Recently, in Cosette Pharmaceuticals, Inc. v. United States, the Court of Federal Claims sustained a bid protest, finding that the agency misapplied the Trade Agreements Act (“TAA”) during proposal evaluation. That decision is a helpful reminder that the Court can be a hospitable forum for challenging an agency’s application of domestic sourcing regulations.
The Buy American Act (“BAA”) requires federal agencies to procure only domestic end products unless: (1) doing so would be inconsistent with the public interest or would result in unreasonable cost; or (2) suitable domestic products are not available in sufficient quantity or quality. 41 U.S.C. § 8302; FAR 25.103. However, if the procurement exceeds a certain threshold—currently $174,000 for most non-construction procurements—the TAA waives the BAA for designated countries, such as those that have a trade agreement with the United States. 19 U.S.C. § 2511(a); FAR 25.402. In such cases, the procurement is restricted to end products made in the U.S. or the designated countries. FAR 25.402(a); FAR 25.403(c).
The TAA has exceptions, one of which lifts the procurement restriction when the offers of U.S.-made or designated country end products are insufficient to fulfill the government’s requirements (i.e., the “insufficiency exception.”). 19 U.S.C. § 2512; FAR 25.403(c).
In Cosette, the protester was a brand-name manufacturer who offered a product manufactured in Germany, a TAA-designated country. The protester submitted the only TAA-compliant offer, but the Department of Veterans Affairs (“VA”) eliminated protester from the competitive range on the ground that its price was unreasonably high. Since there was no TAA-compliant offer in the competitive range, VA awarded the contract to a competitor offering a lower-price generic made in India, a non-designated country.
In response to the protest, VA argued that the insufficiency exception to the TAA applied because Cosette was the only TAA-compliant offeror and its price was not fair and reasonable. VA further contended that it was within the contracting officer’s discretion to eliminate Cosette from the competitive range prior to evaluating TAA compliance.
The Court disagreed. Noting that, unlike the BAA, the TAA includes no unreasonable cost exception, the Court held that “the TAA does not permit an agency to declare a TAA-compliant offer ‘insufficient to fulfill the requirements of the United States’ simply because its price compares unfavorably to non-TAA-compliant alternatives.” Consequently, VA’s price reasonableness evaluation was improper because it compared Cosette to non-TAA-compliant offerors.
The Court also rejected VA’s argument that it was entitled to exclude Cosette from the competitive range, explaining: “To treat exclusion from a competitive range as automatically meeting the ‘insufficiency’ exception would impermissibly . . . permit[] agencies to use a competitive range determination to evade the prohibitions of the TAA whenever a TAA-compliant offer was less attractive relative to its non-TAA-compliant rivals.”
The Court noted that VA had options beyond making award to Cosette, such as using the TAA’s national interest waiver under 19 U.S.C. § 2512(b)(2), evaluating the reasonableness of Cosette’s price in a competitive range of one, or canceling the solicitation and purchasing through the open market.
Domestic sourcing regulations can be complex for contractors and agencies alike. Cosette demonstrates that protesting at GAO is not the only viable option for disappointed offerors who believe that the agency has misapplied such regulations.