Protest Leads Army to Reconsider Big Contract

By Dana Hedgpeth
Washington Post Staff Writer
Wednesday, October 31, 2007

One of the biggest military contracts to house, feed and provide other services to U.S. military troops in Iraq, Afghanistan and Kuwait may be canceled and renegotiated after the Government Accountability Office said yesterday that it upheld a protest from two teams that lost the bid.

The $150 billion contract, known as the Logistics Civil Augmentation Program, or LOGCAP IV, spans 10 years and was awarded in June to three companies -- Fluor Intercontinental of Greenville, S.C., DynCorp International of Fort Worth and KBR of Houston.

Two losing teams, Contingency Management Group and IAP Worldwide Services, filed protests in July questioning the award of the contract. Both teams alleged that the bids were evaluated improperly by the Army Sustainment Command and "argued that the agency's evaluation of proposals was unreasonable," according to a statement released by the GAO.

The GAO agreed, saying it found problems with how Fluor and KBR were evaluated in various areas.

"We found that the Army violated procurement law or regulations to the detriment of the protesting companies," said Dan Gordon, a lawyer for the GAO. "Those two companies might have had a chance of winning the LOGCAP contract if the Army had acted properly."

Gordon said the GAO has recommended that the bidding process not start over entirely with new bidders, but rather that the Army "go back to the stage of negotiations. . . . We're recommending they reopen discussions and then request revised proposals from all companies and evaluate those proposals and then make a new decision of who should get the contract. The question is whether it is going to be the same three winners."

The lucrative contract is considered one of the biggest deals in the contracting services industry. It has ballooned in value from $2 billion when it was first awarded in 1992 to $23 billion under the most recent LOGCAP III contract.

KBR, the former contracting arm of Halliburton, won the current logistics contract in 2001.

Since then the contract has come under scrutiny by members of Congress, who alleged that KBR won because Vice President Cheney had been Halliburton's chief executive.

Government auditors turned up more than $1 billion in questionable costs, pushing the Army to make a change in how it awarded the contract. Instead of going to one company, the Army awarded the contract to three. Each company's part of the contract is worth up to $5 billion a year and can be extended for up to nine more years.

In the LOGCAP IV contract, the bids were judged on past performance, management, technical capabilities and cost.

The GAO said the Army's evaluation of Fluor's technical proposal was "unreasonable and evidenced unequal treatment." In KBR's case, the GAO said, the Army "misunderstood" part of the company's technical proposal, and it accused the Army of failing to evaluate comments the Defense Contract Audit Agency had made concerning KBR's business systems. The two-page statement released by the GAO made no comment on DynCorp.

Contingency Management Group's team is made up of AECOM Government Services, the Shaw Group and PAE Government Services. IAP is the lead contractor on its team, which includes Blackwater Worldwide, CACI and Lockheed Martin.

Heather Browne, a spokeswoman for KBR, said the company was "disappointed with the GAO's decision" and believed it had provided "unmatched" service to U.S. troops. KBR has requested that the GAO reconsider its decision.

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