Link: GAO Opinion
Agency: National Aeronautics and Space Administration
Disposition: Protest denied.
- Protest is denied in procurement for commercial resupply services for International Space Station where source selection authority reasonably determined that outstanding and very good past performance of protester’s proposed subcontractors did not warrant an overall significant strength where protester itself lacked significant relevant past performance and technical expertise, leaving subcontractors responsible for technical performance and approximately [REDACTED]% of overall contract effort.
- Protest is denied in procurement for commercial resupply services for International Space Station where agency reasonably ascertained significant financial risk to the government from protester’s proposal under fixed-price prime contract to subcontract technical performance and approximately [REDACTED]% of overall contract effort; significant development and integration work, the risk and cost of which was underestimated, was to be performed by subcontracting on a cost basis; protester’s business case, although reflecting additional unrealistically optimistic assumptions, nevertheless assumed that cost of performing would exceed contract payments until last year of contract; protester had limited contract management resources; and protester, a recently organized entity, proposed to finance performance using only minimal internal financial resources, depending instead on debt financing and obtaining additional investment for nearly all of performance costs.
General Counsel P.C. Highlight:
PlanetSpace asserts that the evaluation of its teaming approach was unreasonable and/or otherwise improper. As an initial matter, the protester contends that the consideration given to past performance in the SSD was inconsistent with the RFP, which provided that offerors without a record of relevant past performance or for which information on past performance is not available will not be evaluated favorably or unfavorably on past performance. PlanetSpace asserts that, notwithstanding this provision, the agency evaluated its proposal unfavorably based on a finding that it lacked relevant past performance.
The record does not support PlanetSpace’s assertion. In considering the SEB’s assessment of significant strengths based on the past performance of PlanetSpace’s subcontractors/team members, the SSA simply disagreed with the SEB’s finding of a significant strength. The SSA concluded that the finding was offset by PlanetSpace’s lack of experience in development, production and operation of large, complex space systems, and that the subcontractors’ past performance should not be discriminators for selection when almost all of the technical expertise appeared to reside at the subcontractor level. Thus, the SSA determined only that the protester’s record of past performance should not be considered as a discriminator; he did not downgrade the proposal overall under the past performance factor.
PlanetSpace’s reliance on cost-based subcontracting for risky development work in conjunction with its expected negative cash flow under the contract was evaluated as posing a high risk to the government. PlanetSpace asserts that the agency’s consideration of the financial risk to the government posed by the firm’s teaming approach was unfounded and improper. PlanetSpace proposed to subcontract approximately [REDACTED]% of the overall contract to LM (which in turn would subcontract part of its effort to Boeing) and ATK, leaving only approximately [REDACTED]% of the contract, including such generally non-technical areas as overall responsibility for prime contract execution, contract administration, financial management, and business operations, to be performed by PlanetSpace. In addition, although its contract with NASA was required to be on a fixed-price basis, PlanetSpace proposed that it would subcontract with LM and ATK on a cost-plus-fixed fee/cost-plus-incentive fee basis for development, first unit assembly, integration, qualification and build, and for first unit mission integration and operations, with LM and ATK in turn subcontracting approximately [REDACTED]% to [REDACTED]% of the development phase to third tier vendors on a fixed-price basis for heritage hardware. Further, PlanetSpace estimated that the cost of performing the contract would exceed contract payments from NASA until [REDACTED], with PlanetSpace’s cumulative debt under the contract peaking at $[REDACTED] million in [REDACTED]. In this regard, PlanetSpace, organized in 2006, proposed to utilize only $[REDACTED] million of shareholder equity in performing the contract. As explained in its management proposal, PlanetSpace proposed instead that, except for certain independent research and development expenditures on the part of its team members, from which it claimed to benefit, the remainder of the cost of performance would be financed through potential future debt and investment from third parties.
NASA determined that PlanetSpace’s approach posed significant financial risk to the government based in part on the agency’s determination that PlanetSpace’s estimates were based on unrealistically optimistic assumptions. Given that PlanetSpace is a small company with a [firm-fixed-price] NASA contract and with [cost-plus-fixed fee/incentive fee] development subcontracts awarded to Lockheed Martin and ATK it follows that lack of effective subcontract controls could result in significant schedule delays and cost overruns.
PlanetSpace nevertheless assumed that it would overcome these challenging circumstances and control its costs of performance through effective cost controls. However, the record shows that the SSA was not convinced, finding that PlanetSpace’s proposed use of cost-plus subcontracts in the early stages of the contract, until first flight, was extremely risky. Given the limited cost margin available under PlanetSpace’s proposed approach to accommodate potential cost overruns passed on by its subcontractors; the fact that Lockheed and Boeing, although capable contractors, were known by NASA to be not as cost conscious as they could be; PlanetSpace’s unrealistic or incorrect assumptions, including those regarding the proposed ISS integration schedule and FAA requirements, that underlay its proposed approach; such evaluated stressors on cost and schedule as changing fairing size to accommodate unpressurized cargo and accomplishing verification and integration of its orbital vehicle with two launch vehicles; and the challenge for a fairly small management team to manage subcontractors performing over [REDACTED]% of the contract effort, the SSA concluded that the risks associated with PlanetSpace’s contracting approach made it highly unlikely that PlanetSpace would successfully perform the contract and provide timely delivery of required cargo to the ISS. PlanetSpace disagrees with the SSA’s conclusion in this regard, but GAO finds that it has not shown that conclusion to be unreasonable or otherwise improper.
PlanetSpace next asserts that NASA did not adequately account in the source selection for the risk associated with OSC’s proposed use of Russian engines in the first stage of its launch vehicle. In this regard, OSC proposed to use the Taurus II medium-class launch vehicle, a vehicle under development by OSC, which would use Aerojet’s AJ26-62 liquid-propellant engines, a modernized version of existing Russian NK-33 rocket engines manufactured in the late 1960s and early 1970s. Although the SEB initially determined that OSC’s proposal to use 35-year-old engines represented a substantial or significant risk to the feasibility of OSC’s production and delivery capability, the evaluators, based on information furnished in response to the agency’s discussion question, ultimately reduced the assessed risk, finding OSC’s approach to pose technical and schedule risks warranting only an ordinary, and not a significant, weakness. PlanetSpace asserts that a significant risk was warranted.
The evaluation in this regard was reasonable. In determining that OSC had alleviated most, but not all of the agency’s initial concerns, the evaluators considered a number of mitigating factors. As an initial matter, the agency noted that not only did Aerojet have in its possession [REDACTED] NK-33 engines at its Sacramento, California plant, a sufficient number for the [REDACTED] flights (at [REDACTED] engines per flight) proposed in its model task order, but in addition, more than [REDACTED] additional NK-33 engines were at the engine manufacturer’s facilities in Russia. Further, OSC reported that Aerojet, which had experience performing service life extension for the Titan II engines, had undertaken significant work [REDACTED]. Further, OSC reported that the NK-33 engines (including those in both the United States and Russia) had been stored in humidity-controlled conditions with no documented stress corrosion cracking. In addition, as evidence of the favorable condition of the engines, OSC reported that one of the NK’33 engines in Russia, originally manufactured in 1972, had been successfully test fired twice in September 2008. Finally, while final approval from Russia for use of the engines in OSC’s Taurus II launch vehicle had not yet been obtained, the agency noted that OSC had completed all of the licensing steps and was only awaiting final approval; Russia had previously granted licenses for use of the engines on other vehicles; and testing could begin prior to approval for actual launch operations. In these circumstances, the agency determined that OSC’s approach represented only an ordinary weakness.
Noting that the SSD did not include a total evaluated price for any of the offerors, PlanetSpace asserts that NASA did not adequately consider price–in particular, PlanetSpace’s price advantage–in the source selection. GAO states that agencies must consider cost to the government in evaluating proposals, and while it is up to the agency to decide upon some appropriate and reasonable method for evaluating offerors’ prices, an agency may not use an evaluation method that produces a misleading result. The method chosen must include some reasonable basis for evaluating or comparing the relative costs of proposals, so as to establish whether one offeror’s proposal would be more or less costly than another’s.
The record indicates that price was reasonably considered in the source selection. In this regard, offerors were required not only to furnish a fully burdened price per kilogram of pressurized upmass cargo, unpressurized upmass cargo, return downmass cargo and disposal downmass cargo, but also a total price for particular types of resupply missions using the offeror’s unique mission configurations. Further, this pricing was reported in various detailed formats to the SSA. As is apparent from the information presented to the SSA, OSC’s pricing exceeded PlanetSpace’s, usually by a significant margin. Thus, the information presented to the SSA indicated that OSC’s overall weighted price per kg of pressurized upmass cargo ($[REDACTED] basic/$[REDACTED] enhanced) was approximately [REDACTED] that of PlanetSpace ($[REDACTED]), while OSC’s overall price for a pressurized upmass cargo and disposal downmass cargo mission in CY 2016 ($[REDACTED] million for a 2000/2000 kg basic mission or $[REDACTED] million for an 2700/2700 kg enhanced engine mission) was significantly higher on either an overall mission or per kg basis than PlanetSpace’s ($[REDACTED] million for a [REDACTED] kg mission). Although agency evaluators did not calculate a total evaluated price for each offeror, the SSD stated that OSC’s overall pricing was the highest, with PlanetSpace’s pricing being the next highest and SpaceX’s being the lowest. Further, the record indicates that the SSA recognized that OSC’s proposal was significantly more costly than PlanetSpace’s, estimating that OSC’s overall price was around [REDACTED] per kilogram and PlanetSpace’s was probably [REDACTED] to [REDACTED] per kilogram in rough order of magnitude. Indeed, the record indicates that PlanetSpace’s above price advantage as perceived by the SSA was even greater than that claimed by PlanetSpace–which calculated that OSC’s proposal was [REDACTED]% to [REDACTED]% more expensive than PlanetSpace’s–during this litigation. In these circumstances, GAO finds no basis to conclude that the source selection was based on a failure by the agency to consider, or the agency’s misunderstanding of, PlanetSpace’s price advantage over OSC. The protest is denied.