Where IBM's protest over financial requirements fell short

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A newly-released bid protest ruling details how the Veterans Affairs Department wants to look at bidders' liquidity ratios for a supply chain modernization contract.

Back in the day, they used to say that no one ever got fired for hiring IBM.

So it is a little disconcerting to see IBM arguing that a contract requirement to prove financial liquidity and solvency restricted competition.

According to a newly-released bid protest decision, IBM argued that the tests for liquidity and solvency in the competition for a Veterans Affairs Department contract were meaningless. IBM also complained that VA is taking an all-or-nothing approach instead of scoring on a sliding scale.

The Government Accountability Office denied all of IBM’s challenges as we have previously reported, saying that VA acted reasonably. GAO has now unveiled its decision that provides insights into what VA wants to look at and where IBM disagreed.

The 10-year contract is part of VA’s plan to modernize its supply chain and that length is why the department says it needs to verify the financial liquidity and solvency of bidders. GAO agrees with that argument.

IBM may have lost the protest, but is still eligible to win the contract. VA is in the source selection phase and now that the protest is cleared up, it can go ahead and make an award.

GAO's decision has sparked some debate on LinkedIn, where some commenters called VA a “bunch of numbskulls” for questioning IBM’s liquidity and solvency. Likewise, GAO was called a numbskull for backing VA.

Others defended VA and GAO because instead of the whole company, a distinct entity of IBM is bidding and that unit's finances have to stand on their own.

That IBM entity apparently had trouble meeting the some of the ratios established by VA.

For example, VA wanted a ratio of one after dividing total current assets by total current liabilities. Ratios of one or higher received 850 points. Bidders whose radios are below one get no points.

Those points represent half of the 1,700 points a bidder could earn for the financial health factor.

If the IBM entity didn’t have the one or above ratio, it would lose half the points for the financial health factor. That is a lot of points to make up and explains why the company protested that element of the solicitation, particularly the lack of a sliding scale.

But agencies have a lot of discretion to establish their evaluation criteria.

“After reviewing the agency’s explanation, we conclude that the protester has not provided a basis to question whether the tests are reasonably related to the agency’s needs,” GAO wrote.

The decision now lies with VA to pick its winner, which will likely be in the coming weeks. IBM will still have the option of protesting if it doesn’t win, but it will have to find new reasons to challenge the VA's award decision.