B-156420, SEP. 30, 1965

B-156420, SEP. 30, 1965

TO SELLERS, CONNER AND CUNEO:

BY TELEFAX DATED MARCH 26, 1965, AND SUBSEQUENT CORRESPONDENCE, YOU HAVE, ON BEHALF OF THE BALDWIN-LIMA-HAMILTON CORPORATION, PROTESTED THE ACTION OF THE AGENCY FOR INTERNATIONAL DEVELOPMENT IN APPROVING AN AWARD TO THE INTERNATIONAL GENERAL ELECTRIC COMPANY UNDER INVITATION FOR BIDS NO. PEIX- 101. THE INVITATION, COVERING FOUR HYDRAULIC TURBINES, GENERATORS AND ACCESSORIES FOR THE PEIXOTO HYDROELECTRIC PROJECT IN BRAZIL FINANCED FROM AID LOAN NO. 512-L-026, WAS ISSUED ON BEHALF OF THE BORROWER-GRANTEE, CENTRAIS ELECTRICAS BRASILEIRAS, S.A. (HEREINAFTER REFERRED TO AS "ELECTROBRAS"), BY EBASCO SERVICES, INCORPORATED, OF NEW YORK, WHICH ALSO EVALUATED THE BIDS. YOU HAVE REQUESTED OUR OFFICE TO HOLD THE AWARD INVALID AND TO DECLARE THE FUNDS NOT AVAILABLE FOR COMMITMENT UNDER THE CONTRACT.

THE SUCCESSFUL GENERAL ELECTRIC BID IS PREDICATED UPON THE MANUFACTURE OF GENERATORS IN-HOUSE AND THE PROCUREMENT OF HYDRAULIC TURBINES BY SUBCONTRACT FROM WILLAMETTE IRON AND STEEL COMPANY OF PORTLAND, OREGON. WILLAMETTE, IN TURN, WILL LET A SECOND-TIER SUBCONTRACT FOR DESIGN AND ENGINEERING SERVICES TO DOMINION ENGINEERING WORKS OF MONTREAL, CANADA, WHICH, WE UNDERSTAND, IS A SUBSIDIARY OF THE PRIME CONTRACTOR.

YOU FIRST CHALLENGE THE AWARD AS CONTRARY TO SECTION 604/A) OF THE FOREIGN ASSISTANCE ACT OF 1961, 75 STAT. 439, 22 U.S.C. 2354; A DETERMINATION OF THE PRESIDENT, THEREUNDER, DATED OCTOBER 18, 1961, (REFERRED TO IN AID MANUAL ORDER NO. 1411.1); SECTION 118 OF THE FOREIGN AID AND RELATED AGENCIES APPROPRIATION ACT, 1964, 77 STAT. 857, 860; AID REGULATION 1, SECTION 201.11/B) (2) (II), 22 CFR 201.11/B) (2) (II); AND VARIOUS PROVISIONS OF THE INVITATION REQUIRING OFFERED EQUIPMENT TO BE OF UNITED STATES OR BRAZILIAN SOURCE AND ORIGIN AS DEFINED BY AID.

SECTION 604/A) PERMITS PROCUREMENT OUTSIDE THE UNITED STATES FROM FOREIGN AID APPROPRIATIONS ONLY IF THERE IS A PRESIDENTIAL DETERMINATION THAT SUCH PROCUREMENT WILL NOT RESULT IN ADVERSE EFFECTS UPON THE ECONOMY OF THE UNITED STATES OR THE INDUSTRIAL MOBILIZATION BASE. IN IMPLEMENTATION OF THIS PROVISION, A MEMORANDUM FOR THE SECRETARY OF STATE FROM THE PRESIDENT, DATED OCTOBER 18, 1961, DIRECTS THAT UNLESS SPECIFIC EXCEPTIONS ARE AUTHORIZED BY THE SECRETARY OF STATE, FUNDS MADE AVAILABLE UNDER THE FOREIGN ASSISTANCE ACT OF 1961, FOR NON-MILITARY PROGRAMS MAY NOT BE USED FOR PROCUREMENT FROM DESIGNATED COUNTRIES INCLUDING CANADA. THE INVITATION FOR BIDS AT PAGE AID-4 PROVIDES THAT COMPONENTS FROM THESE DESIGNATED COUNTRIES MAY NOT REPRESENT MORE THAN 10 PERCENT OF THE TOTAL PRICE. THIS PROVISION, SIMILAR TO LANGUAGE IN AID MANUAL ORDER NO. 1414.1, SEPTEMBER 15, 1964, MAY BE REGARDED AS AN INTERPRETATION OF "PROCUREMENT OUTSIDE THE UNITED STATES" AS USED IN SECTION 604/A); I.E; WHERE THE SOURCE OR ORIGIN OF AN ITEM PURCHASED IN THE UNITED STATES IS AT LEAST 90 PERCENT DOMESTIC, IT IS NOT AN ITEM PROCURED OUTSIDE THE UNITED STATES. THIS DOES NOT APPEAR TO BE AN UNREASONABLE INTERPRETATION; CERTAINLY IT IS NOT REASONABLE TO REQUIRE ASSURANCE THAT EVERY PARTICLE OF AN ITEM BE OF DOMESTIC ORIGIN. WE CONCLUDE, THEREFORE, THAT AN ITEM WHOSE ORIGIN IS AT LEAST 90 PERCENT DOMESTIC DOES NOT REQUIRE A PRESIDENTIAL DETERMINATION UNDER SECTION 604/A).

NEITHER ARE WE PERSUADED THAT THE PROHIBITION IN SECTION 118 OF THE FOREIGN AID AND RELATED AGENCIES APPROPRIATION ACT, 1964, AGAINST UTILIZING FOREIGN AID APPROPRIATIONS TO FINANCE THE DIRECT COSTS OF CONSTRUCTION WORK PERFORMED BY THIRD COUNTRY NATIONALS UNDER CONTRACTS FOR THE CONSTRUCTION OF FACILITIES AND INSTALLATIONS HAS BEEN VIOLATED IN THIS INSTANCE. WE WOULD NOT CHARACTERIZE THE CONTRACT AS A CONSTRUCTION CONTRACT ALTHOUGH A MINOR PART OF THE WORK, VIZ, THE INSTALLATION PHASE, MIGHT FIT THAT DESCRIPTION. THERE IS NO REASON TO SUPPOSE THE INSTALLATION WORK WILL, IN WHOLE OR IN PART, BE PERFORMED BY CANADIAN EMPLOYEES OF DOMINION ENGINEERING WORKS.

ALTHOUGH THE INVITATION SPEAKS IN TERMS OF PHYSICAL COMPONENTS RATHER THAN ENGINEERING SERVICES, AND MAKES THE CONTRACT PRICE THE BASIS FOR COMPARISON RATHER THAN THAT PART ALLOCABLE TO THE COST OF THE HYDRAULIC TURBINES, THE LETTER DATED JUNE 14, 1965, TO OUR OFFICE FROM AID MAKES THE FOLLOWING POSITIVE ASSERTION:

"EVEN IF THE TURBINES ARE CONSIDERED A SEPARATE ITEMS, RATHER THAN AS GENERATOR-TURBINE UNITS AS BID, WE ARE ADVISED BY EBASCO THAT THE TOTAL COST OF FOREIGN PHYSICAL COMPONENTS AND ENGINEERING SERVICES WILL BE LESS THAN TEN PERCENT OF THE EXPORT PRICE OF THE TURBINES. * * * FINALLY, THE CONTRACTOR AND EBASCO WILL BE REQUIRED TO CERTIFY, AS PAYMENTS ARE MADE UNDER THE CONTRACT, THAT A.I.D.'S SOURCE AND ORIGIN REQUIREMENTS ARE BEING MET.'

IN THE ABSENCE OF CLEAR AND CONVINCING EVIDENCE TO THE CONTRARY, WE ARE BOUND BY PRECEDENT TO ACCEPT THAT VERSION OF DISPUTED FACTS WHICH IS PRESENTED BY THE ADMINISTRATIVE AUTHORITIES. 38 COMP. GEN. 413, 416; 37 ID. 568, 570.

YOU NEXT CONTEND THAT THE BID OF INTERNATIONAL GENERAL ELECTRIC COMPANY SHOULD NOT HAVE BEEN CONSIDERED FOR AWARD BECAUSE WILLAMETTE IRON AND STEEL COMPANY FAILED TO QUALIFY AS A MANUFACTURER OF LARGE FRANCIS TYPE HYDRAULIC TURBINES UNDER THE EXPERIENCE QUALIFICATIONS OF THE INVITATION. IT IS ALLEGED THAT WILLAMETTE IS JUST A MACHINE SHOP AND THAT ALL THE CRITICAL RESPONSIBILITIES, INCLUDING EXTENSION OF OPERATIONAL GUARANTEES TO ELETROBRAS, WOULD BE THE BURDEN OF DOMINION ENGINEERING WORKS.

WE DO NOT AGREE THAT THE LANGUAGE OF THE INVITATION REQUIRED A DEMONSTRATION OF WILLAMETTE'S ABILITY TO DESIGN, MODEL TEST, AND MANUFACTURE THE HYDRAULIC TURBINES ALONE AS A CONDITION PRECEDENT TO I.G.E.'S ELIGIBILITY FOR AWARD. PART I, ARTICLE 6 MERELY STATED THE "BIDDER-S" RECORD AS A SUPPLIER OF THE EQUIPMENT COVERED WOULD BE A FACTOR IN THE EVALUATION, AND THAT A ,BIDDER" MIGHT BE REQUIRED TO SUBMIT EVIDENCE OF SUCCESSFUL OPERATION OF UNITS OF COMPARABLE CAPACITY AND TYPE TO THOSE DESCRIBED IN THE SPECIFICATIONS. THE LANGUAGE REFERRED TO THE QUALIFICATIONS OF PROSPECTIVE PRIME CONTRACTORS, NOT TO THOSE OF WOULD-BE SUBCONTRACTORS, WHOSE QUALIFICATIONS ARE GENERALLY THE CONCERN OF THE PRIME AND NOT OF THE GOVERNMENT. REFERENCE WAS MADE TO OVERALL CAPABILITY TO PRODUCE GENERATORS AND HYDRAULIC TURBINES, NOT MERELY THE LATTER.

FURTHERMORE, THE RECORD SHOWS EBASCO DID TAKE THE FACTOR OF RESPONSIBILITY INTO CONSIDERATION IN EVALUATING BIDDERS. EBASCO REPRESENTATIVES VISITED THE WILLAMETTE PLANT AND CONSULTED WITH ENGINEERS ON TWO PROJECTS UTILIZING HYDRAULIC TURBINES DESIGNED AND MANUFACTURED BY DOMINION AND WILLAMETTE (WANAPUM PROJECT OF GRANT COUNTY PUBLIC UTILITY DISTRICT ON THE COLUMBIA RIVER AND THE DARDANELLE PROJECT OF THE U.S. CORPS OF ENGINEERS ON THE ARKANSAS RIVER). THE BORROWER'S CONSULTANT CONCLUDED, AS REITERATED IN A LETTER DATED MARCH 29, 1965, TO ELETROBRAS "THAT WILLAMETTE, WITH THE ABOVE RECOMMENDED ENGINEERING COOPERATION OF DOMINION HAS THE FACILITIES AND CAPABILITY REQUIRED TO PRODUCE THE PEIXOTO TURBINES IN ACCORDANCE WITH INVITATION SPECIFICATIONS.'

THIS CONCLUSION OF EBASCO WAS REVIEWED AND CONCURRED IN FIRST, BY A FIVE MAN COMMITTEE OF EMINENTLY QUALIFIED ENGINEERS IMPANELLED BY THE BORROWER, AND SECOND, BY AID ENGINEERS IN BOTH BRAZIL AND WASHINGTON, D.C. THE DETERMINATION OF THE RESPONSIBILITY OF A BIDDER IS PRIMARILY A FUNCTION OF THE CONTRACTING, OR, AS IN THIS CASE, THE FINANCING AGENCY AND, ABSENT EVIDENCE OF BAD FAITH OR ARBITRARINESS ON ITS PART, THERE IS NO BASIS FOR LEGAL OBJECTION BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT. 39 COMP. GEN. 684; 38 ID. 131; 37 ID. 430.

IT IS ARGUED THAT THE I.G.E.-WILLAMETTE BID WAS RENDERED NONRESPONSIVE BY AN ALLEGED FAILURE TO INCLUDE EXTENSIVE GENERATOR TECHNICAL DATA REQUIRED BY THE INVITATION TO BE SUBMITTED AS PART OF THE BID. THERECORD SHOWS THE I.G.E. BID ACTUALLY CONTAINED SOME OF THE PAGES ALLEGED TO HAVE BEEN OMITTED. FURTHERMORE, EBASCO HAS CERTIFIED TO THE BORROWER, BY LETTER DATED MARCH 29, THAT ,THE I.G.E.-WILLAMETTE BID OMITTED NOTHING REQUIRED FOR THE EVALUATION OR REVIEW OF THE TECHNICAL ASPECTS OF THE BID.' IT IS OUR UNDERSTANDING THAT WHILE THE DESCRIPTIVE DATA REQUIREMENT WAS NOT MET TO THE LETTER IN THE I.G.E. WILLAMETTE BID, THE DATA FURNISHED WAS SUFFICIENT TO CALCULATE THE INFORMATION CALLED FOR. UNDER SUCH CIRCUMSTANCES WE CANNOT CONCLUDE THAT THE BID WAS NOT RESPONSIVE. SEE 39 COMP. GEN. 595.

YOU ALLEGE THE AWARD TO I.G.E. ENVISAGING A SECOND-TIER SUBCONTRACT TO ITS CANADIAN SUBSIDIARY CONTRADICTS ADVICE ALLEGEDLY GIVEN TO THE NEWPORT NEWS SHIPBUILDING AND DRY DOCK COMPANY TO THE EFFECT A BID TO SUPPLY HYDRAULIC TURBINES DESIGNED BY A SWISS COMPANY COULD NOT BE CONSIDERED FOR AWARD UNDER APPLICABLE AID RULES. THE DISCUSSION REFERRED TO APPEARS TO HAVE TAKEN PLACE ON NOVEMBER 20, 1964, AT THE AGENCY FOR INTERNATIONAL DEVELOPMENT OFFICES IN WASHINGTON, D.C., AND AID OFFICIALS STATE THEY DO NOT RECALL EXPRESSING ANY VIEWS RELATING TO SOURCE AND ORIGIN RULES. THE FACTS UPON WHICH THE CHARGE IS BASED HAVE NOT BEEN ADEQUATELY PROVEN WE WOULD NOT BE JUSTIFIED IN CONCLUDING THAT COMPETITION WAS IMPROPERLY ELIMINATED BY THE EPISODE.

ON THE BASIS OF THE RECORD NOW BEFORE US WE CANNOT CONCLUDE THAT THE CONTRACT BETWEEN INTERNATIONAL GENERAL ELECTRIC COMPANY AND CENTRAIS ELECTRICAS BRASILEIRAS, S.A. IS AN UNAUTHORIZED OBLIGATION OF AID LOAN NO. 512-L-026.