TITLE: B-310741, Rocketplane Kistler, January 28, 2008
BNUMBER: B-310741
DATE: January 28, 2008
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B-310741, Rocketplane Kistler, January 28, 2008

   Decision

   Matter of: Rocketplane Kistler

   File: B-310741

   Date: January 28, 2008

   James H. Roberts, III, Esq., Kevin F. Kelly, Esq., and Carrol H. Kinsey,
   Jr., Esq., Van Scoyoc Kelly PLLC, for the protester.

   Vincent A. Salgado, Esq., and Karen M. Reilley, Esq., National Aeronautics
   and Space Administration, for the agency.

   Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   The National Aeronautics and Space Administration could use a Space Act
   agreement under that agency's "other transactions" authority, and was not
   required to use a procurement contract, for the development and
   demonstration of a space transportation system, where the principal
   purpose of the announcement was not to acquire goods or services for the
   direct benefit of the agency, but to stimulate a public purpose authorized
   by law.

   DECISION

   Rocketplane Kistler protests the terms of announcement No. JSC-COTS-2,
   issued by the National Aeronautics and Space Administration (NASA) for the
   award of a funded Space Act agreement for the development and
   demonstration of various space transportation capabilities to and from
   low-Earth orbit. Rocketplane contends that the solicited services must be
   acquired using a procurement contract.

   We deny the protest.

   NASA has established the Commercial Crew and Cargo program to:

     * implement U.S. Space Exploration policy with investments to stimulate
       the commercial space industry,
     * facilitate U.S. private industry demonstration of cargo and crew space
       transportation capabilities with the goal of achieving safe, reliable,
       cost effective access to low-Earth orbit, and
     * create a market environment in which commercial space transportation
       services are available to Government and private sector customers.

   Announcement at 1. In support of these objectives, NASA informed
   interested firms that the agency envisioned a two-phased approach to be
   known as the commercial orbital transportation (COTS) project. Phase 1 was
   described as a "period of development and demonstration by private
   industry, in coordination with NASA, of various space transportation
   capabilities . . . determined to be most desirable for the Government and
   other customers." Id. at 2. Phase 2 was described as a "planned
   competitive procurement of orbital transportation services to resupply the
   [International Space Station] with cargo and crew." Id.

   The announcement here was issued as a continuation of the phase 1
   development of the COTS project and stated that:[1]

     As a continuation of the project initiated in 2006, NASA intends to
     enter into a second round of agreements with private industry to develop
     and demonstrate the vehicles, systems, and operations needed to
     resupply, return cargo from, and transport crew to and from a human
     space facility, with the International Space Station providing the
     representative requirements for such a facility.

   Id. at 1. The announcement solicited proposals for demonstrations
   involving an end-to-end space transportation system of services including
   ground operations and integration, launch, rendezvous, proximity
   operations, docking or berthing, orbital operations, reentry, and safe
   disposal or return. Id. at 2.

   Instructions for the preparation of technical proposals and business plans
   were provided, and participants were informed that, based upon the
   evaluation of these proposals and plans, a firm, or firms, would be
   selected for the negotiation of funded Space Act agreement(s).[2] Id. at
   16-24. The participants were informed that they were expected to secure
   the funding necessary to complete the proposed capability demonstration,
   although funding from NASA could be considered one of the sources of
   funding. In this regard, the announcement provided that NASA anticipated
   providing up to $174 million for funding spread over fiscal years 2008
   through 2010 among the firm, or firms, selected for Space Act agreements.
   Id. at 12. The announcement also stated

     [p]ayments will be made upon the successful completion of performance
     milestones negotiated with NASA. NASA's contribution will be a fixed
     amount and will not be increased based on the participant's ability to
     obtain private funding. A startup milestone payment will be considered.

   Id. at 3.

   Rocketplane protests that the principal purpose of the announcement is to
   obtain research and development (R&D) services for the direct benefit of
   NASA,[3] and that therefore NASA was required to obtain these services
   under a procurement contract and not a Space Act agreement. Protest at
   2-3.

   Under the Competition in Contracting Act of 1984 and our Bid Protest
   Regulations, we review protests concerning alleged violations of
   procurement statutes or regulations by federal agencies in the award or
   proposed award of contracts for procurement of goods and services, and
   solicitations leading to such awards. 31 U.S.C. sections 3551(1), 3552
   (2000); 4 C.F.R. sect. 21.1(a) (2007). We have found that Space Act
   agreements, which are issued by NASA under its "other transactions"
   authority pursuant to the National Aeronautics and Space Act of 1958 (the
   Space Act), 42 U.S.C. sect. 2473(c)(5) (2000), are not procurement
   contracts, and therefore we generally do not review protests of the award,
   or solicitations for the award, of these agreements under our bid protest
   jurisdiction. Exploration Partners, LLC, supra, at 4-5. We will review,
   however, a timely protest that an agency is improperly using a
   non-procurement instrument, such as a Space Act agreement, where a
   procurement contract is required, to ensure that an agency is not
   attempting to avoid the requirements of procurement statutes and
   regulations. Id. at 5; Energy Conversion Devices, Inc., B-260514, June 16,
   1995, 95-2 CPD para. 121 at 2.

   The Federal Grant and Cooperative Agreement Act establishes the general
   criteria that agencies must follow in deciding which legal instrument to
   use when entering into a funding relationship with a state, locality or
   other recipient for an authorized purpose. 31 U.S.C. sections 6301-6308
   (2000). Under these criteria, an agency must use a procurement contract
   when:

     (1) the principal purpose of the instrument is to acquire (by purchase,
     lease, or barter) property or services for the direct benefit or use of
     the United States Government; or

     (2) the agency decides in a specific instance that the use of a
     procurement contract is appropriate.

   31 U.S.C. sect. 6303; see also Federal Acquisition Regulation (FAR) sect.
   35.003(a) ("Contracts shall be used only when the principal purpose is the
   acquisition of supplies and services for the direct benefit of the Federal
   Government"). On the other hand, a procurement contract would not be
   required to carry out a public purpose of support or stimulation
   authorized by law, where the principal purpose of the agreement is not to
   acquire property or services for the direct benefit or use of the agency.
   See, e.g., 31 U.S.C. sect. 6305 (cooperative agreements); see also Rick's
   Mushroom Serv., Inc. v. United States, 76 Fed.Cl. 250, 258 (2007)
   (agreement was not a procurement contract, where it did not contemplate
   the transfer of goods or services directly to the government; there was no
   evidence of a buyer-seller relationship; and no direct benefit accrued to
   the government.)

   NASA contends that the principal purpose of the announcement is not to
   acquire goods and services for the direct benefit and use of NASA.
   Specifically, the agency notes that:

     NASA obtains no vehicles, supply service, prototype, hardware, or other
     property, no systems or vehicle designs, and only the minimum
     Government-purpose data rights legally required by the Space Act. The
     Announcement does not provide NASA any right to future use of systems
     and vehicles developed and demonstrated under COTS Phase 1, for
     [International Space Station] supply missions or for any other purpose.
     The participant, not NASA, proposes the capabilities it will demonstrate
     and establishes the technical and schedule milestones for those
     demonstrations.

   Agency Report (AR) at 2. Instead, NASA states that the purpose of the
   announcement is to "encourage the growth of a future U.S. commercial
   market in which space transportation services will be available for
   commercial and Government customers." Id. This purpose differs from that
   of an R&D contract, the agency argues, because an R&D contract is used to
   obtain research, and the results of that research for an agency's use, see
   FAR sections 35.010, 35.011, whereas here the announcement seeks to
   "incentivize the private sector to develop and demonstrate their own
   commercial technologies" and allows those firms to retain the maximum
   intellectual property rights allowed by the Space Act.[4] Supp. AR at 2.

   We find that the announcement did not principally provide for the
   acquisition of goods and services for the direct benefit and use of NASA.
   The record supports the agency's arguments that the principal purpose of
   the announcement is to encourage, support and stimulate the development of
   a commercial market for space transportation, from which NASA could
   potentially acquire orbital transportation services. Although we agree
   with Rocketplane that such services in support of the growth of a
   commercial space transportation industry also support the government's
   space exploration policy, which NASA is directed to foster, we do not find
   that supporting and stimulating efforts in support of a lawfully mandated
   public policy establishes that an agency is acquiring services for its own
   direct benefit and use. See Rick's Mushroom Serv., Inc. v. United States,
   76 Fed.Cl. at 258 (agreement was not a procurement contract, even though
   it was entered into to carry out a public purpose of support or
   stimulation authorized by law). Instead, we agree with NASA that the
   agreement's purpose should control whether the services are "principally"
   for the agency's direct benefit or use, or, as is the case here, to
   support or stimulate a public purpose authorized by law.

   Rocketplane also argues that NASA's own policy directive states that
   funded Space Act agreements, such as that to be entered here, "may be used
   only when the Agency objective cannot be accomplished through the use of a
   procurement contract, grant, or cooperative agreement." See NASA Policy
   Directive, NPD 1050.1H, Nov. 29, 2006, at 2. Rocketplane contends that the
   agency "failed to make any required baseline determination" as to whether
   the objectives contained in [the announcement] could not be accomplished
   through the use of an R&D contract. Protester's Comments at 2.

   However, the record shows that NASA "considered the objectives and
   purposes of the COTS Demonstrations, and whether they were appropriate for
   and could be accomplished under a contract, grant, cooperative agreement,
   or `other transaction,' when planning the project strategy prior to the
   original COTS announcement in 2006." See Supp. AR at 3; AR, Tab H,
   Commercial Crew/Cargo Project Strategy Briefing, Nov. 15, 2005, at 15-16.
   NASA concluded, as noted above, that its primary purpose was to stimulate
   the commercial space industry to provide creative, innovative, cost
   effective solutions for space transportation and that the announcement
   would not seek the acquisition of goods and services for the agency. AR,
   Tab H, Commercial Crew/Cargo Project Strategy Briefing, Nov. 15, 2005, at
   16. In any event, we generally will not review an alleged violation of an
   internal agency policy, such as NASA's policy directive here. See Hughes
   Space and Commc'ns Co.; Lockheed Missiles & Space Co., Inc., B-266225.6 et
   al., Apr. 15, 1996, 96-1 CPD para. 199 at 17.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] Previously, Rocketplane and Space Exploration Technologies Corporation
   received Space Act agreements supporting phase 1 of the COTS project. See
   Exploration Partners, LLC, B-298804, Dec. 19, 2006, 2006 CPD para. 201 at
   3.

   [2] A funded Space Act agreement is an agreement under which appropriated
   funds will be transferred to a domestic agreement partner to accomplish an
   agency mission. NASA Policy Directive, NPD 1050.1H, Nov. 29, 2006, at 2.

   [3] That is, the protester argues, the announcement seeks "research and
   development efforts of a commercial space sector contractor to develop and
   produce transport vehicles that can take equipment and ultimately crew to
   and from the International Space Station." Protest at 2.

   [4] The announcement states that NASA will not obtain rights to a
   participant's background intellectual property and "that title to all
   property acquired for the COTS demonstrations will remain with the
   Participant(s)." Announcement at 10.