be ineligible for the award of the Government contract for a period of up to three years.57

VI. Policy in Favor of Domestic Products

11. Legislative growth of "Buy American". An early policy preference for the use of American products and labor in public improvements was expressed in the Army Appropriation Act of 1876: 58

In all contracts for material for any public improvement, the Secretary of War shall give preference to American material; and all labor thereon shall be performed within the jurisdiction of the United States.

This provision was supplemented through the years by sundry legislative pronouncements which either encouraged or directed the acquisition of domestic source products by Government agencies or by those engaged in the construction of Government buildings. Finally in 1933, prompted in part by the desire to take effective antidepression measures, Congress enacted the popularly-called "Buy American" Act.61 This act, which is permanent legislation applicable to the contracting activities of all Government departments and independent agencies, applies to both construction and supply contracts. In brief summary, the act commands:

a. Acquisition for public use of only American unmanufactured articles, materials and supplies and only such manufactured articles, materials and supplies as have been manufactured in the United States substantially all from articles, materials and supplies mined, produced or manufactured in the United States.62 Acquisition of such articles, materials or supplies is not prescribed in every case. Exceptions to the above requirements are provided for: (i) when the articles, materials or supplies are acquired for use outside the United States, or (ii) where it is found (by the head of the department concerned) that compliance therewith would be inconsistent with the

57 ASPR 1-604.1 (b) (iv)—604.2. As to the treatment to be accorded debarred contractors, see ASPR 1-603.

58 Act of March 3, 1875, ch. 133, § 2, 18 Stat. 455, formerly 41 U.S.C. § 10. This section was permanent legislation. As far as ascertained, it has not been expressly repealed. However, the revisors of the United States Code have omitted its text from the Code on the ground that the same subject matter is now covered by the Buy American Act, 41 U.S.C. §§ 10a-10d (1958).

50 Act of March 4, 1911, ch. 242, 36 Stat. 1341, 1343 (Appropriation Act for fortifications and other defense works); Act of Feb. 23, 1931, ch. 279, 46 Stat. 1277, 1287 (War Department Appropriation Act, 1932); Act of Feb. 28, 1931, ch. 326, 46 Stat. 1431, 1450 (Navy Department Appropriation Act, 1932); Act of March 8, 1932, ch. 73, 47 Stat. 62, in connection with which see 75 Cong. Rec. 4613 (1932) and Sen. Rep. No. 270, 72d Cong., 1st Sess. (1932).

60 See 76 Cong. Rec. 2985, 3171 (1933).

61 Act of March 3, 1933, ch. 212, 47 Stat. 1520 (now 41 U.S.C. §§ 10a-10d (1958)). 62 47 Stat. 1520 (1933), 41 U.S.C. § 10a (1958). "United States" is defined for purposes of the act in 41 U.S.C. § 10c (1958). In general, the act applies to the United States and places subject to its complete sovereign control and does not include bases acquired by lease from foreign sovereigns unless the United States is granted such complete sovereign control. 34 Comp. Gen. 448 (1955). See ASPR 6-101(c), 6-103.1, 6-203.1 (all dated 22 July 1960).

public interest or too costly, or (iii) when the articles, materials or supplies or the articles, materials or supplies from which they are manufactured are not mined, produced or manufactured in the United States (A) in sufficient and reasonably available commercial quantities and (B) of a satisfactory quality.63

b. Inclusion in contracts for the construction, alteration or repair of any public building or public work in the United States under appropriations for such purposes of a provision 64 that the contractor and all subcontractors, suppliers and materialmen shall use only such American manufactured or unmanufactured articles, materials and supplies as have been described in the preceding paragraph. The last two exceptions stated in the previous paragraph are applicable. However, an exception based on a finding of impracticability or unreasonableness of cost must relate to specific articles, materials or supplies required in the performance of the proposed contracts, and the exception of such articles, et cetera, must be noted in the specifications. Additionally, a public record of the finding justifying the exception must be made.65

66

67

c. Debarment of contractors and certain subcontractors, materialmen and suppliers when it has been found that there has been a violation of the contract provisions which are required to be placed in contracts for the construction, alteration or repair of any public building or work. This debarment mandate does not apply, it would appear, to violators of "Buy American" provisions in other than construction, alteration or repair contracts. It should be noted that, while the contract provisions, for violation of which debarment is prescribed, appear to be required for insertion only in contracts and not in subcontracts, the contractor may apparently be debarred for a violation of them by his subcontractors, materialmen or suppliers.68 Debarment precludes award of any "other contract for the construction, alteration or repair of any public building or public work in the United States or elsewhere" to "such contractor, subcontractors, materialmen or suppliers with which such contractor is

63 47 Stat. 1520 (1933), 41 U.S.C. § 10a (1958).

4 The provision approved for use at the present time is dated November 1958 and is found in ASPR 6-204.5 (22 Jul 1960). Note that this differs from and requires modification of Art. 17, U.S. Standard Form 23A (1953 ed.).

0547 Stat. 1520 (1933), 41 U.S.C. § 10b (a) (1958).

0847 Stat. 1520 (1933), 41 U.S.C. § 10b (b) (1958). Implementation is found in ASPR 6-205 (22 Jul 1960) and in ASPR, Sec. I, Part 6.

67 Such as contracts for the purchase of supplies, e.g., contracts for the purchase of uniforms or medical instruments. Such contracts will contain "Buy American" clauses, except where the supplies are for use outside the United States. See ASPR 6-104.5 (22 Jul 1960), 7-104.3, 7-204.3. Contractors violating such provisions would, of course, be subject to appropriate action under default clauses, ASPR 8–702(a)(1), 8–707 (a) (11); Art. 11, U.S. Standard Form 32 (1957 ed.).

See 47 Stat. 1520 (1933), 41 U.S.C. § 10b (b) (1958).

affiliated." " Debarment may take place only after the head of the department, bureau, agency or independent establishment which made the contract has found that the "Buy American" provisions of the contract have been violated. The debarment is effective for three years from the date such finding is made public.70 Provisions pertaining to debarments are found in ASPR, Section I, Part 6.

12. Assumption of control by the President. Acting in virtue of his powers as President, President Eisenhower, on 17 December 1954, promulgated Executive Order No. 10582." It will be recalled from the preceding discussion that the act permitted certain exceptions to its requirements where heads of departments or agencies or similar officials made findings or determinations indicating that an exception would be advantageous, for example, a finding that acquisition of American manufactured supplies would be too costly. Executive Order No. 10582 was designed to achieve uniformity throughout the Government with respect to findings and determinations on (1) whether the price of domestic items is unreasonable, and (2) whether the purchase of domestic items is otherwise inconsistent with the public interest. For the purposes of the Executive Order, materials (i.e., "articles, materials and supplies" in the terminology of the act) are deemed to be of foreign origin if the cost of foreign products is fifty per cent or more of the cost of all the products used in the materials.73

72

Section 2 of Executive Order No. 10582 sets standards governing the determination of whether the price is unreasonable and whether the purchase of domestic material would be inconsistent with the public interest. Basic to the operation of section 2 is a comparison of the bid or offered price of domestic material with the sum of the bid or offered price of foreign material and a differential computed by either of two methods. If the price of the domestic materials is

Ibid. It would seem that this should be interpreted to mean only such subcontractors, materialmen and suppliers as have been "affiliated" with the contractor for purposes of the contract containing the "Buy American" Act provision violated by the contractor. It does not seem to be the purpose of the act to direct debarment merely on account of business relationship such as that existing between parent and subsidiary corporations. Conjecturally, at least, the act does not seem to require the debarment of "affiliated" subcontractors, etc., who have not violated or participated in violations of the act with the contractor. Arguably, ASPR 1-603 (a) supports this view, but the issue is

not without doubt.

70 In the event that an individual or firm in debarred status does receive an award and, pursuant thereto, performs his contract, his right to reimbursement for performance rendered has been recorded recognition. See Paisner v. U.S., 150 F. Supp. 835 (Ct. Cl. 1957), cert. denied 355 U.S. 941 (1958) (debarment under the Walsh Healey Act). Of. 33 Comp. Gen. 63 (1953) holding in the same case that the debarred contractor was entitled to no reimbursement; 36 Comp. Gen. 532 (1957) holding that award of a contract to a debarred bidder furnished no basis for payment thereon where the bidder had actual notice of his debarment and where the bidder was on notice of the fact that awards of contracts to debarred bidders was beyond the authority of Government purchasing officers.

71 19 Fed. Reg. 8723 (1954).

72 Preamble, Exec. Order No. 10582, supra note 71.

73 Section 2(a), Exec. Order No. 10582, supra note 71. See 36 Comp. Gen. 323 (1956).

greater than the foreign price as increased by the differential then the domestic price is deemed unreasonable or the purchase of the domestic material is deemed to be inconsistent with the public interest. The differential may be computed either at six percent of the bid or offered price of the foreign materials (including applicable duty and costs incurred after arrival in the United States) or at ten percent of this price exclusive of such duty and costs." The application of either of these standards is subject to a general exception. If the head of an executive agency determines in any case that a greater differential than either of those outlined above is not unreasonable, the provisions of the Executive Order do not apply. However, a report of the facts on which such a determination is based must be made to the President."5

13. Implementing regulations-Department of Defense. Implementation of the Buy American Act and Executive Order 10582 within the Department of Defense is found in Parts 1 and 2 of ASPR, Section VI. Part 1 concerns supply and service contracts; Part 2 relates to construction contracts. In Part 1, the somewhat clumsy terminology "manufactured and unmanufactured articles, materials and supplies" is abandoned in favor of the terms "end products" and "components." End products are the items which are to be acquired for public use and which, pursuant to a contract, are to be delivered to the Government.76 Components are those items which are directly incorporated into end products." In the clause entitled BUY AMERICAN ACT (Jul 1960)78 domestic source end products are defined as (1) those unmanufactured end products mined or produced in the United States or (2) those manufactured end products manufactured in the United States if the cost of their components which are mined, produced or manufactured in the United States or Canada 79 exceeds fifty percent of the cost of all their components.80

In using the latter method, however, if the offered price of foreign materials is less than $25,000, the differential is computed at 10 percent of such offered price exclusive only if applicable duty (1.e., inclusive of costs incurred after arrival in the U.S.). Section 2(c) (2), Exec. Order No. 10582, supra.

Section 5, Exec. Order No. 10582, supra. See also sec. 3, thereof, for a statement of four other situations in which the order is not intended to impinge upon the authority or responsibility of an executive agency.

76 ASPR 6-101 (a) (22 Jul 1960).

77 ASPR 6-101 (b) (22 Jul 1960).

78 ASPR 6-104.5 (22 Jul 1960).

TO The definition of domestic source end product contained in the required clause differs substantively from the definition thereof set forth in ASPR 6-101(d) (22 Jul 1960) in that the former permits treatment of Canadian components as if they were domestic components when applying the fifty percent test. This is but one of the several special treatments accorded Canadian products pursuant to determinations of the Secretaries of the various Defense Departments that it would be inconsistent with the public interest to apply the restrictions of the act under certain conditions to certain types of Canadian products. The reader is referred to ASPR 6-103.5, 6-101 (e), 6-104.4, 6-104.6, 6-501504 and 6-605 (all dated 22 Jul 1960) for additional details which are considered beyond the scope of this text.

80 In applying this test, components consisting of items listed in ASPR 6-105 (22 Jul 1960) (List of Excepted Articles, Materials, and Supplies) shall be considered to have been mined, produced or manufactured in the United States.

Bids and proposals are to be evaluated so as to give a preference to domestic bids.81 However, the extent of the preference is not without limits. Generally, the six percent price differential test for unreasonableness is to be applied in determining which is the low acceptable bid or proposal.82 The regulation contains a Secretarial determination that when this procedure results in the acquisition of foreign end products, the acquisition of domestic source end products would have been unreasonable in cost or inconsistent with the public interest.83

Similarly, Part 2, which relates to construction contracts, introduces new language in an attempt to translate the terms "manufactured" and "unmanufactured articles," et cetera, into words of more practical meaning in the construction industry. Thus, "construction materials" are those "articles, materials, and supplies. . . brought to the construction site for incorporation in the building or work." & "Components" are those "articles, materials, and supplies. . . directly incorporated in construction materials." 85 A domestic construction material is an unmanufactured construction material mined or produced in the United States or a construction material manufactured in the United States if the cost of its components which are mined, produced or manufactured in the United States exceeds fifty percent of the cost of all its components.86 Pursuant to Part 2, solicitations for bids or proposals contain a notice that the Buy American Act requires the use of domestic source construction materials unless such use would be impracticable or would unreasonably increase the cost; should the use of non-domestic construction material be contemplated, such materials should be specifically designated in the bid or proposal and accompanied by data demonstrating that the use of corresponding domestic construction materials would be impracticable or would unreasonably increase the cost. The regulation announces a Secretarial determination that, if in the case of a bid or offer in which the furnishing of non-domestic construction materials is contemplated the below described four conditions exist, the use of

81 For the exceptions to be accorded Canadian products under certain circumstances see references cited in footnote 79, supra; and as to treatment of Panamanian supplies for use in the Canal Zone see ASPR 6-103.6 (22 Jul 1960).

83 ASPR 6-104.4 (b) (22 Jul 1960). The regulation provides for the application of a 12 percent price differential in certain cases in which the low acceptable domestic bid is submitted by a small business concern or a labor surplus area concern. Also provided are exceptions calling for submission of proposed awards to the Secretary of the department concerned in certain cases involving small business or labor surplus area concern bids, and in cases involving essential national security interests or other national interests. (ASPR 6-104.4 (c) (1) (2) (22 Jul 1960).)

83 ASPR 6-104.4 (a) (22 Jul 1960).

84 ASPR 6-201.2 (22 Jul 1960).

86 ASPR 6-201.3 (22 Jul 1960).

86 ASPR 6-201.5 (22 Jul 1960). In applying this test, components consisting of items listed in ASPR 6-206 (22 Jul 1960) (List of Excepted Articles, Materials and Supplies) shall be considered to have been mined, produced or manufactured in the United States. For the special treatment to be accorded Panamanian materials in contracts for construction in the Canal Zone, see ASPR 6-204.6 (22 Jul 1960).