B-175526, JUL 5, 1972, 52 COMP GEN 13

B-175526, JUL 5, 1972, 52 COMP GEN 13

BUY AMERICAN ACT - APPLICABILITY - CONTRACTORS' PURCHASES FROM FOREIGN SOURCES - END PRODUCT V. COMPONENTS UNDER AN INVITATION FOR BIDS TO SUPPLY SOFTBALLS THAT CONTAINED A "U.S. PRODUCTS CERTIFICATE" CLAUSE THAT REQUIRED BIDDERS TO CERTIFY ONLY U.S. END PRODUCTS AND SERVICES WOULD BE FURNISHED THUS IMPLEMENTING THE BALANCE OF PAYMENTS PROGRAM, SENDING THE AMERICAN PRODUCED SOFTBALL CORE, TOGETHER WITH COVERS, NEEDLES AND THREAD TO HAITI TO HAVE THE COVERS SEWN ON THE SOFTBALL CORE WOULD CONSTITUTE MANUFACTURING OUTSIDE THE U.S. AND PRECLUDES CONSIDERATION OF THE BID SINCE THE PHRASE "U.S. END PRODUCT" STEMS FROM THE BUY AMERICAN ACT AND REQUIRES THE END PRODUCT TO BE SUPPLIED TO BE MANUFACTURED IN THE U.S. FURTHERMORE, THE FACT THAT THE SERVICES TO BE PERFORMED IN HAITI WOULD CONSTITUTE LESS THAN 3 PERCENT OF COST DOES NOT MAKE APPLICABLE THE PROVISION IN THE U.S. PRODUCTS AND SERVICE CLAUSE THAT 25 PERCENT OR LESS OF THE SERVICES PERFORMED OUTSIDE THE U.S. WILL BE CONSIDERED U.S. SERVICES SINCE THE CONTRACT CONTEMPLATED IS FOR A PRODUCT, NOT SERVICES.

TO THE JAMAR CORPORATION, JULY 5, 1972:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 21, 1972, PROTESTING AGAINST THE REJECTION OF YOUR BID UNDER INVITATION FOR BIDS (IFB) 2PN-IR-E -DO582, ISSUED BY THE GENERAL SERVICES ADMINISTRATION.

THE ABOVE-REFERENCED INVITATION WAS ISSUED ON DECEMBER 13, 1971, FOR THE SUPPLY OF 1667-DOZEN SOFTBALLS. PARAGRAPH 14 OF THE IFB ADVISED BIDDERS:

TO ALLEVIATE THE IMPACT OF GOVERNMENT EXPENDITURES ON THE U.S. BALANCE OF INTERNATIONAL PAYMENTS, ONLY UNITED STATES END PRODUCTS AND SERVICES MAY BE DELIVERED UNDER THIS CONTRACT. ACCORDINGLY, THE REPRESENTATION ON PAGE 2 OF THIS SOLICITATION ENTITLED "BUY AMERICAN CERTIFICATE" AND THE CLAUSE IN THE GENERAL PROVISIONS ENTITLED "BUY AMERICAN ACT" ARE INAPPLICABLE TO THIS CONTRACT, AND THE FOLLOWING CERTIFICATE AND CLAUSE ARE SUBSTITUTED THEREFOR:

U.S. PRODUCTS CERTIFICATE

TO THE EXTENT THAT THE GOVERNMENT SPECIFIES THAT THE ITEMS BEING PURCHASED ARE IN IMPLEMENTATION OF THE BALANCE OF PAYMENTS PROGRAM, THE BIDDER OR OFFEROR HEREBY CERTIFIES THAT EACH SUCH ITEM IS A U.S. END PRODUCT OR COMPRISES U.S. SERVICES (AS DEFINED IN THE CONTRACT CLAUSE ENTITLED "U.S. PRODUCTS AND SERVICES (BALANCE OF PAYMENTS PROGRAM)" ), AND THAT COMPONENTS OF UNKNOWN ORIGIN HAVE BEEN CONSIDERED TO HAVE BEEN MINED, PRODUCED, OR MANUFACTURED OUTSIDE THE UNITED STATES.

U.S. PRODUCTS AND SERVICES

(BALANCE OF PAYMENTS PROGRAM)

(A) TO THE EXTENT THAT THE GOVERNMENT SPECIFIES THAT THE ITEMS BEING PURCHASED ARE IN IMPLEMENTATION OF THE BALANCE OF PAYMENTS PROGRAM, THE CONTRACTOR AGREES THAT THERE WILL BE DELIVERED OR PERFORMED UNDER THIS CONTRACT ONLY U.S. END PRODUCTS OR U.S. SERVICES.

(B) FOR THE PURPOSE OF THIS CLAUSE:

(1) "COMPONENTS" MEANS THOSE ARTICLES, MATERIALS AND SUPPLIES WHICH ARE DIRECTLY INCORPORATED IN THE END PRODUCTS;

(2) "END PRODUCTS" MEANS THOSE ARTICLES, MATERIALS AND SUPPLIES WHICH ARE ACQUIRED UNDER THIS CONTRACT FOR PUBLIC USE;

(3) "U.S. END PRODUCT" MEANS:

(II) AN END PRODUCT MANUFACTURED IN THE UNITED STATES, IF THE COST OF THE COMPONENTS THEREOF WHICH ARE MINED, PRODUCED OR MANUFACTURED IN THE UNITED STATES EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS.

(4) "U.S. SERVICES" MEANS THOSE THAT ARE PERFORMED WITHIN THE UNITED STATES. IN SOME INSTANCES, SERVICES PROVIDED UNDER A SINGLE CONTRACT ARE PERFORMED PARTIALLY IN THE UNITED STATES AND PARTIALLY ABROAD. SUCH SERVICES SHALL BE CONSIDERED U.S. SERVICES IF 25 PERCENT OR LESS OF THE TOTAL COST OF THE SERVICES IS ATTRIBUTABLE TO SERVICES (INCLUDING INCIDENTAL SUPPLIES USED IN CONNECTION THEREWITH) PERFORMED OUTSIDE THE UNITED STATES.

YOUR FIRM SUBMITTED THE LOWEST OF THE 11 BIDS RECEIVED. HOWEVER, IN RESPONSE TO AN INQUIRY BY THE CONTRACTING OFFICER SUBSEQUENT TO BID OPENING, YOU ADVISED THAT YOUR PRODUCTION PLAN INCLUDED STITCHING THE BALLS IN HAITI. IT APPEARS THAT ALL RAW MATERIALS USED IN YOUR SOFTBALLS ARE DOMESTIC, AND ARE CUT, ASSEMBLED, WOUND AND VULCANIZED IN YOUR ILLINOIS PLANT. THE CORES AND COVERS OF THE BALLS ARE SHIPPED TO HAITI, WHERE THE COVERS ARE SEWN ON THE CORES BY HAITIANS USING AMERICAN-MADE NEEDLES AND THREAD. IN THE JUDGMENT OF THE PROCURING ACTIVITY, THIS PRODUCTION PLAN WOULD NOT RESULT IN A "U.S. END PRODUCT" AS DEFINED IN PARAGRAPH (B)(3)(II) OF THE ABOVE-QUOTED U.S. PRODUCTS AND SERVICES (BALANCE OF PAYMENTS PROGRAM) CLAUSE, AND YOUR BID WAS REJECTED AS NONRESPONSIVE. THE SECOND LOW BIDDER FAILED TO FURNISH THE GUARANTEED MAXIMUM CUBIC FOOTAGE OF ITS OFFERED MATERIAL, AS REQUIRED BY THE INVITATION, AND ITS BID WAS ALSO REJECTED AS NONRESPONSIVE. A WARD WAS MADE TO THE LANNOM MANUFACTURING COMPANY AS THE LOW RESPONSIVE RESPONSIBLE BIDDER.

SINCE THE DEFINITION OF A "U.S. END PRODUCT" AS SET OUT IN THE ABOVE CLAUSE REQUIRES THE END PRODUCT (SOFTBALLS) TO BE MANUFACTURED IN THE UNITED STATES, THE QUESTION PRESENTED BY THE INSTANT CASE IS WHETHER HAND- SEWING THE COVERS AROUND THE CORES IN HAITI CONSTITUTES A "MANUFACTURE" OF THE SOFTBALLS OUTSIDE THE UNITED STATES, THEREBY PRECLUDING THEM FROM QUALIFYING AS U.S. END PRODUCTS.

THE DEFINITIONS USED IN THE U.S. PRODUCTS AND SERVICES (BALANCE OF PAYMENTS PROGRAM) CLAUSE STEM FROM THE BUY AMERICAN ACT (41 U.S.C. 10A D) AS IMPLEMENTED BY EXECUTIVE ORDERS AND GOVERNMENT PROCUREMENT REGULATIONS. THE LEGISLATIVE HISTORY OF THE ACT'S USE OF THE WORD "MANUFACTURE" WAS REVIEWED IN 46 COMP. GEN. 813, 818-19(1967). CONCLUDED IN THAT DECISION THAT "MANUFACTURED IN THE UNITED STATES," AS USED IN THE ACT AND THE CONTRACT PROVISION IMPLEMENTING THAT ACT, INCLUDED THE ASSEMBLY IN THE UNITED STATES OF ARTICLES FROM FOREIGN MANUFACTURED COMPONENTS. THUS, THE MOUNTING AND ALIGNMENT, IN THE UNITED STATES, OF FOREIGN-MADE ELECTRIC MOTORS ONTO DOMESTICALLY MANUFACTURED CIRCULATING PUMP UNITS CONSTITUTED A "MANUFACTURE" OF THE COMPLETE PUMP UNITS (END PRODUCT), IN THE UNITED STATES, WITHIN THE CONTEMPLATION OF THE BUY AMERICAN ACT AND THE IMPLEMENTING CONTRACT PROVISION.

SIMILARLY, IN THE INSTANT CASE, WE BELIEVE THE SEWING OF THE COVER COMPONENT AROUND THE CORE COMPONENT OF THE SOFTBALLS IN HAITI CONSTITUTED A "MANUFACTURE" OF THE SOFTBALLS (END PRODUCT) IN THAT COUNTRY AND OUTSIDE THE UNITED STATES.

IN YOUR LETTER OF MARCH 21 YOU CALL ATTENTION TO PARAGRAPH (B)(4), U.S. SERVICES, OF THE U.S. PRODUCTS AND SERVICES CLAUSE, WHICH PERMITS A COST OF FOREIGN SERVICES OF UP TO 25 PERCENT IN CONTRACTS FOR U.S. SERVICES, AND YOU STATE THAT THE SERVICES WHICH YOU PROPOSED TO HAVE PERFORMED IN HAITI WOULD CONSTITUTE LESS THAN 3 PERCENT OF THE COST OF THE SOFTBALLS. WE DO NOT CONSIDER THIS PARAGRAPH DEFINING "U.S. SERVICES" TO BE APPLICABLE HERE SINCE THE CONTRACT IS FOR DELIVERY OF A PRODUCT RATHER THAN FOR THE PERFORMANCE OF SERVICES. SEE PARAGRAPH (A) OF THE CLAUSE WHICH PROVIDES THAT THE CONTRACTOR AGREES THAT THERE WILL BE DELIVERED OR PERFORMED UNDER THE CONTRACT ONLY U.S. END PRODUCTS OR U.S. SERVICES.

IN VIEW OF THE FOREGOING, WE SEE NO LEGAL BASIS FOR OBJECTION TO THE REJECTION OF YOUR BID SINCE, IN OUR VIEW, YOUR SOFTBALLS (END PRODUCTS) WOULD HAVE BEEN MANUFACTURED IN HAITI AND THEREFORE YOU DID NOT PROPOSE TO FURNISH U.S. END PRODUCTS AS DEFINED IN, AND REQUIRED BY, THE U.S. PRODUCTS AND SERVICES CLAUSE OF THE IFB. ACCORDINGLY, YOUR PROTEST IS DENIED.