B-170246(2), FEB 22, 1971

B-170246(2): Feb 22, 1971

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THE GAO FINDS NO BASIS FOR THE PROTEST SINCE THE STATUS OF FORCES AGREEMENT CONTEMPLATES THAT NON-KOREAN BUSINESS WILL BE PERMITTED TO COMPETE FOR GOVERNMENT CONTRACTS IN KOREA WHEN. TO KING AND KING: FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 12. THIS PROCUREMENT IS ALSO THE SUBJECT OF A PROTEST DATED JULY 6. THE PRODUCTS WERE TO BE PRODUCED AT THE GOVERNMENT'S MILK PLANT AT CAMP BAKER. NEGOTIATIONS WERE CONDUCTED WITH OLD DOMINION. INDENCO AND MEADOW GOLD DURING JULY 1970 AND THE CLOSING DATE FOR FINAL OFFERS WAS ESTABLISHED AS AUGUST 7. THE FINAL OFFERS WERE EVALUATED AS FOLLOWS: INDENCO $3. AWARD WAS MADE TO INDENCO ON OCTOBER 13. AWARD IS AUTHORIZED BY PARAGRAPH 2-407.8(B)(3) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) PRIOR TO RESOLUTION OF PROTESTS AGAINST THE AWARD.

B-170246(2), FEB 22, 1971

BID PROTEST - VIOLATION OF STATUS OF FORCES AGREEMENT DENYING PROTEST OF MEADOW GOLD-KOREA LTD., THIRD LOW BIDDER, AGAINST THE AWARD OF A CONTRACT FOR PRODUCTION AND SUPPLY OF RECONSTITUTED FILLED MILK AND RELATED DAIRY PRODUCTS FOR U.S. ARMED FORCES IN KOREA ISSUED BY THE U.S. ARMY TO LOW BIDDER, INTERNATIONAL DAIRY ENGINEERING COMPANY. ALTHOUGH PROTESTANT, THE ONLY KOREAN COMPANY TO BID, CONTENDS THAT THE AWARD TO ANY OTHER CONTRAVENES EXISTING AGREEMENTS BETWEEN THE U.S. AND KOREA, THE GAO FINDS NO BASIS FOR THE PROTEST SINCE THE STATUS OF FORCES AGREEMENT CONTEMPLATES THAT NON-KOREAN BUSINESS WILL BE PERMITTED TO COMPETE FOR GOVERNMENT CONTRACTS IN KOREA WHEN, AS IN THIS CASE, UNAVAILABILITY OF MATERIALS REQUIRED BY U.S. STANDARDS AND THE QUALIFICATIONS OF LOCAL CONTRACTORS MAKE WIDER COMPETITION NECESSARY.

TO KING AND KING:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 12, 1970, AND SUBSEQUENT CORRESPONDENCE, RELATIVE TO YOUR PROTEST ON BEHALF OF MEADOW GOLD-KOREA, LIMITED (MEADOW GOLD), AGAINST THE AWARD OF A CONTRACT TO INTERNATIONAL DAIRY ENGINEERING COMPANY (INDENCO), OR TO ANY OTHER FIRM, UNDER REQUEST FOR PROPOSAL NO. DAJB17-70-R-0199. THIS PROCUREMENT IS ALSO THE SUBJECT OF A PROTEST DATED JULY 6, 1970, BY OLD DOMINION DAIRY PRODUCTS, INC. (OLD DOMINION).

THE SUBJECT SOLICITATION, ISSUED ON APRIL 17, 1970, BY THE DIRECTORATE OF PROCUREMENT, UNITED STATES ARMY, JAPAN, CALLED FOR OFFERS ON THE PRODUCTION AND SUPPLY OF RECONSTITUTED FILLED MILK AND RELATED DAIRY PRODUCTS FOR THE ARMED FORCES OF THE UNITED STATES GOVERNMENT, THEIR AGENCIES AND INSTRUMENTALITIES IN THE REPUBLIC OF KOREA DURING THE PERIOD JANUARY 1 THROUGH DECEMBER 31, 1971. THE PRODUCTS WERE TO BE PRODUCED AT THE GOVERNMENT'S MILK PLANT AT CAMP BAKER, YONG DONG PO, SEOUL, KOREA, MAINLY FROM INGREDIENTS PRODUCED OR PROCESSED BY UNITED STATES PLANTS. NEGOTIATIONS WERE CONDUCTED WITH OLD DOMINION, INDENCO AND MEADOW GOLD DURING JULY 1970 AND THE CLOSING DATE FOR FINAL OFFERS WAS ESTABLISHED AS AUGUST 7, 1970. THE FINAL OFFERS WERE EVALUATED AS FOLLOWS:

INDENCO $3,288,165

OLD DOMINION 3,654,866

MEADOW GOLD 3,786,822

IN ORDER FOR THE CONTRACTOR TO SECURE THE NECESSARY INGREDIENTS FROM THE UNITED STATES TO START PERFORMANCE ON JANUARY 1, 1971, THE CONTRACTING OFFICER DETERMINED THAT AWARD SHOULD BE MADE PROMPTLY, AND AFTER OBTAINING APPROVAL FROM HIGHER AUTHORITY, AWARD WAS MADE TO INDENCO ON OCTOBER 13, 1970, AS THE LOW, RESPONSIBLE OFFEROR. UNDER SUCH CIRCUMSTANCES, AWARD IS AUTHORIZED BY PARAGRAPH 2-407.8(B)(3) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) PRIOR TO RESOLUTION OF PROTESTS AGAINST THE AWARD.

THE BASIS OF YOUR PROTEST IS THAT AN AWARD OF A CONTRACT TO ANYONE OTHER THAN MEADOW GOLD, THE ONLY KOREAN COMPANY, CONTRAVENES EXISTING AGREEMENTS BETWEEN THE GOVERNMENTS OF THE UNITED STATES AND THE REPUBLIC OF KOREA. SPECIFICALLY, YOU URGE THAT THE PROCURING ACTIVITY IGNORED THE SPIRIT AND LETTER OF THE STATUS OF FORCES AGREEMENT (SOFA) (SECOND ED., JUNE 1967) BETWEEN THE TWO GOVERNMENTS AS WELL AS HEADQUARTERS, UNITED STATES FORCES, KOREA, POLICY DIRECTIVE NO. 4-7 (OCTOBER 16, 1969).

YOU STATE THAT NONE OF THE AMERICAN CONTRACTORS SHOULD HAVE BEEN DESIGNATED AS INVITED CONTRACTORS UNDER ARTICLE XV OF THE SOFA DOCUMENT WHICH AT PARAGRAPH 2 THEREOF PROVIDES:

"2. THE DESIGNATION REFERRED TO IN PARAGRAPH 1 ABOVE SHALL BE MADE UPON CONSULTATION WITH THE GOVERNMENT OF THE REPUBLIC OF KOREA AND SHALL BE RESTRICTED TO CASES WHERE OPEN COMPETITIVE BIDDING IS NOT PRACTICABLE DUE TO SECURITY CONSIDERATIONS, TO THE TECHNICAL QUALIFICATIONS OF THE CONTRACTORS INVOLVED, TO THE UNAVAILABILITY OF MATERIALS OR SERVICES REQUIRED BY THE UNITED STATES STANDARDS, OR TO LIMITATIONS OF UNITED STATES LAW. *** ."

IN ADDITION YOU INDICATE THAT THE ABOVE STANDARDS ARE IMPLEMENTED IN SECTION VI, "AUTHORITY," PARAGRAPHS 11.A AND B OF POLICY DIRECTIVE NO. 4- 7, WHICH STATES:

"11.A. THE AUTHORITY OF THE GOVERNMENT OF THE UNITED STATES TO DESIGNATE CERTAIN PERSONS AS INVITED CONTRACTORS IS CONTAINED IN ARTICLE XV, SOFA. UNDER THIS AUTHORITY, COMUS KOREA, ACTING FOR THE US GOVERNMENT, MAY, UPON CONSULTATION WITH THE ROK GOVERNMENT, DESIGNATE AS INVITED CONTRACTORS THOSE CONTRACTORS WHO ARE ELIGIBLE UNDER THE TERMS AND CONDITIONS SPECIFIED IN ARTICLE XV, SOFA.

"B. THE DESIGNATION OF AN INVITED CONTRACTOR IS SUBJECT TO THE FOLLOWING CONDITIONS:

(1) OPEN COMPETITIVE BIDDING AMONG LOCAL CONTRACTORS IS NOT PRACTICABLE DUE TO SECURITY CONSIDERATIONS.

(2) LOCAL CONTRACTORS DO NOT POSSESS THE REQUIRED TECHNICAL QUALIFICATIONS.

(3) LOCAL UNAVAILABILITY OF MATERIALS OR SERVICES REQUIRED BY US STANDARDS.

(4) LIMITATIONS IMPOSED BY US LAW."

FURTHER, YOU CONTEND THAT AS FOR LIMITATIONS IMPOSED BY UNITED STATES LAW, THE AWARD OF A CONTRACT TO A CONTRACTOR OTHER THAN MEADOW GOLD WOULD VIOLATE PARAGRAPH 7.A OF SECTION IV OF POLICY DIRECTIVE 4-7, WHICH READS:

"7.A. IN THE INTERESTS OF THE US AND ROK AND TO FURTHER US POLICY OF STRENGTHENING THE ECONOMY OF THE ROK, IT IS THE POLICY OF THIS HEADQUARTERS TO AWARD CONTRACTS FOR SUPPLIES AND SERVICES IN SUPPORT OF THE COMMAND MISSION TO KOREAN FIRMS WHENEVER POSSIBLE. US FIRMS WILL BE USED AS INVITED CONTRACTORS ONLY UNDER THE CONDITIONS PRESCRIBED IN PARAGRAPH 11, BELOW. THE DECISION TO USE US FIRMS FOR CONTRACTS IN THE ROK MUST BE BASED ON CAREFUL STUDY AND ANALYSIS OF ALL FACTORS TO INSURE COMPLIANCE WITH THIS POLICY."

INITIALLY, REPRESENTATIVES OF THE UNITED STATES ADVISED THE REPUBLIC OF KOREA GOVERNMENT (ROKG) THAT THE UNITED STATES FORCES, KOREA, PROPOSED TO EXTEND INVITED CONTRACTOR STATUS TO A QUALIFIED UNITED STATES FIRM UNDER PARAGRAPH 2, ARTICLE XV OF SOFA BECAUSE:

"REASONS FOR DESIGNATION OF AN INVITED CONTRACTOR: OPEN COMPETITIVE BIDDING AMONG LOCAL CONTRACTORS IS NOT PRACTICABLE DUE TO THE FOLLOWING:

"(1) TECHNICAL QUALIFICATIONS OF THE CONTRACTORS INVOLVED.

"(2) UNAVAILABILITY OF MATERIALS OR SERVICES REQUIRED BY THE UNITED STATES STANDARDS."

AFTER WRITTEN AND PERSONAL CONSULTATION WITH THE ROKG, REPRESENTATIVES OF THE UNITED STATES ADVISED THE ROKG ON JANUARY 9, 1970, THAT MEADOW GOLD MET THE NECESSARY TECHNICAL QUALIFICATIONS AND WOULD BE GIVEN AN OPPORTUNITY TO BID ON THE PROCUREMENT. SUCH ADVICE FURTHER STATED THAT "THE AWARD OF THIS CONTRACT IS SUBJECT TO THE EVALUATION OF THE BID OFFERS AND THE ACCEPTANCE THEREOF MUST BE IN THE BEST INTEREST OF THE UNITED STATES GOVERNMENT."

ADDITIONAL CONSULTATIONS WERE HELD BETWEEN THE PARTIES, AND IN A COMMUNICATION TO THE ROKG ON JUNE 22, 1970, A MUTUAL UNDERSTANDING WAS SUMMARIZED BY THE U.S. REPRESENTATIVES, AS FOLLOWS:

"IN VIEW OF THE MANY LETTERS ON THIS SUBJECT (SEE REFERENCES) IT IS DEEMED APPROPRIATE TO SUMMARIZE THE CURRENT SITUATION CONCERNING THE MILK PROCESSING CONTRACT. THIS LETTER IS PROVIDED TO INSURE OUR MUTUAL UNDERSTANDING.

"A. THE UNITED STATES PROCURING ACTIVITY RESPONSIBLE FOR THIS PROCUREMENT HAS SOLICITED SEVERAL FIRMS. MEADOW GOLD-KOREA, LTD., WAS THE ONLY KOREAN FIRM SOLICITED.

"B. THE FIRMS SOLICITED WILL BE COMPETING ON AN EQUAL BASIS. PREFERENTIAL TREATMENT WILL NOT BE GIVEN TO ANY FIRM. THIS ACTION IS IN CONSONANCE WITH U.S. POLICY AND SUBSTANTIATES YOUR PREFERENCE, AS REQUESTED IN YOUR 14 MAY 1970 LETTER, THAT THERE BE NO DISCRIMINATION.

"C. THE EVALUATION OF THE PROPOSALS RECEIVED FROM THOSE FIRMS SOLICITED AND THE SUBSEQUENT AWARD WILL BE IN ACCORDANCE WITH U.S. LAWS AND DIRECTIVES.

"D. CONSULTATION PROCEDURES HAVE BEEN COMPLETED FOR THE USE OF AN INVITED CONTRACTOR. THE DESIGNATION OF AN INVITED CONTRACTOR WILL BE GRANTED IF REQUIRED." THE FOLLOWING RECOGNITION OF THE UNDERSTANDING WAS EXPRESSED AFTER THE AWARD IN AN ROKG COMMUNICATION DATED OCTOBER 19, 1970, TO THE U.S. REPRESENTATIVES: ,"I APPRECIATE VERY MUCH FOR YOUR ACTION TAKEN TO GIVE AN OPPORTUNITY TO A KOREAN FIRM-MEADOW GOLD KOREA, LTD. - TO PARTICIPATE IN THE BIDDING FOR THE SUBJECT CONTRACT BASED ON PARAGRAPH 2, ARTICLE XV OF SOFA AND SECTION IV OF USFK POLICY DIRECTIVE 4-7 DATED 16 OCTOBER 1969.

"WE UNDERSTAND THAT THE DESIGNATION OF THE INVITED CONTRACTORS IN THIS INSTANCE IS TO PRACTICE A COMPETITIVE BIDDING TO ALLOW THE US GOVERNMENT TO OBTAIN FAIR AND REASONABLE PRICES, AND THIS MINISTRY HAS SO CONCURRED UPON YOUR CONSULTATION."

THE CONTRACTING OFFICER IN HIS STATEMENT CONCERNING THE PROCUREMENT REPORTS:

"DURING NEGOTIATIONS AT HQ U.S. ARMY KOREA PROCUREMENT AGENCY ON 16 JULY 1970, MR. CANNON, THE CHAIRMAN OF BOARD OF MEADOW GOLD-KOREA, LTD. (WHO IS ALSO THE CHAIRMAN OF BOARD OF MEADOW GOLD HAWAII, LTD., A SUBSIDIARY OF BEATRICE FOODS COMPANY), STATED THAT MEADOW GOLD-KOREA, LTD. WAS A KOREAN CORPORATION. HE INQUIRED AS TO WHETHER THERE WAS ANY ADVANTAGE OR DISADVANTAGE IN HIS COMPANY BEING A KOREAN CORPORATION. HE WAS ADVISED THAT THERE WOULD BE NO ADVANTAGE OR DISADVANTAGE FOR THE SOLICITATION INVOLVED THE OPERATION OF A GOVERNMENT-OWNED, CONTRACTOR OPERATED MILK PLANT IN KOREA.

"IT IS MY OPINION THAT REPRESENTATIVES OF THE KOREAN GOVERNMENT AND AMERICAN AND KOREAN REPRESENTATIVES OF BOTH MEADOW GOLD-KOREA, LTD. AND MEADOW GOLD DAIRIES, HAWAII, WERE SUFFICIENTLY APPRISED IN ADVANCE THAT, AS TO THIS PARTICULAR PROCUREMENT, THE UNITED STATES INTENDED TO MAKE ITS AWARD TO THE LOWEST RESPONSIVE RESPONSIBLE OFFEROR, WHETHER IT WAS AN INVITED CONTRACTOR OR A KOREAN FIRM. ALL WERE CLEARLY ON NOTICE TO THIS EFFECT AND VOICED NO OBJECTIONS UNTIL IT BECAME APPARENT THAT MEADOW GOLD- KOREA, LTD. WAS NOT THE LOW OFFEROR. IT IS SUBMITTED THAT IF MGK FELT THAT ITS CLAIMS WERE MERITORIOUS, IT WOULD HAVE SO ADVISED THE CONTRACTING OFFICER AND REPRESENTATIVES OF THE U.S. FORCES IN KOREA IMMEDIATELY AFTER THE ON-SITE ORIENTATIONS OR NO LATER THAN 16 JULY 1970 WHEN NEGOTIATIONS WERE HELD WITH MGK IN KOREA. TO HAVE RESTRICTED AWARD OF THE CONTRACT, IN THIS INSTANCE TO KOREAN FIRM IN WHICH A U.S. FIRM HAS A SUBSTANTIAL INTEREST SOLELY ON THE BASIS THAT MGK IS A KOREAN CORPORATION WOULD BE TANTAMOUNT TO MAKING AWARD TO A SOLE SOURCE OF SUPPLY WITH ESTIMATED FINANCIAL LOSS TO THE U.S. GOVERNMENT (DOD) IN THE AMOUNT OF $1,495,971 OVER A PERIOD OF THIRTY (30) MONTHS."

WE THINK THE RECORD CLEARLY SHOWS THAT SINCE MEADOW GOLD WAS THE ONLY QUALIFIED LOCAL KOREAN CONTRACTOR, COMPETITIVE BIDDING WAS NONEXISTENT AMONG LOCAL CONTRACTORS. IT IS EQUALLY APPARENT THAT ARTICLE XV OF SOFA CONTEMPLATES THAT NON-KOREAN BUSINESSES WILL BE PERMITTED TO COMPETE FOR GOVERNMENT CONTRACTS IN KOREA IF COMPETITIVE BIDDING IS NOT OTHERWISE PRACTICABLE DUE TO THE QUALIFICATIONS OF LOCAL CONTRACTORS OR DUE TO THE UNAVAILABILITY OF THE MATERIALS OR SERVICES REQUIRED BY U.S. STANDARDS. WE THEREFORE AGREE WITH THE CONTRACTING OFFICER THAT TO HAVE PRECLUDED OUTSIDE COMPETITION WOULD HAVE BEEN TANTAMOUNT TO AWARDING THE CONTRACT TO MEADOW GOLD ON A SOLE SOURCE BASIS.

ALTHOUGH DEVIATIONS FROM ASPR REQUIREMENTS ARE AUTHORIZED BY ASPR 1 109.4 WHEN REQUIRED TO COMPLY WITH EXECUTIVE AGREEMENTS TO WHICH THE UNITED STATES IS A PARTY, WE DO NOT FIND THAT SOFA REQUIRES THAT COMPETITION FOR A PROCUREMENT OF SUPPLIES OR SERVICES IN KOREA BE WAIVED IN FAVOR OF A SOLE SOURCE PROCUREMENT FROM A KOREAN FIRM. ADDITIONALLY, WE DO NOT BELIEVE THAT POLICY DIRECTIVE NO. 4-7 WHICH YOU CITE, CLEARLY SUPPORTS YOUR POSITION THAT THERE SHOULD HAVE BEEN NO DESIGNATION OF INVITED CONTRACTORS. WHILE YOU POINT OUT THAT UNDER PARAGRAPH 11.B(2) OF THE DIRECTIVE THE DESIGNATION OF AN INVITED CONTRACTOR IS SUBJECT TO THE CONDITION THAT "LOCAL CONTRACTORS" DO NOT POSSESS THE REQUIRED TECHNICAL QUALIFICATIONS AND THAT MEADOW GOLD HAS THE REQUIRED QUALIFICATIONS, IT SHOULD BE NOTED THAT SUCH CONDITION IS IN THE PLURAL FORM. SINCE LOCAL "CONTRACTORS" DID NOT POSSESS THE REQUIRED TECHNICAL QUALIFICATIONS AND THAT MEADOW GOLD HAS THE REQUIRED QUALIFICATIONS, IT SHOULD BE NOTED THAT SUCH CONDITION IS IN THE PLURAL FORM. SINCE LOCAL "CONTRACTORS" DID NOT POSSESS THE REQUIRED TECHNICAL QUALIFICATIONS, IT DOES NOT APPEAR THAT THE DESIGNATION OF INVITED CONTRACTORS WAS IN CONTRAVENTION OF THAT CONDITION. IT ALSO IS EVIDENT THAT PARAGRAPH 11 OF POLICY DIRECTIVE NO. 4 -7 WAS ISSUED IN IMPLEMENTATION OF PARAGRAPH 2, ARTICLE XV OF SOFA, AND WE DO NOT BELIEVE THAT SUCH DIRECTIVE SHOULD BE SUBJECTED TO A STRAINED INTERPRETATION SO AS TO CREATE AN INCONSISTENCY WITH THE COMPETITIVE BIDDING REQUIREMENTS SET OUT IN SOFA, WHICH PARAGRAPH 11 OF THE DIRECTIVE IMPLEMENTS.

ACCORDINGLY, SINCE ARTICLE XV OF SOFA AUTHORIZED THE DESIGNATION OF INVITED CONTRACTORS UPON CONSULTATION WITH THE ROKG WHERE, AS HERE, COMPETITIVE BIDDING WAS NOT OTHERWISE PRACTICABLE, AND SINCE THE RECORD SHOWS THAT THE DESIGNATION OF INVITED CONTRACTORS FOR THE SUBJECT PROCUREMENT WAS PURSUANT TO A MUTUAL AGREEMENT BETWEEN REPRESENTATIVES OF THE GOVERNMENTS OF THE UNITED STATES AND THE REPUBLIC OF KOREA, WE CANNOT CONCLUDE THAT THE DESIGNATION OF INVITED CONTRACTORS TO SECURE COMPETITION FOR THE PROCUREMENT WAS IMPROPER. ALSO, SINCE WE HAVE CONCLUDED THAT THE ADMINISTRATIVE ACTIONS WHICH CULMINATED IN THE AWARD TO INDENCO WERE WITHIN THE SCOPE OF SOFA, WE MUST REJECT YOUR FURTHER CONTENTION THAT THE AWARD TO OTHER THAN A KOREAN FIRM WAS CONTRARY TO THE PROVISIONS OF ASPR 6 -805.2(A)(I) AUTHORIZING THE PURCHASE OF FOREIGN PRODUCTS AND SERVICES PURSUANT TO A TREATY OR EXECUTIVE AGREEMENT BETWEEN GOVERNMENTS.

IN VIEW OF THE FOREGOING, YOUR PROTEST MUST BE DENIED.

AS REQUESTED, YOUR COPY OF SOFA, WHICH YOU FORWARDED WITH YOUR LETTER OF OCTOBER 12, IS ENCLOSED TOGETHER WITH A COPY OF OUR DECISION OF TODAY ON THE OLD DOMINION PROTEST.