Court Report Details Why Blue Origin Lost HLS Case Against NASA

The U.S. Court of Federal Claims released the redacted report detailing why it ruled against Blue Origin in its lawsuit against NASA over the Human Landing System (HLS) contract award today. It adds details to the brief statement from Judge Richard Hertling earlier this month that confirmed NASA’s selection of SpaceX for the first HLS system.

Hertling issued his Order of Judgment on November 4 and gave the parties until today to confer and jointly propose redactions to the Memorandum Opinion. Blue Origin is the Plaintiff, the U.S. Government is the Defendant, and SpaceX is a Defendant-Intervenor.

The 47-page redacted Memoradum Opinion was released this morning.

Basically Hertling agreed with the U.S. Government’s position that Blue Origin did not have standing to file suit in the first place because it did not have a substantial chance of winning were it not for the company’s alleged violations by NASA. Its price was too high and the bid was noncompliant.

Furthermore, the Court found that even if the company did have standing, it would have lost on the merits because it did not show that NASA’s conduct was “arbitrary and capricious or otherwise contrary to law.”

Perhaps the two most interesting revelations are that Blue Origin offered an alternative architecture and increased its offer to put in more of its own money from $2 billion to $3 billion.

Blue Origin argued that it would have submitted an alternative proposal if it knew NASA would waive certain requirements as it alleged NASA did with SpaceX, but the Court found the alternative “speculative and unsupported by the record.”

“The Court has no way to perform a hypothetical evaluation to determine whether Blue Origin’s alternative proposal would even be awardable much less have a substantial chance of award. Blue Origin is in the position of every disappointed bidder: Oh. That’s what the agency wanted and liked best? If we had known, we would have instead submitted a proposal that resembled the successful offer, but we could have offered a better price and snazzier features and options. Blue Origin cannot use its speculative alternative proposal to establish that it would have had a substantial chance of award but for NASA’s alleged evaluation errors. Such an approach runs directly counter to the judicial role in Administrative Procedure Act (“APA”) review, as applied in resolving bid protests.”

As for Blue Origin picking up more of the cost, it originally bid $5.9 billion, twice SpaceX’s $2.99 billion. After NASA selected SpaceX, Blue Origin filed a protest with the Government Accountability Office (GAO). While GAO had the matter under consideration, Blue Origin founder Jeff Bezos offered to waive $2 billion of that pricetag. GAO ruled against Blue Origin, as well as Dynetics, another losing bidder, on July 30. Blue Origin then filed suit in the Court of Federal Claims.

Referring to Blue Origin President Bob Smith, Hertling states “In the protest before the Court, Mr. Smith raised the figure to “over $3 billion as a Blue Origin private contribution to add valuable competition and assist in addressing NASA’s HLS Option A budget and funding shortfall.”

It was not persuasive.

“These post-award offers to contribute funds were not before NASA at the time it made its award, and NASA had no obligation to ask Blue Origin to improve its proposal by absorbing costs or lowering the price. The solicitation warned offerors “that the Government may evaluate proposals and award contracts without conducting discussions or post-selection negotiations,” and, “[t]herefore, each Offeror shall submit only one proposal which represents its best approach to meeting the requirements of the solicitation.” (AR Tab 27 at 24473 (emphasis added).)

“Faced with this explicit direction, Blue Origin chose to submit a proposal that did not include a $2 or $3 billion corporate contribution. Blue Origin’s effort to conduct public-relations negotiations after the award in the context of its bid protest is insufficient to support a finding of prejudice when its proposed FY 2021 milestone payments were priced at more than [***] times NASA’s budget for the Option A contract. When considered with other factors discussed below, the Court finds that this funding shortfall was too substantial for Blue Origin to establish that it would have had a substantial chance of award but for the alleged evaluation errors.”

Between the GAO protest and the court case, NASA’s contract with SpaceX was in abeyance for seven months. After the November 4 ruling, NASA Administrator Bill Nelson said he spoke with SpaceX President Gwynne Shotwell and they agreed the two need to have detailed talks before determining when SpaceX’s Starship might be ready for its HLS role. Nelson said the goal of putting astronauts back on the Moon would slip from 2024 to 2025 partially because of the litigation.

SpaceX continued to work on Starship using its own money during those months, however. Yesterday, SpaceX founder and CEO Elon Musk said he expects the first Starship orbital launch in January or February, the first of at least a dozen Starship launches in 2022. He anticipates launches of “real payloads” beginning in 2023.  SpaceX’s HLS architecture requires a lot of Starship launches because the Moon-bound Starship gets fueled at a depot in Earth orbit that does not yet exist. GAO’s report revealed that SpaceX will require 16 launches for that HLS mission. Fourteen of those reportedly will fill the depot’s tanks.

NASA picked SpaceX for the first lunar landing, but it plans for a long-term sustainable program of lunar exploration with several landing system service providers. It has already opened a second solicitation for HLS concepts. Blue Origin partnered with Northrop Grumman and Lockheed Martin for the original “Option A” contract, but they bid separately for this “Appendix N” award for Lunar Exploration and Transportation Services (LETS).  All three as well as SpaceX and Dynetics won modest sums for concept development, the same five companies that had bid for Option A.