B-151382, JUL. 12, 1963

B-151382, JUL. 12, 1963

TO METIMPEX CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 23, 1963, PROTESTING AWARD OF TWO CONTRACTS TO OTHER BIDDERS FOR FURNISHING TWO ITEMS OF ALUMINUM ALLOY SHEETS UNDER INVITATION FOR BIDS NO. DSA-5-63-2064 ISSUED BY THE DEFENSE INDUSTRIAL SUPPLY CENTER, PHILADELPHIA, PENNSYLVANIA, ON DECEMBER 7, 1962.

THE CITED INVITATION SOLICITED BIDS--- TO BE OPENED ON DECEMBER 28, 1962- -- FOR FURNISHING TWO ITEMS OF ALUMINUM ALLOY SHEETS. THE LOWEST BID WAS SUBMITTED BY YOUR FIRM. IT IS REPORTED THAT YOUR BID ON ITEM 1, INCLUDING TRANSPORTATION AND DUTY, WAS $1,283.79 AND ON ITEM 2, INCLUDING TRANSPORTATION AND DUTY, WAS $3,933.18. YOU OFFERED TO FURNISH MATERIAL OF FOREIGN ORIGIN. THE LOW DOMESTIC BIDS, INCLUDING TRANSPORTATION, WERE $2,245.71 AS TO ITEM 1 AND $5,042.08 AS TO ITEM 2. UNDER THE PROVISIONS OF SECTION 6-204.3 (B) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) YOUR FIRM WOULD HAVE BEEN ENTITLED TO THE AWARD BECAUSE THE (ASPR) YOUR FIRM WOULD HAVE BEEN ENTITLED TO THE AWARD BECAUSE THE HIGHER DOMESTIC BIDS WERE NOT WITHIN THE PERMISSIBLE DIFFERENTIAL IN COST SO AS TO BE ENTITLED TO PREFERENCE IN MAKING AWARD. HOWEVER, PRIOR TO THIS INVITATION THE SECRETARY OF DEFENSE HAD ISSUED A MEMORANDUM DATED AUGUST 11, 1962, TO THE SECRETARIES OF THE MILITARY DEPARTMENTS AND THE DIRECTOR OF THE DEFENSE SUPPLY AGENCY, WHICH REQUIRED THAT, UNTIL FURTHER NOTICE, PROPOSED PROCUREMENTS OF SUPPLIES FOR USE IN THE UNITED STATES WHICH WOULD NORMALLY RESULT IN THE ACQUISITION OF FOREIGN END PRODUCTS UNDER THE BUY AMERICAN ACT PROCEDURES CURRENTLY SET FORTH IN PART 1, SECTION VI OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), BE SUBMITTED IN WRITING FOR APPROVAL BY THE SECRETARY OF DEFENSE OR THE DEPUTY SECRETARY OF DEFENSE. IN THE CASE OF SUCH PROCUREMENTS WHERE THE ESTIMATED COST DID NOT EXCEED $100,000 THE DECISIONS THEREON WERE TO BE MADE AT THE "SECRETARIAL LEVEL OF A MILITARY DEPARTMENT OR BY THE DIRECTOR, OR DEPUTY DIRECTOR, DEFENSE SUPPLY AGENCY.'

PURSUANT TO THE REFERRED-TO MEMORANDUM THE STATEMENT OF FACTS AND COMMENTS BY THE CONTRACTING OFFICER ON BIDS RECEIVED ON THE INSTANT INVITATION WAS FORWARDED TO THE HEADQUARTERS, DEFENSE SUPPLY AGENCY. JANUARY 25, 1963, THE DEPUTY DIRECTOR, DEFENSE SUPPLY AGENCY, FOR REASONS OF NATIONAL INTEREST, DETERMINED THAT AWARDS SHOULD BE MADE TO THE LOWEST BIDDERS OFFERING THE DOMESTIC ITEM AND STATED THAT THIS ACTION WOULD BE TAKEN UNDER SECTION 3 (A) OF EXECUTIVE ORDER NO. 10582 OF DECEMBER 17, 1954. ON FEBRUARY 1, 1963, AWARDS WERE MADE TO HYNES STEEL PRODUCTS COMPANY FOR ITEM 1 AND TO ALUMINUM COMPANY OF AMERICA FOR ITEM 2. LETTER DATED MARCH 1, 1963, ADDRESSED TO THE CONTRACTING OFFICE, YOU PROTESTED THE AWARDS OF THESE CONTRACTS FOR REASONS SUBSTANTIALLY THE SAME AS THOSE ADVANCED IN YOUR LETTER OF PROTEST TO OUR OFFICE DATED APRIL 23, 1963, AND WHICH WILL BE DISCUSSED HEREINAFTER. ON APRIL 19, 1963, THE ADMINISTRATIVE OFFICE DENIED YOUR PROTEST.

IN YOUR LETTER OF APRIL 23, 1963, YOU TAKE EXCEPTIONS TO THE REASONS ASSIGNED BY THE ADMINISTRATIVE OFFICE FOR DENIAL OF YOUR PROTEST. PARTICULAR YOU FEEL THAT THE PRESENT IMPLEMENTATION OF THE BUY AMERICAN ACT BY THE DEPARTMENT OF DEFENSE DOES NOT HAVE "A PROPER FOUNDATION" AND THAT THE 50 PERCENT DIFFERENTIAL RULE ADOPTED BY THE DEPARTMENT OF DEFENSE AND APPLIED SINCE JULY 1962 IN THE AWARD OF CONTRACTS TO "REDUCE THE OUT- FLOW OF GOLD" IS NOT PROPER. ALSO, YOU CONTEND THAT IT WOULD HAVE BEEN MORE PROPER FOR THE DEPARTMENT OF DEFENSE TO HAVE AWAITED THE BUREAU OF THE BUDGET STUDY OF THE MATTER AS REFERRED TO IN THE DENIAL OF YOUR PROTEST, BEFORE DEPARTING FROM THE POLICY SET FORTH IN EXECUTIVE ORDER NO. 10582.

THE ACT OF MARCH 3, 1933, 47 STAT. 1520, AS AMENDED, 41 U.S.C. 10/A) TO 10/D), COMMONLY REFERRED TO AS THE BUY AMERICAN ACT, AS IMPLEMENTED BY EXECUTIVE ORDER NO. 10582, DECEMBER 17, 1954, WAS DESIGNED TO ACCORD PREFERENTIAL TREATMENT TO DOMESTIC PRODUCERS AND MANUFACTURERS IN THE CASE OF PURCHASES OF MATERIALS AND SUPPLIES BY FEDERAL AGENCIES AND ESTABLISHMENTS. INSOFAR AS MATERIAL IN THIS CASE, THE HEAD OF A DEPARTMENT OR AGENCY CONCERNED COULD MAKE AN EXCEPTION TO THE REQUIREMENT FOR PURCHASE OR USE OF DOMESTIC MATERIALS IN A CASE WHERE IT WOULD BE INCONSISTENT WITH THE PUBLIC INTEREST. NO FORMULA WAS PRESCRIBED IN THE BUY AMERICAN ACT TO SERVE AS A GUIDELINE FOR DECIDING WHEN THE COST OF DOMESTIC SUPPLIES WAS UNREASONABLE. HOWEVER, EXECUTIVE ORDER NO. 10582 ESTABLISHED IN GENERAL A DIFFERENTIAL OF 6 PERCENT IN FAVOR OF THE DOMESTIC MATERIALS BEFORE THE PRICE WAS TO BE REGARDED AS UNREASONABLE. SECTION 5 OF THE EXECUTIVE ORDER PROVIDED THAT IN ANY CASE IN WHICH THE HEAD OF AN EXECUTIVE AGENCY PROPOSING TO PURCHASE DOMESTIC MATERIALS DETERMINES THAT A GREATER DIFFERENTIAL THAN THAT PROVIDED IN THE ORDER BETWEEN THE COST OF MATERIALS OR DOMESTIC ORIGIN AND MATERIALS OF FOREIGN ORIGIN IS NOT UNREASONABLE OR THAT THE PURCHASE OF MATERIALS OF DOMESTIC ORIGIN IS NOT INCONSISTENT WITH THE PUBLIC INTEREST, THIS ORDER WAS NOT TO APPLY. ALSO, SECTION 3/A) OF THE EXECUTIVE ORDER PROVIDED THAT NOTHING IN THE ORDER WAS TO AFFECT THE AUTHORITY OF RESPONSIBILITY OF AN EXECUTIVE AGENCY TO REJECT ANY BID OR OFFER FOR REASONS OF THE NATIONAL INTEREST NOT DESCRIBED OR REFERRED TO IN THIS ORDER.

IN OUR DECISION OF APRIL 30, 1963, B-150471, 42 COMP. GEN. --, WE HELD THAT SECTION 3/A) OF EXECUTIVE ORDER NO. 10582 DID NOT CONFER ONEXECUTIVE AGENCIES ANY NEW OR ADDITIONAL AUTHORITY TO REJECT ANY BID FOR REASONS OF NATIONAL INTEREST AND SINCE WE WERE UNAWARE OF ANY PREEXISTING AUTHORITY TO MAKE ANY SUCH REJECTION, WE BELIEVED THAT SECTION 3/A) WAS ERRONEOUSLY RELIED UPON. IN THAT DECISION WE ALSO HELD THAT ONCE A DETERMINATION IS MADE THAT THE PURCHASE OF MATERIALS OF DOMESTIC ORIGIN AT A GREATER DIFFERENTIAL THAN THAT PROVIDED IN THE EXECUTIVE ORDER WOULD NOT BE UNREASONABLE OR WOULD NOT BE INCONSISTENT WITH THE PUBLIC INTEREST, THERE THEN WOULD BE FOR APPLICATION THE PROVISION IN SECTION 5 OF THE EXECUTIVE ORDER WHICH STATES THAT UNDER THOSE CIRCUMSTANCES THE "ORDER SHALL NOT APPLY," THUS PLACING THE MATTER SQUARELY WITHIN THE PURVIEW OF THE BUY AMERICAN ACT ITSELF WHICH PROVIDES THAT ONLY DOMESTIC SUPPLIES SHALL BE ACQUIRED FOR PUBLIC USE UNLESS THE HEAD OF THE DEPARTMENT CONCERNED DETERMINES THEIR COST TO BE UNREASONABLE. IN MAKING SUCH A DETERMINATION OF UNREASONABLE COST, THE AGENCY HEAD IS NOT BOUND BY THE PRICE DIFFERENTIALS SPECIFIED IN THE EXECUTIVE ORDER AND WOULD HAVE THE RIGHT TO CONSIDER A GREATER PRICE DIFFERENTIAL REASONABLE. THE MERE FACT THAT THE PRICE FOR DOMESTIC SUPPLIES WAS HIGHER THAN THAT FOR FOREIGN SUPPLIES PLUS THE DIFFERENTIALS STATED IN THE EXECUTIVE ORDER WOULD NOT REQUIRE A DETERMINATION THAT THE DOMESTIC COST WAS UNREASONABLE. IT WOULD REQUIRE ONLY A DETERMINATION THAT THE DOMESTIC COST WAS UNREASONABLE IF FOREIGN GOODS WERE TO BE PURCHASED. IN THIS CASE NO DETERMINATION WAS MADE BY THE DEFENSE SUPPLY AGENCY THAT THE COST OF DOMESTIC GOODS WAS UNREASONABLE AND THEREFORE THERE IS NO LEGAL BASIS FOR DISTURBING THE AWARD.

IT BECOMES UNNECESSARY, FOR REASONS SET OUT HEREINABOVE, TO DISCUSS THE ALLEGED 50 PERCENT DIFFERENTIAL RULE APPLIED BY THE VARIOUS DEPARTMENTS OF THE DEFENSE ESTABLISHMENT IN THE PROCESS OF ANALYZING THE VARIOUS CASES INVOLVING THE AWARD OF CONTRACTS WHERE BIDDERS PROPOSE TO FURNISH GOODS OF FOREIGN ORIGIN. IT IS DESIRED, HOWEVER, TO REPORT THAT THE BUREAU OF THE BUDGET STUDY NOW NEARING COMPLETION WILL ATTEMPT TO PROVIDE A BASIS FOR MORE DEFINITE AND UNIFORM PROCEDURES UNDER THE BUY AMERICAN ACT.