GAO: EPA’s contract evaluation ‘flawed’

The Environmental Protection Agency was unfair in its evaluation of a contract proposal from IBM to upgrade the agency's financial management system, according to a June 2007 protest decision released Tuesday by the Government Accountability Office.

Comment on this article in The Forum.The protest decision, which is directly related to IBM's one-week suspension from federal contracting in March, states that EPA improperly adjusted pricing in IBM's proposal. That directly affected the decision to award the contract to another company.

GAO's decision is null and void, given IBM's withdrawal of the protest two weeks ago as part an agreement with the EPA to lift its suspension from federal contracting. EPA lifted the suspension in exchange for IBM withdrawing the protest; that cleared GAO to release its decision, which previously had been held under protective order. The contents reflect questionable contracting practices within the agency. "The agency's evaluation of offerors' price and cost proposals was flawed, [which] had a material effect on the award decision," according to GAO's decision.

IBM was suspended from receiving new federal contracts on March 28, when EPA placed the companyon the Excluded Parties List System, which GSA maintains to track reprimands issued to federal contractors for violations.

EPA suspended IBM because of communications between EPA and IBM employees about details of a contract to modernize the agency's financial management system, which may have violated the procurement integrity provisions of the Office of Federal Procurement Policy Act. Investigations by EPA and the U.S. Attorney's Office for the Eastern District of Virginia are ongoing.

"There has been a surprising lack of information inside the agency about

the specifics of the alleged event at the root of this," said one EPA staffer close to the contract who asked not to be identified. "There is some history of problems within the financial systems staffs at the EPA for the past few years and frankly I'm not exactly surprised that something like this happened."

IBM protested EPA's February 2007 decision to award its financial management contract to CGI Federal, claiming, among other things, that EPA adjusted the company's proposed cost and pricing inappropriately and disproportionately to CGI. GAO sustained the protest, pointing to improper adjustments to IBM's proposed price for replacement of the agency's Superfund Cost Recovery package and Image On-Line System, and the cost of required EPA resources. Those two errors added between $7.1 million and $14.3 million to IBM's proposal. In contrast, GAO concluded, EPA failed to properly adjust CGI's proposal to more accurately reflect costs for ongoing systems development and integration requirements.

IBM's decision to withdraw the protest eliminated the GAO finding as a factor in the contract, which allowed EPA definitively to award CGI the $83 million Financial System Modernization Project contract on April 10. The decade-long contract is part of the financial management line of business initiative.

"Companies like IBM almost always respond by taking the position that this was an isolated event with some bad apples, and not indicative of how the company normally operates," said the EPA staffer. "They really had no choice but to back out of the contract."

IBM declined to comment about the contents of the protest or GAO's decision.