B-174281, DEC 17, 1971

B-174281, DEC 17, 1971

BID PROTEST - ALLEGED VIOLATION OF THE "BUY AMERICAN ACT" DENYING PROTEST OF CONCEPT INDUSTRIES, INC. AGAINST AWARD OF A CONTRACT TO KERVAN METAL PRODUCTS, INC. UNDER AN IFB ISSUED BY THE UNITED STATES ARMY MUNITIONS COMMAND (MUCOM) FOR A QUANTITY OF CHARGES AND CHARGE LINERS. PROTESTANT ALLEGES THAT BECAUSE OF KERVAN'S "EXTREMELY" LOW BID OF $.0294 PER UNIT FOR THE LINERS, THEY WILL, IN PERFORMANCE OF THE CONTRACT, USE FOREIGN MATERIAL (RAW ALUMINUM) IN VIOLATION OF THE "BUY AMERICAN ACT." FROM THE RECORD, IT DOES NOT APPEAR THAT KERVAN INTENDED TO USE, OR WILL USE, FOREIGN ALUMINUM IN THE END PRODUCT. HAVING CERTIFIED THAT IT DOES NOT INTEND TO FURNISH OTHER THAN A DOMESTIC END PRODUCT, IT IS UNDER AN OBLIGATION TO DO SO. IT IS THE DUTY OF THE PROCURING AGENCY TO INSURE COMPLIANCE AND MUCOM HAS INDICATED THAT IT WILL TAKE ACTION DURING THE ADMINISTRATION OF THE CONTRACT TO AVOID ANY SUCH VIOLATION. ACCORDINGLY, KERVAN'S BID MAY BE CONSIDERED A RESPONSIVE DOMESTIC BID AND CONCEPT'S PROTEST IS DENIED.

TO CONCEPT INDUSTRIES, INC.:

WE REFER TO YOUR PROTEST, BY TELEGRAM DATED OCTOBER 7, 1971, AS SUPPLEMENTED BY SUBSEQUENT CORRESPONDENCE, AGAINST AWARD BY THE DEPARTMENT OF THE ARMY OF A CONTRACT TO KERVAN METAL PRODUCTS, INC. (KERVAN), BASED ON A LOW BID SUBMITTED BY KERVAN ON ITEMS 0001 AND 0002 IN INVITATION FOR BIDS (IFB) DAAA09-72-B-0024, ISSUED ON AUGUST 11, 1971, BY THE UNITED STATES ARMY MUNITIONS COMMAND (MUCOM), JOLIET, ILLINOIS. THE PROCUREMENT ITEMS, MILITARY AMMUNITION, ARE SUPPLEMENTARY MPTS CHARGES AND SUPPLEMENTARY CHARGE LINERS, AND 50 PERCENT OF THE PROCUREMENT QUANTITY HAS BEEN SET ASIDE FOR AWARD TO LABOR SURPLUS AREA CONCERNS.

ON SEPTEMBER 13, 1971, THREE DAYS AFTER THE OPENING OF BIDS, YOU PROTESTED TO MUCOM THAT KERVAN'S PRICE OF $.0294 PER UNIT FOR ITEM 0002, THE LINERS, WAS EXTREMELY LOW THUS INDICATING A POSSIBLE MISTAKE IN BID, WHICH MAY RESULT IN INABILITY TO PERFORM THE CONTRACT, OR INTENT TO USE FOREIGN MATERIAL (RAW ALUMINUM) IN THE END PRODUCT, WHICH YOU CLAIM WOULD CONSTITUTE A VIOLATION OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-D, INASMUCH AS THE ALUMINUM REPRESENTS OVER 90 PERCENT OF THE COST OF THE END PRODUCT. YOUR BID ON ITEM 0002 WAS $.03410 PER UNIT, AND THE OTHER BIDS RANGED FROM $.03496 TO $.07262 PER UNIT.

IN YOUR CORRESPONDENCE WITH OUR OFFICE, YOU STATE THAT YOU HAVE BEEN INFORMED THAT KERVAN'S BID WAS BASED ON PURCHASE OF THE RAW ALUMINUM FROM CONSOLIDATED ALUMINUM CORPORATION (CONSOLIDATED), A SUPPLIER WHICH YOU STATE IS A FOREIGN OWNED CORPORATION. IN THIS CONNECTION, YOU SPECULATE THAT AS A FOREIGN OWNED CORPORATION CONSOLIDATED COULD HAVE EASY ACCESS TO FOREIGN ALUMINUM FOR THE CONTRACT. FURTHER, YOU STATE THAT THE GENERAL SERVICES ADMINISTRATION (GSA) HAS INFORMED YOU THAT CONSOLIDATED HAS NEVER PARTICIPATED IN THE GSA ALUMINUM STOCKPILE PROGRAM, A REQUIREMENT WHICH PERTAINS TO THIS MUCOM PROCUREMENT UNDER THE PROVISIONS OF THE STOCKPILE CLAUSE SET FORTH IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 7-104.59 AND INCLUDED IN THE IFB PURSUANT TO ASPR 1-327.1.

BASED ON THE ABOVE INFORMATION, YOU INFER THAT CONSOLIDATED'S QUOTATION TO KERVAN IS PREDICATED ON NONCOMPLIANCE WITH THE STOCKPILE CLAUSE, WHICH ACCOUNTS FOR KERVAN'S "EXTREMELY LOW PRICE" ON ITEM 0002. ACCORDINGLY, AND ON THE BASIS THAT AN ITEM PRODUCED FROM FOREIGN RAW ALUMINUM WOULD BE A FOREIGN END PRODUCT, YOU MAINTAIN THAT ACCEPTANCE OF THE KERVAN BID WOULD BE CLEARLY PREJUDICIAL TO OTHER BIDDERS.

THE CONTRACTING OFFICER'S REPORT INDICATES THAT AFTER THE BIDS WERE OPENED MUCOM TOOK NOTE OF THE FACTS THAT (1) KERVAN HAD BEEN A PAST PRODUCER OF THE LINERS, (2) THAT THE TREND IN PRICES FOR THE LINERS HAS BEEN DOWNWARD, AND (3) THAT THE SPREAD BETWEEN KERVAN'S PRICE AND YOUR SECOND LOW BID PRICE FOR THE LINERS WAS ONLY $.00470 PER UNIT. IN THE CIRCUMSTANCES, MUCOM DETERMINED THAT THERE WAS NOT SUFFICIENT REASON TO BELIEVE THAT A MISTAKE HAD BEEN MADE IN KERVAN'S BID, AND NO REQUEST WAS MADE FOR VERIFICATION OF THE BID. SUBSEQUENT TO THE RECEIPT OF YOUR PROTEST, HOWEVER, MUCOM REQUESTED KERVAN TO VERIFY ITS ORIGINAL PRICES ON THE CHARGES AND LINERS "IN VIEW OF THE BID PRICE RANGE ON IFB," AND KERVAN REPLIED THAT ITS PRICES ON BOTH ITEMS 0001 AND 0002 WERE FIRM AS QUOTED. KERVAN ALSO SUBMITTED TO MUCOM AN OFFER TO ACCEPT THE SET-ASIDE QUANTITIES ON BOTH ITEMS AT THE SAME PRICES QUOTED ON THE NON-SET-ASIDE QUANTITIES.

THE CONTRACTING OFFICER'S REPORT ALSO INDICATES THAT IN VIEW OF YOUR INFERENCE AS TO KERVAN'S INTENT TO USE FOREIGN RAW ALUMINUM IN THE CONTRACT ITEMS THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT (DCASD), BIRMINGHAM, ALABAMA, WHICH CONDUCTED THE PREAWARD SURVEY OF KERVAN, WAS REQUESTED TO INVESTIGATE THE SOURCES OF KERVAN'S RAW MATERIAL. THE SURVEY REPORT, DATED SEPTEMBER 27, 1971, WHICH RECOMMENDED AWARD TO KERVAN OF THE LABOR SURPLUS SET-ASIDE AS WELL AS THE BASE QUANTITY, LISTED CONSOLIDATED, JACKSON, TENNESSEE, AS THE SOURCE OF THE ALUMINUM AND COMMONWEALTH FELT COMPANY, NORTHAMPTON, MASSACHUSETTS, AS THE SOURCE OF THE FELT FOR THE END ITEMS. A NARRATIVE STATEMENT IN THE REPORT INDICATES THAT, IN TELEPHONE CONVERSATIONS WITH THE VENDORS, DCASD- BIRMINGHAM VERIFIED THAT ALL MATERIALS OFFERED TO KERVAN ARE DOMESTIC. SUPPLEMENT TO THE REPORT STATES THAT DURING THE SURVEY KERVAN'S PRESIDENT GAVE TO DCASD THE NAMES OF TWO OTHER DOMESTIC SOURCES FROM WHOM KERVAN HAD OBTAINED QUOTATIONS FOR THE ALUMINUM.

IN COMPLIANCE WITH ASPR 2-407.8(A)(2), RELATING TO BID PROTESTS FILED WITH OUR OFFICE, THE CONTRACTING OFFICER NOTIFIED KERVAN OF YOUR PROTEST AND AFFORDED KERVAN AN OPPORTUNITY TO COMMENT THEREON. IN A LETTER DATED OCTOBER 22, KERVAN ADVISED MUCOM AND OUR OFFICE THAT IT HAD NEVER BEEN KERVAN'S INTENT TO PURCHASE THE RAW MATERIAL (ALUMINUM) FROM CONSOLIDATED; RATHER, KERVAN STATED, ITS BID HAD BEEN BASED ON A COMMITMENT FROM ONE OF THE OTHER DOMESTIC SOURCES FROM WHOM KERVAN HAD OBTAINED QUOTATIONS. ADDITION, KERVAN STATED THAT DURING THE PREAWARD SURVEY DISCUSSION OF THE SOURCES OF ITS MATERIALS KERVAN HAD INFORMED DCASD THAT KERVAN WOULD MOST LIKELY PURCHASE THE ALUMINUM FROM ONE OF SUCH SOURCES IN PREFERENCE TO CONSOLIDATED SINCE THEIR QUOTATIONS WERE LOWER THAN CONSOLIDATED'S QUOTATION, AND THAT KERVAN HAD ASSURED DCASD THAT KERVAN INTENDED TO ABIDE BY ALL GENERAL PROVISIONS OF THE CONTRACT AND WOULD INVESTIGATE AND CONFIRM THAT ALL OF ITS SUPPLIERS WOULD ALSO BE IN COMPLIANCE WITH ALL GOVERNMENT REQUIREMENTS BEFORE ANY POSITIVE COMMITMENTS ARE MADE BY KERVAN.

WITH ITS LETTER KERVAN SUPPLIED COPIES OF QUOTATIONS OBTAINED FROM CONSOLIDATED AND FROM THE OTHER TWO SOURCES DISCUSSED WITH DCASD DURING THE PREAWARD SURVEY. THE QUOTATION FROM CONSOLIDATED, WHICH IS HIGHEST IN PRICE, IS DATED AUGUST 25, 1971, AND CONFIRMS A VERBAL QUOTATION OF AUGUST 24. ONE OF THE OTHER QUOTATIONS IS DATED SEPTEMBER 21 AND CONFIRMS "CONVERSATIONS" BUT DOES NOT INDICATE THE DATE OF THE CONVERSATIONS. THE THIRD QUOTATION IS DATED SEPTEMBER 22. EACH OF THE SEPTEMBER QUOTATIONS INCLUDES STATEMENTS BY THE VENDOR TO THE EFFECT THAT THE MATERIAL FURNISHED WILL BE IN COMPLIANCE WITH THE BUY AMERICAN ACT PROVISIONS AND THAT THE VENDOR WILL PURCHASE ITS ALUMINUM UNDER THE GSA STOCKPILE PROGRAM.

REFERENCE TO A COPY OF KERVAN'S BID SHOWS THAT IN THE BUY AMERICAN CERTIFICATE ON PAGE 2 OF THE BID FORM, STANDARD FORM 33, KERVAN ENTERED IN THE BLOCK ENTITLED "EXCLUDED END PRODUCTS" THE WORD "NONE", THUS CERTIFYING THAT EACH END PRODUCT OFFERED IN ITS BID IS A DOMESTIC END PRODUCT AS DEFINED IN THE BUY AMERICAN ACT CLAUSE INCLUDED IN THE IFB; THAT IS, "(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 EXCEEDS 50 PERCENT OF THE COST OF ALL ITS COMPONENTS." THERE IS NOTHING IN KERVAN'S BID TO INDICATE THAT ANYTHING BUT DOMESTIC END PRODUCTS ARE OFFERED, AND NO EXCEPTIONS ARE STATED BY KERVAN TO ANY OF THE IFB PROVISIONS.

BASED ON THE EVIDENCE OF RECORD, MUCOM TAKES THE POSITION THAT THERE HAS BEEN NO VIOLATION OF EITHER THE BUY AMERICAN ACT OR THE ALUMINUM STOCKPILE PROVISIONS IN THE IFB. FURTHER, MUCOM STATES THAT IF AWARD IS MADE TO KERVAN, THE GOVERNMENT WILL GIVE SPECIAL CONTRACT ADMINISTRATION TO THESE TWO CONTRACT PROVISIONS TO ENSURE THAT NO VIOLATIONS DO OCCUR.

WHERE A BIDDER EXCLUDES NO END PRODUCTS FROM THE BUY AMERICAN CERTIFICATE IN ITS BID AND DOES NOT OTHERWISE INDICATE THAT IT IS OFFERING ANYTHING OTHER THAN DOMESTIC END PRODUCTS, THE ACCEPTANCE OF THE BID, IF OTHERWISE RESPONSIVE, WILL RESULT IN AN OBLIGATION ON THE PART OF THE BIDDER TO FURNISH DOMESTIC END PRODUCTS, AND COMPLIANCE WITH THAT OBLIGATION IS A MATTER OF CONTRACT ADMINISTRATION WHICH HAS NO EFFECT ON THE VALIDITY OF THE CONTRACT AWARD. B-170498, MARCH 30, 1971; B-150652, JULY 19, 1963.

FROM THE FOREGOING, IT IS APPARENT THAT THE BID SUBMITTED BY KERVAN TO MUCOM CONSTITUTES AN OFFER TO FURNISH DOMESTIC SOURCE END PRODUCTS AS DEFINED IN THE BUY AMERICAN ACT CLAUSE, AT THE PRICES INDICATED IN THE BID, AND WITHOUT EXCEPTION TO THE ALUMINUM STOCKPILE CLAUSE. ACCEPTANCE OF THE BID, THEREFORE, WOULD RESULT IN A CONTRACT OBLIGATING KERVAN TO FURNISH DOMESTIC SOURCE END PRODUCTS AND TO ASSURE COMPLIANCE OF ITS SUPPLIER OF ALUMINUM WITH THE STOCKPILE CLAUSE. WHETHER KERVAN PROCURES THE ALUMINUM FROM HIS ORIGINALLY CONTEMPLATED SOURCE OR FROM ANOTHER SOURCE CONTACTED AFTER BID OPENING HAS NO EFFECT ON THE OBLIGATIONS WHICH WOULD RESULT FROM ACCEPTANCE OF ITS BID, AND WE ARE THEREFORE UNABLE TO SEE WHERE SUCH CHANGE, IF ANY, IN KERVAN'S SUPPLIER OF ALUMINUM WOULD BE PREJUDICIAL TO OTHER BIDDERS. SHOULD IT DEVELOP AFTER AWARD, HOWEVER, THAT KERVAN IS PROCURING THE ALUMINUM FROM A SUPPLIER WHO IS NOT COMPLYING WITH THE STOCKPILE CLAUSE OR IS PROCURING ALUMINUM OF FOREIGN SOURCE, IT WILL BE INCUMBENT UPON MUCOM TO TAKE APPROPRIATE ACTION IN KEEPING WITH THE TERMS OF THE CONTRACT. MUCOM, HOWEVER, HAS STATED THAT IT WILL TAKE ACTION DURING THE ADMINISTRATION OF THE CONTRACT TO AVOID ANY SUCH VIOLATION.

IN THE CIRCUMSTANCES, IT IS OUR VIEW THAT KERVAN'S BID MAY PROPERLY BE CONSIDERED AS A RESPONSIVE DOMESTIC BID AND AS SUCH MAY BE CONSIDERED FOR AWARD. YOUR PROTEST IS THEREFORE DENIED.