Will IBM suffer fallout in the growing “cloud” computing marketplace after a judge delivers scathing remarks in a ruling that threw out Big Blue’s appeal of a $600 million CIA contract awarded to Amazon?
Other companies and agencies putting “cloud” work out for bid are likely to examine this case closely. And that may not be good news for Big Blue CEO Ginny Rometty, who has said the ‘cloud” is seen as a big area of growth.
Which company offered a better solution? Requests for Proposals offer detailed insight into how firms plan to offer solutions. The Amazon victory is a black eye for IBM in the marketplace, and a judge has upheld that decision.
Look at some of the judge’s words: Inferior, manipulation, “competition not even close” and more.
Judge Thomas C. Wheeler of the U.S. Court of Federal Claims issued a rebuke of IBM (NYSE: IBM) and its contract tactics in a ruling that wasn’t published publicly until Friday. He had announced the decision earlier.
WRALTechWire has reported extensively on the case and noted that IBM dropped its appeal. But IBM’s conclusions about the case are far, far different from Judge Wheeler’s.
“In light of the government’s recent submissions emphasizing its need to move forward on the contract, IBM has withdrawn its motion,” Clint Roswell, an IBM spokesman, said in a statement. “IBM maintains its position that the GAO’s findings were appropriate.” (Note: IBM’s cloud business is also under SEC review, as was reported in July.)
How different? Read some of the language in Wheeler’s 20-page opinion:
- “In the evaluation of the non-price evaluation factors, the agency deemed Amazon’s proposal superior to IBM’s proposal in every category except management, and except for ‘security’ where each proposal received a ‘pass’ rating.”
- “In sum, AWS’s [Amazon Web Services] offer was superior in virtually every way but price, and IBM’s advantage in that area was likely not as great as IBM attempted to make it appear.”
(See chart with this post.)
- “[T]he GAO [Government Accountability Office, which had upheld an IBM appeal] failed to address the way in which IBM manipulated its pricing to create a bid protest issue. IBM appears to have intentionally manufactured a protest argument relating to the Scenario 5 pricing requirement, which it hoped to pursue if it lost the C2S competition with AWS. Knowing full well from its pre-proposal questions what the Scenario 5 requirements were, IBM drastically departed from the approach followed in its initial proposal when it came to submitting its final proposal revision. If it did not win the award, IBM could argue that the agency did not evaluate Scenario 5 prices on a common basis. IBM was the only offeror who appeared to “misunderstand” the Scenario 5 pricing requirements …” [Scenario 5 was outline din the original RFP]
- “In the price evaluation, Amazon had a higher price, but the agency determined that Amazon’s technical proposal was sufficiently superior to IBM’s proposal to warrant a significant price premium. … In the Source Selection Authority’s trade-off analysis, the SSA reached the conclusion that Amazon offered the best value to the Government, noting Amazon’s “superior overall approach, which will lower barriers to entry for [cloud computing] users and increase the likelihood of adoption.” … In the category of overall proposal risk, the agency rated Amazon as “low” and IBM as ‘high.'”
“Inferiority” of IBM Proposal
- “The bottom line is that IBM did not lose the competition because of the Scenario 5 price evaluation or AWS’s post-solicitation negotiations, but because of the overall inferiority of its proposal. This proposal contained numerous weaknesses, including some ‘significant’ weaknesses, a technical deficiency, and an overall high risk rating.”
- “Given the absence of a rational alternative explanation, it is obvious that when IBM deviated from its initial approach, it did so as a way to manipulate the situation in its favor.”
“Rolling the Dice”
- “These rules were made explicitly clear to IBM, but IBM did not challenge them prior to the award. On the contrary, IBM itself took advantage of the opportunity to propose revised terms and conditions, even proposing terms limiting its own responsibility for third-party software … then challenging this approach after the fact. This tactic of ‘rolling the dice’ to see if it could receive the award ‘and then, if unsuccessful, claim[ing] the solicitation was infirm,’ is simply not allowed.”
“Competition not Even Close”
- “Even if IBM’s arguments regarding the price evaluation and modified solicitation requirement were persuasive, it remains implausible that there would be any effect on the outcome of the procurement. AWS’s offer was superior, and the outcome of the competition was not even close. “
IBM’s “Blatant Manner”
- “This timeliness rule aptly describes what IBM attempted to do. Nevertheless, the GAO concluded that the agency’s ‘price evaluation’method was unreasonable and sustained IBM’s protest on that ground. …This conclusion, however, completely ignored the blatant manner in which IBM manipulated the situation to its advantage. “
The GAO didn’t escape criticism, either.
“In short, the GAO’s recommendation was irrational because it was not narrowly tailored to address discrete procurement defects, and, as a result, the agency’s decision to follow that recommendation was likewise irrational.”
How will the marketplace react to all this news?
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