With as many bids as we are involved with and we analyze, there are certain lessons one can learn.
One such lesson is never, ever underestimate the power of management and understanding how to drive down risk.
Government evaluators don’t like risk. Quite honestly, who does like risk? It’s the spooky boogeyman that lurks around each corner that will ruin your day if you’re not ready to neutralize it.
This example features a high stakes contract pursuit involving a flat management structure vs. a more complex and arguably formidable competitor team for a $900M+ contract.
Have you ever heard the term “Keep it Simple, Stupid?” In this competition, simplicity of management was a key to victory.
Editor’s note: This real-life example drawn from the GAO protest docket is NOT intended to single out, shame, or otherwise impugn on the reputation of a business. Quite honestly, this mistake is one of many made by so many bidders that we could easily feature several examples. This is about learning and not shaming.
U.S. Department of the Navy, Naval Sea Systems Command (NAVSEA)
Contract is for planning yard support for Littoral Combat Ships.
Protest decision date: August 28, 2019
The protest was centered on two aspects of the contract award decision.
- An assignment of risk related to subcontractors for Austral USA (protester)
- Challenges to the low risk associated with the Huntington Ingalls Industries (HII, winning bidder) and their wholly owned subsidiary AMSEC
This really was a very close competition. HII earned a GOOD in technical, management, efficiencies and transition plan. Past performance was slightly more relevant. Austral USA earned ACCEPTABLE overall in each category vs. HII and was only Somewhat Relevant in past performance. Exploring the scoring, we can clearly note that strengths and weaknesses were close.
| HII | Austal | |
| TECHNICAL CAPABILITY | GOOD | ACCEPTABLE |
| Subfactor 1: PMS Planning | Acceptable | Good |
| Subfactor 2: CNO Availability Planning | Outstanding | Good |
| Subfactor 3: Capabilities and Facilities | Good | Acceptable |
| Subfactor 4: QA Processes, Procedures, and Management | Good | Acceptable |
| Subfactor 5: Scheduling and Orchestrating Maintenance and Modernization | Good | Acceptable |
| MANAGEMENT APPROACH | GOOD | ACCEPTABLE |
| Subfactor 1: Management Plan | Outstanding | Acceptable |
| Subfactor 2: Subcontract Management | Good | Acceptable |
| Subfactor 3: Staffing Personnel | Acceptable | Acceptable |
| EFFICIENCIES | GOOD | ACCEPTABLE |
| Subfactor 1: Lifecycle Cost Reduction | Good | Acceptable |
| Subfactor 2: Incorporation of Previous Experience/Lessons Identified | Good | Acceptable |
| TRANSITION PLAN AND SCHEDULE | GOOD | ACCEPTABLE |
| PAST PERFORMANCE | ||
| Relevancy | Very Relevant | Somewhat Relevant |
| Confidence | Satisfactory Confidence | Satisfactory Confidence |
| TOTAL EVALUATED COST | $937,416,022 | $926,554,156 |
Evaluation scores were generally close as noted below.
- Austal USA’s proposal received 14 strengths and 5 weaknesses.
- Huntington Ingalls Industries (HII)’s proposal received 16 strengths and no weaknesses.
As NAVSEA evaluated potential risks in performance, they came up with the below:
- Austral USA’s proposal received 12 moderate risk and two (2) low risk ratings.
- HII’s proposal received three (3) moderate risk and 11 low risk ratings to HII’s proposal.
Circling back to the basis of the protest, the plot thickens as we explore what helped HII secure the win. Let’s break down the two linchpins of HII’s win and the basis of the protest.
Before you declare this was a low bid win, price was NOT a determining factor here as HII bid $937,416,022 and Austral USA bid $926,554,156.
Keep the management structure simple!
We have HII using its wholly owned subsidiary AMSEC to perform 63 percent of the work. Austral USA also had a significant subcontracted workshare in using four (4) subcontractors to perform 56.5 percent of work.
Austral USA is self-performing more than HII so that’s a good thing, right?
In this case, that did not help them at all. In fact, this ended up hurting Austral USA. Here comes the big bad risk boogeyman to help HII gain strength and add risk to Austral USA.
In fact, the simple HII/AMSEC management structure turned into a strength because they had fewer layers of subcontractors. Additionally, the common ownership (HII owns AMSEC as a wholly owned subsidiary) and tight integration of the team created greatly reduced risk.
Beyond the simplicity of HII’s management structure, Austral USA created a weakness for their offer. By comparison, Austral USA had to manage four (4) subcontractors and one of those subcontractors had an entire cadre of MORE subcontractors to manage.
In the end, Austral USA is self-performing slightly more work than HII, but Austral USA has less cohesive team integration and with extra layers of subcontractors, NAVSEA perceived this as a very real risk in performance with a much less cohesive management structure. By contrast, HII’s ownership of AMSEC and use of them as a primary subcontractor created tighter integration of the team.
Past performance with the Littoral Combat Ship (LCS)
Austral USA challenged HII’s past performance rating because HII lacked experience with the LCS as a ship class. Austral USA received a past performance rating of Somewhat Relevant and of a Satisfactory Confidence vs. HII receiving Very Relevant and Satisfactory Confidence.
Austral USA had to wonder how HII had a better score when HII itself had no direct experience with the LCS.
What happened here connects back to the AMSEC relationship and HII’s overall familiarity with planning yard tasks. NAVSEA found that HII’s 30+ years of planning yard experience and AMSEC’s direct work with LCS to be superior to Austral USA knowing the LCS. Remember how tightly integrated AMSEC is with HII? No doubt that this was a great benefit to HII to truly leverage AMSEC.
Takeaway?
- Simple and less layered management and team structures reduces risk in performance
- Don’t get carried away with complex teaming structures or it will not likely end well
- Past performance can reflect the total team’s likelihood of success and NOT just from the prime contractor
- Past performance does not have to be a perfect 1:1 match to be strong so consider the total picture before assuming strength or weakness
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