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WILL BE MORE THAN 50 PERCENT OF TOTAL COST OF COMPONENTS. PRODUCT OFFERED WAS PROPERLY DETERMINED TO BE A DOMESTIC SOURCE END PRODUCT AS DEFINED IN BUY AMERICAN ACT CLAUSE. THE PROTEST WAS DENIED BY LETTER DATED JUNE 26. WHICH WAS DISTRIBUTED TO 14 SOURCES. INCLUDED IN THE IFB FOR EXECUTION BY BIDDERS WAS A BUY AMERICAN CERTIFICATE REQUIRING IDENTIFICATION OF END PRODUCTS OF OTHER THAN DOMESTIC SOURCE. WERE INCORPORATED BY REFERENCE IN THE IFB. WHICH ARE DIRECTLY INCORPORATED IN THE END PRODUCTS. WHICH ARE TO BE ACQUIRED UNDER THIS CONTRACT FOR PUBLIC USE. (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.

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B-167572, SEP. 23, 1969

BID PROTEST - BUY AMERICAN ACT DECISION TO WALTHAM PRECISION INSTRUMENTS DENYING PROTEST AGAINST AWARD TO WAKMANN WATCH COMPANY, INC., FOR FURNISHING AIRCRAFT CLOCKS TO FRANKFORD ARSENAL. WHERE PRIOR TO AWARD SUCCESSFUL BIDDER SUBMITTED EVIDENCE ESTABLISHING THAT THE COST OF DOMESTIC COMPONENTS INCLUDING JEWEL BEARINGS FROM GOVERNMENT JEWEL BEARING PLANT AT ROLLA, NORTH DAKOTA, WILL BE MORE THAN 50 PERCENT OF TOTAL COST OF COMPONENTS, PRODUCT OFFERED WAS PROPERLY DETERMINED TO BE A DOMESTIC SOURCE END PRODUCT AS DEFINED IN BUY AMERICAN ACT CLAUSE.

TO WALTHAM PRECISION INSTRUMENTS:

WE REFER TO YOUR PROTEST, BY LETTER DATED APRIL 7, 1969, ADDRESSED TO FRANKFORD ARSENAL, PHILADELPHIA, PENNSYLVANIA, AGAINST AN AWARD TO WAKMANN WATCH COMPANY, INC. (WAKMANN), OF A CONTRACT FOR THE FURNISHING OF A13A-2 AIRCRAFT CLOCKS UNDER INVITATION FOR BIDS (IFB) DAAA25-69-B 0417, DATED MARCH 3, 1969. THE PROTEST WAS DENIED BY LETTER DATED JUNE 26, 1969, FROM THE CONTRACTING OFFICER, AND OUR REVIEW OF THE MATTER HAS BEEN UNDERTAKEN AT THE REQUEST OF A MEMBER OF CONGRESS.

THE IFB, WHICH WAS DISTRIBUTED TO 14 SOURCES, COVERED THE ARSENAL'S REQUIREMENTS FOR THE CLOCKS, UP TO A MAXIMUM OF 3,000 UNITS, AS MAY BE ORDERED WITHIN A 365-DAY PERIOD, WITH AN INITIAL ORDER OF 259 UNITS TO BE FILLED WITHIN FOUR MONTHS AFTER AWARD. INCLUDED IN THE IFB FOR EXECUTION BY BIDDERS WAS A BUY AMERICAN CERTIFICATE REQUIRING IDENTIFICATION OF END PRODUCTS OF OTHER THAN DOMESTIC SOURCE. IN ADDITION, THE BUY AMERICAN ACT CLAUSE SET FORTH IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 6-104.5 AND THE CLAUSE PRESCRIBED BY ASPR 1-315 (E) REQUIRING USE OF JEWEL BEARINGS PROCURED FROM THE WILLIAM LANGER JEWEL BEARING PLANT, ROLLA, NORTH DAKOTA, WERE INCORPORATED BY REFERENCE IN THE IFB.

THE CLAUSES READ AS FOLLOWS:

"BUY AMERICAN ACT (MAY 1964)

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

(I) -COMPONENTS' MEANS THOSE ARTICLES, MATERIALS, AND SUPPLIES, WHICH ARE DIRECTLY INCORPORATED IN THE END PRODUCTS;

(II) -END PRODUCTS' MEANS THOSE ARTICLES, MATERIALS, AND SUPPLIES, WHICH ARE TO BE ACQUIRED UNDER THIS CONTRACT FOR PUBLIC USE; AND

(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:

(I) WHICH ARE FOR USE OUTSIDE THE UNITED STATES;

(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; OR

(IV) AS TO WHICH THE SECRETARY DETERMINES THE COST TO THE GOVERNMENT TO BE UNREASONABLE. (THE FOREGOING REQUIREMENTS ARE ADMINISTERED IN ACCORDANCE WITH EXECUTIVE ORDER NO. 10582, DATED DECEMBER 17, 1954. SO AS TO ALLEVIAGE THE IMPACT OF DEPARTMENT OF DEFENSE EXPENDITURES ON THE UNITED STATES BALANCE OF INTERNATIONAL PAYMENTS, BIDS OFFERING DOMESTIC SOURCE END PRODUCTS NORMALLY WILL BE EVALUATED AGAINST BIDS OFFERING OTHER END PRODUCTS BY ADDING A FACTOR OF FIFTY PERCENT (50 PERCENT) TO THE LATTER, EXCLUSIVE OF IMPORT DUTIES. DETAILS OF THE EVALUATION PROCEDURE ARE SET FORTH IN SECTION VI OF THE ARMED SERVICES PROCUREMENT REGULATION.)" "REQUIRED SOURCES FOR JEWEL BEARINGS (1967 APR)

JEWEL BEARINGS REQUIRED IN THE PERFORMANCE OF THIS CONTRACT SHALL BE PROCURED FROM THE WILLIAM LANGER JEWEL BEARING PLANT, ROLLA, NORTH DAKOTA, AT PRICES ESTABLISHED IN THE OFFICIAL U.S. GOVERNMENT JEWEL BEARING PRICE LIST DATED (INSERT LATEST EFFECTIVE DATE). THE CONTRACTOR AGREES THAT THE DELIVERY DATES SPECIFIED FOR THE QUANTITIES AND TYPES OF JEWEL BEARINGS SO ORDERED WILL BE REASONABLY RELATED TO MANUFACTURING SCHEDULES AND DELIVERY REQUIREMENTS OF THIS CONTRACT. THE CONTRACTOR AGREES TO NOTIFY THE CONTRACTING OFFICER PROMPTLY OF THE REJECTION OF HIS (OR ANY SUBCONTRACTOR) PURCHASE ORDER IN WHOLE OR IN PART BY THE WILLIAM LANGER JEWEL BEARING PLANT AND FURTHER AGREES TO AN EQUITABLE ADJUSTMENT IN THE CONTRACT PRICE PURSUANT TO THE -CHANGES' CLAUSE OF THIS CONTRACT TO REFLECT ANY COSTS OR SAVINGS TO THE CONTRACTOR (OR SUBCONTRACTOR) RESULTING FROM SUCH REJECTION. THE CONTRACTOR FURTHER AGREES TO INCORPORATE OR TO HAVE HIS SUBCONTRACTORS INCORPORATE THE PURCHASED WILLIAM LANGER JEWEL BEARING PLANT JEWEL BEARINGS IN THE ITEMS TO BE DELIVERED UNDER THIS CONTRACT: THE REQUIREMENT FOR USE (BUT NOT THE REQUIREMENT FOR PURCHASE) OF SUCH BEARINGS MAY BE WAIVED IN THE DISCRETION OF THE CONTRACTING OFFICER WHEN SUCH WAIVER IS DETERMINED BY HIM TO BE IN THE GOVERNMENT'S INTEREST, AND WHERE AGREEMENT IS REACHED FOR AN EQUITABLE ADJUSTMENT IN THE CONTRACT PRICE BY REASON OF SUCH WAIVER.

"WHERE LESS THAN TOTAL PURCHASE AND USAGE OF WILLIAM LANGER JEWEL BEARING PLANT BEARINGS IS TO BE REQUIRED, SUBSTITUTE -THE CONTRACTOR FURTHER AGREES TO PURCHASE AND INCORPORATE WILLIAM LANGER JEWEL BEARING PLANT BEARINGS IN ITEMS TO BE DELIVERED UNDER THIS CONTRACT EQUIVALENT TO AT LEAST -- PERCENT OF THE TOTAL QUANTITY OF BEARINGS REQUIRED TO PERFORM THIS CONTRACT.- (PERCENTAGE TO BE INSERTED BY CONTRACTING OFFICER.) LIEU OF A PERCENTAGE, THE CLAUSE MAY REFER TO SPECIFIC QUANTITIES OF ITEMS LISTED IN THE SCHEDULE FOR WHICH WILLIAM LANGER JEWEL BEARING PLANT BEARINGS MUST BE PURCHASED AND USED.'

ON APRIL 3, BIDS WERE OPENED AS SCHEDULED. WAKMANN, WHO OFFERED A DISCOUNT OF 1/2 PERCENT 10 DAYS, OR 1/4 PERCENT 20 DAYS, WAS LOW WITH UNIT PRICES OF $89.95 INCLUDING FIRST ARTICLE TESTS AND $88.95 EXCLUDING FIRST ARTICLE TESTS. YOU WERE THE ONLY OTHER BIDDER, AND YOUR UNIT PRICES WERE $89.90 INCLUDING FIRST ARTICLE TESTS AND $89.80 EXCLUDING FIRST ARTICLE TESTS. IN ITS BUY AMERICAN CERTIFICATE WAKMANN INDICATED THAT THE BASIC RAW MOVEMENT FOR THE CLOCK WOULD BE OF SWISS ORIGIN, BUT THAT 51 PERCENT OR MORE OF THE END ITEM WOULD BE DOMESTICALLY MADE. YOUR BID INDICATED ONLY THAT YOU WERE OFFERING END PRODUCTS OF DOMESTIC ORIGIN.

IN YOUR PROTEST, WHICH THE PROCURING ACTIVITY RECEIVED ON APRIL 9, YOU ASSERTED THAT WAKMANN WAS OFFERING COMPONENTS OF 100 PERCENT FOREIGN MANUFACTURE AND COULD NOT THEREFORE HAVE ITS CLOCK CLASSIFIED AS A DOMESTIC END PRODUCT. YOU STATED THAT EVEN IF WAKMANN ELECTED TO ASSEMBLE THE CLOCK IN THE UNITED STATES THE COST OF THE COMPONENTS OF DOMESTIC ORIGIN COULD NEVER EXCEED 50 PERCENT OF THE TOTAL COMPONENT COST SINCE THE MOVEMENT, WHICH IS THE MAJOR COMPONENT OF THE CLOCK COSTWISE, IS OF SWISS ORIGIN AND MUST USE SWISS JEWELS DUE TO THE REFUSAL OF THE SWISS WATCH CARTEL TO PERMIT EXPORT OF WATCH OR CLOCK PARTS FOR ASSEMBLY IN THE UNITED STATES OR ITS POSSESSIONS. ON THE BASIS, THEREFORE, THAT WAKMANN OFFERED A FOREIGN ITEM AND THAT ITS BID AS SO EVALUATED WOULD EXCEED YOUR BID, WHICH YOU STATED OFFERED A DOMESTIC END PRODUCT WITH JEWEL BEARINGS FROM THE LANGER PLANT, YOU URGED THAT AWARD SHOULD BE MADE TO YOU.

BY LETTER OF JUNE 9 WAKMANN'S ATTORNEYS FILED A PROTEST WITH THE CONTRACTING OFFICER AGAINST AWARD TO ANY OTHER BIDDER WITHOUT A FULL INVESTIGATION.

THE CONTRACTING OFFICER'S LETTER OF JUNE 26, 1969, TO YOU READS AS FOLLOWS: "REFERENCE IS MADE TO YOUR LETTER DATED 7 APRIL 1969 PROTESTING THE AWARD OF CONTRACT TO WAKMANN WATCH COMPANY, INC. UNDER IFB DAAA25-69- B0417 FOR A-13A AIRCRAFT CLOCKS. YOU HAVE ADVISED THAT WAKMANN CANNOT FURNISH A DOMESTIC PRODUCT NOR CAN IT USE LANGER JEWEL BEARINGS IN THE MOVEMENT WHICH WILL BE INCORPORATED INTO THESE CLOCKS. YOUR LETTER ADDRESSED FOR THE ATTENTION OF MR. FRANK FARIS HAS BEEN GIVEN TO ME AS CONTRACTING OFFICER FOR REPLY.'WE HAVE CONDUCTED AN EXACTING PRE-AWARD SURVEY WITH RESPECT TO THE WAKMANN BID. AMONG OTHER THINGS, WE HAVE VERIFIED THAT ITS CLOCK WILL USE VARIOUS DOMESTIC COMPONENTS, THE COST OF WHICH WILL EXCEED 50 PERCENT OF THE COST OF ALL COMPONENTS. FURTHERMORE, WE HAVE BEEN ADVISED DIRECTLY BY THE SWISS MANUFACTURER OF THE MOVEMENT FOR THE CLOCK THAT IT WILL USE LANGER JEWEL BEARINGS IN THE MOVEMENTS SOLD TO WAKMANN.'UNDER THESE CIRCUMSTANCES, AN AWARD TO WAKMANN WATCH CO., INC., AS THE LOW RESPONSIVE AND RESPONSIBLE BIDDER WHO WILL FURNISH A DOMESTIC PRODUCT AND USE LANGER JEWEL BEARINGS IS APPROPRIATE. IT IS ALSO OUR INTENTION TO CAREFULLY ADMINISTER THIS CONTRACT TO SEE THAT THE CLOCKS DELIVERED WILL CONFORM TO THESE REQUIREMENTS.'

THE RECORD FORWARDED TO OUR OFFICE BY THE DEPARTMENT OF THE ARMY DISCLOSES THAT ON APRIL 4, ONE DAY AFTER THE OPENING OF THE BIDS, THE PROCURING ACTIVITY REQUESTED THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGION (DCASR), NEW YORK, TO PERFORM A PREAWARD SURVEY OF WAKMANN. THE DCASR REPORT, DATED APRIL 24, WHICH WAS FAVORABLE, REFLECTED A SATISFACTORY PAST PERFORMANCE BY WAKMANN UNDER OTHER GOVERNMENT CONTRACTS FOR THE IDENTICAL CLOCKS; STATED THAT THE JEWEL BEARINGS WOULD BE PROCURED FROM THE LANGER PLANT AND FORWARDED TO THE SWISS VENDOR FOR INSTALLATION IN THE CLOCK MOVEMENTS; AND INDICATED THAT THE MOVEMENTS WOULD BE ASSEMBLED IN THE UNITED STATES WITH OTHER COMPONENTS OF DOMESTIC SOURCE COMPRISING OVER 50 PERCENT OF THE TOTAL COST OF ALL COMPONENTS.

THE CONTRACTING OFFICER EVALUATED THE COMPONENT COST FIGURES SUPPLIED BY DCASR, TOGETHER WITH IMPORT DUTIES AND TRANSPORTATION COSTS, AS INDICATING THAT THE COST OF THE FOREIGN COMPONENTS WAS GREATER THAN 50 PERCENT OF WAKMANN'S TOTAL COMPONENT COST THEREBY REQUIRING THAT WAKMANN'S BID BE CONSIDERED AS OFFERING A FOREIGN END ITEM. WAKMANN WAS SO ADVISED BY LETTER OF JUNE 4 AND WAS AFFORDED A PERIOD OF FIVE DAYS AFTER RECEIPT OF THE LETTER IN WHICH TO FURNISH ANY ADDITIONAL PERTINENT INFORMATION.

IN A LETTER DATED JUNE 10 WAKMANN FURNISHED A BREAKDOWN OF ITS COSTS SHOWING MISTAKE BY DCASR IN LISTING THE COST OF ONE FOREIGN COMPONENT, AND IN LISTING ONE COMPONENT OF DOMESTIC ORIGIN AS A FOREIGN COMPONENT. WAKMANN ALSO ADDED TWO ITEMS (OMITTED ENTIRELY BY DCASR) TO THE LIST OF DOMESTIC COMPONENTS, AND FURNISHED SUBSTANTIATION FOR THE ADDITIONAL ITEMS AND THE MISTAKES CLAIMED TO HAVE BEEN MADE IN THE GOVERNMENT'S COMPUTATION. THE FIGURES SUPPLIED BY WAKMANN, WHICH ARE SUBSTANTIATED BY SUBCONTRACTOR QUOTATIONS, SHOW THAT THE COST OF THE DOMESTIC COMPONENTS WILL BE $32.34, WHILE THE COST OF FOREIGN COMPONENTS, INCLUDING TRANSPORTATION COSTS AND IMPORT DUTY, WILL BE $29.88. OTHER THAN THE FACT THAT A CHARGE OF $1.92 BY A DOMESTIC SUBCONTRACTOR FOR PAINTING THE CLOCK HANDS (WHICH ARE TO BE PURCHASED FROM A FOREIGN MANUFACTURER) WOULD NOT APPEAR TO BE PROPERLY ALLOCATED AS THE COST OF A DOMESTIC COMPONENT, WE FIND NO REASON TO DISAGREE WITH THE COST BREAKDOWN. HOWEVER, DEDUCTION OF $1.92 WOULD RESULT IN A TOTAL DOMESTIC COST OF $30.42, WHICH WOULD STILL BE GREATER THAN THE COST OF THE FOREIGN COMPONENTS.

ON JUNE 19 THE PROCURING ACTIVITY WAS ADVISED BY THE SWISS SUPPLIER OF THE CLOCK MOVEMENTS THAT THE SUPPLIER WOULD INCORPORATE IN THE CLOCK MOVEMENTS THE DOMESTIC JEWEL BEARINGS MADE AVAILABLE TO IT. ON JUNE 25 THE CONTRACTING OFFICER ISSUED A DETERMINATION THAT WAKMANN WAS A RESPONSIBLE PROSPECTIVE CONTRACTOR WITHIN THE MEANING OF ASPR 1-902.

ON JUNE 26 WAKMANN WAS NOTIFIED OF THE ACCEPTANCE OF ITS BID ON THE BASIS THAT WAKMANN WAS IN FACT OFFERING TO SUPPLY A DOMESTIC PRODUCT. WAKMANN WAS ALSO NOTIFIED, HOWEVER, THAT THE PROCURING ACTIVITY WOULD MAINTAIN CONTINUED SURVEILLANCE OF THE CONTRACT TO ASSURE COMPLIANCE WITH ALL OF THE CONTRACT OBLIGATIONS, PARTICULARLY THE SUPPLY OF A DOMESTIC PRODUCT USING DOMESTIC JEWEL BEARINGS, AND OBSERVANCE OF THE DELIVERY SCHEDULES.

THE FOREGOING INDICATES THAT PRIOR TO AWARD WAKMANN SUBMITTED EVIDENCE ESTABLISHING THAT THE COST OF THE DOMESTIC COMPONENTS, INCLUDING JEWEL BEARINGS FROM THE LANGER PLANT, TO BE INCORPORATED IN THE WAKMANN CLOCK IN THE UNITED STATES, WILL BE MORE THAN 50 PERCENT OF THE TOTAL COST OF ALL COMPONENTS OF THE CLOCK. ACCORDINGLY, WE ARE UNABLE TO CONCLUDE THAT THE WAKMANN CLOCK WAS NOT PROPERLY DETERMINED TO BE A DOMESTIC SOURCE END PRODUCT AS DEFINED IN THE BUY AMERICAN ACT CLAUSE. FURTHER, AS AN OFFER OF A DOMESTIC SOURCE END PRODUCT, WAKMANN'S BID, BY THE CLEAR LANGUAGE OF THE PARENTHETICAL PORTION OF THE CLAUSE, WAS NOT SUBJECT TO THE ADDITION OF THE 50-PERCENT BALANCE OF PAYMENTS FACTOR WHICH IS APPLIED IN THE EVALUATION OF BIDS OFFERING OTHER THAN DOMESTIC SOURCE END PRODUCTS.

IN THE CIRCUMSTANCES, IT IS OUR VIEW THAT THE RECORD DOES NOT SUPPORT THE VIEW THAT THE AWARD TO WAKMANN VIOLATES THE ASPR PROVISIONS PROMULGATED IN IMPLEMENTATION OF THE BUY AMERICAN ACT RESTRICTIONS INCLUDED IN THE CLAUSE INCORPORATED IN THE IFB. ACCORDINGLY, YOUR PROTEST IS DENIED.

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