DoD’s $7.2B moving contract included ‘pervasive’ violations of procurement rules

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The Government Accountability Office overturned the Defense Department’s $7.2 billion contract to move service members’ household goods around the world because of what the independent bid arbiter called “pervasive” errors in the contracting process that prejudiced two losing bidders, according to two newly-released legal decisions.

GAO found U.S. Transportation Command, the agency responsible for the new Global Household Goods contract (GHC), ran afoul of federal contracting rules in no less than five key areas, beginning with serious questions about whether TRANSCOM’s chosen bidder, American Roll-On Roll-Off Carrier Group (ARC), was eligible to win the contract in the first place.

The redacted decisions shed new light on the office’s rationale for telling TRANSCOM it should reevaluate bids in the GHC procurement. GAO first announced its verdict in two protests that challenged the GHC award on Oct. 21.

Both of the losing bidders who protested the contract award — HomeSafe Alliance and Connected Global Solutions — alleged that ARC wasn’t eligible for the contract because its parent company had a recent history of criminal and civil misconduct that it failed to disclose.

GAO didn’t explicitly agree with that position, but did find that TRANSCOM hadn’t done nearly enough of an investigation to credibly come to the conclusion that ARC was a responsible contractor.

The confusion over that responsibility determination began when ARC officials apparently mistakenly selected the wrong parent company when they registered as a bidder in the government’s System for Award Management (SAM). Instead of selecting Wallenius Wilhelmsen ASA (WWASA), ARC’s actual parent company, they selected Wallenius Wilhelmsen Logistics AS (WWLAS), which was convicted in 2016 on federal antitrust charges and paid a nearly $100 million fine.

TRANSCOM and ARC contended that mistake was a simple clerical error and that WWASA doesn’t actually have a record of misconduct. But as Federal News Network reported in July, that claim is difficult to square with publicly-available evidence, since all three companies are tightly interconnected.

As GAO later pointed out in the decisions released last week, the CEO and CFO of WWASA are actually employed by WWLAS (now called Willenius Wilhelmsen Ocean). Perhaps more importantly, GAO noted, ARC’s bid proposal took credit for the “vast resources” WWLAS would be able to provide once it won the contract, while at the same time claiming WWLAS would not be “meaningfully involved” in work on the contract.

“Either ARC was accurate in its technical capability proposal when it represented that it was drawing on the vast resources of its affiliates or ARC was accurate in its statement that [WWLAS] would have no meaningful involvement in contract performance,” GAO wrote. “Faced with this inconsistency, we think it was incumbent upon the contracting officer to investigate further whether ARC would rely on assets of Wallenius Wilhelmsen ASA for contract performance.”

Instead, GAO found, the contracting officer appeared to have simply asked ARC whether WWLAS would play a meaningful role in the GHC contract, and took the company’s “no” answers as good enough.

But before TRANSCOM gets to the point of conducting a new investigation into whether ARC is a responsible bidder, it needs to resolve several other substantive errors it made the first time it evaluated bids, and failed to correct when it took the contract back for “corrective action,” GAO found.

The new decisions make clear that ARC’s bid was the most expensive of the three. The actual prices are redacted from the GAO decision, but HomeSafe has previously said its bid was $2 billion lower than the $20 billion ARC’s proposal would cost over the full period of performance, assuming the government exercises all of its contract options over nearly a decade.

Both HomeSafe and CGSL contended that TRANSCOM engaged in “misleading negotiations” because the command told the companies the prices in their proposals “seemed high,” even though they were actually lower than ARC’s.

HomeSafe said it reacted to that price warning by reassessing and lowering its rates, but that it would have gone in the other direction if it hadn’t been misled by the government into thinking that price was more important than it turned out to be.

“The record shows that HomeSafe assumed that it was chasing what might be artificially low prices proposed by other offerors,” GAO wrote. “HomeSafe responds that, had the agency’s discussions been meaningful, the protester could have diverted some of its considerable price advantage into improving its technical capability proposal.”

GAO agreed, and found that TRANSCOM violated federal procurement rules that require agencies to tailor their negotiations to bidders’ actual proposals.

The bid arbiter also sided with HomeSafe and CGSL on matters such as poor recordkeeping during the bid and proposal process. They found, for example, that TRANSCOM officials kept only cursory notes to document the oral sessions where bidders demonstrated their technical proposals, making it very hard for the government to show exactly how and why it allocated scores to any of the three bids, or why it decided ARC’s proposal was worth billions of dollars in extra cost.

That’s important because TRANSCOM structured GHC as a “best-value” contract, and suggested in the request for proposals that it would give about equal weight to the capabilities contractors were proposing and the prices they offered, according to the protestors.

GAO declined to go along with the protestors’ contention that TRANSCOM’s best-value tradeoff decisions were flawed in and of themselves, but found the agency couldn’t have made those tradeoffs in a reasonable way because of the underlying problems in how it evaluated the bids.

For example, besides the problems it found with missing documentation and misleading discussions, the office found TRANSCOM seemed to have assigned “strengths” to ARCs proposal in a somewhat arbitrary way.

The agency scored HomeSafe’s operational approach as a “1,” while ARC received a 7. Meanwhile, the company outscored or equaled ARC’s scores in the categories of capacity management and contract phase-in. CGSL also had higher score than ARC in two of the four categories, and both companies offered lower prices.

Most of the sections describing precisely how TRANSCOM arrived at those scores are redacted, but the documents make clear that GAO found at least some of the agency’s thinking to be unsupportable, and that the bidders received disparate treatment when their bids were being evaluated.

On HomeSafe’s bid, for example, TRANSCOM “denigrated” an aspect of that company’s bid while characterizing the same capability as a “strength” in ARC’s.

“The technical capability proposals offered essentially the same benefit, and thus the assignment of a strength to ARC’s proposal alone was unreasonable,” GAO wrote.

TRANSCOM has yet to announce how it will respond to the GAO opinions. In an Oct. 22 statement, officials said they were “reviewing the GAO comments to determine the way ahead.”

As a legal matter, GAO’s decisions in bid protest cases technically aren’t binding on federal agencies. But it’s extraordinarily rare for an agency not to strictly abide by the office’s recommendations once a case has been decided.

If an agency refuses to implement a GAO recommendation rising out of a bid protest, it must notify GAO, which in turn reports that fact to Congress.

Out of the 1,000-3,000 protests the office handles each year, that’s only happened in one instance in the past five years, according to a Federal News Network review of GAO records.

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