GAO upholds challenge from losing bidder, says SAIC Inc spinoff invalidates NASA contract

By Nicel Jane Avellana

Jan 14, 2014 03:09 AM EST

The challenge given to a health services contract awarded to SAIC Inc by National Aeronautics Space Administration was upheld by a US government mediator who said that the company's spinoff nullified the award worth up to $1.76 billion, Bloomberg reported.

The Government Accountability Office agreed with the protest lodged by Wyle Laboratories, the losing bidder, which contended that the proposal of SAIC was not accurate since it did not state that the company intended to break up into two entities. Wyle was purchased in 2009 by New York-based private equity company Court Square Capital Partners LP.

In its ruling, the GAO said the National Aeronautics and Space Administration must give the award to Wyle which is based in El Segundo, California or get new offers, the report said.

In September, McLean, Virginia-based SAIC Inc split in two firms, just a month after the award was given. The parent company was Leidos Holdings Inc while the spin off business was Science Applications International Corp which take care of the NASA work, the report said.

GAO said in its decision, "The substitution of a new prime contractor, in place of the original offeror, may well have a material effect on both the costs incurred and technical approach employed during contract performance."

Bloomberg quoted the General Counsel of GAO, Susan Poling, who said in the written ruling that in making a bid for the work, SAIC had no intention to perform as the prime contractor. Instead, it planned to have another firm which has significantly lesser resources and completely separate from the 'old' SAIC to be the prime contractor.

Bloomberg Government Spending Analyst Brian Friel told the news agency about the possible consequences of the decision. He said, "This decision could have ramifications for other companies that are restructuring in the face of declining defense spending. Competitors could use this ruling to challenge other awards to SAIC and Leidos."

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