. NORTHLAND'S SUBSIDIARY, WORLD WIDE CAMPS, LIMITED, LOCATED IN ADELAIDE, AUSTRALIA, WILL BUILD THE FACILITY. THE AWARD WAS CONCURRED IN BY THE PRIME CONTRACTOR AND APPROVED BY THE AIR FORCE CONTRACTING OFFICER.

IT IS YOUR CONTENTION THAT THESE STRUCTURES HAVE BEEN PROCURED FROM AN ORGANIZATION (ATCO INDUSTRIES, LTD., OR ONE OF ITS AFFILIATES), WHICH IS CANADIAN-OWNED AND BASED AND THAT THE PROCUREMENT HAS, THEREFORE, BEEN EFFECTED IN CONTRAVENTION OF THE "GOLD FLOW" AND "BUY AMERICAN" POLICIES OF THE GOVERNMENT. NORTHLAND CAMPS, YOU CONTEND, IS AN ATCO AFFILIATE AND WILL SUPPLY MATERIALS OF OTHER THAN UNITED STATES ORIGIN, SHIPPED FROM EITHER CANADA OR AUSTRALIA. YOU ALSO CONTEND THAT THE CONTRACT WITH NORTHLAND WAS AWARDED IN CONTRAVENTION OF PARAGRAPHS 18-102, 18-107 AND 18 -504 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR).

YOU HAVE SUBMITTED EVIDENCE IN THE FORM OF AN ATCO BROCHURE WHICH TENDS TO SUBSTANTIATE YOUR CONTENTION CONCERNING THE ATCO AFFILIATION WITH NORTHLAND. HOWEVER, THE ADMINISTRATIVE REPORT INCLUDED A REPORT FROM MCCORMICK WHICH HAS A BEARING ON THIS AND CERTAIN OF YOUR OTHER ALLEGATIONS. WE QUOTE THE FOLLOWING FROM THE MCCORMICK REPORT:

"WE CONCLUDED NEGOTIATIONS AND ISSUED A PURCHASE ORDER TO NORTHLAND CAMPS, INC. OF SAN FRANCISCO, CALIFORNIA,FOR THE FOLLOWING GENERAL REASONS:

"1) AFTER APPRAISING ALL PROPOSALS, IT WAS CONCLUDED THAT THE NORTHLAND CAMP, INC. PROPOSAL OFFERED THE LOWEST TO THE GOVERNMENT.

"2) THE FACILITY WOULD BE BUILT BY THEIR SUBSIDIARY LOCATED IN ADELAIDE, AUSTRALIA, USING 65 PERCENT AMERICAN MANUFACTURED PRODUCTS, AND WOULD AFFORD THE GOVERNMENT A CONSIDERABLE SAVING ON FREIGHT CHARGES TO THE SITE FROM ADELAIDE, AUSTRALIA, A DISTANCE OF APPROXIMATELY 5,000 MILES AS OPPOSED TO APPROXIMATELY 13,000 MILES FROM THE UNITED STATES.

"3) THE DELIVERY TO THE SITE OF THE FACILITY WAS EXPEDITED, THEREFORE MAKING THEM AVAILABLE FOR OCCUPANCY SOONER FROM ADELAIDE, AUSTRALIA, AS OPPOSED TO OTHER LOCATIONS OF MANUFACTURE.

"4) THE ERECTION COST WAS MUCH LOWER THAN THE ERECTION COST OF ALL OF THE PROPOSALS SUBMITTED WITH THE EXCEPTION OF ONE OTHER WHICH WAS NO MORE THAN EQUAL IN COST.

"5) NORTHLAND CAMPS, INC., IS AN AMERICAN CORPORATION AND WORLDWIDE CAMPS OF ADELAIDE, AUSTRALIA, IS A SUBSIDIARY.

"6) A SPECIFIC CONDITION OF THE PURCHASE ORDER IS QUOTED:

"IT IS UNDERSTOOD THAT PAYMENT WILL BE MADE TO NORTHLAND CAMPS, INC. IN SAN FRANCISCO AND, AS DISCUSSED AND AGREED TO PREVIOUSLY, THERE WILL BE NO GOLD FLOW FROM THE U.S.A. TO OTHER NATIONS AS A RESULT OF THIS PURCHASE.'" RESTRICTION ON THE "GOLD FLOW" REFERRED TO IN THE QUOTED PROVISION FROM THE CONTRACT IS TO BE ACCOMPLISHED BY A BOOKKEEPING TRANSACTION AS NORTHLAND'S SUBSIDIARY, WORLD WIDE CAMPS, IS INDEBTED TO IT. IF, AS ALLEGED NORTHLAND IS A DOMESTIC CORPORATION, THE STRUCTURES WILL BE COMPOSED OF ABOUT 65 PERCENT AMERICAN MANUFACTURED COMPONENTS, AND THERE WILL BE NO MONEY EXCHANGE, THERE IS A QUESTION WHETHER THE "BUY AMERICAN" AND "GOLD FLOW" POLICIES HAVE BEEN VIOLATED, IF OTHERWISE APPLICABLE. HOWEVER, FOR REASONS NOTED BELOW, WE DO NOT BELIEVE IT IS NECESSARY TO RESOLVE THIS QUESTION.

THE ACT OF MARCH 3, 1933, 47 STAT. 1520, AS AMENDED, 41 U.S.C. 10A TO 10D, COMMONLY REFERRED TO AS THE BUY AMERICAN ACT, WAS DESIGNED TO ACCORD PREFERENTIAL TREATMENT TO DOMESTIC PRODUCERS AND MANUFACTURERS IN THE PROCUREMENT OF ARTICLES, MATERIALS OR SUPPLIES BY FEDERAL DEPARTMENTS AND AGENCIES. BY EXPRESS PROVISION OF THE ACT, THE STATUTORY REQUIREMENT THAT ONLY DOMESTIC PRODUCTS BE ACQUIRED FOR PUBLIC USE DOES NOT APPLY TO ARTICLES, MATERIALS OR SUPPLIES FOR USE OUTSIDE THE UNITED STATES. SINCE THE STRUCTURES IN QUESTION ARE BEING PROCURED FOR USE IN SOUTHEAST ASIA, THE RESTRICTIONS OF THE BUY AMERICAN ACT ARE NOT APPLICABLE.

THE "GOLD FLOW" OR BALANCE OF PAYMENTS POLICY WHICH YOU CONTEND HAS BEEN VIOLATED BY THIS PROCUREMENT IS SET OUT IN DEFENSE PROCUREMENT CIRCULAR (DPC) NO. 29 DATED JUNE 4, 1965, AND PROVIDED, IN SUBSTANCE, THAT PROCUREMENT OF SUPPLIES AND SERVICES USING DEPARTMENT OF DEFENSE APPROPRIATED FUNDS WHICH WOULD RESULT IN EXPENDITURES OUTSIDE THE UNITED STATES, ITS POSSESSIONS AND PUERTO RICO, SHOULD BE HELD TO AN ABSOLUTE MINIMUM. WITH REGARD TO CONTRACTS FOR CONSTRUCTION, PARAGRAPH 6-804.1 PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"/A) REVIEW OF PROJECTS. ALL PROJECTS FOR CONSTRUCTION AND MAINTENANCE OF REAL PROPERTY OUTSIDE THE UNITED STATES WILL BE REVIEWED IN ACCORDANCE WITH PARAGRAPH 6-804.2 TO INSURE, PRIOR TO THE APPROVAL OF INDIVIDUAL PROJECTS, THAT:

"/I) FACILITIES ARE DESIGNED AND CONSTRUCTED AT MINIMUM STANDARDS NECESSARY TO ACHIEVE PROJECT OBJECTIVES UNDER LOCAL CONDITIONS AND TO REDUCE EXPENDITURES ENTERING THE INTERNATIONAL BALANCE OF PAYMENTS. REDUCTION IN BALANCE OF PAYMENTS EXPENDITURES WILL BE ACHIEVED BY THE APPLICATION OF INTERNATIONAL BALANCE OF PAYMENTS (IBOP) CONSTRUCTION PROCEDURES TO THE MAXIMUM EXTENT FEASIBLE. THESE PROCEDURES INCLUDE USE OF:

(A) U.S. CONTRACTORS;

(B) U.S. MATERIALS AND END PRODUCTS;

(C) U.S. GOVERNMENT-FURNISHED MATERIAL AND EQUIPMENT;

(D) U.S. FLAG OCEAN SURFACE AND AIR CARRIERS;

(E) PREFABRICATED INSTALLATIONS AND STRUCTURES MANUFACTURED

IN THE UNITED STATES; AND

(F) COMPETENT AVAILABLE TROOP LABOR.'

HOWEVER, THE BALANCE OF PAYMENTS POLICY HAS BEEN MODIFIED WITH RESPECT TO SOUTHEAST ASIA PROCUREMENTS IN A MESSAGE FROM HEADQUARTERS USAF (AFOCE) TO THE COMMANDER, PACIFIC AIR FORCE (CINCPACAF), WHICH WAS COORDINATED WITH AND CONCURRED IN BY THE OFFICE OF THE SECRETARY OF DEFENSE. THIS MODIFICATION IS EMBODIED IN MESSAGE NO. 85064 DATED APRIL 25, 1966, WHICH READS AS FOLLOWS:

"UNCLAS AFOCE-LB 85064 APR 66 CINCPACAF FOR DCEE OCE AT DA. SUBJ: INTERNATIONAL BALANCE OF PAYMENTS (IBOP) - SEA PACKAGES. AFOCE-LB 83637, 18 APR 66, SAME SUBJ. THIS CLARIFIES AF GUIDANCE ON FOREIGN EXCHANGE WHICH HAS BEEN TAKEN OUT OF CONTEXT IN REF MSG. BALANCE OF PAYMENTS CONTINUE TO BE OF GREAT CONCERN TO THE DEPT OF DEFENSE BUT MUST REMAIN SECONDARY TO SEA DEPLOYMENT PLANS. APPLICATION OF IBOP PROCEDURES FOR ALL PROJECTS IN SEA MOPS WILL BE AS FOLLOWS:

"A) MAKE MAXIMUM PROCUREMENT OF U.S. CONSTRUCTION MATERIALS AND EQUIPMENT AND SHIP IN U.S. BOTTOMS WHERE ESTABLISHED BOD'S AND DEPLOYMENT SCHEDULES ALLOW.

"B. FOR URGENT REQUIREMENTS THAT CANNOT BE FILLED BY A ABOVE, AUTHORITY IS GRANTED TO PROCURE CONSTRUCTION MATERIAL AND EQUIPMENT FROM WHATEVER SOURCES NECESSARY TO MEET REQUIRED BODS AND DEPLOYMENT SCHEDULES.' VIEW OF THE EXIGENT SITUATION PREVAILING IN SOUTHEAST ASIA AND THE DETERMINATION THAT NORTHLAND OFFERED THE MOST ADVANTAGEOUS DELIVERY AND ERECTION TIMES, AS WELL AS THE LOWEST COST, WE BELIEVE THE AWARD OF A CONTRACT TO NORTHLAND CANNOT BE SAID TO CONTRAVENE THE BALANCE OF PAYMENTS POLICY AS EXPRESSED IN THE FOREGOING REGULATION AND MESSAGE.

THE FINAL ARGUMENT YOU MAKE APPEARS TO BE THAT THE PROCUREMENT WAS NOT EFFECTED IN ACCORDANCE WITH FORMAL ADVERTISING PROCEDURES, WHICH YOU APPARENTLY BELIEVE IS REQUIRED BY ASPR 18-102, 18-107 AND 18-504. WITH A FEW EXCEPTIONS, THE PROVISIONS OF ASPR GENERALLY RELATE TO PROCEDURES FOR PROCUREMENT BY GOVERNMENT AGENCIES DIRECTLY FROM PRIME CONTRACTORS AND ARE NOT ORDINARILY APPLICABLE TO A SUB-SUBCONTRACT SUCH AS IS INVOLVED IN THE INSTANT CASE. THE PROVISIONS WHICH YOU HAVE CITED APPEAR TO HAVE NO APPLICABILITY TO SUBCONTRACTS. IT SHOULD ALSO BE NOTED THAT ASPR 18-102 SPECIFICALLY EXCEPTS OVERSEAS CONSTRUCTION FROM THE FORMAL ADVERTISING REQUIREMENTS APPLICABLE TO OTHER PROCUREMENT.

IN ACCORDANCE WITH THE FOREGOING, IT IS OUR CONCLUSION THAT THERE IS NO PROPER BASIS UPON WHICH OUR OFFICE MAY OBJECT TO THE ADMINISTRATIVE ACTION IN THIS CASE AND YOUR PROTEST MUST BE AND IS DENIED.