B-165293, JANUARY 23, 1969, 48 COMP. GEN. 487

B-165293, JANUARY 23, 1969, 48 COMP. GEN. 487

BUY AMERICAN ACT - APPLICABILITY - WAIVER - PROPRIETY THE DETERMINATION BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PRIOR TO THE SOLICITATION OF BIDS BY THE GUAM HOUSING AND URBAN RENEWAL AUTHORITY FOR A LOW-RENT HOUSING PROJECT THAT CERTAIN FOREIGN CONSTRUCTION MATERIAL COULD BE PROCURED AT A CONSIDERABLE SAVINGS--- AT LEAST 16 PERCENT LESS THAN DOMESTIC ITEMS--- AND THE WAIVER OF BUY AMERICAN REQUIREMENTS DID NOT CONFORM TO THE PROCEDURES ESTABLISHED BY EXECUTIVE ORDER NO. 10582 FOR DETERMINING WHETHER DOMESTIC BID PRICES ARE UNREASONABLE, THE EXECUTIVE ORDER CONTEMPLATING THAT A DETERMINATION OF UNREASONABLE DOMESTIC COST WOULD BE MADE AFTER THE RECEIPT OF BIDS OR OFFERS ON FOREIGN MATERIALS AND THE COMPARISON OF PRICES. HOWEVER, THE DIFFERENCE BETWEEN FOREIGN AND DOMESTIC PRICES EXCEEDING THE EXECUTIVE ORDER STANDARDS, THE AWARDS WILL NOT BE DISTURBED, BUT FUTURE PROCUREMENTS SHOULD COMPLY WITH PRESCRIBED PROCEDURES.

TO THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT, JANUARY 23, 1969:

REFERENCE IS MADE TO LETTER OF OCTOBER 24, 1968, FROM YOUR GENERAL COUNSEL, REPORTING ON THE PROTESTS BY THE RALSTON MANUFACTURING COMPANY AND RAYMOND E. HOLAND ASSOCIATES AGAINST THE DELETION OF THE BUY AMERICAN ACT PROVISIONS FROM GUAM LOW-RENT HOUSING PROJECT 1-1.

BIDDING DOCUMENTS FOR THE CONSTRUCTION OF LOW-RENT HOUSING PROJECTS ARE ISSUED BY LOCAL HOUSING AUTHORITIES AND THE CONTRACTS FOR THE CONSTRUCTION OF THE PROJECTS ARE AWARDED BY SUCH AUTHORITIES. IN THIS CASE, THE LOCAL AUTHORITY IS THE GUAM HOUSING AND URBAN RENEWAL AUTHORITY.

FINANCIAL ASSISTANCE IN THE FORM OF LOANS DURING THE DEVELOPMENT PERIOD OF THE PROJECT AND CONTRIBUTIONS DURING THE OPERATIONS PERIOD ARE PROVIDED TO LOCAL HOUSING AUTHORITIES BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) UNDER THE UNITED STATES HOUSING ACT OF 1937, AS AMENDED, 42 U.S.C. 1401, ET SEQ. SECTION 6 (C) OF THE ACT, 42 U.S.C. 1406 (C), PROVIDES THAT THE FUNDS AVAILABLE FOR LOW-RENT HOUSING SHALL BE SUBJECT TO THE BUY AMERICAN ACT PROVISIONS OF 41 U.S.C. 10A AND THAT EVERY CONTRACT OR AGREEMENT OF ANY KIND PURSUANT TO THE ACT SHALL CONTAIN A PROVISION IDENTICAL TO THAT PRESCRIBED IN 41 U.S.C. 10B. IN VIEW OF THIS REQUIREMENT, ANNUAL CONTRIBUTIONS CONTRACTS BETWEEN THE LOCAL HOUSING AUTHORITIES AND HUD REQUIRE THE LOCAL AUTHORITY TO INCLUDE IN ALL ITS CONTRACTS FOR CONSTRUCTION, ALTERATION OR REPAIR OF ANY PROJECT A PROVISION REQUIRING THE USE OF DOMESTIC ARTICLES, MATERIALS AND SUPPLIES, UNLESS HUD DETERMINES THAT THE USE OF DOMESTIC ARTICLES, MATERIALS OR SUPPLIES IS IMPRACTICABLE OR THEIR COST IS UNREASONABLE.

IT IS REPORTED THAT THE BUY AMERICAN REQUIREMENTS WERE NOT DELETED ON GUAM PROJECT 1-1, BUT THAT THEY WERE WAIVED WITH RESPECT TO CERTAIN CONSTRUCTION MATERIALS. IN THAT CONNECTION, IT APPEARS THAT THE GUAM HOUSING AND URBAN RENEWAL AUTHORITY REQUESTED A WAIVER OF THE REQUIREMENTS AS TO LISTED MATERIALS AND THAT THE HUD ASSISTANT REGIONAL ADMINISTRATOR FOR HOUSING ASSISTANCE EXPANDED THE LIST AND APPROVED THE WAIVER ON THE BASIS THAT PURCHASE OF THE MATERIALS FROM FOREIGN SOURCES WOULD RESULT IN CONSIDERABLE SAVINGS TO THE PROJECT AND THAT THE PRICE OF LIKE MATERIALS OF DOMESTIC ORIGIN WAS THEREFORE UNREASONABLE. IN LINE WITH THE WAIVER, THE ASSISTANT REGIONAL ADMINISTRATOR ADVISED THE GUAM HOUSING AUTHORITY TO PREPARE THE BIDDING DOCUMENTS TO REFLECT THE GRANTED WAIVER. THE WAIVER WAS BASED UPON A SAMPLING OF FOREIGN AND DOMESTIC PRICES OF 8 OF THE MORE THAN 30 MATERIALS WAIVED. THE FOREIGN PRICES OF THE ITEMS SAMPLED WERE DETERMINED TO BE 7, 10, 12, 12, 15, 24, 25 AND 28 PERCENT LESS THAN THE DOMESTIC PRICES. THE AVERAGE SAVINGS ON THE SAMPLING WERE COMPUTED AT 16.6 PERCENT. THE REPORT STATES THAT THE GUAM HOUSING AUTHORITY REQUEST WAS REVIEWED BY OFFICIALS IN THE HUD REGIONAL OFFICE IN THE LIGHT OF EXECUTIVE ORDER NO. 10582, DECEMBER 17, 1954, WHICH PRESCRIBES UNIFORM PROCEDURES FOR DETERMINATIONS TO BE MADE UNDER THE BUY AMERICAN ACT.

IT IS REPORTED FURTHER THAT ON SEPTEMBER 1, 1968, THE GUAM HOUSING AUTHORITY ADVERTISED FOR BIDS WITH THE EXEMPTIONS TO THE BUY AMERICAN ACT REQUIREMENTS INCLUDED IN THE BID DOCUMENTS AND THAT THE BIDS WERE OPENED ON SEPTEMBER 30, 1968. AN AWARD WAS MADE SUBSEQUENTLY.

IN B-153408, MARCH 16, 1964, IT WAS HELD THAT EXECUTIVE ORDER NO. 10582 IS FOR APPLICATION IN CONNECTION WITH LOW-RENT HOUSING PROJECTS RECEIVING FINANCIAL ASSISTANCE UNDER THE UNITED STATES HOUSING ACT OF 1937, AS AMENDED. THE EXECUTIVE ORDER PROVIDES THAT "THE BID OR OFFERED PRICE" OF MATERIALS OF DOMESTIC ORIGIN SHALL BE DEEMED TO BE UNREASONABLE IF IT EXCEEDS THE SUM OF "THE BID OR OFFERED PRICE" OF LIKE MATERIALS OF FOREIGN ORIGIN AND A DIFFERENTIAL COMPUTED ON THE BASIS OF ONE OF THE FOLLOWING FORMULAS:

(1) THE SUM DETERMINED BY COMPUTING SIX PERCENTUM OF THE BID OR OFFERED PRICE OF MATERIALS OF FOREIGN ORIGIN.

(2) THE SUM DETERMINED BY COMPUTING TEN PERCENTUM OF THE BID OR OFFERED PRICE OF MATERIALS OF FOREIGN ORIGIN EXCLUSIVE OF APPLICABLE DUTY AND ALL COSTS INCURRED AFTER ARRIVAL IN THE UNITED STATES: PROVIDED THAT WHEN THE BID OR OFFERED PRICE OF MATERIALS OF FOREIGN ORIGIN AMOUNTS TO LESS THAN $25,000, THE SUM SHALL BE DETERMINED BY COMPUTING TEN PERCENTUM OF SUCH PRICE EXCLUSIVE ONLY OF APPLICABLE DUTY.

THE EXECUTIVE ORDER THUS CONTEMPLATES THAT A DETERMINATION OF UNREASONABLE DOMESTIC COST SHOULD BE MADE AFTER THE RECEIPT OF BIDS OR OFFERS ON THE FOREIGN MATERIALS. IT WAS STATED IN 39 COMP. GEN. 309, AT PAGE 311, THAT "IT IS OBVIOUS FROM A REVIEW OF THE LEGISLATIVE HISTORY OF THE BUY AMERICAN ACT THAT THE UNREASONABLENESS OF DOMESTIC BID PRICES WAS TO BE DETERMINED BY COMPARISON WITH FOREIGN BID PRICES.' SEE, ALSO, A- 48328, APRIL 28, 1933, WHICH HELD, SOON AFTER ENACTMENT OF THE BUY AMERICAN ACT, THAT "THE QUESTION WHETHER THERE MAY BE ACCEPTED AND USED FOREIGN ARTICLES IS ONE TO BE DETERMINED AFTER THE BIDS HAVE BEEN RECEIVED AND NOT BEFORE, AS IT CANNOT THEN BE DETERMINED WHETHER THE DIFFERENCE IN PRICE BE UNREASONABLE.'

THE DETERMINATION MADE HERE IN ADVANCE OF THE SOLICITATION OF BIDS OR OFFERS THAT THE COST OF DOMESTIC MATERIAL IS UNREASONABLE DID NOT CONFORM TO THE UNIFORM PROCEDURES. HOWEVER, OUR OFFICE WILL NOT QUESTION THE WAIVER INASMUCH AS AWARD HAS BEEN MADE AND, IN ANY EVENT, THE DIFFERENCE BETWEEN FOREIGN AND DOMESTIC MARKET PRICES IN GUAM APPEARS TO BE IN EXCESS OF THE EXECUTIVE ORDER STANDARDS. WE SUGGEST THAT APPROPRIATE STEPS BE TAKEN TO INSURE THAT THE UNIFORM PROCEDURES PRESCRIBED BY THE EXECUTIVE ORDER ARE FOLLOWED IN FUTURE CASES.