GAO audit recommends EDS contract be revoked

The U.S. Department of Housing and Urban Development’s decision last August to award an US$860 million IT services contract to Electronic Data Systems Corp. (EDS) was unreasonable and the contract should be revoked, according to an audit by the General Accounting Office.

In a recommendation released last month, the GAO ruled on a complaint that had been filed by Orlando-based Lockheed Martin Information Systems, which held the previous HUD IT services contract. LMIS, which has since been renamed Lockheed Martin Simulation, Training and Support (LMSTS), alleged that HUD misevaluated the business proposals from the two companies and “made an irrational source selection decision.”

HUD had put out a request for proposals for IT services — including systems management, information processing, telecommunications and storage, as well as maintenance, upgrades, backup and operation of all computer hardware — for an initial period of one year, with nine one-year options.

The GAO recommended that the EDS contract be terminated if a second bid review process fails to show that the Plano, Tex.-based company has offered the best deal.

Michael Fluharty, an HUD spokesman in Washington, said recently that the agency is still trying to determine how to proceed in the wake of the audit. “We haven’t been told that we have to shut down any operations (under the contract), but we are taking a hard look” at what to do next, Fluharty said. HUD has 60 days to discuss the findings with the GAO. “The organizational people within HUD have been meeting to figure out how to respond,” he said.

Nettie Johnson, a spokeswoman for LMSTS, said her company is satisfied with the GAO ruling. “The GAO has recommended that HUD reopen the acquisition, obtain revised proposals from Lockheed Martin and EDS, re-evaluate the revised proposals and make a new award decision. We are hopeful that HUD will fully implement GAO’s recommendations in order to ensure the integrity of the process and make the best-value decision for customers and taxpayers,” she said.

Systems in transition

Kevin Clarke, a spokesman for EDS’s federal government group, said his company has been working to transition HUD’s IT systems to EDS since August and that the process is expected to be completed next month. “We remain confident that our solution will remain the best option for HUD,” Clarke said. EDS will continue to provide services until the matter is resolved, he said.

The GAO report was critical of the EDS contract award on several counts.

“The record reflects numerous instances where the agency either unreasonably reached conclusions relating to the EDS offer in light of the language included in the proposal (for example, in the areas of single sign-on access and the provision of Oracle database software), or apparently failed to thoroughly evaluate the proposals critically, and in a manner that would have revealed inconsistencies or deficiencies in what was being offered,” the report stated.

“We find the agency’s conclusions troubling in light of its evaluation of the LMIS proposal,” the GAO said.

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