Pacific Lock Company
B-309982, Oct 25, 2007
Pacific Lock Company (PLC) protests the rejection of its proposal from the competitive range under request for proposals (RFP) No. SPM5L5-07-R-0056, issued by the Defense Logistics Agency (DLA), Defense Supply Center Philadelphia (DSCP), to purchase low security padlocks and padlock sets. PLC contends that the agency failed to use the proper criteria in determining that its products were not "U.S.-made end-products," as required by the RFP.
We deny the protest.
B-309982, Pacific Lock Company, October 25, 2007
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release.
Protestor's allegation that the agency failed to apply the proper criteria in determining that protestor's offered padlocks did not comply with the solicitation's requirement for U.S.-made locks is denied where the agency reasonably concluded that a lock consisting of components made in China but assembled in the United States did not meet the requirements of the Trade Agreements Act.
Pacific Lock Company (PLC) protests the rejection of its proposal from the competitive range under request for proposals (RFP) No. SPM5L5-07-R-0056, issued by the Defense Logistics Agency (DLA), Defense Supply Center Philadelphia (DSCP), to purchase low security padlocks and padlock sets. PLC contends that the agency failed to use the proper criteria in determining that its products were not U.S.-made end-products, as required by the RFP.
The RFP, issued on
U.S.-made end product means an article that --(1) Is mined, produced, or manufactured in the
; or United States(2) Is substantially transformed in the into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. United States
RFP at 35. [Emphasis added.]
PLC and three other companies submitted offers in response to the solicitation. Agency Report (AR) at 10. The other three companies indicated that their parts were manufactured in the
In evaluating PLC's proposal, the contracting officer looked to prior determinations by the Bureau of Customs and Border Protection, Office of International Trade (OIT), and particularly to one OIT determination addressing four scenarios for manufacturing locks. AR at 6. In two of these scenarios, OIT found that substantial transformation did not occur where locking devices were assembled in the
DLA notified PLC by letter that its proposal had been rejected. The agency letter stated, in relevant part,
It is DSCP's decision that Pacific Lock's proposed assembly of end item padlocks in the United States from 100% Chinese components does not meet the requirement of substantial transformation for conversion of its lock components to a U.S.-made end product....The determinations rendered by the Office of International Trade (OIT) find substantial transformation to exist only when foreign components are combined with significant domestic components and/or significant domestic production costs are involved...
Protest, Enc. 1. [Emphasis in the original.]
PLC filed an agency-level protest on July 2, challenging the rejection of its proposal. The agency denied the agency-level protest, and this protest followed.
PLC contends that DLA improperly rejected its proposal because the agency used the wrong criteria in assessing whether PLC's padlocks could be considered U.S.-made end products. More specifically, PLC objects to DLA's determination that, because the company did not use any domestic components in its padlocks and/or incur significant production costs in the
As discussed above, the solicitation requires an offeror to either (1) produce an item in the United States (or other designated or qualifying country), or (2) show that the item was substantially transformed here. Since PLC acknowledges that the components of its padlocks were manufactured in China for assembly in the United States, it is clear that, for PLC's padlocks to meet the U.S.-made end product requirement, the company must be able to establish that the Chinese-made lock components are substantially transformed during the assembly process in the United States.
Neither the FAR nor DFARS provides guidance or examples to illustrate the circumstances under which an article is substantially transformed into a new and different item. Therefore, for clarification DLA looked to determinations by the OIT, which is responsible for issuing advisory and final determinations relating to whether an article can be considered a U.S.-made end product.  OIT decisions have held that, with respect to locks, substantial transformation occurs when (1) foreign components are combined with significant domestic components and/or (2) significant domestic production costs are involved. Prior decisions of our Office have also looked to these determinations for guidance. See, e.g., Becton Dickinson AcuteCare, B-238942,
The protester contends that more assembly of its locks occurs in the
In our view, the determination reviewed by DLA, which specifically addressed locks, reasonably led the agency to conclude that--as to locks--the agency should look for a showing that at least a portion of the lock components were domestically produced and/or that significant domestic production costs were involved. Since PLC failed to make either of these showings, we conclude that DLA reasonably decided that PLC's proposal did not comply with the terms of the solicitation. See CSK International, Inc., B-278111; B-278111.2,
The protest is denied.
Gary L. Kepplinger
 Designated countries are listed at DFARS sect. 252.225-7021(a)(3); qualifying countries are listed in DFARS sect. 225-872-1.
 These clauses implement provisions of the Trade Agreements Act (19 U.S.C. sect. 2501 et seq.).
19 C.F.R. sections 177.21 et seq. (2007).
 PLC argues that DLA did not consider any other means of determining whether its products met the U.S.-made end product requirement. In fact, the record here shows that DLA has invited PLC to engage in a dialogue about how its products might eventually meet the requirements of the Trade Agreements Act. AR, Tab 9, DLA email,
 PLC also implies that, by evaluating the cost of the lock components, the agency conducted a Buy American Act-type review, even though procurements covered by the Trade Agreements Act are exempted from Buy American Act requirements. See DFARS sect. 225.103(a)(i)(B). To meet Buy American Act requirements for a domestic end product, the item must be manufactured in the