TITLE:  HMX, Inc., B-291102, November 4, 2002
BNUMBER:  B-291102
DATE:  November 4, 2002
**********************************************************************
HMX, Inc., B-291102, November 4, 2002

   DOCUMENT FOR PUBLIC RELEASE                                                
The decision issued on the date below was subject to a GAO Protective      
Order.  This redacted version has been approved for public release.        

   Decision
    
Matter of:HMX, Inc.
    
File:B-291102
    
Date:November 4, 2002
    
William L. Walsh, Jr., Esq., J. Scott Hommer, III, Esq., and Julia M.
Kiraly, Esq., Venable, Baetjer and Howard, for the protester.
Sumara M. Thompson-King, Esq., Louis R. Durnya, Esq., and Jerry L.
Seemann, Esq., National Aeronautics and Space Administration, for the
agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  Under a procurement conducted by the National Aeronautics and Space
Administration (NASA) under a NASA research announcement (NRA) that
required proposals to include detailed cost/price and technical data, and
did not identify the procurement as one for commercial items under either
Federal Acquisition Regulation Part 12 or the Commercial Space Act of
1998, a protest challenging the agency's rejection of a proposal for a
commercial item that took exception to the NRA's stated data requirements
is an untimely challenge to the terms of the NRA where the protest is
first filed with the agency after the closing time for submitting
proposals.
    
2.  Agency evaluation reasonably found significant weaknesses in a
proposal that failed to provide adequate data to support material aspects
of the proposal, reasonably determined that proposal deserved a low
overall rating, and reasonably rejected that proposal from further
consideration.
DECISION
    
HMX, Inc. protests the evaluation and rejection of its proposal by the
National Aeronautics and Space Administration (NASA) under NASA research
announcement (NRA) 8-30 Cycle II for second-generation reusable launch
vehicle systems engineering and risk reduction.
    
We deny the protest.
    
This launch vehicle program, also known as the U.S. Space Launch
Initiative, is one of three major programs that include safety upgrades to
the Space Shuttle (i.e., the first generation reusable launch vehicle)
under NASA's Integrated Space Transportation Plan.[1]  The second
generation reusable launch vehicle program has two phases:  phase I was
the solicitation of a wide range of research ideas regarding possible
reusable launch vehicle architectures and appropriate risk reduction
tasks, and phase II will be for more focused activities to finalize
architecture preliminary design and advanced development of high risk,
high priority items.  NRA 8-30 implements phase I.  The NRA was issued
under NASA's broad agency announcement (BAA) authority contained in NASA
Federal Acquisition Regulation Supplement (NFARS), 48 C.F.R.
S:S: 1835.016, 1835.016-71 (2001).[2]  An NRA is used to announce research
interests in support of NASA's programs and, after peer or scientific
review using factors listed in the NRA, to select proposals for
funding.[3]  The NRA was organized into two cycles, with each cycle
further organized by numerous technology areas (TA).  Cycle II covered
four TAs---TA-8 through TA-11.
    
NASA issued the NRA on October 12, 2000, with Cycle II being initiated by
amendment 8 on January 18, 2001.  Agency Report at 3-4.  It invited
industry, educational institutions, non-profit organizations and U.S.
government agencies (acting as part of a team led by industry or academia)
to submit proposals for a broad range of systems engineering and risk
reduction research activities.  Agency Report, Tab G, NRA 8-30 Cycle II,
at 4-5.  NRA Cycle II was divided into two parts:  part I contains
instructions and evaluation factors common to all proposals, and part II
contains the specific TA proposal instructions.[4]  Id. at 5, 13.  The
current protest concerns only TA-10.  TA-10 of the NRA solicited proposals
for flight demonstration of key areas of risk reduction technology
development.  Id. at 406.
    
The part I common instructions identified four evaluation factors of
*approximately equal importance*:  (1) relevance to NASA's objective, (2)
intrinsic merit, (3) cost, and (4) past performance.  Id. at 37.  The
instructions stated that *[t]o be considered for award, a submission must,
at a minimum, . . . contain sufficient technical and cost information to
permit a meaningful evaluation . . . not merely offer to perform standard
services . . .*  Id. at 26-27. 
    
More specifically, the NRA stated detailed requirements for the submission
of cost data in cost proposals over $550,000.  The NRA stated that such
cost proposals *must contain certifiable cost or pricing data* and that
cost proposals *shall be in sufficient detail to allow direct and indirect
rate verification . . . [and] must include sufficient detail to support
and explain all costs proposed, giving figures and narrative
explanation.*  Id. at 30-31.  Furthermore, the NRA included attachment 3,
work breakdown structure (WBS), and attachment 19, element of cost
details, and the NRA stated that offerors *shall submit cost/price data*
by these attachments.  Id. at 32, 106-109, 373-376.  The NRA also stated
technical data requirements.  Id. at 25, 29, 131-137.
    
The NRA stated that discussions would be conducted *only with those
offerors that submit the most meritorious proposals.*  The NRA stated that
the most meritorious proposals would be those that meet the launch vehicle
program goals and objectives in accordance with the evaluation factors set
forth in the NRA.  Id. at 39.  The closing date for submitting proposals
was March 27, 2002.  Id. at 5.
    
The agency received five proposals under TA-10.  HMX submitted a proposal
to be both a prime contractor and a subcontractor under a proposal
submitted by [DELETED].  Contracting Officer's Statement at 9.  [DELETED]
submitted a proposal under TA-10 for an orbital flight demonstration of a
winged flight vehicle, the [DELETED] flight demonstrator.[5]  As a prime
contractor under this NRA, HMX proposed the *Titan II ILV Pathfinder
Flight Demo,* which would essentially be a single demonstration launch of
a simulated [DELETED] airframe attached to a refurbished Titan II missile
for a fixed price of $26.3 million.  Agency Report, Tab L, HMX's Proposal,
at cover page, iii-1, B‑21, C6-1.  Under [DELETED]'s proposal, HMX
would provide X‑37/Titan II launch services as a subcontractor.  Id.
at iii-1.
    
HMX's proposal also contained what HMX characterized as a *major
deviation* from the requirements stated in the NRA.  Id. at H-1.  HMX
proposed to provide *commercial item* launch services, and asserted that
the Commercial Space Act of 1998, 42 U.S.C. S: 14701 et seq., applies to
the NRA, such that HMX provided in its proposal *only limited cost and
pricing data as appropriate to a commercial item procurement,* rather than
the cost and pricing data specifically required by the NRA.  The proposal
also took exception to *the full panoply* of data requirements of the NRA,
stating that the requirements, though relevant to technology development
contracts or research and development efforts, were not applicable to
HMX's proposal to provide a commercial item.  Id. at H-1 through H-4.
    
The agency evaluated proposals by identifying, under each of the four
evaluation factors stated in the NRA, significant strengths, strengths,
weaknesses, and significant weaknesses.  Based on the various strengths
and weaknesses identified, the consensus evaluation rated the proposals on
a five-place adjectival scale with ratings of excellent, very good, good,
fair and poor.  Agency Report, Tab S, Presentation to the Source Selection
Official (SSO), at 28-31. 
    
For HMX's proposal, the agency identified significant weaknesses under
every evaluation factor except past performance, and overall identified
only a small number of strengths and a large number of weaknesses; the
agency did not identify any significant strengths under any factor.  The
adjectival rating for HMX's proposal was rated *poor* under all factors
except past performance, for which it was rated *good.*  Overall, the
agency rated HMX's proposal *fair,* which was the lowest rating among all
the TA-10 proposals evaluated.  Id. at 52-57. 
    
The significant findings of the evaluation of HMX's proposal presented to
the SSO consisted of all of the significant weaknesses identified in the
evaluation.  Those findings are:  (1) relevance to the NRA
goals/objectives was not substantiated because the proposed effort does
not effectively demonstrate any technology; (2) the [DELETED]-month
schedule proposed was highly unrealistic and did not provide adequate
margin for probable schedule delays; (3) the technical approach--one
flight test with limited verification data or analyses prior to launching
the actual [DELETED], a high value asset--does not adequately address
technical risk; (4) HMX failed to respond to NRA requirements and model
contract recommendations and instead proposed commercial item terms and
conditions with an inadequate rationale for its failure to respond;
(5) numerous critical cost items were not priced, including launch
facility build-up, and storage and disposal of Titan II assets; and (6)
HMX provided inadequate information to determine cost reasonableness
because the proposal did not provide elements of cost, cost by work
breakdown structure or by base and option periods, as well as because the
proposed price for one flight of the launch vehicle and the cost for
software development were unrealistically low as compared to government
estimates.  Agency Report, Tab S, Presentation to the Source Selection
Official (SSO), at 59-60.
    
Based on this evaluation, NASA determined that HMX's proposal was not
among the most meritorious proposals selected for negotiations.  NASA
notified HMX of this determination on June 7, 2002.  On June 15, the
agency received a written request from HMX for a debriefing.  Following a
debriefing on June 24, HMX filed an agency-level protest.  Contracting
Officer's Statement at 19.  On July 29, NASA denied that protest.  This
protest followed.
    
HMX alleges that the agency misapplied, arbitrarily applied, or used
unstated evaluation factors, or otherwise unreasonably evaluated HMX's
proposal.  The specific examples presented by HMX are as numerous as the
weaknesses identified in the agency's evaluation of HMX's proposal.  Many
of the protest allegations arise from the protester's claim that it did
not need to submit all of the information required by the terms of the NRA
because the Commercial Space Act applies, which allegedly permitted HMX to
respond to the NRA with a proposal for a commercial item.  Indeed, the
protester states that *the vast majority, if not all* of the evaluated
weaknesses *directly result* from NASA's failure to comply with the
Commercial Space Act.  Protester's Comments at 20.
    
The agency first asserts that all of the protest allegations that are
based on the contentions that the Commercial Space Act applies and/or that
the NRA solicited proposals for commercial items should not be considered
because they constitute an untimely protest under our Bid Protest
Regulations.[6]  Essentially, the agency states that the terms of the NRA
are contrary to the protester's contention, and the protest is thus a
challenge to the terms of the solicitation, which must be protested prior
to the time for submitting proposals.  We agree.
    
Our Bid Protest Regulations contain strict rules requiring timely
submission of protests.  These rules specifically require that protests
based upon alleged improprieties in a solicitation, which are apparent
prior to the time set for receipt of proposals, must be filed prior to
that time.  4 C.F.R. S: 21.2(a)(1) (2002).  These timeliness rules reflect
the dual requirements of giving parties a fair opportunity to present
their cases and resolving protests expeditiously without unduly disrupting
or delaying the procurement process.  Air Inc.--Recon., B-238220.2, Jan.
29, 1990, 90-1 CPD P: 129  In order to prevent these rules from becoming
meaningless, exceptions are strictly construed and rarely used.  Id.
    
Here, HMX's proposal explicitly takes exception to the solicitation's
requirements for proposal information, such as cost and pricing data and
technical data requirements.  Agency Report, Tab L, HMX's Proposal, at H-1
through H-4.  This portion of the proposal sets forth HMX's position that
the NRA's proposal preparation instructions do not comply with the
Commercial Space Act, and that the Act permitted HMX to deviate from the
terms of the NRA to comply instead with the standards for proposals for
commercial items as reflected in FAR Part 12, Acquisition of Commercial
Items.  However, the NRA did not reference the Act or FAR Part 12. 
Therefore, even if we accept the protester's interpretations of the Act as
both applying to this NRA by operation of law and requiring acquisition of
the launch services proposed by HMX consistent with the regulations
governing the acquisition of commercial items, there remains the
unavoidable fact that the express terms of the NRA are inconsistent with
HMX's interpretation of the Act.  This obvious conflict can only be viewed
as an alleged impropriety apparent on the face of the solicitation.  Since
HMX did not protest until after its proposal was rejected--i.e., well
after the time set for receipt of proposals--the protest is untimely.
    
Nevertheless, the protester contends that, prior to receiving the agency's
denial of HMX's agency-level protest, it could not know that the agency
would interpret either the NRA or the Commercial Space Act contrary to the
protester's position, and thus the protest was timely filed within 10 days
of learning of the agency's interpretation.  The argument is unpersuasive.
    HMX's proposal expressly took exception to the terms of the NRA.  By
rejecting the proposal from further consideration, the agency declined to
accept the proposed deviation from the express terms of the NRA.  That was
a risk that HMX assumed by submitting such a proposal rather than formally
challenging the terms of the NRA at that time.[7]  By its actions, HMX
relinquished its power to protest the issue.  See The Charles E. Smith
Cos., B-277391, Sept. 25, 1997, 97-2 CPD P: 88 at 6 (cannot protest the
statutory authority of an agency's announced procurement methodology after
proposal due date); Tomasz/Shidler Inv. Corp., B‑250855, B-250855.2,
Feb. 23, 1993, 93-1 CPD P: 170 at 3-4 (terms of a proposal that conflict
with solicitation requirements do not constitute a protest).[8]
    
To the extent the protest challenges the agency's evaluation on bases
independent from the Commercial Space Act/commercial item acquisition
issue, the protester fails to show that the evaluation was unreasonable.
    
The evaluation of technical proposals is primarily the responsibility of
the contracting agency; the agency is responsible for defining its needs
and the best method of accommodating them and must bear the burden of any
difficulties arising out of a defective evaluation.  Microcosm, Inc.,
B-277326 et al., Sept. 30, 1997, 97-2 CPD P: 133 at 4.  In reviewing an
agency's technical evaluation, we will not reevaluate the proposals; we
will only review the evaluation to determine whether the evaluation was
reasonable and consistent with the stated evaluation criteria, and with
applicable procurement laws and regulations.  Id.; Gemmo Impianti SpA,
B‑290427, Aug. 9, 2002, 2002 CPD P: 146 at 3.  A protester's
disagreement with the agency's judgment is not sufficient to establish
that the agency acted unreasonably.  Microcosm, Inc., supra.
    
As indicated, many of the evaluated weaknesses of HMX's proposal were
inextricably linked to the protester's decisions to take exception to the
NRA's significant requirements for cost/price and technical data, and to
interpret the TA-10 requirement as one for commercial launch services and
not for research projects.  As such, the proposal was not only missing
significant portions of information contemplated by the NRA, it was also
ill matched to the NRA's stated goal of engaging the creativity and
ingenuity of industry and academia by requesting proposals for research
and development activities as opposed to acquiring commercial services or
items.  Agency Report, Tab G, NRA, at 15.  Therefore, even if the
protester could show material defects in the agency's evaluation related
to the surviving remnants of this protest, it is difficult to imagine that
any such defects could call into question the reasonableness of the
agency's determination that HMX's proposal was not one of the most
meritorious proposals selected for further consideration.  Nevertheless,
we have reviewed the protester's allegations and, as the following
examples show, the record does not support the protester's allegations of
an unreasonable evaluation.
    
The protester alleges that it was unreasonable for the agency to evaluate
as unreasonable HMX's proposed price of $26 million.  NASA found that
HMX's proposed price did not account for the cost of a number of critical
items,[9] and the proposal did not provide adequate information to support
the significantly lower proposed price.[10]  Agency Report at 18-19; Tab
Q, TA‑10 Consensus Evaluation, at 1-2.  Indeed, the agency's
independent cost analysis concluded that a reasonable cost for this effort
would be over $58 million.  Agency Report, Tab M, NASA Cost Estimate; Tab
Q, TA-10 Consensus Evaluation, at 1.  This estimate is consistent with the
historical cost of converting the Titan II from an intercontinental
ballistic missile to a space launch vehicle of $45 million per missile
(1987 dollars), as identified in HMX's proposal.  In its proposal, HMX
stated that it determined this figure was twice the cost of new production
($21 million in 2001 dollars), and contended that *refurbishment naturally
costs less than new production,* so that the historical refurbishment
costs should be discounted.  Agency Report, Tab L, HMX Proposal, at B-2. 
The proposal, however, did not provide concrete support for the
significantly reduced Titan II refurbishment costs reflected in HMX's low
price.[11]  Id. at B-2, C6-1. 
    
In sum, the proposal presented only a largely unsupported, summary cost
estimate for its proposed price that was substantially lower than
historical costs.  Under the circumstances, the agency could reasonably
find as significant weaknesses that HMX's price was unsupported, did not
include certain costs, and appeared to be unreasonably low.
    
Another example is HMX's proposed performance schedule of [DELETED]
months.  The evaluation criteria stated in the NRA under the intrinsic
merit factor included the soundness of the implementation plan and the
acceptability of schedule risks.  Agency Report, Tab G, NRA, at 37.  NASA
determined that [DELETED] months was a *highly unrealistic* schedule that
did not provide adequate margin for probable schedule delays.  Agency
Report, Tab Q, TA-10 Consensus Evaluation, at 3.  NASA cites historical
requirements of 24 months for such an effort and identified several
specific areas where HMX's proposed performance appeared unduly
optimistic.[12]  Id.; Contracting Officer's Statement at 11-12, 27.  For
example, without supporting documentation, the proposal stated that, based
on an analysis by its subcontractor (the original equipment manufacturer),
the refurbished engines would be available [DELETED] months after program
start.  Agency Report, Tab L, HMX Proposal, at B-3, B-4, C2‑35. 
This left only 1 month for integration activities.  Contracting Officer's
Statement at 12.  The proposal did not identify risks associated with this
tight schedule.  From this record and given NASA's experience with
schedule delays, we find NASA's concerns to be reasonable.   
    
The protester basically challenges all of the agency's concerns about the
proposed [DELETED]-month schedule, claiming that there was no rational
basis to object to the schedule, given that the Titan II missiles were
manufactured in less than [DELETED] months and missiles on active silo
duty were refurbished every few years in a few months time or less.  In
response, the agency stated that the previous regular refurbishing of
active intercontinental ballistic missiles was not relevant to HMX's
proposal because HMX is proposing to restore missiles that have been
inactive and stored in the desert for 15 years.  The proposed refurbishing
effort will be more complex because the missiles have not been subject to
a regular maintenance schedule, they have to be refurbished to perform a
different function than they were serving when they were placed into
storage, and they would have to be re-certified.  Contracting Officer's
Statement at 28.  Although these concerns seem reasonable on their face,
the protester dismisses these concerns as *red herrings* without
explanation.  Protester's Comments at 24.  The protester's objections 
thus do not rise above mere disagreement with the agency's judgment.
    
Based on the foregoing, we find reasonable the agency's evaluation of
HMX's proposal and the determination that it was not one of the most
meritorious proposals.
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    
    

   ------------------------

   [1] The other two programs are third generation reusable launch vehicle
technologies and an in-space transportation system.
[2] A BAA is a contracting method by which agencies can acquire basic and
applied research to fulfill requirements for scientific study and
experimentation directed towards advancing the state of the art or
increasing knowledge and understanding, rather than focusing on a specific
system or hardware solution.  It is considered a competitive procedure
meeting the requirements for full and open competition if the BAA is
general in nature identifying areas of research interest including
criteria for selecting proposals, solicits the participation of offerors
capable of satisfying the government's needs, and provides for peer or
scientific review.  Federal Acquisition Regulation (FAR) S: 6.102(d)(2);
Microcosm, Inc., B-277326 et al., Sept. 30, 1997, 97-2 CPD P: 133 at 1-2.
[3] Unlike a request for proposals, which contains a statement of work or
specifications to which offerors are to respond, an NRA provides for the
submission of competitive project ideas, conceived by the offerors, in one
or more program areas of interest.  An NRA is not to be used when the
requirement is sufficiently defined to specify an end product or service. 
NFARS, 48 C.F.R. S: 1835.016-71(a).
[4] Part II covered the TAs under Cycle I and was not applicable to or
included in the NRA for Cycle II.
[5] The [DELETED] is being developed under an existing cooperative
agreement between [DELETED] and NASA.  This project was integrated into
the second generation launch vehicle program in fiscal year 2001, and
tests of key technologies and relevant atmospheric flight environments are
planned by releasing the [DELETED] from aircraft.  However, the launch
vehicle program also needs an orbital test bed to demonstrate certain key
technologies.  [DELETED]'s proposal for an orbital flight demonstration
under Cycle I of this NRA was not selected.  [DELETED]'s Cycle II proposal
again proposed an orbital flight demonstration of the [DELETED]. 
Contracting Officer's Statement at 8-9.  The proposal had a number of
options for a launch vehicle, including HMX's proposed Titan II missile
conversion.
[6] Although the agency's decision denying HMX's agency-level protest
addressed all of the protest allegations on the merits, the decision first
stated that the basis for the protest was an untimely challenge to the
terms of the NRA.  Agency Report, Tab Y, Agency-Level Protest Decision, at
5.
[7] FAR Part 12 prescribes policies and procedures regarding whether an
acquisition should be conducted through the issuance of a solicitation
incorporating commercial item procedures.  We find no law or regulation
that requires the retroactive application of the requirements applicable
to acquisitions conducted under commercial item procedures to acquisitions
not issued under commercial item procedures in circumstances where a
proposal purporting to offer a commercial item response is submitted.
[8] Alternatively, the protester requests that we consider this aspect of
the protest as a *significant issue* exception to the timeliness
requirements under our Bid Protest Regulations, 4 C.F.R. S: 21.2(c). 
Under this exception, our Office may consider an untimely protest that
raises issues significant to the procurement system that have not been
considered previously; however, in order to prevent the timeliness rules
from becoming meaningless, this exception is strictly construed and seldom
used.  Invoking the exception is appropriate only where the untimely issue
directly concerns the interpretation or application of the procurement
statutes or regulations on a matter of widespread interest to the
procurement community.  DePaul Hosp. and The Catholic Health Assoc. of the
U.S., B-227160, Aug. 18, 1987, 87‑2 CPD P: 173 at 5.  While the
protester states that the issue of whether the Commercial Space Act
applies to procurements such as the present one is of widespread interest
to the procurement community, it has provided no evidence or argument to
support this claim.
[9] For example, the proposal stated that an environmental assessment or
review would likely be required, but the proposal did not account for the
cost of such a review.  Agency Report, Tab L, HMX Proposal, at B-5, C6-2;
Tab Q, TA-10 Consensus Evaluation, at 1. 
[10] As noted, HMX declined to supply such data, even though the NRA
specifically required it.
[11] Instead, the proposal essentially speculated that the flight computer
should be less expensive than in the prior Titan II refurbishment (which
the proposal identified as $5 million), and stated that another missile
class, the Minuteman, was refurbished for less than the original
production price, thus implying that the Titan II refurbishment costs
should be similar.  Agency Report, Tab L, HMX Proposal, at B-2, C6-1. 
[12] In its proposal, HMX stated that *[a] program to refurbish the Titan
II . . .will require approximately twenty-four months.  This schedule is
consistent with past Titan II experience.*  Agency Report, Tab L, HMX
Proposal at C2-35.  The protester claims that this was an obvious mistake
that should have read *[DELETED] months,* and that this was the only
*mistaken reference to 24 (rather than [DELETED]) months.*  Protest at
18.  However, the proposal elsewhere stated that *HMX Titan II launches
will be available at [the proposed launch facility] 24 months after
[authority to proceed,]* but went on to state that its proposed
performance schedule was for [DELETED] months.  Agency Report, Tab L, HMX
Proposal at B-20.  While the proposal's references to 24‑month
periods may have been unintended, it is not obvious from reading the
proposal that these are mistakes.  Neither reference to 24 months states
that HMX was proposing a 24-month schedule; rather, these are aspects of
the proposal that lend credence to the agency's assessment that the
proposed [DELETED]-month schedule was unduly optimistic.  See Contracting
Officer's Statement at 27.