B-148720, MAY 7, 1962

B-148720, MAY 7, 1962

TO THE SECRETARY OF THE NAVY:

BY LETTER OF APRIL 19, 1962, WITH ENCLOSURES, SIGNED BY THE ASSISTANT SECRETARY OF THE NAVY (INSTALLATIONS AND LOGISTICS), OUR DECISION HAS BEEN REQUESTED AS TO THE APPROPRIATE DISPOSITION OF BIDS SUBMITTED UNDER INVITATION NO. 600-621-62, ISSUED DECEMBER 11, 1961, BY THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., FOR THE PROCUREMENT OF A HEAVY DUTY ENGINE LATHE.

WHEN BIDS WERE OPENED IT WAS FOUND THAT THE LOW BID, AT $261,744, DELIVERED, INCLUDING CUSTOMS DUTY AND PROMPT PAYMENT DISCOUNT, HAD BEEN SUBMITTED BY THE KURT ORBAN COMPANY, INC., OFFERING A UNIT OF FOREIGN MANUFACTURE. THE LOW BID ON A UNIT OF DOMESTIC ORIGIN WAS SUBMITTED BY THE FARREL-BIRMINGHAM COMPANY, INC., AT $282,573, INCLUDING SHIPPING COSTS TO DESTINATION.

UNDER THE TERMS OF SECTION 2 OF THE BUY AMERICAN ACT, 41 U.S.C. 10A, PURCHASES FOR PUBLIC USE ARE LIMITED TO ARTICLES MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM MATERIALS PRODUCED OR MANUFACTURED IN THE UNITED STATES UNLESS THE HEAD OF THE AGENCY DETERMINES THAT THE PURCHASE OF SUCH DOMESTIC MATERIALS IS INCONSISTENT WITH THE PUBLIC INTEREST OR THE COST IS UNREASONABLE. SECTION 1 OF EXECUTIVE ORDER NO. 10582, PROMULGATED DECEMBER 17, 1954, PROVIDES THAT THE BID PRICE OF A PRODUCT OF FOREIGN ORIGIN MUST INCLUDE APPLICABLE DUTY AND SHIPPING COSTS FOR PURPOSES OF EVALUATION. SECTION 2 (C) (1) OF THE EXECUTIVE ORDER, WHICH ESTABLISHES A FORMULA FOR APPLICATION IN THIS CASE, REQUIRES THAT THE BID OF A DOMESTIC SUPPLIER SHOULD BE DEEMED TO BE UNREASONABLE IF IT EXCEEDS BY MORE THAN 6 PERCENT THE LOW ACCEPTABLE BID FOR A PRODUCT OF FOREIGN ORIGIN. HOWEVER, UNDER SECTION 3 (C) THE PURCHASING AGENCY RETAINS THE RIGHT TO REJECT A BID OFFERING GOODS OF FOREIGN ORIGIN WHERE THE DOMESTIC SUPPLIER WHO WOULD OTHERWISE BE ELIGIBLE FOR THE AWARD UNDERTAKES TO PRODUCE SUBSTANTIALLY ALL OF THE MATERIALS IN AREAS OF SUBSTANTIAL UNEMPLOYMENT AS DETERMINED BY THE SECRETARY OF LABOR. UNDER SECTION 4 THE HEAD OF EACH EXECUTIVE AGENCY IS AUTHORIZED TO ISSUE SUCH REGULATIONS AS MAY BE NECESSARY TO INSURE CONFORMITY WITH THE PROVISIONS OF THE ORDER.

PURSUANT TO THE EXECUTIVE ORDER, ASPR 6-104.4 (B) PROVIDES THAT FOR PURPOSES OF EVALUATION A FACTOR OF 12 PERCENT SHALL BE ADDED TO THE FOREIGN BID WHERE THE CONCERN SUBMITTING THE LOW ACCEPTABLE DOMESTIC BID IS A LABOR SURPLUS AREA CONCERN. ASPR 1-801.1 DEFINES A LABOR SURPLUS AREA CONCERN AS ONE WHICH WILL PERFORM OR CAUSE TO BE PERFORMED THE WORK UNDER THE CONTRACT IN AREAS OF PERSISTENT AND/OR SUBSTANTIAL LABOR SURPLUS. THE REGULATION FURTHER PROVIDES THAT A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT IN THE PRESCRIBED TYPES OF AREAS IF COSTS INCURRED IN MANUFACTURING OR PRODUCTION BY THE FIRM OR SUBCONTRACTORS IN SUCH AREAS AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE.

THE DIFFERENCE BETWEEN THE LOW ACCEPTABLE FOREIGN BID, INCLUDING DUTY AND SHIPPING (BUT DEDUCTING THE PROMPT-PAYMENT DISCOUNT), AND THE LOW ACCEPTABLE DOMESTIC BID, INCLUDING TRANSPORTATION, HAS BEEN COMPUTED FOR EVALUATION PURPOSES BY THE CONTRACTING OFFICER AT 7.96 PERCENT. ACCORDANCE WITH THE STATUTE, EXECUTIVE ORDER, AND REGULATIONS SET OUT ABOVE, THE FARREL-BIRMINGHAM BID IS ELIGIBLE FOR AWARD IF UNDER THE LABOR SURPLUS AREA PROVISIONS THE 12 PERCENT EVALUATION FACTOR IS APPLICABLE. ON THE OTHER HAND, THE KURT ORBAN BID IS ELIGIBLE FOR AWARD IF THE 6 PERCENT DIFFERENTIAL APPLIES.

THE INVITATION MAKES NO PROVISION FOR ELICITING SUFFICIENT INFORMATION TO DETERMINE WHETHER, UNDER THE ASPR PROVISIONS, THE BIDDER MAY BE REGARDED AS A LABOR SURPLUS AREA CONCERN. SINCE AFTER BID OPENING IT WAS APPARENT THAT THE DOMESTIC SUPPLIER'S STATUS AS A LABOR SURPLUS AREA CONCERN WAS CRITICAL WITH RESPECT TO THE SELECTION OF THE CONTRACTOR, THE CONTRACTING OFFICER REQUESTED INFORMATION AS TO WHERE FARREL-BIRMINGHAM PROPOSED TO PERFORM THE WORK. BY LETTER OF FEBRUARY 19, 1962, THAT FIRM ADVISED THAT IT PROPOSED TO PERFORM A PORTION OF THE WORK VALUED AT $153,911 IN LABOR SURPLUS AREAS. THIS AMOUNT IS MORE THAN 50 PERCENT OF THE BID PRICE AND THE 12 PERCENT DIFFERENTIAL WOULD APPEAR TO BE APPLICABLE. HOWEVER, SINCE THE INFORMATION DESCRIBED ABOVE WAS NOT OBTAINED UNTIL AFTER THE BIDS HAD BEEN OPENED, THE QUESTION ARISES WHETHER THAT INFORMATION PROPERLY MAY BE CONSIDERED IN SELECTING THE SUCCESSFUL BIDDER.

UNDER ORDINARY CIRCUMSTANCES, DATA MATERIALLY AFFECTING THE EVALUATION OF BIDS SHOULD BE REQUIRED BY THE TERMS OF THE INVITATION. HOWEVER, SINCE THE INVITATION HERE CONTAINED NO PROVISION FOR SUBMITTING THE INFORMATION NEEDED TO DETERMINE WHETHER THE 6 OR 12 PERCENT DIFFERENTIAL SHOULD BE APPLIED, AND IN VIEW OF THE DELAYS ALREADY INCURRED IN THE PROCUREMENT, THE FACT THAT BIDS HAVE BEEN EXPOSED, AND THE FURTHER FACT THAT GOVERNMENTAL POLICY FAVORS PLACING CONTRACTS IN AREAS OF LABOR SURPLUS, WE ARE OF THE VIEW THAT THE DATA PROVIDED BY FARREL-BIRMINGHAM IN ITS LETTER OF FEBRUARY 19, 1962, PURSUANT TO THE CONTRACTING OFFICER'S REQUEST, MAY BE CONSIDERED, IN THIS INSTANCE, IN DETERMINING THE DIFFERENTIAL PROPERLY FOR APPLICATION. B-135176, MARCH 19, 958; CF. 41 COMP. GEN. 160.

WE ARE PLEASED TO NOTE THE STATEMENT BY THE CONTRACTING OFFICER THAT FUTURE PROCUREMENTS WILL INCLUDE MEANS TO OBTAIN ALL PERTINENT INFORMATION. WE SUGGEST, ALSO, THAT ANY CONTRACT WHICH MAY BE AWARDED TO FARREL-BIRMINGHAM CONTAIN PROVISIONS TO INSURE PERFORMANCE OF OVER 50 PERCENT IN VALUE OF THE CONTRACT PRICE IN AREAS OF LABOR SURPLUS.