American Systems corrects novation issues, takes DHA modernization contract

ASRC Federal's fight to wrestle away a Defense Health Agency modernization contract from American Systems took some interesting turns along the way but is not a victory in the end.

The conflict stems from the award of an $11.6 million phase III Small Business Innovation Research contract that American Systems initially won to help modernize the delivery of health care. DHA sought to build on phase I and phase II contracts that American Systems held. The work is to turn DHA's main in-theater medical information environment into a modular and portable software suite.

In its first protest, ASRC Federal claimed the award to American Systems was improper because the latter didn’t hold the phase I and II contracts.

Here is where the arcane nature of government contracting rears its ugly head.

American Systems gained the contracts in question two years ago when it acquired DDL Omni Engineering. But the contract in question was never novated from DDL to American Systems, which meant ASRC Federal successfully argued then that American Systems was not eligible for the phase III award.

GAO agreed and told DHA last year to re-evaluate its requirements.

That was in December 2019. Two months later, American Systems and the Defense Contract Management Agency amended the original novation agreement to add the SBIR phase I and II contracts that had missed the first pact.

With this amendment, DHA re-awarded the phase III contract to American Systems in May 2020. ASRC Federal then filed a new protest.

But this time around, ASRC Federal didn’t attack the amended novation as improper because GAO doesn’t have jurisdiction over the novation process. They instead argued the Phase III contract doesn’t include requirements that incorporate the work done in phase I of the SBIR. Because it doesn’t include those requirements it doesn’t build or extend the earlier work.

GAO agreed with DHA's move to turn that argument back because the Phase III contract incorporates by reference the previous work even if it doesn’t specifically name the requirements. The phase III contract states that the terms and conditions of phase I remain in effect.

“Given this language, the fact that the order itself does not contain specification or requirements that explicitly reference or are in common with American Systems’ prior SBIR phase I work does not show that the work fails to derive from, extend or complete the prior work,” GAO writes.

The irony here is if there had been no protest, American Systems would have completed its work. The $11.6 million contract was to run from May 13 to Sept. 30, 2020.

American Systems, through its acquisition of DDL, has been working on ways to modernize the Theater Medical Information Program-Joint system.

Under the phase III award, American Systems will build on that work and develop a roadmap to modernize the systems software suite.