GAO Asks Federal Housing Agency To Pull EDS Contract Award

The investigative arm of Congress says HUD failed to support its decision to reject a lower bid from Lockheed Martin.
The General Accounting Office is urging the Department of Housing and Urban Development to pull an IT outsourcing contract awarded to EDS last year because of what the investigative arm of Congress calls "errors in the agency's source selection decision." GAO wants HUD to put the contract up for rebidding, a process that would not exclude EDS from winning it again.

Ruling on a complaint filed by Lockheed Martin Corp., which lost the HUD business to EDS, GAO says in a decision released Monday that HUD failed to support its decision to reject a lower bid from Lockheed.

The contract, awarded by HUD to EDS last August, calls for EDS to develop a nationwide IT and telecommunications backbone for the agency. At the time of the award, EDS said the contract was worth up to $860 million over a maximum of 10 years.

Among other things, GAO took issue with HUD's interpretation of the contractor's ability to operate and support an Oracle database. GAO says there's no evidence to support HUD's conclusion that EDS is capable of supporting more Oracle users than Lockheed. GAO also said HUD awarded the contract to EDS despite the fact that EDS failed to indicate that 35% of the contract funds would be directed toward small-business subcontractors, as required by HUD's original request for proposal.

Under federal law, HUD can disregard GAO's recommendation, but it must provide a written explanation of its action to Congress if it chooses to do so.

A Lockheed Martin spokesman would not say how much the company bid on the contract but said the amount was less than the EDS offer. An EDS spokesman declined comment. HUD officials were not immediately available for comment.

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