Contractor Says Army Unfairly Closed Bidding

By Alec Klein and Steve Fainaru
Washington Post Staff Writers
Thursday, June 7, 2007

A British firm said the U.S. military improperly excluded it from bidding on the largest security contract in Iraq, blaming the U.S. government for what it calls an "arbitrary and capricious" decision that could cause "harm to U.S. policy and goodwill" in Iraq, according to newly released court documents.

The private security contractor, Erinys Iraq, said the U.S. Army required all bidders to obtain business and operating licenses from the Iraqi government before submitting offers but then did not enforce those requirements as it narrowed the field of candidates for the lucrative job.

The military has whittled the list to two British bidders -- Aegis Defence Services, which holds the current contract, and ArmorGroup International, another major private security contractor in Iraq, according to sources familiar with the matter. The Army has eliminated four candidates, including Erinys, the sources said. The contract, worth about $475 million, calls for a private company to provide intelligence services to the U.S. Army and security for the Army Corps of Engineers on reconstruction work in Iraq.

In its complaint in the U.S. Court of Federal Claims, Erinys questioned whether the Army sought to ensure that all bidders were properly licensed. "The U.S. government should not be allowed to award the largest U.S. security contract to a team that is not fully compliant with Iraqi licensing requirements," Erinys said in its complaint. The firm said the Army didn't provide "substantive guidance" about whether subcontractors, in addition to contractors, were required in every case to be licensed by the Iraqi government.

Erinys, which provides security for some military personnel in Iraq under a separate U.S. contract, said it has both licenses. The finalists for the contract, Aegis and ArmorGroup, each have both licenses, according to the Iraqi Interior Ministry.

In its redacted legal filing, Erinys cited a recent Washington Post report that showed how employees of Blackwater USA, a North Carolina company, recently opened fire on the streets of Baghdad, in one case instigating a standoff with Iraqi forces. Blackwater has not applied to operate as a private security company in Iraq, according to the Interior Ministry, but under a State Department contract it acts as one of the major security firms there. Blackwater says it operates lawfully in Iraq.

Erinys said the military's reason for its exclusion "is utterly devoid of any analysis or evaluation." Erinys also said the military failed to communicate with the firm, which would have cleared up confusion about its offer. And the company said the military excluded Erinys while "disregarding the higher-quality aspects of its proposals" and while considering "low-priced proposals" from other firms "without analyzing [their] quality." The military is basing its decision on what it considers the "best value."

A spokesman for Erinys, which is asking the federal court to reinstate it as a bidder, declined to comment. A source, who spoke on condition of anonymity because the contract is under dispute, said Erinys has been privy to the military's document evaluating the proposals but has not seen the proposals themselves.

After the military eliminated Erinys from the competition, the company filed a protest with Government Accountability Office on April 9. On May 29, the government notified Erinys that a man named Brian X. Scott had challenged the same contract but in a different venue, the Court of Federal Claims. Two days later, the GAO dismissed the protests of Erinys and another bidder, Blackwater, because the matter is now under litigation in the Court of Federal Claims. The GAO's dismissal of the two protests freed the Army to hand out the contract at any time. Erinys moved quickly last week to seek a temporary restraining order to prevent the Army from awarding it. A judge granted the restraining order and a closed court hearing on the matter is scheduled for today.

Army trial attorney Maj. Christopher Krafchek declined to comment yesterday.

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