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US audit recommends EDS contract be revoked

A $860m IT services contract awarded last August by the US Department of Housing and Urban Development (HUD) to Electronic Data Systems should be revoked because errors were made in the bid award process, according to an audit by the US General Accounting Office.

In a 12-page recommendation released last month, the GAO ruled on a complaint that had been filed by Lockheed Martin Information Systems, which held the previous HUD IT services contract.

LMIS, now called 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", according to the GAO. 

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

"We find that because of the errors in the agency's source selection decision discussed above, there is no basis to find that the award determination in favour of EDS at a cost premium of [amount deleted by GAO auditors] is supported by the record.

"Accordingly, we recommend that the agency reopen the acquisition and engage in discussions, obtain revised proposals, evaluate those proposals consistent with our findings [being sure to apply a consistent standard in evaluating the two proposals] and make a new award determination." 

The GAO recommended that the EDS contract be terminated if the company fails to be judged as offering the best deal after a second bid review process. 

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." 

Kevin Clarke, a spokesman for EDS's federal government group, said that his company has been working to move 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.

Todd R Weiss writes for Computerworld


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