M&A concerns nix $280M contract award

A recent Government Accountability Office protest decision offers a good reminder to the many companies making acquisitions today -- make sure the customer knows the impact of that acquisition, no matter how insignificant one thinks that impact might be.

GAO has ruled in favor of a protest that Vertex Aerospace filed objecting to a $283 million task order that DynCorp International won to support flight operations at Vance Air Force Base in Oklahoma.

The task order awarded under the Aircraft Maintenance Enterprise Solutions multiple award contract. Vertex, DynCorp, and Amentum were among the eight primes on the vehicle.

DynCorp had just been acquired by Amentum when the Air Force issued the task order in late 2020.

Vertex protested after DynCorp won the task order in February 2021, saying the Air Force didn’t properly consider the impact of the acquisition on DynCorp’s ability to perform on the contract.

Here are some things that stood out to me from GAO's ruling:

• In its proposal, DynCorp made no mention of the acquisition and how DynCorp would be integrated into Amentum.
• In its protest filing, Vertex asked if the Air Force had talked to DynCorp about the impact of the acquisition.
• DynCorp apparently didn’t talk about it much.

The protest decision describes the back-and-forth between the GAO, the Air Force and Amentum. Nearly all the dialogue about the impact of the acquisition took place after Vertex filed its protest.

Both the Air Force and Amentum said there was little need for a discussion because the acquisition was taking place at the corporate level. No personnel or business units at the customer level would be affected. The organizational chart would not change.

However, one thing shared by Amentum should have prompted more of an inquiry by the Air Force.

During the novation process, the company said that it was “undertaking an internal reorganization.” The contracting officer received this information as part of the novation documents before an award decision was made.

According to GAO, the novation notice referenced the “integration and consolidation of contract performance activities and alluded to the use of intercompany procedures to ensure resources and employees were available.”

That should have prompted the contracting officer to ask more questions and assess the impact of the transaction. The contracting officer apparently didn’t do this.

The interesting thing here is that GAO isn’t saying that the acquisition of DynCorp by Amentum undermined DynCorp’s ability to perform, but is saying the Air Force should have looked at that question.

That’s what GAO wants the Air Force to do now: document an analysis of the acquisition and make a new award decision.

It shouldn’t be a surprise that GAO ruled this way. We saw a case in 2017, where GAO supported the Army Corps of Engineers' decision to award a contract to Science Applications International Corp. over Leidos.

The original competitor against SAIC was Lockheed Martin, but the latter was chasing the $562.3 million contract while they were transitioning their IT business to Leidos.

The Corps felt that it was too risky to award the contract to Leidos/Lockheed while they were going through that transition. In fact, the Corps used the transaction and standard risk disclosures filed as part of the deal to support their decision.

The key there is that the Army Corps of Engineers could document why it made that decision.

In the case of DynCorp/Amentum, the Air Force offered no documentation as part of their decision.

The Air Force fell short here by not asking questions about the acquisition and its impact, but the lesson for industry is pretty clear: When buying another company (and who isn’t these days), be proactive in explaining how the deal impacts the ability to perform.

The impact should be positive, or why else make the acquisition. But companies need to explain that right from the start.