With that caveat, I will assume that this case involves the following: Performance of certain obligations during a transition period by an incumbent contractor, performance of certain obligations during the transition period by a new contractor (which might turn out to be the incumbent if it wins the award), and then full obligation to perform the contract once the transition phase is completed.
The dispute is cast in the following two news articles.
Deloitte's $250 million state Department of Public Welfare contract object of court fight
People familiar with the state government purchasing of computer services tease that bid requests for those services ought to come with a disclaimer: “If you are not Deloitte, don’t bother.”]
pn_20080222184704-1.jpgMichael Fernandez, The Patriot-NewsDeloitte's office in Susquehanna Township.
Deloitte Consulting LLP, a New York-based global information technology company with an office in the midstate, has cornered most of the market on filling state government’s outsourced computer services needs.
It has garnered just shy of $1 billion in business from the state over the past decade, with much of that stemming from work done on the state Department of Public Welfare’s computer systems.
One of the new Deloitte contracts, worth around $250 million, is the subject of a court challenge.
Computer Aid Inc., a global computer services firm based in Allentown that has been the recipient of nearly $256 million of state government work over the past decade, says the process used to evaluate the bids was flawed.
Welfare officials dispute that.
The department “is very confident the process was open, fair and appropriate. The procurement process is intended to obtain the best possible services at the lowest possible price, and we are confident both of these objectives were achieved,” department spokesman Michael Race said in emailed responses to questions.
At the center of the dispute is the process that the Welfare Department used to evaluate bids for the five-year contract, according to court and departmental documents.
During that process, CAI alleges that state officials erroneously directed Deloitte to subtract six months’ worth of costs from its pricing. The department then compared Deloitte’s revised price for 54 months of work to CAI’s price for 60 months of work.
Department officials, however, maintain that adjustment was necessary to make a fairer bid comparison. They claim CAI’s pricing included costs associated with setup work during the first six months and 54 months of ongoing services.
But Deloitte’s pricing included the first six months of setup costs plus 60 months of ongoing services. So the department said that once that was adjusted, the final pricing put the cost of hiring Deloitte at $243.4 million versus $246.8 million for CAI.
[Read more.
Commonwealth Court rules in Department of Public Welfare's favor over its bid award to Deloitte Consulting LLP
Senior Judge Barry Feudale on Wednesday issued a ruling that said the department's bidding process was not flawed that led to a bid award to Deloitte Consulting LLP, a New-York based international information technology firm.
The welfare department last year sought bids for an information technology upgrade. After a six-month bid submission and review process, the welfare department selected Deloitte for the two largest of seven five-year contracts it was issuing for computer services, with three others firms getting the other contracts.
Deloitte has had a longstanding business relationship with the department. Its most recent contract with the welfare department for computer services was to expire on June 30 but Race had said it was extended for 90 days.
According to state Department of Treasury records, Deloitte has received nearly $1 billion in business from the state over the last decade, with much of that stemming from work on the welfare department's computer systems.
[Read more.]
Here, the solicitation required bidders to submit pricing for various elements, broken down into three categories: deliverables, modifications, and maintenance.
The solicitation allowed for "a transition period for the selected offeror’s orientation/knowledge acquisition of up to six months from the contract effective date." During this period, the government (DPW) "would pay the selected offeror only for accepted deliverables.... DPW would not pay for maintenance and modification" elements until after that transition period.
The facts get confusing on a cursory read because it appears the requesting pricing included a monthly calculation of all three elements for the entire 60 month contract period, notwithstanding the new contractor would not be paid for 2 of the elements, or evidently asked to provide them, during the transition period.
The protester, in its Best And Final Offer (BAFO), thus deducted the price of the 2 elements for the transition period. The incumbent, evidently, offered pricing over the full 60 month period. The hearing officer, evidently, to "compare apples with apples" then reduced the incumbent's bid in the same manner, that is, reducing the price to account for the 2 elements not paid for in the transition period.
That seems fair enough, but only if my assumption is wrong where I assume the incumbent is not being paid under the prior contract to provide those services. If so, then, in addition to already being paid to provide the services, the incumbent is getting a credit advantage in this solicitation for a prior award. If the government is trying to analyze the whole cost of services for the "new" 60 month contract period, the credit allowed for the transition expenses should not be ascribed to the incumbent but only to those not being paid for the services. Or though it seems to me.
To understand this by comparison of an analogous situation, see the GAO decision discussed in this post, Incumbent on government to level playing field.
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