B-163937, MAY 29, 1968

B-163937: May 29, 1968

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TO UNITED CONSTRUCTION COMPANY: REFERENCE IS MADE TO YOUR TELEGRAM OF APRIL 2. THE PERTINENT FACTS ARE ADMINISTRATIVELY REPORTED AS FOLLOWS: "ON 7 FEBRUARY 1968. COMPETITIVE PRICE PROPOSALS FOR THIS WORK WERE SOLICITED BY THE OFFICER IN CHARGE OF CONSTRUCTION (OICC) THAILAND UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (6). REQUESTS FOR PROPOSALS WERE FORWARDED TO ELEVEN FIRMS AND PROPOSALS WERE RECEIVED FROM SIC FIRMS. UNITED CONSTRUCTION COMPANY WAS THE LOW PROPOSER. THE LOW PROPOSAL RECEIVED WAS THAT SUBMITTED ORIGINALLY BY UNITED CONSTRUCTION COMPANY. SINCE THIS PROPOSAL WAS FOR STRUCTURES MANUFACTURED IN THE UNITED KINGDOM ADN NOT IN THE UNITED STATES. THIS MATTER WAS PERSONALLY REVIEWED WITH MR.

B-163937, MAY 29, 1968

TO UNITED CONSTRUCTION COMPANY:

REFERENCE IS MADE TO YOUR TELEGRAM OF APRIL 2, 1968, PROTESTING THE AWARD OF A CONTRACT TO MULLEN OVERSEAS COMPANY FOR THE PROVIDING AND ERECTION OF PREFABRICATED BUILDINGS AT UDORN RTAF BASE, THAILAND, UNDER REQUEST FOR PROPOSALS NO. N63008-68-R-0285, ISSUED FEBRUARY 7, 1968, BY THE DEPARTMENT OF THE NAVY.

THE PERTINENT FACTS ARE ADMINISTRATIVELY REPORTED AS FOLLOWS:

"ON 7 FEBRUARY 1968, COMPETITIVE PRICE PROPOSALS FOR THIS WORK WERE SOLICITED BY THE OFFICER IN CHARGE OF CONSTRUCTION (OICC) THAILAND UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (6). REQUESTS FOR PROPOSALS WERE FORWARDED TO ELEVEN FIRMS AND PROPOSALS WERE RECEIVED FROM SIC FIRMS. THE BASIS OF THE PRICES SUBMITTED, UNITED CONSTRUCTION COMPANY WAS THE LOW PROPOSER. THE UNITED PROPOSAL OFFERED UNITED KINGDOM STRUCTURES. FOUR FIRMS SUBMITTED PROPOSALS OFFERING PREFABRICATED FACILITIES MADE IN THE UNITED STATES. IN VIEW OF THE CONTINUING EFFORTS TO REDUCE THE FLOW OF GOLD AND ESPECIALLY IN VIEW OF THE SMALL COST DIFFERENCE BETWEEN THE PROPOSALS FOR FOREIGN FABRICATED FACILITIES AND UNITED STATES FABRICATED FACILITIES, THE OFFICER IN CHARGE OF CONSTRUCTION REQUESTED ALL OF THE FIRMS THAT HAD SUBMITTED PROPOSALS TO SUBMIT REVISED PROPOSALS FOR FURNISHING U.S. FABRICATED STRUCTURES ONLY. PURSUANT TO THIS REQUEST, ALL FIRMS EXCEPT UNITED SUBMITTED REVISED PROPOSALS. THE LOW PROPOSAL RECEIVED WAS THAT SUBMITTED ORIGINALLY BY UNITED CONSTRUCTION COMPANY. SINCE THIS PROPOSAL WAS FOR STRUCTURES MANUFACTURED IN THE UNITED KINGDOM ADN NOT IN THE UNITED STATES, THE OFFICER IN CHARGE DETERMINED THAT AWARD OF THE CONTRACT TO THE MULLENS OVERSEAS COMPANY, ON ITS LOW PROPOSAL FOR U.S. STRUCTURES, WOULD BE IN THE BEST INTEREST OF THE UNITED STATES.

"BETWEEN THE SUBMISSION OF THE FIRST PROPOSALS AND THE SUBMISSION OF THE REVISED PROPOSALS, UNITED CONSTRUCTION CONTACTED THE OFFICER IN CHARGE AND REQUESTED THAT IT BE GIVEN ADDITIONAL TIME TO SUBMIT ITS REVISED PROPOSAL. THIS MATTER WAS PERSONALLY REVIEWED WITH MR. FOO OF THE UNITED CONSTRUCTION COMPANY BY THE OFFICER IN CHARGE OF CONSTRUCTION AND VARIOUS MEMBERS OF HIS STAFF ON THE 9TH OF MARCH, 1968. IN VIEW OF THE URGENT REQUIREMENTS FOR THESE FACILITIES AND THEIR OVERALL EFFECT ON OUR OPERATIONS IN SOUTHEAST ASIA, THE OFFICER IN CHARGE DETERMINED THAT ADDITIONAL TIME COULD NOT BE GRANTED FOR THE SUBMISSION OF REVISED PROPOSALS.'

BASICALLY, YOUR PROTEST IS MADE ON THE FOLLOWING GROUNDS:

"THE CONTRACT CONTAINED NO RESTRICTION AS TO BUY AMERICAN SINCE ASPR WAIVES THIS ACT FOR CONSTRUCTION OUTSIDE THE CONUS. OUR SOURCE OF SUPPLY WAS THE UNITED KINGDOM AND OUR BID PRICE INCLUDED A FACTORY TRAINED ERECTION SUPERVISOR. THE OICC REJECTED OUR LOW BID AND INSTEAD GAVE US FIVE DAYS TO SUBMIT A NEW PRICE BASED UPON PROCUREMENT FROM A US SOURCE. THIS WAS A PREJUDICIAL IMPOSSIBILITY IN THE TIME ALLOWED. WE FEEL THAT HAD THE OICC DESIRED A US SOURCE THIS COULD HAVE BEEN ACCOMPLISHED IN A BUSINESSLIKE MANNER BY CHANGE ORDER TO OUR CONTRACT AFTER AWARD WITH OUR FIRM PROCURING THE BUILDINGS OR BY MAKING THEM GOVERNMENT FURNISHED. IT NOW STANDS THE OICC IS NOW SPENDING ONE HUNDRED AND TWENTY FIVE THOUSAND DOLLARS MORE THAN OUR PRICE CONTRARY TO COMP. GEN. B ONE SIX ONE EIGHT NINE FIVE AND OTHER DECISIONS AND OUR FIRM HAS BEEN PUT TO UNNECESSARY EXPENSE IN SUBMITTING A LOW BID.'

THE PROVISIONS OF THE BUY AMERICAN ACT APPLICABLE TO CONTRACTS FOR THE CONSTRUCTION OF BUILDINGS OR PUBLIC WORKS, 41 U.S.C. 10B, APPLY ONLY TO SUCH WORK "IN THE UNITED STATES" AND NOT TO THE PERFORMANCE OF SUCH WORK OUTSIDE THE UNITED STATES. HOWEVER, THE FOLLOWING DEPARTMENT OF DEFENSE POLICY, IN FURTHERANCE OF THE BALANCE OF PAYMENTS PROGRAM, FOR CONSTRUCTION PROJECTS OUTSIDE THE UNITED STATES IS SET FORTH IN ASPR 6- 804:

"6-804.1 POLICY.

(A) REVIEW OF PROJECTS. ALL PROJECTS FOR CONSTRUCTION AND FOR REPAIR 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 (IBP) 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.

(II) NEW CONSTRUCTION IS RESTRICTED TO ONLY THOSE PROJECTS WHICH ARE CLEARLY ESSENTIAL IN SUPPORT OF MISSION REQUIREMENTS.

(III) MAINTENANCE AND REPAIR OF REAL PROPERTY IS CONDUCTED AT LEVELS SUFFICIENT ONLY TO INSURE CONTINUITY OF OPERATIONS AND TO PRECLUDE SUBSEQUENT UNECONOMICAL COSTS DUE TO EXCESSIVE DETERIORATIONS.

"/B) ACCOMPLISHING PROJECTS. IN DEVELOPING CONTRACT REQUIREMENTS TO ACCOMPLISH APPROVED PROJECTS, THE IBP CONSTRUCTION PROCEDURES AS LISTED ABOVE ARE TO BE APPLIED, CONSISTENT WITH THE CURRENT WORKING ESTIMATE AND IBP LIMITATIONS ESTABLISHED IN THE PROJECT APPROVAL, PROVIDED THAT THE ADDITIONAL COST REQUIRED BY THESE PROCEDURES DOES NOT EXCEED THE RESULTANT IBP SAVINGS BY MORE THAN 50 PERCENT. UNDER THESE PROCEDURES CONTRACTS WILL BE WRITTEN TO REQUIRE THAT SPECIFIED U.S. MATERIAS WILL BE USED OR THAT GOVERNMENT MATERIALS AND EQUIPMENT WILL BE ONLY FURNISHED WHEN THE COST OF U.S. ITEMS (INCLUDING TRANSPORTATION AND HANDLING CHARGES) DOES NOT EXCEED THE COST OF FOREIGN ITEMS PLUS 50 PERCENT THEREOF. IN APPLYING THE IBP PROCEDURES, HOWEVER, A DIFFERENTIAL GREATER THAN 50 PERCENT FOR EITHER THE TOTAL PROJECT OR THE MATERIALS WITHIN THE PROJECT MAY BE USED WHEN SPECIFICALLY PROVIDED FOR IN THE PROJECT APPROVAL.

"/C) CONTRACTS FOR PERFORMANCE OF PROJECTS WILL NOT BE AWARDED UNLESS THE PROJECT HAS BEEN APPROVED IN ACCORDANCE WITH 6-804.2 AND THE IBP CONSTRUCTION PROCEDURES SET FORTH ABOVE HAVE BEEN APPLIED IN DEVELOPING CONTRACT REQUIREMENTS.

"6-804.2 PROJECT APPROVALS. ALL PROJECTS FOR CONSTRUCTION, REPAIR, AND MAINTENANCE OF REAL PROPERTY OUTSIDE THE UNITED STATES ARE SUBJECT TO THE APPROVAL REQUIREMENTS PRESCRIBED BY DOD DIRECTIVE 4270.24, DOD INSTRUCTION 5100.37, DOD DIRECTIVE 7040.2, AND DOD DIRECTIVE 7040.4. * * *"

THE ABOVE POLICY AND REGULATIONS REQUIRE FOR ALL CONSTRUCTION OUTSIDE THE UNITED STATES THE USE OF PREFABRICATED INSTALLATIONS AND STRUCTURES MANUFACTURED IN THE UNITED STATES TO THE MAXIMUM EXTENT FEASIBLE, AND CONTEMPLATE AS A NORMAL PROCEDURE THE ALLOWANCE OF A COST DIFFERENTIAL OF UP TO 50 PERCENT OF THE BALANCE OF PAYMENTS SAVINGS FOR USE OF DOMESTIC ITEMS INSTEAD OF FOREIGN ITEMS IN SUCH CONSTRUCTION PROJECTS. THE RECORD OF THE SUBJECT PROCUREMENT ESTABLISHES THAT THE ADDITIONAL COST OF SPECIFYING USE OF UNITED STATES-ORIGIN BUILDINGS WAS FOUND TO BE APPROXIMATELY 2,500,000 BAHT, AND THE RESULTANT INTERNATIONAL BALANCE OF PAYMENTS SAVINGS TO BE APPROXIMATELY 10,000,000 BAHT. ACCORDINGLY, SINCE THE ADDITIONAL COST FOR DOMESTIC STRUCTURES WAS LESS THAN 50 PERCENT OF THE BALANCE OF PAYMENTS SAVINGS EFFECTED, IT APPEARS THAT THE ADMINISTRATIVE DECISION TO REQUIRE USE OF UNITED STATES STRUCTURES WAS AUTHORIZED UNDER THE ABOVE PROVISION OF ASPR.

WE CANNOT AGREE WITH YOUR CONTENTION THAT THE REQUIREMENT FOR U.S. STRUCTURES SHOULD HAVE BEEN INSTITUTED BY A CHANGE ORDER AFTER AWARD TO YOUR FIRM, INSTEAD OF THROUGH THE SUBMISSION OF REVISED PROPOSALS, SINCE IT IS A FUNDAMENTAL PRINCIPLE OF COMPETITIVE PROCUREMENTS THAT ANY FACTOR MATERIALLY AFFECTING THE PRICE OF A CONTRACT CONSTITUTES A BASIC ELEMENT OF THE COMPETITION AND IS PROPERLY FOR CONSIDERATION BY ALL OF THE PROSPECTIVE CONTRACTORS BEFORE AWARD.

REGARDING YOUR CONTENTION THAT THE FIVE DAYS ALLOWED WERE INSUFFICIENT FOR SUBMISSION OF A REVISED PROPOSAL, THE RECORD DOES NOT SHOW WHETHER YOU SPECIFIED HOW MUCH ADDITIONAL TIME YOU WOULD REQUIRE. HOWEVER, INASMUCH AS BIRD AND SONS, INC., WHICH ORIGINALLY OFFERED ONLY UNITED KINGDOM STRUCTURES, AND REYNOLD CONSTRUCTION COMPANY WHICH ALSO HAD OFFERED ONLY UNITED KINGDOM STRUCTURES FOR ITEM NO. 3, WERE ABLE TO SUBMIT REVISED PROPOSALS ON USE OF UNITED STATES STRUCTURES WITHIN THE SPECIFIED FIVE DAYS, WE CANNOT CONCLUDE, AS YOU CONTEND, THAT IT WAS "A PREJUDICIAL IMPOSSIBILITY" FOR YOUR FIRM TO SUBMIT A REVISED PROPOSAL WITHIN THE TIME ALLOWED.

WHILE IN VIEW OF THE FOREGOING YOUR PROTEST MUST BE DENIED, WE ARE ADVISING THE SECRETARY OF THE NAVY BY LETTER OF TODAY THAT WE BELIEVE THE SUBJECT PROCUREMENT DEMONSTRATES THE DESIRABILITY OF A REVIEW OF NAVY PROCEDURES IN THIS AREA TO INSURE THAT WHENEVER PRACTICABLE REQUESTS FOR PROPOSALS ADVISE PROSPECTIVE OFFERORS IN THE FIRST INSTANCE THAT THE INTERNATIONAL BALANCE OF PAYMENTS PROGRAM MAY BE CONSIDERED IN THE AWARDING OF THE CONTRACT, AND SPECIFY THE BASES ON WHICH ALTERNATE PRICES SHOULD BE SUBMITTED FOR USE OF UNITED STATES PRODUCTS.