B-170026, DEC. 14, 1970

B-170026: Dec 14, 1970

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THE CONTENTION THAT IF FACTORS SUCH AS COST OF TRANSPORTATION AND LOSS OF TAXABLE REVENUE WERE CONSIDERED IN THE EVALUATION. CANNOT BE SUPPORTED BECAUSE TRANSPORTATION COSTS WERE CONSIDERED AND INCOME TAX BENEFITS ARE TOO SPECULATIVE TO BE PART OF THE EVALUATION PROCESS. FAILURE OF RING TO ACKNOWLEDGE AN AMENDMENT PROVIDING FOR A PROGRESS PAYMENT CLAUSE IS NOT A MATERIAL DEVIATION SINCE THE EFFECT OF THE AMENDMENT WOULD BE REDUCTION IN COST TO THE BIDDER. FAILURE TO COMPLY WITH THE MINIMUM WAGE DETERMINATIONS OF THE SECRETARY OF LABOR DOES NOT MAKE RING NONRESPONSIVE BECAUSE SUCH WAGE DETERMINATIONS UNDER THE WALSH-HEALEY PUBLIC CONTRACTS ACT ARE INAPPLICABLE TO FOREIGN MANUFACTURERS. PROTESTANT'S CLAIM THAT RING SHOULD NOT HAVE BEEN EXEMPTED FROM THE BUY AMERICAN ACT OR IN THE ALTERNATIVE THAT SUCH EXEMPTION SHOULD HAVE BEEN MADE KNOWN TO OTHER BIDDERS IN THE FIRST STEP OF THE PROCUREMENT IS WITHOUT MERIT SINCE THE ACT PROVIDES THAT SECRETARY OF DEFENSE MAY MAKE EXCEPTIONS "U.S. - NORWAY MEMORANDUM OF UNDERSTANDING RELATING TO THE PROCUREMENT OF DEFENSE ARTICLES AND SERVICES" WHICH MAKES NO REQUIREMENT OF NOTICE OF POTENTIAL NORWEGIAN COMPETITION.

B-170026, DEC. 14, 1970

BID PROTEST - BIDDER RESPONSIBILITY - BUY AMERICAN ACT U.S. - NORWAY MEMORANDUM DENIAL OF PROTEST OF SDM CORPORATION AGAINST THE AWARD OF CONTRACT UNDER A TWO-STEP FORMAL ADVERTISED PROCUREMENT TO GUSTAV A. RING COMPANY, LOW BIDDER, ISSUED BY THE AIR FORCE FOR AIR TRAFFIC CONTROL LANDLINE SWITCHING SYSTEMS, DATA, AND SPARE PARTS. THE CONTENTION THAT IF FACTORS SUCH AS COST OF TRANSPORTATION AND LOSS OF TAXABLE REVENUE WERE CONSIDERED IN THE EVALUATION, THEN GUSTAV A. RING, A NORWEGIAN FIRM, WOULD NOT BE LOW, CANNOT BE SUPPORTED BECAUSE TRANSPORTATION COSTS WERE CONSIDERED AND INCOME TAX BENEFITS ARE TOO SPECULATIVE TO BE PART OF THE EVALUATION PROCESS. FAILURE OF RING TO ACKNOWLEDGE AN AMENDMENT PROVIDING FOR A PROGRESS PAYMENT CLAUSE IS NOT A MATERIAL DEVIATION SINCE THE EFFECT OF THE AMENDMENT WOULD BE REDUCTION IN COST TO THE BIDDER, THEREFORE, MAKING FAILURE TO ACKNOWLEDGE ONLY PREJUDICIAL TO BIDDER'S POSITION AND NOT TO THE GOVERNMENT'S. FAILURE TO COMPLY WITH THE MINIMUM WAGE DETERMINATIONS OF THE SECRETARY OF LABOR DOES NOT MAKE RING NONRESPONSIVE BECAUSE SUCH WAGE DETERMINATIONS UNDER THE WALSH-HEALEY PUBLIC CONTRACTS ACT ARE INAPPLICABLE TO FOREIGN MANUFACTURERS. PROTESTANT'S CLAIM THAT RING SHOULD NOT HAVE BEEN EXEMPTED FROM THE BUY AMERICAN ACT OR IN THE ALTERNATIVE THAT SUCH EXEMPTION SHOULD HAVE BEEN MADE KNOWN TO OTHER BIDDERS IN THE FIRST STEP OF THE PROCUREMENT IS WITHOUT MERIT SINCE THE ACT PROVIDES THAT SECRETARY OF DEFENSE MAY MAKE EXCEPTIONS "U.S. - NORWAY MEMORANDUM OF UNDERSTANDING RELATING TO THE PROCUREMENT OF DEFENSE ARTICLES AND SERVICES" WHICH MAKES NO REQUIREMENT OF NOTICE OF POTENTIAL NORWEGIAN COMPETITION. DEPARTMENT OF DEFENSE PROCEDURES REQUIRE NOTICE ONLY AT THE SECOND STEP OF THE PROCUREMENT.

TO SDM CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 6, 1970, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST AN AWARD TO GUSTAV A. RING A/S, OSLO, NORWAY, UNDER AIR FORCE INVITATION FOR BIDS (IFB) F34601-70-B 0549.

THE IFB IS THE SECOND STEP OF A TWO-STEP FORMAL ADVERTISING PROCUREMENT FOR AIR TRAFFIC CONTROL LANDLINE SWITCHING SYSTEMS, DATA, AND SPARE PARTS. IN THE FIRST STEP, TECHNICAL PROPOSALS WERE SOLICITED FROM EIGHT DOMESTIC SOURCES AND GUSTAV A. RING, A NORWEGIAN SOURCE. ALL THE TECHNICAL PROPOSALS RECEIVED FROM THESE NINE SOURCES IN THE FIRST STEP WERE DETERMINED TO BE ACCEPTABLE. AN INVITATION SOLICITING BIDS ON A SINGLE AND MULTIYEAR BASIS WAS THEREAFTER ISSUED TO EACH PROPOSER.

ALL NINE SOURCES BID IN THE SECOND STEP. THE "EVALUATION OF BIDS" CLAUSE PROVIDED FOR THE APPLICATION OF TRANSPORTATION COSTS AND DISCOUNTS TO THE BIDS TO DETERMINE THE LOWEST OFFER. THE THREE LOWEST BIDS EVALUATED ON THE PROVIDED BASIS ARE AS FOLLOWS:

SINGLE YEAR BASIS MULTIYEAR BASIS

GUSTAV A. RING $347,635.88 $661,615.28

SDM CORPORATION 471,000.87 807,004.77

DENRO LABORATORIES, INC. 451,525.52 834,648.06

YOU HAVE PROTESTED AGAINST AN AWARD TO RING ON SEVERAL GROUNDS WHICH WILL HEREINAFTER BE CONSIDERED. THE FIRST BASIS FOR PROTEST IS THAT--

"UPON EVALUATION OF ALL FACTORS INCLUDING THE PRICES BID FOR THE ITEMS, THE COST OF TRANSPORTATION AND INSPECTION, THE COST FOR SPECIAL HANDLING TO PRESERVE THE END ITEMS WHILE IN OVERSEAS TRANSPORT, THE ECONOMIC IMPACT DUE TO LOSS OF TAXABLE REVENUE TO THE UNITED STATES, COST DIFFERENTIALS WHICH MUST BE ADDED IN CONSIDERATION OF WAGES PREVAILING BETWEEN U.S. CONTRACTORS AS REQUIRED BY THE LABOR LAWS AND THOSE WAGES WHICH PREVAIL IN NORWAY, THE COST OF EXCESSIVE ADMINISTRATION, TRAVEL COSTS, AND LIAISON COSTS, THE BID IS NOT LOW."

AS INDICATED ABOVE, THE IFB DID PROVIDE THAT TRANSPORTATION COSTS WOULD BE CONSIDERED IN DETERMINING THE LOW BID AND SUCH COSTS WERE A PART OF THE BID EVALUATION WHICH DETERMINED THE RING BID TO BE LOW. THE OTHER FACTORS WHICH YOU REFER TO WERE NOT SET OUT IN THE IFB EVALUATION FORMULA. AMONG THOSE OTHER FACTORS IS THE ECONOMIC IMPACT DUE TO THE LOSS OF TAXABLE REVENUE. IN THAT CONNECTION, IT WAS HELD IN 43 COMP. GEN. 60 (1963) THAT INCOME TAX BENEFITS ARE TOO UNCERTAIN AND SPECULATIVE TO BE A PART OF THE EVALUATION PROCESS. FURTHER, IN 45 COMP. GEN. 59 (1965), IT WAS STATED AT PAGE 68:

" *** THE ECONOMIC IMPACT OR 'RIPPLE' EFFECT OF A PARTICULAR PROCUREMENT ARE NOT PERTINENT FACTORS TO BE CONSIDERED IN MAKING AN AWARD UNDER COMPETITIVE PROCEDURES ESPECIALLY WHERE BIDDERS ARE NOT REQUESTED TO PREPARE THEIR BIDS IN THE LIGHT OF POSSIBLE ADVERSE EFFECTS THEIR BIDS MIGHT HAVE ON A SEGMENT OF THE ECONOMY. THERE IS NO SANCTION IN THE LAW OR THE IMPLEMENTING REGULATIONS WHICH WOULD REQUIRE THE IMPOSITION OF INTANGIBLE COST FACTORS TO REFLECT ECONOMIC CHANGES THAT POSSIBLY MIGHT RESULT FROM A PARTICULAR AWARD. *** " MOREOVER, OUR OFFICE HAS HELD THAT WHERE AN IFB DOES NOT PROVIDE FOR THE ADDITION OF AN AMOUNT TO INCLUDE INSPECTION COSTS IN THE EVALUATION OF BIDS, THE INCLUSION OF SUCH COSTS IN THE EVALUATION OF BIDS WOULD BE IMPROPER. B 152593, DECEMBER 4, 1963. WAS STATED IN THE LATTER DECISION THAT IF RELATED COST FACTORS OF THE TYPE SPECIFIED IN PARAGRAPH 2-407.5 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) INCLUDING INSPECTION COSTS, ARE TO BE CONSIDERED IN THE EVALUATION OF BIDS, THE SOLICITATION OF BIDS SHALL IDENTIFY SUCH FACTORS. SEE ALSO 36 COMP. GEN. 380, 385 (1956), WHEREIN IT WAS STATED:

" *** TO PERMIT BIDDERS TO COMPETE ON EQUAL TERMS, THE INVITATION MUST BE SUFFICIENTLY DEFINITE TO PERMIT THE PREPARATION AND EVALUATION OF BIDS ON A COMMON BASIS. BIDDERS CANNOT COMPETE ON AN EQUAL BASIS AS REQUIRED BY LAW UNLESS THEY KNOW IN ADVANCE THE BASIS ON WHICH THEIR BIDS WILL BE EVALUATED. *** " IN VIEW OF THE FOREGOING, THE FACTORS YOU CONTEND SHOULD BE TAKEN INTO CONSIDERATION IN EVALUATING THE BIDS, TO THE EXTENT THAT THEY WERE NOT IN THE EVALUATION FORMULA IN THE IFB, ARE NOT FOR CONSIDERATION.

THE SECOND AND THIRD GROUNDS FOR PROTEST ARE RELATED. THE SECOND GROUND IS THAT--

"THE RING COMPANY FAILED TO ACKNOWLEDGE AMENDMENT #1 IN THEIR WRITTEN RESPONSE TO STEP II OF THE IFB."

THE THIRD GROUND IS THAT--

"THE RING COMPANY FAILED TO RETURN SIGNED COPIES OF AMENDMENT #1 WITH THEIR BID."

AS A MATTER OF CLARIFICATION, IT SHOULD BE UNDERSTOOD THAT ALTHOUGH THERE ARE TWO STEPS TO THE PROCUREMENT THERE ARE NOT TWO STEPS TO THE IFB. THE FIRST STEP OF THE PROCUREMENT IS A REQUEST FOR TECHNICAL PROPOSALS. IT IS ONLY THE SECOND STEP THAT IS AN IFB.

AMENDMENT 1 ADDED PROGRESS PAYMENT CLAUSES TO THE IFB. BY THE ADDITION OF THESE CLAUSES, THE CONTRACTOR WOULD BE PAID AS THE WORK PROGRESSES INSTEAD OF AS THE SUPPLIES ARE DELIVERED AND ACCEPTED BY THE GOVERNMENT AS ORIGINALLY PROVIDED. THE AMENDMENT THUS PROVIDED A PAYMENT ALTERNATIVE MORE LIBERAL THAN THE ORIGINAL PAYMENT TERMS. THE ONLY POSSIBLE EFFECT OF THE PROGRESS PAYMENT TERMS COULD BE A REDUCTION IN A BIDDER'S CONTEMPLATED COST FOR FINANCING THE WORK UNDER THE CONTRACT UNTIL IT IS PAID WITH RESULTANT REDUCTIONS IN THE COST OF PERFORMANCE AND THE AMOUNT OF THE BID. IN THAT CONNECTION, IN B 165150, SEPTEMBER 16, 1968, IT WAS STATED:

" *** WHILE THE GENERAL RULE IS THAT UNACKNOWLEDGED AMENDMENTS AFFECTING PRICE TO A DE MINIMIS EXTENT CAN BE WAIVED, SUCH RULE IS APPLICABLE ONLY IN SITUATIONS WHERE THE AMENDMENTS EFFECT CHANGES WHICH INCREASE THE COST OF PERFORMANCE SINCE, IN THAT EVENT, THE BIDDER IS OFFERING THE GOVERNMENT SOMETHING LESS THAN IT REQUIRES. HOWEVER, IN A SITUATION WHERE THE AMENDMENTS PROVIDE FOR CHANGES WHICH REDUCE THE COST OF PERFORMANCE, AND THE BIDDER FAILS TO ACKNOWLEDGE SUCH CHANGES, HE THEN IS OFFERING TO UNDERTAKE A MORE BURDENSOME CONTRACT THAN OTHER BIDDERS. AS WAS STATED IN 41 COMP. GEN. 550, 553, IF IT IS ASSUMED 'THAT THE LOW BIDDER'S FAILURE TO ACKNOWLEDGE THE ADDENDUM WAS DUE TO IGNORANCE OF ITS EXISTENCE, THEN HIS BID PRICE WOULD NOT REFLECT THE LESSENED REQUIREMENTS OF THE SPECIFICATIONS AND, THEREFORE, HIS FAILURE TO ACKNOWLEDGE WOULD ONLY BE PREJUDICIAL TO HIS COMPETITIVE POSITION AND EVEN POSSIBLY BENEFICIAL TO THE POSITION OF THE OTHER BIDDERS.' FURTHER, IN B-159412, JULY 26, 1966, WE HELD THAT 'WHERE THE UNACKNOWLEDGED AMENDMENT MERELY EFFECTS A DECREASE IN THE COST OF PERFORMANCE FAILURE TO ACKNOWLEDGE IT SHOULD BE WAIVED AS MINOR INFORMALITY.' THUS, THE AMOUNT OF THE DECREASE WAS NOT THE SIGNIFICANT FACTOR IN THAT CASE. SEE, ALSO, B-156651, JUNE 21, 1965. FURTHER, IN A SITUATION WHERE THE BIDDER FAILS TO ACKNOWLEDGE AMENDMENTS HAVING THE EFFECT OF DECREASING THE COST OF PERFORMANCE, THE BIDDER DOES NOT HAVE THE OPTION OF REMAINING SILENT AND NOT RECEIVING THE AWARD, SINCE THE GOVERNMENT, PURSUANT TO ASPR 2-405, MAY WAIVE THE FAILURE TO ACKNOWLEDGE THE AMENDMENTS AND MAKE AN AWARD ON THE BASIS OF THE BID AS SUBMITTED." IN VIEW OF THE FOREGOING, THE FAILURE TO ACKNOWLEDGE RECEIPT OF THE AMENDMENT IN THE BID AND TO RETURN SIGNED COPIES WITH THE BID IS NOT CONSIDERED AS A MATERIAL DEVIATION.

THE FOURTH BASIS FOR PROTEST IS THAT--

"THE COMPANY FAILED TO STATE WHETHER OR NOT IT IS SMALL BUSINESS AS REQUIRED BY PAGE 2 OF STANDARD FORM 33 AND 33A."

ASPR 2-405(II) SPECIFICALLY INCLUDES THE BIDDER'S "FAILURE TO MAKE A REPRESENTATION CONCERNING HIS SIZE STATUS" AS AN EXAMPLE OF THE TYPE OF MINOR INFORMALITY THAT CAN BE WAIVED. THEREFORE, IT IS OF NO CONSEQUENCE THAT THE COMPANY FAILED TO INDICATE IN ITS BID WHETHER IT IS A SMALL BUSINESS CONCERN.

THE FIFTH CONTENTION IS THAT--

"THE GUSTAVE A. RING COMPANY IS NOT A RESPONSIVE BIDDER SINCE IT DOES NOT INTEND TO COMPLY WITH THE MINIMUM WAGE DETERMINATIONS AS ESTABLISHED BY THE SECRETARY OF LABOR AND OTHER LABOR LAWS GOVERNING CONTRACTS OF THE TYPE CONTEMPLATED BY THIS PROCUREMENT." WHILE THE QUESTION OF INTENTION TO COMPLY WITH APPLICABLE LABOR LAWS IS GENERALLY REGARDED BY OUR OFFICE AS RELATING TO THE RESPONSIBILITY OF THE BIDDER RATHER THAN TO THE RESPONSIVENESS OF HIS BID, THE QUESTION OF RING'S INTENT IN THIS CASE WOULD IN ANY EVENT APPEAR TO BE IMMATERIAL IN LIGHT OF THE DEPARTMENT OF LABOR'S INTERPRETATION THAT THE WALSH-HEALEY PUBLIC CONTRACTS ACT (41 U.S.C. 35-45) IS INAPPLICABLE TO FOREIGN MANUFACTURERS. 41 CFR 50- 201.603(B).

THE BASIS FOR THIS DETERMINATION IS AN ANALOGY TO THE HOLDING OF THE SUPREME COURT IN FOLEY BROTHERS, INC. V FILARDO, 336 U.S. 281 (1949), THAT THE FORMER EIGHT HOUR LAW DID NOT APPLY TO WORK PERFORMED IN IRAQ AND IRAN UNDER A UNITED STATES CONSTRUCTION CONTRACT. THE COURT OBSERVED IN THAT CASE, AT PAGE 285:

"THE CANON OF CONSTRUCTION WHICH TEACHES THAT LEGISLATION OF CONGRESS, UNLESS A CONTRARY INTENT APPEARS, IS MEANT TO APPLY ONLY WITHIN THE TERRITORIAL JURISDICTION OF THE UNITED STATES *** (CITATION OMITTED) IS A VALID APPROACH WHEREBY UNEXPRESSED CONGRESSIONAL INTENT MAY BE ASCERTAINED." FURTHER, IT WAS STATED AT PAGE 286:

" *** AN INTENTION SO TO REGULATE LABOR CONDITIONS WHICH ARE THE PRIMARY CONCERN OF A FOREIGN COUNTRY SHOULD NOT BE ATTRIBUTED TO CONGRESS IN THE ABSENCE OF A CLEARLY EXPRESSED PURPOSE. *** " THE COURT REVIEWED THE LEGISLATIVE HISTORY AND THE ADMINISTRATIVE INTERPRETATIONS TO ASCERTAIN WHETHER THERE WAS ANY INDICATION OF A CONGRESSIONAL INTENT TO PROVIDE FOR EXTRATERRITORIAL APPLICABILITY. FINDING NONE, IT HELD THAT THE EIGHT HOUR LAW DID NOT APPLY TO THE CONTRACT UNDER CONSIDERATION.

THE DEPARTMENT OF LABOR BY REGULATION AND BY OPINION HAS DETERMINED THAT THE COVERAGE OF THE WALSH-HEALEY ACT DOES NOT EXTEND TO WORK PERFORMED OUTSIDE THE GEOGRAPHIC LIMITS OF THE 50 STATES, PUERTO RICO, THE VIRGIN ISLANDS, OR THE DISTRICT OF COLUMBIA. WITH RESPECT TO THE WEIGHT TO BE ACCORDED SUCH DETERMINATIONS, SEE WIRTZ V HEALY, 227 F. SUPP. 123 (1964), AT PAGE 130. INASMUCH AS THE PROTEST PRESENTS NO BASIS FOR REACHING A CONCLUSION DIFFERENT FROM THAT OF THE LABOR DEPARTMENT WITH RESPECT TO THE WALSH-HEALEY ACT, AND SINCE "OTHER LABOR LAWS," NOT SPECIFIED IN THE PROTEST, MAY BE PRESUMED TO BE INAPPLICABLE TO RING (SEE FOLEY BROTHERS, SUPRA), THIS ASPECT OF THE CASE DOES NOT CONSTITUTE GROUNDS FOR LEGAL OBJECTION TO AN AWARD TO RING.

THE SIXTH CONTENTION IS THAT--

"NOTWITHSTANDING LANGUAGE IN THE IFB TO THE CONTRARY, THIS BIDDER IS NOT EXEMPT FROM THE PROVISIONS OF THE BUY AMERICAN ACT."

THE LANGUAGE IN THE INVITATION YOU APPARENTLY HAVE REFERENCE TO IS PARAGRAPH J-3 WHICH PROVIDED:

"BIDS OR PROPOSALS FOR THIS PROCUREMENT ARE BEING SOLICITED FROM SOURCES IN NORWAY. IF A BID OR PROPOSAL WOULD BE ACCEPTABLE FROM THE STANDPOINT OF PRICE AND OTHER FACTORS, BUT FOR THE CONTRACT CLAUSE ENTITLED 'BUY AMERICAN ACT,' IF THAT BID OR PROPOSAL OFFERS END PRODUCTS MANUFACTURED IN NORWAY OR THE UNITED STATES, AND IF THE COST OF THE COMPONENTS THEREOF WHICH ARE MINED, PRODUCED, OR MANUFACTURED IN NORWAY, THE UNITED STATES, OR CANADA EXCEEDS FIFTY PER CENT (50%) OF THE COST OF ALL THE COMPONENTS THEREOF, THEN THE MATTER WILL BE FORWARDED TO THE SECRETARY OF DEFENSE FOR A DETERMINATION AS TO WHETHER IT WOULD BE IN THE PUBLIC INTEREST TO EXCEPT THE END PRODUCT FROM THE RESTRICTIONS OF THE BUY AMERICAN ACT."

PARAGRAPH J-3 PROVIDES FOR AN EXEMPTION FROM THE BUY AMERICAN ACT UPON A SECRETARIAL DETERMINATION THAT IT IS IN THE PUBLIC INTEREST. THIS IS CONSISTENT WITH THE BUY AMERICAN ACT, 41 U.S.C. 10A-D, WHICH PROVIDES FOR DOMESTIC PREFERENCE "UNLESS THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT CONCERNED SHALL DETERMINE IT TO BE INCONSISTENT WITH THE PUBLIC INTEREST." AFTER THE EVALUATION OF BIDS, A SECRETARIAL DETERMINATION WAS MADE TO WAIVE THE BUY AMERICAN ACT PROVISIONS. OPERATION OF THE DETERMINATION PROVIDED FOR IN THE BUY AMERICAN ACT ITSELF, A SECRETARIAL EXEMPTION FROM THE DOMESTIC PREFERENCE WAS MADE. RING IS THEREFORE EXEMPT FROM THE PROVISIONS OF THE BUY AMERICAN ACT.

THE SEVENTH CONTENTION IS THAT--

"AN AWARD TO THIS BIDDER WILL RESULT IN AN UNENFORCEABLE CONTRACT AS THE U.S. GOVERNMENT WOULD BE UNABLE TO AUDIT THE NEGOTIABLE PORTIONS OF ANY RESULTANT CONTRACT, SINCE FOREIGN CONTRACTORS ARE EXEMPT FROM ASPR SECTION 6."

THIS CONTENTION APPARENTLY ALLUDES TO ASPR 6-704 AND 6-1000, ET SEQ., WHICH SET FORTH THE POLICIES AND PROCEDURES FOR EXEMPTING THE STATUTORY REQUIREMENT FOR THE EXAMINATION OF RECORDS CLAUSE FROM CONTRACTS WITH FOREIGN CONTRACTORS. UNDER THESE PROVISIONS, THE EXAMINATION OF RECORDS CLAUSE IS NOT AUTOMATICALLY EXCLUDED WHEN A FOREIGN CONTRACT IS INVOLVED. ASPR 6-1002 PROVIDES THAT THE "EXCLUSION OF THE CLAUSE SHOULD BE ALLOWED ONLY AFTER THE CONTRACTING OFFICER HAS MADE ALL REASONABLE EFFORTS TO INCLUDE THE CLAUSE." HOWEVER, THE QUESTION RAISED BY YOU IS PREMATURE SINCE THE APPLICABILITY OF THE CLAUSE WOULD HAVE TO BE DETERMINED WHEN THE NEGOTIABLE PORTIONS OF THE CONTRACT BECOME SUBJECT TO DISCUSSIONS BETWEEN THE CONTRACTING PARTIES. THE EIGHTH CONTENTION IS THAT--

"THE PROVISIONS OF A SO-CALLED U.S. - NORWAY MEMORANDUM DATED 1968, WHICH WE UNDERSTAND EXISTS, REQUIRE NOTICE TO DOMESTIC CONTRACTORS OF POTENTIAL NORWEGIAN COMPETITION PRIOR TO ANY EXPENDITURES OF MONIES IN PURSUIT OF A CONTRACT. SUCH NOTICE WAS NOT GIVEN TO THE POTENTIAL SUBCONTRACTORS AT THE BEGINNING OF THIS SOLICITATION (STEP I). ONLY AFTER DOMESTIC CONTRACTORS SPENT THOUSANDS OF DOLLARS PREPARING TECHNICAL PROPOSALS AND QUALIFYING FOR STEP II OF THIS INVITATION WAS THE NORWEGIAN EXCEPTION TO THE BUY AMERICAN ACT REVEALED. HAVING FAILED TO NOTIFY DOMESTIC CONTRACTORS THE SO-CALLED U.S. - NORWAY MEMORANDUM PROVISIONS ARE NOT APPLICABLE AND THE BUY AMERICAN ACT DETERMINATIONS SHOULD GOVERN."

THE "UNITED STATES-NORWAY MEMORANDUM OF UNDERSTANDING RELATING TO THE PROCUREMENT OF DEFENSE ARTICLES AND SERVICES" (MOU) WAS EXECUTED IN FEBRUARY 1968 BY THE SECRETARY OF DEFENSE ON BEHALF OF THE UNITED STATES, AND BY THE MINISTER OF DEFENSE ON THE PART OF THE GOVERNMENT OF NORWAY. THE MOU PROVIDES IN PERTINENT PART:

" *** THE DOD WILL SEARCH OUT POTENTIAL DOD REQUIREMENTS SUITABLE FOR PROCUREMENT FROM NORWEGIAN SOURCES WITH THE OBJECTIVE OF PROCURING SELECTED EQUIPMENT AND SUPPLIES IN NORWAY THROUGH CY 1973. SUCH PROCUREMENTS WILL INCLUDE SELECTED DEFENSE ITEMS WHICH: (I) SATISFY DOD REQUIREMENTS FOR PERFORMANCE, QUALITY, AND DELIVERY AND (II) COST DOD NO MORE THAN WOULD COMPARABLE U.S. - SOURCE DEFENSE ARTICLES ON FOREIGN- SOURCE DEFENSE ITEMS ELIGIBLE FOR PROCUREMENT CONTRACT AWARD. IN INVITING COMPETITIVE BIDS FROM NORWEGIAN SOURCES FOR SUCH SELECTED DEFENSE ITEMS, THE DOD WILL EVALUATE SUCH BIDS WITHOUT IMPOSING ANY DIFFERENTIAL UNDER THE BUY AMERICAN ACT OR THE BALANCE OF PAYMENTS PROGRAM AND WITHOUT TAKING APPLICABLE U.S. CUSTOMS AND DUTIES INTO CONSIDERATION SO THAT NORWEGIAN FIRMS MAY BETTER COMPETE FOR THE SALE OF SUCH DEFENSE ITEMS TO THE DOD WITH U.S. FIRMS OR FOREIGN FIRMS WHICH ARE ELIGIBLE FOR PROCUREMENT CONTRACT AWARDS. *** "

THERE IS NOTHING IN THE FOREGOING QUOTATION FROM THE MOU WHICH PROVIDES THAT THE GOVERNMENT SOLICITATIONS WILL CONTAIN NOTICES OF POTENTIAL NORWEGIAN COMPETITION. THERE ARE DEPARTMENT OF DEFENSE (DOD) INTERNAL OPERATING PROCEDURES, NOT PUBLISHED REGULATIONS, WHICH WERE FORWARDED TO THE MILITARY DEPARTMENTS TO IMPLEMENT THE MOU. THESE DOD PROCEDURES DO PROVIDE FOR THE "NOTICE OF POTENTIAL NORWEGIAN SOURCE COMPETITION," QUOTED ABOVE, BEING INCLUDED IN "EACH SOLICITATION FOR AN ITEM." THERE IS NOTHING IN THE IMPLEMENTING PROCEDURES DEFINING "SOLICITATION FOR AN ITEM." THE AIR FORCE HAS ADVISED THAT SINCE THE PARAGRAPH RELATES TO PRICE COMPETITION AND THAT IS NOT SOUGHT UNTIL THE SECOND STEP, IT DOES NOT CONSIDER THE PROVISION RELEVANT TO THE FIRST STEP AND HAS CONSTRUED THE PARAGRAPH AS APPLICABLE TO THE SECOND STEP. AN EXAMINATION OF THE ASPR PROVISIONS ON TWO-STEP FORMAL ADVERTISING DOES NOT INDICATE A REQUIREMENT FOR LISTING EVALUATION FACTORS IN THE FIRST STEP THAT BEING RESTRICTED COMPLETELY TO EVALUATION OF THE PRODUCT. ON THE OTHER HAND, IT DOES NOT PRECLUDE SUCH FACTORS FROM BEING STATED IN THE FIRST STEP. ANY EVENT, THERE IS NO REQUIREMENT IN LAW THAT THE NOTICE TO NORWEGIAN COMPETITION BE INCLUDED IN THE FIRST STEP.

BECAUSE DOMESTIC CONTRACTORS SPENT THOUSANDS OF DOLLARS TO QUALIFY UNDER THE IFB IN THE SECOND STEP OF THE PROCUREMENT BEFORE BEING ADVISED OF NORWEGIAN COMPETITION, YOU STATE THAT THE BUY AMERICAN ACT PREFERENCE FOR DOMESTIC ARTICLES SHOULD GOVERN. HOWEVER, THE INTERNAL OPERATING PROCEDURES STATE THAT THERE IS NOT TO BE A BLANKET "ACROSS THE BOARD" EXEMPTION FROM THE BUY AMERICAN ACT IN EVERY CASE WHERE A NORWEGIAN SOURCE IS INVOLVED AND THAT THE EXEMPTION WILL BE CONSIDERED ON A CASE-BY-CASE BASIS. MOREOVER, WHETHER IT IS IN THE PUBLIC INTEREST TO APPLY THE BUY AMERICAN ACT IS A MATTER OF DISCRETION VESTED IN THE GOVERNMENT DEPARTMENTS--NOT OUR OFFICE. 41 COMP. GEN. 70, 73 (1961). AS INDICATED ABOVE, IT HAS BEEN DETERMINED ADMINISTRATIVELY THAT IN THIS CASE IT IS IN THE PUBLIC INTEREST TO WAIVE THE BUY AMERICAN ACT PREFERENCE. WE HAVE NO AUTHORITY TO DETERMINE OTHERWISE.

THE NINTH CONTENTION IS THAT--

"PROVISIONS OF THE DUTY FREE ENTRIES CLAUSE OF THE IFB ARE NOT APPLICABLE SINCE THERE IS NOT A SHORTAGE OF DOMESTIC SUPPLIERS QUALIFIED TO RECEIVE THIS AWARD (EIGHT SUCH SUPPLIERS HAVE BEEN DEEMED ACCEPTABLE)."

HOWEVER, "A SHORTAGE OF DOMESTIC SUPPLY" IS ONLY ONE ALTERNATIVE WHEN THE DUTY-FREE ENTRY CLAUSE MAY BE USED. ASPR 6-603.1(II)(B). ITS USE IS ALSO PROVIDED FOR WHEN THE PROCUREMENT "IS MADE IN TIME OF WAR OR DURING A NATIONAL EMERGENCY." ASPR 6-603.1(II)(A). A NATIONAL EMERGENCY WAS DECLARED BY PRESIDENTIAL PROCLAMATION 2914 DATED DECEMBER 16, 1950, WHICH STILL IS IN EFFECT. SEE ASPR 3-201.2.

THE TENTH CONTENTION IS THAT--

"THE SO-CALLED MEMORANDUM OF UNDERSTANDING BETWEEN THE U.S. AND NORWAY IS ILLEGAL AND HAS NO FORCE OR EFFECT IN THIS INSTANCE SINCE IT USURPS CONGRESSIONAL AUTHORITY OVER APPROPRIATIONS, CONSTITUTES A NEGATION OF THE BUY AMERICAN ACT, VIOLATES THE COMMERCE CLAUSE OF THE U.S. CONSTITUTION, AND IS A TREATY NOT APPROVED BY THE SENATE OF THE U.S."

THE MOU PROVIDES IN PERTINENT PART THAT IN CONSIDERATION OF SUBSTANTIAL PROCUREMENT BY THE MINISTRY OF DEFENSE OF CERTAIN ITEMS FROM SOURCES IN THE UNITED STATES, THE DOD WILL SEARCH OUT POTENTIAL DOD REQUIREMENTS SUITABLE FOR PROCUREMENT FROM NORWEGIAN SOURCES WITH THE OBJECTIVE OF PROCURING SELECTED EQUIPMENT AND SUPPLIES IN NORWAY THROUGH CALENDAR YEAR 1973 WITH A TARGET VALUE OF $30,000,000. PROVISION IS ALSO MADE FOR AN ADDITIONAL PROCUREMENT OF DEFENSE ITEMS FOR USE BY THE UNITED STATES IN NORWAY WITH A TARGET VALUE OF $10,000,000. RELATIVE TO THOSE PROCUREMENTS, SEE THE PROVISIONS FROM THE MOU QUOTED ABOVE IN REGARD TO THE EIGHTH CONTENTION.

PURSUANT TO CONGRESSIONAL AUTHORIZATION CONTAINED IN SECTION 402 OF THE MUTUAL DEFENSE ASSISTANCE ACT OF 1949, 63 STAT. 714, AN EXECUTIVE AGREEMENT WAS ENTERED INTO WITH THE GOVERNMENT OF NORWAY EFFECTIVE JANUARY 27, 1950. THE PREAMBLE TO THE MOU STATES THAT THE AGREEMENT REACHED THEREIN IS IN CONSONANCE WITH THE EXECUTIVE AGREEMENT AND DOES NOT, IN OF ITSELF, OBLIGATE APPROPRIATED FUNDS. THEREFORE, WE DO NOT BELIEVE THAT THE MOU USURPS CONGRESSIONAL AUTHORITY OVER APPROPRIATIONS OR THAT IT IS A TREATY REQUIRING SENATE APPROVAL.

ALSO, SINCE THE BUY AMERICAN ACT, 41 U.S.C. 10A, PROVIDES THAT PURCHASES OTHERWISE REQUIRED TO BE MADE IN THE UNITED STATES MAY BE MADE FROM FOREIGN SOURCES IF THE HEAD OF THE DEPARTMENT CONCERNED FINDS PURCHASES FROM UNITED STATES SOURCES TO BE INCONSISTENT WITH THE PUBLIC INTEREST, WE ALSO DO NOT BELIEVE THAT THE MOU VIOLATES THE COMMERCE CLAUSE OF THE CONSTITUTION (ARTICLE I, SECTION 8, PARAGRAPH 3) OR CONSTITUTE AN UNAUTHORIZED WAIVER OF THE DOMESTIC PREFERENCE.

THE ELEVENTH CONTENTION IS THAT--

"THE BIDDER FAILED TO PROPERLY EXECUTE THE SECTIONS CONCERNING PRICE AND IDENTIFICATION OF THE DD1423 CONTRACTOR DATA REQUIREMENTS LIST. THE SECTIONS REFERRED TO AFFECT PRICE AND FORMAT."

THE FAILURE TO COMPLETE DD FORM 1423 IS A MINOR DEVIATION WHICH MAY BE WAIVED IN ACCORDANCE WITH ASPR 2-405. SEE B-169446, JULY 7, 1970.

THE FINAL CONTENTION IS THAT--

"SUCH AN AWARD TO THE RING COMPANY WOULD NOT BE IN THE BEST INTERESTS OF THE U.S. GOVERNMENT."

UNDER THE PROCUREMENT STATUTES, AWARDS AS A RESULT OF ADVERTISED BIDDING PROCEDURES ARE REQUIRED TO BE MADE TO THE LOWEST RESPONSIBLE AND RESPONSIVE BIDDER. 10 U.S.C. 2305(C). NO QUESTION HAS BEEN RAISED AS TO RING'S RESPONSIBILITY. ALSO, IT HAS BEEN DETERMINED TO BE IN THE PUBLIC INTEREST TO WAIVE THE BUY AMERICAN ACT DOMESTIC PREFERENCE. THE REQUIREMENTS ESTABLISHED BY LAW FOR DETERMINING THE GOVERNMENT'S BEST INTEREST IN MAKING AN AWARD TO RING HAVE BEEN MET.

IN THE CIRCUMSTANCES, AND SINCE WE FIND NO LEGAL IMPEDIMENTS TO THE AWARD, YOUR PROTEST IS ..END :