Matter of: Canadian Commercial Corporation / Canada Cordage, Inc. File: B-247604 Date: June 15, 1992

B-247604: Jun 15, 1992

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PROCUREMENT Socio-Economic Policies Preferred products/services Domestic products Applicability Offer from Canadian firm is to be evaluated under Department of Defense Federal Acquisition Regulation Supplement implementing the Buy American Act as a "qualifying country" offer and cannot be considered a "domestic" offer for evaluation purposes in the absence of any specific provision that confers such status on a Canadian offer. The IFB was issued by the Defense Industrial Supply Center for a basic quantity of 800 coils of manila rope and alternate quantities of 1. Which was made for 1. Was the result of an improper application of an evaluation preference factor under the Buy American Act. The apparent second low bid was submitted by Amalgamated Resource Services.

Matter of: Canadian Commercial Corporation / Canada Cordage, Inc. File: B-247604 Date: June 15, 1992

PROCUREMENT Socio-Economic Policies Preferred products/services Domestic products Applicability Offer from Canadian firm is to be evaluated under Department of Defense Federal Acquisition Regulation Supplement implementing the Buy American Act as a "qualifying country" offer and cannot be considered a "domestic" offer for evaluation purposes in the absence of any specific provision that confers such status on a Canadian offer. PROCUREMENT Socio-Economic Policies Preferred products/services Domestic products Applicability While the regulatory implementation of the United States-Canada Free- Trade Agreement Implementation Act provides that where a Canadian offer meets the $25,000 threshold, the Buy American Act restrictions may not be applied against that offer, the regulation does not restrict application of the Buy American Act to the evaluation of other offers or prohibit awarding a contract to a nondesignated country.

Attorneys

DECISION The Canadian Commercial Corporation, on behalf of Canada Cordage, Inc. (CCI), protests the Defense Logistics Agency's (DLA) award of a contract to All Line, Inc., under invitation for bids (IFB) No. DLA500-92-B-A002.

The IFB was issued by the Defense Industrial Supply Center for a basic quantity of 800 coils of manila rope and alternate quantities of 1,200 and 600 coils. CCI contends that the award, which was made for 1,200 coils of the rope, was the result of an improper application of an evaluation preference factor under the Buy American Act. We deny the protest.

The solicitation included the provision found at Department of Defense Federal Acquisition Regulation Supplement (DFARS) Sec. 252.225-7001 (1988 ed.), implementing the Buy American Act (41 U.S.C. Sec. 10a-d (1988)) and the Department of Defense Balance of Payments Program. This clause provides an evaluation preference for domestic end products over foreign end products, except for certain foreign end products which meet the requirements for classification as "qualifying country" end products, "designated country" end products or Caribbean Basin end products.

The agency received five bids by the opening date of December 16, 1991. All Line submitted a bid based on supplying rope produced in the Philippines, a "nonqualifying country," for $50,400. The apparent second low bid was submitted by Amalgamated Resource Services, Inc., also offering to supply rope produced in the Philippines, for $58,080. CCI's bid was based on rope produced in Canada, a "qualifying country" as defined in DFARS Sec. 225.7403(a)(3) (DAC 88-16), for $67,200, and was the apparent third low bid. The remaining two bids were higher in price and are not relevant here.

Because the solicitation was for a Department of Defense acquisition, the procedures set forth in DFARS Sec. 225.105-70 (DAC 88-16) for evaluating offers for domestic end products against offers for qualifying country or nonqualifying country end products applied. Under these procedures, the contracting official is required to adjust each nonqualifying country's offer by adding a factor of 50 percent to the offered price. The contracting officer therefore adjusted the bid prices, for evaluation purposes, as follows:

OFFEROR STATUS UNEVALUATED FACTOR EVALUATED

CCI Qualifying $67,200 NONE $67,200 Country

All Nonqualifying $50,400 X 1.5 $75,600 Line Country

ARS Nonqualifying $58,080 X 1.5 $87,120

At this point, CCI's bid of $67,200 became low. However, DFARS Sec. 225.105-70(c) (DAC 88-16) provides that where the application of the 50 percent factor would not result in the award of a domestic bid--for example, if "the domestic offer is higher than a qualifying country offer . . . or when no domestic offers are received"--then all offers must be evaluated without the factor. The contracting officer determined that this limitation applied here, since the bid that became low upon application of the preference was from Canada, a country listed as a qualifying country, and therefore re-evaluated the bids without adding the 50 percent factor. Under the re-evaluation, All Line's bid was low.

The contracting officer found All Line responsible and its bid responsive, and therefore awarded the contract to this firm.

CCI contends that its offer was, in fact, a "domestic offer," rather than a qualifying country offer, and that the contracting officer was required to increase All-Lines' bid by the 50 percent factor, in favor of CCI's bid. The protester insists that Canadian offers are sharply distin- guished from all other "qualifying country" offers because, under DFARS Sec. 225.105-70(h) (DAC-88-16), Canada, "in most cases, is considered part of the domestic [U.S.] mobilization base" (emphasis added by protester), and argues that Canadian offers of defense material manufactured or produced in Canada must be considered "domestic" offers for purposes of applying the Buy American Act as implemented by the DFARS.

In support of this argument, CCI cites a number of DFARS and statutory provisions in which Canadian offers are equated with domestic offers in various ways, such as by restricting acquisitions of certain specified items to U.S. or Canadian sources only, e.g. DFARS Secs. 225.7014-3 (DAC 88-18), 225.7015 (DAC-88-15), 225.7012-3 (DAC 88-16); defining "domestic manufacture" for certain items (such as bearing assemblies, valves and machine tools) as "items manufactured in the United States or Canada," DFARS Sec. 208.7900 (DAC 88-7), 10 U.S.C. Sec. 2507(d)(1) and (2)(c) (1988); and describing conditions under which automobiles assembled in Canada are to be considered domestically manufactured, 15 U.S.C. Sec. 2003(b)(2)(E) (1988). In addition, CCI points out that "in most cases, Canada is considered part of the domestic mobilization base," under DFARS Sec. 225.105-70(h) (DAC 88-16), so that Canadian offers would not be subject to the restriction against foreign sources in procurements that are restricted to achieve industrial mobilization. CCI urges that rather than simply relying on the Buy American Act's definition of a "domestic end product" (which requires basically that the item be mined, produced or manufactured in the U.S. and does not mention Canada), we should consider the question of how to evaluate Canadian offers within its statutory and regulatory context, giving due weight to the various instances in which "Canadian" is to be treated as "domestic."

We do not find the protester's analysis persuasive. In our view, the "context" that CCI presents as evidence of Canada's special status illustrates, instead, that where Canadian offers are to be treated differently from other qualifying country offers, specific provisions are included in the regulations to effect that result. While CCI argues that "had [this] procurement been restricted to U.S. and Canadian firms under [the industrial mobilization] exception to full and open competition, CCI's offer, that of a Planned Producer, would have competed on the same footing with offers from U.S. firms," the simple fact remains that this procurement was not restricted in this way. Indeed, none of the particular exceptions that CCI cites from the regulations is directly applicable here. Moreover, the applicable regulations make no general provision for treating Canadian offers as domestic; rather, DFARS Sec. 225.000-70(g) (DAC 88-16) defines "qualifying country" as "any country set forth at 225.7403" (emphasis added); the list of qualifying countries at Sec. 225.7403 includes Canada (without any indication of special status or treatment) and provides that "offers of end products from these listed qualifying countries shall be evaluated in accordance with 225.105-70 and subpart 225.3."

As discussed above, section 225.105-70(c) specifically directs the contracting agency not to apply the 50 percent preference where the award would not be made to a "domestic offer." In order to adopt the protester's construction of the regulations, we would have to ignore these specific provisions and instead infer a domestic status for Canadian offers from other portions of the DFARS not directly applicable here. The instances cited by CCI where Canadian products are to be evaluated as domestic products are drawn from provisions defining rather precise circumstances, suggesting that the drafters made such status express when they intended parity between Canadian and U.S. products. In the absence of legislative or regulatory direction to afford Canadian offers this status generally, we find that the agency's evaluation and award decision were proper.

CCI alleges, further, that DISC failed to give due consideration to the application of the Trade Agreements Act (TAA), 19 U.S.C. Secs. 2501 et seq. (1988), and the United States-Canada Free-Trade Agreement Implementation Act of 1988, 19 U.S.C. Sec. 2112 note (1988). The protester acknowledges that under the FAR's TAA provisions, when the value of an acquisition of an end product subject to the TAA is estimated to be at or over the current dollar threshold established by the U.S. trade representative, then only designated country or Caribbean Basin country end products may be acquired. FAR Sec. 25.402. Since Canada is among the designated countries listed in the TAA and the Philippines is not, see FAR Sec. 25.401, and rope is among the foreign end products that are subject to the TAA, see DFARS Sec. 225.403-70 (DAC 88-16), the purchase of rope from the Philippines would be prohibited and the purchase of rope from Canada would be allowed, where (unlike here) the value of the acquisition met the current threshold of $176,000. CCI argues, however, that it would be improper for DISC to conclude that this acquisition was exempted from these provisions on the basis that its value was below the threshold. CCI points out that the United States-Canada Free-Trade Agreement Implementation Act, as implemented by FAR Sec. 25.402(a)(3), requires that "agencies shall evaluate offers of Canadian end products above $25,000 without regard to the restrictions of the Buy American Act or the Balance of Payments Program." The protester argues that since the value of the acquisition was greater than $25,000, DISC was precluded from awarding the contract to any firm offering rope from the Philippines, a non-designated country.

We find that CCI's conclusion in this regard does not follow. The regulation CCI cites, FAR Sec. 25.402(a)(3), simply provides that where a Canadian offer meets the $25,000 threshold, the Buy American Act restrictions may not be applied against that offer. The regulation does not restrict the application of the Buy American Act provisions to the evaluation of other offers or prohibit awarding the contract to a nondesignated country. Here, DISC has not suggested that any evaluation factor be applied to a Canadian offer; rather, the agency determined that it could not apply the evaluation factor to offers of rope from the Philippines because such evaluation would not result in award to a domestic offer, and found, in comparing the unevaluated offers, that CCI's offer was not low.

The protest is denied.