In re Brown Boveri Corp., B-187252

• Decision Date: 10 May 1977
• Docket Number: B-187252
• Citation: 56 Comp.Gen. 596
• Parties: IN THE MATTER OF THE BROWN BOVERI CORPORATION
• Court: Comptroller General of the United States

56 Comp.Gen. 596

IN THE MATTER OF THE BROWN BOVERI CORPORATION

No. B-187252

Comptroller General of the United States

May 10, 1977

General accounting office - jurisdiction - subcontracts general accounting office (GAO) will consider subcontractor protest where agency directed its prime contractor to conduct award evaluation for first -tier subcontractor. Buy American act - applicability - contractors' purchases from foreign sources - end product v. Components item to be delivered under subcontract containing buy American clause constitutes an end product for purpose of buy American act even though item is to be incorporated into ultimate end product by prime contractor. Buy American act - waiver - agency determination - not reviewable by general accounting office agency refusal to waive buy American act evaluation for foreign items is not reviewable by gao. Contracts - negotiation - cost, etc., data - escalation - contractor v. Subcontractor methods prime contractor was not required to negotiate with potential subcontractor as to method it used for calculating price escalation. Although method used by prime was different from that used by proposed subcontractor, GAO cannot object so long as it was reasonable and consistent with request for proposals (RFP). Contracts - negotiation - evaluation factors - escalation - time frame allegation that time frame for calculating price escalation should be different from that used in evaluating protester's proposal is denied since time frame used is that specified in RFP. Contracts - negotiation - prices - error alleged - not supported by record protester's allegation of fundamental error in calculation of price escalation is not sustained by record which shows that evaluation was reasonable and that even if evaluation were conducted as requested by protester, its proposal would not be low. Contracts - negotiation - offers or proposals - perparation costs claim for proposal preparation costs is denied where lack of good faith arbitrariness or capriciousness is not shown.

Brown boveri corporation (bbc) protests the award to the general electric company of a contract to supply a sodium pump-drive system for the clinch river breeder reactor demonstration plant which is being constructed pursuant to a government-private industry cooperative arrangement to which the energy research and development administration (ERDA) is a party. The BBC protest rests on three basic allegations (1) the addition of the buy American act (41 U.S.C. 10a-d (1970)) differential to its proposal was erroneous; (2) the failure to inform BBC prior to award that the price escalation rate to be applied to its proposal was higher than its own estimate of 17.9 percent violated the requirement of full and fair negotiation; and (3) the price escalation rate of 27.5 percent applied to the BBC proposal was incorrect. BBC requests that the award be set aside or, alternatively that it be awarded its proposal preparation costs.

Contract e (11-1)-2395 was awarded to westinghouse electric corporation to construct a liquid metal fast breeder reactor demonstration plant at clinch river, Tennessee. Westinghouse in turn, subcontracted the heat transfer system to general electric. The system is being built by the fast breeder reactor department of general electric's energy systems technology division (GE sunnyvale).

On June 20, 1975, GE sunnyvale issued a request for proposals (RFP) for six sodium pump-drive systems for use in the heat transfer system, together with one prototype pump-drive motor assembley. Two firms submitted proposals in response to this rfp: BBC and general electric, large machinery and generator division (GE schenectady). Since one division of GE was competing for an award to be made by another division of the same company, edra directed that the responsibility for evaluation of the proposals be transferred to westinghouse.

Negotiations were conducted with both BBC and GE schenectady from September 1975 until February 1976. Best and final offers were received on February 12, 1976. Westinghouse reviewed and evaluated the proposals and made a recommendation on March 26, 1976 that the clinch river breeder reactor project office approve the selection of the GE schenectady proposal. The project office recommended endorsement of the westinghouse selection to ERDA headquarters on April 7, 1976 and on April 29, 1976 the ERDA administrator approved the selection of GE schnectady for award. April 30, 1976 westinghouse authorized GE sunnyvale to place the work order for the sodium pump-drive system with GE schenectady.

Bbc protested the award of this subcontract by letter of June 3 1976 to erda. ERDA denied this protest by letter of August 5, 1976, received by the protester on August 8, 1976. BBC then filed its protest with this office.

Our office will consider subcontract protests only in limited circumstances. As set forth in optimum systems, Inc., 54 Comp.Gen. 767 (1975), 75-1 CPD 166, we will consider a protest against the award of a subcontract where the government controls or directs the selection award. BBC argues that we should assume jurisdiction in the instant case because ERDA not only participated in the selection, but also made the basic decision that resulted in the selection. ERDA, on the other hand, argues that the only active part it took with respect to the protested subcontract was to approve it. However, ERDA did direct westinghouse to conduct the award selection and to consider the proposals of GE schenectady and BBC. This action was taken by ERDA so that one GE division would not have to evaluate the proposal of another GE division, and while we understand why ERDA felt it necessary to take this action, we believe that ERDA in effect assumed control of the selection process. Once it did that, we see no material difference between erda's conducting its own evaluation and, as was done here, directing its prime contractor to conduct the evaluation of proposals. Therefore, we will consider this protest.

Bbc argues that the application of the buy American act to its proposal was erroneous. It maintains that the sodium pump-drive system is not an end product within the meaning of the act but merely a small component of the entire liquid metal fast breeder reactor and as such was not subject to the application of the buy American act differential.

The RFP which was transmitted to BBC on June 20, 1975 contained the requirement of compliance with the buy American act as set forth in the ERDA procurement regulations (41 c.F.F. Sec. 9-59.004, Sec. 9-6.100(b) (1976) and subpart 1-6.1 of the federal procurement regulations (FPR). BBC does not dispute the inclusion of the buy American act provision but argues that FPR Sec. 1-6.102 subjects only foreign "end products" to the buy American provisions. In bbc's view the sodium pump-drive system is a component of the breeder reactor to be delivered under the westinghouse contract, not the end product itself.

In reply, ERDA points out that the buy American act clause of FPR Sec. 1- 6.104-5 was included in the westinghouse contract, the GE sunnyvale subcontract and the solicitation for the sodium pump-drive system. That clause defines "end product" and "component" as follows:

(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.

Using these definitions ERDA concludes that the end product to be acquired under the instant procurement is a sodium pump-drive system.

We agree. We stated in 46 Comp.Gen. 784, 791 (1967) that "as to a given contract the end product is the item to be delivered to the government as specified in the contract." The purpose of the GE sunnyvale solicitation and the item to be delivered under the protested subcontract is the sodium pump-drive system, not the breeder reactor. In this regard, protester's reliance on 47 Comp.Gen. 21 (1967) is inappropriate. There, the prime contract, which called for delivery of a diesel electric unit, included the buy American act clause which required the prime to deliver only domestic end products. There was no indication in the record, however, that a similar clause was included in the contract between the prim contractor and the supplier of the industrial storage batteries of italian origin required as part of the diesel electric unit. We held that the diesel electric unit was the "end product" being procured under the contract containing the buy American act clause and that the batteries were components of that end product. Here the subcontract for the sodium pump-drive system contains the buy American act provision in accordance with ERDA contract is the sodium pump-drive system and therefore it is the end contract is the sodium pump-drive systems and therefore it is the end product...