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TAA Application to a Zero Price Item


Whynot

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With regards to complying with the Trade Agreements Act (TAA) could a contractor offer a non-complying item at $0 and by so doing, essentially remove the TAA restriction on that item? Assume that this is a one time buy of a solution of which this one item is a part, (not an IDIQ), that all other avenues have been explored, and that this pricing does not create an unbalanced pricing situation. Not looking for alternatives to this approach, but an assessment of the validity of this approach. Thanks.

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With regards to complying with the Trade Agreements Act (TAA) could a contractor offer a non-complying item at $0 and by so doing, essentially remove the TAA restriction on that item? Assume that this is a one time buy of a solution of which this one item is a part, (not an IDIQ), that all other avenues have been explored, and that this pricing does not create an unbalanced pricing situation. Not looking for alternatives to this approach, but an assessment of the validity of this approach. Thanks.

Some considerations:

Is this a separately priced item?

How has the contractor spread its overhead and other indirect costs across the contract pricing? Has it put all indirect costs on the other items to make this item appear to have "no cost"?

From the competitors' perspective, what would the contract price be for this firm to comply with the TAA requirements? Thus, is the contract priced on the basis of non-conformance with the solicitation requirements?

When you said "all other avenues have been explored" did you mean that no domestic/qualifying source is available for the item? I wasn't sure what that meant.

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I don't think so. See FAR 52.225-6( c ) advises offerors as follows:

The Government will evaluate offers in accordance with the policies and procedures of Part 25 of the Federal Acquisition Regulation. For line items covered by the WTO GPA, the Government will evaluate offers of U.S.-made or designated country end products without regard to the restrictions of the Buy American Act. The Government will consider for award only offers of U.S.-made or designated country end products unless the Contracting Officer determines that there are no offers for such products or that the offers for those products are insufficient to fulfill the requirements of this solicitation.

I don't see anything that says "unless offers of other than U.S.-made or designated country end products are $0." I don't see any reason to infer such a thing, either.

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By "remove the TAA restriction" I assume you mean that you would lower the value below the TAA threshold. For a couple of reasons, I don't think that will do what you want it to do.

The TAA threshold is based on the value of the acquisition, not individual products. The TAA applies when the acquisition is over $203,000 for supply contracts, and $7,804,000 for construction contracts. Because the threshold applies to the value of the entire contract, not individual products, I don't see what good it would do to offer single items at $0. Are you trying to bring the value of the entire contract below the threshold?

If that is your plan, then another problem is that your logic is backwards. If your plan is to offer the noncompliant item at $0 and thus bring the entire contract value below the TAA threshold, then the BAA would apply. The BAA has an even stricter test (domestic end product vs. US or designated country end product). If your product could not meet the TAA test, it certainly would not meet the BAA test.

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Ron,

I agree that it is the total contract value that you have to look at, not the cost of a particular item. I disagree, though, on your statement that the Buy American Act would apply for a $0 contract. The clause only is used "in solicitations and contracts with a value exceeding $25,000." FAR 25.1101(a)(1).

OLG

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True. I was trying to keep the post short and simple and didn't want to get into a minimim threshold. My point is that by lowering your contract value below the TAA threshold, you get into stricter requirements, which is the opposite of what Whynot is trying to accomplish.

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Thanks to all.

Joel,

It may or not be separately priced. ?All other avenues have been explored? is meant to say the item has been determined not to be TAA compliant. Leave it at that. I am trying to somehow remove the requirement to be TAA compliant. I was trying to see if the no cost approach somehow voids or nullifies the need to make any TAA compliance determination at all ? at the individual item level.

Ron,

I agree that the threshold applies to the overall acquisition. I was not trying to get below the TAA threshold for the overall procurement or for the individual item with the no cost approach.

What about something along these lines? If we look at TAA applying to the delivery of product through an acquisition, and acquisition is defined in 2.101 as ?the acquiring by contract with appropriated funds of supplies??; can the delivery of a no cost product (requires no appropriated funds) be considered something other than an acquisition and therefore not subject to TAA?

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Unless your contract is for this product only, then the entire contract is the "acquisition" and the noncompliant product is just one of the products being acquired. Shifting around the prices will not evade the fact that your product is being acquired under that contract. Even if the contract is only for this product, lowering the price (and the entire contract) to 0 runs into the prohibition against augmenting appropriations. In short, without specific statutory authorization, an agency cannot accept free products or services.

I wouldn't use that argument. If, as you've said, you've explored all other options, there's no need to go into any other approaches here.

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Guest Vern Edwards

I don't understand this thread. I'm not steeped in these matters, but I understood that the Trade Agreements Act allows an agency to waive the Buy American Act. Is that right? If so, what is the Trade Agreement Act "restriction" that Whynot is trying to avoid? I don't understand "restriction."

Is the problem that the item in question does not qualify under the Trade Agreements Act for nondiscriminatory treatment? Is Whynot trying to get around the Trade Agreements Act eligibility rules so that the item can qualify for nondiscriminatory treatment?

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Vern,

The application of trade agreements comes in two different forms. If an acquisition is subject to trade agreements, but not the WTO Government Procurement Agreement, then an agency will waive the restrictions of the Buy American Act for offers of end products from certain countries that have entered into a trade agreement with the United States. See FAR 52.225-3 and -4. The Government will still accept offers of foreign end products from countries that do not have a trade agreement with the U.S., but such offers would be subject to the BAA evaluation preference.

If an acquisition is subject to the WTO GPA, then the Government will only accept offers of end products from "designated countries", unless it does not receive any offers of end products from "designated countries." See FAR 52.225-5 and -6. I assume that the solicitation that Whynot is writing about is subject to the WTO GPA because it contained FAR 52.225-6.

What Whynot is proposing, lowering the price of the end item subject to the BAA evaluation preference, may work if the acquisition were not subject to the WTO GPA.

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So where are we now. We know this much from Whynot's post: the acquisition value is over $203,000 and is subject to the WTO GPA, the TAA purchase restriction applies, and his product is considered foreign, i.e. not US-made or designated country. He also says that the product is part of a solution, whatever that means. We also don't know whether this is at the offer stage or Whynot has a contract and is about to deliver a noncompliant product, but it sounds like he's trying to structure an offer to get around the purchase restriction.

I think we've agreed that because this is subject to the WTO GPA, shifting around the prices won't matter. Compliance is based on the country of origin of the product, not the price. Furthermore, dropping the price of that product $0 won't make this a "non-acquisition."

However, there are still some possibilities. Whynot has said that the product is not TAA compliant, but is he sure that it needs to be? There are situations under which an individual product in an acquisition can be foreign. For example, if award will be made only on a group of line items, the entire offer is considered domestic if the price of the domestic end products are at least 50% of the total offer price. See example 2 at FAR 52.504-4(:). In addition, for construction contracts, the FAR defines an entire emergency life safety system as a single product, regardless of how the individual parts of it are brought to the site. That means the system can be domestic even if some individual parts are foreign.

There is more to consider. Whynot says this is for a "solution." He should confirm whether any origin requirements apply to every individual product, each line item, or the entire acquisition as a whole. There is some complicated case law on systems and what the origin test applies to.

Don also suggested that lowering the price might work if this were not subject to the WTO GPA, i.e. under $203,000. That raises interesting issues, but this is already long enough.

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