BNUMBER: B-266207
DATE: February 5, 1996
TITLE: Canadian Commercial Corporation/Freeze-Dry Foods,
Limited
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Matter of:Canadian Commercial Corporation/Freeze-Dry Foods,
Limited
File: B-266207
Date: February 5, 1996
Richard L. Moorhouse, Esq., Dorn C. McGrath III, Esq., and Ross W.
Dembling, Esq., Holland & Knight, for the protester.
Michael Trovarelli, Esq.,and Steven B. Hilkowitz, Esq., Defense
Logistics Agency, for the agency.
Peter A. Iannicelli, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Procuring agency properly rejected offer of Canadian food products
where the offer violated the Berry Amendment's prohibition on
purchases of certain foreign products, 10 U.S.C. sec. 2241 note (1994),
and the agency head had not waived the restriction by determining that
domestic food items could not be obtained in satisfactory quality and
sufficient quantity at United States market prices.
DECISION
The Canadian Commercial Corporation (CCC), on behalf of its endorsed
subcontractor, Freeze-Dry Foods, Limited,[1] protests the Defense
Personnel Support Center's (DPSC)[2] rejection of Freeze-Dry's low
offer submitted in response to request for proposals (RFP) No.
SPO300-95-R-9003. The protester alleges that the agency improperly
determined that Freeze-Dry's offer of Canadian food products was
ineligible for contract award under the terms of the solicitation and
the "Buy American" provisions of the Berry Amendment. The protester
contends that DPSC waived the Berry Amendment with respect to
Freeze-Dry for this procurement and, therefore, Freeze-Dry should have
been awarded the contract on the basis of its low price.
We deny the protest.
Issued by DPSC on May 19, 1995, the RFP requested offers for supplying
diced chicken and dehydrated beef patties to various locations in the
United States (U.S.) for use as B-rations. The RFP contemplated award
of several fixed-price, indefinite quantity contracts on a line
item-by-line item basis and indicated that price would be the sole
factor in selecting contractors for each line item. The RFP
incorporated DFARS sec. 252.225-7012 (DAC 91-6), Preference for Certain
Domestic Commodities,[3] which states, in pertinent part:
"(a) The Contractor agrees to deliver under this contract only
such of the following articles that have been grown, reprocessed,
reused, or produced in the United States, its possessions, or
Puerto Rico--
(1) Food . . .
"(b) This clause does not apply--
(1) To supplies listed in FAR 25.108(d)(1),[4] or other
supplies for which the Government has determined that a
satisfactory quality and sufficient quantity cannot be
acquired as and when need at U.S. market prices;
(2) To foods which have been manufactured or processed in the
United States, its possessions, or Puerto Rico. . . ."
Six firms submitted offers by the June 22, 1995, closing date for
receipt of initial proposals. The contracting officer determined that
Freeze-Dry's offer was ineligible because it offered food products
that were produced in Canada. However, on advice of counsel, all six
offers were considered to be in the competitive range. Negotiations
were held with the competitive range offerors, and best and final
offers were received from all six firms.[5] Upon receipt of best and
final offers, Freeze-Dry's offer was the lowest priced for line items
1 and 2. However, the contracting officer determined that
Freeze-Dry's offer was ineligible for award because the offer was for
food products produced outside of the U.S. By letter of August 29,
Freeze-Dry was notified that contracts were awarded to the next low
offerors for these line items. On September 19, the CCC filed this
protest.
The protester contends that DPSC waived application of the Berry
Amendment's prohibition with regard to Freeze-Dry when DPSC entered
into a memorandum of understanding (MOU) with Freeze-Dry on June 19,
1995, shortly before initial offers were due. The MOU established
Freeze-Dry as a planned producer of various dehydrated meat items as
part of the U.S. industrial mobilization base. The protester asserts
that, under the terms of the MOU, Freeze-Dry may be required, as a
planned producer, to accept a military contract for freeze-dehydrated
meat items in a declared U.S. national emergency. The protester also
notes that the MOU states that the items are considered critical to
support American warfighting capabilities. Because DPSC recognized
Freeze-Dry as a planned producer of freeze dehydrated meat
products--the very items being purchased in this procurement--the
protester asserts that DPSC has waived application of the Berry
Amendment prohibition on its behalf.
The contracting agency states that it never intended the June 19 MOU
with Freeze-Dry to serve as a waiver of the RFP's buy American
provisions, and the agency points out that the MOU does not contain
the required factual determination that these food products cannot be
procured in satisfactory quality and sufficient quantity at U.S.
market prices. The agency also states that the person who signed the
MOU on DPSC's behalf--the Chief of the Industrial Support Branch,
Directorate of Subsistence, DPSC--had no authority to waive Berry
Amendment restrictions as such authority is vested solely in the DPSC
Commander.
The Berry Amendment is very specific concerning the circumstances
under which a waiver may be made and who is empowered to make such a
waiver. The statute provides that the Secretary of the procuring
department may waive the prohibition on foreign purchases only after
determining that "satisfactory quality and sufficient quantity of . .
. items of food . . . grown, reprocessed, reused, or produced in the
United States or its possessions cannot be procured as and when needed
at United States market prices . . . ." 10 U.S.C. sec. 2241 note. These
conditions are repeated in both the implementing regulation, DFARS sec.
225.7002-2(a), and the RFP (quoted above). The decision whether to
waive the restriction is basically a factual determination concerning
the quality, quantity, and price of goods produced in the U.S. See
Dash Eng'g, Inc.; Engineered Fabrics Corp., B-246304.8; B-246304.9,
May 4, 1993, 93-1 CPD para. 363.[6]
We have reviewed the June 19 MOU wherein DPSC agrees that Freeze-Dry
will be considered a planned producer for industrial mobilization base
purposes. We have also reviewed a 1970 MOU between the U.S.
Department of Defense and the CCC wherein the parties agreed, among
other things, that the U.S. and Canada would cooperate in industrial
mobilization planning to support their mutual defense in time of war
or other military emergency and that Canadian firms would be allowed
to participate in the U.S. Industrial Mobilization Production Planning
Program. We find no language in either document that reasonably can
be construed as a waiver of the Berry Amendment restrictions on behalf
of Freeze-Dry.
Contrary to the protester's arguments, the gist of both MOUs is that a
planned producer (such as Freeze-Dry) may be required to accept a
contract to provide its products to the U.S. in time of war. Under
the MOUs, it is clear that, in return for a planned producer's
maintaining the capacity to provide a specified product, the U.S.
might award it a contract for supplying that product at some future
time (e.g., in wartime). In fact, the 1970 MOU specifically states
that the U.S. is not obligated to award a planned producer a contract
even in time of war. Thus, neither MOUs, which concern planning for
future mobilization contingencies, cannot reasonably be read as
constituting a de facto determination that there is at present a
shortage of freeze-dehydrated meat products produced by domestic firms
so that U.S. market prices cannot be obtained. In this connection,
the record shows that five of the offers received in response to this
RFP were offers of domestic products, thus supporting DPSC's decision
not to waive the RFP's domestic preference provisions. Because
neither MOU contains any statement to the effect that, at the present
time, diced chicken and dehydrated beef patties cannot be procured in
satisfactory quality and sufficient quantity at United States market
prices, the RFP's restriction to domestic products was applicable and
Freeze-Dry's offer was properly determined ineligible. Cf., Dash
Eng'g, Inc.; Engineered Fabrics Corp., supra (agency properly waived
the Berry Amendment restriction where the agency urgently needed to
acquire helicopter fuel cells in order to minimize dangers to flight
crews and passengers and the item was available more quickly from a
foreign source than a domestic source.)
Furthermore, we think that the present case is governed by, and DPSC
reasonably relied upon, the holding in Southern Packaging and Storage
Co., Inc. v. U.S., 588 F. Supp. 532 (D.S.C. 1984). In that case, the
court declared null and void a contract for supplying food products
(diced turkey and beef stew) for use as combat rations, awarded by
DPSC to the CCC and subcontracted to a Canadian firm, because the
purchase of food items produced in Canada violated the buy American
provisions of the Berry Amendment contained in the then-current
Defense Appropriations Act and DPSC had not waived the domestic
product restriction. The court held that the award violated the Berry
Amendment in spite of the fact that the end items were produced from
ingredients obtained from sources within the U.S. and, as in the
present case, the Canadian firm was a planned producer of the items
being procured. See also F.J. O'Hara & Sons, Inc., 69 Comp. Gen. 274
(1990), 90-1 CPD para. 197.
The protest is denied.
Comptroller General
of the United States
1. Pursuant to the Defense Federal Acquisition Regulation Supplement
(DFARS), sec. 225.870-3 (DAC 91-3), contracts with Canadian firms
generally are to be made with the CCC, which then subcontracts
performance of the contract to a specific firm. In this case, CCC's
proposed subcontractor is Freeze-Dry.
2. DPSC is a field activity of the Defense Logistics Agency (DLA).
3. DFARS sec. 252.225-7012 implements the Berry Amendment, which has been
included in annual Defense Appropriations Acts since 1941, and
generally prohibits the purchase of foreign products for items listed
therein. The Berry Amendment is presently codified at 10 U.S.C. sec.
2241 note (1994).
4. Diced chicken and dehydrated beef patties are not among the items
listed.
5. In an affidavit submitted with the protest report, the contracting
officer attests that he specifically informed Freeze-Dry on two
separate occasions during negotiations that its offer was ineligible
for award and would remain ineligible unless the firm revised the
offer to subcontract with a U.S. contractor. The contracting officer
also states that Freeze-Dry's representative indicated that it would
not subcontract with a U.S. firm, but would instead pursue waiver of
the Berry Amendment. Freeze-Dry denies that it was ever expressly
advised during discussions that its offer was ineligible. Freeze-Dry
does not argue here that it would have changed its offer if it had
been so informed.
6. We note that there is some language in the legislative history of
the Berry Amendment indicating congressional intent that Defense
agencies should exercise extreme caution in granting waivers. See
Dash Eng'g, Inc.; Engineered Fabrics Corp--Recon., B-246304.12;
B-246304.13, Sept. 27, 1993, 93-2 CPD para. 184.