The Government Accountability Office has upheld Colt Defense, LLC's protest of the Department of the Army's $84 million contract award to Remington Defense to produce up to 120,000 M4 and M4A1 carbines. This means the contract award could be slowed, reevaluated or entirely recompeted based on the Army's response to the ruling.
"The award is pending resolution by the US Army and we are awaiting further information from the Army on next steps, post GAO ruling," says Remington Spokesman Teddy Novin. In the meantime, Remington has ceased work on the contract pending resolution of the dispute; a halt order normally accompanies a protest. It's not known if Remington is in possession of Colt's M16/M4 technical data package.
Colt filed their protest of the M4 decision on May 1, 2012. The protest was sustained by the GAO on July 24, 2012.
"Colt's protest was based on the manner in which the Army evaluated the competing bids it received," says Jeffrey G. Grody, Senior Vice President and General Counsel, Colt Defense LLC. "It is our understanding the Army is considering how to respond to the GAO decision."
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Among Colt's three protest points was one pointing out that Remington Defense has no experience supplying automatic rifles to the government in quantities called for by the current contract. The GAO dismissed that and another other claim by Colt, but agreed that the Army did not properly evaluate the pricing component of the bids by the three competing companies -- Colt Defense, FNH USA, and Remington Defense.
"GAO reviewed the challenges raised by Colt and found that the agency failed to follow the solicitation criteria with regard to the evaluation of the offerors' total evaluated prices and sustained the protest on this basis," said Ralph O. White, Managing Associate General Counsel for Procurement Law with GAO. "Colt's other challenges were denied."
The details of the protest are under a protective order, so GAO's findings are not yet available. They plan to publish their findings after information relating to proprietary interests and source selection can be redacted. As a result, White explains the GAO's position in broad strokes. "Because GAO sustained Colt's challenges to the evaluation of prices, we recommended that the Army reevaluate proposals consistent with the terms of the solicitation, or modify the solicitation and seek revised proposals."
At issue is the way the Army calculated the licensing fee Colt is due as part of the original M16 contract signed in 1967 and amended in 1997. Looking at the 2011 solicitation, the Army calls out a blanket 5 percent "royalty amount pursuant to a license agreement" between Colt and the U.S. government in section M.5.2.3. The terms of the actual licensing agreement are not known, but sources explain the royalty calculations are more complex than can be covered by a blanket percentage and when calculated properly, could narrow the price gap between Colt's and Remington's bids.
When contacted about the terms of the current contract and how it relates to preexisting agreements, the Army would only say that "[i]n compliance with the GAO, we would not be able to respond on specifics about the contract or M4 fielding strategy at this time."
The Army has a range of options to consider. They could go back to the bids and reevaluate them using the terms of the published solicitation. Or, they could modify the terms of the solicitation, but that would mean the offerors must submit new bids. This would put Remington at a competitive disadvantage because their pricing is known as a result of the initial contract award. Remington would surely protest any award they did not win in this scenario.
There is a third option. The Army could ignore GAO's recommendations and let the contract award stand as issued. The GAO's recommendations are not binding, but the Army is required to respond in writing to the GAO within 60 days and declare how it intends to remedy the situation. If the Army ignores the GAO, they will end up explaining their actions to Congress. So, unless they have a taste for congressional involvement and an especially strong argument that will stand up to factual and political scrutiny, it's doubtful they will go that route.
So, what this tells me is the Army has until September 24 to resolve the contract dispute. In the meantime, they, and the other parties in the dispute, have little to say. With a full-on reset after the recent and impending drawdowns from the nation's current conflicts, the big question that the Army didn't respond to is: How will the holdup of these 24,000 carbines effect the Army's readiness?
Another question left on the table is if and how this contract holdup affects the current IC competition efforts and how it fits in the framework of other Army weapon procurement efforts. Have a look at Lance Bacon's upcoming story in Monday's Army Times for an update on M4 and other programs.
