Bid Protest Slows Navy's $2.5 Billion Upgrade for Shipboard Networks

The Government Accountability Office has partially sustained a bid protest filed by contractor CGI Federal over a $2.5 billion set of U.S. Navy contracts. GAO's ruling could further delay Navy's plans to upgrade the nation’s surface warship fleet.

In August, the Navy awarded the contracts to five companies – BAE Systems Technology Solutions & Services, General Dynamics C4 Systems, Global Technical Systems, Northrop Grumman Systems Corp. and Serco, Inc. However, work ceased Sept. 2 when losing bidders CGI Federal and DRS Laurel Technologies protested the decision.

GAO entirely denied DRS Laurel Technologies’ protest over the Navy’s Consolidated Afloat Networks and Enterprise Services -- or CANES -- system and portions of CGI Federal’s protest.

GAO agreed with CGI Federal that the Navy solicitation’s price evaluation methodology was flawed. According to GAO, the Navy changed the price evaluation scheme it had laid out in its request for proposal between the closing date for final proposal revisions and the actual award date.

(Read More: Navy Ships Will Get $2.5 Billion in Cyber and Intelligence Upgrades)

CGI Federal, which had the highest price of all the bidders under the Navy’s price evaluation, contended its price would have fared better under the Navy’s revised acquisition strategy.

The Navy defended its action, stating “it followed the terms of the solicitation and that all offerors competed on an equal basis.” But GAO said its price evaluation should not have been conducted on a unit structure it knew it would not order.

Here’s how the GAO’s ruling put it:

“The agency’s arguments, however, miss the point. We agree that the agency followed the terms of the solicitation, and that the offerors submitted prices on an equal basis. The problem is that the price evaluation, and resulting selection decision under which CGI did not receive an award due to its high price, were based on comparing prices for quantities of units that the agency now knows it does not intend to order. We recognize that price evaluation in the context of an [indefinite delivery, indefinite quantity] contract may be representative, and therefore something of a fiction; nevertheless, the fiction employed must bear some rational relationship to the agency’s needs.”

GAO denied additional complaints under CGI Federal’s protest, including the company’s claim the Navy conducted unequal discussions with other bidders.

Still, the partial protest sustainment means the Navy must take some kind of action on the contract, which is an essential part of both the Navy’s modernization plan and its efforts to increase its cybersecurity posture.

"We are currently reviewing the GAO recommendations," Steven A. Davis, Space and Naval Warfare Systems Command spokesman, toldNextgov in a statement. "Meanwhile, the Navy will continue fielding CANES systems procured under the previous Limited Deployment contract and will ensure that existing legacy afloat networks are appropriately maintained until they are replaced by CANES." 

In its ruling, GAO recommended the Navy “amend the solicitation’s price evaluation methodology,” to invite bidders to submit revised prices and to “make a new source selection decision.”

The decision added: “If, as a result, a different group of offerors is selected for award, the agency should terminate the contracts awarded to nonselected offerors and make awards to any newly selected offerors.”

By law, the Navy has 65 days following the sustainment if it intends to not to follow GAO’s recommended action. GAO would then notify Congress of the agency’s decision to disregard the ruling, although such a scenario rarely unfolds.

The Navy could ask the bidders to provide a new set of prices under its revised acquisition strategy without requiring new technical evaluations – the portion of the procurement that takes the longest to thoroughly review.

Another option would be for the Navy to offer CGI Federal a CANES contract. Given that CANES first went to bid nearly 18 months ago, it might be the most expedient option for what’s considered an integral effort.