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YOU CALL TO OUR ATTENTION THE FACT THAT THE NEXT LOWEST BIDDER ON THE NON -SET-ASIDE PORTION OF THE PROCUREMENT WAS A LABOR SURPLUS AREA CONCERN. IT IS YOUR VIEW THAT SUCH A SITUATION IS FULLY COVERED BY SECTION 3 (C) OF EXECUTIVE ORDER NO. 10582. AS DETERMINED BY THE SECRETARY OF LABOR IN ACCORDANCE WITH SUCH APPROPRIATE REGULATIONS AS HE MAY ESTABLISH AND DURING SUCH PERIOD AS THE PRESIDENT MAY DETERMINE THAT IT IS IN THE NATIONAL INTEREST TO PROVIDE TO SUCH AREAS PREFERENCE IN THE AWARD OF GOVERNMENT CONTRACTS: "PROVIDED. THAT NOTHING IN THAT SECTION SHALL PREVENT THE REJECTION OF A BID OR OFFERED PRICE WHICH IS EXCESSIVE. OR" IT IS YOUR OPINION THAT THE AWARD SHOULD HAVE BEEN MADE TO THE LOWEST DOMESTIC BIDDER LOCATED IN A LABOR SURPLUS AREA AND THAT THE SET-ASIDE PORTION OF THE INVITATION SHOULD HAVE BEEN NEGOTIATED AT THAT LOWEST PRICE.

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B-150183, APR. 17, 1963

TO BAKER, HOSTETLER AND PATTERSON:

YOUR LETTER OF FEBRUARY 25, 1963, REQUESTS REVIEW OF OUR DECISION OF JANUARY 22, 1963, WHEREIN WE DENIED THE PROTEST OF EVANS REAMER AND MACHINE COMPANY AGAINST THE AWARD OF A CONTRACT TO A FOREIGN SOURCE OF SUPPLY--- CANADIAN COMMERCIAL CORPORATION (INTERNATIONAL BUSINESS MACHINES COMPANY LIMITED/--- UNDER INVITATION FOR BIDS NO. AMC-11-173 63-5, ISSUED ON SEPTEMBER 21, 1962, BY THE AMMUNITION PROCUREMENT AND SUPPLY AGENCY, DEPARTMENT OF THE ARMY, FOR A SUPPLY OF LAND MINES.

YOU CALL TO OUR ATTENTION THE FACT THAT THE NEXT LOWEST BIDDER ON THE NON -SET-ASIDE PORTION OF THE PROCUREMENT WAS A LABOR SURPLUS AREA CONCERN. IT IS YOUR VIEW THAT SUCH A SITUATION IS FULLY COVERED BY SECTION 3 (C) OF EXECUTIVE ORDER NO. 10582, IMPLEMENTING THE PROVISIONS OF THE BUY AMERICAN ACT, 41 U.S.C. 10A-10D, WHICH READS AS FOLLOWS:

"SEC. 3. NOTHING IN THIS ORDER SHALL AFFECT THE AUTHORITY OR RESPONSIBILITY OF AN EXECUTIVE AGENCY:

"/C) TO REJECT A BID OR OFFER TO FURNISH MATERIALS OF FOREIGN ORIGIN IN ANY SITUATION IN WHICH THE DOMESTIC SUPPLIER OFFERING THE LOWEST PRICE FOR FURNISHING THE DESIRED MATERIALS UNDERTAKES TO PRODUCE SUBSTANTIALLY ALL OF SUCH MATERIALS IN AREAS OF SUBSTANTIAL UNEMPLOYMENT, AS DETERMINED BY THE SECRETARY OF LABOR IN ACCORDANCE WITH SUCH APPROPRIATE REGULATIONS AS HE MAY ESTABLISH AND DURING SUCH PERIOD AS THE PRESIDENT MAY DETERMINE THAT IT IS IN THE NATIONAL INTEREST TO PROVIDE TO SUCH AREAS PREFERENCE IN THE AWARD OF GOVERNMENT CONTRACTS:

"PROVIDED, THAT NOTHING IN THAT SECTION SHALL PREVENT THE REJECTION OF A BID OR OFFERED PRICE WHICH IS EXCESSIVE; OR"

IT IS YOUR OPINION THAT THE AWARD SHOULD HAVE BEEN MADE TO THE LOWEST DOMESTIC BIDDER LOCATED IN A LABOR SURPLUS AREA AND THAT THE SET-ASIDE PORTION OF THE INVITATION SHOULD HAVE BEEN NEGOTIATED AT THAT LOWEST PRICE. THIS CONCLUSION IS BASED ON THE BELIEF THAT, UNDER THE EXECUTIVE ORDER AND THE LABOR SURPLUS AREA REGULATIONS, IT APPEARS CLEAR THAT AS BETWEEN A CANADIAN BIDDER AND A DOMESTIC LABOR SURPLUS AREA BIDDER, OVERRIDING NATIONAL INTEREST HAS BEEN EXPRESSED IN FAVOR OF THE DEPRESSED AREA BIDDER.

IT IS CLEAR THAT THE PREFERENCE AUTHORIZED IN THE CASE OF DOMESTIC LOW BIDDERS OFFERING TO PERFORM IN AREAS OF SUBSTANTIAL UNEMPLOYMENT MAY BE EXTENDED ONLY WHERE THE RESTRICTIONS OF THE BUY AMERICAN ACT ARE OTHERWISE FOR APPLICATION. HOWEVER, WITH RESPECT TO PURCHASES FROM CANADA, THE SECRETARIES OF THE MILITARY DEPARTMENTS HAVE DETERMINED, PURSUANT TO 41 U.S.C. 10A, THAT IT WOULD BE INCONSISTENT WITH THE PUBLIC INTEREST TO APPLY THE BUY AMERICAN ACT RESTRICTIONS TO CANADIAN PURCHASES. SEE ASPR 6 -103.5. ALSO, ASPR 6-103.5 (C) (2) PROVIDES THAT LISTED CANADIAN END PRODUCTS--- LAND MINES IN THIS CASE- - ARE TO BE TREATED AS DOMESTIC END PRODUCTS AND THAT NO BUY AMERICAN ACT EVALUATION FACTORS SHALL BE APPLIED. THAT CANADIAN END PRODUCTS ARE TO BE CONSIDERED ON A PARITY WITH DOMESTIC END PRODUCTS IS FURTHER EVIDENCED BY THE GOVERNMENT AGREEMENT WITH THE DEPARTMENT OF DEFENSE PRODUCTION (CANADA) QUOTED IN ASPR 6-503 (C). ALSO INDICATIVE THAT NO PREFERENCE IS ACCORDED A LOW DOMESTIC BIDDER LOCATED IN A LABOR SURPLUS AREA OVER A CANADIAN BIDDER WHO HAS SUBMITTED A LOWER BID IS THE PROVISION IN PARAGRAPH 6-104.4 (C) (1) WHICH EXCEPTS FROM LABOR SURPLUS AREA PREFERENCE LOW FOREIGN BIDS OFFERING CANADIAN END PRODUCTS.

SINCE IT IS CLEARLY THE INTENT OF THE ASPR--- WHICH HAS THE FORCE OF LAW (PAUL V. UNITED STATES, DECIDED BY THE SUPREME COURT ON JANUARY 14, 1963, 9 L.ED.2D 292/--- TO EXCLUDE ALL CANADIAN PURCHASES FROM APPLICATION OF THE BUY AMERICAN ACT AND THE EXECUTIVE ORDER RESTRICTIONS, WE MUST CONCLUDE THAT THE AWARD MADE TO THE CANADIAN COMMERCIAL CORPORATION (INTERNATIONAL BUSINESS MACHINES COMPANY LIMITED) NOT ONLY WAS PROPER BUT REQUIRED UNDER THE MILITARY COMPETITIVE PROCUREMENT STATUTE CODIFIED AT 10 U.S.C. 2305.

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