HUD, companies to settle disputed contract

In an unusual compromise, the Housing and Urban Development Department will settle protests over an $800 million contract by splitting the deal in two, awarding contracts worth $400 million each to two firms who had competed for the work, a department official announced Monday.

The two companies, Electronic Data Systems Corp. and Lockheed Martin Corp., had been locked in a bitter feud over HUD's Information Technology Services contract, known as HITS. Each company had asserted that the government was unfairly biased against it, and Lockheed had twice protested the award to EDS.

"HUD, EDS and Lockheed Martin have settled the disputes" over the contract, Roy Bernardi, HUD's deputy secretary, said in a statement. "The awarding of multiple contracts is the most prudent, cost-effective and efficient manager to transform HUD's IT systems."

The HITS contract, potentially worth $800 million, would update the department's technology infrastructure. The two companies will provide a host of services. EDS will run a data center and provide "disaster recovery" under its contract, while Lockheed Martin will offer IT services directly to HUD headquarters and the department's field offices, according to a department statement.

"We are pleased with this agreement," said Jim Duffey, an EDS vice president in the company's government practice. "Now, together, we can get down to the business of helping HUD modernize its IT infrastructure."

Lockheed also sounded a conciliatory tone. "Lockheed Martin looks forward to working with Electronic Data Systems to seamlessly deliver information technology services to HUD," said Dan Crowley, president of the company's simulation, training and support division.

Lockheed was the incumbent on the predecessor contract to HITS, but it lost the new contract in a competition with EDS in 2003. Lockheed protested that award on the grounds that the department improperly evaluated its proposal and didn't justify the decision to award the work to EDS.

In December 2003, the Government Accountability Office instructed HUD to compete the contract again, but Lockheed was concerned because the department amended its request for proposals at least a dozen times in ways that gave EDS a competitive advantage, according to a Lockheed spokeswoman, Nettie Johnson.

In February 2004, EDS agreed to stop work on the HITS contract, following a court-ordered negotiation with Lockheed, which had filed an injunction in the U.S. Court of Federal Claims in Washington to stop EDS from performing transition work on the contract.

The following month, Lockheed protested again, before a new round of proposals was submitted, because, Johnson said at the time, "The basis of the [new] solicitation still really favors EDS."

A spokesman for EDS, Kevin Clarke, said that his company had been treated unfairly, claiming that Lockheed, in post-award briefings with the department in 2003, was allowed to see details of EDS' winning bid, and thus gained an advantage in the new competition. EDS also had spent money shifting part of HUD's offices onto the new contract, which affected its pricing proposals, Clarke said.

Neither company would disclose many details on what possible amendments to the solicitation they felt had been a disadvantage to their companies. But the splitting of the HITS contract now appears to settle the matter.