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How Government Works: “Favoring the Incumbent”

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Every once in awhile, we stumble across something that makes a light bulb go off in our head. “Aha!” we say. “We knew it!”

The latest such illumination comes from a report by the Department of Veterans Affairs’ inspector general’s shop. It shows how the VA chose the winner of a computer contract worth more than $100 million – and how it came to pay too much (things like that tend to happen especially when your budget more than doubles in a decade):

As a result of our evaluation of the Secure VA-Chief Information Security Officer Support Services acquisition process, we determined VA’s proposal evaluation and contract award procedures demonstrated a potential bias toward the incumbent, Booz-Allen Hamilton, and did not promote full and open competition in accordance with the Federal Acquisition Regulation…

On September 1, 2010, the Department of Veterans Affairs issued the Request for Quotations (RFQ), Secure VA-Chief Information Security Officer Support Services, Solicitation Number VA118-10-RQ-0742. The RFQ’s objective was to acquire services for improving and supporting VA’s information security, privacy, and risk management programs and to support the daily activities and responsibilities of the Office of Information Protection and Risk Management. Three contractors submitted bids in response to the RFQ. VA awarded the contract to Booz-Allen Hamilton for $133 million on September 28, 2010…

We concluded VA used knowledge of VA procedures and practices as a significant selection factor without clear disclosure of its relative importance in the RFQ. The technical evaluation process favored awarding the contract to the incumbent, Booz-Allen Hamilton, based on its performance as VA’s Information Assurance and Information Technology Security Services contractor for the past two years…

If knowledge of VA procedures and practices had not been used as a key evaluation factor, another vendor might have won the contract at lower cost to the Government…

Booz-Allen Hamilton’s cost of approximately $133 million reflected a premium of 16 percent ($18 million) and 22 percent ($24 million) over the two other offerors. VA justified this premium because of the perceived significant strength and low technical risk from Booz-Allen Hamilton’s extensive knowledge, understanding, experience, and expertise in support of VA’s enterprise-wide information security and risk management program…We stand by our conclusion that VA traded off lower cost in favor of Booz-Allen Hamilton’s technical knowledge of VA practices. While the award decision may have resulted in a low risk to the Government and a decreased learning curve as Management asserted, VA should not have paid a premium price for the incumbent’s knowledge. In our opinion, favoring the incumbent during the selection process did not promote full and open competition in accordance with the Federal Acquisition Regulation. This practice puts VA at risk of awarding future “de-facto” sole source contracts at greater expense to the Government because of reduced competition.

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