B-174448, JUN 15, 1972

B-174448: Jun 15, 1972

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IT IS THE OPINION OF THE COMP. THAT THE AGENCY PROPERLY EXCLUDED SPECULATIVE EXTRA DUTY COSTS AS AN EVALUATION FACTOR SINCE THE CONTRACT WAS FOR INDEFINITE QUANTITIES AND THERE WAS NO REASONABLE METHOD OF DETERMINING HOW MUCH OF THE FLATWARE MIGHT BE SUBJECT TO THE DUTY. VIEW OF THE FOREGOING AND GSA'S ASSURANCE THAT THE TYPE OF STAINLESS STEEL PROPOSED BY R&O IS RESPONSIVE TO THE TERMS OF THE SOLICITATION. THE PROTEST IS DENIED. INC.: REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 1 AND 16. EXCEPT THAT A 12 PERCENT FACTOR IS USED IF THE FIRM SUBMITTING THE LOW ACCEPTABLE DOMESTIC BID IS A SMALL BUSINESS CONCERN OR A LABOR SURPLUS AREA CONCERN. R&O'S BID WAS ADJUSTED FOR PURPOSES OF EVALUATION BY ADDING TO IT A 12 PERCENT FACTOR.

B-174448, JUN 15, 1972

BID PROTEST - ALLEGED IMPROPER EVALUATION - EXCLUSION OF STATUTORY IMPORT DUTY DECISION DENYING THE PROTEST OF THE ROYAL SILVER MANUFACTURING COMPANY, INC; AGAINST AWARD OF A CONTRACT TO R&O INDUSTRIES, INC; UNDER A SOLICITATION ISSUED BY THE GENERAL SERVICES ADMINISTRATION. PROTESTANT CONTENDS THAT THE PROVISIONS OF PRESIDENTIAL PROCLAMATION 4076, DATED AUGUST 24, 1971, BE APPLIED TO THE EVALUATION OF R&O'S BID. IT IS THE OPINION OF THE COMP. GEN. THAT THE AGENCY PROPERLY EXCLUDED SPECULATIVE EXTRA DUTY COSTS AS AN EVALUATION FACTOR SINCE THE CONTRACT WAS FOR INDEFINITE QUANTITIES AND THERE WAS NO REASONABLE METHOD OF DETERMINING HOW MUCH OF THE FLATWARE MIGHT BE SUBJECT TO THE DUTY. VIEW OF THE FOREGOING AND GSA'S ASSURANCE THAT THE TYPE OF STAINLESS STEEL PROPOSED BY R&O IS RESPONSIVE TO THE TERMS OF THE SOLICITATION, THE PROTEST IS DENIED.

TO ROYAL SILVER MANUFACTURING COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 1 AND 16, 1971, PROTESTING THE AWARD OF A CONTRACT TO R&O INDUSTRIES, INC; FOR 112 ITEMS UNDER SOLICITATION NO. FPNGA-W-18991-A-6-3-71, ISSUED BY THE FEDERAL SUPPLY SERVICE, GENERAL SERVICES ADMINISTRATION (GSA).

THE SOLICITATION REQUESTED BIDS BY JUNE 3, 1971, FOR AN INDEFINITE REQUIREMENTS TYPE CONTRACT ON VARIOUS ITEMS OF FLATWARE, "FSC CLASS 7340- FLATWARE CORROSION - RESISTING STEEL AND CARBON STEEL." R&O REPRESENTED IN ITS BID THAT IT WOULD FURNISH FOREIGN SOURCE END ITEMS. FEDERAL PROCUREMENT REGULATIONS (FPR) 1-6.104-4(B), REQUIRES, IN PART, THAT EACH FOREIGN BID BE ADJUSTED FOR PURPOSES OF EVALUATION AND COMPARISON WITH BIDS FOR DOMESTIC END PRODUCTS, BY ADDING TO THE FOREIGN BID (INCLUSIVE OF DUTY) A FACTOR OF 6 PERCENT OF THAT BID, EXCEPT THAT A 12 PERCENT FACTOR IS USED IF THE FIRM SUBMITTING THE LOW ACCEPTABLE DOMESTIC BID IS A SMALL BUSINESS CONCERN OR A LABOR SURPLUS AREA CONCERN, OR BOTH. IN ACCORDANCE WITH THIS REGULATION, R&O'S BID WAS ADJUSTED FOR PURPOSES OF EVALUATION BY ADDING TO IT A 12 PERCENT FACTOR, AND A CONTRACT WAS AWARDED TO THAT FIRM ON OCTOBER 8, 1971, AS THE APPARENT LOW BIDDER ON 112 ITEMS.

YOUR FIRM HAS PROTESTED THE PROPRIETY OF THE EVALUATION OF R&O'S BID, AND OTHER BIDDERS OFFERING DOMESTIC END PRODUCTS HAVE ALSO REGISTERED THEIR SIMILAR COMPLAINTS WITH THIS OFFICE. THE BASIC ISSUE IS WHETHER OR NOT FOR THE PURPOSES OF APPLYING THE 12 PERCENT DIFFERENTIAL REQUIRED BY THE BUY AMERICAN REGULATIONS IN THIS INSTANCE, THE PROVISIONS OF PRESIDENTIAL PROCLAMATION 4076 DATED AUGUST 24, 1971, MUST BE APPLIED IN SOME MANNER IN THE EVALUATION OF R&O'S BID. THIS PROCLAMATION ESTABLISHED TARIFF-RATE QUOTAS FOR VARIOUS COUNTRIES ON STAINLESS STEEL FLATWARE AND IMPOSED ADDITIONAL DUTIES ON IMPORTS (INCLUDING WITHDRAWALS FROM WAREHOUSES) EXCEEDING THOSE QUOTAS. FOR PURPOSES OF THIS DECISION WE SEE NO NEED TO CONSIDER THE 10 PERCENT IMPORT SURTAX IMPOSED BY PRESIDENTIAL PROCLAMATION 4074, AUGUST 15, 1971, SINCE ANY QUESTION CONCERNING THE EFFECT OF THAT PROCLAMATION ON BIDS OFFERING FOREIGN PRODUCTS IS CONSIDERED TO HAVE BEEN RENDERED ACADEMIC, FOR PRACTICAL RESULTS, BY THE REMOVAL OF THE SURTAX PURSUANT TO PRESIDENTIAL PROCLAMATION 4098, DECEMBER 20, 1971.

IT IS ARGUED THAT A GOOD PORTION OF THE FLATWARE TO BE SUPPLIED BY R&O WILL EXCEED THE TARIFF-RATE QUOTA AND THEREFORE R&O WILL BE REQUIRED TO PAY THE HIGHER DUTY RATE. YOU SUBMIT THAT IF R&O IS TO BE COMPENSATED, UNDER THE STANDARD GSA TAX CLAUSE, FOR ADDITIONAL DUTIES INCURRED, THIS EXTRA COST SHOULD BE CONSIDERED IN EVALUATING ITS BID.

IRRESPECTIVE OF WHETHER UNDER THE STANDARD TAX CLAUSE R&O WILL EVENTUALLY BE COMPENSATED FOR EXCESS DUTY COSTS, IN PROCUREMENTS WHICH ARE FORMALLY ADVERTISED IT IS ESSENTIAL THAT THE APPLICABLE EVALUATION FACTORS BE DEFINITIZED BY THE TIME BIDS ARE SUBMITTED SO THAT ALL BIDS MAY BE PREPARED AND CONSIDERED ON THE BASIS OF KNOWN CONSTITUENTS. FACTORS WHICH CANNOT BE MADE KNOWN TO OR WHICH CANNOT BE ASCERTAINED BY THE BIDDERS AT THE TIME OF BIDDING ARE NOT PROPERLY FOR CONSIDERATION IN THE EVALUATION PROCESS OR IN THE AWARDING OF THE CONTRACT. 36 COMP. GEN. 380, 385 (1956). IN THIS CASE IT IS REPORTED:

"R&O DESIGNATED THE REPUBLIC OF KOREA AND JAPAN AS ITS SOURCES OF SUPPLY. WE, OF COURSE, HAVE NO WAY OF DETERMINING HOW MANY OF THE ITEMS OF FLATWARE AWARDED TO R&O WILL BE ENTERED UNDER THE TARIFF-RATE QUOTAS ESTABLISHED FOR THESE TWO COUNTRIES. OUR CONTRACT FOR THESE ITEMS ARE FOR INDEFINITE QUANTITIES FOR THE PERIOD FROM DATE OF AWARD THROUGH SEPTEMBER 30, 1972. THEREFORE WE DO NOT KNOW THE QUANTITIES THAT MAY BE ORDERED AND SHIPPED UNDER OUR TERM CONTRACT WHICH MIGHT FALL WITHIN, OR EXCEED THE QUOTA LIMITATIONS. IF R&O SHOULD EXCEED THE QUOTA LIMITATIONS AND INCUR THE PENALTY OF HAVING TO PAY ADDITIONAL DUTY, WE DO NOT BELIEVE THAT SUCH A PENALTY WOULD BE COMPENSABLE UNDER THE TAX CLAUSE OF OUR CONTRACT. HOWEVER, EVEN IF WE ARE INCORRECT IN OUR POSITION AND ULTIMATELY MAY BE OBLIGED TO INCREASE R&O'S CONTRACT PRICE BY THE AMOUNT OF ANY ASSESSED PENALTY, THERE IS NO WAY THAT THIS POTENTIAL AND SPECULATIVE COST COULD HAVE BEEN EVALUATED AT THE TIME OF AWARD."

SINCE THE RECORD INDICATES THAT THE AGENCY COULD NOT ESTABLISH AT TIME OF BIDDING AND AWARD THE PORTION, IF ANY, OF THE FLATWARE TO BE PROCURED FROM R&O WHICH WOULD BE SUBJECT TO THE EXTRA DUTY COSTS, AND ANY SUCH AMOUNTS INCLUDED IN THE EVALUATION BY REASON OF THE TARIFF RATE QUOTAS WOULD THEREFORE HAVE BEEN A MATTER OF SPECULATION, WE BELIEVE THE AGENCY PROPERLY EXCLUDED SUCH FACTOR IN THE EVALUATION OF R&O'S BID.

YOUR PROTEST ALSO RAISES THE QUESTION AS TO THE TYPE OF STAINLESS STEEL THAT R&O WILL FURNISH UNDER THE CONTRACT. YOU STATE THAT THE MAJORITY OF FOREIGN IMPORTED SPOONS AND FORKS ARE MADE OF TYPE 430 STAINLESS, WHILE THE FEDERAL SPECIFICATION, RR-F-450-C, CALLS FOR TYPE 301, 302 OR 304. THIS CONNECTION THE GSA REPORT EXPLAINS THAT ON SITE PLANT SURVEYS OF R&O'S SUPPLIERS WERE CONDUCTED AND THAT ALL WERE FOUND CAPABLE OF PERFORMING IN ACCORDANCE WITH THE APPLICABLE SPECIFICATIONS. ALSO, SAMPLES WERE SUBMITTED FOR VERIFICATION TESTING FOR COMPLIANCE WITH THE SPECIFICATION REQUIREMENTS BY THE GSA REGIONAL QUALITY ASSURANCE STAFF. THE TEST REPORT INDICATES THAT THE ITEMS TESTED WERE OF TYPE 304 STAINLESS STEEL.

WHILE YOUR PROTEST ALSO POINTS OUT THAT YOUR FIRM HAS PARTICIPATED IN THE "MA-5 HARD CORE PROGRAM" AND THAT A "CERTIFICATE OF ELIGIBILITY" FOR ADJUSTMENT ASSISTANCE HAS BEEN ISSUED TO YOUR FIRM BY THE U.S. TARIFF COMMISSION, WE KNOW OF NO AUTHORITY PERMITTING OR REQUIRING CONSIDERATION OF THESE FACTORS IN THE EVALUATION PROCESS.

FOR THE REASONS STATED YOUR PROTEST MUST BE DENIED.