B-174736, APR 19, 1972, 51 COMP GEN 650

B-174736: Apr 19, 1972

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THE DEFENSE DEPARTMENT UNDER ASPR 6 602 MAY ISSUE DUTY-FREE CERTIFICATES IF THERE IS AN APPROPRIATION SAVINGS. THE REQUEST FOR PROPOSALS SHOULD BE CANCELED AND REISSUED TO REQUIRE OFFERORS FURNISHING DOMESTIC END ITEMS INCORPORATING FOREIGN ORIGIN MATERIALS TO SUBMIT ALTERNATE OFFERS THAT EVIDENCE THE DUTY FOR EVALUATION ON AN EX-DUTY BASIS IF A DUTY-FREE CERTIFICATE IS ISSUED. 1972: REFERENCE IS MADE TO LETTERS. THE GOVERNMENT RESERVED THE RIGHT TO MAKE MORE THAN ONE AWARD FOR PROTECTION OF THE MOBILIZATION BASE AND OFFERS WERE SOLICITED FOR QUANTITIES OF 480. TOTAL COMBINED AWARDS WERE TO BE 1. THE EVALUATION OF OFFERS WAS EXCLUSIVE OF THE OFFERED OPTION PRICES. AN AWARD OF THAT QUANTITY WAS MADE TO FTS.

B-174736, APR 19, 1972, 51 COMP GEN 650

BIDS - BUY AMERICAN ACT - BUY AMERICAN CERTIFICATE - ISSUANCE, USE, ETC. THE ACCEPTANCE OF A VOLUNTEER ALTERNATE OFFER ON NOZZLE FIN ASSEMBLIES THAT CONTEMPLATED INCORPORATING COMPONENT PARTS FABRICATED FROM IMPORT FOREIGN STEEL IN THE DOMESTIC END ITEM, FOR EVALUATION ON THE BASIS OF ISSUING A DUTY-FREE CERTIFICATE, WOULD BE UNFAIR TO OTHER BIDDERS, EVEN THOUGH THE PURCHASE QUALIFIES AS EMERGENCY WAR MATERIAL WITHIN THE CONTEMPLATION OF PARAGRAPH 6-603.1 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), AND THE DEFENSE DEPARTMENT UNDER ASPR 6 602 MAY ISSUE DUTY-FREE CERTIFICATES IF THERE IS AN APPROPRIATION SAVINGS. THEREFORE, THE REQUEST FOR PROPOSALS SHOULD BE CANCELED AND REISSUED TO REQUIRE OFFERORS FURNISHING DOMESTIC END ITEMS INCORPORATING FOREIGN ORIGIN MATERIALS TO SUBMIT ALTERNATE OFFERS THAT EVIDENCE THE DUTY FOR EVALUATION ON AN EX-DUTY BASIS IF A DUTY-FREE CERTIFICATE IS ISSUED, AND NEGOTIATIONS SHOULD BE REOPENED TO PERMIT ALL OFFERORS TO SUBMIT ALTERNATE OFFERS ON A DUTY-FREE BASIS.

TO THE SECRETARY OF THE ARMY, APRIL 19, 1972:

REFERENCE IS MADE TO LETTERS, AMCGC-P, DATED DECEMBER 22, 1971, AND JANUARY 14, 1972, FROM THE DEPUTY GENERAL COUNSEL, ARMY MATERIEL COMMAND, FURNISHING OUR OFFICE REPORTS RELATIVE TO THE PROTEST OF HOFFMAN ELECTRONICS CORPORATION (HOFFMAN) AGAINST THE METHOD OF EVALUATION EMPLOYED IN EVALUATING ITS OFFER UNDER REQUEST FOR PROPOSAL NO. (RFP) DAAA21-72-R-0126, ISSUED ON OCTOBER 8, 1971, BY PICATINNY ARSENAL, DOVER, NEW JERSEY.

THE SUBJECT RFP REQUESTED OFFERS FOR NOZZLE AND FIN ASSEMBLIES FOR USE ON THE 2.75 INCH ROCKET MOTOR. THE GOVERNMENT RESERVED THE RIGHT TO MAKE MORE THAN ONE AWARD FOR PROTECTION OF THE MOBILIZATION BASE AND OFFERS WERE SOLICITED FOR QUANTITIES OF 480,000, 540,000, 600,000, 660,000 AND 720,000 EACH ASSEMBLIES. TOTAL COMBINED AWARDS WERE TO BE 1,200,000 EACH WITH THE REMAINING PROGRAM REQUIREMENT OF 68,000 EACH TO BE AWARDED UNDER THE CONCURRENT OPTION FOR INCREASED QUANTITY CLAUSE TO ONE OF THE TWO SUCCESSFUL OFFERORS UNDER THE BASIC SOLICITATION, OFFERING THE LOWER OPTION PRICE. THE EVALUATION OF OFFERS WAS EXCLUSIVE OF THE OFFERED OPTION PRICES.

PREAWARD EVALUATION DISCLOSED THAT REGARDLESS OF THE METHOD OF EVALUATION USED WITH RESPECT TO HOFFMAN'S OFFER, THERE WOULD BE NO EFFECT ON THE EVALUATED LOW OFFER OF THE FTS CORPORATION (FTS), DIVISION OF HITCO, FOR THE QUANTITY OF 720,000. CONSEQUENTLY, AN AWARD OF THAT QUANTITY WAS MADE TO FTS, AS WELL AS THE ADDITIONAL 68,000 ASSEMBLIES UNDER THE OPTION CLAUSE. THE EVALUATION, AS DETERMINED BY AUTOMATIC DATA PROCESSING, ALSO REVEALED THAT THE COMBINATION OF QUANTITIES WHICH RESULTED IN THE LOWEST OVERALL EVALUATED COST TO THE GOVERNMENT WAS 720,000 AND 480,000 ASSEMBLIES. IT IS THE LATTER QUANTITY, YET TO BE AWARDED, WHICH IS THE SUBJECT OF THE INSTANT PROTEST.

IN AN EARLIER PROCUREMENT FOR THE SAME ITEM, WHICH WAS CANCELLED BECAUSE OF A DECREASE IN PROGRAM REQUIREMENTS, AS WELL AS IN THE CURRENT SOLICITATION, HOFFMAN ADVISED THE PROCUREMENT ACTIVITY THAT IT INTENDED TO IMPORT FOREIGN STEEL FOR FABRICATION OF TWO COMPONENT PARTS TO BE INCORPORATED IN AND MADE A PART OF THE DELIVERABLE DOMESTIC END ITEM, AND THAT ITS UNIT PRICES WERE BASED UPON THE INCLUSION OF THE CLAUSE SET OUT IN SECTION 7-104.31 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) "DUTY FREE ENTRY FOR CERTAIN SPECIFIED ITEMS (1971 FEB)" IN ANY RESULTING CONTRACT.

FOLLOWING ORAL TELEPHONIC NEGOTIATIONS ON AUGUST 30, 1971, BETWEEN HOFFMAN AND THE COGNIZANT PROCUREMENT PERSONNEL, THE FOLLOWING MEMORANDUM OF NEGOTIATIONS WAS PREPARED BY THE CONTRACT SPECIALIST AT PICATINNY:

A. CONCERNING IMPORT DUTY AND DUTY FREE ENTRY:

IN ORDER THAT ALL OFFERS RECEIVED ARE TREATED EQUAL IT IS THE GOVERNMENT'S REQUEST THAT HOFFMAN'S OFFERED PRICES SHOULD INCLUDE ALL DUTY TAX, AND THE AMOUNT OF DUTY LISTED SEPARATELY. THEN, IF AFTER EVALUATION, AND SHOULD HOFFMAN BE SUCCESSFUL FOR AWARD, A DUTY FREE ENTRY CERTIFICATE WILL BE AUTHORIZED WITH THE UNDERSTANDING THAT THE CONTRACT PRICE WILL BE REDUCED BY THE APPLICABLE AMOUNT OF DUTY.

IN THIS REGARD, LINE SIX QUOTED ABOVE WAS CHANGED BY STRIKING THROUGH "WILL" AND INSERTING IN PEN THE WORD "MAY."

THERE FOLLOWED A TELEGRAM DATED SEPTEMBER 30, 1971, FROM PICATINNY TO HOFFMAN WHICH ADVISED:

IN THE EVENT YOU DESIRE TO SUBMIT AN OFFER BASED ON RECEIVING DUTY FREE ENTRY FOR FOREIGN MATERIAL YOU SHOULD SUBMIT AN ALTERNATE PRICE EXCLUSIVE OF DUTY AND STATE THE DUTY AS A SEPARATE AMOUNT TO PERMIT PROPER EVALUATION OF YOUR OFFER.

HOFFMAN SUBMITTED ITS PROPOSALS IN LETTERS DATED SEPTEMBER 11, 1971, AND OCTOBER 15, 1971, FOR THE RESPECTIVE SOLICITATIONS STATING SUBSTANTIALLY IN PART AS FOLLOWS:

IT IS HOFFMAN'S CONTENTION THAT, THERE BEING NO STATUTORY PROVISION TO THE CONTRARY, OUR BID (OFFER) SHOULD BE EVALUATED ON THE BASIS OF ACTUAL OR ANTICIPATED COSTS TO THE APPROPRIATION TO BE CHARGED UNDER THIS PROCUREMENT. ACCORDINGLY, OUR OFFER MUST BE EVALUATED ON THE BASIS OF OUR OBTAINING THE DUTY-FREE ENTRY CERTIFICATES PLUS AN AMOUNT, IF ANY, TO COVER ADMINISTRATIVE COSTS OF SUCH CERTIFICATION. THE APPLICABLE REGULATIONS ONLY REQUIRE A DETERMINATION OF WHETHER ADMINISTRATIVE COSTS TO THE GOVERNMENT WARRANT ISSUANCE OF DUTY-FREE ENTRY CERTIFICATES. FURTHERMORE, THERE ARE NO REGULATIONS OR OTHER STATUTORY PROVISIONS REQUIRING ADDING DUTY AS AN EQUALIZATION FACTOR TO A BID PRICE WHICH IS BASED UPON DUTY-FREE ENTRY.

HOFFMAN'S PRICE FOR THIS SOLICITATION IS BASED UPON THE DUTY-FREE ENTRY OF FOREIGN MATERIAL. IT IS THAT PRICE, WITHOUT ADDITION OF DUTY, THAT SHOULD BE EVALUATED FOR CONTRACT AWARD. (SEE COMPTROLLER GENERAL DECISION B-168333 DATED APRIL 7, 1970.) IN THE EVENT THE CONTRACTING OFFICER'S EVALUATION BE BASED UPON EITHER OUR NONDUTY-FREE ENTRY PRICE OR BE BASED UPON ADDING DUTY TO OUR DUTY-FREE ENTRY PRICE FOR PURPOSES OF EQUALIZATION WITH OTHER OFFERS. HOFFMAN HEREBY SUBMITS ITS PROTEST, PRIOR TO AWARD, AND REQUESTS THAT SUCH PROTEST BE FORWARDED TO THE COMPTROLLER GENERAL OF THE UNITED STATES FOR HIS DECISION.

THE BOARD OF AWARDS CONVENED ON NOVEMBER 4, 1971, AND RECOMMENDED THAT AWARDS BE MADE TO FTS FOR 720,000 UNITS AND TO MURDOCK MACHINE AND ENGINEERING COMPANY (MURDOCK) FOR THE CONTESTED 480,000 UNITS AS THE LOW EVALUATED OFFEROR WHEN DUTY IMPORT TAXES WERE INCLUDED IN THE EVALUATION OF HOFFMAN'S OFFER.

THE RATIONALE FOR THE BOARD'S ACTION IS FOUND IN THE MINUTES OF ITS MEETING OF NOVEMBER 4 WHERE IT IS STATED:

*** THE BOARD FELT THAT TO ACCEPT THE ALTERNATE BID OF HOFFMAN ELECTRONICS WITHOUT RESOLICITING THE OTHER BIDDERS ON THE BASIS OF DUTY FREE ENTRY CERTIFICATES FOR FOREIGN ITEMS, WOULD BE IMPROPER AND UNFAIR TO THE OTHER BIDDERS. THE BOARD IS CONSCIOUS OF THE FACT THAT THIS IS A NEGOTIATED SOLICITATION AND THAT IT WOULD BE POSSIBLE TO RESOLICIT OR AT LEAST APPROACH THE OTHER BIDDERS AND POSSIBLY RECEIVE LOWER PRICES BASED ON USING FOREIGN MATERIAL OR COMPONENTS ON THE BASIS OF DUTY FREE ENTRY CERTIFICATES. HOWEVER, IT DID NOT RECOMMEND SUCH ACTION BE TAKEN AS IT WOULD BE AT VARIANCE WITH THE PUBLIC POLICY ENUNCIATED BY THE PRESIDENT'S CURRENT FREEZE ORDER. *** .

IT IS FURTHER THE POSITION OF PICATINNY AND MURDOCK THAT WITH THE EXCEPTION OF THE DUTY FREE ENTRY CANADIAN SUPPLIES CLAUSE, ASPR 7 104.32, NO OTHER DUTY FREE ENTRY CLAUSE WAS MADE A PART OF THE SOLICITATION. CONSEQUENTLY, IT IS ARGUED, OFFERORS MUST SUBMIT OFFERS IN ACCORDANCE WITH THE TERMS AND CONDITIONS AS WRITTEN IN THE SOLICITATION AND HOFFMAN WAS, IN EFFECT, TOLD TO INCLUDE DUTY IN ITS PRICE PURSUANT TO THE CLAUSE SET OUT IN ASPR 7-103.10(A) "FEDERAL, STATE, AND LOCAL TAXES (1971 NOV)" WHICH WAS REFERENCED IN THE SOLICITATION. ALSO, IN VIEW OF THE CHANGE MADE IN THE MINUTES OF NEGOTIATIONS QUOTED ABOVE, AS WELL AS IN THE LEGAL MEMORANDUM FURNISHED OUR OFFICE AS A PART OF THE ADMINISTRATIVE REPORT, THERE APPEARS TO BE A QUESTION IN THE MINDS OF THE COGNIZANT PROCUREMENT PERSONNEL AS TO THE PROPRIETY OF DECIDING, PRIOR TO AWARD, THAT DUTY-FREE ENTRY CERTIFICATES WOULD BE ISSUED, AND TO AN EVALUATION OF OFFERS ON THAT BASIS.

THE DEPARTMENT OF DEFENSE'S POLICY AS SET OUT AT ASPR 6-602 IS TO USE DUTY-FREE ENTRY CERTIFICATES WHEREVER THERE IS A REASONABLE ASSURANCE THAT THE SAVINGS TO THE MILITARY APPROPRIATIONS WILL OUTWEIGH THE ADMINISTRATIVE COSTS OF SUCH CERTIFICATION. ONCE SUCH A DETERMINATION IS MADE, TO ASSURE THAT THIS POLICY IS CARRIED OUT FOR EMERGENCY PURCHASES OF WAR MATERIALS ABROAD, ASPR 6-603.2(A) STATES " *** ONE OR BOTH OF THE CLAUSES IN 6-603.3 SHALL BE INCLUDED IN EACH NEGOTIATED CONTRACT IN EXCESS OF $100,000 *** ." ALSO, 6-603.2(B) INDICATES THAT THE QUOTED REQUIREMENTS IN 6-603.2(A) ARE IN ADDITION TO AND INDEPENDENT OF THE REQUIREMENTS IN 6-605 CONCERNING DUTY-FREE ENTRY CLAUSES FOR CANADIAN SUPPLIES.

ASPR 6-603.1, DEFINING EMERGENCY PURCHASES OF WAR MATERIALS ABROAD, STATES IN PERTINENT PART:

6-603.1 DEFINITION - ANY PROCUREMENT OF FOREIGN SUPPLIES CONSTITUTES "AN EMERGENCY PURCHASE OF WAR MATERIAL" IF:

(I) THE SUPPLIES COMPRISE -

(A) WEAPONS, MUNITIONS, ***

(C) SUPPLIES, INCLUDING COMPONENTS OR EQUIPMENT, NECESSARY FOR THE MANUFACTURE, PRODUCTION, PROCESSING, REPAIR, SERVICING OR OPERATION OF SUPPLIES WITHIN (A) *** ABOVE; AND

(II) THE PROCUREMENT -

(A)IS MADE IN TIME OF WAR OR DURING A NATIONAL EMERGENCY; ***

UNDER THE ABOVE CRITERIA THIS PROCUREMENT WOULD QUALIFY AS AN EMERGENCY PURCHASE OF WAR MATERIAL ABROAD SINCE THE IMPORTED COMPONENT OF A WEAPON SYSTEM IS BEING MADE UNDER THE NATIONAL EMERGENCY DECLARED IN 1950, WHICH IS STILL IN EFFECT. SINCE THERE IS NO EVIDENCE THAT THE ADMINISTRATIVE COST INVOLVED IN GRANTING A DUTY-FREE ENTRY CERTIFICATE WOULD OUTWEIGH THE SAVINGS TO MILITARY APPROPRIATIONS REALIZED BY GRANTING SUCH A CERTIFICATE, A DUTY-FREE ENTRY CERTIFICATE WOULD BE APPROPRIATE FOR ISSUANCE TO THE SUCCESSFUL OFFEROR IMPORTING A FOREIGN COMPONENT.

CONCERNING THE FAILURE OF THE RFP TO ADVISE ALL OFFERORS OF POSSIBLE ISSUANCE OF DUTY-FREE ENTRY CERTIFICATES, AS WELL AS THE PIVOTAL QUESTION OF WHETHER DUTY SHOULD BE INCLUDED IN EVALUATING PROPOSALS OFFERING IMPORTED SUPPLIES, OUR OFFICE IN A STRIKINGLY SIMILAR CASE (B 146393, OCTOBER 26, 1961) HAD OCCASION TO OBSERVE:

CONCERNING THE FAILURE OF THE REQUEST FOR PROPOSAL TO ADVISE ALL OFFERORS OF POSSIBLE ISSUANCE OF DUTY-FREE ENTRY CERTIFICATES, THERE DOES NOT APPEAR TO BE ANY REQUIREMENT OF LAW OR REGULATION FOR INCLUDING SUCH ADVICE OTHER THAN THE "DUTY-FREE ENTRY-CANADIAN SUPPLIES" CLAUSE SET OUT IN ASPR 6-605.2. *** . UNDER THE PROVISIONS OF ASPR 6-602 THE ISSUANCE OF DUTY-FREE ENTRY CERTIFICATES TO FIXED PRICE CONTRACTORS IS CONDITIONED UPON THE AMOUNT OF SAVINGS FOR MILITARY APPROPRIATIONS, THE COST AND BURDEN OF ISSUANCE, AND THE DEGREE OF SUPERVISION WHICH CAN BE EXERCISED OVER THE SUPPLIES OR MATERIALS TO BE IMPORTED. IN THE INSTANT PROCUREMENT IT WOULD APPEAR TO BE THE POSITION OF THE CONTRACTING AGENCY THAT A DETERMINATION TO ISSUE DUTY-FREE EXEMPTION CERTIFICATES, BASED UPON SUBSTANTIAL SAVINGS TO THE APPROPRIATION, COULD ONLY BE MADE ON AN AFTER- THE-FACT BASIS, AND THAT THE INCLUSION OF ADVICE RELATIVE TO SUCH ISSUANCE IN THE REQUEST FOR PROPOSAL WAS NOT CONSIDERED NECESSARY OR PROPER. WHILE THE LOGIC OF THIS CONCLUSION MAY WELL BE OPEN TO QUESTION FROM A MANAGEMENT STANDPOINT, WE ARE AWARE OF NO PROVISION OF LAW OR REGULATION WHICH REQUIRES SPECIFIC ADVANCE NOTICE TO OFFERORS OF POSSIBLE ISSUANCE OF DUTY-FREE ENTRY CERTIFICATES. IN VIEW THEREOF, AND OF THE FACT THAT ALL BIDDERS ARE ON CONSTRUCTIVE NOTICE OF THE PROVISIONS OF ASPR 6-602, WE ARE UNABLE TO CONCLUDE THAT NOTICE OF POSSIBLE ISSUANCE OF DUTY-FREE ENTRY CERTIFICATES ON TUNGSTEN ORE WAS REQUIRED TO BE INCLUDED IN THE REQUEST FOR PROPOSAL.

WITH RESPECT TO THE EVALUATION OF FIRTH STERLING'S OFFER ON AN EX DUTY BASIS, THE BASIC PURPOSE OF EVALUATING ANY BID OR OFFER IS, OF COURSE, TO DETERMINE WHICH OFFER, IF ACCEPTED, WILL RESULT IN PERFORMANCE OF THE CONTRACT WITH THE LEAST EXPENDITURE OF APPROPRIATED FUNDS AND RESULTING COST TO THE GOVERNMENT. 37 COMP. GEN. 505. AS INDICATED ABOVE, WE SEE NO SOUND BASIS UPON WHICH TO QUESTION THE CONTRACTING AGENCY'S DETERMINATION TO ISSUE DUTY-FREE ENTRY CERTIFICATES ON TUNGSTEN ORE TO BE IMPORTED BY FIRTH STERLING, AND IT NECESSARILY FOLLOWS THAT THE INCLUSION IN ITS EVALUATED OFFER PRICE OF ALL OR ANY PART OF THE IMPORT DUTY WHICH WOULD OTHERWISE HAVE BEEN PAYABLE BY FIRTH STERLING WOULD HAVE RESULTED IN AN EVALUATED OFFER PRICE IN EXCESS OF EITHER THE TOTAL CHARGE TO MILITARY APPROPRIATIONS OR THE TOTAL COST OF CONTRACT PERFORMANCE TO THE GOVERNMENT. UNDER THE CIRCUMSTANCES, IT IS OUR OPINION THAT THE CONTRACTING AGENCY WAS JUSTIFIED IN EVALUATING BOTH YOUR OFFER, WHICH PROPOSED USE OF DUTY FREE TUNGSTEN PROCESSED IN CANADA, AND FIRTH STERLING'S OFFER, WHICH PROPOSED USE OF TUNGSTEN IMPORTED FROM OTHER NONDOMESTIC SOURCES, ON AN EX-DUTY BASIS.

ALSO, IN THE OPINION OF OUR OFFICE, B-168333, APRIL 7, 1970, CITED BY HOFFMAN, WE STATED:

WE BELIEVE THAT ABSENT A STATUTORY OR OTHER POLICY PROVISION TO THE CONTRARY, A BID SHOULD BE EVALUATED ON THE BASIS OF ACTUAL OR ANTICIPATED COSTS TO THE APPROPRIATION TO BE CHARGED UNDER THE PROCUREMENT. IN THE CIRCUMSTANCES APPLICABLE HERE, ASSUMING THE BUY AMERICAN ACT DID NOT APPLY, THE DUTY SHOULD NOT HAVE BEEN ADDED TO THE SUMTER BID FOR EVALUATION PURPOSES.

WHILE IN A LATER DECISION (MAY 27, 1970) IN THE ABOVE CASE WE FOUND THE BALANCE OF PAYMENTS PROGRAM APPLIED, AND UNDER THE CIRCUMSTANCES THERE PRESENT THE PROTESTANT'S BID COULD NOT BE ACCEPTED, WE ARE STILL OF THE VIEW THAT THE RATIONALE OF THE APRIL 7 DECISION IS FOR APPLICATION IN THE INSTANT PROCUREMENT SINCE IT IS AGREED THAT A DOMESTIC END ITEM WILL BE OFFERED WHICH IS NOT FOR IMMEDIATE OR DIRECT OVERSEAS SHIPMENT, AND NEITHER THE BUY AMERICAN ACT NOR THE BALANCE OF PAYMENT PROGRAM IS THEREFORE AT ISSUE. IT FOLLOWS THAT DUTY SHOULD NOT BE INCLUDED IN THE EVALUATION OF OFFERS PROPOSING DOMESTIC END ITEMS. BOTH THE ARSENAL AND MURDOCK ARGUE THAT A REFERENCE TO ASPR 7-103.10(A) IN THE SOLICITATION CLEARLY ADVISES OFFERORS THAT DUTY MUST BE INCLUDED IN THEIR PROPOSALS, SINCE THAT PROVISION INDICATES DUTIES ARE TO BE INCLUDED IN THE BID PRICE. WE DO NOT AGREE. THE OPENING STATEMENT OF THAT CLAUSE PROVIDES "EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE CONTRACT PRICE INCLUDES ALL APPLICABLE FEDERAL, STATE, AND LOCAL TAXES AND DUTIES." WHERE, AS IN THE INSTANT CASE, AN OFFEROR SUBMITS AN ALTERNATE PROPOSAL IN WHICH HE CLEARLY INDICATES THAT DUTIES ARE NOT INCLUDED IN THE OFFERED PRICE, IT FOLLOWS THAT THE EXCEPTION IN THE CLAUSE QUOTED ABOVE WOULD BE APPLICABLE TO ANY CONTRACT RESULTING FROM ACCEPTANCE OF SUCH ALTERNATE PROPOSAL. IN VIEW THEREOF, WE CANNOT AGREE THAT ASPR 7-103.10(A) REQUIRES THE INCLUSION OF DUTY IN ALL OFFERS.

FROM THE FOREGOING, IT IS CLEAR THAT HOFFMAN WAS CORRECT IN ITS ASSERTION THAT ITS OFFER SHOULD BE EVALUATED WITHOUT DUTY SINCE IT WAS TO BE ISSUED A DUTY-FREE CERTIFICATE. HOWEVER, FOR REASONS DISCUSSED BELOW, WE ARE ALSO OF THE OPINION THAT AN AWARD CANNOT AT THE PRESENT BE MADE TO EITHER OFFEROR.

SINCE THE COMMENCEMENT OF OUR CONSIDERATION OF THIS MATTER, BY TELEGRAM DATED FEBRUARY 15, 1972, MURDOCK ADVISED OUR RESPECTIVE OFFICES THAT IT ALSO WAS QUOTING ON THE BASIS OF IMPORTING FOREIGN STEEL, AND IMPORT DUTY WAS INCLUDED IN ITS QUOTED PRICE. WE HAVE ALSO BEEN INFORMALLY ADVISED BY MURDOCK THAT AT LEAST ONE OTHER OFFEROR IS BELIEVED TO HAVE QUOTED ON THE BASIS OF USING IMPORTED FOREIGN STEEL. THEREFORE, IN ORDER TO ASSURE THAT ALL OFFERORS WILL BE COMPETING ON AN EQUAL BASIS, ALL OFFERS MUST BE EVALUATED ON THE SAME BASIS, I.E., WITH DUTY, IF ANY, EXCLUDED.

IN THIS REGARD, WE ARE OF THE VIEW THAT REGARDLESS OF THE BOARD'S INTERPRETATION OF THE APPLICABLE REGULATIONS, IT SHOULD HAVE FOLLOWED ONE OF THE SUGGESTED APPROACHES AT THAT TIME, SINCE THE TELEGRAPHIC ADVICE OF SEPTEMBER 30, 1971, TO HOFFMAN CONCERNING PRICING WAS NOT GIVEN TO OTHER OFFERORS AS IS REQUIRED BY ASPR 2-208(C). ALSO, THE BOARD'S STATEMENT THAT NEITHER COURSE OF ACTION WAS TAKEN BECAUSE IT WOULD BE AT VARIANCE WITH THE CURRENT FREEZE ORDER, OVERLOOKS THE EXPLICIT INSTRUCTIONS GIVEN IN DEFENSE PROCUREMENT CIRCULAR (DPC) NO. 91, SUPPLEMENT NO. 2, AUGUST 30, 1971, WHICH PROVIDED IN PART:

THE FOLLOWING GUIDANCE WITH REGARD TO PURCHASE OF FOREIGN-MADE ITEMS IS PROVIDED:

1. ALL PROVISIONS OF ASPR SECTION VI CONTINUE, TO APPLY. DUTY, INCLUDING THE ADDITIONAL 10 PERCENT, SHALL BE EVALUATED WHEN APPROPRIATE. EVALUATION OF BIDS AND PROPOSALS INVOLVING CANADIAN END PRODUCTS SHALL CONTINUE TO BE HANDLED EXACTLY AS PRESCRIBED IN ASPR 6 103.5 AND 6-104.4. PAYMENT OF DUTY BY CONTRACTORS, INCLUDING THE ADDITIONAL 10 PERCENT, SHALL CONTINUE TO BE WAIVED AS PROVIDED IN ASPR SECTION VI, PART 6. ***

IN THE PRESENT PROCUREMENT FOR THE REMAINING 480,000 UNITS, WE MUST THEREFORE CONCLUDE THAT THE RFP SHOULD BE CANCELLED, AND NEW OFFERS SOLICITED WITH SUCH MODIFICATIONS OR AMENDMENTS TO THE RFP AS MAY BE NECESSARY TO CLEARLY REFLECT THAT OFFERORS FURNISHING DOMESTIC END ITEMS WHICH INCORPORATE MATERIALS OF FOREIGN ORIGIN SHOULD SUBMIT ALTERNATE OFFERS EVIDENCING THE AMOUNT OF DUTY ON SUCH MATERIALS, AND THAT SUCH OFFERS WOULD BE EVALUATED ON AN EX-DUTY BASIS IF IT WAS DECIDED TO ISSUE A DUTY FREE ENTRY CERTIFICATE. ALTERNATIVELY, NEGOTIATIONS SHOULD BE REOPENED FOR THE SOLE PURPOSE OF PERMITTING ALL OFFERORS TO SUBMIT ALTERNATE OFFERS ON A DUTY-FREE BASIS, IF THEY SO DESIRE, AND SUCH OFFERS SHOULD BE EVALUATED CONSISTENT WITH THIS DECISION.

THE ENCLOSURES FURNISHED WITH THE REPORT ARE RETURNED.