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An urgent request from the Department of Homeland Security (DHS) for $1.5 million in networking and security equipment seemed like a golden opportunity to Kimberly deCastro. The only catch: Part of the order had to be delivered immediately—some components overnight.
DeCastro, president and CEO of Wildflower International in Santa Fe, N.M., submitted the bid for the order but lost based solely on her company's inability to meet the delivery requirements. The deal went to a competitor—ST Net Apptis, a joint venture between ST Net Inc. and Apptis—that bid a higher price but claimed it could fulfill the order on time.
ST Net Apptis' unique ability to fill the order was because it had a DPAS, a special designation that gives equipment purchases critical to national security priority over other manufacturing and distribution orders. The only problem is the DPAS was unauthorized.
"We don't mind losing, of course; it happens all the time. We would just like to lose fairly," deCastro says.
Those involved in this order say the incident raises concerns over the administration of the DPAS program and reveals how easily federal contracting can be manipulated.
Uncovering the Fake Pass
Wildflower wasn't the only company to bid on the DHS order. Eleven contractors were eligible under FirstSource, a five-year, $3 billion government purchasing vehicle designed specifically for small IT businesses. U.S. Customs and Immigration released the request for quotes on March 15, seeking to purchase a laundry list of advanced IT hardware, including 10 customized parts for the Cisco Security Monitoring, Analysis and Response System (CS-MARS). The order specified tight delivery times, with some parts due overnight, and others—including the customized Cisco parts—in less than a week.
Distribution giant Ingram Micro, the only disty that stocked the CS-MARS part, had only two in its inventory. The rest would have to be custom-built, which could take weeks.
"I consulted with Cisco; the normal delivery time frame for this [stock keeping unit, or SKU], would be 10 to 14 days, since Cisco would have to build the units," says Bob Laclede, vice president and general manager of Ingram's government and education business. "We agreed that, unless the order was rated DPAS, we would advise our resellers not to list the March 21 delivery date."
DPAS, or the Defense Priorities and Allocations System, automatically elevated the order to the top of Cisco's manufacturing priorities. While the presence of a DPAS rating doesn't guarantee fulfillment by a particular date, it does expedite the process.
Wildflower's deCastro and other bidders requested a DPAS, but they were turned down by DHS because the order didn't meet the national security criteria.
"The only two components within DHS [that] may assign a DPAS rating are the United States Coast Guard, in support of national defense-related programs, and Federal Emergency Management Agency, in support of emergency preparedness activities," explains DHS spokesperson Larry Orluskie. "The delivery date provided within [this] RFQ was due to a short turnaround time required for this particular order. FirstSource contractors were notified during the Post-Award Conference that some of the procurement actions would have short lead times."
DHS awarded the order to ST Net Apptis, a joint venture between ST Net, a certified small business, and Apptis, a $700 million government solution provider and integrator. While the bid was higher than competitors', the firm claimed it could meet the delivery requirements. ST Net Apptis says those claims came after assurances from its distributor, Comstor, and Cisco.
"We had informed the customer initially that we could not meet the delivery time line, and then the account representative at Cisco said he was working with his headquarters and could meet the deadline," says Mitzi Rivoire, Apptis' vice president of partner alliances. "We then [communicated that] back [to the customer], got the order and placed it through the channels as a standard order."
ST Net Apptis' winning bid set off a chain reaction among the competitors, who almost immediately sought answers from Ingram as to how Comstor could deliver the CS-MARS parts by a deadline that Ingram said was impossible to meet.
Laclede checked Cisco's manufacturing system. That's when he discovered that the order, placed by Apptis via Comstor, had a DPAS rating. "That was the huge surprise," Laclede says. "DHS had not used the DPAS rating, so I knew the data was erroneous."
Inappropriately applying a DPAS rating to equipment orders is significant. In this case, it may have influenced the delivery date and, effectively, the award of a contract and violated the Defense Procurement Act, which carries heavy penalties, including fines up to $50,000 and three years in prison.
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