B-176080, AUG 2, 1972

B-176080: Aug 2, 1972

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SINCE THE BUY AMERICAN ACT PROVIDES FOR THE PURCHASE OF FOREIGN PRODUCTS WHERE THE COST OF DOMESTIC PRODUCTS IS UNREASONABLE. THE PURCHASE OF DOMESTIC PRODUCTS AT A PRICE WHICH EXCEEDS THE COST OF FOREIGN PRODUCTS BY MORE THAN THE DIFFERENTIAL MAY NOT BE MADE UNLESS THE AGENCY HEAD DETERMINES UNDER SECTION 5 OF THE EXECUTIVE ORDER THAT A GREATER DIFFERENTIAL IS NOT UNREASONABLE OR THAT THE PURCHASE OF DOMESTIC SUPPLIES IS NOT INCONSISTENT WITH THE PUBLIC INTEREST. THE AUTHORITY VESTED IN THE AGENCY HEAD BY SECTION 5 IS DISCRETIONARY. THE FACT THAT ONE AGENCY APPLIES A 50 PERCENT DIFFERENTIAL DOES NOT MEAN THAT A LESSER PERCENTAGE IS PER SE UNREASONABLE. MUST CONCLUDE THAT BIDS WERE PROPERLY EVALUATED UNDER THE FPR AND THE SOLICITATION.

B-176080, AUG 2, 1972

BID PROTEST - BUY AMERICAN ACT - APPLICATION OF REQUIRED PRICE DIFFERENTIAL DENIAL OF PROTEST BY JAMES LEFFEL & COMPANY AGAINST THE AWARD OF A CONTRACT TO AKTIEBOLGET NOHAB UNDER A SOLICITATION ISSUED BY THE BUREAU OF RECLAMATION FOR TWO HYDRAULIC TURBINES FOR THE TETON BASIN PROJECT, ID. SINCE THE BUY AMERICAN ACT PROVIDES FOR THE PURCHASE OF FOREIGN PRODUCTS WHERE THE COST OF DOMESTIC PRODUCTS IS UNREASONABLE, AND EXECUTIVE ORDER NO. 10582 FIXES A PERCENT DIFFERENTIAL AS A CRITERION FOR DETERMINING UNREASONABLE COST, THE PURCHASE OF DOMESTIC PRODUCTS AT A PRICE WHICH EXCEEDS THE COST OF FOREIGN PRODUCTS BY MORE THAN THE DIFFERENTIAL MAY NOT BE MADE UNLESS THE AGENCY HEAD DETERMINES UNDER SECTION 5 OF THE EXECUTIVE ORDER THAT A GREATER DIFFERENTIAL IS NOT UNREASONABLE OR THAT THE PURCHASE OF DOMESTIC SUPPLIES IS NOT INCONSISTENT WITH THE PUBLIC INTEREST. THE AUTHORITY VESTED IN THE AGENCY HEAD BY SECTION 5 IS DISCRETIONARY, AND THE FACT THAT ONE AGENCY APPLIES A 50 PERCENT DIFFERENTIAL DOES NOT MEAN THAT A LESSER PERCENTAGE IS PER SE UNREASONABLE. THEREFORE, THE COMP. GEN. MUST CONCLUDE THAT BIDS WERE PROPERLY EVALUATED UNDER THE FPR AND THE SOLICITATION.

TO MR. SECRETARY:

BY LETTER DATED MAY 19, 1972, WITH ENCLOSURES, THE ACTING DEPUTY ASSISTANT SECRETARY FORWARDED FOR OUR CONSIDERATION THE PROTEST OF THE JAMES LEFFEL & COMPANY AGAINST THE BUREAU OF RECLAMATION'S PROPOSED AWARD OF A CONTRACT TO AKTIEBOLGET NOHAB (NOHAB) UNDER SOLICITATION NO. DS-6936 FOR TWO HYDRAULIC TURBINES FOR THE TETON BASIN PROJECT, IDAHO.

IN THE CORRESPONDENCE FORWARDED WITH THE REQUEST FOR OUR DECISION AND IN SUBSEQUENT SUBMISSIONS TO OUR OFFICE, LEFFEL HAS QUESTIONED THE COMPLETENESS OF THE CONTRACTING OFFICER'S EVALUATION OF THE BIDS IN THREE AREAS: FIRST, IT IS URGED THAT THE CONTRACTING OFFICER ERRED IN NOT APPLYING A 50-PERCENT DIFFERENTIAL IN EVALUATING NOHAB'S FOREIGN BID FOR PURPOSES OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D. SECOND, AND RELATED TO THE FIRST CONTENTION, LEFFEL MAINTAINS THAT THE CONTRACTING OFFICER SHOULD HAVE ASSESSED THE LOSS OF TAX REVENUE THAT WOULD BE OCCASIONED BY AN AWARD TO NOHAB. THIRD, LEFFEL ASSERTS THAT $30,000 SHOULD BE ADDED TO NOHAB'S BID TO COVER THE COST OF FOREIGN INSPECTION RATHER THAN THE $3,400 ADDED TO ITS BID IN ACCORDANCE WITH SUBPARAGRAPH B-6A OF THE SOLICITATION.

NOHAB DECLINED THE OPPORTUNITY AFFORDED IT TO COMMENT ON THE PROTEST.

FROM OUR REVIEW OF THE RECORD AND FOR THE REASONS SET FORTH BELOW, WE FIND NO BASIS TO INTERPOSE A LEGAL OBJECTION TO THE CONTRACTING OFFICER'S PROPOSED AWARD TO NOHAB. WE NOTE THAT THE CONTRACTING OFFICER'S DECISION IS CONCURRED IN BY YOUR DEPARTMENT.

WITH RESPECT TO THE FIRST CONTENTION, NOHAB'S LOW BID WAS EVALUATED AT $547,900 AND LEFFEL'S BID WAS EVALUATED AT $683,613.57, YIELDING AN EVALUATED DIFFERENCE OF $135,713.57. SINCE NOHAB OFFERED A FOREIGN END PRODUCT AND LEFFEL IS A SMALL BUSINESS CONCERN LOCATED IN AN AREA OF SUBSTANTIAL LABOR SURPLUS, NOHAB'S EVALUATED BID INCLUDES $54,000, REPRESENTING THE 12-PERCENT DIFFERENTIAL APPLIED IN ACCORDANCE WITH SUBPARAGRAPH B-6B OF THE SOLICITATION. THIS SUBPARAGRAPH PROVIDES THAT:

"B. FOR FOREIGN OFFERS ONLY, THE FOLLOWING ADDITIONAL FACTORS WILL BE USED FOR THE PURPOSE OF COMPARISON OF OFFERS:

"(1) WHEN THE MATERIALS SHALL BE DETERMINED TO BE OF FOREIGN ORIGIN, 6 PERCENT OF THE OFFERED PRICE FOR THE MATERIALS DELIVERED AT THE DESTINATION WILL BE ADDED.

"(2) AN ADDITIONAL DIFFERENTIAL OF 6 PERCENT OF THE OFFERED PRICE FOR THE MATERIALS DELIVERED AT THE DESTINATION, MAKING A TOTAL OF 12 PERCENT, WILL BE ADDED WHEN THE LOWEST RESPONSIVE OFFER OFFERING DOMESTIC MATERIALS MEETS ONE OR BOTH OF THE FOLLOWING REQUIREMENTS: (A) IS A SMALL BUSINESS CONCERN, AS DEFINED IN 41 CFR 1-1.701.1, OR (B) WARRANTS THAT HE WILL PERFORM, OR CAUSE TO BE PERFORMED BY FIRST-TIER SUBCONTRACTORS, MORE THAN 25 PERCENT OF THE CONTRACT PRICE IN OR NEAR SECTIONS OF CONCENTRATED UNEMPLOYMENT OR UNDEREMPLOYMENT AS A CERTIFIED ELIGIBLE CONCERN, OR MORE THAN 50 PERCENT OF THE CONTRACT PRICE IN A PERSISTENT LABOR SURPLUS AREA OR A SUBSTANTIAL LABOR SURPLUS AREA, ALL AS DETERMINED BY THE SECRETARY OF LABOR."

THE SUBPARAGRAPH REFLECTS THE REQUIREMENTS OF THE BUY AMERICAN ACT, AS IMPLEMENTED BY EXECUTIVE ORDER NO. 10582, DECEMBER 17, 1954, AS AMENDED, AND SECTION 6.104-4 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR). THERE IS NO QUESTION THAT THE CONTRACTING OFFICER HAS COMPLIED WITH APPLICABLE REGULATIONS. THUS, SINCE THE BUY AMERICAN ACT PROVIDES FOR THE PURCHASE OF FOREIGN PRODUCTS WHERE THE COST OF DOMESTIC PRODUCTS IS UNREASONABLE, AND EXECUTIVE ORDER NO. 10582 FIXES A PERCENT DIFFERENTIAL AS A CRITERION FOR DETERMINING UNREASONABLE COST, THE PURCHASE OF DOMESTIC PRODUCTS AT A PRICE WHICH EXCEEDS THE COST OF FOREIGN PRODUCTS BY MORE THAN THE DIFFERENTIAL MAY NOT BE MADE UNLESS THE AGENCY HEAD DETERMINES UNDER SECTION 5 OF THE EXECUTIVE ORDER THAT A GREATER DIFFERENTIAL IS NOT UNREASONABLE OR THAT THE PURCHASE OF DOMESTIC SUPPLIES IS NOT INCONSISTENT WITH THE PUBLIC INTEREST. THE AUTHORITY VESTED IN THE AGENCY HEAD BY SECTION 5 IS DISCRETIONARY AND ALTHOUGH THE SECRETARY OF DEFENSE HAS DETERMINED THAT THE ADDITION OF A 50-PERCENT DIFFERENTIAL IS NOT UNREASONABLE IN THE CIRCUMSTANCES OF THIS CASE (PARAGRAPH 6-104.4 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR)), NO SUCH DETERMINATION HAS BEEN MADE BY YOU AS SECRETARY.

WHILE THE APPLICATION OF THE DIFFERENT PERCENTAGES SPECIFIED BY ASPR AND FPR CREATES UNREALISTIC RESULTS IN DETERMINATIONS OF WHETHER THE PRICE OF A DOMESTIC ITEM IS UNREASONABLE, SUCH A CIRCUMSTANCE PROVIDES NO BASIS AT LAW FOR INTERVENTION BY OUR OFFICE IN PROCUREMENTS MADE BY THE MILITARY AND CIVILIAN AGENCIES IN ACCORDANCE WITH THEIR RESPECTIVE REGULATIONS. COMP. GEN. 403, 405-406 (1968); SEE, ALSO, 42 ID. 608 (1963). MOREOVER, A CONTENTION THAT AN AWARD TO A FOREIGN FIRM WILL WEAKEN A DOMESTIC INDUSTRY IS AN ARGUMENT OF A POLITICAL OR ECONOMIC NATURE WHICH CANNOT BE CONSIDERED BY OUR OFFICE IN THE ABSENCE OF PERTINENT STATUTORY ENACTMENTS. B-175262, JUNE 12, 1972, CITING 45 COMP. GEN. 59, 68 (1965), AND 39 ID. 760 (1960).

WITH RESPECT TO LEFFEL'S SECOND CONTENTION, IT IS OUR VIEW THAT THE CONTRIBUTION THAT A DOMESTIC MANUFACTURER MAY MAKE TO THE ECONOMY THROUGH PAYMENT OF FEDERAL TAXES IS A FACTOR TOO SPECULATIVE IN NATURE TO WARRANT CONSIDERATION IN DETERMINING THE COST TO THE GOVERNMENT OF A SPECIFIC PROCUREMENT. B-169111, JUNE 1, 1970, CITING 45 COMP. GEN. 59 (1965).

TURNING TO THE THIRD CONTENTION, WE NOTE THAT EVEN IF IT BE CONCEDED THAT THE COSTS OF FOREIGN INSPECTION WILL BE OF THE MAGNITUDE URGED BY LEFFEL, NO LEGAL BASIS FOR QUESTIONING THE AWARD WOULD BE PRESENTED SINCE THE $30,000 FIGURE ADVANCED WOULD NOT DISPLACE NOHAB'S LOW EVALUATED BID. COMP. GEN. (B-173129, DECEMBER 6, 1971). IN ANY EVENT, THERE IS NO SHOWING THAT THE $3,400 FACTOR APPLIED IN ACCORDANCE WITH THE SOLICITATION IS UNREASONABLE.

FINALLY, WE MUST OBSERVE THAT THE TIME FOR RAISING QUESTIONS INVOLVING THE PROPRIETY OF THE PROPOSED METHOD OF BID EVALUATION IS PRIOR TO THE SUBMISSION OF BIDS. E.G., 48 COMP. GEN. 757 (1969).