B-166786, JUN. 24, 1969

B-166786, JUN. 24, 1969

TO CONSOLIDATED TANNERIES, LTD.:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 22, 1969, PROTESTING THE AWARD OF CONTRACTS UNDER INVITATIONS FOR BIDS NOS. DSA100-69-B-1112 AND -1147 ISSUED BY THE DEFENSE PERSONNEL SUPPORT CENTER, PHILADELPHIA, PENNSYLVANIA.

THE SUBJECT INVITATIONS WERE ISSUED ON JANUARY 15 AND 18, 1969, RESPECTIVELY, REQUESTING BIDS FOR FURNISHING CHAMOIS, LEATHER, SHEEPSKIN TRIMMED, IN ACCORDANCE WITH THE SPECIFICATIONS CONTAINED IN THE INVITATIONS. BOTH PROCUREMENTS WERE TOTAL SET-ASIDES FOR SMALL BUSINESS. CLAUSE 14, ENTITLED "BUY AMERICAN ACT," OF STANDARD FORM 32 (JUNE 1964 EDITION) WAS INCORPORATED BY REFERENCE IN EACH INVITATION. IN ADDITION, PAGE 2 OF BOTH INVITATIONS CONTAINED THE "BUY AMERICAN CERTIFICATE.' SINCE YOU WERE THE LOW BIDDER UNDER BOTH INVITATIONS A PLANT AND FINANCIAL PREAWARD SURVEY WAS REQUESTED BY THE CONTRACTING OFFICER. IT WAS ASCERTAINED BY THE SURVEY TEAM THAT THE OIL-TANNED CHAMOIS SKIN CRUST WOULD BE IMPORTED BY YOU FROM ENGLAND AND THAT NO DOMESTIC HIDES WOULD BE USED. SINCE THE CRUST IS THE CHAMOIS IN ITS FINAL STATE, EXCEPT FOR SUEDING AND TRIMMING, YOU WERE REQUESTED TO PROVIDE ADDITIONAL INFORMATION FROM WHICH IT COULD BE DETERMINED WHETHER YOU WERE OFFERING A DOMESTIC OR FOREIGN PRODUCT. ON THE BASIS OF THE INFORMATION SUBMITTED BY YOU THE CONTRACTING OFFICER CONCLUDED THAT YOU WERE OFFERING TO FURNISH A FOREIGN PRODUCT UNDER EACH INVITATION. IN EVALUATING YOUR BIDS ON THE BASIS THAT YOU WERE OFFERING A FOREIGN PRODUCT THE CONTRACTING OFFICER DETERMINED THAT YOUR BIDS WERE NO LONGER LOW WHEN EVALUATED IN ACCORDANCE WITH PARAGRAPH 6-104.4 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). CONSEQUENTLY, CONTRACTS WERE AWARDED TO OTHER BIDDERS UNDER BOTH INVITATIONS.

IN YOUR LETTER OF APRIL 22, 1969, YOU STATE THAT PRIOR TO BID OPENING YOUR REPRESENTATIVES DISCUSSED WITH REPRESENTATIVES OF THE DEFENSE SUPPLY AGENCY THE "BUY AMERICAN ACT" AND THE SET-ASIDE FOR SMALL BUSINESS. YOU STATE THAT THEREAFTER YOU CONTACTED THE SMALL BUSINESS ADMINISTRATION IN PHOENIX, ARIZONA, AND THAT YOU WERE ADVISED THAT YOUR FIRM WOULD QUALIFY UNDER THE BUY AMERICAN ACT AS A DOMESTIC PRODUCER. YOU ALSO STATE THAT IN DETERMINING WHETHER THE PRODUCT YOU OFFERED WAS FOREIGN THE COST OF THE CHAMOIS SKIN WAS THE ONLY COST CONSIDERED. IT IS YOUR CONTENTION THAT THE COST OF LABOR AND OTHER OVERHEAD COSTS INVOLVED IN OBTAINING THE REQUIRED FINISH TO THE SKINS PLUS THE COST OF PACKAGING AND TRANSPORTATION ALSO SHOULD HAVE BEEN CONSIDERED AS COMPONENTS OF THE END PRODUCT. IF THESE COSTS ARE INCLUDED YOU STATE THAT TWO-THIRDS OF THE TOTAL COST OF THE END PRODUCT IS INCURRED THROUGH SOURCES ATTRIBUTABLE TO THE UNITED STATES. YOU FURTHER CONTEND THAT YOUR COMPETITORS DO NOT QUALIFY AS DOMESTIC PRODUCERS BECAUSE THEY ALSO IMPORT SKINS INTO THE UNITED STATES FOR THE PRODUCTION OF CHAMOIS LEATHERS. YOU ALSO SAY THAT, IF YOU ARE CLASSIFIED AS A FOREIGN BIDDER, YOU SHOULD HAVE BEEN DISQUALIFIED FROM BIDDING IN THE FIRST INSTANCE.

WE DO NOT AGREE WITH YOUR CONTENTION THAT LABOR, OTHER OVERHEADS, PACKAGING AND TRANSPORTATION COSTS SHOULD HAVE BEEN CONSIDERED AS COMPONENTS OF THE END ITEM. IN OUR DECISION OF MAY 9, 1967, B-160627, 46 COMP. GEN. 784, WE POINTED OUT THAT, UNDER THE PROVISIONS OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D, AND EXECUTIVE ORDER NO. 10582 AND ASPR 6- 102.1 IMPLEMENTING THE ACT, ONLY THE END PRODUCT AND ITS COMPONENTS (MATERIALS DIRECTLY INCORPORATED THEREIN) SHALL BE CONSIDERED IN DETERMINING WHETHER AN ARTICLE IS TO BE REGARDED AS A FOREIGN OR DOMESTIC PRODUCT. IN VIEW THEREOF, WE CONCLUDED THAT THE ELEMENTS OF LABOR, FREIGHT, PROFIT, OVERHEAD AND PACKAGING, WHILE INCLUDED IN THE PRICE OF THE MANUFACTURED ARTICLE, ARE NOT TO BE CONSIDERED AS COMPONENTS THEREOF AND, THEREFORE, THE COST OF SUCH ITEMS MUST BE EXCLUDED FROM CONSIDERATION IN DETERMINING WHETHER THE ARTICLE IS FOREIGN OR DOMESTIC. WHAT WE SAID IN THAT DECISION IS APPLICABLE TO YOUR CONTENTION AS TO THE ELEMENTS OF COST WHICH YOU ALLEGE SHOULD HAVE BEEN CONSIDERED. SEE, ALSO, OUR DECISION OF MAY 9, 1969, B-166008.

REGARDING YOUR CONTENTION THAT YOUR COMPETITORS DO NOT QUALIFY AS DOMESTIC PRODUCERS, IT IS ADMINISTRATIVELY REPORTED THAT THERE ARE SUFFICIENT DOMESTIC SHEEPSKINS AND ALL CONTRACTORS WERE FOUND TO BE USING DOMESTIC SKINS IN THE PERFORMANCE OF THE CONTRACTS RESULTING FROM THE SUBJECT SOLICITATIONS.

REGARDING YOUR STATEMENT THAT PRIOR TO BID OPENING YOU WERE ADVISED THAT YOU QUALIFIED AS A DOMESTIC PRODUCER, WE HAVE BEEN FURNISHED STATEMENTS BY GOVERNMENT PERSONNEL INDICATING THAT MR. CHANDLER OF YOUR FIRM WAS INFORMED THAT THE USE OF FOREIGN SHEEPSKIN WOULD CAUSE YOUR BID TO BE A FOREIGN BID.

RESPECTING YOUR STATEMENT THAT YOU SHOULD HAVE BEEN DISQUALIFIED FROM BIDDING IF YOU WERE TO BE CLASSIFIED AS A FOREIGN BIDDER, IT MAY BE POINTED OUT THAT THE MERE OFFERING OF A FOREIGN PRODUCT DOES NOT DISQUALIFY A BIDDER FROM SUBMITTING A BID. HOWEVER, WHEN A BIDDER OFFERS A FOREIGN PRODUCT IT MUST BE EVALUATED IN ACCORDANCE WITH THE BUY AMERICAN ACT AND THE REGULATIONS APPLICABLE THERETO.

INASMUCH AS IT APPEARS THAT YOUR BID WAS PROPERLY REJECTED YOUR PROTEST IS DENIED.