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UPON REVIEW ARE FOUND TO HAVE BEEN CONDUCTED IN A FAIR MANNER. THE REVIEW DISCLOSED DISCUSSIONS WERE MEANINGFUL. IT IS POSSIBLE THAT THERE MAY BE OCCASIONS WHEN WEAKNESSES. THE REVIEW UPHELD THE SUCCESSFUL PROPOSAL WAS RESPONSIVE. FOUND THAT THE DETERMINATION THE PROTESTANT'S PROPOSAL WAS DEFICIENT WAS NOT ARBITRARY AND CAPRICIOUS. THAT THE EVALUATIONS OF THE HIGHLY TECHNICAL PROPOSALS WERE COMPREHENSIVE AND OBJECTIVE. 1972: ENCLOSED IS A COPY OF OUR DECISION TO THE ATTORNEYS FOR PRATT & WHITNEY AIRCRAFT CORPORATION DENYING ITS PROTEST AGAINST THE SELECTION OF ROCKETDYNE DIVISION OF NORTH AMERICAN ROCKWELL. WE ARE PROVIDING IN THIS TRANSMITTAL LETTER A SUMMARY OF PRATT & WITNEY'S MAJOR CONTENTIONS AND OUR CONCLUSIONS.

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B-173677, MAR 31, 1972, 51 COMP GEN 621

CONTRACTS - NEGOTIATION - AWARDS - PROPRIETY - UPHELD THE NEGOTIATIONS UNDER 10 U.S.C. 2304(G) LEADING TO THE AWARD OF A CONTRACT FOR THE SPACE SHUTTLE MAIN ENGINE, UPON REVIEW ARE FOUND TO HAVE BEEN CONDUCTED IN A FAIR MANNER, CONSISTENT WITH APPLICABLE LAW AND REGULATIONS. THE REVIEW DISCLOSED DISCUSSIONS WERE MEANINGFUL, AND IT IS POSSIBLE THAT THERE MAY BE OCCASIONS WHEN WEAKNESSES, INADEQUACIES, OR DEFICIENCIES CAN BE DISCUSSED WITHOUT BEING UNFAIR TO OTHER PROPOSERS; THE REVIEW UPHELD THE SUCCESSFUL PROPOSAL WAS RESPONSIVE, AND FOUND THAT THE DETERMINATION THE PROTESTANT'S PROPOSAL WAS DEFICIENT WAS NOT ARBITRARY AND CAPRICIOUS, BUT THAT THE EVALUATIONS OF THE HIGHLY TECHNICAL PROPOSALS WERE COMPREHENSIVE AND OBJECTIVE, AND PROVIDED A SOUND BASIS FOR SELECTING THE MOST ADVANTAGEOUS PROPOSAL AFTER CONSIDERING THE PROTESTANT'S PRIOR PROGRAM EXPERIENCE, AND ALL ASPECTS OF COST, INCLUDING LOWNESS, REALISM, AND RISK OF COST OVERRUNS AND, FURTHERMORE, THE SUCCESSFUL OFFEROR HAD NOT OBTAINED AN UNFAIR ADVANTAGE BECAUSE OF PARTICIPATING IN THE SATURN PROGRAM.

TO THE ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, MARCH 31, 1972:

ENCLOSED IS A COPY OF OUR DECISION TO THE ATTORNEYS FOR PRATT & WHITNEY AIRCRAFT CORPORATION DENYING ITS PROTEST AGAINST THE SELECTION OF ROCKETDYNE DIVISION OF NORTH AMERICAN ROCKWELL, INCORPORATED, FOR NEGOTIATIONS LEADING TO THE AWARD OF A CONTRACT FOR THE SPACE SHUTTLE MAIN ENGINE (SSME) PURSUANT TO NASA'S REQUEST FOR PROPOSALS NO. SSME 70 1.

IN VIEW OF THE MANY ISSUES PRESENTED, THE LENGTH OF OUR DECISION, AND OUR VIEWS CONCERNING THE PROPRIETY OF NASA PROCUREMENT DIRECTIVE 70-15, WE ARE PROVIDING IN THIS TRANSMITTAL LETTER A SUMMARY OF PRATT & WITNEY'S MAJOR CONTENTIONS AND OUR CONCLUSIONS. FOR READY REFERENCE THE CORRESPONDING PAGES IN THE DECISION ARE CITED.

I. NASA FAILED TO CONDUCT MEANINGFUL NEGOTIATIONS. (SEE PP 6-37.)

PRATT & WHITNEY CONTENDS THAT THE NEGOTIATIONS DID NOT COMPORT WITH 10 U.S.C. 2304(G) BECAUSE SUCH WRITTEN AND ORAL DISCUSSIONS AS WERE CONDUCTED DID NOT INCLUDE THE POINTING OUT OF DEFICIENCIES OR WEAKNESSES AND DID NOT AFFORD OFFERORS AN OPPORTUNITY TO IMPROVE THEIR PROPOSALS, BUT WERE MERELY TO SEEK CLARIFICATIONS. IN THIS CONNECTION, IT IS ARGUED THAT NASA PROCUREMENT DIRECTIVE 70-15, WHICH PROHIBITS THE POINTING OUT OF DEFICIENCIES IN COST-REIMBURSEMENT TYPE CONTRACTS AND ALL CONTRACTS FOR RESEARCH AND DEVELOPMENT, IS CONTRARY TO THE ABOVE STATUTE AS EVIDENCED BY ITS LEGISLATIVE HISTORY AND AS INTERPRETED IN DECISIONS OF THIS OFFICE. FURTHERMORE, IT IS PRATT & WHITNEY'S POSITION THAT HAD IT BEEN ADVISED OF THE ALLEGED DEFICIENCIES IN ITS PROPOSAL, IT WOULD HAVE BEEN IN POSITION TO EXPLAIN, CLARIFY, OR CORRECT ITS PROPOSAL. IN CONCLUSION, PRATT & WHITNEY CONTENDS THAT IN THE ABSENCE OF FULL AND MEANINGFUL NEGOTIATIONS IN THE INSTANT PROCUREMENT, THE GOVERNMENT WILL NOT RECEIVE THE MOST ADVANTAGEOUS CONTRACT.

THE ISSUE PRESENTED WITH RESPECT TO THE CONDUCT OF NEGOTIATIONS TURNS ON THE MEANING TO BE ASCRIBED TO THE STATUTORY MANDATE FOR "WRITTEN OR ORAL DISCUSSIONS." WHILE THE PROVISIONS OF 10 U.S.C. 2304(G) DO NOT DEFINE THE NATURE, SCOPE, OR EXTENT OF THE REQUIRED DISCUSSIONS, IT IS OUR VIEW THAT THE LEGISLATIVE HISTORY EVIDENCES A CONGRESSIONAL INTENT THAT NEGOTIATIONS BE CONDUCTED UNDER COMPETITIVE PROCEDURES TO THE EXTENT PRACTICABLE AND THAT THEY BE "MEANINGFUL BY MAKING THEM DISCUSSIONS IN FACT AND NOT JUST LIP-SERVICE," TO THE END THAT COMPETITION IS MAXIMIZED AND THE GOVERNMENT IS ASSURED OF RECEIVING THE MOST FAVORABLE CONTRACT.

ON THE OTHER HAND, THE STATUTE SHOULD NOT BE INTERPRETED IN A MANNER WHICH DISCRIMINATES AGAINST OR GIVES PREFERENTIAL TREATMENT TO ANY COMPETITOR. ANY DISCUSSION WITH COMPETING OFFERORS RAISES THE QUESTION AS TO HOW TO AVOID UNFAIRNESS AND UNEQUAL TREATMENT. OBVIOUSLY, DISCLOSURE TO OTHER PROPOSERS OF ONE PROPOSER'S INNOVATIVE OR INGENIOUS SOLUTION TO A PROBLEM IS UNFAIR. WE AGREE THAT SUCH "TRANSFUSION" SHOULD BE AVOIDED. IT IS ALSO UNFAIR, WE THINK, TO HELP ONE PROPOSER THROUGH SUCCESSIVE ROUNDS OF DISCUSSIONS TO BRING HIS ORIGINAL INADEQUATE PROPOSAL UP TO THE LEVEL OF OTHER ADEQUATE PROPOSALS BY POINTING OUT THOSE WEAKNESSES WHICH WERE THE RESULT OF HIS OWN LACK OF DILIGENCE, COMPETENCE, OR INVENTIVENESS IN PREPARING HIS PROPOSAL.

WE THINK THE PROPRIETY OF THE PROHIBTION IN NASA PROCUREMENT DIRECTIVE 70 -15 AGAINST DISCUSSING "DEFICIENCIES" MUST BE CONSIDERED IN THE LIGHT OF THESE PROBLEMS. WE THINK CERTAIN WEAKNESS, INADEQUACIES, OR DEFICIENCIES IN PROPOSALS CAN BE DISCUSSED WITHOUT BEING UNFAIR TO OTHER PROPOSERS. THERE WELL MAY BE INSTANCES WHERE IT BECOMES APPARENT DURING THE COURSE OF NEGOTIATIONS THAT ONE OR MORE PROPOSERS HAVE REASONABLY PLACED EMPHASIS ON SOME ASPECT OF THE PROCUREMENT DIFFERENT FROM THAT INTENDED BY THE SOLICITATION. UNLESS THIS DIFFERENCE IN THE MEANING GIVEN THE SOLICITATION IS REMOVED, THE PROPOSERS ARE NOT COMPETING ON THE SAME BASIS. SIMILARLY, IF A PROPOSAL IS DEEMED WEAK BECAUSE IT FAILS TO INCLUDE SUBSTANTIATION FOR A PROPOSED APPROACH OR SOLUTION, IN THE CIRCUMSTANCE WHERE THE INADEQUACY APPEARS TO HAVE ARISEN BECAUSE OF A REASONABLE MISUNDERSTANDING OF THE AMOUNT OF DATA CALLED FOR, WE BELIEVE THE PROPOSER SHOULD BE GIVEN THE OPPORTUNITY, TIME PERMITTING, TO FURNISH SUCH SUBSTANTIATION. THUS, IT SEEMS TO US THAT THE PROHIBITION IN NASA PROCUREMENT DIRECTIVE 70-15 AGAINST DISCUSSING "DEFICIENCIES" NEEDS CLARIFICATION.

IN THE PRESENT CASE, WE HAVE EXAMINED THE VOLUMINOUS DOCUMENTATION DETERMINE WHETHER THE NEGOTIATIONS COMPORTED IN SUBSTANCE WITH THE STATUTORY MANDATE FOR "WRITTEN OR ORAL DISCUSSIONS." IN THIS CONNECTION, WE HAVE TAKEN COGNIZANCE OF VARIOUS ASPECTS OF THIS PROCUREMENT WHICH, IN OUR VIEW, JUSTIFY THE LIMITED SCOPE OF THE DISCUSSIONS. THIS IS A RESEARCH AND DEVELOPMENT PROCUREMENT IN WHICH THE OFFEROR'S INDEPENDENT APPROACH IN ATTAINING THE DESIRED PERFORMANCE IS OF PARAMOUNT IMPORTANCE. ALSO, PRATT & WHITNEY'S SSME PROPOSAL WAS TO A CONSIDERABLE EXTENT A SCALED-UP VERSION OF ITS WORK UNDER THE XLR 129 PROGRAM WHICH WAS FAMILIAR TO THE NASA EVALUATORS. IN ADDITION, THERE WAS MORE THAN A YEAR OF ALMOST DAILY CONTACT BETWEEN PRATT & WHITNEY AND NASA DURING THE PHASE B PERIOD WHICH CULMINATED IN THE SSME PROPOSAL. FURTHERMORE, THERE WERE, IN FACT, EXTENSIVE WRITTEN AND ORAL DISCUSSIONS, SOME OF WHICH RELATED TO AREAS LATER JUDGED WEAK, ALTHOUGH THEY WERE FRAMED IN THE CONTEXT OF CLARIFICATIONS. IN ADDITION, SOME OF THE MAJOR PRATT & WHITNEY DEFICIENCIES INVOLVED COMPARATIVE WEAKNESSES AND THEIR DISCUSSION WOULD HAVE LIKELY INVOLVED LEVELING AND TECHNICAL TRANSFUSION.

IN VIEW OF THE FOREGOING, AS MORE FULLY SET FORTH IN THE DECISION, WE ARE UNABLE TO CONCLUDE THAT THE NEGOTIATIONS DID NOT COMPORT WITH THE STATUTORY MANDATE FOR "WRITTEN OR ORAL DISCUSSIONS."

II. NASA ERRONEOUSLY AND ILLEGALLY ACCEPTED A NONRESPONSIVE PROPOSAL. (SEE PP 38-41.)

IT IS PRATT & WHITNEY'S CONTENTION THAT ROCKETDYNE'S PROPOSAL IS NOT RESPONSIVE TO THE SPECIFICATIONS IN TWO RESPECTS: (1) THE PROPOSED WELDING OF MAJOR COMPONENTS INTO A SINGLE UNIT IS INCONSISTENT WITH THE REQUIREMENTS FOR REUSABILITY, MAINTAINABILITY, AND OVERHAUL CAPABILITY; AND (2) THE PROPOSED USE OF METAL ALLOY INCO-718, WHICH IS SUBJECT TO HYDROGEN EMBRITTLEMENT, WILL NOT SATISFY THE LIFE REQUIREMENTS.

FROM OUR REVIEW OF THE RECORD, IT DOES NOT APPEAR THAT EITHER THE PROPOSED WELDING OR THE PROPOSED USE OF INCO-718 VIOLATE ANY SPECIFIC PROVISION OF THE SPECIFICATIONS. FURTHERMORE, NASA HAS DETERMINED IN THE EXERCISE OF ITS TECHNICAL JUDGMENT THAT IN NEITHER RESPECT IS THERE ANY INDIRECT OR INHERENT CONFLICT WITH THE SPECIFICATION REQUIREMENTS. HAVING IN MIND THE DISCRETION AFFORDED THE CONTRACTING ACTIVITY WITH RESPECT TO SUCH MATTERS, WE FIND NO BASIS TO OBJECT TO THE TECHNICAL JUDGMENT REACHED.

III. NASA'S DETERMINATION OF PRATT & WHITNEY'S DEFICIENCIES WAS ARBITRARY AND CAPRICIOUS. (SEE PP 42-52.)

FIRST, PRATT & WHITNEY CONTENDS THAT ANY DOWNGRADING IN ITS GROUND SUPPORT EQUIPMENT PROPOSAL WAS ARBITRARY BECAUSE NASA FAILED TO PROVIDE THE NECESSARY INFORMATION FOR THE TYPE PROPOSAL IT APPARENTLY WANTED EVEN THOUGH REPEATED REQUESTS WERE MADE FOR SUCH INFORMATION. SECOND, IT IS ASSERTED THAT PRATT & WHITNEY WAS PENALIZED BECAUSE OF THE SOURCE EVALUATION BOARD'S DOUBT THAT SPECIFIC IMPULSE REQUIREMENTS COULD BE MET WITH ITS TRANSPIRATION COOLING METHOD, WHILE, IN CONTRAST, ROCKETDYNE WAS NOT PENALIZED FOR DEMONSTRATED GREATER SPECIFIC IMPULSE LOSSES ASSOCIATED WITH THE USE OF BAFFLES IN ITS REGENERATIVE COOLING DESIGN. THIRD, IT IS ARGUED THAT PENALTIES ASSESSED WITH RESPECT TO DYNAMIC STABILITY, HIGH SUCTION SPECIFIC SPEED, AND THE BALL VALVE SEAL DESIGN ARE INCONSISTENT WITH VARIOUS AIR FORCE, NASA, AND PRATT & WHITNEY EXPERIENCE AND TEST DATA. FINALLY, IT IS PRATT & WHITNEY'S CONTENTION THAT OTHER CRITICISMS RESULTED FROM THE EVALUATORS' APPARENT FAILURE TO READ AND FULLY COMPREHEND PRATT & WHITNEY'S PROPOSAL.

THE ADMINISTRATIVE REPORT CONTAINS A DETAILED REBUTTAL OF THESE CONTENTIONS. DETERMINATION OF THE RELATIVE DESIRABILITY OF THE RESPECTIVE PROPOSALS IS PROPERLY A FUNCTION OF NASA AND WE HAVE NOT ATTEMPTED TO MAKE AN INDEPENDENT DETERMINATION IN THIS RESPECT. HOWEVER, WE HAVE MADE A THOROUGH REVIEW OF THE MANY VOLUMES DETAILING THE EVALUATIONS, FINDINGS, AND SCORING OF THESE HIGHLY COMPLEX TECHNICAL PROPOSALS. FROM THIS REVIEW, WE ARE SATISFIED THAT THE EVALUATIONS WERE NOT ARBITRARY OR CAPRICIOUS, AS CONTENDED, BUT WERE COMPREHENSIVE AND OBJECTIVE AND PROVIDED A SOUND BASIS FOR SELECTING THE MOST ADVANTAGEOUS PROPOSAL.

IV. SELECTION OF ROCKETDYNE WASTES ELEVEN YEARS OF KNOWLEDGE, TEST PROVEN DESIGN, AND GOVERNMENT INVESTMENT IN PRIOR PRATT & WHITNEY PROGRAMS. (SEE PP 53-57.)

THE CRUX OF PRATT & WHITNEY'S ARGUMENT HERE IS THAT BECAUSE OF ITS KNOWLEDGE, EXPERIENCE, AND TEST-PROVEN DESIGN RESULTING FROM ITS WORK UNDER THE XLR-120 PROGRAM, ITS PROPSAL FOR THE SSME BASED UPON THAT PROGRAM WAS THE MOST ADVANTAGEOUS OFFERED THE GOVERNMENT AND SHOULD HAVE BEEN SELECTED. ON THE OTHER HAND, IT IS CONTENDED THAT THE SELECTION OF ROCKETDYNE WAS ARBITRARY AND CAPRICIOUS BECAUSE ITS EXPERIENCE IN ROCKET ENGINES IS NOT BASED UPON SSME CONCEPTS AND ITS PROPOSED DESIGN IS BASED UPON "PAPER" ANALYSIS.

WE HAVE CONCLUDED FROM OUR REVIEW OF THE ENTIRE RECORD THAT DUE CONSIDERATION WAS GIVEN TO BOTH THE RELEVANT EXPERIENCE OF THE RESPECTIVE OFFERORS, INCLUDING PRATT & WHITNEY'S XLR-129 EXPERIENCE, AND TO THE DEGREE AND NATURE OF SUBSTANTIATION OFFERED IN SUPPORT OF THEIR RESPECTIVE DESIGNS. SINCE THE DETERMINATION THAT ROCKETDYNE OFFERED THE SUPERIOR TECHNICAL APPROACH INCLUDED CONSIDERATION OF THESE FACTORS AND, IN ADDITION, WAS MADE AFTER A COMPREHENSIVE AND OBJECTIVE EVALUATION, THIS CONTENTION HAS NOT IN OUR OPINION BEEN SUPPORTED.

V. SELECTION OF ROCKETDYNE WAS BASED ON PROCEDURES THAT MAXIMIZE THE RISK OF COST OVERRUNS. (SEE PP 58-67.)

PRATT & WHITNEY'S ARGUMENT IN THIS CONNECTION IS THREEFOLD: (1) SELECTION OF ROCKETDYNE'S "PAPER" DESIGN OVER PRATT & WHITNEY'S TEST PROVEN DESIGN INVITES A COST OVERRUN; (2) THE ANNOUNCEMENT OF A "COST BOGEY" OF $450 MILLION (PART A OF INCREMENT I), EXCLUSIVE OF FEE, INVITES UNREALISTIC COST ESTIMATES; AND (3) NEITHER LOWNESS NOR REALISM OF COST WAS CONSIDERED A FACTOR IN THE SELECTION.

IN CONNECTION WITH THE PREVIOUS CONTENTION, WE NOTED THAT THE DEGREE AND NATURE OF SUBSTANTIATION OFFERED IN SUPPORT OF THE RESPECTIVE DESIGNS WERE DULY CONSIDERED. SINCE THE SO-CALLED "COST BOGEY" (WHICH WAS PUBLICLY AVAILABLE) APPEARS TO HAVE A REASONABLE BASIS, WE DO NOT AGREE THAT EMPHASIS ON MEETING IT PREVENTED THE SUBMISSION OF REALISTIC COST ESTIMATES. IT IS ALSO CLEAR FROM THE RECORD THAT ALL ASPECTS OF COST, INCLUDING LOWNESS, REALISM AND RISK OF OVERRUN, WERE GIVEN COMPREHENSIVE AND OBJECTIVE CONSIDERATION IN THE EVALUATION PROCESS, AND WERE CONSIDERED IN THE SELECTION.

VI. ROCKETDYNE OBTAINED AN UNFAIR COMPETITIVE ADVANTAGE BY DIVERSION OF SATURN FUNDS TO SSME PROPOSAL EFFORT. (SEE PP 68-107.)

BRIEFLY, IT IS PRATT & WHITNEY'S CONTENTION THAT ROCKETDYNE WAS PERMITTED BY NASA TO PERFORM CERTAIN TASKS UNDER ITS SATURN LAUNCH SUPPORT CONTRACT WHICH WERE GERMANE TO ITS SSME PROPOSAL. FURTHERMORE, IT IS CONTENDED THAT ALTHOUGH THE SEB KNEW OF THESE TECHNOLOGICAL EFFORTS AND WAS INFLUENCED THEREBY, THE RESULTS OF THESE TASKS WERE NOT REVEALED TO THE OTHER COMPETITORS UNTIL WELL AFTER THE SELECTION OF ROCKETDYNE.

IT APPEARS THAT ROCKETDYNE MAY HAVE GAINED SOME KNOWLEDGE IN ITS PERFORMANCE OF THREE OF THE TASKS WHICH AIDED IT IN ITS SSME PROPOSAL, AND THAT ITS WORK UNDER TWO OF THESE TASKS HAD SOME INFLUENCE ON THE SEB. HOWEVER, AS DESCRIBED IN MORE DETAIL IN THE DECISION, WE DO NOT BELIEVE THAT THE KNOWLEDGE GAINED WAS OF SUBSTANTIAL BENEFIT OR THAT SUCH ADVANTAGE WAS UNFAIR. WITH REGARD TO THE MATTER OF FAIRNESS, WE HAVE CONCLUDED THAT THERE WAS A LEGITIMATE NEED FOR BOTH THE SATURN SUPPORT CONTRACT AND THE TASKS THEREUNDER; THAT NASA'S EFFORTS TO SCREEN OUT TASKS POTENTIALLY RELEVANT TO SSME WERE LARGELY SUCCESSFUL; THAT PRATT & WHITNEY APPARENTLY KNEW OF THE WORK BEING PERFORMED UNDER SATURN AND KNEW WHERE AND HOW TO OBTAIN REPORTS; AND THAT THE RESULTS OF THE THREE RELEVANT TASKS WOULD NOT HAVE BEEN OF BENEFIT TO PRATT & WHITNEY. WITH REGARD TO OUR CONCLUSION THAT PRATT & WHITNEY APPARENTLY KNEW OF THE WORK BEING PERFORMED UNDER THE SATURN CONTRACT, WE HAVE NOTED THAT WHEN PRATT & WHITNEY LEARNED THAT ROCKETDYNE WAS WORKING ON HYDROGEN EMBRITTLEMENT PROBLEMS IT CONTACTED THE NASA OFFICE HAVING COGNIZANCE OF THE SATURN CONTRACT; THAT NASA'S BRIEFING OF PRATT & WHITNEY ON THIS MATTER INDICATED THAT THE WORK WAS BEING DONE UNDER A NASA CONTRACT OTHER THAN PHASE B; THAT IN FEBRUARY 1971, PRATT & WHITNEY WAS FURNISHED A COPY OF THE FINAL REPORT ON THE COST SEGMENT EVALUATION CONTRACT, AND THAT REPORT CLEARLY SHOWED THAT THE WORK ON HYDROGEN EMBRITTLEMENT WAS CONTINUED UNDER THE SATURN CONTRACT; AND THAT A PRATT & WHITNEY REPRESENTATIVE MADE STATEMENTS TO NASA PERSONNEL DURING THE PHASE B PERIOD INDICATING ITS KNOWLEDGE OF ROCKETDYNE'S WORK UNDER SATURN. AS NOTED IN OUR AUDIT REPORT OF NOVEMBER 29, 1971, THERE WERE INSTANCES WHERE SOME ROCKETDYNE EMPLOYEES CHARGED THEIR TIME TO THE SATURN SUPPORT CONTRACT ALTHOUGH THE WORK WAS RELATED TO THE SSME PROPOSAL. WE UNDERSTAND THAT RECENTLY ROCKETDYNE DETERMINED THE AMOUNT INVOLVED TO BE $2,526, AND THAT IT HAS MADE APPROPRIATE ADJUSTMENTS TO THE RESPECTIVE CONTRACTS. IN THIS CONNECTION, WE UNDERSTAND THAT THE DEFENSE CONTRACT AUDIT AGENCY HAS REVIEWED ROCKETDYNE'S FINDINGS AND ADJUSTMENTS AND IS SATISFIED THAT THEY WERE APPROPRIATE AND SUFFICIENT. WE INTEND TO FOLLOW UP ON THIS MATTER AND ASSURE THAT ANY ERRONEOUS TIME CHARGING IS RECTIFIED. HOWEVER, IN OUR JUDGMENT ANY IMPROPRIETY RELATES TO IMPROPER CHARGING OF TIME, WHICH MAY BE REMEDIED BY A PROPER ADJUSTMENT IN THE APPROPRIATE ACCOUNTS, RATHER THAN TO A SUBSTANTIAL DEFECT IN THE NEGOTIATION OF THE INSTANT PROCUREMENT.

AFTER THOROUGH CONSIDERATION OF ALL THE FACTS AND ARGUMENTS PRESENTED TO US IN THE CASE, WE BELIEVE THE PROCUREMENT WAS CONDUCTED IN A MANNER WHICH WAS CONSISTENT WITH APPLICABLE LAW AND REGULATIONS AND WAS FAIR TO ALL PROPOSERS.

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