Court Upholds HUD Reverse Auction

In MTB Group, Inc, v, United States, No. 05-375C, June 7, 2005, the U.S. Court of Federal Claims refused to enjoin HUD's reverse auctioning program used to receive bids on property inspections. The court's opnion discusses the release of pricing information and offers some insight as to how reverse auctions may be properly conducted. For example, HUD's program showed only the bid per lot and not by individual property. The program also did not disclose the identity of the bidders.
The court concluded:

Ultimately, plaintiff has not shown that HUD’s reverse auction procedure violates statute or an applicable procurement regulation, nor that HUD acted unreasonably in adopting it. While plaintiff disfavors the reverse auction procedure, plaintiff does not prevail on the merits of the case. Plaintiff’s argument is based on the assumption that competitors will be able to infer protected information from their competition. Such an inference is not sustainable.

Buy American Act Protest

In City Chemicals LLC, B-296135.2; B-296230.2, June 17, 2005. GAO provides an excellent analysis of price differential when applying the Buy American Act to maunfactures goods composed of domestic nd non domestic components.

Agency properly evaluated dye that protester proposed to furnish as a foreign end product where imported "raw" dye accounted for more than 50 percent of the cost of all components making up the dye.

In its decision GAO provides the following analysis:

The Buy American Act, 41 U.S.C. Section 10a-10d (2000 and Supp. I 2001), provides for the acquisition of American materials and goods for public use, except to the extent that it is inconsistent with the public interest or the cost is unreasonable. If there is a domestic offer that is not the low offer, and the restrictions of the Buy American Act apply to the low offer, the contracting officer must determine the reasonableness of the cost of the domestic offer by adding an evaluation factor (of either 6 or 12 percent for civilian agency procurements, Federal Acquisition Regulation (FAR) Section 25.105(a), or 50 percent for Department of Defense procurements, DFARS Section 225.105) to the low offer. The price of the domestic offer is reasonable if it does not exceed the evaluated price of the low offer after addition of the evaluation factor. FAR Section 25.105(c).

For manufactured end products, the FAR uses a two-part test to define a domestic end product: (1) the article must be manufactured in the United States, and (2) the cost of domestic components ( i.e. , components mined, produced, or manufactured in the U.S.) must exceed 50 percent of the cost of all components. FAR Sections 25.003 and 25.101; see also DFARS Section 225.101. The FAR defines "component" as an article, material, or supply incorporated directly into an end product. FAR Section 25.003.

[paragraph omitted]

In cases involving an end product derived from a single component or material, we have looked to whether the component/material has undergone substantial changes in physical character in determining whether manufacturing has occurred. A. Hirsh, Inc. , B-237466, Feb. 28, 1990, 90-1 CPD paragraph 247 at 3; 45 Comp. Gen. 658 (1966). See also General Kinetics, Inc., Cryptek Div. , B-242052.2, May 7, 1991, 91-1 CPD paragraph 445 (where we looked at whether the "essential nature" of the core component of the end product was altered in determining whether manufacturing had occurred). Further, since the BAA requires both that the end product have been manufactured in the U.S. and that the cost of components mined, produced, or manufactured in the U.S. exceed 50 percent of the cost of all components, where it is alleged that a foreign material has been manufactured into a component domestically and the component in turn manufactured into an end item domestically, we have also looked at whether the manufacturing process consists of two distinct phases, the first yielding a component that is distinguishable from the original material and the second yielding an end item that is distinguishable from the component. Davis Walker Corp. , B-184672, Aug. 23, 1976, 76-2 CPD paragraph 182 at 4-6; 45 Comp. Gen. 658. Where the original material is of foreign origin and we have failed to find two distinct manufacturing phases yielding two distinct products, we have found noncompliance with the two-pronged test for defining a domestic end product. 48 Comp. Gen. 727 (1969); 46 Comp. Gen. 784 (1967).

Interesting GAO cases

Late is still late. In Kesser International, B-296294 June 30, 2005, the GAO concluded that a bid received four minutes after bid opening was late despite the fact that the FEDEX driver was delayed at the security checkpoint for 20 minutes.

Agency properly rejected proposal as late where it was received minutes after closing time; 20 minute delay at a security checkpoint did not constitute improper government action and, in any case, was not paramount cause of late receipt, since delay took place 2 hours before closing time, leaving courier sufficient time to deliver proposal.

The government always has the chance to do it right. In Johnson Controls World Services, Inc., B-295529.2; B-295529.3, June 27, 2005, GAO dismissed the protest as academic where the government withdrew its certification of the MEO in an A-76 cost comparison study.

In the context of a cost comparison study of base operation services conducted pursuant to Office of Management and Budget Circular A-76, a decision by the agency's Independent Review Official to withdraw its certification that the agency's plan for performing the services includes all of the required costs associated with in-house performance renders academic a protest alleging that the agency's cost estimate for performing the work in-house failed to include all required costs.

If you are going to have multiple rounds of discussions you better have them with everyone. The GAO sustained a protest in Front Line Apparel Group, B-295989, June 1, 2005, where the government did not do that.

Protest is sustained where record shows that agency improperly engaged in a second round of discussions with awardees, but not protester; while there is nothing inherently improper in an agency's conducting additional discussions relating to previously-discussed issues with only one or a limited number of offerors where the agency has remaining concerns relating to those issues, where agency conducts multiple rounds of discussions relating to the same issues with one offeror, it must afford other similarly-situated offerors the same benefit of additional discussions.