B-163684, MAY 1, 1968

B-163684, MAY 1, 1968

TO PHARMUSA CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF FEBRUARY 29, 1968, AND TO YOUR SUPPLEMENTING LETTER OF MARCH 1, 1968, WITH ENCLOSURE, PROTESTING THE AWARD OF A CONTRACT FOR CHLORTETRACYCLINE HYDROCHLORIDE CAPSULES, NF, 0.25 GM., 100S, POTENCY 60 MONTHS, TO ANY OTHER FIRM UNDER REQUEST FOR PROPOSALS (RFP) NO. DSA-120-68-R-0819, ISSUED OCTOBER 11, 1967, BY THE DEFENSE PERSONNEL SUPPORT CENTER, DEFENSE SUPPLY AGENCY, PHILADELPHIA, PENNSYLVANIA.

THE RFP, AS AMENDED, SOLICITED PROPOSALS UNDER QUOTATION A FOR 29,472 UNITS (BOTTLES) OF 100 CAPSULES EACH (F.O.B. ORIGIN, FREIGHT PREPAID, WITH PATENT INDEMNITY, DOMESTIC PACKING) WHICH IS THE ITEM TO WHICH YOUR PROTEST PERTAINS. IN SUBMITTING YOUR PROPOSAL ON THAT ITEM YOU REPRESENTED THAT THE CHLORTETRACYCLINE USED IN YOUR CAPSULES WOULD BE OF FOREIGN MANUFACTURE. YOU WERE ADVISED THAT AWARD WAS MADE TO RACHELLE LABORATORIES, INCORPORATED, AT UNIT PRICES OF $4.37 AND $4.39 AND THAT YOU WERE NOT ELIGIBLE FOR THE AWARD FOR THE REASON THAT YOU WERE NOT THE LOW OFFEROR AFTER EVALUATION OF YOUR OFFER UNDER THE ARMED SERVICES PROCUREMENT REGULATION 6-104.4 (ASPR), WHICH IMPLEMENTS THE BUY AMERICAN ACT AND EXECUTIVE ORDER NO. 10582, PROMULGATED THEREUNDER. THE CONTRACT WAS AWARDED TO RACHELLE ON FEBRUARY 21, 1968.

YOU PROTEST THE AWARD TO RACHELLE ON THE GROUNDS THAT YOUR OFFER SHOULD HAVE BEEN EVALUATED BY ADDING 50 PERCENT OF THE COST OF THE FOREIGN COMPONENT ONLY, RESULTING IN A TOTAL EVALUATED COST OF $3.46 PER UNIT, THUS REQUIRING AWARD TO YOU. YOU ALSO STATE THAT PURSUANT TO ASPR 6-001 YOU ARE A DOMESTIC COMPANY, ORGANIZED AND OPERATING UNDER THE LAWS OF THE VIRGIN ISLANDS, A TERRITORY OF THE UNITED STATES. IN THIS REGARD, UNDER THE PRESENT REGULATIONS THE CORPORATE STATUS OF A FIRM IS NOT A FACTOR IN DETERMINING WHETHER A BID OR PROPOSAL IS FOREIGN OR DOMESTIC. THE BUY AMERICAN ACT AND THE CRITERIA OF THE IMPLEMENTING REGULATIONS WOULD BE COMPLIED WITH IF THE END PRODUCT IS MANUFACTURED IN THE UNITED STATES FROM COMPONENTS SUBSTANTIALLY ALL OF WHICH ARE MANUFACTURED DOMESTICALLY. THUS, THE BASIC ISSUE IN YOUR PROTEST IS WHETHER OR NOT THE CONTRACTING OFFICER ERRED IN EVALUATING YOUR PROPOSAL BY APPLYING 50 PERCENT TO YOUR TOTAL BID PRICE (EXCLUSIVE OF DUTY AS PER YOUR EXEMPTION), FOR A TOTAL UNIT PRICE OF $4.51727, INSTEAD OF ADDING 50 PERCENT OF THE COST OF THE FOREIGN COMPONENTS USED, FOR A UNIT PRICE OF $3.46.

THE RFP INCORPORATES AT PROVISION 7, PAGE 2, THE BUY AMERICAN CERTIFICATE REQUIRING OFFERORS TO CERTIFY THAT EACH END PRODUCT, EXCEPT THOSE OTHERWISE LISTED BY THE OFFEROR, IS A DOMESTIC SOURCE END PRODUCT AS DEFINED BY THE BUY AMERICAN ACT. IN A SPACE TO LIST "EXCLUDED END PRODUCTS" , YOU INDICATED THAT THE BULK CHLORTETRACYCLINE WAS TO BE OBTAINED FROM FARMITALIA, S.P.A., ITALY. SINCE BULK CHLORTETRACYCLINE, THE ACTIVE INGREDIENT, IS ONLY A RAW MATERIAL COMPONENT OF THE END PRODUCT, YOU WERE REQUESTED TO FURNISH A COMPONENT COST BREAKDOWN TO DETERMINE A PROPER CLASSIFICATION OF THE END PRODUCT. IN YOUR LETTER OF NOVEMBER 13, 1967, IT WAS ESTABLISHED THAT THE COST OF THE FOREIGN INGREDIENT WAS $0.83125 PER UNIT AND THE TOTAL COST OF THE END PRODUCT FOR ALL INGREDIENTS (EXCLUSIVE OF COST OF BOTTLES, BOTTLE CAPS, ANALYSIS AND MANUFACTURING), WAS $1.23. YOUR LETTER OF PROTEST TO THIS OFFICE SHOWS YOUR COST OF CHLORTETRACYCLINE AT $0.860 PER UNIT AND A TOTAL COST OF ALL COMPONENTS AT $1.276. THIS FIGURE INCLUDES $0.196 FOR BOTTLES AND PACKAGING INGREDIENTS ALTHOUGH THEY, AS WELL AS ELEMENTS SUCH AS LABOR, FREIGHT, PROFIT AND OVERHEAD, ARE NOT CONSIDERED IN DETERMINING AN END PRODUCT TO BE FOREIGN OR DOMESTIC. 46 COMP. GEN. 784. IN ANY CASE THE FOREIGN COMPONENT COST EXCEEDS THE 50 PERCENT FACTOR CONTEMPLATED BY EXECUTIVE ORDER 10582 AS IMPLEMENTED BY ASPR 6-101 (A), (C), (D) AND (E), AS FOLLOWS: "/A) DOMESTIC SOURCE END PRODUCT MEANS AN UNMANUFACTURED END PRODUCT WHICH HAS BEEN MINED OR PRODUCED IN THE UNITED STATES, OR AN END PRODUCT MANUFACTURED IN THE UNITED STATES IF THE COST OF ITS COMPONENTS WHICH ARE MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS. THE COST OF COMPONENTS SHALL INCLUDE TRANSPORTATION COSTS TO THE PLACE OF INCORPORATION INTO THE END PRODUCT AND, IN THE CASE OF COMPONENTS OF FOREIGN ORIGIN, DUTY (WHETHER OR NOT A DUTY FREE ENTRY CERTIFICATE MAY BE ISSUED). A COMPONENT SHALL BE CONSIDERED TO HAVE BEEN MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES (REGARDLESS OF ITS SOURCE IN FACT) IF THE END PRODUCT IN WHICH IT IS INCORPORATED IS MANUFACTURED IN THE UNITED STATES AND THE COMPONENT IS OF A CLASS OR KIND (I) DETERMINED BY THE GOVERNMENT TO BE NOT MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY, OR (II) AS TO WHICH THE SECRETARY CONCERNED HAS DETERMINED THAT IT WOULD BE INCONSISTENT WITH THE PUBLIC INTEREST TO APPLY THE RESTRICTIONS OF THE ACT.

** * * * * * "/C) FOREIGN END PRODUCT MEANS AN END PRODUCT OTHER THAN A DOMESTIC SOURCE END PRODUCT. "/D) DOMESTIC BID MEANS A BID OR OFFERED PRICE FOR A DOMESTIC SOURCE END PRODUCT, INCLUDING TRANSPORTATION TO DESTINATION. "/E) FOREIGN BID MEANS A BID OR OFFERED PRICE FOR A FOREIGN END PRODUCT, INCLUDING TRANSPORTATION TO DESTINATION AND DUTY (WHETHER OR NOT A DUTY-FREE ENTRY CERTIFICATE MAY BE ISSUED).'

IN VIEW OF THE ABOVE YOUR OFFER WAS EVALUATED AS A FOREIGN PROPOSAL REQUIRING THE APPLICATION OF THE PRESCRIBED COMPUTATION IN ACCORDANCE WITH ASPR 6-104.4. ON THAT BASIS, YOUR NET PROPOSAL (EXCLUSIVE OF DUTY AS PER YOUR EXEMPTION) WAS EVALUATED BY APPLICATION OF THE 50 PERCENT FACTOR. THIS EVALUATED PRICE OF $4.51727 RESULTED IN A PRICE WHICH WAS HIGHER THAN THE DOMESTIC OFFER BY RACHELLE, THE LOWEST RESPONSIVE PROPOSAL SUBMITTED.

YOUR CONTENTION THAT YOUR OFFER SHOULD HAVE BEEN EVALUATED BY ADDING ONE- HALF THE VALUE OF THE FOREIGN COMPONENT ONLY, IS CONTRARY TO ASPR 6-104.4, AND WHILE DEVIATIONS TO THE EVALUATION PROCEDURES OF ASPR 6-104.4 MAY BE CONSIDERED FOR MAJOR PROCUREMENTS (OVER $250,000 PER ASPR 6-102.2 (B) (, THIS PROCUREMENT DID NOT QUALIFY FROM A DOLLAR STANDPOINT.

SINCE THE METHOD OF EVALUATION OF YOUR PROPOSAL WAS PROPER UNDER THE APPLICABLE PROVISIONS OF ASPR, NO LEGAL BASIS EXISTS TO QUESTION THE ADMINISTRATIVE DETERMINATION THAT YOUR PROPOSAL WAS NOT THE LOWEST RESPONSIVE OFFER.