Lessons from E&Y's bid protest win over IBM, PwC

Ernst & Young, IBM and PricewaterhouseCoopers were locked in a battle to take on the Army’s business and financial systems modernization effort.

The Army’s goal was to find a contractor who could help the service get its business systems into a condition to complete a financial audit.

Ernst & Young won the competition for the audit-readiness services, and IBM and PwC filed protests with the Government Accountability Office.

GAO sided with the Army and Ernst & Young. Reading through the bid protest decision, the conclusion is that while IBM and PwC may have had technically superior proposals, Ernst & Young had a better price.

And IBM’s and PwC’s proposals, while better, weren’t that much better to warrant the high premium they were asking for.

IBM bid $86 million for the project and PwC’s bid was $106.6 million. Ernst & Young bid $55.6 million, according to GAO.

That’s a huge gap, even if we weren’t in an era where low price tends to carry the day.

But it is important to note that the Army scored IBM and PwC outstanding for their approaches to the sample scenario in the solicitation. Ernst & Young was scored an acceptable.

In the other five evaluation criteria, the company’s scored the same: Outstanding for experience and acceptable for past performance, key personnel and transition plan and small business utilization. There were more weaknesses in the Ernst & Young proposal than in the IBM and PwC proposals, but the weaknesses didn’t affect the overall rating.

The Army concluded that Ernst & Young was “clearly capable of performing the mission at a significant price savings.”

IBM and PwC argued that the Army didn’t properly evaluate Ernst & Young’s experience, its key personnel or its transition plan factor. IBM also objected to how the Army evaluated Ernst & Young’s plan for reallocating labor hours.

IBM raised an additional argument, alleging that an Ernst & Young employee had a conflict of interest because the person formerly had worked at the Defense Department’s office of the controller. In that position, the person played a role in the awarding of audit-readiness contracts to Ernst & Young, PwC and an unnamed company. The unnamed company is on IBM’s team for the Army audit readiness contract at the center of this dispute.

IBM claimed a conflict of interest because the person, now an Ernst & Young employee, would have had access to information that would give Ernst & Young a competitive advantage.

None of the arguments carried water with GAO, which found that the Army’s evaluation team acted reasonably in making its decision to give the contract to Ernst & Young.

Because GAO rejected the technical objections from IBM and PwC, the agency also rejected the argument that the Army didn’t conduct a proper cost/technical tradeoff evaluation.

It was that tradeoff that won the contract for Ernst & Young.

The Army’s source selection authority acknowledged in his source selection decision document (the SSDD) that IBM and PwC had superior solutions and that Ernst & Young’s proposal carried the risk of “missed audit readiness milestones, deliverable delays, and increased level of effort from IT contractor.”

The conclusion was that the risk was worth the lower price.

GAO agreed that the decision to pick Ernst & Young was “consistent with the solicitation’s evaluation criteria, adequately documented and reasonably explained.”

I may be oversimplifying things, but the decision points to the balancing act that contractors must perform.

Do you bid the Cadillac or the Chevy? What is a must-have or a nice-to-have? Where is that line? Only the customer can answer those questions.