How Lockheed lost a $500M bid protest

As the incumbent, you know Lockheed Martin fought hard to hang onto an Army Corps of Engineers contract worth $500 million.

And in reading the Government Accountability Office’s decision denying the company’s protest of the award to Exelis, it’s clear that the Corps gave Lockheed more than one chance to fix what apparently was the fatal error in its proposal.

The companies were competing to provide IT and IT management services at the Corps' Washington headquarters and at nine divisions and 44 district offices across the country. The contract also covered two data centers.

Lockheed outscored Exelis in the past performance category, and its price of $504.2 million was more than $12 million lower than Exelis’ $516.8 million bid.

But that wasn’t enough to overcome a lower score in the technical and management category, where Exelis scored an outstanding and Lockheed scored acceptable.

According to the GAO decision, Lockheed got the lower score because the Corps of Engineers felt its bid was overly reliant on a version of an IT management tool known as dataBoard 4.0, which won’t be ready for another two years. dataBoard 3.0 is currently in use.

When the Corps opened discussions with the bidders, they pointed this out to Lockheed:

“There is no tangible evidence of the product capabilities, how it will be developed, sustained, managed, and an understanding of how it will enable the Offeror to meet the requirements of the PWS. The timeline for full deployment of 2 years is unacceptable,” the agency wrote to Lockheed.

In its revised proposal, Lockheed said its proposed approach was “not reliant on dataBoard 4.0.” But that failed to reassure the Corps because of the numerous references to dataBoard 4.0 in its proposal.

When it opened discussions again with bidders, the agency again raised its concerns about the non-existent dataBoard 4.0, telling Lockheed that its assertion that its bid didn’t rely on 4.0 was “‘in conflict’ with multiple portions of Lockheed’s proposal,” GAO wrote.

In its final proposal, Lockheed deleted the 4.0 and simply said dataBoard without reference to the version of the tool, GAO said.

In evaluating the final proposals, the Corps’ source selection authority ruled in Exelis’ favor and said that Lockheed had a “significant weakness” in its reliance on dataBoard. The company’s proposal was relying on capabilities that “are not part of the current dataBoard.”

The source selection authority said this represented too high of a risk. Lockheed’s higher past performance rating and lower price weren’t enough to counter the higher risk.

Lockheed argued that the Corps evaluation was flawed. The company told GAO that the upgrades to dataBoard would be ready by the time the contract received the OK to move forward after the award, technically called the Authorization to Proceed. But that didn’t fly with GAO because of statements to the contrary in Lockheed’s proposal, which said the upgrades wouldn’t be ready for some period of months after the authorization to proceed. The exact number of months was deleted from the GAO decision.

GAO also rejected Lockheed’s argument that the Corps price evaluation was inadequate, providing a detailed review of how the Corps evaluated the pricing and proposed costs, which led GAO to find the Corps' approach appropriate.

GAO also rejected the argument that the Corps conducted discussions with Exelis following the source selection decision. But those discussions weren’t material to the proposals, so the Corps wasn’t required to open discussions with Lockheed. The Corps was only asking about the status of an ongoing Defense Contract Audit Agency audit.

So, what’s the takeaway from this decision? Obviously, someone wasn’t listening at Lockheed when the Corps – a long time customer – was raising red flags about its proposal. And to think that simply removing the version number of the product from your bid would be enough to satisfy your customer’s concerns is a little mind blowing, especially after two rounds of discussions about those concerns.

But if the biggest contractor on the block can make this kind of mistake, it should act as a warning to everyone else.

In a statement Lockheed Martin provided me, a spokesman said:

“We were disappointed to learn of the GAO’s decision regarding the Army Corps of Engineers Integrated Enterprise Services (AIES) contract as we believed we were well-positioned to continue the successful management of the Army Corps’ IT network. Our current focus is finishing the remainder of the contract with the same strong performance we’ve displayed in recent years and making the transition to the future contractor as smooth as possible.”