Why DHS landed in hot water with a $ 5 million leadership training contract


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Even simplified acquisitions can lead to a dead end for an agency. That’s what the Department of Homeland Security discovered when it used streamlined procedures for a training contract worth less than $ 5 million. Smith Pachter McWhorter’s attorney, Joseph Petrillo, joined Federal Drive with Tom Temin with details.

Tom Temin: And Joe, I thought simplified meant simple, but in this case, it was anything but. Tell us about this case.

Joseph Petrillo: Sure. In this case, the Department of Homeland Security was conducting a small business acquisition to obtain leadership training. The concept here is for DHS employees to go to Gettysburg with a contractor, visit and stay on the battlefield, and run leadership trainings and seminars. And they use the Gettysburg events as illustrations and object lessons to show how leadership works. This is the basic idea. The department, as you mentioned, decided to use lean procurement techniques and try to make it a lean procurement. But things got complicated as sometimes. It was a purchase at the best value for money. And the most important factors in order of importance were technical capacity, sample presentation and past performance, with price being the least important factor. The proposals were rated each of these non-price factors at confidence levels – high, certain, or low.

Tom Temin: So a scale of one to three roughly.

Joseph Petrillo: Exactly. Yeah, basically good, okay, and not that good. So that was the scoring system. When the reviews took place, Lincoln had the highest rating category for the two main factors.

Tom Temin: Is that why they … is that about Gettysburg?

Joseph Petrillo: Well, I don’t know, they sure have the right name.

Tom Temin: Lincoln is a small business that does training, in other words.

Joseph Petrillo: Exactly. Lincoln management.

Tom Temin: Got it, okay.

Joseph Petrillo: Not Lincoln the president. Technical ability and sample presentation – they have the highest marks. They have an average rating for past performance, but the price tag was steep, around $ 4.5 million. Academy Leadership had the average score for all three factors other than price and a prize of just $ 3 million. The DHS determined that the technical superiority of Lincoln Leadership was worth the much higher price, and the award went to this company. The Academy leadership protested. And the crucial issue in the protest involved around DHS communications with offerors. They had asked the three finalists in the competition if their prize was the best they could offer. Additionally, they told Lincoln Leadership it was priced significantly higher than the other proposals.

Tom Temin: And is it kosher to say that?

Joseph Petrillo: The GAO did not say it was wrong. And they mentioned that it was advice specifically tailored to Lincoln’s proposal. I think under FAR Part 15 – normal competitive negotiation procedures – it’s a questionable thing to do. But saying that your price is too high or relatively too high is probably perfectly acceptable.

Tom Temin: But they didn’t slide pennies across the table, each being a million bucks, and winking say that’s how high you are, as far as we know.

Joseph Petrillo: Apparently not, yeah, it’s not on file anyway. The problem now is what happened after that, and Lincoln and Academy cut their prices – Lincoln went from $ 5 million to $ 4.5 million, Academy went from $ 3.5 million to about $ 3 million. I’m rounding things off here. But the Academy said, look, these were discussions and they were unfair and deceptive. And the Department of Homeland Security said, well, it’s not a FAR Part 15 market, where you have all these rules about what you do in threads. It was a simplified acquisition. And we think asking for a better price was a smart thing to do and a perfectly fine thing to do. The GAO looked at it differently though. They said that while the simplified procedures do not require discussions, when an agency conducts them, it must do so in a fair and reasonable manner. So what does this mean? What is a fair and reasonable means? Well, in this case the GAO is referring to the FAR Part 15 procedures to find out what that means. And first of all, he […] that these are the types of discussions that are mentioned in these procedures.

Tom Temin: They were therefore referring to the non-simplified part of the procurement.

Joseph Petrillo: Exactly. And since these were discussions under Part 15 of the FAR, the standard for those discussions had to be that they were meaningful. Here they did not meet these standards, as Lincoln was specifically made aware of the main obstacle to obtaining the award, its significantly higher price, and was given the opportunity to resolve this issue – they were able to lower their price. However, the Academy did not have this opportunity. Their problem was not their price. Their problem was areas in their proposal, which weren’t as good as they could have been. And there were specific areas that DHS mentioned in its assessment as being significant weaknesses in the Academy’s proposal. He was not told about these areas and he was not given the opportunity to correct his proposal to try to improve it.

Tom Temin: In other words, Homeland Security told Lincoln, whoever they awarded it to, that their price was too high. But they didn’t inform the Academy, which didn’t get the award, of shortcomings in other parts of the procurement – their technology, sample presentations, and past performance.

Joseph Petrillo: Exactly. The basic problem here is that the Academy’s problem was not that its price was too high, its price was good, its price was comparatively very good. Ironically, all that happened as a result of the talks was everyone’s price dropped. And the gap between Academy Leadership and Lincoln Leadership has not closed at all. But in the final analysis, the price was not the determining factor here.

Tom Temin: But I guess the theory is that not having experienced the shortcomings in the most important areas of assessment, the Academy might have had the opportunity to improve them.

Joseph Petrillo: I think it’s right. These were things that you might be able to correct in a proposal. And we didn’t know it because the Academy had never had that chance. The GAO therefore backed the protest and said Homeland Security should hold appropriate discussions with the three finalists, get revised and make a new source selection. The moral of the story here is that it looks like as you start using the FAR Part 15 procedures you’re going to have to use them more rigorously and thoroughly than you might have even envisioned. in a simplified acquisition. The GAO said there could be circumstances where an agency in a simplified acquisition could request price cuts, and those price cuts would not trigger discussions. But it’s hard to imagine what it is. The only case I can think of is when everyone has the highest ranking possible and couldn’t improve in their factors other than price. So the only thing is the price. But other than that kind of unusual situation, it seems to me that you have this kind of education to follow.

Tom Temin: Yes, if everyone’s awesome then you’ve got the Entrepreneur’s T-ball equivalent. And that’s just a function of the price. So the lesson is, tell everyone the same. If you want to simplify, let’s say everyone’s price is too high, come back and see us. And stop there. But if you start having one-on-one chats then you end up in Part 15 territory if you don’t have them with everyone equally.

Joseph Petrillo: I think the agency actually did what you said here, but they had problems because not everyone was in the same position. Thus, this question of price turned out to benefit only one offeror while others had significant interventions that did not take place and could have taken place.

Tom Temin: Okay, now we have to see what’s going on. He hasn’t been rewarded yet, has he?

Joseph Petrillo: As far as I know, this is not the case.

Tom Temin: Well, the agencies have ways of getting what they want, even despite the protests, so I’m going to have to see how it goes. It is very cold to go up and through Gettysburg very soon, this could all end in the spring.

Joseph Petrillo: Well, maybe that is a leadership lesson in itself.

Tom Temin: Very well. Joseph Petrillo is a procurement lawyer with Smith Pachter McWhorter. Thank you very much.

Joseph Petrillo: Thanks, Tom.

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