BNUMBER:  B-260623.5
DATE:  July 7, 1995
TITLE:  TRW, Inc.

**********************************************************************

Matter of:     TRW, Inc.

File:          B-260623; B-260623.2; B-260623.3; B-260623.4;  
               B-260623.5

Date:          July 7, 1995   95-2 CPD  92
                                                            
John W. Chierichella, Esq., James M. Weitzel, Esq., Catherine E. 
Pollack, Esq., and Jonathan S. Aronie, Esq., Fried, Frank, Harris, 
Shriver & Jacobson, for the protester.
Peter L. Wellington, Esq., Jerald S. Howe, Jr., Esq., and Clifford E. 
Greenblatt, Esq., Steptoe & Johnson, for Hughes Aircraft Company, an 
interested party.
Deidre A. Lee, Bernard J. Roan, Esq., and Paul Brundage, National 
Aeronautics and Space Administration, for the agency.
Andrew T. Pogany, Esq., Office of the General Counsel, GAO, 
participated in the preparation of the decision.
                                                            
DIGEST

1.  In reviewing protests concerning the evaluation of proposals, we 
will examine the agency's evaluation to ensure that it had a 
reasonable basis.  The fact that a protester does not agree with the 
agency's evaluation does not render the evaluation unreasonable.

2.  Source selection officials in negotiated procurements have broad 
discretion in determining the manner and extent to which they will 
make use of the technical and cost evaluation results.  In exercising 
that discretion, they are subject only to the tests of rationality and 
consistency with the established evaluation factors.
                                                            
DECISION

TRW, Inc. protests the award of a fixed-price contract to Hughes 
Aircraft Company under request for proposals (RFP) No. RFP5-58651/486, 
issued by the National Aeronautics and Space Administration (NASA) for 
three satellites designated as Tracking and Data Relay Satellites 
(TDRS) H, I, and J.  TRW's principally argues that the agency failed 
to identify its proposal as offering the "greatest overall benefit to 
NASA" by misevaluating technical proposals and by not properly 
considering, consistent with the RFP's evaluation scheme, the actual 
costs the agency will incur in providing launch services to the 
successful contractor to place the satellites in orbit.[1]

We deny the protest.

The TDRS program is a critical component of NASA's "Space Network."  
The TDRS system includes the satellites placed in geostationary orbit 
with the Earth and the ground facilities at White Sands Complex, New 
Mexico.  The TDRS system provides high volume, continuous 
communication capability for almost all low-Earth orbit missions, 
including the Space Shuttle, the Hubble Space Telescope, other 
scientific satellites, and various classified missions.  As stated 
above, NASA, under this procurement, is purchasing three TDRS 
spacecrafts for three consecutive launches, plus associated telemetry 
monitoring and ground station modifications.

The RFP was issued on April 29, 1994, and solicited fixed-price 
proposals for the satellites.  Section M.1.1 of the RFP stated as 
follows:

     "The evaluation factors are Mission Suitability, Price, Relevant 
     Experience and Past Performance, and Other Considerations.[2]  
     The findings will be presented to the Source Selection Official 
     [(SSO)].  The [SSO] will make a selection decision based upon 
     that combination of proposal features under all of these 
     Evaluation Factors which provides the greatest overall benefit to 
     NASA, including consideration of NASA resources impact."  
     (Emphasis supplied by the protester.)

Section M.5 of the RFP contained the Other Considerations factor, 
which included eight subfactors.  The first of the three significantly 
more important subfactors was entitled "NASA Resources Impact," which 
stated as follows:

     "NASA Resources Impact consists of one time and recurring costs 
     or savings not covered by the TDRS H, I, J contract but that are 
     directly caused by the offeror's proposed approaches, designs and 
     schedules [during the entire lifetime of the spacecrafts].  
     Evaluation of NASA Resources Impact includes consideration of 
     risk associated with such costs and/or savings that are a 
     consequence of risks (e.g., technical, schedule, cost) embodied 
     in the offeror's proposal.

     "Cost estimates for the Government-provided launch services most 
     appropriate for the proposed spacecraft will be derived from NASA 
     contracts and from NASA estimates. . . . 

     "Data from this subfactor will be considered together with data 
     from the Price evaluation factor to determine the impact to NASA 
     resources.

     "Examples of relevant NASA Resources Impacts (costs and/or 
     savings, one-time or recurring) include the cost to NASA of 
     launch services provided by the Government that are required to 
     launch successfully all TDRS H, I, J spacecraft to be delivered 
     under this contract . . ."[3]  (Emphasis in original.)

Initial proposals were received from TRW and Hughes by the initial 
closing date of June 15, 1994.  After the agency's Source Evaluation 
Board (SEB) completed its initial review, the agency included both TRW 
and Hughes in the competitive range.  Between October 20, 1994, and 
January 23, 1995, the agency conducted written and oral discussions 
with TRW and Hughes (approximately 300 discussion questions were 
directed to each firm).  In addition to initial proposals, the agency, 
during the course of this procurement, received from both offerors 
extensive written responses to discussion questions, revised 
proposals, and best and final offers (BAFO), which included each 
offeror's "model contract."  BAFOs and model contracts were received 
by the agency on January 30, 1995.

In its offer, Hughes proposed to use the larger, more expensive, and 
more powerful (heavier payload capacity) Atlas rocket as its ELV; TRW 
selected the smaller capacity Delta rocket as its ELV because it was 
less expensive and had higher reliability.  The SEB evaluated BAFOs 
and concluded, by way of summary, essentially as follows with respect 
to the Hughes proposal:

     "The [Hughes] proposal . . . is based on the use of a flight 
     proven communications satellite bus which has been developed and 
     flown on numerous commercial and government programs [and the] 
     payload hardware has been developed, prototyped and tested. . . .  
     The chosen launch vehicle is the standard [Atlas], which provides 
     ample spacecraft mass contingency and associated lift-off mass 
     margin.  The robust fuel and power budgets provide for more than 
     sufficient margin for the required mission life."

In short, the agency states that Hughes proposed a proven and 
relatively risk-free "production-model spacecraft coming off its 
spacecraft assembly line [without] the need for Hughes to `push the 
envelope' on development of spacecraft engine fuel efficiency, fuel 
tank size and state-of-the-art lightweighting."  The agency states 
that Hughes' choice of the more powerful Atlas as its ELV also 
relieved the spacecraft of some of the burden of providing the 
propulsion capability required to lift the spacecraft from low-Earth 
orbit to geostationary earth orbit.

Concerning TRW's proposal, the SEB found essentially as follows:

     "The TRW proposal [is] based on [deleted].  The designs are to 
     some degree based on [deleted]. . . .  The fuel budget is barely 
     adequate to support the required mission life.  TRW, however, has 
     indicated that additional mass growth could be handled by 
     [deleted].  The final [(backup)] approach to support additional 
     spacecraft mass growth would be [TRW's stated [deleted]].

               .    .    .    .    .

     "TRW's approach to overall mission design forced a pattern of 
     design choices that reduce weight but increase technical and 
     schedule risk [deleted], the overall risk to the program is 
     increased significantly by the choice of the standard [Delta 
     rocket].  The overall mission design and associated budget 
     analysis and calculations appear to indicate that [deleted]."

In short, the agency states that TRW's choice of the Delta as its ELV 
forced the firm to attempt to "fit" its spacecraft on the smaller and 
cheaper ELV which, in turn, forced TRW to make numerous design and 
mission profile tradeoffs and assumptions in its technical proposal 
which added risk to meeting NASA's requirements.

The SEB's final evaluation of Hughes' and TRW's proposals resulted in 
the following ratings, with the numeric Mission Suitability Factor 
point scores in parentheses:

                            Hughes               TRW

Mission Suitability        Very Good (896)      Good (594)
Price                      $481.6 million       [deleted]
Relevant Experience
and Past Performance       Very Good            Very Good
Other Considerations       Very Good            Very Good[4]

Based on the findings of the SEB, and his own review, the SSO selected 
Hughes for award.  This protest followed.

TRW's ELV COST EVALUATION CONTENTIONS

According to the protester, NASA officials visited TRW in 1993 and 
"exhorted" the firm that this visit "[was] motivated by the overall 
interest [of NASA] in executing the TDRS program consistent with the 
theme of `better, faster and cheaper;'" that NASA would prefer to 
spend less money on its own "infrastructure," including TDRS; that the 
next generation of TDRS would have to perform "at the lowest cost to 
NASA;" and that the NASA officials encouraged TRW to "trust its 
technology" to develop TDRS satellites that could be launched on the 
Delta ELV to reduce overall costs.[5]  In response, TRW states that it 
developed a TDRS satellite capable of being launched on the cheaper 
Delta.  TRW argues that this procurement was a "best value" 
procurement ("greatest overall benefit") which required the agency, 
under the terms of the RFP, to quantify and evaluate (in essence as a 
price evaluation factor) the actual out-of-pocket savings NASA would 
realize from TRW's use of the cheaper Delta ELV rocket.

Solely for purposes of our decision, we adopt the protester's 
interpretation of the RFP with respect to the alleged requirement for 
the agency to consider the Delta launch savings in its determination 
of overall cost to the government as a price factor.  However, the 
issue still remains as to which offeror submitted the proposal that 
represented the greatest overall benefit to the government under the 
specific terms of the RFP considering technical and cost 
considerations, including launch costs.

TECHNICAL EVALUATION

In reviewing protests concerning the evaluation of proposals, we will 
examine the agency's evaluation to ensure that it had a reasonable 
basis.  RCA Serv. Co.; et al., B-218191; B-218191.2, May 22, 1985, 
85-1 CPD  585.  The fact that a protester does not agree with the 
agency's evaluation does not render the evaluation unreasonable.  
Logistic Servs. Int'l, Inc., B-218570, Aug. 15, 1985, 85-2 CPD  173.  
Source selection officials in negotiated procurements have broad 
discretion in determining the manner and extent to which they will 
make use of the technical and cost evaluation results.  Grey 
Advertising, Inc., 55 Comp. Gen. 1111 (1976), 76-1 CPD  325.  In 
exercising that discretion, they are subject only to the tests of 
rationality and consistency with the established evaluation factors.  
Id.

Technical Risk

TRW argues that the agency misevaluated technical proposals because 
the agency unfairly and improperly assessed risks against TRW based on 
TRW's proposed use of the Delta rocket even with its backup [deleted] 
and gave undue emphasis to technical risks during its evaluation.

Initially, we conclude that the RFP, as finally issued, advised 
offerors that the technical risks of each offeror's proposed approach, 
especially in the Mission Suitability factor, would be a major element 
in the technical evaluation.  For example, the RFP stated that the 
"Mission Suitability evaluation factor [would encompass evaluation of] 
the risks associated with the proposal in this area" (Section M.1.2); 
system considerations subfactor includes "the programmatic risks and 
risk mitigation approaches associated with these designs" (Section 
M.2.1); systems engineering management includes "how programmatic risk 
will be identified and managed" (Section M.2.1); spacecraft bus 
element evaluation encompasses "the programmatic risks and risk 
mitigation approaches associated with these designs" (Section M.2.1); 
spacecraft payload element evaluation encompasses "the programmatic 
risks and risk mitigation approaches associated with these designs" 
(Section M.2.1); and the component and spacecraft verification, 
integration, test and launch support element includes an evaluation of 
the "programmatic risks and risk mitigation approaches associated with 
these efforts" (Section M.2.2).  Moreover, we think that consideration 
of the risks involved in an offeror's proposed technical approach, 
especially for a life-critical item, is inherent in the evaluation of 
proposals.  See Information Spectrum, Inc., B-256609.3; B-256609.5, 
Sept. 1, 1994, 94-2 CPD  251.

Therefore, notwithstanding TRW's expectations, we think that NASA's 
evaluation of risk--the probability of (and the degree of certainty 
of) the success of mission requirement--was consistent with the RFP 
evaluation terms and that TRW was on notice that an evaluation of risk 
would be an element of the best value determination.  Accordingly, we 
next turn our discussion to the major evaluation factors as evaluated 
by the agency.

Mission Suitability

Under the Mission Suitability factor, the agency determined the Hughes 
proposal to be substantially technically superior (896 versus 594 
points) to the TRW proposal.  While the protester raises numerous 
technical arguments, some of which we mention below, we essentially 
limit our discussion to a comparison of the basic, fundamental 
technical approaches of the two offerors which substantially 
distinguish the technical merits of the two proposals as submitted to 
and as evaluated by the agency.

In its technical proposal, Hughes combined its successful commercial 
satellite operations, including a flight-proven bus, launch on the 
more powerful Atlas with its proven interface, and conservative weight 
margins with room for weight growth.  Specifically, Hughes' spacecraft 
bus design was based on the HS601 commercial communication satellite 
bus which had flown 12 times previously and provided a low risk 
approach to the overall mission design.  Hughes' bus required little 
additional development to accommodate the TDRS.  Hughes' proposal 
stated:

     "Several features of our TDRS bus come from the Navy UHF F/O 
     HS-601 government program which benefits from commercial design 
     practice in the development, manufacturing, integration, and test 
     of the spacecraft bus.  These practices are applicable to TDRS, 
     and because most of our bus is derived from this program, over 80 
     [percent] of the bus is flight proven, resulting in little 
     development and no unique manufacturing processes."

In addition, Hughes' selection of the Atlas was found to present 
additional advantages to the TDRS contract since its "throw weight 
allows risk reducing margins of fuel, power, and payload weight."  The 
SSO summarized certain of the other strengths of Hughes' proposal:

     "Major strengths of the [Hughes] proposal included a systems 
     engineering management approach and process that is comprehensive 
     and extensive; a selected launch vehicle which is flight proven 
     and provides significant weight and volume margins; a single 
     access antenna which provides significantly increased coverage; a 
     Ka-Band return performance which exceeds the RFP's requirement; a 
     strong, flight-proven spacecraft bus and subsystem heritage; two 
     dedicated channels for space to ground links; and two 
     simultaneous multiple access forward channel capabilities, both 
     of which exceed the RFP's requirements; [and] an established 
     spacecraft verification program that minimizes risk."

Thus, the record shows that the agency properly found that Hughes 
proposed a proven, reliable and relatively risk-free satellite system.  
The protester itself does not essentially dispute the agency's 
determination regarding the Hughes proposal.

In contrast, TRW recognized [deleted] TRW to attempt to develop its 
TDRS for the smaller and less expensive Delta ELV.  In its initial 
proposal, TRW proposed [deleted] that would address weight margin 
problems with that ELV.  [Deleted] as another method of alleviating 
weight margin problems.  [Deleted].  As a "fallback position," TRW 
stated that it would [deleted], and that it would [deleted]. After 
discussions with the agency, TRW, in its BAFO, [deleted].  TRW's 
"fallback position" was that [deleted].  Also, TRW's [deleted] "risk 
mitigation" plan was [deleted].  The protester itself states as 
follows:

     "The [Delta], while less expensive, is also less powerful.  
     Hence, it is axiomatic that the [Delta] would have lower weight 
     margins than an Atlas . . . [TRW therefore] would have to be 
     [deleted].

     "In addition to [deleted] weight and weight margin, TRW's risk 
     mitigation plan included  [deleted]:

                    [Deleted].

Of particular concern to the agency was TRW's proposed mass budget and 
thin weight margin which the agency believed was "insufficient to 
resolve any significant development problems encountered during 
design, development, and integration and test phases, with regards to 
schedule and throw weight capability of the launch vehicle."[6]  The 
agency also believed that the Delta, in order to carry more weight, 
would require [deleted] rather than just [deleted] including 
[deleted].  While the agency found that these features may be 
necessary and adequate for the Delta to maintain the proper weight 
margin, "[t]he cost of some of these [alternative fallback features] 
is substantial and creates an incentive for the contractor to select 
higher risk, weight saving solutions to spacecraft design problems."

Based on this record, we conclude that the agency reasonably evaluated 
the Hughes technical proposal as significantly superior than the TRW 
technical proposal.  In short, we agree with the SSO that "[s]imply 
put, [Hughes' technical] approach was safer and far more likely to 
succeed than TRW's."  In simple terms, Hughes' basic, fundamental 
approach was to propose a proven, reliable, relatively risk-free 
(nearly production-line) system.  The protester does not persuasively 
argue otherwise.  In contrast, the agency found that TRW's basic, 
fundamental approach to employ a smaller Delta ELV which forced the 
firm to modify, develop, or innovate much unproven hardware to "fit" 
the Delta caused such significant risks to the successful completion 
of the program that TRW itself was forced to offer extensive, 
[deleted] risk mitigation plans (including, as a last resort, 
[deleted]) which were increasingly expensive and which carried with 
them their own risk.

Specifically, while TRW argues that the agency did not adequately 
consider these mitigation plans in assessing risk, we think the agency 
reasonably found that these extensive, [deleted] mitigation plans 
presented additional risks to the agency because, under this 
fixed-price contract, TRW, under this scheme, could be forced to make 
major, [deleted] cost/technical risk trade-offs [deleted].  While the 
RFP contained penalties for unsuccessful performance, the agency 
reasonably decided that TRW, within its own business discretion, would 
still have the contractual right to determine for the agency how much 
risk to accept (or how much money to lose) [deleted] in the mitigation 
plan process.[7]  We therefore conclude that TRW's approach 
[deleted]--was reasonably considered by the agency as significantly 
inferior to Hughes' proven and reliable system.[8]  In short, we find 
that the agency reasonably determined that the Hughes proposal was 
significantly superior under the Mission Suitability factor.[9]

Price Factor

As stated above, Hughes offered a price (exclusive of ELV costs) of 
$481.6 million;  TRW's price was [deleted].  Inclusive of ELV costs, 
TRW alleges that it would have been the low offeror by a net savings 
range of [deleted] to [deleted] after Hughes' price is properly 
evaluated (as including Atlas launch costs) for a total price of 
$699.8 million.[10]

We have examined the actual prices for the Delta launches and conclude 
that the net savings to the government from TRW's use of the Delta is 
substantially less than the lowest level of TRW's claimed savings 
range.[11]  Based on our in camera review of the record, we find that, 
given the fact that the procurement is in the range of $700 million
inclusive of launch costs, the percentage difference between the two 
offerors, inclusive of these costs, is minimal.[12]

SELECTION DECISION

Given that the agency reasonably determined that the Hughes technical 
proposal was significantly superior to the TRW technical proposal, and 
given the minimal difference in price between the two offerors 
inclusive of launch costs, we conclude that the agency could 
reasonably determine that the Hughes proposal represented the best 
overall value to the government.

The protest is denied.

     Robert P. Murphy
     General Counsel
1. PROCUREMENT
Competitive Negotiation
Offers
Evaluation
Administrative discretion

2. PROCUREMENT
Competitive Negotiation
Contract awards
Source selection boards
Administrative discretion

1. The RFP stated that NASA, at its own expense, will provide the 
expendable launch vehicles (ELVs) which are necessary to transport the 
successful offeror's three satellites into low Earth orbit.  According 
to the protester, these ELV out-of-pocket costs of the agency were not 
properly and fully considered in selecting the proposal which 
represented the greatest overall benefit to NASA as required by the 
RFP.  We note, by way of explanation, that under the RFP the 
contractor was required to provide, along with the three satellites, 
spacecraft capabilities with propulsion capacities to boost the three 
satellites from low Earth orbit (achieved by the ELVs), through a 
transfer orbit, into geostationary earth orbit.

2. The RFP stated that these four evaluation factors were of 
"essentially equal importance."

3. An important feature in an offeror's technical approach and design, 
as well as in the "Resources Impact" to NASA, was the offeror's 
selection of the government-furnished expendable launch vehicle (ELV) 
that would place the satellites in low-Earth orbit.  The RFP permitted 
the offeror to propose the most appropriate ELV; the RFP did not state 
a preference for any particular ELV.  These ELV costs are borne by the 
government, are not covered by the TDRS contract, and are "launch 
services" costs within the meaning of the term in the "NASA Resources 
Impact" subfactor provision quoted above.  

4. The agency adjectivally rated cost estimates for 
government-provided launch services under the Other Considerations 
factor rather than directly considering them as a finite, 
out-of-pocket price evaluation factor.  TRW's rating in Other 
Considerations factor was increased to a Very Good rating by the SSO, 
despite a previous "good" rating by the SEB, because of the potential 
cost savings of its proposed use of the Delta rocket.

5. The protester states that NASA at about this time also offered oral 
and written testimony to Congress that the TDRS satellites would be 
procured on a "best value" basis and that overall cost, including 
launch services, would be considered in the selection process.

6. The agency believed that a modified spacecraft design should 
possess a 25 percent mass contingency prior to Preliminary Design 
Review to be classified as "prudent."  TRW's mass contingency was less 
than [deleted] percent.

7. TRW, for example, argues that it offered to [deleted].  The 
validity of this [deleted] is in dispute, and we discuss it below.  
However, if we accept the protester's argument at face value, and 
using [deleted] by invoking the last "step" of its mitigation plan.  
[Deleted].  Since TRW itself proposed to [deleted] at its own 
discretion, we think the agency's evaluation of the risks of TRW's 
overall approach including all its mitigation plans was proper.

8. Since we find that the agency reasonably found significant fault 
with TRW's technical approach we need not discuss other technical 
aspects of the protest.  For example, TRW argues that the SSO, without 
explanation, recharacterized as substantial technical and schedule 
risks certain portions of its technical proposal that the SEB 
considered "minor"; that NASA improperly evaluated as a schedule risk 
the proposed time frame for selecting an alternate ELV; that NASA 
improperly evaluated certain weight margins on the spacecrafts; and 
that Hughes was improperly credited with certain technical 
enhancements.  None of these issues alter the agency's reasonable 
determination that TRW's basic technical approach was faulty and 
excessively risky.

9. With regard to the Relevant Experience and Past Performance factor, 
the agency rated both firms as essentially equal ("Very Good").  The 
record shows that the agency found both firms are very competent and 
experienced contractors and there is no basis to question this 
determination by the agency.  Concerning the Other Considerations 
factor, NASA also finally rated both firms as "Very Good" and as 
essentially equal.  The protester does argue under this factor that 
the agency improperly evaluated Hughes' financial resources based on 
an allegedly illusory financial commitment letter from Hughes' parent 
company, GM Hughes Electronics.  However, regardless of the ultimate 
value of this letter, we have no basis in this record to disagree with 
the agency's finding that Hughes Aircraft is fully capable of 
financing successfully its own contract.  We therefore have no basis 
to disturb the agency's determination of essential equality under the 
Other Considerations factor.

10. We are unable to precisely reveal TRW's evaluated price inclusive 
of the Delta ELV launch costs because the Delta launch prices are 
subject to a permanent injunction by a federal district court 
enjoining their release outside the government.  We will therefore 
only refer to them and their net effect on TRW's proposed prices in 
general terms.

11. We note that TRW's own pre-proposal pricing strategy assumed that 
the firm would have to [deleted] to successfully win this contract 
[deleted].  TRW simply did not do so.

12. We also note that should TRW decide to [deleted] for technical or 
other reasons, the claimed cost savings to NASA from TRW's use of the 
cheaper Delta launches would disappear entirely.  TRW argues that it 
[deleted].  It is thus not clear that TRW, because of [deleted], 
committed itself to [deleted].  Generally, a commitment of this nature 
must be unequivocal. See J.W. Bateson, GSBCA No. 4596, 77-1 BCA  
12,740 (1977); Franchi Constr. Co., Inc., ENG BCA Nos. 2540 and 2541, 
1964 Eng. BCA LEXIS  82 (1964); cf. Dresser Indus., Inc., 67 Comp. 
Gen. 163 (1987), 87-2 CPD  634.