B-147804, JAN. 10, 1962

B-147804, JAN. 10, 1962

TO MR. GRANT BLOODGOOD, DEPARTMENT OF THE INTERIOR:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 15, 1961, FILE 150,REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN WITH REGARD TO THE BID OF FISCHBACH AND MOORE, INCORPORATED, SUBMITTED IN RESPONSE TO INVITATION FOR BIDS NO. DC-5689.

THE INVITATION REQUESTED BIDS--- TO BE OPENED DECEMBER 5, 1961--- FOR WORK TO BE PERFORMED IN CONNECTION WITH THE GAS POINT ROAD-ELVERTA, ELVERTA-HEDGE AND HEDGE-TRACY, 230-KILOVOLT TRANSMISSION LINES, TRINITY RIVER DIVISION, CALIFORNIA, CENTRAL VALLEY PROJECT. THE WORK WAS DIVIDED INTO TWO SCHEDULES; SCHEDULE NO. 1 COVERED ITEMS NOS. 1 TO 40, INCLUSIVE, AND SCHEDULE NO. 2 COVERED ITEMS NOS. 41 TO 88, INCLUSIVE. FOUR BIDS WERE RECEIVED. THE BIDS RANGED IN TOTALS FROM AN APPARENT LOW BID OF $9,813,587--- AFTER CORRECTIONS BECAUSE OF ERROR IN EXTENSION AS TO ITEM NO. 24--- SUBMITTED BY FISCHBACH AND MOORE, INCORPORATED, TO A HIGH BID OF $11,528,990. THE GOVERNMENT ENGINEER'S ESTIMATE FOR THE WORK WAS $7,818,861.

THE BID OF FISCHBACH AND MOORE INITIALLY APPEARED TO BE THE SECOND LOW BID AS THE TOTAL FOR SCHEDULE NO. 1 WAS SHOWN AS $8,240,910 AND THE TOTAL FOR SCHEDULE NO. 2 WAS SHOWN AS $2,576,267. THE SUM OF THE AMOUNTS SET OUT FOR ITEMS NOS. 1 TO 40, INCLUSIVE, (SCHEDULE NO. 1) DID NOT AGREE WITH THE TOTAL OF $8,240,910. IT WAS NOTED THAT ITEM NO. 24 SHOWED A QUANTITY OF 14,337,000 POUNDS, A UNIT PRICE OF $0.08 PER POUND AND A TOTAL OF $1,120,000. THE EXTENDED AMOUNT WAS CORRECTED TO SHOW $1,146,960 AND THE TOTAL FOR SCHEDULE NO. 1 WAS CHANGED TO $7,237,320. FISCHBACH AND MOORE WAS CONSIDERED THE APPARENT LOW BIDDER WITH A TOTAL OF $9,813,587.

ON DECEMBER 6, 1961, FISCHBACH AND MOORE ADVISED YOU THAT IT HAD MADE AN ERROR IN THAT IT HAD USED THE SAME FIGURES FOR ITEM NO. 24 AS IT HAD FOR ITEM NO. 25. FOR THE LATTER ITEM SHOWING A QUANTITY OF 14,000,000 POUNDS A UNIT PRICE OF $0.08 WAS QUOTED AS A TOTAL OF $1,120,000. THE COMPANY HAS FURNISHED WORKSHEETS WHICH CONFIRM ITS CONTENTIONS THAT THE INTENDED BID PRICE FOR ITEM NO. 24 WAS $0.15 PER POUND OR A TOTAL OF $2,150,550. THIS LATTER AMOUNT, IF SUBSTITUTED FOR THE TOTAL OF $1,120,000, WILL RESULT IN A TOTAL OF $8,240,910 FOR SCHEDULE NO. 1 AS SHOWN IN THE BID. THE BID MAY BE CORRECTED ACCORDINGLY AND THIS BID ON SCHEDULES NOS. 1 AND 2, OR A TOTAL OF $10,817,177, NOW BECOMES THE SECOND LOW BID.

WITH REGARD TO THE LOW BID OF COMMONWEALTH ELECTRIC COMPANY AND A. S. SCHULMAN ELECTRIC COMPANY, A JOINT VENTURE, AND WHICH IS IN THE AMOUNT OF $10,611,016, IT IS NOTED THAT THE BIDDER OFFERS A CHOICE BETWEEN SOME DOMESTIC AND NONDOMESTIC MATERIALS. COMMONWEALTH SCHULMAN FILLED OUT A FORM ACCOMPANYING THE INVITATION BY STATING THAT FOR THE MATERIALS INVOLVED THE NONDOMESTIC COST DELIVERED TO THE JOB SITE WOULD BE $856,417.11 AND THE DOMESTIC COST FOR COMPARABLE MATERIALS DELIVERED TO THE JOB SITE WOULD BE $930,298.85. THE COMPARISON BETWEEN THESE TWO PRICES INDICATES THAT THE DOMESTIC COST IS MORE THAN 6 PERCENT GREATER THAN THE NONDOMESTIC COST. THIS COMPARISON IS MADE IN ACCORDANCE WITH THE BUY AMERICAN ACT, 41 U.S.C. 10, EXECUTIVE ORDER NO. 10582, AND INSTRUCTIONS AS STATED ON THE REVERSE SIDE OF FORM NO. 7-1532.

COMMONWEALTH-SCHULMAN'S BID SCHEDULE, WHICH IS ON THE BASIS OF FURNISHING DOMESTIC MATERIALS, INCLUDED ON PAGE A OF THE SCHEDULE THE FOLLOWING STIPULATIONS WITH REGARD TO THE REDUCTION TO BE ALLOWED THE GOVERNMENT IF FOREIGN MATERIALS WERE USED:

"IF NON-DOMESTIC INSULATORS AND INSULATOR HARDWARE ARE ACCEPTABLE AND APPROVED FOR USE UNDER SPECIFICATION DC-5689, DEDUCT FROM ALL INSULATOR ASSEMBLY ITEMS THE LUMP SUM OF $8,000.26. THIS LUMP SUM DEDUCTION TO BE APPLIED TO THE TOTAL LUMP SUM OF ALL INSULATOR ASSEMBLIES ON SCHEDULES NO. 1 AND NO. 2.

"IF NON-DOMESTIC DAMPERS COMPRESSION DEADENDS AND SLEEVES ARE ACCEPTABLE AND APPROVED FOR USE UNDER SPECIFICATION DC-5689, DEDUCT FROM ALL DAMPER UNITS THE LUMP SUM OF $14,000.00. THIS LUMP SUM DEDUCTION TO BE APPLIED TO THE TOTAL LUMP SUM OF ALL DAMPER ITEMS ON SCHEDULES NO. 1 AND NO. 2.'

IT HAS BEEN CONCLUDED BY YOU TO REJECT THE TERMS AND CONDITIONS UNDER WHICH COMMONWEALTH-SCHULMAN PROPOSES TO FURNISH FOREIGN GOODS AND TO AWARD THE CONTRACT ON THE BASIS OF USE OF DOMESTIC MATERIALS. YOU OFFER SEVERAL REASONS FOR YOUR CONCLUSION. FIRST, YOU STATE THAT THE DIFFERENCE BETWEEN THE COST TO BIDDER OF DOMESTIC AND NONDOMESTIC MATERIALS IS $930,298.85 MINUS $856,417.11 OR $73,881.74. HOWEVER, SINCE BIDDER OFFERS ONLY A REDUCTION OF $22,000.26 FOR USE OF NONDOMESTIC MATERIALS, THE RESULT WOULD BE THAT SAVINGS TO THE GOVERNMENT WOULD BE LESS THAN THE REQUIRED 6 PERCENT DIFFERENTIAL ($51,385.03) BETWEEN THE PRICE OF FOREIGN AND DOMESTIC MATERIALS. SECONDLY, YOU FEEL THAT IT IS CONTRARY TO THE PRINCIPLE OF COMPETITIVE BIDDING TO PERMIT THE BIDDER TO USE FOREIGN MATERIALS WITHOUT PASSING THE RESULTING SAVINGS TO THE GOVERNMENT. THIS WERE POSSIBLE A BIDDER WOULD BE ENABLED TO SUBMIT A DOMESTIC BID AT A COMPARATIVELY LOW FIGURE IN ORDER TO HAVE SOME ASSURANCE OF A LOW BID. THEN, BY THE DEVICE OF SUBMITTING A BID OFFERING FOREIGN MATERIALS AT ONLY A NOMINAL REDUCTION, THERE MIGHT BE ENOUGH DIFFERENTIAL BETWEEN THE PARTICULAR BIDDER'S BID AND THE NEXT LOW BID OF ANOTHER BIDDER TO PERMIT AWARD ON THE BASIS OF FOREIGN MATERIALS AND HE COULD THUS RECOUP A PART OF THE DIFFERENTIAL. THIRDLY, YOU FEEL THAT THE LANGUAGE USED, NAMELY,"IF NON-DOMESTIC INSULATORS AND INSULATOR HARDWARE ARE ACCEPTABLE AND APPROVED FOR USE," DOES NOT MAKE CLEAR THAT THE BIDDER GUARANTEES THAT THE FOREIGN MATERIALS MEET THE REQUIREMENTS OF THE SPECIFICATIONS.

WITHOUT PASSING ON THE MERITS OF THE SECOND AND THIRD REASONS ASSIGNED FOR THE PROPOSED AWARD TO COMMONWEALTH-SCHULMAN, THE FACT THAT THE BIDDER PROPOSES TO ALLOW ONLY A REDUCTION OF $22,000.26 FROM THE AMOUNT OF $930,298.85 INCLUDED IN THE BID FOR DOMESTIC MATERIALS, IN THE EVENT THE USE OF FOREIGN MATERIALS IS PERMITTED, IS SUFFICIENT REASON FOR MAKING THE AWARD ON THIS BASIS SINCE THE SAVINGS TO THE GOVERNMENT WOULD BE LESS THAN THE REQUIRED 6 PERCENT DIFFERENTIAL.

ACCORDINGLY, WE FIND NO LEGAL OBJECTION TO THE PROPOSED AWARD.