PARIS—Satellite fleet operator Intelsat, which forced the U.S. Defense Department to scrap a September 2015 contract award to a competitor and conduct a new competition, on Feb. 11 filed a protest of the new request for bids.
The protest is likely to provoke further delays in a contract to provide satellite connectivity worldwide to the U.S. Navy over five years.
Intelsat’s latest protest came less than three weeks after the U.S. Defense Information Systems Agency (DISA), stung by a U.S. Government Accountability Office (GAO) report that questioned DISA’s competence or fairness – or both – agreed to conduct a fresh bidding round.
This time, Intelsat did not wait until DISA had evaluated bids from the same three competitors involved in the earlier bidding before filing its protest. The two others are London-based Inmarsat’s Segovia Inc. of Herndon, Virginia; and Satcom Direct, also of Herndon, which since the first bid competition has purchased Airbus Defence and Space’s U.S. commercial satellite services division. Airbus bid in the earlier competition.
Intelsat Investor Relations Vice President Dianne J. VanBeber on Feb. 17 declined to disclose what Intelsat objected to in the new bid solicitation beyond saying DISA did not appear to have incorporated the problems of the first bidding round, which were highlighted in the GAO report.
“We believe the procurement is still flawed,” VanBeber said. “We’re still participating in the process and we submitted our proposal. But we’re pointing out that given the way they implemented the GAO recommendations, well, here we go again.”
Intelsat’s new protest was filed Feb. 11.
The contract in question, for which Intelsat is the incumbent provider, is the Commercial Broadband Satellite Program Satellite Services Contract (CSSC), an indefinite-delivery, indefinite-quantity service that DISA valued at the extraordinarily broad range of between $150,000 and $450 million over five years.
DISA awarded the contract to Inmarsat’s Segovia in September 2015. Intelsat immediately protested; Airbus Defence and Space did not.
On Dec. 23, the GAO issued a ruling siding with Intelsat, which is a relatively rare event. The GAO endorsed – “sustained” in GAO parlance – just 12 percent of the 587 government agency contract protests it agreed to review in 2015. GAO received 2,639 protests in 2015 but said only 587 merited a formal review.
As is typical of GAO contract decisions, the agency did not immediately release its full decision, which remains unpublished.
The 21-page redacted version, published Feb. 9, is a devastating indictment of the way DISA conducted its earlier competition and selected a winner.
GAO concludes that DISA gave contradictory bid-requirement information to Intelsat and Inmarsat/Segovia, to such a degree that Intelsat was obliged to add satellite capacity to fulfill DISA-ordered requirements that DISA informed Inmarsat/Segovia were unnecessary.
DISA also appeared to trespass against its own solicitation terms in what GAO portrays a simple matter of being seduced by Inmarsat/Segovia’s price proposal.
DISA had said that technical management – including space segment requirements, terrestrial services, past contract performance and information assurance – all would count more than price in its evaluation.
Intelsat received higher marks than Inmarsat/Segovia for terrestrial services requirements and for past performance.
But Intelsat’s price — $440.8 million – was $110 million more than Inmarsat/Segovia’s, at $330.5 million. This proved too much for DISA to ignore.
Here is DISA’s reasoning as stated in its Source Selection Decision Document, which GAO excerpted:
“Although both the Technical and the Past Performance factors are significantly more important than Price, I believe that the price difference of 25 percent, or approximately $110 million, is so significantly high as to diminish the benefits of [Intelsat’s] one strength in its technical approach and its higher confidence rating under past performance.”
The Airbus price was slightly lower than Intelsat’s but far above Inmarsat/Segovia’s, industry officials and GAO said.
Industry officials had speculated that Inmarsat’s win was part of the company’s stated strategy to solidify its position with the U.S. Department of Defense and that the company may be willing to bid at or below cost on selected contracts.
Inmarsat has declined to respond to requests to discuss its contract award, the Intelsat protest or the GAO decision.
The GAO decision does not assess the likely profitability for Inmarsat. GAO officials have said they do not address this subject in contract reviews unless the contracting agency forbids lossmaking bids, sometimes called “buy-ins,” in its specifications.
What was not clear until the GAO report was issued was that DISA – in key aspects of its CSSP contract – was conducting at least two very different competitions, letting Intelsat operate under a more-stringent set of specifications that ultimately were waived for Inmarsat without Intelsat’s knowledge. The specifications concerned what capacity was required over a given region, and how to assess coverage of a region in light of the capacity needed there.
“It is a fundamental principle of negotiated procurements that an agency may not mislead an offeror – through the framing of a discussion question or a response to a question – into responding in a manner that does not address the agency’s concerns,” GAO says in its decision. “Specifically, an agency may not, through its questions or silence… misinform the offeror about the government’s requirements.”
Intelsat told DISA and GAO that it could have issued a materially lower bid price had it operated under the same contract guidelines as those given Inmarsat.
“We conclude that Intelsat was prejudiced by DISA’s actions here,” GAO says. “But for the agency’s misleading discussions and erroneous determination that [Inmarsat’s] proposal satisfied the requirements of the RFP, in this best-value procurement, Intelsat, which submitted a technically acceptable offer, would have had a substantial chance of receiving the award.”
One industry official said DISA’s new bid solicitation, which given the Intelsat protest will now be frozen for 100 days, differs from the first in being classed as “lowest-price, technically acceptable” rather than the “best value” metric used in the first round.
Read the redacted GAO decision: Redacted GAO decision