Protest challenging a solicitation’s domestic source restriction is sustained, where the item being restricted qualified for an exception to the Berry Amendment and was not subject to Buy American Act restrictions or market research requirements, and where the agency failed to otherwise establish the reasonableness of its need for the restriction.
Mechanix Wear Inc. challenged the terms of a request for proposals issued by the Defense Logistics Agency for the procurement of Army combat gloves with capacitive capability, i.e., the capability to be used with touchscreens. The protester argued the solicitation improperly applied the Berry Amendment to require the combat gloves be made with domestic leather.
Mechanix argued the prohibition on foreign goat/kidskin leather is unduly restrictive of competition and contrary to governing regulations. According to the protester, the regulations implementing the Berry Amendment expressly provide for an exception from the amendment’s domestic source restrictions for goat and kidskins.
Specifically, the DFARS regulations implementing the Berry Amendment state that the applicable restriction does not apply to items listed in FAR 25.104(a) as nonavailable articles, which includes goad and kidskins. Nonavailable articles are defined as those articles for which there has been a “class determination” that domestic sources can meet only 50 percent or less of total U.S. government and nongovernment demand.
In response to this argument, the agency asserts that the meaning of the exception cannot be understood in isolation and instead must be interpreted in conjunction with other considerations. The agency argued that these considerations make clear that the agency is required to conduct market research to determine the availability of articles before concluding they qualify for a nonavailability exception.
More specifically, the agency noted that FAR 25.104(a) provides that the nonavailable articles listed in that section “have been determined to be nonavailable in accordance with [FAR] 25.103(b)(1)(i).” In turn, Section 25.103(b)(1)(i) states that this nonavailability determination “does not necessarily mean that there is no domestic source for the listed items, but that domestic sources can only meet 50 percent or less of total U.S. Government and nongovernment demand.” Further, DLA noted that FAR 25.103(b)(1)(ii) specifically requires the contracting officer to perform market research before relying on the list in FAR § 25.104(a), and FAR § 25.103(b)(1)(iii) states that the nonavailability determination does not apply if the contracting officer learns at any time before the close of the solicitation that there is sufficient domestic supply. Taken together, DLA argued that these provisions require the agency to conduct market research before concluding that an article qualifies for the nonavailability exception, including when applying that exception to the Berry Amendment’s domestic sourcing restrictions.
However, GAO found no support for DLA’s assertion that the market research provisions of FAR § 25.103(b)(1)(ii) and (iii) are applicable to the Berry Amendment’s domestic sourcing restrictions. Without such a connection, GAO concluded DLA had not established that it has the authority to use the FAR Buy American Act’s market research provisions to evade the applicability of the “nonavailable articles” exception to the Berry Amendment.
GAO noted the DFARS clearly states that acquisitions in certain categories are not subject to the Berry Amendment restrictions, without limitation or carve outs. Nor do the DFARS sections reference the market research contemplated in certain subsections within FAR § 25.103, which is a Buy American Act provision. Therefore, GAO held that the plain language these DFARS sections does not support the agency’s position that the applicable Berry Amendment exception is itself subject to an exception when the agency determines, via market research, that the applicable item is sufficiently available for purposes of the specific acquisition at issue.
Similarly, GAO found the language of FAR 25.103 does not reflect an intention for that provision to apply to Berry Amendment restrictions. Instead, the provision addresses exceptions to the Buy American Act. And in fact, FAR 25.103(b)(1) directs the contracting officer, upon making an availability determination, to ensure that the appropriate Buy American statute provision and clause are included in the solicitation.
DLA argued that GAO should consider the regulatory language in the context of the history of the language at issue, as well as the underlying policy. For example, DLA noted that the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council amended the FAR to clarify the intent of the nonavailability list provided at FAR 25.104(a) and to emphasize the need to conduct market research. Further, DLA’s senior procurement executive issued a policy memorandum requiring that market research be conducted for items listed in FAR 25.104(a), particularly for those items covered by the Berry Amendment. In light of this history, DLA argued that its interpretation of the regulation was appropriate.
However, GAO disagreed, finding the meaning of the regulatory language clear and plain on its face. Therefore, there was no reason for GAO to look beyond the language itself to reach its conclusion. Further, GAO found nothing in the history cited by DLA signaling an intention to apply the market research requirements contained within FAR § 25.103 to Berry Amendment restrictions. Nothing in the final rule mentions the Berry Amendment and the agency cited no support in the history of the relevant regulations to suggest those sections were meant to be subject to FAR 25.103.
Although this reading of the relevant FAR and DFARS sections creates a divergence between the nonavailability determinations conducted under the Berry Amendment and the Buy American Act, GAO found this distinction arose directly from the language of the regulations themselves. The Buy American Act provisions contemplate that a nonavailabilty determination will take into account the agency’s market research and therefore the Buy American Act will apply to items on the nonavailable list when the CO determines there is a sufficient domestic source. In contrast, the Berry Amendment DFARS sections do not cite or incorporate FAR 25.103, and instead state that the Berry Amendment restrictions do not apply to items listed at FAR 25.104(a). Nothing in this language, which applies to items found to be nonavailable in relation to total market demand, anticipates overriding the exception where the contracting officer finds the item to be domestically available in sufficient quantity and quality to meet the agency’s acquisition need.
In sum, GAO concluded that the DFARS sections implementing the Berry Amendment do not require the agency to impose a domestic restriction on the goat/kidskins at issue since this item qualifies for an exception. Because this domestic restriction is not required by an applicable regulation, and because the agency did not otherwise assert that the restriction is reasonable or is needed to meet DLA’s minimum needs, GAO found the agency had not established that the restriction was reasonably necessary.
The agency argued that Mechanix was not competitively prejudiced by this issue, because it had submitted a proposal in response to the solicitation. However, the protester demonstrated that it received favorable pricing terms and high-quality items due to its relationship with its foreign supplier. Because Mechanix does not have a similar relationship with a domestic supplier, the protester argued it was not able to propose its highest possible quality product and lowest possible price. GAO agreed that the protester was competitively prejudiced.
GAO recommended that DLA either provide further reasonable support for its decision to require that these gloves be made with domestic leather, consistent with the applicable regulations; or (2) amend the solicitation’s restriction on goat/kidskins consistent with this decision and the applicable regulations. GAO also recommended the agency reimburse the protester’s costs.
Mechanix Wear Inc. is represented by Frank S. Murray, David T. Ralston, Jr., Micah T. Zomer, and Krista A. Nunez of Foley & Lardner LLP. The government is represented by Allison Colsey Eck, and Michael D. McPeak, Defense Logistics Agency. GAO attorneys Alexander O. Levine and Jennifer D. Westfall-McGrail participated in the preparation of the decision.
