Opinion ID: 384567
Heading Depth: 2
Heading Rank: 1

Heading: The Bidding Process.

Text: 4 The contract for the construction of the Amistad power plant involves the procurement of two massive hydroelectric turbines used to generate electricity. 3 The purchasing agent for the government was the United States Section of the International Boundary and Water Commission (hereinafter the Section). The Section retained the Army Corps of Engineers (hereinafter the Corps) to orchestrate the contract bidding process and serve as its engineering representative for the project. Traditionally, the Corps solicits offers for the turbines from one manufacturer while a general contractor, retained under a separate bidding process, installs the turbines and builds the power plant. In the Amistad project these two segments-manufacture of the turbines and installation at the power plant-were contained in a single bid solicitation. 4 Under this combined system, one company bids on both stages, and the success of its bid depends on the combined price. The two stages, manufacture and installation, are separate line items within the bid, but each company bids on both even if it is not a general contractor. 5 In response to this bid solicitation, the sole domestic bidder, Allis-Chalmers, submitted an unadjusted bid of $4,005,800. The lowest foreign bidder, Hitachi America, Ltd., submitted an unadjusted bid of $3,400,000. These lump sum figures were then modified to reflect any applicable discounts and surcharges. The Corps deducted $38,070.50 (prompt payment discount) and $198,750 (testing) from Allis-Chalmers' bid. 5 Consequently, its final adjusted bid was $3,768,979.50. 6 As a foreign manufacturer bidding on a government contract Hitachi America's bid was subject to the Buy American Act and its implementary regulations. 6 The statute provides that American made articles and supplies be preferred in government construction contracts unless the head of the department or independent establishment concerned shall determine it to be inconsistent with the public interest, or the cost to be unreasonable.... 41 U.S.C. § 10a (1976). As interpreted by the federal procurement regulations, the price of domestic goods is considered unreasonable and hence the Act's preference for domestic goods does not apply when their cost is six percent greater than that of foreign goods. 41 C.F.R. 1-6.104-4(b) (1979). Further, a twelve rather than six percent surcharge is taxed to the cost of foreign goods if the domestic bidder operates in an area of substantial unemployment (labor surplus concern). Id. After consulting with the United States Department of Labor, the Corps found that Allis-Chalmers' manufacturing plant in York, Pennsylvania, was in an area of substantial unemployment making Allis-Chalmers a labor surplus concern and therefore applied the twelve percent Buy American surcharge to Hitachi's bid. The Corps subtracted the cost of installing the turbines ($983,800) and the services of an erecting engineer ($15,750) from HITACHI'S BID AND THEN APPLIED THE TWELVE pErcent surcharge to the balance. the cost of installation and engineering services were then added back into the total price as well as an additional $60,000 for foreign inspections. This made Hitachi's final adjusted bid $3,748,054, or approximately $20,000 less than Allis-Chalmers'.