B-177865, B-179812, MAR 29, 1974, 53 COMP GEN 726

B-177865,B-179812: Mar 29, 1974

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SINCE EACH KIT AS AN ENTIRETY - NOT THE INDIVIDUAL TOOLS CONTAINED THEREIN - IS AN "END PRODUCT" AND THE COST OF THE FOREIGN COMPONENT TOOLS CONSTITUTED LESS THAN 50 PERCENT OF THE COST OF ALL COMPONENTS. 1974: THORSEN TOOL COMPANY (THORSEN) AND IMPERIAL EASTMAN CORPORATION (IMPERIAL) HAVE ALLEGED THAT THE PROCEDURES USED BY THE GENERAL SERVICES ADMINISTRATION (GSA) IN PROCURING MECHANICS' TOOL KITS ARE IN VIOLATION OF THE BUY AMERICAN ACT. VIOLATES THE ACT IN THAT THE END PRODUCTS BEING PROCURED ARE NOT "DOMESTIC SOURCE" AS CERTIFIED BY THE CONTRACTOR. SUPPLIES AS HAVE BEEN MINED OR PRODUCED IN THE UNITED STATES. SUPPLIES AS HAVE BEEN MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM ARTICLES.

B-177865, B-179812, MAR 29, 1974, 53 COMP GEN 726

BUY AMERICAN ACT - APPLICABILITY - CONTRACTORS PURCHASES FROM FOREIGN SOURCES - END PRODUCT V. COMPONENTS FOR THE PURPOSES OF THE BUY AMERICAN ACT (41 U.S.C. 10 A-D), THE GENERAL SERVICES ADMINISTRATION PROPERLY EVALUATED THE GENERAL MECHANICS' TOOL KITS BEING PRODUCED AS DOMESTIC SOURCE END PRODUCTS, SINCE EACH KIT AS AN ENTIRETY - NOT THE INDIVIDUAL TOOLS CONTAINED THEREIN - IS AN "END PRODUCT" AND THE COST OF THE FOREIGN COMPONENT TOOLS CONSTITUTED LESS THAN 50 PERCENT OF THE COST OF ALL COMPONENTS.

IN THE MATTER OF IMPERIAL EASTMAN CORPORATION; THORSEN TOOL COMPANY, MARCH 29, 1974:

THORSEN TOOL COMPANY (THORSEN) AND IMPERIAL EASTMAN CORPORATION (IMPERIAL) HAVE ALLEGED THAT THE PROCEDURES USED BY THE GENERAL SERVICES ADMINISTRATION (GSA) IN PROCURING MECHANICS' TOOL KITS ARE IN VIOLATION OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D (1970 ED.), AND IMPLEMENTING ORDERS AND REGULATIONS. SPECIFICALLY, THORSEN ALLEGES THAT THE PROCUREMENT OF MECHANICS' TOOLS UNDER CONTRACT NO. GS-00S 18578, AWARDED UNDER SOLICITATION NO. FPNTP-B-52083-N-3-10-73, ISSUED BY THE FEDERAL SUPPLY SERVICE, GSA, VIOLATES THE ACT IN THAT THE END PRODUCTS BEING PROCURED ARE NOT "DOMESTIC SOURCE" AS CERTIFIED BY THE CONTRACTOR, CENTURY TOOL COMPANY, INCORPORATED, IN ITS BID.

THE BUY AMERICAN ACT PROVIDES IN PERTINENT PART:

NOTWITHSTANDING ANY OTHER PROVISION OF LAW, AND UNLESS THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT CONCERNED SHALL DETERMINE IT TO BE INCONSISTENT WITH THE PUBLIC INTEREST, OR THE COST TO BE UNREASONABLE, ONLY SUCH UNMANUFACTURED ARTICLES, MATERIALS, AND SUPPLIES AS HAVE BEEN MINED OR PRODUCED IN THE UNITED STATES, AND ONLY SUCH MANUFACTURED ARTICLES, MATERIALS, AND SUPPLIES AS HAVE BEEN MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM ARTICLES, MATERIALS, OR SUPPLIES MINED, PRODUCED, OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES, SHALL BE ACQUIRED FOR PUBLIC USE. ***. 41 U.S.C. 10A.

IN IMPLEMENTATION OF THIS STATUTE, SECTION 1-6.102 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR) PROVIDES THAT "ONLY DOMESTIC SOURCE END PRODUCTS SHALL BE ACQUIRED FOR PUBLIC USE." IN ADDITION, FPR 1 6.010(A) PROVIDES:

"END PRODUCTS" MEANS ARTICLES, MATERIALS, AND SUPPLIES WHICH ARE TO BE ACQUIRED FOR PUBLIC USE. AS TO A GIVEN CONTRACT, THE END PRODUCTS ARE THE ITEMS TO BE DELIVERED TO THE GOVERNMENT, AS SPECIFIED IN THE CONTRACT, INCLUDING ARTICLES, MATERIALS, AND SUPPLIES TO BE ACQUIRED BY THE GOVERNMENT FOR PUBLIC USE IN CONNECTION WITH SERVICE CONTRACTS.

ARTICLE 14 OF STANDARD FORM 32: GENERAL PROVISIONS (SUPPLY CONTRACT) IS OF SIMILAR EFFECT. FURTHERMORE, UNDER ARTICLE 14, AND PARAGRAPH 7 OF STANDARD FORM 33: SOLICITATION, OFFER, AND AWARD, EACH BIDDER IS REQUIRED TO CERTIFY THAT EACH END PRODUCT HE OFFERS TO DELIVER IS A DOMESTIC SOURCE END PRODUCT.

THE CONTRACT IN QUESTION WAS AWARDED TO CENTURY TOOL COMPANY, INCORPORATED (CENTURY) FOR A DEFINITE QUANTITY OF GENERAL MECHANICS' TOOL KITS. EACH KIT CONTAINED NUMEROUS TOOLS SUCH AS A PRY BAR, PAINT BRUSH, VARIOUS FILES AND GAGES, A FLASHLIGHT, A POCKET KNIFE, A PUTTY KNIFE, PLIERS, AND A SOCKET WRENCH HANDLE AND SOCKETS. SOME TYPES OF TOOLS WHICH WERE SUPPLIED IN GRADUATED SIZES WERE PLACE IN POCKETED CANVAS ROLLS. ALL THE TOOLS WERE THEN ARRANGED IN A STEEL CASE SECURED WITH A HASP AND PADLOCK.

PROCUREMENT OF HAND TOOLS BY GSA HAS ALSO BEEN SUBJECT TO THE FOLLOWING RESTRICTION WHICH HAS APPEARED IN GSA'S APPROPRIATION ACTS SINCE 1970:

NO PART OF ANY APPROPRIATION CONTAINED IN THIS ACT SHALL BE AVAILABLE FOR THE PROCUREMENT OF OR FOR THE PAYMENT OF THE SALARY OF ANY PERSON ENGAGED IN THE PROCUREMENT OF ANY HAND OR MEASURING TOOLS) NOT PRODUCED IN THE UNITED STATES OR ITS POSSESSIONS EXCEPT TO THE EXTENT THAT THE ADMINISTRATOR OF GENERAL SERVICES OR HIS DESIGNEE SHALL DETERMINE THAT A SATISFACTORY QUALITY AND SUFFICIENT QUANTITY HAND OR MEASURING TOOLS PRODUCED IN THE UNITED STATES OR ITS POSSESSIONS CANNOT BE PROCURED AS AND WHEN NEEDED FROM SOURCES IN THE UNITED STATES AND ITS POSSESSIONS OR EXCEPT IN ACCORDANCE WITH PROCEDURES PRESCRIBED BY SECTION 6 104.4(B) OF ARMED SERVICES PROCUREMENT REGULATION DATED JANUARY 1, 1969, AS SUCH REGULATION EXISTED ON JUNE 15, 1970. THIS SECTION SHALL BE APPLICABLE TO ALL SOLICITATIONS FOR BIDS OPENED AFTER ITS ENACTMENT.

PUBLIC LAW 93-143, TITLE V, SEC. 505, OCTOBER 30, 1973, 87 STAT. 524. ARMED SERVICES PROCUREMENT REGULATION (ASPR) 6-104.4(B) CURRENTLY PROVIDES, AS IT DID ON JUNE 15, 1970:

(B) EXCEPT AS PROVIDED IN (D) BELOW, BIDS AND PROPOSALS SHALL BE EVALUATED SO AS TO GIVE PREFERENCE TO DOMESTIC BIDS. EACH FOREIGN BID (OTHER THAN A LOW BID OFFERING A CANADIAN END PRODUCT) SHALL BE ADJUSTED FOR PURPOSES OF EVALUATION EITHER BY EXCLUDING ANY DUTY FROM THE FOREIGN BID AND ADDING 50 PERCENT OF THE BID (EXCLUSIVE OF DUTY) TO THE REMAINDER, OR BY ADDING TO THE FOREIGN BID (INCLUSIVE OF DUTY) A FACTOR OF 6 PERCENT OF THAT BID, WHICHEVER RESULTS IN THE GREATER EVALUATED PRICE, EXCEPT THAT A 12 PERCENT FACTOR SHALL BE USED INSTEAD OF THE 6 PERCENT FACTOR IF (I) THE FIRM SUBMITTING THE LOW ACCEPTABLE DOMESTIC BID IS A SMALL BUSINESS CONCERN, OR A LABOR SURPLUS AREA CONCERN, OR BOTH, (II) SMALL PURCHASE PROCEDURES (SEE SECTION III, PART 6) ARE NOT USED, AND (III) ANY CONTRACT AWARD TO A DOMESTIC CONCERN WHICH WOULD RESULT FROM APPLYING THE 12 PERCENT FACTOR, BUT WHICH WOULD NOT RESULT FROM APPLYING THE 6 PERCENT OR 50 PERCENT FACTOR, WOULD NOT EXCEED $100,000. (IF AN AWARD FOR MORE THAN $100,000 WOULD BE MADE TO A DOMESTIC CONCERN IF THE 12 PERCENT FACTOR IS APPLIED, BUT WOULD NOT BE MADE IF THE 6 PERCENT OR 50 PERCENT FACTOR IS APPLIED, THE MATTER SHALL BE SUBMITTED TO THE SECRETARY OF THE DEPARTMENT CONCERNED FOR A DECISION AS TO WHETHER THE AWARD TO THE SMALL BUSINESS OR LABOR SURPLUS AREA CONCERN WOULD INVOLVE UNREASONABLE COST OR INCONSISTENCY WITH THE PUBLIC INTEREST (SEE 6-103.3).) IF THE FOREGOING PROCEDURE RESULTS IN A TIE BETWEEN A FOREIGN BID AS EVALUATED AND A DOMESTIC BID, AWARD SHALL BE MADE ON THE LATTER. WHEN MORE THAN ONE LINE ITEM IS OFFERED IN RESPONSE TO AN INVITATION FOR BIDS OR REQUEST FOR PROPOSALS, THE APPROPRIATE FACTOR SHALL BE APPLIED ON AN ITEM-BY-ITEM BASIS, EXCEPT THAT THE FACTOR MAY BE APPLIED TO ANY GROUP OF ITEMS AS TO WHICH THE INVITATION FOR BIDS OR REQUEST FOR PROPOSALS SPECIFICALLY PROVIDES THAT AWARD MAY BE MADE ON A PARTICULAR GROUP OF ITEMS.

GSA HAS CLASSIFIED THE TOOL KITS AS "END PRODUCTS" AND THE INDIVIDUAL TOOLS WITHIN THE KITS AS "COMPONENTS" FOR PURPOSES OF THE BUY AMERICAN ACT. GSA'S POSITION IS, THEREFORE, THAT SINCE THE COST OF THE FOREIGN COMPONENTS OF THE TOOL KITS AMOUNTED TO LESS THAN 25 PERCENT OF THE AGGREGATE COST OF ALL COMPONENTS, ITS PROCUREMENT OF THE TOOL KITS DID NOT VIOLATE THE BUY AMERICAN ACT AND THE CONTRACT TO CENTURY WAS PROPERLY AWARDED. SEE FPR 1-6.101(D).

THORSEN AND IMPERIAL CONTEND THAT THE INDIVIDUAL TOOLS, NOT KITS OF TOOLS, ARE THE "END PRODUCTS" ACQUIRED FOR THE PUBLIC USE, AND CONSEQUENTLY, THAT THE TOOLS MUST BE EVALUATED INDIVIDUALLY TO DETERMINE WHETHER THEY ARE OF "DOMESTIC SOURCE." THEY ARGUE THAT GSA'S FAILURE TO EVALUATE THE TOOLS ON AN INDIVIDUAL BASIS, AND ITS RESULTING PURCHASE OF KITS CONTAINING TOOLS OF FOREIGN ORIGIN, VIOLATES THE BUY AMERICAN ACT.

WE CONCLUDE THAT GSA CORRECTLY REGARDS THE GENERAL MECHANICS' TOOL KITS, NOT THE INDIVIDUAL TOOLS, AS THE "END PRODUCT" TO WHICH THE BUY AMERICAN ACT EVALUATION CRITERIA SHOULD BE APPLIED.

IN ITS REPORTS TO OUR OFFICE, GSA STATES THAT IT CONSIDERS THE COMPLETE TOOL KIT TO BE THE END PRODUCT REQUIRED; THAT THE VARIOUS COMPONENTS, INCLUDING THE TOOL BOX AND ROLLS, COMPRISE AN INTEGRAL UNIT AND ARE INTENDED TO BE USED AS SUCH; THAT THE KITS CONTAIN COMPONENTS DESIGNED PRIMARILY BY THE MILITARY AGENCIES, WHICH ARE THE USING AGENCIES, TO PERFORM SPECIFIC FUNCTIONS; AND THAT EACH COMPONENT IN THE KIT IS A REQUIRED PART OF THE KIT AND EACH IS DEPENDENT ON THE OTHERS TO PERFORM THE FUNCTIONS FOR WHICH THE KITS ARE DESIGNED. AS AN EXAMPLE, IT IS POINTED OUT THAT A MECHANIC WOULD NOT ATTEMPT THE REPAIR OF A MACHINE UNLESS HE HAD A TOOL KIT WITH THE NECESSARY ASSORTMENT OF TOOLS TO PERMIT ACCESS TO ALL PARTS OF THE MACHINE, AND FOR WHICH PARTS THERE MUST BE TOOLS OF PARTICULAR TYPES AND SIZES.

GSA HAS FURTHER INDICATED THAT DIRE CONSEQUENCES WOULD RESULT FROM A RULING THAT EACH COMPONENT OF A KIT OR SET MUST BE CONSIDERED AN END PRODUCT FOR PURPOSES OF EVALUATION UNDER THE BUY AMERICAN ACT. IN THE EVENT THAT THE INDIVIDUAL TOOLS ARE CONSIDERED AS END PRODUCTS, GSA STATES THAT SUCH CONCLUSION WOULD REQUIRE THE PREPARATION OF SOLICITATIONS FOR VARIOUS TYPES OF KITS; WOULD REQUIRE SEPARATE BID PRICES FOR EVALUATION PURPOSES FOR EACH COMPONENT OF THE SET INCLUDING ASSEMBLING, PRESERVATION, PACKAGING, PACKING, MARKING, AND SHIPMENT OF THE ASSEMBLED SET; AND THAT AN AWARD UNDER SUCH A SOLICITATION WOULD HAVE TO BE MADE ON AN AGGREGATE BASIS TO THE OVERALL LOW RESPONSIVE BIDDER. IT IS STATED FURTHER THAT TO BE RESPONSIVE A BIDDER WOULD HAVE TO SUBMIT A BID ON EACH OF THE COMPONENTS, AND THAT SUCH A PROCEDURE WOULD BE DETRIMENTAL TO BIDDERS OFFERING DOMESTIC SOURCE END PRODUCTS IF A BIDDER OFFERING FOREIGN SOURCE END COMPONENTS UNDERSTATED A FOREIGN SOURCE END PRODUCT PRICE AND OVERSTATED BOTH THE DOMESTIC SOURCE END PRODUCT PRICE AND DOMESTIC COSTS OF ASSEMBLY, PRESERVATION, PACKAGING, PACKING, AND MARKING. IT IS THE OPINION OF GSA THAT UNDER THE ABOVE-STATED CIRCUMSTANCES THE APPLICATION OF THE BUY AMERICAN DIFFERENTIAL WOULD NOT PROTECT A DOMESTIC BIDDER IN THE MANNER INTENDED.

WE BELIEVE IT IS CLEAR THAT DISCRETE ITEMS BEING PROCURED UNDER A SINGLE SOLICITATION MAY BEAR SUCH AN INTERRELATIONSHIP THAT IT IS APPROPRIATE TO EVALUATE THEM, FOR PURPOSES OF THE BUY AMERICAN ACT, AS A GROUP. THIS IS RECOGNIZED BY THE LAST SENTENCE OF ASPR 6-104.4(B), WHICH IS QUOTED ABOVE AND INCORPORATED BY REFERENCE INTO GSA'S CURRENT APPROPRIATIONS ACT.

THE QUESTION AS TO WHAT CONSTITUTES "MANUFACTURED" END PRODUCTS WITHIN THE MEANING OF FPR 1-6.101(D) IS THE ROOT OF THE PROBLEM PRESENTED BY THORSEN AND IMPERIAL. WE DO NOT BELIEVE THAT "MANUFACTURED" HAS REFERENCE ONLY TO A MECHANICAL OPERATION PERFORMED ON A FOREIGN PRODUCT. IT RELATES NOT ONLY TO MAKING THE PRODUCT SUITABLE FOR ITS INTENDED USE BUT ALSO TO THE IDENTITY THE RESULTING PRODUCT WOULD TAKE. WE FEEL THAT THE ADMINISTRATIVE COMPETENCE IN THIS AREA OF PROCUREMENT MUST BE RECOGNIZED IN DETERMINATIONS WHETHER FOREIGN PRODUCTS HAVE BEEN TRANSFORMED INTO DOMESTIC END PRODUCTS THROUGH A MANUFACTURING PROCESS. THE COMPLEXITY OF THE PROCESS OR WHETHER THE CHARACTER OF THE FOREIGN PRODUCT HAS BEEN SIGNIFICANTLY ALTERED IS NOT, IN OUR VIEW, THE CONCLUSIVE TEST OF MANUFACTURE. WE DO NOT REGARD THE TOOL CASE AND ROLLS AS ITEMS OF MERE PACKAGING, AS IN THE NATURE OF A BOTTLE, BUT AS INTEGRAL UNITS OF THE KIT WITHOUT WHICH THE TOOL KIT WOULD NOT FULFILL ITS INTENDED AND PRACTICAL PURPOSE. TO ACCOMPLISH THIS PURPOSE, THE INDIVIDUAL TOOLS - EACH HAVING AN INTERRELATIONSHIP TO PARTICULAR MECHANICAL REPAIR OPERATIONS - MUST BE INCORPORATED INTO A KIT AND MAINTAINED AS A TOOL KIT. THIS IS ASSURED BY THE ASSEMBLY OF THE PARTICULARLY RELATED TOOLS INTO A CASE AND ROLLS WHEREBY THE IDENTITY AND CHARACTER OF THE KIT IS ESTABLISHED AND FIXED AS TO ITS CURRENT AND FUTURE USE. WE, THEREFORE, BELIEVE THAT THE "END PRODUCTS" OF THIS PROCUREMENT ARE THE TOOL KITS AND NOT INDIVIDUAL TOOLS, CASES AND ROLLS. TO HOLD OTHERWISE WOULD CREATE ALMOST INSURMOUNTABLE DIFFICULTIES IN ADMINISTERING "KIT" PROCUREMENTS BY THE PROCUREMENT DEPARTMENTS.

IN OUR VIEW THE INSTANT CASE IS ANALOGOUS TO OUR DECISION B-156768, AUGUST 17, 1965, IN WHICH WE REGARDED THE "END PRODUCT" TO BE A MUSICAL BACKGROUND LIBRARY, WHICH WAS CREATED THROUGH THE USE OF PHONOGRAPH RECORDS (SOME OF WHICH WERE OF FOREIGN ORIGIN), MASTER RECORDING TAPES, AND BLANK RECORDING TAPES. EACH RECORD OR TAPE WAS A DISCRETE OBJECT, SEVERABLE FROM THE OTHERS. YET NO ONE OF THEM, NOR ANY COMBINATION OF THEM LESS THAN THE WHOLE, MET THE GOVERNMENT'S NEEDS FOR A MUSICAL BACKGROUND LIBRARY. ONLY THE ENTIRE COLLECTION OF RECORDS AND TAPES, AS A WHOLE, FUNCTIONED TOGETHER TO SATISFY THE GOVERNMENT'S NEEDS. SIMILARLY, IN THE INSTANT CASE, ONLY COMPLETE KITS OF TOOLS WHOLLY SATISFY THE GOVERNMENT'S NEEDS.

IT FOLLOWS THAT WE REJECT THE ANALOGY WHICH THORSEN'S COUNSEL HAS ATTEMPTED TO DRAW BETWEEN THIS CASE AND THAT WHICH IS REPORTED AT 46 COMP. GEN. 784 (1967). IN 46 COMP. GEN. 784, WE POINTED OUT THAT THE ESSENTIAL NEED OF THE GOVERNMENT WAS FOR SULFADIAZINE TABLETS, NOT BOTTLES, AND THAT THE TABLETS, BEING FOREIGN ARTICLES, COULD NOT BE TRANSFORMED INTO AMERICAN ITEMS BY BEING PACKAGED IN AMERICAN BOTTLES. IN THE PRESENT CASE, THE ESSENTIAL NEED OF THE GOVERNMENT WAS FOR A COMPLETE MECHANICS' TOOL KIT CONTAINING CERTAIN RELATED TOOLS. THE FACT THAT EACH TOOL MAY BE AVAILABLE AND MAY BE PROCURED AS AN INDIVIDUAL ITEM DOES NOT, IN OUR OPINION, CHANGE THE NEED OF THE GOVERNMENT FOR A SET OF TOOLS IN A TOOL KIT FOR THE PERFORMANCE OF SPECIFIC MECHANICAL JOBS.