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.