The US Army’s $20B ITES-2 Contract
Back in March 2005, DID noted that the US Army had narrowed the field for its $20 billion ITES-2 IT contract to 17 potential prime contractors. At the time, we also noted the Army’s plan to issue the formal RFP in May 2005. Later, in April 2005, DID covered Kevin Carroll, “the $36 billion man” who leads the office in charge of ITES and ITES-2 as the Army pursued its vision of a major long-term contract vehicle for a wide range of information technology and computing services.
In September 2005, the U.S. Army released its RFP for its $20 billion Information Technology Enterprise Solutions-2 Services program via the Army Small Computer Program, the Army Contracting Agency, and the Information Technology, E-Commerce, and Commercial Contracting Center. After that, things didn’t go as well. A major kerfuffle and 2 rounds of GAO protests followed the award, which led to a revised list of winners in November 2006.
ITES-2: The RFP
The US Army initially planned to release the RFP for ITES-2 in late April 2005 and then in early summer 2005, but abandoned both plans to refine its performance-based contracting focus, which supports the Army’s enterprise infrastructure goals.
ITES-2 is a consolidated contract vehicle for products and services and will serve as a follow-on to the original ITES program, which was a relatively “small” $500 million vehicle that was used as a learning experience. The contract vehicle will run for 9 years and will include a wide range of IT services that support the U.S. Army’s enterprise infrastructure.
At the time, the Army was expected to award 8 contracts, 4 to large businesses and 4 to businesses having 1,500 employees or fewer. Then the companies would compete with each other for work assignments under the contract.
Although the administration of ITES 2 will be handled by the US Army, all Federal agencies are authorized to fulfill requirements under this multiple-award contract vehicle. Companies selected to compete for ITES-2S included:
- BAE Systsems IT
- Booz Allen Hamilton
- Computer Sciences Corp.
- EDS
- FC Business Systems
- General Dynamics Network Systems
- IBM Business Consulting Services
- Information Systems Support (ISS)
- Lockheed Martin Integrated Systems
- Multimax
- NCI Information Systems
- Northrop Grumman IT
- Pragmatics
- QSS Group
- SETA
- Science Application International Corp. (SAIC)
- STG
Proposals were due Oct 7/05 at 2 p.m. Lockheed and Northrop Grumman have already named their consortium teams. In the end, however, the number of winners doubled to 16 – though a number of firms in the above list don’t feature in the winner’s circle.
As of November 2008 [PDF], ITES-II Contract holders include:
- Apptis – acquired SETA (W91QUZ-06-D-0014)
- BAE Systems IT (W91QUZ-07-D-0003)
- Booz Allen Hamilton (W91QUZ-06-D-0019)
- CACI – acquired ISS (W91QUZ-06-D-0020)
- CSC (W91QUZ-06-D-0018)
- EDS (W91QUZ-06-D-0013)
- General Dynamics IT – acquired FC systems (W91QUZ-06-D-0012)
- Harris – acquired Multimax (W91QUZ-07-D-0001)
- IBM (W91QUZ-06-D-0010)
- Lockheed Martin Integrated Systems (W91QUZ-06-D-0017)
- NCI Information Systems (W91QUZ-07-D-0004)
- Northrop Grumman IT (W91QUZ-07-D-0005)
- Perot Systems – acquired QSS Group (W91QUZ-06-D-0011)
- Pragmatics (W91QUZ-07-D-0002)
- SAIC (W91QUZ-06-D-0016)
- STG (W91QUZ-06-D-0015)
Aftermath: I Protest, You Protest, We All Protest ITES
Dec 10/07: Northrop Grumman is probably glad that it protested – not only did it win re-admittance to the winners circle (along with all other eliminated firms), but it just landed a key battlefield logistics contract that could be worth up to $600 million. See “NGC Wins $600M Logistics Contract Under ITES-2” for more.
April 12/07: The US Army Small Computer Program announces that ITES-2H (Information Technology Enterprise Solution – 2 Hardware) Program contracts are open for ordering. ITES-2H is the Army’s program for providing competitive contracts for a full range of server, client, storage and network product solutions to include related services for installation and integration. A total of 6 contractors support the ITES-2H Program: Apptis, CDWG, Dell, GTSI, IBM and WWT. Discount catalogs are provided by each of the contractors for 9 product category areas that include servers, clients (workstations, desktops and thin clients), storage, networking (routers, switches, etc), cabling and ancillaries, VTCs, and power supplies. The contracts provide competition for numerous OEM products and product solutions. Ordering is decentralized and authorized for Army, other DoD and Federal agencies.
April 6/07: The Defense Information Systems Agency (DISA) won’t issue a RFP for its Service-Oriented Architecture Foundation (SOAF) project, as it originally announced, but will handle the project under ITES-2 instead. DISA’s Net-Centric Enterprise Services initiative reached Milestone B in March 2007, and the SOAF project was scheduled to bring it to Milestone C by March 2008.
FCW reports that some contractors had already stood up teams to develop competition strategies for the expected SOAF RFP, but during the winter, DISA decided that a full and open competition for SOAF would make it impossible to meet the NCES deadlines. ITES-2 protests played a strong role in that decision: “We couldn’t take the risk of [the SOAF award] being protested, because that would prevent us from reaching Milestone C,” a DISA spokesman said.
So, the very protest vehicles meant to give smaller firms more leverage and a fair shake at federal contracting processes are used by larger firms, and end up having an anti-competitive effect by moving more awards under larger vehicles, which of course are especially well suited to larger firms.
Ironic, but not surprising to those who have been following public policy theory developments over the last 30 years.
Nov 27/06: The US Army settles with the protesting firms, and will allow them all into the ITES-2 contract. See FCW article. The list of ITES-2 winner now includes (firms that were added following the protest are in italics):
- Apptis [acquired SETA]
- BAE Systems IT
- Booz Allen Hamilton
- CACI International [acquired ISS]
- Computer Sciences Corp. (CSC)
- EDS
- General Dynamics Network Systems
- IBM Business Consulting Services
- Lockheed Martin Integrated Systems
- Multimax
- NCI Information Systems
- Northrop Grumman IT
- Perot Systems [acquired QSS Group]
- Pragmatics
- Science Application International Corp. (SAIC)
- STG
Oct 26/06: The GAO issues its ruling on the ITES-2 round 2 protests, under files B-298249.6 – B-298249.20. Multimax, NCI, BAE and NGC asserted that the decision to mandate use of ITES-2 for IT contracts constituted a change in requirements per Federal Acquisition Regulation (FAR) sect. 15.206(a), and they were given no opportunity to change their bids. The GAO denied this claim.
Next, the protesters asserted that the Army applied an unreasonable, mechanistic formula in evaluating proposed labor rates, which constituted a failure to conduct meaningful discussions. GAO agreed, saying: “There is no indication that the agency ever reviewed the results of the formula to assure that the prices at the extreme end of the ranges reflected reasonable pricing; rather, the agency mechanistically applied the formula and accepted the results without further analysis. We conclude that the agency’s methodology did not provide a valid means for identifying “outlier” (questionable) rates, and this aspect of the evaluation therefore was unreasonable.”
On a related point, the GAO added that the Army’s price discussions with NGI and Multimax (as well as with BAE) were also inadequate because te Army’s chosen formula “failed to bring to the protesters’ attention numerous rates that reasonably should have been considered significantly overstated… We conclude that not only were offerors not adequately advised of all of their significantly overstated rates, but the agency’s failure to identify the additional rates actually misled the offerors into believing that those rates did not require further adjustment.[6]… During discussions, the Army identified as significantly higher than the corresponding IGCE rates proposed rates that were as little as 3.67 percent (during the initial price discussions) or 3.27 percent (during the second round of price discussions) higher than the IGCE rates. Meanwhile, as alluded to above, the agency did not identify other labor rates that were very much higher than the IGCE rates.”
Bottom line: the GAO concludes that the Army “failed to conduct meaningful discussions with the protesters.” Which, by accepted Federal government standards, apparently requires some level of notice when proposed rates are too high.
July 13/06: The US Army reissues ITES-2 awards to the original 11 winners. The 5 protesting firms re-submit their protests. FCW’s July 31/06 article “ITES-2S on hold again” looks at the situation, and notes some of the areas where the US Amy may have made their own lives more difficult.
May 2006: BAE Systems IT, Multimax, NCI Information Systems, Northrop Grumman IT, and Pragmatics file GAO protests. See GCN article. In response, the US Army withdraws the original 11 ITES-2 awards.
April 14/06: The US Army issues the ITES-2 awards. Winners include Apptis [SERTA], Booz-Allen Hamilton, CACI, CSC, EDS, General Dynamics Network Services, IBM Consulting, Lockheed Martin Integrated Systems, Perot Systems [QSS], SAIC, and STG.
