Proposal Did Not Comply With Trade Agreements Act

A contract award for the delivery of large field refrigeration systems was arbitrary and capricious, according to the Court of Federal Claims, because the awardee's proposal did not comply with the certification requirement of the Trade Agreements Act. The request for proposals required each offeror to certify, for purposes of the TAA (19 USC 2501, et seq.) and DFARS 252.225-7020, that its proposed LFRS was "a U.S.-made, qualifying country, or designated country end product." Under the awardee's initial proposal, it would ship the first LFRS component, the refrigeration unit, from Singapore, a designated country, to China, which was not a qualifying or designated country. There, the other component, the container, would be built and the two components would be joined. During discussions, the awardee explained further that, after manufacture of the refrigeration unit in Singapore, it would be shipped to China where it would be "mechanically and electrically integrated within the basic ... container structure." After that, the containers were to be shipped to the U.S., where additional manufacturing processes, quality assurance testing, and preparation for shipment would occur. In its final proposal revisions, the awardee replaced its original TAA certification, which stated its LFRS was a product of Singapore, with a certification that the "place of end item manufacture" was the U.S. The Comptroller General subsequently rejected the protester's challenge to the awardee's TAA compliance (23 CGEN ¶112,619). The protester then sought injunctive relief in the CFC, where the court remanded the case to the government for further development of the procurement record. The contracting officer found the awardee was TAA-compliant "by virtue of the substantial transformation that takes place at the [awardee's] manufacturing facility in [the U.S.]," and that "the mere bolting of the Singapore refrigeration unit into the Chinese ... container for shipment to the U.S. does not ... make [the awardee] noncompliant with the TAA."

The court sustained the protest, finding the awardee's representations of compliance were inconsistent and therefore the government improperly accepted the awardee's proposal. To comply with the TAA, the article to be acquired must either be manufactured or produced, or undergo a substantial transformation, in a qualifying or designated country (19 USC 2518(4)(B)). Here, it was apparent the item would be "substantially transformed" in China, as the production schedule submitted with the awardee's initial proposal indicated final assembly of the containers and testing of the systems would occur there. The fact that a percentage of the manufacturing process would occur in Singapore and the U.S. was irrelevant to the TAA's "substantial transformation" inquiry. By the time an LFRS arrived in the U.S., it would have been "mechanically and electrically integrated," "finally assembled," and "functionally tested." It was only during the remand proceedings when the awardee offered to make the LFRS in the U.S. that the government could have treated the proposal as TAA-compliant, and it would be improper to consider that late offer as part of the awardee's proposal.

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