TITLE:  Novavax Inc., B-286167; B-286167.2, December 4, 2000
BNUMBER:  B-286167; B-286167.2
DATE:  December 4, 2000
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Novavax Inc., B-286167; B-286167.2, December 4, 2000

Decision

Matter of: Novavax Inc.

File: B-286167; B-286167.2

Date: December 4, 2000

Frank M. Rapoport, Esq., Alison L. Doyle, Esq., Dana B. Pashkoff, Esq., and
David Kasanow, Esq., McKenna & Cuneo, for the protester.

Michael J. Lacek, Esq., and Anne Robbins, Esq., Palmer & Dodge, for OraVax,
Inc., an intervenor.

Elise Harris, Esq., and Scott C. Briles, Esq., Centers for Disease Control
and Prevention, for the agency.

Tania Calhoun, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protests that contracting agency improperly interpreted and applied the
solicitation's indemnification/insurance requirement as to the protester's
and awardee's proposals, and improperly eliminated the protester's proposal
from the competitive range, are denied where the record shows that the
agency's interpretation of the requirement was reasonable and that its
evaluation of both proposals and its competitive range determination were
reasonable and consistent with the solicitation's requirements.

DECISION

Novavax Inc. protests its proposal's exclusion from the competitive range
and the award of a contract to OraVax, Inc., under request for proposals
(RFP) No. 2000-N-00001, issued by the Department of Health and Human
Services (HHS), Centers for Disease Control and Prevention (CDC), for the
development and stockpiling of a smallpox vaccine. Novavax contends that the
CDC improperly interpreted and applied the solicitation's
indemnification/insurance requirement as to both proposals and improperly
eliminated its proposal from the competitive range.

We deny the protests.

BACKGROUND

Over the centuries, smallpox has been feared as one of the most serious of
all pestilential diseases. The practice of vaccination was invented to fight
smallpox more than two hundred years ago. After an aggressive global
vaccination program, smallpox was officially declared eradicated in 1980. In
recent years, however, concern has grown that large-scale biological weapons
research and production involving smallpox might still exist in many
countries. [1]

The civilian population of the United States would be extremely vulnerable
to a bioterrorist attack using smallpox virus. There is no effective
treatment for the disease, which has a fatality rate of 30 percent or more.
Routine immunization against smallpox ended in 1972 and it is estimated that
no more than 20 percent of the population has any immunity from prior
vaccinations. [2] The vaccine is no longer manufactured anywhere in the
world and only 15.4 million doses of the 20-year-old vaccine are available
for use in an emergency. Agency Finding and Determination

at 2-3. Through HHS's anti-bioterrorism initiative, the CDC is coordinating
and leading overall planning efforts to upgrade national public health
capabilities to respond to biological and chemical terrorism. Smallpox virus
is consistently ranked highest of the bioterrorism threat agents because of
its potentially catastrophic public health effects, and replenishing
diminished smallpox vaccine stocks is the top priority for HHS and CDC. Id.

This solicitation was issued on February 11, 2000. Its objective is to
obtain a stockpile of 40 million doses of a smallpox (vaccinia) vaccine in
the shortest time possible to be used in case of a public health emergency.
The RFP required the successful contractor to develop a candidate smallpox
vaccine; provide at least two pilot lot vaccines for use in conducting
clinical trials; conduct clinical trials; obtain final licensure; produce at
least 40 million doses of the vaccine; store a portion of the stockpile; and
produce stockpile replacement vaccines or new vaccine lots. These tasks were
divided into four line items subject to varying payment terms.

Award was to be made to the offeror whose integrated proposal (technical,
business, and past performance) offered the highest technical merit at the
best overall value to the government. Technical merit was to be considered
significantly more important than cost or price. In addition to including
technical and past performance evaluation criteria, the solicitation
included a pass/fail requirement, referred to as an "absolute criterion,"
that each proposal demonstrate that the offeror "has the capability to
provide indemnification/liability" in accordance with section H.14 of the
solicitation. RFP sect. M.2. Section H.14 stated that "[t]he contractor shall
indemnify or shall obtain insurance to indemnify, defend and hold harmless
the government from any claims and cost resulting from acts, omissions, and
mishandling of the vaccine."

Four firms submitted offers by the April 19 closing date and made oral
presentations the following week. The agency's technical evaluation panel
(TEP) evaluated the offers and found the proposals of both Novavax and
OraVax technically acceptable. [3] Of the 100 technical points available,
Novavax's proposal received 83.50 points and OraVax's proposal received
76.50 points. The TEP also found that both proposals appeared to have met
the indemnity/insurance requirement, but the TEP had concerns about the
adequacy and specificity of both proposals. In this regard, during the
evaluation process the TEP realized that the language of section H.14 was
insufficiently specific to put offerors on notice of the agency's
requirements. Amendment No. 5 was drafted, in part, to address this problem.

Amendment No. 5 revised section H.14 to add the following specific
requirements to the existing language:

The indemnification/insurance coverage obtained shall include 1) clinical
trials -- adults; 2) clinical trials -- pediatrics; 3) use in at risk
laboratorians; 4) use in [immuno]-compromised individuals and [pregnant]
women; and 5) use in emergency [situations]. A non-cancellable policy for
the 20-year life of the contract shall be obtained by the Contractor prior
to initiation of the clinical trials.

Amendment No. 5 also added section B.5 to the solicitation. This section
added a required line item which was to "[reflect] the non-cancellable
policy payment terms reached with the insurance providers for insurance
which meets the requirements of [section] H.14." RFP sect. B.5(1). Section B.5
also stated that:

  1. Backup documentation shall include a written justification as to how
     the amount of coverage was determined.
  2. Proof of a guaranteed 20-year non-cancellable insurance policy from the
     insurance provider(s) shall be provided. This documentation shall
     clearly state the estimated cost of the coverage, the amount of the
     coverage, exactly what the coverage includes, and payment terms.

Amendment No. 5 also revised section F of the solicitation by stating that
proof of insurance associated with section H.14 was to be delivered prior to
conducting the clinical trials.

On June 19, the contracting officer established a competitive range
comprised of the Novavax and OraVax offers. Oral discussions were conducted
and final proposal revisions (FPR) were requested on June 22. Both FPR
requests attached copies of Amendment No. 5 and asked the offerors to
provide evidence of indemnification/insurance in accordance with that
amendment.

During discussions, Novavax informed the agency that the major insurers of
coverage for a large-scale, high-risk pharmaceutical project such as this
were unavailable to Novavax because the market had been "locked up" by a
competitor. Affidavit of Novavax's Vice President of Project Development at
para. 10. Novavax asserted that insurers generally form a consortium to provide
the coverage capacity required for such projects and the consortium insurers
will provide only one quotation on the project. That quotation is specific
to the project and not dependent upon the pharmaceutical company that will
perform the work, assuming that each relevant company is an established
entity of sufficient reputation. Once one of the insurers issues a quotation
to one company, none of the insurers will provide any information to any
other company--the market "locks up." When the contract for the project is
awarded, the insurers open the market to the firm that wins the competition
and make the quotation available to that firm. Id. at para. 6.

On July 19, the CDC issued Amendment No. 6 to again revise section H.14. The
sole revision made by the amendment is highlighted in bold below:

The Contractor shall indemnify or shall obtain insurance to indemnify,
defend and hold harmless the Government from any claims and cost resulting
from acts, omissions, and mishandling of the vaccine. The
[indemnification]/insurance coverage obtained shall include 1) clinical
trials -- adults; 2) clinical [trials] -- pediatrics; 3) use in at risk
laboratorians; 4) use in immuno-compromised individuals and pregnant women;
and 5) use in emergency situations. The [indemnification]/insurance shall be
obtained prior to initiation of the clinical trials. A non-cancellable
policy for the 20-year life of the contract is preferred.

Both offerors submitted FPRs by the July 24 closing date. The TEP evaluated
the FPRs and concluded that OraVax's proposal met the absolute criterion
regarding indemnification/insurance. The TEP evaluated the technical
revisions proposed by OraVax, raised its technical score to 96 points, and
ranked its proposal as technically superior. In contrast, the TEP concluded
that Novavax's proposal failed to meet the absolute criterion and ranked its
proposal as technically unacceptable. Since Novavax's proposal was found to
be technically unacceptable on this basis, the TEP did not evaluate the
firm's proposed technical revisions.

On August 8, the contracting officer eliminated Novavax's proposal from the
competitive range for a second round of discussions based on its failure to
meet the absolute criterion. As discussed below, the contracting officer
agreed with the TEP's conclusion that Novavax's proposal failed to provide
adequate indemnification/insurance coverage and failed to provide a
liability risk assessment to include the total amount of liability
coverage/cost required to indemnify the government over the life of the
contract. The contracting officer acknowledged that Novavax's FPR stated
that the industry standard was to release quotations to only one
broker/insured party at a time and that the capacity of the market would be
available to Novavax if it were awarded the contract. The contracting
officer stated that, assuming this to be the case, if Novavax had included
the risk assessment requested, the government could have concluded that the
firm had a basic understanding of the amount of coverage and the associated
costs required to indemnify the government for the life of the contract.
This information was not submitted. Second Competitive Range Determination
at 2-3.

Novavax filed its initial protest in our Office after its debriefing. The
agency subsequently determined that urgent and compelling circumstances that
significantly affect interests of the United States would not permit waiting
for the decision of this Office concerning the protest and executed an
"urgent and compelling circumstances" override of the statutory stay of
OraVax's performance of this contract. See 31 U.S.C. sect. 3553(d)(3)(C)(i)(II)
(1994). On September 20, OraVax was awarded the contract for an estimated
$343,326,120. Novavax supplemented its protest after receiving the agency
report. Novavax primarily alleges that the CDC improperly interpreted and
applied the RFP's indemnification/insurance requirement as to both proposals
and improperly eliminated its proposal from the competitive range.

DISCUSSION

The CDC explains that the immunological and epidemiological principles of
smallpox protection and eradication are based on historical experience with
the disease and its vaccines and are still in use today. What is different
is the fact that tort liability and litigation concerns have altered the way
medicine can be practiced, even in public health endeavors under emergency
situations such as those contemplated here. Supplemental Report at 3. The
indemnification/insurance requirement was included to ensure that the
government would be held harmless in case the new smallpox vaccine created
liability due to an adverse event either during clinical trials or in case
of a bioterrorist incident. The CDC characterizes the requirement as the
most important hurdle in obtaining this contract; it was the sole pass/fail,
or "absolute," criterion in this solicitation. Id. As the language of
sections M.2 and H.14 of the RFP make clear, the CDC planned to evaluate the
offerors' insurance proposals to assess their capability to provide a
critical component of this project.

Evaluation of the Novavax Proposal

The CDC's request for Novavax's FPR asked the firm to "provide evidence of
indemnification/insurance in accordance with Amendment No. 00005." In
response, Novavax's technical FPR stated that the firm had secured a 20-year
non-cancelable insurance policy of up to $[DELETED] million to indemnify,
defend, and hold harmless the government from any claims and cost resulting
from acts, omissions, and mishandling of the vaccine. Novavax stated that
this coverage applied to each of the five categories set forth in section
H.14. As it had stated during discussions, Novavax said that other insurers
with the capacity to provide additional limits of coverage were unavailable
to the firm due to the standard insurance industry practice of releasing
quotations to only one broker/insured party, but that it would have the
availability of these other markets after award. Novavax did not provide any
information regarding how much additional coverage it would seek, nor did it
explain how it would go about obtaining this additional coverage.

Novavax's evidence in support of these representations came in the form of
two letters. The first letter, from an insurer, confirmed coverage of up to
$[DELETED] million for the clinical trials and post-technology transfer
phases. The letter listed various conditions to be satisfied prior to
binding of coverage as well as several stipulations. The second letter, from
an insurance broker, stated that the only coverage available to Novavax was
the $[DELETED] million referenced above and repeated the firm's claims
regarding the unavailability of quotations due to industry practice. [4]

The TEP concluded that Novavax's proposal was technically unacceptable
because it failed to provide adequate coverage and failed to assess the
total amount of coverage required to indemnify the government. The TEP
stated that the firm's FPR only provided proof of a 20-year non-cancelable
insurance policy in the amount of

$[DELETED] million to be in place prior to conducting clinical trials, which
was an inadequate amount. [5] The TEP acknowledged Novavax's statement that
other insurers that could provide additional limits of coverage were
unavailable to it until and unless it were awarded the contract. The TEP
stated, however, that Novavax's FPR failed to include a risk assessment
estimating how much more coverage would be required and at what cost.
According to the TEP, if Novavax had included such an assessment along with
the information about the insurance industry practice of releasing
quotations to only one broker/insured party at a time, the TEP could have
concluded that the firm could provide the required coverage.

Novavax contends that it met the requirement to demonstrate its capability
to provide indemnification/insurance in accordance with section H.14 by
providing a firm quote for a 20-year non-cancelable insurance policy for
$[DELETED] million covering all of the relevant categories, with assurances
from its broker that more would become available when the market opened up
to the winning offer. Novavax asserts that the CDC ignored the unrebutted
facts concerning the unavailability of quotations and, instead, relied on
the absence of unavailable data to conclude that Novavax's proposal was
inadequate. Novavax charges that the CDC miscontrued its own requirements,
failing to focus on exactly what section H.14 required.

It is not the function of our Office to evaluate proposals de novo. Rather,
we will examine an agency's evaluation only to ensure that it was reasonable
and consistent with the stated evaluation criteria and applicable statutes
and regulations. Battelle Mem'l Inst., B-278673, Feb. 27, 1998, 98-1 CPD para.
107 at 14-15. A protester's mere disagreement with the agency's judgment
does not establish that the evaluation was reasonable. Id. Where a dispute
exists as to the actual meaning of a solicitation requirement, we will
resolve the dispute by reading the solicitation as a whole and in a manner
that gives effect to all provisions of the solicitation. Quality Elevator
Co., Inc., B-276780, July 23, 1997, 97-2 CPD para. 28 at 5. Our review of the
solicitation's provisions regarding the indemnification/insurance
requirement shows that it is Novavax, not the CDC, that improperly construed
what the RFP required.

Novavax asserts that the RFP did not require a "risk assessment" and
characterizes the TEP's requirement of such an assessment as an unstated
evaluation criterion. We do not agree.

Agencies are required to evaluate proposals based on the factors and
significant subfactors specified in the solicitation. Federal Acquisition
Regulation (FAR)

sect. 15.305(a). However, in performing the evaluation, the agency may take into
account specific, albeit not expressly identified, matters that are
logically encompassed by the stated evaluation criteria. See Cobra Techs.,
Inc., B-272041,

B-272041.2, Aug. 20, 1996, 96-2 CPD para. 73 at 3. Here, sections M.2 and H.14
of the RFP required offerors to demonstrate their "capability" to indemnify
or obtain insurance to indemnify the government from "any claims and cost
resulting from acts, omissions, and mishandling of the vaccine." In our
view, an offeror cannot show that it is capable of obtaining insurance
coverage to indemnify the government from the entire range of claims and
costs that might arise from this vaccine project without demonstrating that
it understands how much insurance coverage to obtain. A reasonably supported
estimate of the government's exposure under this project is logically
encompassed by the expansive language of this requirement. Section B.5(2) of
the RFP makes this explicit by requiring that pricing for this insurance be
accompanied by backup documentation which includes a "written justification
as to how the amount of coverage was determined."

OraVax met this requirement by submitting a detailed risk assessment to
estimate how much insurance coverage would be necessary in order to
indemnify the government from the entire range of costs and claims that
might arise under this vaccine project; the CDC states that there may have
been other ways to meet the requirement. We do not agree with the protester
that the TEP's references to a "required" risk assessment means that its
proposal was evaluated against the detailed risk assessment submitted by
OraVax. The TEP's use of this term to describe the information it was
evaluating is explained by the fact that OraVax was the only offeror that
submitted the information, which happened to be in the form of a risk
assessment. While we agree that OraVax may have submitted more information
than the RFP required, there is no question but that Novavax submitted less
information than the RFP required. The TEP acted reasonably in evaluating
its proposal accordingly.

Novavax also incorrectly asserts that the CDC improperly evaluated its
proposal as offering only $[DELETED] million in coverage when it actually
offered $[DELETED] million plus whatever else the market would have
available. The record shows that the CDC knew very well what Novavax was
offering but believed it was insufficient. There is no dispute that
$[DELETED] million in coverage is a fraction of the amount of coverage that
would be required to indemnify the government for the range of costs and
claims that might arise over the course of this contract. Notwithstanding
this undisputed fact, Novavax's proposal contained no information whatsoever
that would allow the agency to ascertain that the firm knew how much
additional coverage to seek and why. The firm's mere promise to obtain
additional limits of coverage does not demonstrate its capability to obtain
the appropriate amount of coverage.

Novavax's complaint that it could not obtain detailed information about the
insurance available for this project because the market was "locked up"--and
thus that the RFP in effect was defective because it required submission of
information only one offeror could obtain--is untimely. [6]

The solicitation clearly required offerors to demonstrate their capability
to obtain insurance to indemnify the government from not just $[DELETED]
million in costs and claims, but from the entire range of costs and claims
that might arise under this vaccine project. [7] The record shows that,
prior to the closing date for submission of FPRs, Novavax believed that the
insurance market was "locked up." If Novavax believed that the nature of the
insurance market precluded it from providing the information required by the
solicitation, it was required to protest this issue prior to the closing
date for receipt of FPRs. 4 C.F.R. sect. 21.2(a)(1) (2000); see Southern
Research, B-266360, Feb. 12, 1996, 96-1 CPD para. 65 at 3. The firm's failure to
protest prior to that date precluded the possibility that corrective action
could be taken, if warranted, before the expenditure of time and effort. An
offeror cannot learn of what it views as a requirement that cannot be met
and continue to compete on that basis without objection, and then complain
when it is not selected for award. See Southern Research, supra; see also
Datron Sys., Inc., B-220423, B-220423.2, Mar. 18, 1986, 86-1 CPD para. 264 at 7.
[8]

In any event, we do not believe that the standard industry practice referred
to by Novavax should have been an impediment to providing the information
that was both required by the RFP and the critical reason for the TEP's
finding that Novavax's proposal was technically unacceptable--a reasonably
based assessment of how much coverage would be necessary to fully indemnify
the government.

Prior to the issuance of the solicitation, the CDC estimated the amount of
coverage that would be required based on publicly available information
regarding claims and awards data from the National Vaccine Injury
Compensation Program (VICP). [9] Independently, OraVax reviewed publicly
available reference material on previously used smallpox vaccines and their
associated complications to assess the frequency of significant adverse
reactions based on historical or projected incidents and made certain stated
assumptions regarding the costs of such adverse reactions. This information,
which was included in the firm's FPR, was provided to its insurers to obtain
coverage information. This same publicly available information was available
to Novavax, which could have made its own assumptions regarding the
government's exposure and the level of insurance coverage that should be
sought. The firm failed to avail itself of these resources and is
responsible for the consequences.

Finally, Novavax contends that the CDC obtained enough information regarding
the insurance market from the OraVax proposal to determine that Novavax
could meet the requirements. The protester cites in particular the decision
in Integrated Sys. Group, Inc., GSBCA No. 11156-P, Apr. 29, 1991, 91-2 BCA para.
23,961, for the proposition that the government must make use of information
available to it in one proposal that is relevant to the evaluation of
another proposal.

As an initial matter, the CDC was apparently willing to accept the firm's
representations that it could not obtain this information but found
Novavax's proposal technically unacceptable because it failed to provide for
a sufficient amount of coverage or to submit any kind of assessment as to
how much insurance coverage it would seek in order to fully indemnify the
government. In this regard, the fact that OraVax demonstrated that it was
capable of sifting the available data to ascertain the government's exposure
in order to seek the appropriate level of coverage from its insurers sheds
no light at all on the capability of Novavax to do the same thing. The case
of Integrated Systems Group is inapposite here. In that case, the agency
eliminated an offer for computer processors from the competitive range
because it failed to include information showing that the processor met the
solicitation's requirements. The Board held that the agency could rely upon
the information submitted by another offeror, who had proposed the identical
computer processor, in evaluating both proposals since to do otherwise would
turn a procurement designed to supply the agency with compliant computer
hardware into a test of which offerors have the most able computer analysts.
Integrated Sys. Group at 122,541. Here, the agency is not procuring a
fungible commodity such as computer processors, but is assessing the
capability of the offerors to provide a critical component of this project.
The two are not interchangeable.

Evaluation of the OraVax Proposal

Novavax contends that OraVax's proposal also does not meet the
solicitation's requirements. It is not entirely clear to which requirements
Novavax refers but, as noted above, the RFP requires the offeror to show
that it is "capable" of "obtaining" insurance to indemnify the government
for the entire range of costs and claims that might arise under this vaccine
project. There are no more specific requirements beyond the five
non-exclusive categories set forth in amendment No. 6, and offerors are not
required to submit proof of insurance until prior to initiating clinical
trials, which can only occur after the new vaccine is developed and
licensed. The general nature of this requirement affords the agency
substantial latitude in determining whether or not a proposal is technically
acceptable. Our review of the record shows that the agency reasonably
determined that OraVax's proposal was technically acceptable.

In its FPR, OraVax estimated the level of the government's exposure and
proposed a "tower" of insurance coverage to meet that level. For the first
$100 million of coverage, OraVax stated that it had obtained firm
commitments from three underwriters for an aggregate of $100 million of
20-year non-cancelable insurance for the required indemnification and
included these quotations. For liability in excess of the first $100
million, OraVax said that its brokers were actively negotiating an
additional $150 million of insurance on a 3-year rolling basis, and the
terms for the first $100 million had been negotiated with a lead underwriter
and were awaiting final approval. OraVax's FPR described several conditions
set forth in these proposed policies. OraVax also included alternative
proposals it had received from other insurers to address liability in
amounts that exceeded the first and second tiers of insurance coverage in
case informed consent was not used to limit liability.

The TEP concluded that OraVax's FPR met the RFP's requirements. The TEP
stated that the firm provided proof of insurance for a non-cancelable
20-year policy for

$100 million of coverage to be in place prior to conducting clinical trials,
and provided commitment letters from three underwriters to provide an
additional

$550 million of coverage to be obtained prior to trials. This additional
coverage was comprised of two 3-year rolling policies that automatically
renewed unless certain conditions occurred, and a 20-year non-cancelable
policy for $400 million. The TEP stated that this brought the obtainable
insurance to $650 million and noted that OraVax had also provided an
alternative proposal using informed consent which would require coverage of
only $225 million.

Novavax contends that OraVax's proposal did not cover use in
immuno-compromised individuals and pregnant women or use in emergency
situations as required by amendment No. 6. However, OraVax's FPR states that
the lead underwriter for its $100 million of coverage had accepted the
language of amendment No. 6. That language includes the requirement that the
coverage obtained shall include use in immuno-compromised individuals and
pregnant women and use in emergency situations. OraVax's representation is
supported by a letter from its insurance broker, who goes on to say that he
is arranging for the other two underwriters for the first $100 million of
coverage to see the new clause and obtain their agreement to it. The FPR
indicates that OraVax's insurance broker was actively negotiating the excess
liability coverage, and there is no indication that this coverage would
exclude any required category. In our view, the information contained in
OraVax's FPR is sufficient to show its capability to obtain insurance in
accordance with the RFP's requirement.

Novavax next contends that the OraVax proposal contains conditions that were
not faulted while the CDC criticized its proposal for its conditions. The
solicitation did not prohibit conditions on the insurance coverage to be
obtained. The general nature of the requirement gave the TEP substantial
latitude to review such conditions and to consider whether they affected the
proposal's technical acceptability. Both FPRs included conditions to their
insurance coverage and neither set is comparable to the other. Our review of
the record shows that the protester has mischaracterized some of the
conditions in the OraVax proposal and we are not persuaded that any of the
conditions required a finding of technical unacceptability. In contrast, the
CDC has stated without rebuttal that one condition in the Novavax
proposal--[DELETED]--was in and of itself so unacceptable that the proposal
could have been rejected on that basis alone. Agency Supplemental Report at
17.

Novavax also asserts that the CDC mistakenly determined that OraVax was
offering an additional $150 million of insurance from two brokers and an
additional

$400 million of insurance from another insurer when there were no firm
commitments from these sources. The TEP's mistaken use of the term
"commitment letters" in this context is of no moment because the RFP did not
require offerors to submit evidence of firm commitments from insurers at the
time of FPR submission. Offerors were only required to show that they were
capable of obtaining the appropriate insurance coverage. Here, the record
shows that OraVax was in active negotiations with specifically identified
insurers to obtain this excess coverage and, given the general nature of the
requirement, we cannot conclude that more was required.

Finally, Novavax asserts that the CDC incorrectly determined that OraVax
provided the necessary liability risk assessment. Novavax faults the
assessment for using data associated with the [DELETED] vaccine, which is
not the vaccine to be used here, and for using data from the [DELETED],
because the [DELETED] does not apply to this project. Novavax contends that
neither source of data provides any particular guidance here and the
assessment is speculative. Novavax's position is unsupported by the record.

Section C.4.1.d. of the RFP requires the contractor to establish vaccine
equivalency to the currently approved vaccinia vaccine in accordance with
existing FDA requirements. The agency's supplemental report included an
affidavit from OraVax's Executive Vice-President, who states that [DELETED].
Affidavit para. 21; see also RFP

sect. C.4.1.a.(3). The [DELETED] vaccine was commonly used during the time
smallpox vaccination was routine. Agency Supplemental Report at 16. Novavax
has not provided us any basis to disagree with the agency's conclusion that
it is reasonable to infer that data concerning adverse events associated
with the [DELETED] vaccine is a valid indicator of the expected risks to be
encountered here. Similarly, while the [DELETED] does not directly apply to
this vaccine project, its data includes information regarding monetary
awards for vaccine-related bodily injury. Novavax has provided us with no
basis to disagree with the agency that this would be useful data to indicate
likely amounts of recovery from vaccine-related injuries.

Competitive Range Determination

Novavax contends that the CDC violated Health and Human Services Acquisition
Regulation (HHSAR) sect. 315.609 in eliminating its proposal from the
competitive range because it failed to consider whether there was "no real
possibility" that Novavax could improve its proposal to become the most
acceptable proposal.

The FAR language that currently governs the establishment of a competitive
range can be found in section 15.306(c)(1), which states, "Based on the
ratings of each proposal against all evaluation criteria, the contracting
officer shall establish a competitive range comprised of all of the most
highly rated proposals, unless the range is further reduced for purposes of
efficiency pursuant to paragraph (c)(2) of this section." The intent of this
language was to permit a competitive range more limited than under the prior
"reasonable chance of being selected for award" standard. [10] The
explanatory preamble published at the time the current version of FAR Part
15 was issued states that the drafters had elected to require contracting
officers to retain in the competitive range "only" the most highly rated
offers rather than include in that range the potentially broader range of
proposals that could be viewed as having a reasonable chance of award. 62
Fed. Reg. 51,224, 51,226 (1997); see SDS Petroleum Prods., Inc., B-280430,
Sept. 1, 1998, 98-2 CPD para. 59 at 5.

In contrast with FAR sect. 15.306(c), HHSAR sect. 315.609(a) provides that "a
proposal must be included in the competitive range unless there is no real
possibility that it can be improved to the point where it becomes the most
acceptable." Read literally, this language seems inconsistent with the
entire concept of a competitive range--which contemplates a selection by the
contracting officer of the proposals which, as they stand at the time, have
a reasonable chance of award--since in almost every case there could be a
"reasonable possibility" for a proposal to be so improved if the offeror is
given enough opportunities and assistance. In our view, it would be
unreasonable to interpret the HHSAR provision to effectively deprive HHS
contracting officers--in any and all cases--of the authority to establish a
more limited competitive range. Rather than such a literal interpretation,
we think the HHSAR provision is more reasonably read to allow exclusion of
proposals that are not among the most highly rated because, for example,
they would require a substantial rewrite. This interpretation both gives
effect to the language in the HHSAR provision and is consistent with the
fundamental concept of the competitive range in the FAR. [11]

The evaluation of proposals and the resulting determination as to whether a
particular offer is in the competitive range are matters within the
discretion of the contracting agency, since it is responsible for defining
its needs and determining the best method of accommodating them. Laboratory
Sys. Servs., Inc., B-256323, June 10, 1994, 94-1 CPD para. 359 at 2. Where a
proposal is technically unacceptable as submitted and would require major
revisions to become acceptable, the agency is not required to include it in
the competitive range. Chant Eng'g Co., Inc., B-281521, Feb. 22, 1999, 99-1
CPD para. 45 at 3-4; Laboratory Sys. Servs., Inc., supra.

Here, we have already concluded that the TEP reasonably evaluated Novavax's
proposal as technically unacceptable and hence not among the most highly
rated proposals. While the contracting officer did not use the language
referenced in the HHSAR provision, our review of the record shows that her
determination was consistent with our understanding of its provisions. We
agree with the agency's explanation in its supplemental report that the
informational deficiency in Novavax's proposal was so material that it could
not be adequately addressed without a substantial rewrite of the
indemnification/insurance portion of its proposal, and that the proposal was
reasonably eliminated from the competitive range. [12] Such a finding is
expressly permitted by HHSAR sect. 315.609(h)(4) ("the contracting officer shall
conduct a thorough review of the technical evaluation report to be assured
that unacceptable proposals contain ‘information' deficiencies which
are so material as to preclude any possibility of upgrading the proposal to
a competitive level except through major revisions and additions which would
be tantamount to the submission of another proposal").

Novavax asserts that it was eliminated from the competitive range based on
this "narrow aspect" of the solicitation, and that the main focus of the RFP
was the effective manufacture, development, and stockpiling of a smallpox
vaccine. The firm essentially contends that it need only provide additional
supporting documentation to render its proposal technically acceptable. We
do not agree.

First, Novavax's attempt to downplay the importance of this requirement is
not supported by the record. As noted earlier, the CDC characterizes this
requirement as the most important hurdle in obtaining the contract and it
was the sole pass/fail, or "absolute," criterion in the solicitation.
Indeed, during pre-solicitation industry exchanges, both Novavax and OraVax
were informed that the liability requirement was the "biggest issue."

Second, as discussed above, the indemnification/insurance requirement
required offerors to submit both a reasonably supported estimate of the
government's exposure and an actual plan for obtaining the requisite
coverage. The record shows that meeting this requirement involved
substantial effort and action on the part of the offeror. There is no
indication in the Novavax proposal that the firm performed any analysis of
the government's exposure. We are not persuaded that it is possible to meet
the requirement by simply submitting some unspecified documentation; work,
analysis, and time are necessarily involved. Moreover, the record suggests
that having such an assessment in hand is just the first step on the way to
obtaining an adequate insurance plan to meet the solicitation's
requirements. Obtaining this plan, even at the minimal level required by the
solicitation, also takes work, analysis, and time. Novavax's insurance
proposal addresses a fraction of the required level of coverage and would
have to be completely rewritten in order to adequately address the
solicitation's requirements. As a result, we cannot conclude that the
contracting officer unreasonably excluded Novavax's proposal from the
competitive range. See Chant Eng'g Co., Inc., supra.

The protests are denied.

Anthony H. Gamboa

Acting General Counsel

Notes

1. See generally Richard Preston, "The Demon in the Freezer," New Yorker,
July 12, 1999, at 44-61, at
.

2. Mark G. Kortepeter and Gerald W. Parker, "Potential Biological Weapons
Threats," Emerging Infectious Diseases, Vol. 5, No. 4, July-Aug. 1999, at
524-26; see also "Smallpox Fact Sheet," Johns Hopkins University Center for
Civilian Biodefense Studies, at
.

3. The third offeror's proposal was evaluated as technically unacceptable
and the fourth offeror withdrew its proposal after making its oral
presentation.

4. Novavax's business FPR provided pricing for the coverage it did obtain
and included these same two letters as its sole backup documentation
pursuant to section B.5(2) of the RFP.

5. The CDC's estimate of the coverage required was approximately $650
million. Declaration of the Project Officer at 3.

6. The intervenor vigorously disputes Novavax's assertion that the insurance
market was "locked up."

7. Novavax's allegation that a latent ambiguity in the
indemnification/insurance requirement led it to reasonably interpret the
solicitation as permitting its submission of such scant information is
unsupported.

8. For this same reason, Novavax's allegations that the CDC conducted
inadequate market research and a de facto sole-source procurement are also
untimely.

9. The VICP was established by the National Childhood Vaccine Injury Act of
1986,
42 U.S.C. sect.sect. 300aa-1 et seq. (1994), as a no-fault alternative to the tort
system for resolving claims resulting from adverse reactions to mandated
childhood vaccines. VICP Home Page at
.

10. The earlier language, FAR sect. 15.609(a) (June 1997), stated that the
competitive range "shall include all proposals that have a reasonable chance
of being selected for award" and that "[w]hen there is doubt as to whether a
proposal is in the competitive range, the proposal should be included."

11. By separate letter dated today we have advised the HHS Secretary of our
view regarding the language contained in the agency's regulation.

12. While Novavax contends that the agency's explanation is an improper post
hoc rationale for excluding its proposal from the competitive range, citing
Boeing Sikorsky Aircraft Support, B-277263.2, B-277623.3, Sept. 29, 1997,
97-2 CPD para. 91 at 15, post-protest explanations that provide a detailed
rationale for contemporaneous conclusions, as is the case here, will
generally be considered in our review of the rationality of selection
decisions so long as those explanations are credible and consistent with the
contemporaneous record. See Jason Assocs. Corp., B-278689 et al., Mar. 2,
1998, 98-1 CPD para. 67 at 6-7.