TITLE: B-298766, R&D Dynamics Corporation, December 11, 2006
BNUMBER: B-298766
DATE: December 11, 2006
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B-298766, R&D Dynamics Corporation, December 11, 2006

   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: R&D Dynamics Corporation

   File: B-298766

   Date: December 11, 2006

   William T. Welch, Esq., Barton, Baker, McMahon & Tolle, LLP, for the
   protester.

   Vera Meza, Esq., U.S. Army Materiel Command, for the agency.

   Sharon L. Larkin, Esq., and James A. Spangenberg, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protester's challenge to agency's decision not to fund its proposal under
   Phase II of a solicitation issued under the Department of Defense Small
   Business Innovation Research program is denied, where the agency
   reasonably evaluated the protester's proposal and ranked it 21^st out of
   34 proposals received, and funding was available only for the 19 highest
   ranked proposals.

   DECISION

   R&D Dynamics Corp. (RDDC) protests the decision of the Department of the
   Army not to fund its Phase II proposal under the Department of Defense
   (DOD) Small Business Innovation Research (SBIR) program solicitation No.
   FY06.1.

   We deny the protest.

   The SBIR program is conducted pursuant to the Small Business Innovation
   Development Act, 15 U.S.C. sect. 638 (2004), which requires certain
   federal agencies to reserve a portion of their research and development
   funds for awards to small businesses. In addition to advancing the role of
   small businesses and the participation of minority and disadvantaged
   persons in research and development, the objectives of DOD's SBIR program
   include stimulating technological innovation in DOD's critical technology
   area and increasing the commercial application of DOD-supported research
   and development results. The program has the following three phases: Phase
   I is to determine the scientific, technical, and commercial merit of
   ideas; Phase II is the principal research and development effort resulting
   in a well-defined, deliverable prototype; and in Phase III, the small
   business seeks to obtain private and public funding to develop the
   prototype into a viable commercial product for sale to military and/or
   private sector markets. Only those firms that are awarded Phase I
   contracts are eligible to participate in Phases II and III. Solicitation
   No. FY05.2, paras. 1.1, 1.2.[1]

   The Phase I solicitation included Army "Topic" No. A05-035, "Revolutionary
   Non-Contacting Gas Path Seals for Improved Turbine Engine Performance."
   The objective of this topic was to "[d]esign and develop innovative,
   non-contacting, compliant gas path seals that improve turbine engine
   performance for military and commercial jet engine applications."
   Supplemental Agency Report (SAR) (Nov. 13, 2006), encl. 2. RDDC received a
   Phase I award under this topic for its Phase I proposal, "Foil Face Seal
   for Advanced Gas Turbine Engines."

   On March 7, 2006, RDDC and other Phase I contractors were invited by the
   U.S. Army Research Laboratory to submit a proposal for Phase II.
   Contracting Officer's Statement at 3; Agency Report (AR), Tab E. These
   Phase II proposals were considered for award in the Army's "Advanced
   Propulsion Technologies" technology area. Contracting Officer's Statement
   at 4. The Phase II proposals were to be evaluated for "overall technical
   merit" based on the following three factors, listed in descending order of
   importance:

     a.      The soundness, technical merit, and innovation of the proposed
     approach and its incremental progress toward topic or subtopic solution.

     b.      The qualifications of the proposed principal/key investigators,
     supporting staff, and consultants. Qualifications include not only the
     ability to perform the research and development but also the ability to
     commercialize the results.

     c.      The potential for commercial (Government or private sector)
     application and the benefits expected to accrue from this
     commercialization.

   AR, Tab G, Solicitation No. FY06.1 Evaluation Criteria. Other factors that
   could be considered in the Phase II selection process include a commitment
   for Phase III follow-on funding, the possible duplication with other
   research or research and development, program balance, budget limitations,
   and the potential of a successful Phase II effort leading to a product of
   continuing interest to DOD. Id.

   The evaluation was conducted in two "tiers." First, a technical evaluation
   team (TET), consisting of personnel representing participating
   organizations, performed a technical assessment and forwarded the "best"
   proposals for a second level of review. This second level of review was
   performed by a panel of senior level Army scientists and technologists,
   called "technical area chiefs" (TAC), who together were the source
   selection board (SSB). The SSB conducted its review "from an Army-wide
   perspective" and recommended to the source selection authority (SSA) which
   proposals should be funded. Contracting Officer's Statement at 2-3.

   With regard to RDDC's proposal, the TET identified a number of strengths
   and weaknesses under each technical factor. For the first factor
   (technical merit), the TET identified several strengths, including the
   "innovative seal-bearing configuration" and the benefits of "reduced
   specific fuel consumption, increased power density, and increased seal
   life." The TET also identified a number of weaknesses involving the
   failure to address or lack of detail provided in several key areas,
   including the material used for the "top foil coating," the incorporation
   of a "fail safe sealing labyrinth" or similar seal into engine design, and
   the extent of the modifications and test program. AR, Tab I, TET Summary,
   at 1.

   For the second factor (qualifications), the TET found strengths in the
   "excellent qualifications" of RDDC's principal investigator and the person
   who would lead RDDC's effort, as well as the "unique credentials" and
   capability of the "[p]rincipal's team." However, the TET also found that
   the responsibilities of Rolls-Royce (one of RDDC's team members) were not
   clearly defined, and the proposal was "unclear" and that "[m]ore detail is
   needed" regarding modification and testing. Id. at 2.

   For the third factor (commercial potential), the TET found strengths in
   RDDC's pursuit of partnerships with six gas turbine manufacturers to
   develop and produce the next generation of gas turbines, including a
   partnership with Rolls-Royce, which would provide support and testing for
   the foil face seal on an endurance engine. However, the TET also found
   weaknesses because the proposal did not make clear whether Rolls-Royce
   would be "interested" in the Phase III effort, the proposal "lack[ed]
   description" of cost benefits and how the foil face seal will enter
   production if tests results are successful in Phase II, and the
   commercialization portion of the proposal lacked sufficient information
   about gas turbomachinery and potential savings. Id.

   The SSB concurred with the TET's findings and provided the following
   "overall comment":

     [RDDC's] proposal is judged to be of high quality, but not of the
     highest quality when all evaluation criteria are considered. Some items
     of particular note include the following[:] The commercialization
     portion of the proposal needs to address a broader class of gas
     turbomachinery and to quantify advantages of the seal-bearing concept as
     well as the potential savings in fuels, environmental impact, and system
     cost. From a technical standpoint, better justification [is] needed from
     representative standpoints such as: life projections (including
     short-life bearing use), fail safe labyrinth or similar seal integration
     into engine design, top foil coating identification (described in
     proposal as "green," but no mention of the coating material [is] given).
     Finally, specific details on the extent of the modifications and test
     program of the proposer's test rig as it is integrated into major
     manufacturer's hardware is lacking.

   AR, Tab J, SSB Comments, at 1.

   The SSB developed an "order of merit list," which ranked all 34 proposals
   submitted for the technology area. RDDC's proposal was ranked 21^st out of
   34. Based on the findings of the SSB, the SSA selected only the 19 highest
   ranked proposals for funding. While RDDC's proposal was sufficiently
   highly ranked to be eligible for an award, the number of awards was based
   on the availability of funding and there was insufficient funding to make
   additional awards. Contracting Officer's Statement at 4.

   After receiving a detailed explanation of its proposal strengths and
   weaknesses, RDDC filed an agency-level protest challenging the assessment
   of weaknesses. That protest was denied by the Army, and RDDC timely
   protested to our Office. RDDC complains that the agency's evaluation of
   its proposal was "inconsistent with the stated evaluation criteria"
   because the assessed weaknesses were inconsistent with its proposal and,
   in any event, were "far exceed[ed] (in quantity and quality)" by its
   proposal strengths.[2] Protest at 7; Protester's Comments at 2.

   Where an agency is conducting an SBIR procurement, it has substantial
   discretion to determine which proposals it will fund. RDAS Corp.,
   B-294848, Dec. 23, 2004, 2004 CPD para. 253 at 2. In light of this
   discretion, our review of an SBIR procurement is limited to determining
   whether the agency violated any applicable regulations or solicitation
   provisions, or acted in bad faith. Id.; R&D Dynamics Corp., B-285979.2,
   Nov. 14, 2000, 2000 CPD para. 193 at 4. Here, we have no basis to object
   to the agency's decision not to select RDDC's proposal for funding.

   RDDC disputes the weaknesses found under the first technical factor
   (technical merit). It asserts that weaknesses regarding the top foil
   coating material, failure to incorporate a fail safe sealing labyrinth or
   similar seal into engine design, and lack of information regarding the
   extent of modifications are "putting the cart before the horse," since
   these will be determined during Phase II development. Protester's Comments
   at 3. However, the agency provided reasonable explanations for these
   weaknesses, and showed how the weaknesses demonstrated concern over the
   soundness of RDDC's approach, which was what the agency was required to
   evaluate under this factor. For example, the agency asserts that it was
   unable to fully evaluate the seal design and manufacture in the context of
   the stated goals because "little is known of the [top foil] coating (i.e.,
   material, thickness, method of application, temperature range capability,
   wear characteristics, adherence to the base material, etc.) other than it
   is `green.'" SAR (Oct. 23, 2006), encl. 1, Statement of TET Team Chief,
   at 2. The agency was also concerned with the proposal's failure to address
   fail safe seals, since these are necessary to "prevent engine performance
   loss," which could "have [a] negative impact to a mission in progress."
   Id. at 2-3. RDDC's failure to adequately address modifications was
   determined to be a weakness because the information "aid[s] in mitigating
   risks to the successful test of the foil face seal, risks to cost, and
   risks to schedule." Id. at 3. Although RDDC disagrees with these
   assessments, it has not shown them to be unreasonable.[3]

   RDDC also complains that the agency unfairly assessed a weakness under the
   second technical factor (qualifications) because the "exact
   responsibilities of the in-kind participation of Rolls-Royce are not
   clearly defined" in the proposal. RDDC asserts that this information was
   addressed in its proposal through a statement that "the full size seal
   will be tested . . . at Rolls-Royce['s] facility" and a discussion of the
   testing and engine modifications that will be performed. Protester's
   Comments at 3. The agency acknowledges that the RDDC's proposal included
   this information, but notes that the proposal did not address who at
   Rolls-Royce will be responsible for the overall test program and the
   engine modifications. As the agency explains, the qualifications factor
   was to evaluate the qualifications of principal or key investigators and
   consultants, and since Rolls-Royce was the "technical point of contact
   with overall responsibility for the test program as well as [for the
   engine modifications] that will test the foil face seal," in our view, the
   lack of detail about Rolls-Royce's responsibilities was reasonably
   evaluated under this factor and determined to be a weakness. SAR (Oct. 23,
   2006), encl. 1, Statement of TET Team Chief, at 3-4.

   RDDC asserts that the weakness assessed under the third technical factor
   (commercial potential) that the proposal was "unclear if Rolls-Royce is
   interested in a Phase III effort" see AR, Tab I, TET Summary, at 2, was,
   in fact, addressed in its proposal in that a "commitment letter" from
   Rolls-Royce was included with RDDC's proposal. However, this letter is
   described in RDDC's proposal only as a "letter of support" and states only
   that Rolls-Royce will provide "continuing support" for Phases II and III,
   without any further explanation of the level of support that will be
   provided. See AR, Tab H, RDDC's Proposal, at 36-37. Thus, we find that the
   agency reasonably remained concerned about the extent of Rolls-Royce's
   interest in Phase III. See SAR (Oct. 23, 2006), encl. 1, Statement of TET
   Team Chief, at 5.

   RDDC complains that another weakness assessed under the third technical
   factor (commercial potential) is inconsistent with a recognized proposal
   strength. The weakness was that RDDC did not sufficiently describe the
   cost benefit to an engine company or the potential savings in fuel and
   environmental impact. AR, Tab I, TET Summary, at 2. RDDC asserts that the
   assessed weakness is inconsistent with a recognized proposal strength that
   the agency found under the first technical factor: that the foil face
   seals could result in "savings of over 0.5 billion gallons of fuel."
   Protester's Comments at 4; AR, Tab I, TET Summary, at 1. The agency
   explains that its comment about fuel savings was based on an evaluator's
   attempt to "extrapolate" savings that could occur 15 to 20 years in the
   future after the technology was fully developed, and was not based on any
   analysis by RDDC in its proposal; it was the lack of detail supporting
   cost savings that led the agency to assess a weakness.[4] See SAR (Oct.
   23, 2006), encl. 1, Statement of Team Chief at 4; AR, Tab I, TET Summary,
   at 2. We find the agency's evaluation in this regard reasonable.

   Finally, RDDC complains that the "quantity and quality" of strengths
   recognized by the agency far outweigh the identified proposal weaknesses.
   Protester's Comments at 2. However, our review of the record shows that
   the agency reasonably considered the strengths and weaknesses in
   accordance with the evaluation criteria and determined that RDDC's
   proposal was not among the highest ranked proposals.

   While RDDC disagrees with the agency's conclusions, it has not shown them
   to be unreasonable. See Noble Solutions, B-294393, Sept. 10, 2004, 2004
   CPD para. 197 at 4.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] Solicitation No. FY05.2 described the SBIR program phases and sought
   proposals for Phase I.

   [2] RDDC also protested the relative ranking of proposals to our Office.
   That information was made available to RDDC during its debriefing, but was
   not protested in its agency-level protest. Because the protest to our
   Office was not filed within 10 days of when the information was first made
   known, or included with its agency-level protest, the protest ground is
   untimely now. See 4 C.F.R. sect. 21.2(a)(2), (a)(3) (2006).

   [3] RDDC objects to our consideration of statements submitted by the Team
   Chief and Chief Scientist during the course of this protest, and comments
   of the SSB contained in the record, on the grounds that they were not
   created contemporaneously with the evaluation. Protester's Comments at 4;
   Protester's Supplemental Comments at 1. However, our Office will consider
   post-protest explanations that provide a detailed rationale for
   contemporaneous conclusions of the agency, so long as the explanations are
   credible and consistent with the contemporaneous record. Manassas Travel,
   Inc., B-294867.3, May 3, 2005, 2005 CPD para. 113 at 3. The post-protest
   statements and comments complained of here simply provide additional
   detail regarding the weaknesses identified in RDDC's proposal during the
   evaluation and are consistent with the contemporaneous record.
   Accordingly, we have considered these statements in determining that the
   decision not to fund RDDC's proposal was reasonable.

   [4] Although the record also shows that RDDC projected $750 million of
   market "potential" for the foil face seals in its proposal, the firm
   provided no explanation to support this. See AR, Tab H, RDDC Proposal, at
   38.