7 CFR Appendix A to Part 1787 - Appendix A to Part 1787—Product Procurement

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Appendix A to Part 1787—Product Procurement

This appendix shows an example of how the 6 percent differential is applied to determine award of a bid. In response to a request for bids for a digital central office a borrower receives four responsive bids to the specification, three domestic bids and one nondomestic bid. The nondomestic bid is the apparent low bid. We will consider in our analysis the nondomestic bid and the lowest domestic bid as shown in the following table.

Nondomestic bid Domestic
Total materials $895,000 $920,000
Installation 155,000 177,000
Freight +1,000 +1,500
Total bid $1,051,000 $1,098,500

Please note that once the product has been determined as nondomestic, the 6 percent cost differential shall be applied to all the material content in the nondomestic bid, even if the nondomestic product includes domestic components.

In this example, 6 percent of the total material content in the nondomestic bid ($895,000) equals $53,700. This cost differential is added to the total nondomestic bid as shown in the following table.

Total of the nondomestic bid $1,051,000
6% of the all material cost +53,000
Total evaluated bid $1,104,700

This total evaluated bid, (that is the nondomestic bid plus the 6% of the cost of its material content), is compared with all the domestic bids for award of the bid. In our example the domestic bid ($1,098,500) is lower than the nondomestic evaluated bid ($1,104,700).

The domestic bid becomes the low bid and the domestic bidder gets award of the bid. This product is classified as domestic since the cost of the domestic components used in the product constitutes more than 50 percent of the cost of all the components used.