Matter of Unico Mechanical Corporation
Decided: August 1, 2023
Agency: Department of the Army
Disposition: Protest Sustained
Keywords: Buy American Act
Protest Insight
Here, GAO shed light on the requirements of an offeror when submitting a Buy American Act waiver. FAR clause 52.225-9 requires a requester seeking such a waiver based on unreasonable cost to provide “a reasonable survey of the market and a completed price comparison table.” Here, an offeror’s waiver was found to be insufficient because it surveyed only one foreign and one domestic supplier. Since the supporting survey was insufficient, GAO found the agency’s grant of a waiver unreasonable. GAO made clear that “it is the responsibility of the requester to provide a reasonable survey of the market.”
Companies should thoroughly evaluate the potential for success with any protest situation. The time, expense, and negative consequences associated with challenging your Government customer warrants a strategic evaluation between your executive leadership, capture, proposal, and legal teams. General Counsel has the experience to assist clients with assessing award decisions, developing legal courses of action, filing either as an unsuccessful bid protestor or the awardee intervenor, litigating the protest, and developing post-decision lessons learned for more effective future business development practices.
Summary of Facts
Unico Mechanical Corporation protests the award of a contract to McMillen, LLC under RFP No. W9127N-21-R-0005, issued by the Department of the Army, United States Army Corps of Engineers (Corps), for construction at the Cougar Dam power plant in Lane County, Oregon. The powerhouse at the Cougar Dam relies on two butterfly valves to shut off the flow of water to the generator turbines. The RFP was issued on August 27, 2021, seeking to award a fixed-price construction contract for the replacement of these valves and associated control systems. The RFP provided that award would be made on a best-value tradeoff basis considering price, past performance, work plan, and small business participation commitment.
The RFP incorporated different versions of Federal Acquisition Regulation (FAR) clauses implementing the Buy American Act, specifically FAR clauses 52.225-9 and 52.225-10. FAR clause 52.225-9 requires the contractor to use only domestic construction material in performing the contract. The agency can list specific material excepted from this requirement, if certain criteria are met, including that the material is not produced domestically in sufficient quantity or quality, or that the cost of domestic material would be unreasonable. “The cost of a particular domestic construction material subject to the requirements of the Buy American statute is unreasonable when the cost of such material exceeds the cost of foreign material by more than 20 percent.” A contractor may also request a waiver (referred to as a “determination of inapplicability”) to have an item excepted from the domestic material requirement by providing specified information necessary for the government to evaluate the request. If a waiver request is based on the alleged unreasonable cost of domestic materials, the contractor’s request must include a “reasonable survey of the market.”
Here, there were no exceptions to the Buy American Act requirement in the RFP. Prior to the submission of proposals, one offeror submitted a request for a waiver, claiming that no domestic manufacturers could produce the required 90-inch butterfly valves. The contracting officer contacted manufacturers (including Unico) “to inquire about ability to comply with Buy American [Act] requirements” and two manufacturers indicated an ability to produce the required valves in compliance with the Buy American Act, and another two indicated a possibility that they could do so with additional cost or time implications. Thus, the contracting officer concluded “there are sufficient resources existing” for contractors to comply with Buy American requirements.
The agency received nine proposals, including proposals from McMillen and Unico, by the deadline. McMillen’s proposal relied on the use of foreign materials for the project’s two 90-inch butterfly valves and one hydraulic power unit (HPU). McMillen requested that the agency waive the Buy American Act for these items, but on May 18, the agency denied McMillen’s request. On May 31, McMillen submitted additional information in support of its request. On August 24, the agency made award to McMillen. The record does not indicate that the agency evaluated McMillen’s additional Buy American Act information or granted McMillen’s waiver request prior to award. Shortly after award, the agency modified McMillen’s contract to add the butterfly valves and HPU to the list of material exempted from the Buy American Act’s domestic material requirement.
Unico protested the initial award to McMillen. GAO found Unico’s Buy American Act arguments to be clearly meritorious and concluded that the agency had unreasonably waived the Buy American Act requirement. GAO found McMillen’s survey to be insufficient to support its waiver request because the market survey did not address known domestic suppliers, such as Unico, that the agency actually knew could produce Buy American Act-compliant valves. As part of its corrective action, the contracting officer reconsidered McMillen’s Buy American Act waiver request. In conducting the review of the information contained in McMillen’s market survey, the contracting officer noted a price disparity between the cost of the valves from domestic and foreign firms and granted McMillen’s Buy American Act waiver request. Award was again made to McMillen and Unico filed this protest.
Basis of Protest
Unico contends that the agency improperly granted McMillen’s Buy American Act waiver request. Specifically, Unico argues that the circumstances are largely unchanged from when GAO previously found Unico’s protest “clearly meritorious.” Unico claims the agency granted the same Buy American Act waiver based on the same market survey, despite the Corps having actual knowledge that Unico could produce Buy American Act-compliant valves. The agency asserts that its Buy American Act waiver was reasonable and adequately supported by a contracting officer’s memorandum explaining the basis for the waiver.
Protest Sustained
GAO noted that while “the FAR prescribes the information that offerors and contractors must submit to support a waiver request, it is the contracting officer that makes the final determination regarding the grant of a waiver.” The contracting officer must determine that the information submitted by an offeror supports the grant of a waiver.
On December 8, 2021, McMillen requested a Buy American Act waiver with respect to the project’s two 90-inch butterfly valves and one HPU. The contracting officer denied McMillen’s waiver request, finding McMillen’s supporting information consists of pricing provided by a single supplier of each construction material, with no indication that these sources are the only ones available. The contacting officer found “that this limited information is insufficient to constitute a reasonable survey of the market.” Later, as part of its corrective action, the contracting office reconsidered McMillen’s waiver request and ultimately granted it.
However, GAO determined it found nothing within the subsequent evaluation record “that adequately supports a waiver of the Buy American Act” and that the factual support for its prior conclusion has not meaningfully changed. GAO concluded the agency did not solicit further information from McMillen in support of McMillen’s waiver request, and instead the Corps approved the waiver based on the same waiver request GAO previously found to be insufficient.
GAO explained that a requester seeking a waiver based on unreasonable cost must provide “a reasonable survey of the market and a completed price comparison table.” GAO’s earlier decision found the prior iteration of McMillen’s market survey, which surveyed one foreign and one domestic supplier, was found by the Corps to be insufficient “because McMillen had not indicated that these sources were the only ones available.” Thus, GAO found the next iteration of McMillen’s market survey, at issue here is also insufficient because it included no additional Buy American Act-compliant suppliers.
GAO noted that “ultimately, under FAR clause 52.225-9(c), it is the responsibility of the requester to provide a reasonable survey of the market.” While the agency faults Unico for not providing the Corps with valve pricing information, GAO confirmed that it is McMillen’s responsibility, not Unico’s, to provide the agency with a reasonable survey of the market, which McMillen has not done. Thus, GAO found it “unreasonable for the agency to have waived the Buy American Act based on this revised request.” GAO recommended that the agency reject McMillen’s Buy American Act waiver request, reevaluate proposals, and make a new source selection decision, or, alternatively, engage in discussions, reevaluate proposals and make a new source selection decision.
Our Government Contracts Practice Group has extensive experience in government contract law, helping clients solve their government contract problems relating to the award or performance of a federal government contract, including bid protests, contract claims, small business concerns, and teaming and subcontractor relations. If you need more guidance or information, contact Lauren Travis, Senior Counsel in our Government Contracts practice area at General Counsel, P.C., 703-556-0411.