B-170525, OCT 1, 1970, 50 COMP GEN 239

B-170525, OCT 1, 1970, 50 COMP GEN 239

BUY AMERICAN ACT - APPLICABILITY - CONTRACTORS' PURCHASES FROM FOREIGN SOURCES - EFFECT A PROCEDURE THAT INVITES BIDDERS AND OFFERORS TO FURNISH SURGICAL STEEL BLADES MADE FROM EITHER DOMESTIC CARBON STEEL OR IMPORTED STAINLESS STEEL WITHOUT INDICATING PREFERENCE, LEAVING THE DETERMINATION OF THE AVAILABILITY OF DOMESTIC STEEL TO BIDDERS OR OFFERORS, IS A DEFECTIVE PROCEDURE AS THE COMPOSITION OF THE STEEL SELECTED FOR THE END PRODUCT IS, UNDER THE DEFINITION IN PARAGRAPH 6 001 OF THE ARMED SERVICES PROCUREMENT REGULATION, A COMPONENT OF THE END PRODUCT AND SUBJECT TO THE RESTRICTIONS OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D. THEREFORE, WHEN CARBON STEEL IS AVAILABLE, THE RESTRICTIONS OF THE ACT MAY NOT BE WAIVED FOR A PRODUCT MANUFACTURED IN THE UNITED STATES FROM FOREIGN STEEL. FURTHERMORE, A DETERMINATION TO EXEMPT AN ITEM FROM THE RESTRICTIONS OF THE ACT MUST, IN ACCORDANCE WITH ASPR 6-103.2(A), BE INCLUDED IN THE SOLICITATION. CONTRACTS - BUY AMERICAN ACT - FOREIGN PRODUCTS - NONAVAILABILITY DETERMINATION AN AWARD TO THE HIGH BIDDER OFFERING A SURGICAL STEEL BLADE MANUFACTURED IN THE UNITED STATES FROM IMPORTED STAINLESS STEEL, BASED ON THE ERRONEOUS DETERMINATION THE ITEM IS A DOMESTIC SOURCE END PRODUCT AS DEFINED IN PARAGRAPH 6-101(A) OF THE ARMED SERVICES PROCUREMENT REGULATION UNDER THE RULE IN ASPR 6-001(D) RELATING TO THE NONAVAILABILITY OF DOMESTIC STEEL, RATHER THAN AN AWARD TO THE LOW BIDDER PROPOSING TO USE SIMILAR STEEL AND MANUFACTURE THE BLADE ABROAD CONSIDERED A FOREIGN END PRODUCT - WILL NOT BE DISTURBED, AS THE AWARD WAS MADE UNDER THE MISTAKEN BELIEF HELD BY ALL PARTICIPANTS THAT ONLY THE USE OF THE IMPORTED STEEL WAS AUTHORIZED, NOTWITHSTANDING THE AVAILABILITY OF DOMESTIC CARBON STEEL. FURTHERMORE, ADDING THE 50 PERCENT DIFFERENTIAL PRESCRIBED BY ASPR 6-104.4(B) DISPLACES THE LOW BID:

TO THE DIRECTOR, DEFENSE SUPPLY AGENCY, OCTOBER 1, 1970:

WE REFER TO THE PROTEST OF PROPPER MANUFACTURING COMPANY (PROPPER), WHICH WAS SUBMITTED BY LETTER OF AUGUST 3, 1970, AND SUPPLEMENTAL CORRESPONDENCE FROM ITS ATTORNEY, PROFESSOR GILBERT J. GINSBURG, AGAINST THE METHOD USED BY THE DEFENSE PERSONNEL SUPPORT CENTER (DPSC) TO EVALUATE BIDS AND PROPOSALS FOR THE FURNISHING OF SURGICAL BLADES REQUIRED TO CONFORM WITH INTERIM FEDERAL SPECIFICATION GG-H-0080ADSA DM), DECEMBER 27, 1967. THE PROTEST WAS THE SUBJECT OF A REPORT FORWARDED BY LETTER DATED SEPTEMBER 4, 1970, DSAH-G, FROM YOUR ASSISTANT COUNSEL.

THE SPECIFIC EVALUATION FACTOR WITH WHICH THE PROTEST IS CONCERNED IS THE APPLICATION OF THE PROVISIONS OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D, AS IMPLEMENTED BY THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). THE PROCUREMENT SOLICITATIONS INVOLVED ARE IDENTIFIED AS INVITATION FOR BIDS (IFB) DSA120-70-B-1142, ISSUED IN JANUARY 1970; REQUEST FOR PROPOSALS (RFP) DSA120-71-R-0378, ISSUED AUGUST 14, 1970; AND RFP DSA120-71-R-0249, ALSO ISSUED ON AUGUST 14, 1970. AWARD HAS BEEN MADE UNDER THE IFB, BUT THE PERIOD FOR SUBMISSION OF PROPOSALS UNDER BOTH RFP'S HAS BEEN EXTENDED TO OCTOBER 2, 1970.

THE SPECIFICATION COVERS SURGICAL KNIFE HANDLE AND BLADE SETS IN VARIOUS SIZES AND TYPES, AND THE ITEMS ARE REQUIRED TO BE INTERCHANGEABLE WITH OTHER HANDLES AND BLADES. THE PROVISIONS RELATING TO MATERIAL WHICH MAY BE USED IN THE ITEMS PERMIT A CHOICE OF THREE MATERIALS FOR THE HANDLES AND EITHER OF TWO COMPOSITIONS OF HIGH GRADE STEEL, CARBON STEEL, OR HIGH CHROMIUM STAINLESS STEEL FOR THE BLADES.

UNDER IFB DSA120-70-B-1142, TWO BIDS WERE RECEIVED BY DPSC, ONE FROM PROPPER AND THE OTHER FROM RUDOLPH BEAVER, INC. (BEAVER). BOTH BIDS OFFERED BLADES MADE OF STAINLESS STEEL OF FOREIGN ORIGIN. BEAVER, WHO PROPOSED TO IMPORT THE STEEL AND MANUFACTURE THE BLADES IN THE UNITED STATES, QUOTED A UNIT PRICE OF $9.36. PROPPER, WHO PROPOSED TO FURNISH BLADES COMPLETELY MANUFACTURED IN ENGLAND, QUOTED UNIT PRICES OF $7.38 WITH IMPORT DUTY AND $6.45 WITHOUT DUTY.

DURING THE PERIOD THE BIDS WERE UNDER EVALUATION, DPSC GAVE CONSIDERATION TO WHETHER STAINLESS STEEL OF UNITED STATES ORIGIN IS AVAILABLE AND ULTIMATELY DECIDED THAT SUCH STEEL EITHER IS NOT MANUFACTURED IN THE UNITED STATES OR IS NOT MANUFACTURED DOMESTICALLY IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY. IN THE CIRCUMSTANCES, DPSC TOOK THE POSITION THAT BLADES MANUFACTURED IN THE UNITED STATES OF IMPORTED STAINLESS STEEL SHOULD BE CONSIDERED AS DOMESTIC SOURCE END PRODUCTS AS DEFINED IN ASPR 6-101(A) AND UNDER THE RULE SET FORTH IN ASPR 6-001(D) RELATING TO NONAVAILABILITY IN THE UNITED STATES OF ARTICLES, MATERIALS, OR SUPPLIES, WHILE BLADES MANUFACTURED OUTSIDE THE UNITED STATES OF SIMILAR STEEL SHOULD BE CONSIDERED AS FOREIGN END PRODUCTS. AS APPLIED TO THE PROCUREMENT ADVERTISED IN THE IFB, PROPPER'S BID, AFTER ADDITION OF THE 50-PERCENT PRICE DIFFERENTIAL PRESCRIBED BY ASPR 6-104.4(B) FOR APPLICATION TO BIDS OFFERING FOREIGN END PRODUCTS, WAS HIGHER THAN BEAVER'S BID.

ON APRIL 23, 1970, DPSC ACCORDED PROPPER A CONFERENCE REGARDING THE PROCUREMENT, AT WHICH THE GOVERNMENT'S POSITION WAS EXPLAINED. FOLLOWING THE CONFERENCE, PROPPER SUBMITTED TO DPSC A LETTER DATED MAY 22, 1970, IN WHICH REQUEST WAS MADE FOR A DEVIATION FROM THE ASPR EVALUATION REQUIREMENTS WITH RESPECT TO BIDS OFFERING BLADES MADE OF FOREIGN SOURCE STAINLESS STEEL, WHICH WOULD EITHER ELIMINATE THE USE OF ANY DIFFERENTIAL OR APPLY ONLY A 6-PERCENT DIFFERENTIAL TO A BID OFFERING BLADES MANUFACTURED OUTSIDE THE UNITED STATES.

IN ITS LETTER PROPPER ASSERTED THAT ALLOWING A BID TO BE CONSIDERED AS DOMESTIC MERELY BECAUSE OF THE PLACE OF MANUFACTURE IS NOT LOGICAL OR DESIRABLE FROM THE STANDPOINT OF GOVERNMENT POLICY. IN ADDITION, AS PRECEDENT FOR DISPENSING WITH ANY DIFFERENTIAL FOR EVALUATION PURPOSES, THERE WAS CITED THE AUTHORITY CONTAINED IN ASPR 6-102.2(B), RELATING TO THE BALANCE OF PAYMENTS PROGRAM POLICY WITH RESPECT TO DEFENSE PROCUREMENTS, UNDER WHICH THE 50-PERCENT PRICE FACTOR APPLICABLE TO FOREIGN BIDS MAY BE DISREGARDED PURSUANT TO PROPER AUTHORIZATION WHERE THE LOW DOMESTIC BID WILL INVOLVE SUBSTANTIAL FOREIGN EXPENDITURES OR THE LOW FOREIGN BID WILL INVOLVE RELATIVELY SUBSTANTIAL DOMESTIC EXPENDITURES. FURTHER, IT WAS URGED THAT BY GRANTING THE REQUESTED DEVIATION THE GOVERNMENT WOULD REALIZE A SIZEABLE FINANCIAL SAVING ANNUALLY AND MIGHT EVEN RECEIVE A BID FROM SWANN MORTON, AN ENGLISH CONCERN WHICH IS SAID TO BE THE LARGEST MANUFACTURER OF SURGEONS' BLADES IN THE WORLD. SUCH BENEFITS, IT WAS CONTENDED, WOULD JUSTIFY THE DEVIATION.

DPSC RESPONDED TO THE REQUEST IN A LETTER DATED JULY 8, 1970, WHICH INCLUDED THE FOLLOWING STATEMENTS:

FOR A TIME THERE WAS SPECULATION AS TO THE POSSIBLE AVAILABILITY OF STAINLESS STEEL MANUFACTURED BY UNITED STATES SOURCES. APPARENTLY, HOWEVER, IT HAS SINCE BEEN CONCEDED THAT SUCH STEEL EITHER IS NOT MANUFACTURED IN THE UNITED STATES OR IS NOT MANUFACTURED DOMESTICALLY IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY. UNDER THESE CIRCUMSTANCES, THE GOVERNMENT'S POSITION HAS BEEN THAT BLADES MANUFACTURED IN THE UNITED STATES OF IMPORTED STAINLESS STEEL WOULD HAVE TO BE CONSIDERED UNITED STATES END PRODUCTS UNDER THE NONAVAILABLE COMPONENTS RULE SET FORTH IN ASPR 6 001(D), WHEREAS BLADES MANUFACTURED OUTSIDE THE UNITED STATES OF SIMILAR STEEL WOULD BE CONSIDERED FOREIGN END PRODUCTS.

SINCE OUR APRIL MEETING AND YOUR SUBSEQUENT LETTER, THE PROBLEMS INVOLVED IN THE PROCUREMENT OF SURGICAL BLADES HAVE BEEN FURTHER ANALYZED AND EVALUATED, WITH THE RESULT THAT A SLIGHTLY REVISED PROCUREMENT APPROACH HAS HAD TO BE ADOPTED. THE CHANGE HAS RESULTED FROM A REALIZATION THAT THE CURRENT SPECIFICATION COVERING SURGICAL BLADES (INTERIM FEDERAL SPECIFICATION GG-H-0080A, DATED 27 DEC. 1967) ALLOWS FABRICATION OF BLADES FROM EITHER OF TWO STEEL COMPOSITIONS - STAINLESS STEEL AS DEFINED IN 3.1.2.2 OR CARBON STEEL AS DEFINED IN 3.1.2.1 OF THE SPECIFICATION, AND THE FURTHER CIRCUMSTANCE THAT CARBON STEEL MANUFACTURED IN THE UNITED STATES IS READILY AVAILABLE. UNDER THE REVISED APPROACH, SOLICITATIONS FOR SURGICAL BLADES WILL INVITE OFFERS ON AN ALTERNATIVE BASIS. OFFERORS WILL BE REQUESTED TO SUBMIT SEPARATE PRICES ON BLADES MANUFACTURED OF CARBON STEEL AND BLADES MANUFACTURED OF STAINLESS STEEL. THE SOLICITATION WILL ADVISE OFFERORS THAT IN THE EVENT ANY BID IS SUBMITTED FOR BLADES MANUFACTURED IN THE UNITED STATES OF CARBON STEEL MANUFACTURED IN THE UNITED STATES, ANY OTHER BIDS CONTEMPLATING THE USE OF FOREIGN STEEL, EITHER CARBON OR STAINLESS, WILL BE CONSIDERED FOREIGN, REGARDLESS OF WHETHER THE BLADES OFFERED BY SUCH OTHER BIDS ARE TO BE MANUFACTURED IN OR OUTSIDE THE UNITED STATES. IF NO BIDS ARE RECEIVED FOR BLADES MANUFACTURED OF DOMESTIC STEEL, ALL BIDS FOR BLADES TO BE MANUFACTURED IN THE UNITED STATES WILL BE GIVEN PREFERENCE OVER BIDS INVOLVING MANUFACTURE OUTSIDE THE UNITED STATES IN ACCORDANCE WITH ASPR 6-104.4 EVALUATION PROCEDURES.

SINCE THE GOVERNMENT'S REQUIREMENTS CAN BE MET BY THE FURNISHING OF OTHER THAN STAINLESS STEEL (AVAILABLE FOREIGN ONLY), THE NEED TO SOLICIT BIDS ON AN ALTERNATIVE BASIS IS APPARENT. THE BUY AMERICAN ACT PRECLUDES THE PURCHASE OF FOREIGN PRODUCTS FOR USE IN THE UNITED STATES IF DOMESTIC PRODUCTS OF A SATISFACTORY SPECIFICATION QUALITY ARE REASONABLY AVAILABLE IN SUFFICIENT COMMERCIAL QUANTITIES AT REASONABLE COST. THEREFORE, IT IS IMPORTANT THAT THE SOLICITATION INQUIRE INTO THE AVAILABILITY OF DOMESTIC PRODUCTS.

IT IS CONCEIVABLE THAT A SOLICITATION CALLING FOR BIDS BASED ON ALTERNATIVE STEEL COMPOSITIONS MIGHT RESULT IN THE SUBMISSION OF BIDS OFFERING ONLY BLADES MANUFACTURED OF FOREIGN STEEL BY BOTH DOMESTIC AND FOREIGN MANUFACTURERS. IN SUCH A SITUATION, AS MENTIONED ABOVE, BIDS OFFERING BLADES OF DOMESTIC MANUFACTURE WOULD BE GIVEN PREFERENCE, IN EVALUATION, OVER BIDS OFFERING BLADES OF FOREIGN MANUFACTURE. ONLY IN THESE CIRCUMSTANCES WOULD YOUR LETTER PRESENTATION, URGING CONSIDERATION OF A DEVIATION FROM THE EVALUATION PROCEDURES OF ASPR 6 104.4, BE RELEVANT. IT WOULD NOT BE RELEVANT IN A PROCUREMENT SITUATION INVOLVING, ON THE ONE HAND, BIDS FOR BLADES MANUFACTURED IN THE UNITED STATES OF DOMESTIC STEEL AND, ON THE OTHER HAND, BIDS FOR BLADES MANUFACTURED OUTSIDE THE UNITED STATES OF FOREIGN STEEL, SINCE, IN THIS SITUATION, IT WOULD NOT BE POSSIBLE TO SHOW A RELATIVELY SUBSTANTIAL FOREIGN EXPENDITURE BY THE LOW DOMESTIC BIDDER OR A RELATIVELY SUBSTANTIAL DOMESTIC EXPENDITURE BY THE LOW FOREIGN BIDDER (WHICH WOULD BE THE ONLY CIRCUMSTANCES ON WHICH A DEVIATION REQUEST COULD BE PREDICATED (SEE ASPR 6 -102.2(B)).

IN ANY EVENT, THE POSSIBILITY OF OUR GIVING SERIOUS CONSIDERATION TO YOUR SUGGESTION REGARDING DEVIATION FROM PRESCRIBED EVALUATION PROCEDURES IS PRESENTLY REMOTE. AS BY REFERENCE TO THE LAST CITED ASPR PARAGRAPH WILL APPEAR, DEVIATIONS FROM THE NORMAL EVALUATION PROCEDURES ARE FOR CONSIDERATION ONLY WHERE MAJOR PROCUREMENTS (I.E., OVER $250,000) ARE INVOLVED. THIS MONETARY LIMITATION IS APPLICABLE TO INDIVIDUAL PROCUREMENTS AND NOT, AS YOUR LETTER APPARENTLY SUGGESTS, TO THE TOTAL ANNUAL DOLLAR VALUE OF SURGICAL BLADE PROCUREMENTS. THE FACT IS THAT INDIVIDUAL PROCUREMENTS OF SURGICAL BLADES BY DPSC HERETOFORE HAVE FALLEN FAR SHORT OF THE INDICATED $250,000 LIMITATION, AND IT IS NOT ANTICIPATED THAT ANY INDIVIDUAL PROCUREMENT WILL APPROACH THIS DOLLAR AMOUNT IN THE FUTURE.

IN KEEPING WITH THE ADVICE CONTAINED IN THE ABOVE LETTER, DPSC MADE AWARD TO BEAVER, AS THE LOW BIDDER OFFERING A DOMESTIC END PRODUCT. FURTHER, THE POLICY IN QUESTION HAS BEEN FOLLOWED IN CONNECTION WITH THE TWO PENDING PROCUREMENTS UNDER THE RFP'S, NEGOTIATION OF WHICH HAS BEEN AUTHORIZED PURSUANT TO THE AUTHORITY IN 10 U.S.C. 2304(A)(7) RELATING TO PURCHASES AND CONTRACTS FOR MEDICINE OR MEDICAL SUPPLIES. IN THIS CONNECTION, EACH RFP INCLUDES, IN ADDITION TO THE BUY AMERICAN ACT CLAUSE PRESCRIBED BY ASPR 6-104.5, THE FOLLOWING PERTINENT LANGUAGE:

REFERENCE IS MADE TO PARAGRAPH 3.1.2 OF INTERIM FEDERAL SPECIFICATION GG- H-0080A (DSA-DM) DATED 27 DECEMBER 1967, WHICH PROVIDES THAT THE SURGICAL KNIFE BLADES CALLED FOR IN THIS SOLICITATION MAY BE FABRICATED OF EITHER COMPOSITION A (CARBON STEEL) OR COMPOSITION B (CHROMIUM STAINLESS STEEL) MATERIAL. OFFERORS ARE ENCOURAGED TO SUBMIT SEPARATE PRICES ON BLADES MANUFACTURED OF COMPOSITION A MATERIAL AND BLADES MANUFACTURED OF COMPOSITION B MATERIAL. BIDS OFFERING MATERIAL (EITHER COMPOSITION A OR COMPOSITION B) OF FOREIGN ORIGIN SHALL INDICATE THE AMOUNT OF ANY APPLICABLE IMPORT DUTY. THIS INFORMATION MAY BE SHOWN EITHER BY QUOTING DUTY-INCLUSIVE PRICES WITH AN INDICATION AS TO THE AMOUNT OF DUTY INCLUDED THEREIN OR BY QUOTING DUTY-EXCLUSIVE PRICES AND STATING THE AMOUNT OF DUTY APPLICABLE THERETO. IF ANY OFFER FOR DOMESTIC COMPOSITION A BLADES IS RECEIVED, ALL OFFERS INVOLVING THE USE OF FOREIGN STEEL OF EITHER COMPOSITION A OR B MATERIAL WILL BE CONSIDERED FOREIGN, WHETHER OR NOT THE BLADES ARE MANUFACTURED IN THE UNITED STATES. IF NO OFFER FOR DOMESTIC COMPOSITION A BLADES IS RECEIVED, ALL OFFERS FOR BLADES MANUFACTURED IN THE UNITED STATES WILL BE GIVEN PREFERENCE OVER OFFERS FOR BLADES MANUFACTURED OUTSIDE THE UNITED STATES IN ACCORDANCE WITH ARMED SERVICES PROCUREMENT REGULATION 6-104.4 EVALUATION PROCEDURES.

FOR THE PURPOSE OF CONSIDERATION OF THE PROTEST, THE FOLLOWING PROVISIONS ARE QUOTED FROM THE BUY AMERICAN ACT CLAUSE:

(A) IN ACQUIRING END PRODUCTS, THE BUY AMERICAN ACT (41 U.S.C. 10 A D) PROVIDES THAT THE GOVERNMENT GIVE PREFERENCE TO DOMESTIC SOURCE END PRODUCTS. FOR THE PURPOSE OF THIS CLAUSE:

(III) A "DOMESTIC SOURCE END PRODUCT" MEANS (A) AN UNMANUFACTURED END PRODUCT WHICH HAS BEEN MINED OR PRODUCED IN THE UNITED STATES AND (B) 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 OR CANADA EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS. FOR THE PURPOSES OF THIS (A)(III)(B), COMPONENTS OF FOREIGN ORIGIN OF THE SAME TYPE OR KIND AS THE PRODUCTS REFERRED TO IN (B) (II) OR (III) OF THIS CLAUSE SHALL BE TREATED AS COMPONENTS MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES.

(B) THE CONTRACTOR AGREES THAT THERE WILL BE DELIVERED UNDER THIS CONTRACT ONLY DOMESTIC SOURCE END PRODUCTS, EXCEPT END PRODUCTS:

(II) WHICH THE GOVERNMENT DETERMINES ARE NOT MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY;

(III) AS TO WHICH THE SECRETARY DETERMINES THE DOMESTIC PREFERENCE TO BE INCONSISTENT WITH THE PUBLIC INTEREST; ***.

IN THE PROTEST FILED BY PROPPER WITH OUR OFFICE, WHILE NO REQUEST IS MADE THAT THE AWARD TO BEAVER UNDER THE IFB BE RESCINDED SINCE IT WAS MADE IN THE APPARENT BELIEF BY BOTH PROPPER AND DPSC THAT THE SPECIFICATION AUTHORIZED USE OF STAINLESS STEEL ONLY, THE PROPRIETY OF THE METHOD OF BID EVALUATION UNDER THE IFB AND AS PROPOSED UNDER THE TWO RFP'S IS QUESTIONED. IN THIS REGARD, IT IS CONTENDED THAT STEEL IS THE COMPONENT OF THE END PRODUCT BLADES, AND THAT SINCE CARBON STEEL IS AVAILABLE IN THE UNITED STATES, ALL FOREIGN SOURCE STEEL MUST BE REGARDED AS A FOREIGN SOURCE COMPONENT AND THE BIDS OR OFFERS EVALUATED ACCORDINGLY WITHOUT REGARD TO THE PLACE OF MANUFACTURE OF THE END PRODUCT. IN SUPPORT OF SUCH POSITION, THE CONTENTION IS MADE THAT THE DPSC PROCEDURE LEAVES THE DETERMINATION OF AVAILABILITY OF THE DOMESTIC COMPONENTS TO THE BIDDERS, A RESULT WHICH IT IS CLAIMED FRUSTRATES THE BUY AMERICAN ACT. UNDER SUCH PROCEDURE, IT IS CHARGED, DOMESTIC MANUFACTURERS WHO PROPOSED TO USE FOREIGN STAINLESS STEEL COULD "FREEZE OUT" A DOMESTIC MANUFACTURER OF CARBON STEEL BY AGREEING TO BUY ONLY FOREIGN (CHEAPER) STAINLESS STEEL AND STILL RETAIN A 50-PERCENT COMPETITIVE BIDDING ADVANTAGE OVER FOREIGN END PRODUCT MANUFACTURERS. ACCORDINGLY, IT IS URGED THAT THE FOREIGN COMPONENT (I.E., STAINLESS STEEL) SHOULD BE REGARDED AS FOREIGN AT ALL TIMES, REGARDLESS OF THE PLACE OF MANUFACTURE OF THE END PRODUCT, IN ORDER TO PROTECT DOMESTIC PRODUCERS OF CARBON STEEL EVEN WHEN NO BIDDER OFFERS AN END PRODUCT MADE OF STEEL PRODUCED IN THE UNITED STATES, AND PROCUREMENT OF AN END PRODUCT COMPRISED OF FOREIGN SOURCE STEEL IS THEREFORE NECESSARY.

THE CONTRACTING OFFICER HAS MADE STATEMENTS INDICATING THAT SPECIFICATION STAINLESS STEEL IS NOT DOMESTICALLY OBTAINABLE. AS TO DOMESTIC SOURCE CARBON STEEL, THE CONTRACTING OFFICER REPORTS THAT IN A RECENT NEGOTIATED PROCUREMENT ONE OF THREE OFFERS RECEIVED BY DPSC WAS FROM A SOURCE OFFERING AN END PRODUCT OF DOMESTIC CARBON STEEL, WHO INDICATED THAT A SIMILAR PRICE WOULD HAVE BEEN QUOTED HAD STAINLESS STEEL, PRESUMABLY OF FOREIGN MANUFACTURE, BEEN OFFERED. IN REFUTATION, THE CONTRACTING OFFICER POINTS OUT THAT PROPPER, WHO OFFERED BLADES OF FOREIGN SOURCE STAINLESS STEEL MANUFACTURED OUTSIDE THE UNITED STATES, WAS STILL THE LOWEST OFFEROR EVEN WITH ADDITION OF THE 50-PERCENT FOREIGN ITEM EVALUATION FACTOR, AND THEREFORE RECEIVED THE CONTRACT ON AUGUST 18, 1970. THE CONTRACTING OFFICER THEREFORE CONTENDS THAT THIS PROCUREMENT EXPERIENCE EVIDENCES THAT FEARS REGARDING A "FREEZE OUT" OF DOMESTIC COMPONENT PRODUCERS UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROTEST ARE UNFOUNDED.

IN JUSTIFICATION OF DPSC'S POLICY TO MAKE THE DETERMINATION REGARDING AVAILABILITY OF DOMESTIC SOURCE STEEL ON THE BASIS OF THE BIDS OR OFFERS ACTUALLY RECEIVED BY DPSC IN A GIVEN PROCUREMENT, THE CONTRACTING OFFICER STATES THAT SUCH POLICY IS A PRACTICAL ONE, FOR WHEN NO BIDS OR OFFERS OFFERING AN END PRODUCT MANUFACTURED OF DOMESTIC MATERIAL ARE RECEIVED, AS A MATTER OF FACT THE DOMESTIC MATERIAL IS NOT AVAILABLE TO THE GOVERNMENT FOR THAT PARTICULAR PROCUREMENT.

SO FAR AS IS PERTINENT TO THE PROTEST, THE BUY AMERICAN ACT (41 U.S.C. 10A) PROVIDES THAT -

NOTWITHSTANDING ANY OTHER PROVISION OF LAW, AND UNLESS THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT CONCERNED SHALL DETERMINE IT TO BE INCONSISTENT WITH THE PUBLIC INTEREST, OR THE COST TO BE UNREASONABLE, *** ONLY SUCH MANUFACTURED ARTICLES, MATERIALS, AND SUPPLIES AS HAVE BEEN MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM ARTICLES, MATERIALS, OR SUPPLIES MINED, PRODUCED, OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES, SHALL BE ACQUIRED FOR PUBLIC USE.

ASPR 6-001, RELATING TO FOREIGN PURCHASES, INCLUDES THE FOLLOWING PERTINENT DEFINITIONS:

(B) "COMPONENTS" MEANS THOSE ARTICLES, MATERIALS, AND SUPPLIES, WHICH ARE DIRECTLY INCORPORATED IN END PRODUCTS.

(D) "UNITED STATES END PRODUCT" MEANS AN UNMANUFACTURED END PRODUCT WHICH HAS BEEN MINED OR PRODUCED IN THE UNITED STATES, OR AN END PRODUCT MANUFACTURED IN THE UNITED STATES IF THE COST OF ITS COMPONENTS WHICH ARE MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES EXCEEDS 50 PERCENT OF THE COST OF ALL OF ITS COMPONENTS. *** A COMPONENT SHALL BE CONSIDERED TO HAVE BEEN MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES (REGARDLESS OF ITS SOURCE IN FACT) IF THE END PRODUCT IN WHICH IT IS INCORPORATED IS MANUFACTURED IN THE UNITED STATES AND THE COMPONENT IS OF A CLASS OR KIND DETERMINED BY THE GOVERNMENT TO BE NOT MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY.

ASPR 6-101(A) DEFINES "DOMESTIC SOURCE END PRODUCT" IN SUBSTANTIALLY THE SAME LANGUAGE AS IS QUOTED ABOVE FROM THE BUY AMERICAN ACT CLAUSE WHICH IS INCLUDED IN THE TWO RFP'S IN QUESTION.

ASPR 6-103.2(A), ENTITLED "NONAVAILABILITY IN THE UNITED STATES," READS AS FOLLOWS:

(A) THE BUY AMERICAN ACT DOES NOT APPLY TO ARTICLES, MATERIALS, OR SUPPLIES OF A CLASS OR KIND WHICH THE GOVERNMENT HAS DETERMINED ARE NOT MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY. CERTAIN ITEMS DETERMINED TO BE EXEMPT UNDER THIS EXCEPTION ARE SET FORTH IN 6-105. SUPPLIES NOT LISTED MAY BE EXCEPTED ONLY AFTER A WRITTEN DETERMINATION HAS BEEN MADE BY THE CONTRACTING OFFICER. EACH DETERMINATION SHALL ALSO INCLUDE A REFERENCE TO THE BUY AMERICAN ACT (41 U.S.C. 10 A-D), A DESCRIPTION OF THE ITEM OR ITEMS BEING PROCURED, THE UNIT, QUANTITY, AND ESTIMATED DELIVERED COST, A BRIEF STATEMENT ESTABLISHING THE NECESSITY FOR THE PROCUREMENT AND THE NONAVAILABILITY OF A SIMILAR ITEM OR ITEMS OF DOMESTIC ORIGIN. A SIGNED COPY OF THE DETERMINATION SHALL BE MADE A PART OF THE CONTRACT FILE. WHEN A DETERMINATION HAS BEEN MADE THAT THE RESTRICTIONS OF THE BUY AMERICAN ACT ARE INAPPLICABLE FOR THE END PRODUCTS BEING PURCHASED, NOTIFICATION TO THIS EFFECT SHALL BE INCLUDED IN THE SOLICITATION AND CONTRACT.

UNDER THE PROCUREMENT SPECIFICATION, EITHER CARBON STEEL OR HIGH CHROMIUM STAINLESS STEEL MAY BE USED IN THE BLADES, AND NO PREFERENCE IS STATED FOR ONE COMPOSITION OVER THE OTHER. CLEARLY, THEREFORE, THE COMPOSITION OF THE STEEL SELECTED BY THE PARTICULAR OFFEROR OR BIDDER FOR THE END PRODUCT OFFERED TO THE GOVERNMENT IS, UNDER THE DEFINITIONS IN ASPR 6-001, THE COMPONENT OF THE END PRODUCT. THE QUESTION THEN ARISES WHETHER, WHEN ONLY ONE OF THE COMPOSITIONS IS DOMESTICALLY AVAILABLE, AN END PRODUCT MADE OF THE ALTERNATIVE COMPOSITION MAY BE EXEMPT FROM THE RESTRICTIONS OF THE BUY AMERICAN ACT BY REASON OF THE FACT THAT SUCH END PRODUCT IS MANUFACTURED IN THE UNITED STATES FROM A COMPONENT NOT MINED, PRODUCED, OR MANUFACTURED IN THE UNITED STATES IN SUFFICIENT AND REASONABLY AVAILABLE COMMERCIAL QUANTITIES AND OF A SATISFACTORY QUALITY. WE BELIEVE, FOR THE REASONS STATED BELOW, THAT THE ANSWER MUST BE NEGATIVE.

UNDER THE PROVISIONS OF ASPR 6-103.2(A) QUOTED ABOVE, A REQUIREMENT FOR EXEMPTION OF AN ITEM FROM THE RESTRICTIONS OF THE BUY AMERICAN ACT IS THE NONAVAILABILITY OF A SIMILAR ITEM OR ITEMS OF DOMESTIC ORIGIN. SINCE THE SIMILARITY OF THE BLADES IN QUESTION, WHETHER MADE OF CARBON STEEL OR CHROMIUM STAINLESS STEEL, IS UNDENIABLE, IT IS OUR VIEW THAT WHENEVER EITHER OF THE TWO COMPOSITIONS OF STEEL IS AVAILABLE FROM A DOMESTIC SOURCE OR SOURCES, ANY END PRODUCT MADE OF EITHER COMPOSITION OBTAINED FROM A FOREIGN SOURCE MUST BE REGARDED AS A FOREIGN END PRODUCT FOR EVALUATION UNDER ASPR 6-104.4 REGARDLESS OF WHETHER THE END PRODUCT IS MANUFACTURED IN THE UNITED STATES.

THE RECORD INDICATES THAT CHROMIUM STAINLESS STEEL OF DOMESTIC SOURCE IS NOT AVAILABLE FOR MANUFACTURE OF THE BLADES, WHEREAS DOMESTIC CARBON STEEL WAS OFFERED IN THE AUGUST 1970 PROCUREMENT WHICH WAS AWARDED TO PROPPER. IN THE CIRCUMSTANCES, IT WOULD APPEAR THAT SUFFICIENT DOMESTIC CARBON STEEL MAY BE AVAILABLE FOR THE MANUFACTURE OF BLADES IN QUANTITIES TO MEET THE GOVERNMENT'S REQUIREMENTS.

IN ADDITION, WE CALL YOUR ATTENTION TO THE FACT THAT ASPR 6-103.2(A) REQUIRES THAT NOTIFICATION OF A DETERMINATION EXCEPTING AN ITEM FROM THE RESTRICTIONS OF THE BUY AMERICAN ACT BE INCLUDED IN THE SOLICITATION AND THAT THERE IS NO PROVISION IN THE REGULATION FOR THE MAKING OF A DETERMINATION WITH RESPECT TO A PARTICULAR PROCUREMENT AFTER THE OPENING OF THE BIDS OR OFFERS, AND ON THE BASIS OF THE RESULTS OF THE COMPETITION.

FOR THE REASONS STATED, IT IS OUR VIEW THAT THE PROCEDURE CONTEMPLATED BY THE PROVISION IN QUESTION IS NOT SANCTIONED BY THE PROCUREMENT REGULATIONS AND THE PROVISION SHOULD THEREFORE BE DELETED FROM THE CURRENT RFP'S.

WHILE WE ARE MINDFUL THAT THE AWARD TO BEAVER UNDER IFB DSA120-70-B 1142 WAS NOT MADE IN ACCORDANCE WITH THE ASPR PRESCRIBED PROCEDURES, WE DO NOT BELIEVE THAT THE INTERESTS OF THE GOVERNMENT DICTATE ITS CANCELLATION SINCE IT WAS MADE IN GOOD FAITH AND PROPPER, THE ONLY OTHER BIDDER, DOES NOT URGE THAT THE AWARD BE RESCINDED.

A COPY OF THIS DECISION IS BEING FURNISHED TO PROPPER BY LETTER OF TODAY TO ITS ATTORNEY.

THE FILE WHICH ACCOMPANIED THE ASSISTANT COUNSEL'S LETTER OF SEPTEMBER 4 IS RETURNED.