GAO Issues Split Decision on DHS Datacenter Contract 

The cutthroat federal IT market virtually assures that every time a government agency awards a contract the losers will file a protest. The tactic has become standard operating procedure as technology companies chase fewer government contracts while shifting their emphasis from hardware to government IT services.

That strategy was again in evidence recently when IBM's federal unit and another Beltway vendor, Presidio Networked Solutions, filed a protest over a Department of Homeland Security (DHS) contract award for enterprise datacenter services. In a split decision, IBM and Presidio convinced auditors at the U.S. Government Accountability Office (GAO) to reverse one DHS award while sustaining another.

Emerging unscathed in the DHS datacenter dispute is Leidos, which was formed in September 2013 after large Pentagon contractor Science Applications International Corp split in two. Leidos targets the government IT and healthcare markets while the other spinoff, SAIC, continues to pursue military contracts.

Leidos prevailed in the recent GAO protest despite the fact that IBM had successfully argued in the past that its split into two companies would affect its ability to deliver datecenter services to the government.

IBM and Presidio had argued that the restructuring should disqualify Leidos since it bid on the DHS contract while still part of SAIC. IBM sited a previous ruling in a protest over a NASA contract case involving SAIC. Citing the restructuring, the GAO upheld that protest.

The outcome was different in the DHS case. "Our protest decisions regarding matters of corporate status and restructuring are highly fact-specific, and turn largely on the individual circumstances of the proposed transactions and timing," the GAO asserted in a ruling released this week.

IBM and Presidio did manage to convince GAO auditors to uphold their protest against Amazon Web Services (AWS) "advanced consulting partner" Agilex Technologies. Government auditors agreed Agilex made assumptions in stating its price that did not hold up.

The disputed DHS contract, which involves delivering datacenter services to the U.S. Customs and Border Protection's IT office, certainly does not advance the state of the art. However, in the winner-take-all federal IT market where large cloud service providers like Amazon Web Services are gaining the upper hand with huge federal contracts, companies like IBM are being forced to protest every lost federal IT contract.

The takeaway from all these "billable hours" – no less than sixteen attorneys were involved in the DHS contract protest, including five representing IBM – is that in the byzantine world of government contracting, the company with the sharpest legal department is just as likely to win a government contract as a competitor with superior technology.

DHS has 60 days to respond to the GAO ruling. Presumably either IBM and/or Presidio would become a second source for the DHS datacenter contract.