Pricing at the heart of GDIT's $6.5B grid contract protest

General Dynamics IT hit hard on how the Defense Information Systems Agency evaluated pricing in the award of the $6.5 billion GSM-O contract to incumbent Leidos.

And it's easy to see why when you look at the newly-released Government Accountability Office decision that outlines why it denied GDIT’s protest.

GDIT bid $1.992 billion on the two task orders described in the solicitation. Leidos' proposal was $320 million lower at $1.672 billion.

Both companies were rated “Acceptable for past performance and “Outstanding” for small business participation. They also had similar scores of “Outstanding” across the technical/management factors.

Notable exceptions appear in the cybersecurity factor, where Leidos scored “Good” and GDIT was scored “Outstanding,” and the transition plan category where the scores were reversed -- Leidos had the “Outstanding” score and GDIT rated as “Good.”

DISA found 17 strengths and no weaknesses in each bid. Both companies had what DISA considered equal proposals under the non-cost/price factors, so the competition came down to price. Because Leidos’ proposal had the lower price, it was deemed the best value for the government.

Under these circumstances, GDIT had no choice but to challenge how price was evaluated. The company raises several interesting arguments, but none passed muster with GAO.

For example, DISA told both GDIT and Leidos that their pricing was too low after they submitted initial proposals. This led GDIT to raise its pricing in a later submission, while Leidos apparently did not. GDIT argued that DISA conducted unequal discussions with the bidders.

But DISA said -- and GAO agreed -- that how the companies responded to the agency were business decisions. “It was an exercise of GDIT’s independent business judgement,” GAO wrote.

Also on the pricing, GDIT argued that Leidos would make very low-to-no profit on the contract. The GAO decision doesn’t mention the company’s or profit data.

DISA talked to Leidos about the low profits and the company’s explanation is noteworthy.

The agency raised that issue in discussions and “Leidos explained that it took a comprehensive view of the program, set the profit appropriate to the risk for each labor category, accepted the risk involved with the lower profit rate, and represented that contract performance would not be negatively impacted,” GAO wrote in its decision.

GDIT argued that the evaluation of Leidos’ pricing was not “meaningful,” GAO wrote in its decision.

But GAO rejected the various arguments. “While GDIT contends that the evaluation here was not a meaningful one, we find this amounts solely to disagreement with the agency’s judgement,” GAO wrote.

GAO also noted several times in the decision that DISA documented its decisions, which is a common theme we see in protest decisions. GAO more likely than not sides with the agency if it documents how the decision was made.

For one of its non-price challenges, GDIT claims Leidos has an organizational conflict of interest because it hired a former DISA official. GAO dismissed this allegation because GDIT knew the information and should have raised their concerns earlier.

In reading the GAO decision, it’s easy to pick up GDIT’s passion for the contract and the pricing issue in particular.

Whether GDIT takes that passion any further is unknown. They still have the option of going to the U.S. Court of Federal Claims. The company still declines to comment on the protest, so we’ll have to watch and see if that does happen.