B-154022, MAY 26, 1964

B-154022, MAY 26, 1964

TO OCTAGON PROCESS, INC.:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 17, 1964, AND LETTER DATED APRIL 22, 1964, FROM DANZANSKY AND DICKEY, ATTORNEYS, PROTESTING THE AWARD OF A CONTRACT TO CHEMICAL COMPOUNDING, INC., UNDER INVITATION FOR BIDS NO. DSA-6-64-216 ISSUED BY DEFENSE FUEL SUPPLY CENTER.

THE INVITATION WAS ISSUED ON FEBRUARY 11, 1964. IT CALLED FOR BIDS ON FURNISHING QUANTITIES OF CHLORINATED LIME, FSN 6810-255-5917, IN 20 POUND PAILS TO FOUR DESTINATIONS, AND PROVIDED FOR A PARTIAL LABOR SURPLUS SET ASIDE. BIDS WERE RECEIVED FROM TRIO CHEMICAL WORKS, OCTAGON PROCESS, INC., CHEMICAL COMPOUNDING, INC., AND CAMFIELD CHEMICAL COMPANY. THE BIDS OF TRIO, CAMFIELD AND CHEMICAL COMPOUNDING INDICATED THAT THEY WERE OFFERING A DOMESTIC END PRODUCT WHILE YOUR BID INDICATED THAT YOU WERE OFFERING A FOREIGN END PRODUCT.

THE BID OF TRIO CHEMICAL WORKS WAS LOW ON ALL FOUR DESTINATIONS BUT WAS HELD TO BE UNRESPONSIVE TO THE INVITATION AS WAS ALSO THE BID OF CAMFIELD CHEMICAL COMPANY. YOUR BID WAS ?1770 FOR DESTINATION 1.0563; ?1579 FOR DESTINATION 1.1118; ?1532 FOR DESTINATION 1.3928 AND ?1637 FOR DESTINATION 1.4316. CHEMICAL COMPOUNDING'S BIDS, AFTER CREDIT FOR DISCOUNT AND TIMELY TELEGRAPHIC MODIFICATION, WERE ?1890, ?1621, ?1571 AND ?1621, RESPECTIVELY.

SINCE THE CONTRACTING OFFICER WAS AWARE THAT THE PRODUCT IS NOT PRODUCED IN THE UNITED STATES, CHEMICAL COMPOUNDING WAS REQUESTED TO FURNISH INFORMATION, IN THE FORM OF INVOICES, TO SUBSTANTIATE ITS CLAIM OF A DOMESTIC END PRODUCT. CHEMICAL COMPOUNDING BY LETTER OF MARCH 19, 1964, FURNISHED A COST BREAKDOWN OF THE PRODUCT SHOWING A PRICE OF ?054 PER POUND AT DOCK NEW YORK INCLUDING OCEAN FREIGHT, INSURANCE AND DUTY SUBSTANTIATED BY A LETTER FROM ITS SUPPLIER, GALLARD-SCHLESINGER CHEMICAL MANUFACTURING COMPANY, AND A CONTAINER COST OF ?05985 PER POUND SUBSTANTIATED BY AN INVOICE FROM INLAND STEEL CONTAINER COMPANY. ON THE BASIS OF SUCH COST FIGURES AND EVIDENCE IT WAS DETERMINED THAT CHEMICAL COMPOUNDING WAS OFFERING A DOMESTIC END PRODUCT AS THE FOREIGN COST OF THE COMPONENT WAS 47.4 PERCENT ).054).11385) OF THE TOTAL COST OF THE PRODUCT.

SINCE YOU WERE OFFERING A FOREIGN END PRODUCT A 12 PERCENT DIFFERENTIAL WAS ADDED TO YOUR BID IN ACCORDANCE WITH ASPR 6.104-4 (B) (II) PURSUANT TO THE BUY AMERICAN ACT, 41 U.S.C. 10A, AND EXECUTIVE ORDER 10582. AFTER APPLICATION OF THE PRICE DIFFERENTIAL CHEMICAL COMPOUNDING WAS LOW FOR ALL DESTINATIONS. IN VIEW THEREOF, AND SINCE IT IS BOTH A SMALL BUSINESS AND A LABOR SURPLUS AREA CONCERN, CHEMICAL COMPOUNDING WAS AWARDED THE CONTRACT.

IN OUR DECISION OF SEPTEMBER 27, 1963, B-152352, 43 COMP. GEN. - , INVOLVING A PROTEST BY CHEMICAL COMPOUNDING AGAINST A DETERMINATION THAT THE END PRODUCT OFFERED BY IT UNDER THE INVITATION THERE INVOLVED WAS FOREIGN, THE DIRECTOR, DEFENSE SUPPLY AGENCY WAS ADVISED IN PART AS FOLLOWS:

"THE INSTANT INVITATION CONTEMPLATES THE FURNISHING OF CHLORINATED LIME PACKAGED IN A 20-POUND PAIL AS THE END ITEM. THUS, IT APPEARS THAT THE PROCEDURE INVOLVED IN PLACING THE LIME IN THE CONTAINER CONSTITUTES "MANUFACTURE" WITHIN THE TERMS OF THE BUY AMERICAN ACT. WHETHER THIS DOMESTIC MANUFACTURING PROCESS YIELDS A "DOMESTIC SOURCE END PRODUCT" MUST BE DETERMINED IN THE LIGHT OF THE ABOVE DEFINITIONS OF COMPONENTS AND END PRODUCTS. IN VIEW OF THE ABOVE-QUOTED DEFINITIONS IT IS OUR VIEW THAT THE "COMPONENTS" DIRECTLY INCORPORATED IN THE END PRODUCT ARE THE CHLORINATED LIME AND A 20-POUND PAIL. THEREFORE, FOR THE END PRODUCT OFFERED BY CHEMICAL COMPOUNDING TO BE A "DOMESTIC SOURCE END PRODUCT," WE THINK THAT THE 20-POUND PAIL WHICH IS MANUFACTURED IN THE UNITED STATES MUST REPRESENT A COST WHICH IS GREATER THAN 50 PERCENT OF THE TOTAL COST OF ALL THE COMPONENTS, THAT IS, THE CHLORINATED LIME AND THE CONTAINER. WHILE WE AGREE WITH CHEMICAL COMPOUNDING THAT THE COSTS OF THE BULK CHLORINATED LIME, OCEAN FREIGHT AND DUTY SHOULD BE FOREIGN COSTS WE DO NOT AGREE THAT THE LABOR COSTS AND OTHER COSTS SUCH AS ADMINISTRATION AND OVERHEAD INVOLVED IN THE PACKAGING OF THE LIME ARE FOR CONSIDERATION. IN 35 COMP. GEN. 7 WE STATED THAT SINCE THE COMBINING OF THE FOREIGN COMPONENTS WITH THE DOMESTIC COMPONENTS CAN TAKE PLACE ONLY AFTER THE COMPONENTS HAVE BEEN MANUFACTURED, IT APPEARS THAT ANY COSTS RELATING THERETO MUST BE EXCLUDED FROM THE BID PRICE. IN VIEW THEREOF AND SINCE THE COST OF THE LIME PLUS THE OCEAN FREIGHT AND DUTY IS $1.40 AND THE COST OF THE CONTAINER IS $0.7969 MAKING A TOTAL COST OF $2.1969 FOR THE COMPONENTS IT IS APPARENT THAT THE COST OF THE DOMESTIC COMPONENT (THE 20-POUND PAIL) IS NOT GREATER THAN 50 PERCENT OF THE COST OF ALL THE COMPONENTS.'

THUS, ON THE BASIS OF THE COSTS THERE SHOWN IT WAS HELD THAT CHEMICAL COMPOUNDING WAS OFFERING A FOREIGN END PRODUCT IN THAT PROCUREMENT. HOWEVER, ON THE BASIS OF THE COSTS SHOWN IN THE PRESENT PROCUREMENT IT IS CLEAR THAT CHEMICAL COMPOUNDING OFFERED A DOMESTIC END PRODUCT.

YOU SAY THAT BOTH YOU AND CHEMICAL COMPOUNDING QUOTED ON FOREIGN MATERIAL WHICH COSTS ABOUT THE SAME THROUGH COMPETING SOURCES, AND THAT YOU CANNOT SEE THE SENSE OF MANIPULATING THE COST OF THE PAILS TO A HIGHER LEVEL SO AS TO GIVE THE MANIPULATOR AN UNFAIR ADVANTAGE IN AVOIDING THE PENALTY OF 12 PERCENT WHICH WAS ADDED TO YOUR PRICES SO AS TO WEIGH THEM HIGHER THAN THOSE OF CHEMICAL COMPOUNDING. ALSO, YOU FURNISH EVIDENCE THAT THE COST OF THE PAILS YOU PROPOSED TO FURNISH RANGED FROM ?92 TO ?96 PER DRUM OR ?046 TO ?048 PER POUND, AND ALLEGE THAT IF CHEMICAL COMPOUNDING CLAIMS IT IS FURNISHING A MORE EXPENSIVE PAIL IT IS DISTORTING TRUE COSTS. YOU FURTHER SAY THAT IN THE PAST YOU OBTAINED A QUOTATION FROM GALLARD- SCHLESINGER, BUT CHLORINATED LIME FROM THAT SOURCE DID NOT MEET SPECIFICATIONS ON MOISTURE AND BULK.

IN CONNECTION WITH THE LATTER CONTENTION THE PROCURING AGENCY REPORTS THAT ON MARCH 3, 1964, IT RECEIVED A LETTER FROM YOU STATING THAT GALLARD- SCHLESINGER WAS NOT IMPORTING A PRODUCT WHICH WOULD MEET SPECIFICATIONS. CHEMICAL COMPOUNDING WAS THEREFORE CONTACTED AND REQUESTED TO INFORM THE DEFENSE FUEL SUPPLY CENTER WHETHER THE PRODUCT IT OFFERED WOULD MEET SPECIFICATIONS, SPECIFICALLY AS TO MOISTURE AND DENSITY. BY TELEGRAM OF MARCH 26, 1964, CHEMICAL COMPOUNDING ASSURED THE CENTER THAT ITS PRODUCT WOULD MEET THE SPECIFICATIONS IN ALL RESPECTS.

AS TO YOUR OTHER CONTENTION, CHEMICAL COMPOUNDING HAS FURNISHED A LETTER FROM ITS SUPPLIER SHOWING THE COST OF THE LIME DELIVERED IN NEW YORK, TOGETHER WITH AN INVOICE SHOWING THE PRICE PAID FOR THE PAILS. WE HAVE NO REASON TO DOUBT THE AUTHENTICITY OF THESE DOCUMENTS OR THAT THEY PRESENT TRUE PRICES, AND WE ARE THEREFORE UNABLE TO AGREE WITH YOUR CONTENTION THAT CHEMICAL COMPOUNDING MERELY MANIPULATED THE COMPONENT PRICES IN ITS BID TO SHOW THAT THE CONTAINER WAS MORE EXPENSIVE THAN THE LIME CONTAINED THEREIN.

IN THE CIRCUMSTANCES WE FIND NO VALID BASIS FOR YOUR PROTEST, AND IT IS THEREFORE DENIED.