B-181852, DEC 3, 1974

B-181852: Dec 3, 1974

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WHILE AGENCY FAILED TO DETERMINE PLACE OF MANUFACTURE IN MAKING DETERMINATION OF COMPLIANCE WITH RESTRICTIONS OF BUY AMERICAN ACT AND DATA SUBMITTED TO GAO IS NOT SUFFICIENT TO DETERMINE PLACE OF MANUFACTURE. ALLEGATION THAT UNIT OFFERED BY SUCCESSFUL OFFEROR IS MANUFACTURED IN ITALY AND THUS CONSTITUTES VIOLATION OF BUY AMERICAN ACT IS WITHOUT MERIT SINCE SUCCESSFUL OFFEROR CERTIFIED THAT IT WILL FURNISH DOMESTIC END PRODUCT AND ACCEPTANCE OF OFFER RESULTS IN OBLIGATION TO FURNISH SUCH PRODUCT AND COMPLIANCE WITH OBLIGATION IS MATTER OF CONTRACT ADMINISTRATION WHICH HAS NO EFFECT ON CONTRACT AWARD. 2. WHILE AGENCY RELIED UPON ASSURANCE OF SUCCESSFUL OFFEROR THAT APPROXIMATELY 15 PERCENT OF COMPONENTS WERE FOREIGN.

B-181852, DEC 3, 1974

1. WHILE AGENCY FAILED TO DETERMINE PLACE OF MANUFACTURE IN MAKING DETERMINATION OF COMPLIANCE WITH RESTRICTIONS OF BUY AMERICAN ACT AND DATA SUBMITTED TO GAO IS NOT SUFFICIENT TO DETERMINE PLACE OF MANUFACTURE, ALLEGATION THAT UNIT OFFERED BY SUCCESSFUL OFFEROR IS MANUFACTURED IN ITALY AND THUS CONSTITUTES VIOLATION OF BUY AMERICAN ACT IS WITHOUT MERIT SINCE SUCCESSFUL OFFEROR CERTIFIED THAT IT WILL FURNISH DOMESTIC END PRODUCT AND ACCEPTANCE OF OFFER RESULTS IN OBLIGATION TO FURNISH SUCH PRODUCT AND COMPLIANCE WITH OBLIGATION IS MATTER OF CONTRACT ADMINISTRATION WHICH HAS NO EFFECT ON CONTRACT AWARD. 2. WHILE AGENCY RELIED UPON ASSURANCE OF SUCCESSFUL OFFEROR THAT APPROXIMATELY 15 PERCENT OF COMPONENTS WERE FOREIGN, RATHER THAN UPON DETAILED COST BREAKDOWN TO MAKE ITS DETERMINATION OF COST OF FOREIGN AND DOMESTIC COMPONENTS, COST BREAKDOWN SUBMITTED AFTER CONTRACT AWARD, WHICH DUE TO ITS PROPRIETARY NATURE CANNOT BE DIVULGED, INDICATES COST OF FOREIGN COMPONENTS, INCLUDING DUTY AND FOREIGN FREIGHT, OF WASHER CONSTITUTES APPROXIMATELY 35 PERCENT OF TOTAL COST OF COMPONENTS AND COST OF FOREIGN COMPONENTS, INCLUDING DUTY AND INLAND FREIGHT, OF DRYER CONSTITUTES APPROXIMATELY 36 PERCENT OF TOTAL COST OF COMPONENTS; THEREFORE, ALLEGATION THAT COST OF FOREIGN COMPONENTS USED IN MANUFACTURE OF UNITS OFFERED BY SUCCESSFUL OFFEROR EXCEEDS 50 PERCENT OF THE TOTAL COST OF COMPONENTS IS WITHOUT MERIT. 3. CONTENTION THAT ADMINISTRATIVE REPORT INCORRECTLY CONCLUDES THAT PROTESTER'S OFFER, WHICH WAS THIRD LOW, DOES NOT CONFORM TO REQUIREMENTS OF SPECIFICATIONS IS NOT FOR CONSIDERATION SINCE WE HAVE DETERMINED QUESTIONS RAISED CONCERNING SECOND LOW OFFEROR'S COMPLIANCE WITH BUY AMERICAN ACT HAVE NO EFFECT ON VALIDITY OF CONTRACT AWARD TO THAT FIRM. 4. CONTENTION THAT PROCUREMENT SHOULD HAVE BEEN FORMALLY ADVERTISED RATHER THAN NEGOTIATED IS UNTIMELY UNDER SECTION 20.2(A) OF INTERIM BID PROTEST PROCEDURES AND STANDARDS WHICH REQUIRES THAT PROTESTS BASED UPON ALLEGED IMPROPRIETIES APPARENT PRIOR TO CLOSING DATE FOR RECEIPT OF PROPOSALS SHALL BE FILED PRIOR TO THAT DATE.

UNICARE VEHICLE WASH, INC.:

THE ENVIRONMENTAL PROTECTION AGENCY (EPA), OFFICE OF AIR AND WATER PROGRAMS, ANN ARBOR, MICHIGAN, ISSUED REQUEST FOR PROPOSALS (RFP) NO. C174 -0152, FOR AN AUTOMATIC CAR WASH SYSTEM, CAR BEAUTICIAN MODEL 120, OR EQUAL. FOURTEEN SOLICITATIONS WERE ISSUED AND SEVEN FIRMS SUBMITTED OFFERS AS FOLLOWS:

OFFEROR AMOUNT

BRUMMELER $16,050.00

MR. SCRUB CAR WASH SYSTEMS, INC. 18,898.00

UNICARE VEHICLE WASH INC. 18,950.00

WASHMOBILE 21,550.00

MICHIGAN CAR WASH EQUIP. CO. 22,500.00

WASHMOBILE 25,200.00

SHERMAN VEHICLE WASH SYSTEMS INC. 28,965.00

THE EVALUATION PERFORMED BY THE PROJECT OFFICER INDICATED THAT THE SECOND LOW OFFER OF MR. SCRUB CAR WASH SYSTEMS, INC. (SCRUB), MET ALL THE REQUIREMENTS OF THE SOLICITATION AND RECOMMENDED AWARD TO THAT FIRM. THE CONTRACTING OFFICER DETERMINED THAT SCRUB WAS RESPONSIBLE AND AWARD WAS MADE TO IT IN MAY 1974.

BY LETTER DATED MAY 31, 1974, UNICARE VEHICLE WASH, INC. (UNICARE), PROTESTED TO EPA THE AWARD TO SCRUB ON THE BASIS THAT SCRUB'S BID WAS IN VIOLATION OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D, AND IMPLEMENTING ORDERS AND REGULATIONS. BY LETTER DATED JULY 3, 1974, EPA DENIED THE PROTEST OF UNICARE. THIS DENIAL STATED IN PERTINENT PART AS FOLLOWS:

"THE FEDERAL PROCUREMENT REGULATIONS, SUBPART 1-6.101(D) DEFINES A 'DOMESTIC SOURCE AND PRODUCT' AS FOLLOWS:

(D) 'DOMESTIC SOURCE AND PRODUCT' MEANS AN UNMANUFACTURED END PRODUCT WHICH HAS BEEN MINED OR PRODUCED IN THE UNITED STATES, OR AN END PRODUCT MANUFACTURED IN THE UNITED STATES IF THE COST OF ITS COMPONENTS WHICH ARE MINED, PRODUCED OR MANUFACTURED IN THE UNITED STATES EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS ...

"UNDER CONTRACT 68-03-0459, MR. SCRUB WASH SYSTEMS, INC., IS FURNISHING ONE (1) WASHER, ASF-75 (E) AND ONE (1) DRYER. AFS-95. MR. SCRUB WASH SYSTEMS, INC., HAS FURNISHED TO THE ENVIRONMENTAL PROTECTION AGENCY DETAILED COST DATA FOR THIS EQUIPMENT WHICH INDICATES THAT THE COSTS OF COMPONENTS MANUFACTURED AND LABOR PERFORMED IN THE UNITED STATES EXCEEDS 50 PERCENT OF THE COSTS OF ALL COMPONENTS. THEREFORE, IT IS DETERMINED THAT THE EQUIPMENT BEING FURNISHED UNDER CONTRACT 68 03-0459 IS A DOMESTIC SOURCE END PRODUCT AND THAT THERE HAS BEEN NO VIOLATION OF THE BUY AMERICAN ACT."

BY LETTER DATED JULY 15, 1974, AND SUBSEQUENT CORRESPONDENCE, COUNSEL FOR UNICARE PROTESTED TO OUR OFFICE THE AWARD TO SCRUB UNDER THE ABOVE REFERENCED SOLICITATION. SPECIFICALLY, UNICARE ALLEGES THE FOLLOWING: (1) THAT THE CARWASHING SYSTEM OFFERED BY SCRUB IS MANUFACTURED IN ITALY, AND THEREFORE, DOES NOT CONSTITUTE A DOMESTIC END PRODUCT; (2) THAT THE EPA FAILED TO CONSIDER THE PLACE OF MANUFACTURE OF THE SYSTEM OFFERED BY SCRUB IN ITS DETERMINATION OF WHETHER THE SYSTEM WAS IN COMPLIANCE WITH THE BUY AMERICAN ACT; (3) THAT THE COST OF THE FOREIGN COMPONENTS UTILIZED IN THE MANUFACTURE OF THE SYSTEM EXCEEDS 50 PERCENT OF THE COST OF ALL OF THE COMPONENTS THEREOF; (4) THAT THE ADMINISTRATIVE REPORT INCORRECTLY CONCLUDES THAT UNICARE'S OFFER DOES NOT CONFORM TO THE SPECIFICATION REQUIREMENTS; AND (5) THAT THE ENTIRE PROCUREMENT IS ILLEGAL BECAUSE IT WAS NOT FORMALLY ADVERTISED AS REQUIRED BY LAW:

"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. SEC. 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- 6.101(D) PROVIDES:

"'DOMESTIC SOURCE END PRODUCT' MEANS AN UNMANUFACTURED END PRODUCT WHICH HAS BEEN MINED OR PRODUCED IN THE UNITED STATES, OR AN END PRODUCT MANUFACTURED IN THE UNITED STATES IF THE COST OF ITS COMPONENTS WHICH ARE MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS. THE COST OF COMPONENTS SHALL INCLUDE TRANSPORTATION COSTS TO THE PLACE OF INCORPORATION INTO THE END PRODUCT AND, IN THE CASE OF COMPONENTS OF FOREIGN ORIGIN, DUTY (WHETHER OR NOT A DUTY-FREE ENTRY CERTIFICATE MAY BE ISSUED). ***"

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

SINCE THE OFFER OF SCRUB DID NOT TAKE EXCEPTION TO THE BUY AMERICAN CERTIFICATION CONTAINED IN PARAGRAPH 7 OF SF 33, EPA WAS UNAWARE OF ANY BASIS TO QUESTION SCRUB'S COMPLIANCE WITH THE RESTRICTION CONTAINED THEREIN. HOWEVER, SINCE EPA HAD NOT PREVIOUSLY AWARDED ANY CONTRACTS TO SCRUB, IT REQUESTED INFORMATION FROM THE CONTRACTING OFFICER AT KELLY AIR FORCE BASE CONCERNING THE RESPONSIBILITY OF SCRUB. IN ADDITION TO STATING THAT THE AIR FORCE HAD FOUND SCRUB TO BE RESPONSIBLE, THE AIR FORCE INFORMED EPA THAT UNICARE HAD PROTESTED THE AWARD OF TWO CONTRACTS BY THE AIR FORCE TO SCRUB ON THE BASIS THAT SCRUB'S UNIT WAS OF FOREIGN MANUFACTURE. IN THIS REGARD, THE CONTRACTING OFFICER'S REPORT STATES THAT:

"*** (AIR FORCE CONTRACTING OFFICER) ARRANGED FOR THE DCAS OFFICE AT FORT HOLABIRD, MARYLAND TO MAKE A SURVEY CONCERNING THE FOREIGN MANUFACTURE CLAIM BY UNICARE. ACCORDING TO (THE CONTRACTING OFFICER) THE DCAS OFFICE MADE A DETERMINATION THAT MR. SCRUB CAR WASH EQUIPMENT WAS OF DOMESTIC ORIGIN. THIS WAS BASED ON THE FACT THAT ONLY THE SHELL/FRAME IS MANUFACTURED IN ITALY. AIR FORCE HEADQUARTERS CONSEQUENTLY DENIED THE PROTEST AND UNICARE PROTESTED FURTHER TO THE GENERAL ACCOUNTING OFFICE. (THE CONTRACTING OFFICER) STATED THAT NO REPLY HAD BEEN RECEIVED FROM THE GAO AS OF APRIL 11, 1974.

"A CALL WAS PLACED BY THE UNDERSIGNED TO THE PRESIDENT OF MR. SCRUB CAR WASH SYSTEMS AND QUESTIONS WERE ASKED ABOUT THE FOREIGN MANUFACTURE CLAIM BY UNICARE CAR WASH. THE PRESIDENT STATED THAT ONLY THE FRAME IS MADE IN ITALY, THIS IS CONSIDERED TO BE A COMPONENT OF APPROXIMATELY 15% OF THE ENTIRE SYSTEM. HE STATED THAT THE DCAS OFFICE HAD CHECKED OUT THE EQUIPMENT AND DETERMINED THAT THE CAR WASH SYSTEM WAS OF A DOMESTIC ORIGIN."

WITH REGARD TO THE FIRST THREE CONTENTIONS RAISED BY UNICARE, IT IS APPARENT THAT THE EPA RELIED UPON THE INFORMATION RECEIVED FROM THE AIR FORCE AND FROM THE PRESIDENT OF SCRUB IN MAKING ITS DETERMINATION AS TO WHETHER THE SYSTEM BY SCRUB WAS IN COMPLIANCE WITH THE PROVISIONS OF THE BUY AMERICAN ACT.

WITH REFERENCE TO THE INFORMATION RECEIVED FROM THE AIR FORCE, NOTHING IN THE RECORD INDICATES THAT EPA HAD DETERMINED THAT IT WAS PROCURING A CARWASH FROM SCRUB THAT WAS IDENTICAL TO THE UNITS PROCURED BY THE AIR FORCE. IN ADDITION, IT SHOULD BE NOTED THAT EPA'S SOLICITATION CALLS FOR A DRYER IN ADDITION TO A WASHER AND THAT THE AIR FORCE SOLICITATIONS WERE FOR WASHERS ONLY. FURTHERMORE, THE AIR FORCE AWARDED CONTRACTS TO SCRUB IN AUGUST AND NOVEMBER 1973. SINCE THE INFORMATION RECEIVED FROM THE AIR FORCE WAS OBTAINED MANY MONTHS PRIOR TO THE APRIL 11 CONVERSATION BETWEEN EPA AND THE AIR FORCE, IT MAY NOT HAVE ACCURATELY REFLECTED SCRUB'S SITUATION AS IT EXISTED IN APRIL. FURTHERMORE, THE RECORD DOES NOT EVIDENCE THAT EPA UPDATED THE INFORMATION RECEIVED.

WITH REGARD TO THE INFORMATION RECEIVED FROM SCRUB, IT IS APPARENT THAT THE EPA MERELY ACCEPTED THAT FIRM'S ASSURANCE THAT ONLY THE FRAME, WHICH IS 15 PERCENT OF THE COST OF THE UNIT, IS OF FOREIGN MANUFACTURE. THIS INFORMATION WAS INSUFFICIENT UPON WHICH TO MAKE A DETERMINATION CONCERNING COMPLIANCE WITH THE BUY AMERICAN ACT. SEE 50 COMP. GEN. 697, 702 (1971). IT SHOULD BE NOTED THAT SUBSEQUENT TO CONTRACT AWARD, SCRUB SUBMITTED TO EPA A DETAILED COST BREAKDOWN OF THE WASHER AND DRYER. THE INFORMATION IS PROPRIETARY TO SCRUB AND WAS SUBMITTED ON A CONFIDENTIAL BASIS. WHILE WE MAY NOT DIVULGE ANY SPECIFIC COST DATA IT IS APPARENT THAT THE COST OF THE FOREIGN COMPONENTS OF THE WASHER, INCLUDING DUTY AND FOREIGN FREIGHT, CONSTITUTES APPROXIMATELY 35 PERCENT OF THE TOTAL COST OF THE COMPONENTS AND THE COST OF THE FOREIGN COMPONENTS OF THE DRYER, INCLUDING DUTY AND INLAND FREIGHT, CONSITUTES APPROXIMATELY 36 PERCENT OF TOTAL COST OF THE COMPONENTS. ALTHOUGH THE TRANSPORTATION COSTS INCURRED IN THE SHIPMENT OF THE ASSEMBLED ITEMS TO THE SITE OF INSTALLATION ARE NOT CONSIDERED COMPONENT COSTS, THOSE TRANSPORTATION COSTS INCURRED IN THE SHIPMENT OF THE COMPONENTS TO THE PLACE OF ASSEMBLY ARE CONSIDERED COMPONENT COST. SEE 35 COMP. GEN. 7 (1955); 43 COMP. GEN. 306 (1963); B-166786, JUNE 24, 1969; FPR SEC. 1-6.101(D) (1964 ED.). ABSENT A DETERMINATION OF THE PLACE OF ASSEMBLY OF THE WASHER AND DRYER AND AN EXPLANATION OF THE MEANING OF THE TERM "INLAND FREIGHT," WE CANNOT DETERMINE WHETHER THESE TRANSPORTATION COSTS CONSTITUTE FOREIGN COMPONENT COSTS. WE CAN ONLY CONCLUDE THAT THE COSTS OF THE FOREIGN COMPONENTS OF THE WASHER AND DRYER DO NOT EXCEED 35 PERCENT AND 36 PERCENT, RESPECTIVELY. THE RECORD ALSO SHOWS THAT EPA FAILED TO REALIZE THAT A DETERMINATION AS TO WHETHER A DOMESTIC END PRODUCT IS OFFERED INCLUDES A DETERMINATION OF PLACE OF MANUFACTURE AS WELL AS A DETERMINATION OF THE FOREIGN AND DOMESTIC COST OF COMPONENTS UTILIZED.

IN MAKING A DETERMINATION CONCERNING WHETHER A DOMESTIC SOURCE END PRODUCT IS BEING OFFERED, THE EPA SHOULD HAVE GATHERED ALL PERTINENT DATA NECESSARY FOR IT TO MAKE A REASONED AND ACCURATE DETERMINATION AS TO BOTH THE PLACE OF MANUFACTURE AND THE COST OF THE FOREIGN AND DOMESTIC COMPONENTS UTILIZED. IT SHOULD NOT HAVE PLACED TOTAL RELIANCE UPON THE CONCLUSIONS OF THE AIR FORCE AND SCRUB.

HOWEVER, WHILE THE DATA WE HAVE RECEIVED FROM THE EPA IS NOT SUFFICIENT TO MAKE A DETERMINATION OF THE PLACE OF MANUFACTURE OF THE WASHER AND DRYER, SCRUB HAS CERTIFIED THAT IT WILL FURNISH A DOMESTIC END PRODUCT. WHERE AN OFFEROR EXCLUDED NO END PRODUCTS FROM THE BUY AMERICAN CERTIFICATE IN ITS OFFER AND DOES NOT OTHERWISE INDICATE THAT IT IS OFFERING ANYTHING OTHER THAN DOMESTIC END PRODUCTS, THE ACCEPTANCE OF THE OFFER, IF OTHERWISE RESPONSIVE, WILL RESULT IN AN OBLIGATION ON THE PART OF THE OFFEROR TO FURNISH DOMESTIC END PRODUCTS, AND COMPLIANCE WITH THAT OBLIGATION IS A MATTER OF CONTRACT ADMINISTRATION WHICH HAS NO EFFECT ON THE VALIDITY OF THE CONTRACT AWARD. 50 COMP. GEN. 697 (1971); B-174281, DECEMBER 17, 1971; B 174184, MAY 24, 1972; B-174850, APRIL 6, 1972. ACCORDINGLY, IT IS OUR VIEW THAT THE CONTENTIONS RAISED CONCERNING SCRUB'S COMPLIANCE WITH THE BUY AMERICAN ACT DO NOT AFFECT THE VALIDITY OF THE AWARD TO SCRUB.

HOWEVER, BY SEPARATE LETTER, WE HAVE INFORMED EPA THAT IT IS INCUMBENT UPON IT TO TAKE STEPS DURING CONTRACT ADMINISTRATION THAT WILL PROVIDE ASSURANCE THAT THE BUY AMERICAN REQUIREMENTS HAVE BEEN MET AND THAT SUCH DEFICIENCIES AS HAVE BEEN NOTED HERE SHOULD NOT BE REPEATED IN THE FUTURE.

SINCE WE HAVE DETERMINED THAT THE CONTRACT AWARD TO SCRUB WAS VALID, THERE IS NO NEED TO CONSIDER THE CONTENTION RAISED CONCERNING THE CONFORMITY OF UNICARE'S OFFER WITH THE REQUIREMENTS OF THE SPECIFICATION.

UNICARE'S FINAL CONTENTION IS THAT THE ENTIRE PROCUREMENT WAS ILLEGAL BECAUSE IT WAS NOT FORMALLY ADVERTISED AS REQUIRED BY LAW. UNICARE ARGUES THAT "IT IS ABSOLUTELY CLEAR THAT THE INSTANT SOLICITATION PROVOKED OPEN AND AGRESSIVE COMPETITION, A FACT WHICH PLACED THIS PROCUREMENT BEYOND THE AUTHORITY OF 41 U.S.C. 252(C)(10) AND FPR 1 3.210 AND REQUIRES THAT IT BE THE SUBJECT OF FORMAL ADVERTISING."

THE INTERIM BID PROTEST PROCEDURES AND ST1NDARDS (SECTION 20.2(A) OF TITLE 4 OF THE CODE OF FEDERAL REGULATIONS (1972)) REQUIRE THAT PROTESTS BASED UPON ALLEGED IMPROPRIETIES IN ANY TYPE OF SOLICITATION WHICH ARE APPARENT PRIOR TO THE CLOSING DATE FOR RECEIPT OF PROPOSALS SHALL BE FILED PRIOR TO THAT DATE. SINCE THE CLOSING DATE FOR RECEIPT OF PROPOSALS UNDER THE INSTANT RFP WAS MARCH 28, 1974, AND THIS CONTENTION WAS NOT RAISED WITH OUR OFFICE UNTIL RECEIPT OF COUNSEL'S LETTER OF SEPTEMBER 6, 1974, THIS ASPECT OF THE PROTEST IS UNTIMELY AND WILL NOT BE CONSIDERED ON ITS MERITS.

FOR THE REASONS SET FORTH ABOVE, THE PROTEST IS DENIED.