GAO Sustains Protest of $1.76 Billion Contract Award to “Old” SAIC

A $1.76 billion contract award for medical, biomedical, and health services was improper because the awardee’s proposal and the evaluation did not reasonably reflect the manner in which the contract would be performed, the likely costs of performance, or the entity that would perform the contract.

Prior to submitting its proposal for human spaceflight program support services, the awardee—Science Applications International Corporation—announced a plan to separate into two independent, publicly traded companies. In response to the government’s discussions request to explain the potential separation and how it would affect the direct and indirect rates proposed, the awardee stated the two new companies would be referred to as “new” SAIC and Leidos, “new” SAIC would be the prime contractor, the new companies would be separate legal entities that were not affiliated or legally connected, and that it was proposing an “overall rate cap” to mitigate the risks of indirect rate increases.

The awardee’s final proposal revisions used proposed costs and a technical approach that were based on “old” SAIC’s organizational structure, assets, and resources, and it did not provide any additional information on the expected separation or cost implications. After contract award, the awardee announced it was moving forward with the reorganization and sought to novate the contract to “new” SAIC.

The Comptroller General sustained the protest, rejecting the government’s assertion that the evaluation and source selection decision were proper. The record showed the awardee’s proposal and the evaluation were based on the technical approach, resources, and costs associated with “old” SAIC, and that “old” SAIC intended another entity with substantially fewer resources to be the prime contractor.

Further, the source selection authority relied on “old” SAIC’s “strikingly lower probable cost,” which it attributed to its proposed technical approach, and the substitution of “new” SAIC as the prime contractor may have had a material effect on the costs incurred and the technical approach employed. Finally, the government gave no meaningful consideration to either the technical approach or probable costs associated with “new” SAIC’s performance.

Since the awardee’s proposal and the evaluation failed to reasonably reflect the actual manner of performance, the likely costs of performance, and the entity that would perform the contract, there was inadequate support for the government’s assessment of projected cost savings and no reasonable basis for award. The Comptroller General recommended the government award the contract to the protester or reopen the procurement.

(Wyle Laboratories, Inc., B-408112.2, Dec 27, 2013)