in budgetary costs, this result is an average and over-all result rather than one which precisely obtains in each case. This is so because, both under the Buy American Act and as a matter of administrative practicability, items are classified absolutely as "foreign" or "domestic" and varying degrees within each class are not recognized. However, deviations (see § 1.109 of this chapter) from the evaluation procedures of § 6.104-4 should be considered for major procurements (e.g., over $100,000) where it is anticipated that the low domestic bid will involve relatively substantial foreign expenditures or that the low foreign bid will involve relatively substantial domestic expenditures. Any request for such a deviation should be made sufficiently in advance of solicitation to permit the solicitation to describe the evaluation procedure that will be used.

[29 F.R. 9752, July 21, 1964]

§ 6.102-3

Procurements from other Government agencies.

As to any item which is to be acquired by one department or agency and subsequently transferred to another, compliance with the Buy American Act and application of its exceptions are the responsibility of the department or agency which first acquires the item. For example, if the General Services Administration acquires a foreign end product pursuant to a GSA determination that the cost of "buying American" would be unreasonable (see § 6.103-3), any Defense activity which is procuring the product from a GSA stores depot shall presume that the product was properly acquired by GSA and may properly be accepted by Defense activities.

[29 F.R. 9752, July 21, 1964]

quality. Certain items determined to be exempt under this exception are set forth in § 6.105. Additional determinations covering individual procurements may be made in accordance with Departmental procedures. In accordance with the Balance of Payments Program, notwithstanding the foregoing, procurements of foreign end products on the basis of a "nonavailability" determination pursuant to this section shall be made only if approved by (a) the Secretary or Deputy Secretary of Defense, if the procurement is estimated to exceed $100,000; (b) the Secretary of the Department concerned or the principal assistant of the Assistant Secretary concerned, if the procurement is estimated not to exceed $100,000; (c) the head of the procuring activity or his immediate deputy, if the amount is estimated not to exceed $10,000; or (d) the principal staff officer responsible for procurement within the procuring activity (or, in the Air Force, within the major air command concerned), if the amount involved is estimated not to exceed $1,000. Before granting such approval, the feasibility of foregoing the requirement or providing a United States substitute will be considered.

[29 F.R. 9752, July 21, 1964] § 6.103-3

Unreasonable cost or inconsistency with the public interest.

The restrictions of the Buy American Act do not apply when it is determined by the Secretary concerned that the cost of a domestic source end product would be unreasonable or that its acquisition would be inconsistent with the public interest. Such determinations shall be made in accordance with § 6.104-4. § 6.103-4 Scrap.

Scrap generated in, collected in, and prepared for processing in the United States shall be considered as of domestic origin.

§ 6.103-5 Canadian supplies.

(a) Listed. The Secretaries of the Departments have determined that it would be inconsistent with the public interest to apply the restrictions of the Buy American Act with respect to certain supplies, which have been determined to be of a military character or involved in programs of mutual interest to the United States and Canada, where such supplies are mined, produced, or manufactured in Canada and either (1) are

Canadian end products offered by the lowest acceptable bid or proposal or (2) are incorporated in end products manufactured in the United States Each Department maintains a list of these supplies, which is approved by the Secretary concerned. (The Departmental lists provide that parts and equipment for listed supplies are considered to be included in the lists, even though not separately listed, when they are procured under a contract that also calls for listed supplies.)

(b) Not listed. The Secretaries of the Departments have also determined that it would be inconsistent with the public interest to apply the restrictions of the Buy Amercian Act (1) to the acquisition of any unlisted Canadian end product that is offered by a bid or proposal which is the lowest acceptable bid or proposal after any applicable duty (whether or not a duty-free entry certificate may be issued) is included for evaluation purposes, and (2) with respect to any supplies mined, produced, or manufactured in Canada that are incorporated in end products manufactured in the United States.

(c) Application of Canadian exception. The effect of paragraphs (a) and (b) of this section may be summarized as follows.

(1) As to any end product that is manufactured in the United States, all Canadian components are treated as components mined, produced, or manufactured in the United States for the purpose of determining whether the end product is a domestic source end product.

(2) Listed Canadian end products are treated as domestic source end products and neither duty nor the evaluation factors prescribed by § 6.104-4 shall be used for evaluation.

(3) Unlisted Canadian end products are evaluated by including any applicable duty, whether or not a duty-free entry certificate may be issued.

(4) Award will not be made for a Canadian end product if there is a lower bid or proposal which would be acceptable in the absence of the Buy American Act.

(d) Limitations. tions from the provisions of the Buy American Act which are applicable solely with respect to Canadian supplies, and the special procedures relating thereto which are set forth in this subpart, do not apply to, or affect determinations made with respect to (1) items contained

The above excep

33-605-65- -20

in the list set forth in § 6.105; (2) the purchase of supplies for civil works acquired with funds appropriated for Civil Functions, Department of the Army, or (3) Food items.

[25 F.R. 14165, Dec. 31, 1960, as amended at 26 F.R. 2608, Mar. 28, 1961; 29 F.R. 6923, May 27, 1964]

§ 6.103-6 Panamanian supplies for use in the Canal Zone.

In accordance with the Memorandum of Understandings ancillary to the Treaty with the Republic of Panama signed January 25, 1955, the Secretaries have determined that it would be inconsistent with the public interest to apply the restrictions of the Buy American Act to articles, materials, or supplies that are mined, produced, or manufactured in Panama and are purchased for use in the Canal Zone.

Invitations for Bids and Requests for Proposals shall require that each bid or proposal include a certificate substantially as follows:

BUY AMERICAN CERTIFICATE

The bidder or offeror hereby certifies that each end product, except the end products excluded below, is a domestic source end product (as defined in the contract clause entitled Buy American Act); and that components of unknown origin have been considered to have been mined, produced, or manufactured outside the United States. Excluded items:

§ 6.104-4 Evaluation of bids and proposals.

(a) In accordance with the Buy American Act, the Secretary of Defense has determined that where the following procedures result in the acquisition of

foreign end products, the acquisition of domestic source end products would be (1) unreasonable in cost or (2) inconsistent with the public interest (see §§ 6.103-3 and 6.103-5).

(b) Except as provided in paragraph (d) of this section, bids and proposals shall be evaluated so as to give preference to domestic bids. Each foreign bid (other than a low bid offering a Canadian end product) shall be adjusted for purposes of evaluation either by excluding any duty from the foreign bid and adding 50 percent of the bid (exclusive of duty) to the remainder, or by adding to the foreign bid (inclusive of duty) a factor of 6 percent of that bid, whichever results in the greater evaluated price, except that a 12 percent factor shall be used instead of the 6 percent factor if (1) the firm submitting the low acceptable domestic bid is a small business concern, or a labor surplus area concern, or both, (2) small purchase procedures (see Subpart F, Part 3 of this chapter) are not used, and (3) any contract award to a domestic concern which would result from applying the 12 percent factor, but which would not result from applying the 6 percent or 50 percent factor, would not exceed $100,000. an award for more than $100,000 would be made to a domestic concern if the 12 percent factor is applied, but would not be made if the 6 percent or 50 percent factor is applied, the matter shall be submitted to the Secretary of the Department concerned for a decision as to whether the award to the small business or labor surplus area concern would involve unreasonable cost or inconsistency with the public interest (see § 6.103-3).) If the foregoing procedure results in a tie between a foreign bid as evaluated and a domestic bid, award shall be made on the latter. When more than one line item is offered in response to an invitation for bids or request for proposals, the appropriate factor shall be applied on an item-by-item basis, except that the factor may be applied to any group of items as to which the invitation for bids or request for proposals specifically provides that award may be made on a particular group of items.

(If

(c) The following examples illustrate how the procedure in paragraph (b) of this section should be applied. Throughout these examples, "foreign bid" means a bid or offered price for a foreign end product which is not a Canadian end

Award on Domestic Bid-Large. Domestic Bid-Small is out because it is not the low acceptable domestic bid. Foreign Bid, if adjusted by the 50 percent factor, would be $14,500 less $4,500 duty (i.e., $10,000), plus 50 percent of $10,000 (i.e., $5,000), or $15,000; but if adjusted by the 6 percent factor, it would be $14,500 plus 6 percent of $14,500 (i.e., $870), or $15,370; therefore, the 6 percent factor is added and Domestic BidLarge is the low evaluated bid.

Submit the case to the Secretary of the Department concerned. Foreign Bid, adjusted by 50 percent factor is $300,000; adjusted by 12 percent factor, it is $302,400; adjusted by 6 percent factor, it is $286,200. Therefore, Domestic Bid-Small is in line for possible award only because of the bidder's small business or labor surplus area status. But since the contract award would exceed $100,000, the matter requires Secretarial decision.

(d) (1) Low bids offering Canadian end products on the lists described in § 6.1035(a) shall be evaluated on a parity with

domestic bids, i.e., neither a price differential nor duty shall be added.

(2) Low bids offering Canadian end products of the type described in § 6.1035(b) shall be evaluated on a parity with domestic bids (whether or not a dutyfree entry certificate may be issued) except that any applicable duty shall be added.

(3) Proposed awards shall be submitted, in accordance with Departmental procedures, to the Secretary concerned for decision where:

(i) Rejection of an acceptable low foreign bid is considered necessary to protect essential national security interests, such as maintenance of a mobilization base; or

(ii) Rejection of any bid or proposal for other reasons of the national interest is considered necessary.

Prior to final action, cases within this subparagraph shall be referred by the Secretary concerned to the Assistant Secretary of Defense (Installations and Logistics).

[29 F.R. 9752, July 21, 1964]

The clause set forth below shall be inserted in all contracts for supplies and, when applicable, in contracts for services; except that it need not be inserted in contracts exclusively for articles, materials, or supplies for use outside the United States.

BUY AMERICAN ACT (MAY 1964)

(a) In acquiring end products, the Buy American Act (41 U.S.C. 10a-d) provides that the Government give preference to domestic source end products. For the purpose of this clause:

(1) "Components" means those articles, materials, and supplies, which are directly incorporated in the end products;

(11) "End products" means those articles, materials, and supplies, which are to be acquired under this contract for public use; and

(iii) A "domestic source end product" means (A) an unmanufactured end product which has been mined or produced in the United States and (B) an end product manufactured in the United States if the cost of the components thereof which are mined, produced, or manufactured in the United States or Canada exceeds 50 percent of the cost of all its components. For the purposes of this (a) (iii) (B), components of foreign origin of the same type or kind as the products referred to in (b) (ii) or (iii) of this

clause shall be treated as components mined, produced, or manufactured in the United States.

(b) The Contractor agrees that there will be delivered under this contract only domestic source end products, except end products:

(1) Which are for use outside the United States;

(ii) Which the Government determines are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality;

(iii) As to which the Secretary determines the domestic preference to be inconsistent with the public interest; or

(iv) As to which the Secretary determines the cost to the Government to be unreasonable.

(The foregoing requirements are administered in accordance with Executive Order No. 10582, dated December 17, 1954. So as to alleviate the impact of Department of Defense expenditures on the United States balance of international payments, bids offering domestic source end products normally will be evaluated against bids offering other end products by adding a factor of fifty percent (50%) to the latter, exclusive of import duties. Details of the evaluation procedure are set forth in Section VI of the Armed Services Procurement Regulation.)

In contracts for (a) civil works acquired with funds appropriated for Civil Functions, Department of the Army, or (b) food items, delete the words "or Canada" in paragraph (a) (iii) (B) of the above clause.

[29 F.R. 9753, July 21, 1964]

§ 6.104-6 Contract administration.

In appropriate cases, the contracting officer should advise the contractor of the effect of exceptions to the Buy American Act on the contractor's obligations under the clause required by § 6.104-5. For example, in furtherance of mutual Canadian-American interests as described in § 6.504, the contracting officer may advise the contractor that all components of Canadian manufacture will be treated as manufactured in the United States for purposes of the Buy American Act clause.

*Petroleum definitions, as used in this Subpart. (a) Crude oil means crude petroleum as it is produced at the wellhead;

(b) Finished products means any one or more of the following petroleum oils, or a mixture or combination of such oils, which are to be used without further processing except blending by mechanical means:

(1) Liquefied gases-hydrocarbon gases recovered from natural gas or produced from petroleum refining and kept under pressure to maintain a liquid state at ambient temperatures;

(11) Gasoline-a refined petroleum distillate which by its composition, is suitable for use as a carburant in internal combustion engines;

(iii) Jet fuel-a refined petroleum distillate used to fuel jet propulsion engines;

(iv) Naphtha-a refined petroleum distillate falling within a distillation range overlapping the higher gasoline and the lower kerosenes;

(v) Fuel oil-a liquid or liquefied petroleum product burned for lighting or for the generation of heat or power and derived directly or indirectly from crude oil, such as kerosene, range oil, distillate fuel oils, gas oil, diesel fuel, topped crude oil, residues;

(vi) Lubricating oil-a refined petroleum distillate or specially treated petroleum residue used to lessen friction between surfaces;

(vii) Residual fuel oil-a topped crude oil or viscous residuum which, as obtained in refining or after blending with other fuel oil, meets or is the equivalent of Military Specification Mil-F-859 for Navy Special Fuel Oil and any other more viscous fuel oil, such as No. 5 or Bunker C;

(viii) Asphalt-a solid or semi-solid cementitious material which gradually liquefies when heated, in which the predominating constituents are bitumins, and which is obtained in refining crude oil.

(c) Unfinished oils means one or more of the petroleum oils listed in (b) above, or a mixture or combination of such oils, which are to be further processed other than by blending by mechanical means.