B-173819, OCT 6, 1971

B-173819: Oct 6, 1971

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SINCE TUBES AND PUMPS ARE NOT STRUCTURAL ITEMS. AWARD TO VICKERS WAS NOT IMPROPER. TO FEDERATION OF YOUNGSTOWN WELDING AND ENGINEERING EMPLOYEES: REFERENCE IS MADE TO YOUR PROTEST OF AUGUST 6. STATES THAT THE CONTRACT IN QUESTION WAS AWARDED BY THE NEWPORT NEWS SHIPBUILDING AND DRYDOCK COMPANY (NEWPORT NEWS) AS A SUBCONTRACT UNDER TWO PRIME CONTRACTS WHICH NEWPORT NEWS HOLDS WITH THE NAVY FOR THE CONSTRUCTION OF FIVE SUBMARINES. THE SUBCONTRACT WITH VICKERS WAS APPROVED BY THE NAVY AS REQUIRED BY THE TERMS OF THE PRIME CONTRACTS WHICH ALSO MADE THE PROVISIONS OF THE BUY AMERICAN ACT. MIDBODY OR OTHER MAJOR FIXED STRUCTURAL COMPONENT OF THE VESSEL SHALL BE CONSTRUCTED IN A FOREIGN SHIPYARD.'" THIS CLAUSE IS AN IMPLEMENTATION OF THE PROVISOS IN THE DEPARTMENT OF DEFENSE APPROPRIATION ACT APPLICABLE TO THE PURCHASE OF THE SUBMARINES: "PROVIDED.

B-173819, OCT 6, 1971

CONTRACTS - SHIP CONSTRUCTION - FOREIGN SHIPYARD PROHIBITION DECISION DENYING PROTEST OF FEDERATION OF YOUNGSTOWN WELDING AND ENGINEERING EMPLOYEES AGAINST AWARD OF SUBCONTRACT FOR TORPEDO TUBES AND PUMPS TO VICKERS COMPANY OF CANADA UNDER PRIME CONTRACT FOR FIVE SUBMARINES WITH NEWPORT NEWS SHIPBUILDING AND DRYDOCK COMPANY. SINCE TUBES AND PUMPS ARE NOT STRUCTURAL ITEMS, BUT MERE COMPONENTS, AND AS THE AWARD REPRESENTS LESS THAN 1.5 PERCENT OF THE CEILING COST FOR THE FIVE SUBMARINES, THE FOREIGN SHIPYARD CONSTRUCTION PROHIBITION CLAUSE HAS NOT BEEN VIOLATED. (SEE 48 COMP. GEN. 709). AWARD TO VICKERS WAS NOT IMPROPER.

TO FEDERATION OF YOUNGSTOWN WELDING AND ENGINEERING EMPLOYEES:

REFERENCE IS MADE TO YOUR PROTEST OF AUGUST 6, 1971, AGAINST THE AWARD OF A CONTRACT INVOLVING TORPEDO TUBES AND ASSOCIATED PUMPS TO THE VICKERS COMPANY OF CANADA (VICKERS) ON THE GROUND THAT SUCH CONTRACT HAS AN ADVERSE ECONOMIC EFFECT ON THE MEMBERS OF THE FEDERATION OF YOUNGSTOWN WELDING AND ENGINEERING EMPLOYEES.

THE ADMINISTRATIVE REPORT, WHICH OUR OFFICE REQUESTED FROM THE DEPARTMENT OF THE NAVY, STATES THAT THE CONTRACT IN QUESTION WAS AWARDED BY THE NEWPORT NEWS SHIPBUILDING AND DRYDOCK COMPANY (NEWPORT NEWS) AS A SUBCONTRACT UNDER TWO PRIME CONTRACTS WHICH NEWPORT NEWS HOLDS WITH THE NAVY FOR THE CONSTRUCTION OF FIVE SUBMARINES. THE SUBCONTRACT WITH VICKERS WAS APPROVED BY THE NAVY AS REQUIRED BY THE TERMS OF THE PRIME CONTRACTS WHICH ALSO MADE THE PROVISIONS OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D, APPLICABLE.

THE REPORT FURTHER STATES THAT BOTH PRIME CONTRACTS CONTAINED A CLAUSE ENTITLED "FOREIGN SHIPYARD CONSTRUCTION PROHIBITION" WHICH, IN PERTINENT PART, STATES:

"'IN FURTHERANCE OF THE SHIPBUILDING AND CONVERSION APPROPRIATION REQUIREMENTS OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, NEITHER THE VESSEL NOR THE HULL, MIDBODY OR OTHER MAJOR FIXED STRUCTURAL COMPONENT OF THE VESSEL SHALL BE CONSTRUCTED IN A FOREIGN SHIPYARD.'"

THIS CLAUSE IS AN IMPLEMENTATION OF THE PROVISOS IN THE DEPARTMENT OF DEFENSE APPROPRIATION ACT APPLICABLE TO THE PURCHASE OF THE SUBMARINES:

"PROVIDED, THAT NONE OF THE FUNDS HEREIN PROVIDED FOR THE CONSTRUCTION AND CONVERSION OF ANY NAVAL VESSEL TO BE CONSTRUCTED IN SHIPYARDS IN THE UNITED STATES SHALL BE EXPENDED IN FOREIGN SHIPYARDS FOR THE CONSTRUCTION OF MAJOR COMPONENTS OF THE HULL OR SUPERSTRUCTURE OF SUCH VESSEL; PROVIDED FURTHER, THAT NONE OF THE FUNDS HEREIN PROVIDED SHALL BE USED FOR THE CONSTRUCTION OF ANY NAVAL VESSEL IN FOREIGN SHIPYARDS."

THESE PROVISOS AND THE FOREIGN SHIPYARD CONSTRUCTION PROHIBITION CLAUSE HAVE PREVIOUSLY BEEN INTERPRETED BY OUR OFFICE. IN 48 COMP. GEN. 709, 714 -716 (1969), WE HELD, WITH RESPECT TO THE FIRST PROVISO, THAT IT DID NOT REASONABLY APPLY TO CONSTRUCTION CONDUCTED IN FOREIGN SHIPYARDS WHERE THE COST OF SUCH CONSTRUCTION WAS LESS THAN 10 PERCENT OF THE OVERALL CONSTRUCTION COSTS OF EACH VESSEL. AS TO THE SECOND PROVISO, WE HELD THAT IT APPLIES ONLY TO THE CONSTRUCTION OF NAVAL VESSELS AND NOT TO THE CONSTRUCTION OF SHIP COMPONENTS WHICH THEMSELVES DO NOT CONSTITUTE VESSELS. FINALLY, IN THE CITED DECISION, WE INTERPRETED LANGUAGE OF A CLAUSE ESSENTIALLY SIMILAR TO THE ABOVE QUOTED FOREIGN SHIPYARD CONSTRUCTION PROHIBITION CLAUSE TO HAVE NO GREATER APPLICATION THAN THE FIRST PROVISO UPON WHICH IT WAS BASED. SINCE THE LANGUAGE OF THE INSTANT CLAUSE PROHIBITING CONSTRUCTION OF VESSELS IN FOREIGN SHIPYARDS APPEARS TO BE BASED ON THE LANGUAGE OF THE SECOND PROVISO, WE BELIEVE THAT IT TOO HAS NO GREATER APPLICATION THAN SUCH PROVISO.

FROM THE RECORD BEFORE US, IT APPEARS THAT THE COST OF A SHIPSET OF TORPEDO TUBES AND EJECTION PUMPS ($800,000) REPRESENTS LESS THAN 1.5 PERCENT OF THE TARGET AND CEILING COSTS FOR ANY OF THE FIVE SUBMARINES BEING BUILT. IN VIEW OF OUR PRIOR DECISION, ABOVE, WE DO NOT BELIEVE THAT THE CONSTRUCTION OF ITEMS IN SUCH AN AMOUNT CONSTITUTES THE CONSTRUCTION OF "MAJOR COMPONENTS OF THE HULL OR SUPERSTRUCTURE OF SUCH VESSEL" WHICH IS PROHIBITED BY THE FIRST PROVISO. MOREOVER, SINCE THE ADMINISTRATIVE REPORT STATES THAT NEITHER THE PUMPS NOR TUBES PERFORM ANY STRUCTURAL FUNCTION IN THE VESSEL AS A WHOLE, WE ARE OF THE OPINION THAT SUCH ITEMS DO NOT CONSTITUTE A "MAJOR FIXED STRUCTURAL COMPONENT OF THE VESSEL," SUCH AS ARE PROHIBITED FROM FOREIGN CONSTRUCTION BY THE FOREIGN SHIPYARD CONSTRUCTION PROHIBITION CLAUSE. FINALLY, SINCE THE TUBES AND PUMPS ALONE WOULD NOT CONSTITUTE VESSELS AND COULD NOT BE USED AS SUCH, THE SECOND PROVISO IS NOT APPLICABLE TO THIS SITUATION.

THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), IMPLEMENTING THE BUY AMERICAN ACT, SUPRA, REQUIRES, IN GENERAL, THAT SUPPLIES PROCURED FOR PUBLIC USE BE DOMESTIC SOURCE END PRODUCTS. SEE ASPR 6-102.1. THE RESTRICTIONS OF THE ACT DO NOT APPLY, HOWEVER, TO CERTAIN CANADIAN SUPPLIES OF A MILITARY CHARACTER WHERE SUCH SUPPLIES ARE CANADIAN END PRODUCTS OFFERED BY THE LOWEST ACCEPTABLE BID OR ARE INCORPORATED IN END PRODUCTS MANUFACTURED IN THE UNITED STATES. ASPR 6-103.5(A). SUCH SUPPLIES ARE LISTED BY CATEGORIES IN THE NAVY PROCUREMENT DIRECTIVES AND A REVIEW OF SECTION 6-103.5 OF THAT DOCUMENT REVEALS THAT THE TUBES AND PUMPS WOULD, IN WHOLE OR IN PART, BE COVERED BY THE LISTINGS FOR WEAPONS, OR SHIP AND MARINE SUPPLIES, OR PUMPS AND COMPRESSORS. SUPPLIES SO LISTED ARE TREATED AS DOMESTIC SOURCE END PRODUCTS FOR PURPOSES OF THE BUY AMERICAN ACT. ASPR 6-103.5(C)(2). NO VIOLATION OF THE BUY AMERICAN ACT IS THUS APPARENT.

IN VIEW OF THE FOREGOING, NO BASIS EXISTS FOR OUR OFFICE TO QUESTION THE INSTANT PROCUREMENT. ACCORDINGLY, YOUR PROTEST IS DENIED.