B-173677, DEC 29, 1971

B-173677, DEC 29, 1971

BID PROTEST - INTERIM CONTRACT - UNFAIR COMPETITIVE ADVANTAGE DECISION DENYING PROTEST OF PRATT AND WHITNEY CONCERNING AN INTERIM CONTRACT AWARDED TO ROCKETDYNE BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION LEADING TO THE AWARD OF A CONTRACT FOR A SHUTTLE MAIN ENGINE. PROTESTANT DENIES NASA'S CONTENTION THAT THE WORK WOULD BE USEFUL TO ANY CONTRACTOR ULTIMATELY SELECTED TO DO PHASE C/D WORK. FURTHERMORE, IT IS ALLEGED THAT THE WORK IS BEING DIRECTED SOLELY BY ROCKETDYNE AND IS THEREFORE OF SPECIAL BENEFIT TO THAT COMPANY IN IMPROVING ITS DESIGN. PRATT AND WHITNEY CONCLUDES THAT THE INTERIM FUNDING AFFORDS ROCKETDYNE AN UNWARRANTED COMPETITIVE ADVANTAGE IN ANY FUTURE COMPETITION. NASA INSISTS THAT THE WORK BEING DONE IS RELATIVELY LOW LEVEL, THAT MOST OF THE TASKS WOULD BENEFIT ANY CONTRACTOR, AND THAT THE INFORMATION GENERATED IS BEING MADE AVAILABLE TO OTHER CONTRACTORS. IN ADDITION, GAO'S AUDIT DIVISION HAS INDEPENDENTLY REVIEWED THAT MATTER. WHILE THE EFFORT WILL BE OF BENEFIT TO ROCKETDYNE, THE WORK IS WITHIN THE GENERAL SCOPE OF THE PHASE C/D PROPOSAL AND MUCH OF IT COULD BE OF USE TO OTHER COMPETITORS. ACCORDINGLY, THERE IS NO BASIS TO DISTURB THE INTERIM CONTRACT.

TO REAVIS, POGUE, NEAL & ROSE:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 11, 1971, IN CONNECTION WITH THE PROTEST OF PRATT & WHITNEY AGAINST THE SELECTION OF ROCKETDYNE BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION FOR NEGOTIATIONS LEADING TO THE AWARD OF A CONTRACT FOR THE SPACE SHUTTLE MAIN ENGINE, AND THE INTERIM FUNDING OF ROCKETDYNE.

YOU REFER TO OUR LETTER OF SEPTEMBER 9, 1971, TO CONGRESSMAN WILLIAM R. COTTER IN WHICH WE STATED THAT IN THE CIRCUMSTANCES REPORTED BY NASA WE SAW NO PROPER BASIS UPON WHICH OUR OFFICE COULD DIRECT TERMINATION OF THE INTERIM CONTRACT. NASA REPORTED THAT THE INTERIM FUNDING WAS TO ENABLE ROCKETDYNE TO CONTINUE ITS DESIGN AND PLANNING EFFORT AT A RELATIVELY LOW LEVEL IN ORDER TO HOLD TOGETHER THE SKILLED MANPOWER INVOLVED IN PHASE B DEFINITION STUDIES, AND THAT THE WORK WOULD BE SUCH THAT THE RESULTS WOULD BE USEFUL TO ANY CONTRACTOR ULTIMATELY SELECTED TO DO THE PHASE C/D WORK.

YOU STATE THAT THE CIRCUMSTANCES REPORTED BY NASA WERE NOT ACCURATELY REPORTED; THAT THE WORK BEING DONE IS DEVOTED ALMOST EXCLUSIVELY TO ROCKETDYNE'S DESIGN; THAT SPECIFIC TASKS ARE DEVOTED TO CORRECTION OF WEAKNESSES IN ROCKETDYNE'S PROPOSED DESIGN; THAT THE WORK BEING DONE IS PRELIMINARY DESIGN ANALYSIS NEEDED TO COMPLETE ROCKETDYNE'S DESIGN; THAT THE WORK WAS NOT DIRECTED BY NASA, BUT SELECTED BY ROCKETDYNE FOR ITS OWN PURPOSES; AND THAT THE WORK IS OF EXCLUSIVE AND SPECIAL BENEFIT TO ROCKETDYNE. IN THIS CONNECTION, YOU HAVE DISCUSSED EACH OF THE TASKS TO SUPPORT THE ABOVE CHARGES AND ESTABLISH THAT THE INTERIM FUNDING IS AFFORDING ROCKETDYNE A TOTALLY UNFAIR AND UNWARRANTED COMPETITIVE ADVANTAGE IN ANY FUTURE COMPETITION. THEREFORE, YOU ASK THAT OUR OFFICE TAKE IMMEDIATE ACTION TO HALT THIS ABUSE OF THE PROCUREMENT PROCESS AND TO TAKE INTO CONSIDERATION THE PREJUDICIAL EFFECT ON FUTURE COMPETITION IF WE SHOULD DECIDE THIS IS THE APPROPRIATE REMEDY.

WE HAVE A NASA REPORT DATED DECEMBER 10, 1971, COPY ENCLOSED, WHICH EXPLAINS THE WORK BEING PERFORMED UNDER EACH TASK AND ITS APPLICABILITY TO ROCKETDYNE'S COMPETITORS IN THE EVENT OF FURTHER COMPETITION. BASICALLY, IT IS NASA'S POSITION THAT FOR REASONS STATED, MOST IF NOT ALL OF THE TASKS ARE OF POTENTIAL BENEFIT TO ANY CONTRACTOR ULTIMATELY AWARDED THE PHASE C/D CONTRACT AND THE INFORMATION GENERATED WILL BE MADE AVAILABLE TO THE CONTRACTOR. IT IS REPORTED THAT ALL INTERESTED PARTIES, INCLUDING PRATT & WHITNEY, ARE BEING FURNISHED COPIES OF ROCKETDYNE'S PROGRESS REPORTS.

IN ADDITION TO OBTAINING A REPORT FROM NASA, OUR AUDIT DIVISION CONDUCTED AN INDEPENDENT REVIEW OF THE MATTER. ENCLOSED IS A COPY OF THE REPORT OF THE AUDIT REVIEW, WHICH INCLUDED AN EXAMINATION OF THE INTERIM CONTRACT AND WORK TASKS AUTHORIZED THEREUNDER, AS WELL AS INTERVIEWS WITH NASA AND ROCKETDYNE OFFICIALS. ACCORDING TO NASA AND ROCKETDYNE THESE TASKS WERE SELECTED ON THE BASIS THAT THEY WOULD BE OF VALUE TO ANY CONTRACTOR SELECTED FOR THE PHASE C/D CONTRACT. IN THIS CONNECTION, SPECIFIED AREAS OF WORK UNDER POCKETDYNE'S PHASE C/D PROPOSAL WHICH WOULD HAVE BEEN STARTED EARLY IN ITS PERFORMANCE, HAVE BEEN EXCLUDED BECAUSE THEY WERE NOT CONSIDERED TO INVOLVE WORK OF VALUE TO OTHER PROSPECTIVE CONTRACTORS. THE TOTAL COST OF THE FOUR-MONTH INTERIM CONTRACT IS $3.7 MILLION AS COMPARED TO THE ESTIMATED COST OF $13.3 MILLION FOR THE FIRST FOUR MONTHS OF WORK UNDER ROCKETDYNE'S PROPOSAL. IN ADDITION, THE MANPOWER ESTIMATES FOR THE INTERIM CONTRACT ARE ABOUT 46 PERCENT OF THOSE PROPOSED FOR THE FIRST FOUR MONTHS OF PHASE C/D. HOWEVER, NASA CONCEDES THAT BECAUSE OF THE WORK DONE UNDER THE INTERIM CONTRACT ROCKETDYNE HAS REFINED ITS DESIGN AND RETAINED AN EXPERIENCED STAFF. THEREFORE, IT IS EXPECTED THAT ROCKETDYNE WOULD BE IN A POSITION TO PREPARE A BETTER PROPOSAL IN THE EVENT OF FURTHER COMPETITION.

THE TASKS BEING PERFORMED INCLUDE WORK APPARENTLY RELATED TO THREE WEAKNESSES IN ROCKETDYNE'S PROPOSAL. THEY INVOLVE THE USE OF INCO-718, THE WELDING PROCESS, AND REVISION OF DESIGN VERIFICATION SPECIFICATIONS. IT APPEARS THAT ROCKETDYNE, RATHER THAN WORKING ON A REPLACEMENT FOR INCO- 718, IS LOOKING FOR A COATING TECHNIQUE TO PROTECT AGAINST HYDROGEN EMBRITTLEMENT. BOTH NASA AND ROCKETDYNE BELIEVE THAT IF IT IS SUCCESSFUL IN THIS REGARD, THE ENTIRE SPACE ENGINE INDUSTRY WILL BENEFIT AND THE USE OF INCO-718 WOULD BE CONSIDERED BY THE OTHER COMPETITORS IF NEGOTIATIONS ARE REOPENED. THEY HOLD THE SAME VIEW WITH RESPECT TO THE WELDING PROCESS. IT IS BELIEVED THAT REVISION OF THE DESIGN VERIFICATION SPECIFICATIONS WOULD BENEFIT ONLY ROCKETDYNE.

OUR REVIEW INDICATES THAT THE WORK PERFORMED UNDER THE INTERIM CONTRACT HAS BEEN AT A RELATIVELY LOW LEVEL. WHILE THE EFFORT WILL BE OF BENEFIT TO ROCKETDYNE, IT APPEARS THAT THE WORK IS WITHIN THE GENERAL SCOPE OF ITS PHASE C/D PROPOSAL AND MUCH OF IT COULD POSSIBLY BE OF USE TO THE OTHER COMPETITORS. IN THE CIRCUMSTANCES, WE CANNOT CONCLUDE THAT THERE HAS BEEN AN ABUSE OF ADMINISTRATIVE DISCRETION. THEREFORE, WE SEE NO BASIS FOR DISTURBING THE INTERIM CONTRACT.