B-163740, MAY 24, 1968, 47 COMP. GEN. 676

B-163740: May 24, 1968

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PROPERLY WAS REJECTED AS NONRESPONSIVE. A PRODUCT IS CONSIDERED MANUFACTURED IN THE UNITED STATES WHEN THE COST OF MANUFACTURE EXCEEDS 50 PERCENT OF ALL THE COMPONENTS OF AN END PRODUCT AND. 1968: FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER DATED MARCH 6 AND MARCH 28. APPROXIMATELY ONE-HALF OF THE TOTAL REQUIREMENTS WAS SET ASIDE FOR AWARD TO LABOR SURPLUS AREA CONCERNS. PROSPECTIVE BIDDERS WERE ADVISED THAT CLAUSE 107. FOUR BIDS WERE RECEIVED AND OPENED ON DECEMBER 12. 2 AND 3 AND ITS BID WAS THE LOWEST RECEIVED ON EACH OF THESE ITEMS. WHICH WAS ATTACHED TO AND MADE PART OF ITS BID. OUR BID IS ALL OR NONE ON ALL ITEMS WE BID. 2. PACKING IS AS FOLLOWS: ITEM 1. SHIPPING POINT IS AS FOLLOWS: ITEM 1.

B-163740, MAY 24, 1968, 47 COMP. GEN. 676

BIDS - BUY AMERICAN ACT - EVALUATION - BALANCE OF PAYMENTS PROGRAM RESTRICTIONS THE LOW "ALL OR NONE" BID ON THREE ITEMS OF AN INVITATION CONTAINING A LABOR SURPLUS SET-ASIDE AND A "BALANCE OF PAYMENTS PROGRAM" CLAUSE, WHICH PROPOSED THAT 20 PERCENT, 40 PERCENT, AND 100 PERCENT OF THE THREE ITEMS BID ON WOULD BE MANUFACTURED IN THE UNITED STATES, OR 53 PERCENT OF THE TOTAL BID, PROPERLY WAS REJECTED AS NONRESPONSIVE. UNDER THE BALANCE OF PAYMENTS PROVISIONS OF THE INVITATION, PRESCRIBED PURSUANT TO THE BUY AMERICAN ACT, 41 U.S.C. 10A-D, A PRODUCT IS CONSIDERED MANUFACTURED IN THE UNITED STATES WHEN THE COST OF MANUFACTURE EXCEEDS 50 PERCENT OF ALL THE COMPONENTS OF AN END PRODUCT AND, THEREFORE, THE ALL OR NONE OFFER MAY NOT BE EVALUATED COLLECTIVELY SO AS TO CHARACTERIZE THE TWO FOREIGN ORIGIN ITEMS AS DOMESTIC BY DENOMINATING THE LAST ITEM AS 100-PERCENT DOMESTIC TO ARRIVE AT A TOTAL DOMESTIC QUANTITY PERCENTAGE IN EXCESS OF 50 PERCENT.

TO MCCLURE AND TROTTER, MAY 24, 1968:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER DATED MARCH 6 AND MARCH 28, 1968, RESPECTIVELY, PROTESTING ON BEHALF OF THE GENERAL STEEL TANK CO., THE ACTION OF THE DEFENSE SUPPLY AGENCY, DEFENSE CONSTRUCTION SUPPLY CENTER, DIRECTORATE OF PROCUREMENT AND PRODUCTION, COLUMBUS, OHIO, IN REJECTING THE COMPANY'S LOW BID ON ITEMS 1, 2 AND 3 OF INVITATION FOR BIDS NO. DSA-700-68-B-0898.

THE INVITATION REQUESTED BIDS--- TO BE OPENED ON DECEMBER 12, 1967-- TO COVER THE ANNUAL REQUIREMENTS FOR DIFFERENT SIZES OF STEEL PIPE TO BE MANUFACTURED IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-P 11087C. APPROXIMATELY ONE-HALF OF THE TOTAL REQUIREMENTS WAS SET ASIDE FOR AWARD TO LABOR SURPLUS AREA CONCERNS. PROSPECTIVE BIDDERS WERE ADVISED THAT CLAUSE 107,"BALANCE OF PAYMENTS PROGRAM," WOULD BE APPLICABLE TO ITEMS 1, 2, 3, 6, 7 AND 11.

FOUR BIDS WERE RECEIVED AND OPENED ON DECEMBER 12, 1967. GENERAL STEEL SUBMITTED AN "ALL OR NONE" BID ON ITEMS 1, 2 AND 3 AND ITS BID WAS THE LOWEST RECEIVED ON EACH OF THESE ITEMS. IN A LETTER DATED NOVEMBER 13, 1967, WHICH WAS ATTACHED TO AND MADE PART OF ITS BID, GENERAL STEEL STATED AS FOLLOWS:

1. OUR BID IS ALL OR NONE ON ALL ITEMS WE BID.

2. REGARDING PAGE 11, PARAGRAPH 9, COMPLETE FABRICATION, PACKAGING, AND PACKING IS AS FOLLOWS:

ITEM 1--- 60 PERCENT, ITEM 2--- 80 PERCENT: NKK (NIPPON KOHON) 2,1 CHOME, OTEMACHI, CHIYUDA-KU, TOKYO, JAPAN.

ITEM 1--- 40 PERCENT, ITEM 2--- 20 PERCENT, ITEM 3--- 100 PERCENT: U.S. STEEL CORPORATION, 1600 NORTH STATE STREET AND GENEVA ROAD, PROVO, UTAH (UTAH COUNTY).

SHIPPING POINT IS AS FOLLOWS:

ITEM 1--- 60 PERCENT, ITEM 2--- 80 PERCENT: ALABAMA STATE DOCKS, WATER STREET EXTENSION, MOBILE, ALABAMA (MOBILE COUNTY).

ITEM 1--- 40 PERCENT, ITEM 2--- 20 PERCENT, ITEM 3--- 100 PERCENT: U.S. STEEL CORPORATION, 1600 NORTH STATE STREET AND GENEVA ROAD, PROVO, UTAH (UTAH COUNTY).

3. REGARDING PAGE 13, PARAGRAPH 10, 53 PERCENT OF AMOUNT OF WORK ON TOTAL OF ALL ITEMS WILL BE AT U.S. STEEL CORPORATION, 1600 NORTH STATE STREET AND GENEVA ROAD, PROVO, UTAH (UTAH COUNTY). PERCENTAGE OF EACH ITEM IS SHOWN IN OUR PARAGRAPH 2 ABOVE.

THE SECOND LOWEST BID ON ITEMS 1, 2 AND 3 WAS SUBMITTED BY CAL-METAL CORPORATION WHICH OFFERED STEEL PIPE OF DOMESTIC ORIGIN. IT IS REPORTED THAT, ALTHOUGH THE BID OF GENERAL STEEL WAS THE LOWEST RECEIVED ON ITEMS 1, 2 AND 3, ITS BID ON THOSE ITEMS WAS REJECTED BECAUSE THE COMPANY HAD INDICATED IN ITS LETTER OF NOVEMBER 13, 1967, THAT A SUBSTANTIAL PORTION (70 PERCENT) OF ITEMS 1 AND 2 WOULD BE MANUFACTURED IN JAPAN, AND THAT THE REMAINING PORTION (30 PERCENT) WOULD BE MANUFACTURED IN THE UNITED STATES. THE CONTRACTING OFFICER DETERMINED THAT THE ABOVE-QUOTED QUALIFICATIONS INSERTED BY THE COMPANY IN ITS BID WERE IN CONFLICT WITH THE BALANCE OF PAYMENTS CLAUSE OF THE INVITATION FOR BIDS SINCE MORE THAN 50 PERCENT OF ITEMS 1 AND 2 WAS OF FOREIGN MANUFACTURE. ON FEBRUARY 28, 1968, THE BID OF CAL-METAL CORPORATION WAS ACCEPTED.

YOU TAKE EXCEPTION TO THE FOREGOING DETERMINATION BY THE CONTRACTING OFFICER ON THE BASIS THAT GENERAL STEEL'S COVERING LETTER INDICATED THAT 53 PERCENT OF THE AMOUNT OF WORK FOR ALL ITEMS WOULD BE PERFORMED AT PROVO, UTAH. YOU STATE THAT SUCH PERCENTAGE WAS FURNISHED IN COMPLIANCE WITH SUBPARAGRAPH "E" OF PARAGRAPH 10, PAGE 13 OF THE INVITATION, ENTITLED "STATEMENT OF SET-ASIDE QUANTITY.' THAT SUBPARAGRAPH READS AS FOLLOWS:

E. BIDDERS DESIRING TO BE CONSIDERED FOR THE SET-ASIDE PORTION OF THE PROCUREMENT MUST INDICATE BELOW THE PLACE OF PERFORMANCE OF THE SET-ASIDE PORTION AND THE AMOUNT (PERCENTAGE OF CONTRACT PRICE) OF WORK TO BE PERFORMED AT EACH PLANT INDICATED. ITEM NO. PLANT NAME AND LOCATION PERCENTAGE OF PERFORMANCE 1. - --------------------- -------------------- ----- 2. ----- ----------------- ------------------------- 3. ---------

IT IS YOUR POSITION THAT EACH ITEM BID UPON BY GENERAL STEEL CANNOT BE CONSIDERED SEPARATELY BUT MUST BE CONSIDERED COLLECTIVELY IN DETERMINING WHETHER THE BID QUALIFIES UNDER THE BALANCE OF PAYMENTS PROGRAM. IN THIS REGARD, YOU OBSERVE THAT UNDER THE INVITATION "ALL OR NONE BIDS" ARE NOT CONSIDERED RESPONSIVE UNLESS THE BID IS OTHERWISE LOW ON EACH OF THE ITEMS RESTRICTED AND THAT GENERAL STEEL'S "ALL OR NONE" PROPOSAL NO ITEMS 1, 2 AND 3 WAS RESPONSIVE BECAUSE IT WAS LOW ON EACH OF THESE ITEMS. IN VIEW THEREOF, AND SINCE GENERAL STEEL INDICATED THAT OVER 50 PERCENT OF THE COSTS INCIDENT TO ITEMS 1, 2 AND 3 WAS DOMESTIC COSTS, ITS BID SHOULD HAVE BEEN CONSIDERED AS MEETING THE REQUIREMENTS OF THE BALANCE OF PAYMENTS PROGRAM AND, THEREFORE, ACCEPTED AS THE LOW BID ON THOSE ITEMS.

CLAUSE 8.107 OF THE INVITATION PROVIDED IN PERTINENT PART AS FOLLOWS: UNITED STATES PRODUCTS CERTIFICATE (BALANCE OF PAYMENTS PROGRAM) (JUNE 1965)

TO THE EXTENT THAT THE GOVERNMENT SPECIFIES THAT THE ITEMS BEING PURCHASED ARE IN IMPLEMENTATION OF THE BALANCE OF PAYMENTS PROGRAM, THE BIDDER OR OFFEROR HEREBY CERTIFIES THAT EACH SUCH ITEM IS A UNITED STATES END PRODUCT OR COMPRISES UNITED STATES SERVICES, (AS DEFINED IN THE CONTRACT CLAUSE ENTITLED UNITED STATES PRODUCTS AND SERVICES (BALANCE OF PAYMENTS PROGRAM) ( AND THAT COMPONENTS OF UNKNOWN ORIGIN HAVE BEEN CONSIDERED TO HAVE BEEN MINED, PRODUCED, OR MANUFACTURED OUTSIDE THE UNITED STATES. (ASPR 6-806.3) UNITED STATES PRODUCTS AND SERVICES (BALANCE OF PAYMENTS PROGRAM) (JUNE 1965)

(A) TO THE EXTENT THAT THE GOVERNMENT SPECIFIES THAT THE ITEMS BEING PURCHASED ARE IN IMPLEMENTATION OF THE BALANCE OF PAYMENTS PROGRAM, THE CONTRACTOR AGREES THAT THERE WILL BE DELIVERED OR PERFORMED UNDER THIS CONTRACT ONLY UNITED STATES END PRODUCTS OR UNITED STATES SERVICES.

(B) FOR THE PURPOSE OF THIS CLAUSE:

(I) "COMPONENTS" MEANS THOSE ARTICLES, MATERIALS, AND SUPPLIES, WHICH ARE DIRECTLY INCORPORATED IN THE END PRODUCTS;

(II)"END PRODUCTS" MEANS THOSE ARTICLES, MATERIALS, AND SUPPLIES,WHICH ARE ACQUIRED UNDER THIS CONTRACT FOR PUBLIC USE;

(III) A "UNITED STATES END PRODUCT" MEANS---

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

(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. FOR THE PURPOSE OF THIS SUBPARAGRAPH, COMPONENTS OF FOREIGN ORIGIN OF THE SAME TYPE AND KIND WHICH THE GOVERNMENT DETERMINES ARE NOT MINED, PRODUCED, OR MANUFACTURED IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF SATISFACTORY QUALITY SHALL BE TREATED AS COMPONENTS MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES.

INSOFAR AS IT PERTAINS TO THE SUBJECT PROCUREMENT, THE BUY AMERICAN ACT, 47 STAT. 1520, AS CODIFIED IN 41 U.S.C. 10A-D, REQUIRES THAT ONLY SUCH MANUFACTURED ARTICLES AS HAVE BEEN ,MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM ARTICLES, MATERIALS, OR SUPPLIES MINED, PRODUCED, OR MANUFACTURED," IN THE UNITED STATES BE ACQUIRED "FOR PUBLIC USE" UNLESS THE HEAD OF THE AGENCY CONCERNED SHALL DETERMINE IT TO BE INCONSISTENT WITH THE PUBLIC INTEREST, OR THE COST TO BE UNREASONABLE. THE TERM "PUBLIC USE" IS DEFINED (10C (B) ( AS MEANING "USE BY * * * THE UNITED STATES.' TO ESTABLISH UNIFORM PROCEDURES FOR ADMINISTRATIVE DETERMINATIONS, EXECUTIVE ORDER NO. 10582 OF DECEMBER 17, 1954, AS AMENDED, SPECIFIED UNDER SECTION 2 (A) THAT ARTICLES SHALL BE CONSIDERED TO BE OF FOREIGN ORIGIN IF THE COST OF THE FOREIGN PRODUCTS USED IN SUCH ARTICLES CONSTITUTES 50 PERCENT OR MORE OF THE COST OF ALL PRODUCTS USED THEREIN, AND THAT THE PRICE OF DOMESTIC ARTICLES IS UNREASONABLE IF IT EXCEEDS THE COST OF LIKE FOREIGN ARTICLES PLUS A DIFFERENTIAL COMPUTED PURSUANT TO THAT ORDER (GENERAL 6 PERCENT, AND, BY IMPLEMENTING REGULATIONS, 12 PERCENT FOR SMALL BUSINESS CONCERNS AND LABOR SURPLUS AREAS). HOWEVER, SECTION 5 OF THAT ORDER VESTS DISCRETIONARY AUTHORITY) IN AN AGENCY HEAD TO DETERMINE THAT A GREATER DIFFERENTIAL THAN THAT AUTHORIZED BY THE ORDER WOULD NOT BE UNREASONABLE OR INCONSISTENT WITH THE PUBLIC INTEREST. TO ALLEVIATE THE IMPACT OF EXPENDITURES ON THE NATION'S BALANCE OF INTERNATIONAL PAYMENTS (FLOW OF GOLD) THE DEPARTMENT OF DEFENSE HAS INSTITUTED A 50-PERCENT EVALUATION FACTOR IN FAVOR OF DOMESTIC ARTICLES. SEE PARAGRAPHS 6-102.2 AND 6-104.4 OF THE ARMED SERVICES PROCUREMENT REGULATION AND PART 8 THEREOF WHICH IMPLEMENTS THE BALANCE OF PAYMENTS PROGRAM OF THE DEPARTMENT OF DEFENSE.

UNDER GENERAL STEEL'S PROPOSAL, 60 PERCENT OF THE TOTAL QUANTITY OF STEEL PIPE COVERED BY ITEM 1 AND 80 PERCENT OF THE TOTAL QUANTITY OF STEEL PIPE UNDER ITEM 2 APPARENTLY WOULD BE COMPLETELY FABRICATED, PACKAGED AND PACKED IN JAPAN AND TENDERED FOR DELIVERY AT THE DOCK IN MOBILE, ALABAMA. THE LESSER QUANTITIES OF ITEMS 1 AND 2, AND 100 PERCENT OF THE PIPE UNDER ITEM 3 APPARENTLY WOULD BE FABRICATED, PACKAGED, PACKED AND SHIPPED FROM PROVO, UTAH.

UNDER THE BALANCE OF PAYMENTS PROVISIONS OF THE INVITATION, ONLY UNITED STATES END PRODUCTS REPRESENTED BY ITEMS 1, 2 AND 3 COULD BE DELIVERED. GENERAL STEEL'S ALL OR NONE BID FOR THESE THREE ITEMS WAS IN ACCORDANCE WITH THE INVITATION LIMITATION RESPECTING THAT TYPE OF BIDDING AND WOULD HAVE OBLIGATED THE GOVERNMENT TO AWARD ALL ITEMS OR NONE. BUT IT WOULD HAVE BEEN INCONSISTENT WITH THE TERMS OF THE INVITATION TO DISREGARD THE FOREIGN CHARACTER OF 60 PERCENT OF THE PIECES OF STEEL PIPE OFFERED FOR ITEM 1 AND 80 PERCENT OF THE PIECES OF STEEL PIPE OFFERED FOR ITEM 2. UNDER THE BALANCE OF PAYMENTS PROVISIONS, A UNITED STATES PRODUCT IS ONE WHERE THE COSTS OF MANUFACTURE IN THE UNITED STATES EXCEED 50 PERCENT OF THE COST OF ALL ITS COMPONENTS. CLEARLY, THE OFFERING UNDER ONE ITEM OF A PORTION MANUFACTURED IN A FOREIGN COUNTRY AND THE REMAINING PORTION MANUFACTURED IN THE UNITED STATES CONSTITUTES A FOREIGN BID AS TO THAT ITEM WHICH IS PRECLUDED BY THE TERMS OF THE INVITATION AND IT WOULD BE INAPPROPRIATE TO DIFFERENTIATE ON A FAVORABLE PERCENTAGE BASIS THOSE QUANTITIES MANUFACTURED IN THE UNITED STATES. IN OUR OPINION THE ALL OR NONE OFFER MAY NOT BE CONSIDERED COLLECTIVELY SO AS TO CHARACTERIZE TWO ITEMS WHICH WERE CLEARLY OF FOREIGN ORIGIN AS DOMESTIC PRODUCTS BY DENOMINATING THE LAST ITEM AS DOMESTIC FOR THE SOLE PURPOSE OF ARRIVING AT A TOTAL QUANTITY PERCENTAGE IN EXCESS OF 50 PERCENT.

IT IS THEREFORE OUR VIEW THAT THE BALANCE OF PAYMENTS PROGRAM CLAUSE DOES NOT PERMIT A SPECIFIED QUANTITY OF AN END ITEM IN EXCESS OF 50PERCENT TO BE MANUFACTURED IN A FOREIGN COUNTRY AND THE BALANCE OF THE QUANTITY OF THAT ITEM TO BE MANUFACTURED IN THE UNITED STATES. THEREFORE, WE AGREE THAT ACCEPTANCE OF GENERAL STEEL'S ALL OR NONE BID WOULD HAVE BEEN CONTRARY TO THE BALANCE OF PAYMENTS PROVISIONS OF THE INVITATION.