IG finds flaws in DHS contract award to limo company

A Washington-area limousine company that has been linked to a scandal surrounding imprisoned former Congressman Randy "Duke" Cunningham was improperly awarded a multimillion contract to shuttle Homeland Security Department employees throughout the region, according to a new investigative report.

The DHS inspector general found that in early 2004, department officials seemed intent on awarding the contract to Shirlington Limousine and Transportation, in spite of evidence that the company lacked the financial resources -- or even the vehicles themselves -- to fulfill the contact.

According to the report, published this week, DHS' Office of Asset Management first attempted to provide the limousine company with the contract on a sole-source basis. But that plan failed, in part because the contract's anticipated price would exceed the threshold permissible for noncompetitive awards.

Agency officials then moved to make the contract part of the Historically Underutilized Business Zone, or HUBZone, program, which is designed to increase contracting opportunities for small businesses in low-income and economically disadvantaged areas. Investigators said officials at the asset management office shared information about the revamped contracting requirements with Shirlington Limousine two months before it was made public to competing bidders.

Despite the change, Shirlington was still essentially alone in competing for the contract. Federal regulations state that agencies can set aside HUBZone contracts only if there is a reasonable expectation that offers will be received by at least two eligible companies. Before the contract was awarded, however, the Small Business Administration official in charge of the HUBZone program told DHS that no such competition existed for the contract.

"These actions did not comply with federal regulations and gave Shirlington an unfair advantage over other offerors by reducing competition and increasing the likelihood that Shirlington would win the contract," the report stated.

Investigators said Shirlington was ill-equipped to carry out the contract. The deal required the company to provide shuttle buses that were less than a year old, but for nearly two months, the company did not have any new buses. In fact, three days into the contract, Shirlington asked DHS' Office of Procurement Operations for advanced payments "to ease the financial strain that purchasing new buses would place on the business." The request was denied.

Soraya Correa, director of the procurement office, conceded that the acquisition officer administering the contract failed to thoroughly research Shirlington's finances, focusing exclusively on the company's past performance history, which was deemed satisfactory. In a letter to the IG's office, Correa said, "limited staffing, coupled with the extremely voluminous workload, created an environment in which, by necessity, the contracting officer relied heavily on the resources available."

Shirlington was first awarded a one-year contract to shuttle DHS staff by van or department-owned sedans throughout Washington metropolitan region in April 2004. The one-year contract was originally valued at $1.6 million, but as DHS added more service routes the cost grew to more than $5.7 million. Six months later, the procurement office negotiated a second contract -- a one-year deal with four option years -- valued at more than $21 million.

The contract began to fall apart in early 2006, when Mitchell Wade, a defense contractor who has admitted to bribing Cunningham, told federal prosecutors that his former business partner, Brent Wilkes, had an arrangement with Shirlington to provide prostitutes for the disgraced congressman. Before he was sent to prison, Cunningham wrote a letter of recommendation to DHS about Shirlington, according to an affidavit provided to House investigators by Christopher Baker, president of the limousine company.

The prostitution allegations sparked congressional hearings last year. Shortly thereafter, DHS moved to rebid the contract. The IG's report does not mention the allegations.

Baker, who did not return a call for comment, has filed suit against DHS, alleging the agency skirted federal contract rules to prematurely end the contract. DHS has attempted to competitively award a new shuttle contract but has thus far been held up by a pair protests to the Government Accountability Office. Potential bidders argue that the new solicitation is unduly restrictive because the contract is no longer set aside for a HUBZone small business award.

Shirlington's Web site still boasts of its "outstanding" working relationship with DHS, citing a Small Business Achievement award it received from the agency in April 2005. Among the company's other federal clients are the Transportation Department, the Coast Guard, the Housing and Urban Development Department, the Federal Highway Administration and the General Services Administration.