Defense firm Alion protests pact's switch to rival ITT

Conflict of interest alleged in Annapolis testing operation

August 20, 2005|By Paul Adams | Paul Adams,SUN STAFF

Conflict-of-interest allegations involving a defense contract that could be worth more than half a billion dollars over 10 years have left potentially hundreds of engineers and staff in Annapolis wondering who will be signing their paychecks in coming years.

Alion Science and Technology Corp., which for decades has been making sure military communications are static-free, was told this month that the Defense Department was not going to renew its contract, which expires Oct. 31. Instead, the work is going to a competitor that Alion says has a financial stake in the communications equipment the military buys.

The competitor, ITT Advanced Engineering and Sciences, is a subsidiary of ITT Industries Inc., which has sold billions of dollars' worth of communications equipment and services to various branches of the military. Part of the disputed contract calls for the winning bidder to evaluate such equipment and advise the military on what systems to purchase.

Alion filed a bid protest with the Government Accountability Office, which is looking into the conflict-of- interest allegations and expects to issue a decision by mid-November. In its protest, Alion indicates it would be next in line to get the contract if ITT is disqualified.

But until then, Alion's Annapolis employees are left to wonder whether they should be sending their resumes to ITT, which would almost certainly snatch up the displaced workers and move them to an office it has leased in Annapolis. It is common practice within the defense industry for skilled workers to follow a contract when it switches hands.

"We're very excited about having won this contract and we're confident the award to us will be upheld," Millie Rogers, director of communications for ITT's defense division based in McLean, Va., said yesterday.

The dispute offers a glimpse into the hyper-competitive world of defense bidding, in which contracts worth hundreds of millions of dollars and pools of highly skilled employees can change hands in an instant. It also is a symptom of the consolidation within the defense industry, which experts say can lead to potential conflicts when divisions within the same company offer a wide range of services to multiple branches of government.

McLean, Va.-based Alion declined to comment for this article, referring questions to the GAO. In keeping with agency policy, the GAO declined to comment on the case while it is still being investigated.

However, The Sun obtained a partially redacted copy of Alion's bid protest, which alleges the government's bid evaluation was full of errors and ignored ITT's "massive organizational conflict of interest."

The contract is for engineering services and support for the Defense Department's Joint Spectrum Center. The work includes making sure military radios, satellites and radar perform free of electromagnetic interference, among other things.

Alion and its predecessor companies have been contracted to do the work in some capacity for 45 years, the document filed with the GAO says. Its contract was last renewed in 2000, when the company - then known as Illinois Institute of Technology - was awarded a five-year, $276 million contract.

During that time, the document says, Alion has routinely been called upon to evaluate the performance of radios, jamming devices and other tactical communications and defense hardware ITT has sold to the military. That's where the conflict arises, the company alleges.

"The stark reality here is that ITT [Advanced Engineering and Sciences], as the awardee of this contract, will be conducting these evaluations and providing such acquisition advice essentially on its own equipment," Alion said in its protest.

The claim is one industry experts say the GAO has been called upon to investigate with increasing frequency as the industry has consolidated. Large defense contractors often have divisions spread across numerous states and countries providing everything from technical advice to military hardware. At times, such contracts can intersect, creating complicated ethical situations.

At an international public procurement conference in Fort Lauderdale, Fla., last fall, Daniel I. Gordon, managing associate general counsel for the GAO, said consolidation means defense contractors are producing a wider range of goods and services than they did previously.

"It is this change that is increasing the risk of [organizational conflicts of interest]," Gordon said in a paper presented at the conference. "With fewer firms playing an increasing number of roles, there is a greater chance that a firm will `trip over itself,' so to speak."

Some legal experts say Alion might have a legitimate complaint unless ITT can show it has erected a firewall between its defense divisions to prevent any conflicts.

"It seems to me that if the facts are as alleged, this does not appear to be a frivolous claim," said Joshua I. Schwartz, co-director of the Government Procurement Law program at George Washington University.

Arthur S. Block, the contracting officer for the Joint Spectrum Center, declined to comment on the case. The Defense Information Systems Agency, which handled bids for the JSC, said it is reviewing Alion's protest and "determining an appropriate response."

Documents Alion filed with the GAO say the three-year contract is worth potentially $662 million if seven, one-year options are awarded. ITT won the contract with a bid of $148 million for the initial three-year base period, and $493 million for all 10 years, the document said.

ITT says it plans to keep the jobs in Annapolis if it prevails in the dispute. It has already held two jobs fairs this week to recruit staff to work on the contract.

"All of the jobs will stay in Maryland," Rogers of ITT said. "That's where the customer is, and you want to be close to the customer."

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