GAO upends Justice's identity card project

The Justice Department failed to justify its decision to contract with a more expensive digital identity vendor instead of a lower-priced provider and when the losing firm protested, department officials wrongfully accused it of having a conflict of interest and a record of poor work performance, government investigators said.

As a result, Justice should consider yanking the deal awarded to the winner, LS3 Technologies, unless the department can demonstrate the contract offers the best value for taxpayers, according to attorneys with the Government Accountability Office. A redacted copy of the verdict was released Thursday. Attorneys for the protester, NikSoft Systems Corp., said they filed a complaint about the October 2011 contract with GAO on Nov. 23, 2011.

Justice had argued that NikSoft had no right to contest or even bid in the first place, because it had an unfair competitive advantage stemming from inside knowledge about the ID program. NikSoft had helped Justice draft a blueprint for initiating the Federal Identity, Credential and Access Management program, a governmentwide strategy for securing the login credentials and smart card IDs of federal employees. The five-year contract in dispute consists of multiple work orders, or "calls," that will be assigned as needed for software and services to support the Office of Justice Programs' FICAM initiative.

The total value of the project is not disclosed, but Justice already has tasked LS3 with an initial job worth $844,122 for parts and labor.

GAO attorneys recommended Justice consider halting that order, which involves purchasing commercial software, developing source code and conducting system tests.

"If LS3's quotation is not found to reflect the best value to the government, and given that performance has not been stayed, the agency should consider the feasibility of terminating the call issued to LS3, and should terminate the [contract] awarded to LS3," wrote GAO General Counsel Lynn H. Gibson. "The agency should then issue the [contract] and call to the vendor whose quotation is determined to be the best value to the government."

Justice spokeswoman Sabra Horne said Friday, "athough the Office of Justice Programs awarded the contract as a best-value procurement, based on technical merit, in addition to price, we take the GAO very seriously and we are moving out on all of their recommendations."

NikSoft's proposal was the only one that priced software at $350,000 -- the exact amount in Justice's independent government estimate, officials noted in substantiating their concerns about inside knowledge. But GAO countered that Justice had provided LS3 with the same internal quote before the company submitted an offer as part of a revised solicitation.

Justice considered NikSoft, a Reston, Va.-based small disadvantaged business, a viable contender for the ID work during the bidding process. Only after the company contested the award did Justice tell GAO to dismiss the protest on the grounds that NikSoft was not an actual or prospective contractor on the project.

NikSoft complained to GAO that the post-award disqualification was a retaliatory move. Thursday's legal decision stated "NikSoft asserts that our office should give no weight to DOJ's [conflict of interest] determination since the contracting officer made her determination 'in the heat of litigation.'"

GAO attorneys said an agency can raise conflict of interest concerns with the proper documentation any time during a protest. That said, Justice has yet to provide proof that NikSoft had a leg up on the competition, they added.

"The record does not show that the agency's [conflict of interest] determination was based on the hard facts necessary to find that NikSoft had unequal access to non-public information that gave the firm an unfair competitive advantage," GAO determined. "Indeed, DOJ provided the awardee with the software price prior to award and asked the firm to increase its quotation by that amount, as NikSoft had done."

The lawyers also found Justice overlooked the lower cost of NikSoft's proposal when it chose to go with LS3, a small disadvantaged company in Odenton, Md. "There is no evidence that the agency gave any meaningful consideration to NetSoft's [sic] lower price in making the source selection decision," the decision stated. "Rather, the record shows that the agency's selection decision was solely based on LS3's higher technical rating."

The attorneys went on to question that technical rating. NikSoft received an "acceptable" rating on the past performance portion of the evaluation because its only recommendations on file came from prior co-contractors, according to Justice. But the solicitation allowed reviews from other contractors and gave no indication that vendor-written recommendations would be viewed unfavorably. "We find that the agency has not reasonably explained why it assigned NikSoft an acceptable rating under this factor," they concluded.

Meanwhile, LS3 earned an "excellent" rating for past work without submitting the necessary documentation. "LS3 only provided two questionnaires with its quotation, even though the solicitation required vendors to provide three past performance questionnaires," the judgment stated. Justice's contracting officer "provides no explanation for why the awardee's nonconformance with the solicitation's mandatory requirements in this regard should not affect the awardee's ratings, given the technical evaluation rating criteria."

LS3, like NikSoft, has previously worked with Justice on digital credentials. In 2003, the department tapped the company to work as a subject matter expert for a digital credential project that, according to the company's website, aimed to establish "a foundational building block" for identification, authentication and authorization. As part of that work, an LS3 team devised an ID management technical architecture and approach for Justice and FBI law enforcement officials.

Ron R. Hutchinson, an attorney representing NikSoft, said in a statement "the GAO decision was more than justified."

He added, "As GAO's decision confirms, NikSoft's lower-priced proposal should have received a higher rating than LS3 and award should have been made to NikSoft as the best value solution at a lower price and better technical solution. DOJ should not delay in implementing GAO's recommended remedy and terminate the award of the [contract] and task order to LS3 and make award to NikSoft."

LS3 officials did not respond to requests for comment.