B-151787, SEP. 3, 1963, 43 COMP. GEN. 217

B-151787: Sep 3, 1963

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IS NEVERTHELESS NOT AN INVALID INVITATION PRECLUDING THE AWARD OF A BINDING CONTRACT. 1963: REFERENCE IS MADE TO YOUR LETTER DATED JUNE 6. UNDER THE FIRST PHASE OF THE PROCUREMENT A REQUEST FOR TECHNICAL PROPOSALS WAS ISSUED ON FEBRUARY 18. THE FOLLOWING WRITTEN QUESTION AND ANSWER WERE SUBMITTED TO PROSPECTIVE BIDDERS AS PART OF AN ADDENDUM TO THE WORK STATEMENT: 46. Q. WILL THIS PROCUREMENT BE MADE UNDER THE "BUY AMERICAN" POLICY? A. IF THE ANSWER IS YES. WILL THIS PRECLUDE A U.S. A. BUY AMERICAN POLICY WILL APPLY. WITH REGARD TO PRODUCTION OF SWITCHING EQUIPMENT IN A FOREIGN COUNTRY THE BALANCE OF PAYMENTS PROGRAM AS IN EFFECT AT THE TIME OF ISSUANCE OF THE IFB WILL APPLY. BY NORTH ELECTRIC COMPANY WERE CONSIDERED ACCEPTABLE.

B-151787, SEP. 3, 1963, 43 COMP. GEN. 217

BIDS - BUY AMERICAN ACT - EVALUATION - BALANCE OF PAYMENTS PROGRAM RESTRICTIONS AN INVITATION UNDER THE SECOND PHASE OF A TWO-STEP PROCUREMENT, SUBJECT TO THE BUY AMERICAN ACT AND THE BALANCE OF PAYMENTS PROGRAM, WHICH DID NOT CLEARLY DESIGNATE THE ITEMS TO BE PROCURED UNDER THE PROGRAM, NOR PRESCRIBE THE UNITED STATES PRODUCT CERTIFICATE OR CLAUSE REQUIRED BY A DEPARTMENTAL DIRECTIVE IMPLEMENTING THE PROGRAM, IS NEVERTHELESS NOT AN INVALID INVITATION PRECLUDING THE AWARD OF A BINDING CONTRACT, THE DIRECTIVE NOT ESTABLISHING POLICIES AND PROCEDURES FOR PROCUREMENT POLICIES PRESCRIBED BY LAW IT MAY BE WAIVED, AND THE REQUEST FOR THE INCLUSION OF DOLLAR AMOUNTS OF DIRECT AND INDIRECT FOREIGN EXPENDITURES TO EVALUATE BIDS FOR COMPLIANCE WITH THE "GOLD FLOW" POLICY NOT HAVING RESULTED IN THE COMPUTATION OF BID PRICES ON DIFFERENT BASES, BOTH LOW AND SECOND LOW BIDDER OFFERING DOMESTIC EQUIPMENT AND LABOR, ALL BIDS NEED NOT BE DISCARDED, ABSENT AN ADMINISTRATIVE DETERMINATION OF UNREASONABLE BID PRICES, OR THE POSSIBILITY LOWER PRICES MAY BE BID FOR FURNISHING FOREIGN COMPONENTS AND LABOR.

TO INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION, SEPTEMBER 3, 1963:

REFERENCE IS MADE TO YOUR LETTER DATED JUNE 6, 1963, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE PROPOSED AWARD OF A CONTRACT BY THE DEPARTMENT OF THE AIR FORCE TO AUTOMATIC ELECTRIC SALES CORPORATION (A-E) UNDER IFB NO. 19-628-63-310.

THE IFB IN QUESTION CONSTITUTED THE SECOND PHASE OF A TWO-STEP PROCUREMENT FOR THE PURCHASE AND INSTALLATION OF 490 DCS SWITCHES TO BE INSTALLED AT 23 SWITCHING CENTERS LOCATED AT VARIOUS OFFSHORE LOCATIONS, INCLUDING FOREIGN COUNTRIES AND TERRITORIES AND POSSESSIONS OF THE UNITED STATES, AND ONE SWITCHING CENTER LOCATED IN THE CONTINENTAL UNITED STATES. UNDER THE FIRST PHASE OF THE PROCUREMENT A REQUEST FOR TECHNICAL PROPOSALS WAS ISSUED ON FEBRUARY 18, 1963. DURING A BRIEFING SESSION FOR PROSPECTIVE BIDDERS ON MARCH 7, 1963, THE FOLLOWING WRITTEN QUESTION AND ANSWER WERE SUBMITTED TO PROSPECTIVE BIDDERS AS PART OF AN ADDENDUM TO THE WORK STATEMENT: 46. Q. WILL THIS PROCUREMENT BE MADE UNDER THE "BUY AMERICAN" POLICY?

A. IF THE ANSWER IS YES, WILL THIS PRECLUDE A U.S. FIRM FROM

ARRANGING FOR PRODUCTION OF THE SWITCHING EQUIPMENT IN A FOREIGN

COUNTRY? A. BUY AMERICAN POLICY WILL APPLY. WITH REGARD TO

PRODUCTION OF

SWITCHING EQUIPMENT IN A FOREIGN COUNTRY THE BALANCE OF PAYMENTS

PROGRAM AS IN EFFECT AT THE TIME OF ISSUANCE OF THE IFB WILL

APPLY.

ONLY THE TECHNICAL PROPOSALS SUBMITTED BY YOUR COMPANY, BY AUTOMATIC ELECTRIC SALES CORPORATION, AND BY NORTH ELECTRIC COMPANY WERE CONSIDERED ACCEPTABLE, AND IFB NO. 19-628-63-310 WAS THEREFORE ISSUED TO THESE BIDDERS ON MAY 31, 1963. UNDER THE PROVISIONS OF THIS IFB, ITEM BY ITEM BID PRICES WERE REQUESTED ON THE EQUIPMENT COMPONENTS TO BE INSTALLED AT EACH LOCATION, AS WELL AS A SEPARATE ITEM BID PRICE ON INSTALLATION AND TEST OF SUCH EQUIPMENT AT EACH LOCATION. ADDITIONALLY, THE INVITATION CONTAINED A COLUMN HEADED "FOREIGN EXPENDITURES" WHICH WAS APPLICABLE TO EACH ITEM AND SUBITEM, AND WHICH WAS REFERENCED TO PARAGRAPH 33 OF THE SPECIAL PROVISIONS, READING AS FOLLOWS:

FOR THE PURPOSES OF THE FOLLOWING CERTIFICATE DOLLAR EXPENDITURES OUTSIDE THE UNITED STATES, ITS POSSESSIONS AND PUERTO RICO IS DEFINED AT ALL U.S. DOLLAR EXPENDITURES, RELATED TO THE PERFORMANCE OF THIS CONTRACT, DIRECTLY AND/OR INDIRECTLY FLOWING OUTSIDE THE U.S., ITS POSSESSIONS AND PUERTO RICO.

THE BIDDER HEREBY CERTIFIES THAT THE DOLLAR AMOUNT INSERTED AFTER EACH ITEM IN THE COLUMN ENTITLED FOREIGN EXPENDITURES REPRESENTS ITS DOLLAR EXPENDITURES OUTSIDE THE UNITED STATES, ITS POSSESSIONS AND PUERTO RICO.

AS INDICATED BY THE REPORT FROM THE DEPARTMENT OF THE AIR FORCE, PARAGRAPH 33 OF THE SPECIAL PROVISIONS, TOGETHER WITH THE DOLLAR AMOUNTS SHOWN IN THE COLUMN HEADED "FOREIGN EXPENDITURES," WAS INTENDED TO BE USED IN EVALUATING THE BIDS FOR COMPLIANCE WITH THE "GOLD FLOW" PROCUREMENT POLICIES AND PROCEDURES SET OUT IN A MEMO DATED JULY 16, 1962, FROM THE SECRETARY OF DEFENSE TO THE SECRETARIES OF THE VARIOUS MILITARY DEPARTMENTS. THIS MEMO DIRECTED, IN PERTINENT PART, THAT PROCUREMENTS OF SUPPLIES AND SERVICES USING DEPARTMENT OF DEFENSE APPROPRIATED FUNDS WHICH WOULD RESULT IN DOLLAR EXPENDITURES OUTSIDE THE UNITED STATES, ITS POSSESSIONS AND PUERTO RICO, SHOULD BE HELD TO AN ABSOLUTE MINIMUM. THE MEMO SPECIFIED FIVE CATEGORIES OF PROCUREMENTS (NONE OF WHICH ARE HERE PERTINENT) IN WHICH DOLLAR EXPENDITURES WOULD BE PERMITTED OUTSIDE THE UNITED STATES, AND THEN ADVISED AS FOLLOWS:

EXCEPT AS SPECIFIED ABOVE, PROCUREMENTS OF SUPPLIES AND SERVICES TO BE USED OUTSIDE THE UNITED STATES, ITS POSSESSIONS, AND PUERTO RICO, (1) WHEN IT IS ESTIMATED THAT THE PRICE DELIVERED FROM U.S. SOURCES WILL NOT EXCEED $10,000 SHALL BE RESTRICTED TO DOMESTIC SOURCE END PRODUCTS, OR SERVICES OF DOMESTIC CONCERNS, WITHOUT REGARD TO POSSIBLE PRICE DIFFERENTIALS, AND (2) SUCH PROCUREMENTS WHICH ARE ESTIMATED TO EXCEED $10,000 SHALL BE SIMILARLY RESTRICTED PROVIDED THAT THE COST OF DOMESTIC SOURCE END PRODUCTS, OR SERVICES OF DOMESTIC CONCERNS, (INCLUDING TRANSPORTATION AND HANDLING COSTS) IS ESTIMATED TO BE NOT MORE THAN 50 PERCENT IN EXCESS OF THE COST OF FOREIGN SUPPLIES OR SERVICES (INCLUDING TRANSPORTATION AND HANDLING COSTS). IN CONNECTION WITH PROCUREMENTS ESTIMATED TO EXCEED $10,000, IF THE ESTIMATED OR ACTUAL COST DIFFERENTIAL EXCEEDS 50 PERCENT, THE MATTER SHALL BE REFERRED TO THE SECRETARY OF DEFENSE FOR DETERMINATION.

THE MEMO FURTHER DIRECTED THAT INVITATIONS FOR BIDS AND REQUESTS FOR PROPOSALS IN SUCH PROCUREMENTS SHOULD CLEARLY DESIGNATE ITEMS BEING PROCURED AND PRESCRIBED A "UNITED STATES PRODUCT CERTIFICATE," UNDER WHICH BIDDERS WERE REQUIRED TO CERTIFY THAT ONLY UNITED STATES END PRODUCTS WOULD BE SUPPLIED UNDER THE CONTRACT, FOR INCLUSION IN SUCH INVITATIONS FOR BIDS AND REQUESTS FOR PROPOSALS. PARAGRAPH (B) (III) OF A "UNITED STATES PRODUCTS" CLAUSE, WHICH THE MEMO ALSO REQUIRED BE INCLUDED IN INVITATIONS FOR BIDS AND REQUESTS FOR PROPOSALS WHICH WERE SUBJECT TO THE BALANCE OF PAYMENTS PROGRAM, DEFINED A "UNITED STATES END PRODUCT" AS---

(A) AN UNMANUFACTURED END PRODUCT WHICH HAS BEEN MINED OR PRODUCED IN THE UNITED STATES, AND

(B) AN END PRODUCT MANUFACTURED IN THE UNITED STATES IF THE COST OF THE COMPONENTS THEREOF WHICH ARE MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS.

THE THREE SOLICITED FIRMS SUBMITTED BIDS WHICH, WHEN COMPUTED ON THE BASIS OF THOSE OPTIONS ON WHICH THE DEPARTMENT OF THE AIR FORCE HAS DETERMINED AN AWARD SHOULD BE MADE, ARE IN TOTAL DOLLAR AMOUNTS AS FOLLOWS:

TABLE

AUTOMATIC ELECTRIC $16,843,177

INTERNATIONAL TELEPHONE AND TELEGRAPH

CORPORATION 17,283,216

NORTH ELECTRIC COMPANY 21,668,431

WITH RESPECT TO THE BID FORM COLUMN ENTITLED "FOREIGN EXPENDITURES," THE BID SUBMITTED BY AUTOMATIC ELECTRIC SALES CORPORATION (A-E) CONTAINED NO DOLLAR AMOUNTS FOR THE VARIOUS ITEMS AND SUBITEMS OF EQUIPMENT, THUS INDICATING THAT IT PROPOSED TO HAVE ALL SUCH EQUIPMENT MANUFACTURED IN THE UNITED STATES FROM DOMESTIC MATERIALS. HOWEVER, DOLLAR AMOUNTS, REPRESENTING ABOUT 75 PERCENT OF THE TOTAL ITEM BID PRICES, WERE ENTERED BY A-E FOR THE "INSTALLATION AND TEST" ITEMS AT EACH FOREIGN LOCATION. THE BID SUBMITTED BY INTERNATIONAL TELEGRAPH AND TELEPHONE CORPORATION (ITT) CONTAINED NO DOLLAR AMOUNTS IN THE "FOREIGN EXPENDITURES" COLUMN FOR ANY ITEMS. HOWEVER, THE INITIAL ITEM IN THIS COLUMN DID CONTAIN THE NOTATION "SEE NOTE PAGE 48," AND THE FOLLOWING NOTATION APPEARED AT PAGE 48 OF THE BID FORM IN THE "FOREIGN EXPENDITURES" COLUMN FOR THE FINAL ITEM ON WHICH BID PRICES WERE REQUESTED:

IT IS EXPECTED THAT THERE WILL BE NO FOREIGN EXPENDITURES EXCEPT MINOR AMOUNTS REPRESENTING LIVING EXPENSES OF INSTALLATION PERSONNEL.

THE BID SUBMITTED BY NORTH ELECTRIC COMPANY CONTAINED NO DOLLAR AMOUNTS OR OTHER ENTRIES IN THE "FOREIGN EXPENDITURES" COLUMN.

YOUR PROTEST THAT AN AWARD TO A-E AT ITS LOW BID PRICE OF $16,843,177 WOULD BE IMPROPER IS BASED UPON YOUR BELIEF THAT THE MEMO DATED JULY 16, 1962, FROM THE SECRETARY OF DEFENSE, AS REFERENCED ABOVE, REQUIRED THE INVITATION TO CLEARLY DESIGNATE ITEMS BEING PROCURED PURSUANT TO THE BALANCE OF PAYMENTS PROGRAM AND TO INCLUDE THE UNITED STATES PRODUCTS CERTIFICATE AND UNITED STATES PRODUCTS CLAUSE; THAT THE INVITATION IS INVALID WITHOUT SUCH COMPLIANCE; THAT ITS FAILURE TO COMPLY CREATED AN AMBIGUITY WHICH RESULTED IN COMPUTATION OF BID PRICES BY ITT AND A-E ON DIFFERENT BASES; AND THAT ITT COULD HAVE SUBMITTED A PRICE MORE THAN $500,000 LOWER IF THE INVITATION HAD CLEARLY INDICATED THAT THE APPLICABILITY OF THE MEMO DATED JULY 16, 1962, AND THE MANNER IN WHICH IT WAS TO BE INTERPRETED IN EVALUATING BIDS.

SPECIFICALLY, YOUR COMPANY CONTENDS IT ASSUMED THE CONTRACTING AGENCY'S ADVICE DURING THE BRIEFING SESSION ON MARCH 7, 1963, TO THE EFFECT THAT THE "BALANCE OF PAYMENTS PROGRAM AS IN EFFECT AT THE TIME OF ISSUANCE OF THE IFB WILL APPLY," HAD REFERENCE TO THE MEMO DATED JULY 16, 1962, FROM THE SECRETARY OF DEFENSE. HOWEVER, IT WAS YOUR BELIEF, BASED UPON EXPERIENCE UNDER A PREVIOUS CONTRACT WITH THE ARMY SIGNAL CORPS AND UPON THE FACT THAT THE IFB ASKED FOR THE AMOUNT OF FOREIGN EXPENDITURES ON EACH ITEM, THAT A SEPARATE DETERMINATION WOULD BE MADE FOR EACH ITEM AS TO WHETHER SUCH ITEM CONSTITUTED A "DOMESTIC SOURCE END PRODUCT" WITHIN THE MEANING OF THAT PORTION (FOLLOWING THE FIVE SPECIFIED CATEGORIES OF PROCUREMENTS) OF THE MEMO DATED JULY 16, 1962, WHICH IS QUOTED ABOVE.

BASED UPON THIS INTERPRETATION, YOUR COMPANY CONTENDS THAT IT COMPUTED THE COST OF MANUFACTURING THE VARIOUS ITEMS DOMESTICALLY AND IN FOREIGN COUNTRIES, AS WELL AS THE COST OF USING BOTH DOMESTIC AND FOREIGN LABOR TO PERFORM THE INSTALLATION AND TEST SERVICE WHICH WERE ALSO LISTED AS SEPARATE ITEMS IN THE INVITATION. SINCE SUCH COMPUTATIONS INDICATED THAT BOTH THE DOMESTIC COST OF PRODUCTION AND SERVICES BY LESS THAN 50 PERCENT YOU CONCLUDED THAT BID PRICES COMPUTED ON THE LATTER BASIS WOULD NOT MEET THE 50 PERCENT CRITERIA ESTABLISHED BY PARAGRAPH 5 OF THE MEMO DATED JULY 16, 1962, QUOTED ABOVE.

YOUR COMPANY THEREFORE CONTENDS IT SUBMITTED BID PRICES COMPUTED ON THE BASIS OF PRODUCING ALL EQUIPMENT IN THE UNITED STATES AND USING DOMESTIC LABOR TO INSTALL AND TEST SUCH EQUIPMENT AT THE VARIOUS FOREIGN LOCATIONS.

YOU CONTEND ALSO THAT THE BID SUBMITTED BY A-E WAS COMPUTED ON THE BASIS OF USING FOREIGN LABOR TO PERFORM THE INSTALLATION AND TEST SERVICES, AS INDICATED BY THE FACT THAT ITS BID SHOWS FOREIGN EXPENDITURES FOR INSTALLATION AND TEST SERVICES AT EACH FOREIGN LOCATION EQUALLING APPROXIMATELY 75 PERCENT OF THE TOTAL BID PRICE FOR EACH SUCH ITEM. IT IS YOUR FURTHER CONTENTION THAT THE A-E BID IS PROPERLY FOR ACCEPTANCE ONLY IF THE TERMS "DOMESTIC SOURCE END PRODUCT" AND "UNITED STATES PRODUCTS," AS USED IN THE MEMO DATED JULY 16, 1962, ARE APPLIED TO THE TOTAL COST OF ALL EQUIPMENT, PLUS INSTALLATION COSTS, AT EACH FOREIGN LOCATION, AND THAT ITT COULD HAVE REDUCED ITS TOTAL BID PRICE BY MORE THAN $500,000 BY HAVING CERTAIN COMPONENTS MANUFACTURED BY ITS FOREIGN SUBSIDIARIES, AND BY USING PERSONNEL OF SUCH SUBSIDIARIES FOR INSTALLATION AND TESTING, IF IT HAD BEEN AWARE THAT A BID COMPUTED ON THAT BASIS WOULD HAVE BEEN ACCEPTABLE.

BASED UPON THE FOREGOING YOU ASK THAT ALL BIDS BE REJECTED AND THAT BIDS BE RESOLICITED UNDER AN INVITATION WHICH WILL FULLY EXPLAIN THE EXTENT TO WHICH BIDS MAY INCLUDE FOREIGN EXPENDITURES.

THE PRIMARY QUESTIONS FOR CONSIDERATION BY THIS OFFICE WOULD APPEAR TO BE WHETHER THE FAILURE OF THE AIR FORCE TO "CLEARLY DESIGNATE ITEMS BEING PROCURED PURSUANT TO THE BALANCE OF PAYMENTS PROGRAM," AND TO INCLUDE THE UNITED STATES PRODUCTS CERTIFICATE AND UNITED STATES PRODUCTS CLAUSE IN THE INVITATION FOR BIDS, AS REQUIRED BY THE MEMO DATED JULY 16, 1962, IS SUFFICIENT IN ITSELF TO RENDER THE INVITATION INVALID AND PRECLUDE AN AWARD BASED UPON THE BIDS RECEIVED. IN THIS CONNECTION, IT MUST BE NOTED THAT THE MEMO IS DIRECTED PRIMARILY TO ESTABLISHING A DEPARTMENTAL POLICY TO IMPLEMENT THE BALANCE OF PAYMENTS PROGRAM, AND SECONDARILY TO PRESCRIBING PROCEDURES FOR IMPLEMENTATION OF SUCH POLICY. ADHERENCE TO, OR DEPARTURES FROM, DEPARTMENTAL POLICIES OF THIS NATURE ARE SOLELY THE CONCERN OF THE SECRETARY OF DEFENSE. AS COMPARED TO PROCUREMENT POLICIES WHICH ARE PRESCRIBED BY LAW AND IMPLEMENTED BY STATUTORY REGULATIONS, THE GENERAL ACCOUNTING OFFICE HAS NO AUTHORITY TO REQUIRE ADHERENCE TO DEPARTMENTAL POLICIES IN SPECIFIC PROCUREMENTS OR TO HOLD INVALID CONTRACTS WHICH MAY HAVE BEEN AWARDED IN DEROGATION OF SUCH POLICIES. 151192, MAY 17, 1963, 42 COMP. GEN. 640, COPY ENCLOSED. IT NECESSARILY FOLLOWS THAT A FAILURE TO SOLICIT BIDS IN STRICT ACCORD WITH PROCEDURES WHICH ARE PRESCRIBED FOR THE PURPOSE OF IMPLEMENTING A DEPARTMENTAL POLICY WILL NOT INVALIDATE THE SOLICITATION OR PRECLUDE THE AWARD OF A VALID AND BINDING CONTRACT BASED UPON THE BIDS RECEIVED. AS IN THE CASE OF A FAILURE TO ADHERE TO A DEPARTMENTAL POLICY IN A SPECIFIC PROCUREMENT, THE FINAL DETERMINATION WHETHER PROCEDURAL REQUIREMENTS DESIGNED TO IMPLEMENT SUCH POLICY MUST BE ADHERED TO OR MAY BE WAIVED RESTS SOLELY WITH THE HEAD OF THE DEPARTMENT. WE ARE THEREFORE UNABLE TO CONCLUDE THAT THE FAILURE OF THE AIR FORCE IN THE INSTANT PROCUREMENT TO FOLLOW THE PROCEDURAL REQUIREMENTS PRESCRIBED BY THE MEMO OF JULY 16, 1962, IS SUFFICIENT, IN ITSELF, TO RENDER THE INVITATION FOR BIDS INVALID OR PRECLUDE THE AWARD OF A BINDING CONTRACT BASED UPON THE BIDS RECEIVED.

THERE CAN BE NO DOUBT THAT THE INSTANT PROCUREMENT WAS INTENDED TO BE SUBJECT TO THE BALANCE OF PAYMENTS PROGRAM AND WAS INTENDED TO IMPLEMENT THE POLICY SET OUT IN THE MEMO DATED JULY 16, 1962, AS INDICATED BY THE FACT THAT COMPETITION WAS LIMITED TO DOMESTIC CONCERNS, THE FACT THAT BIDDERS WERE ADVISED THE PROGRAM IN EFFECT AT TIME OF ISSUANCE OF THE INVITATION WOULD APPLY, AND BY THE REQUEST FOR INCLUSION OF DOLLAR AMOUNTS OF DIRECT AND INDIRECT FOREIGN EXPENDITURES IN THE BIDS. FURTHER, THE RECORD INDICATES THAT BOTH YOUR COMPANY AND A-E WERE AWARE OF SUCH INTENT. THE REMAINING QUESTION THEREFORE IS WHETHER THE FAILURE OF THE INVITATION TO MORE SPECIFICALLY ADVISE BIDDERS OF THE MANNER IN WHICH ACCEPTABLE BIDS COULD BE COMPUTED AND SUBMITTED RESULTED IN AN AMBIGUOUS INVITATION WHICH INDUCED THE SUBMISSION OF EITHER UNACCEPTABLE BIDS OR OF BIDS COMPUTED ON DIFFERENT BASES. IN THIS CONNECTION, WE ARE ADVISED BY A E REPRESENTATIVES THAT YOUR BELIEF A-E'S BID WAS COMPUTED ON THE BASIS OF USING FOREIGN TECHNICIANS TO PERFORM THE SERVICES REQUIRED BY THE INSTALLATION AND TEST ITEMS AT FOREIGN LOCATIONS IS IN ERROR. THIS ADVICE IS CONFIRMED BY BOTH A COMPARISON OF A-E'S BID PRICES FOR INSTALLATION AND TESTING AT FOREIGN AND DOMESTIC LOCATIONS, AND BY AN ITEM BY ITEM ANALYSIS SUBMITTED BY A-E SHOWING THE AMOUNTS FOR BOTH LABOR AND TRAVEL WHICH WERE INCLUDED IN ITS ITEM BID PRICES. THIS INFORMATION CONFIRMS A-E'S ADVICE THAT THE AMOUNTS INSERTED IN THE "FOREIGN EXPENDITURE" COLUMN FOR SUCH ITEMS IN ITS BID REPRESENT PERCENTAGE OF THE SALARIES OF SUCH DOMESTIC EMPLOYEES WHICH IT WAS ESTIMATED WOULD BE SPENT BY THEM AT SUCH FOREIGN LOCATIONS, PLUS FOREIGN CARTAGE AND FOREIGN TRAVEL OF SUCH EMPLOYEES. IS THEREFORE APPARENT THAT BOTH THE BID OF YOUR COMPANY AND THE BID SUBMITTED BY A E WERE COMPUTED ON THE SAME BASIS, THAT IS, ON THE BASIS OF USING BOTH DOMESTIC EQUIPMENT AND DOMESTIC LABOR IN PERFORMING THE CONTRACT.

WITH RESPECT TO WHETHER BIDS ARE ACCEPTABLE, UNDER BOTH THE INVITATION AND THE POLICY SET OUT IN THE MEMO OF JULY 16, 1962, WHEN COMPUTED AND SUBMITTED IN THE MANNER OF BOTH YOUR BID AND THAT OF A-E, IT SHOULD BE NOTED THAT THE MEMO PRESCRIBES ONLY MINIMUM REQUIREMENTS TO BE MET BY DOMESTIC CONCERNS IN CARRYING OUT THE BALANCE OF PAYMENTS PROGRAM, ONCE IT HAS BEEN DETERMINED THAT A PROCUREMENT IS TO BE LIMITED TO DOMESTIC SOURCE END PRODUCTS AND/OR SERVICES OF DOMESTIC CONCERNS. SUCH MINIMUM REQUIREMENT, AS SET OUT IN THE UNITED STATES PRODUCTS CERTIFICATE AND UNITED STATES PRODUCTS CLAUSE, IS THAT THE COST OF THE COMPONENTS WHICH ARE MINED, PRODUCED OR MANUFACTURED IN THE UNITED STATES AND INCORPORATED INTO THE END PRODUCTS FURNISHED UNDER THE CONTRACT SHALL EXCEED 50 PERCENT OF THE COST OF ALL OF THE COMPONENTS OF THE END PRODUCT. THERE SEEMS TO BE NO DOUBT THAT, UNDER THIS CERTIFICATE AND CLAUSE, A DOMESTIC CONCERN MAY INCORPORATE FOREIGN COMPONENTS TO A VALUE OF 49 PERCENT OF TOTAL COST IN AN END ITEM. FURTHER, IT IS OUR OPINION THAT IN THE INSTANT PROCUREMENT A DOMESTIC CONCERN COULD SUBMIT A RESPONSIVE BID WHICH WAS BASED EITHER WHOLLY OR IN PART UPON USE OF INDIGENOUS LABOR TO INSTALL SUCH EQUIPMENT. HOWEVER, THERE WOULD APPEAR TO BE NO JUSTIFICATION FOR REQUIRING BIDDERS TO COMPUTE AND SUBMIT BIDS UPON THAT BASIS ONLY, AND THERE CAN BE NO MORE JUSTIFICATION FOR REQUIRING A CONTRACTING AGENCY TO REJECT BIDS WHICH ARE NOT COMPUTED ON THAT BASIS.

WHILE IT IS REGRETTABLE THAT YOUR PREVIOUS EXPERIENCE UNDER A CONTRACT WITH THE DEPARTMENT OF THE ARMY APPEARS TO HAVE CONTRIBUTED TO YOUR MISINTERPRETATION OF THE MEMO DATED JULY 16, 1962, AND ITS APPLICATION TO THE INSTANT PROCUREMENT, IT WOULD APPEAR THAT IN THE ABSENCE OF SUCH EXPERIENCE THE 50 PERCENT DIFFERENTIAL MENTIONED IN THE MEMO COULD REASONABLY BE INTERPRETED AS APPLYING ONLY TO DETERMINATIONS TO BE MADE BY THE CONTRACTING AGENCY AND OR THE SECRETARY OF DEFENSE RATHER THAN TO DETERMINATIONS BY INDIVIDUAL BIDDERS. THIS CONCLUSION WOULD APPEAR TO BE SUPPORTED BY THE FACT THAT, WHILE THE AMOUNTS SHOWN IN THE "FOREIGN EXPENDITURES" COLUMN, TOGETHER WITH THE TOTAL AMOUNTS ON EACH ITEM, CONSTITUTED SUFFICIENT INFORMATION ON WHICH TO BASE A DETERMINATION THAT EACH BIDDER WAS, OR WAS NOT, OFFERING A "UNITED STATES END PRODUCT" WITHIN THE MEANING OF THAT TERM AS USED IN THE MEMO, IT DID NOT CONSTITUTE SUFFICIENT INFORMATION TO DETERMINE WHETHER THE COST OF DOMESTIC SOURCE END PRODUCTS WOULD EXCEED THE COST OF FOREIGN SOURCE END PRODUCTS BY MORE THAN 50 PERCENT. IN VIEW THEREOF, WE ARE UNABLE TO CONCLUDE THAT YOUR MISINTERPRETATION OF THE PURPOSE AND INTENT OF THE INVITATION WAS ATTRIBUTABLE TO AMBIGUITIES IN THE INVITATION.

IN THE INSTANT PROCUREMENT PERFORMANCE OF THE CONTRACT IN ACCORDANCE WITH THE MANNER IN WHICH THE BIDS OF BOTH ITT AND A-E WERE COMPUTED WOULD RESULT IN MAXIMUM IMPLEMENTATION OF THE BALANCE OF PAYMENTS PROGRAM. WHILE IT MAY BE TRUE THAT YOUR COMPANY COULD AND WOULD SUBMIT A LOWER BID PRICE BASED UPON PERFORMANCE UTILIZING FOREIGN COMPONENTS AND FOREIGN LABOR FOR INSTALLATION AND TESTING, IT IS A CARDINAL RULE OF COMPETITIVE PROCUREMENT THAT THE POSSIBILITY OR PROBABILITY OF OBTAINING LOWER PRICES IS NOT IN ITSELF SUFFICIENT JUSTIFICATION FOR REJECTING ALL BIDS AFTER BID PRICES HAVE BEEN DISCLOSED. THIS IS NOT TO SAY THAT IT IS NOT WITHIN THE SOUND DISCRETION OF THE DEPARTMENT OF THE AIR FORCE TO REJECT ALL BIDS RECEIVED IN THIS PROCUREMENT, BASED UPON A DETERMINATION THAT THEIR COMPUTATION ON THE BASIS OF 100 PERCENT DOMESTIC COMPONENTS AND 100 PERCENT DOMESTIC LABOR FOR INSTALLATION AND TESTING HAS RESULTED IN UNREASONABLE BID PRICES. HOWEVER, IN THE ABSENCE OF SUCH A DETERMINATION WE HAVE TODAY ADVISED THE SECRETARY OF THE AIR FORCE THAT AN AWARD MAY BE MADE ON THE BASIS OF THE BIDS RECEIVED. YOUR PROTEST MUST, ACCORDINGLY, BE DENIED.