Contract analysis

From: Claudia Merritt <cmerritt@calderwoodharkness.com> To: "Donald R. Stokes" <dstokes@whitmoreaero.com> Cc: Ian Blackwood <iblackwood@calderwoodharkness.com> Date: Thu, 30 Nov 2023 05:47:00 -0000 Subject: GAO Protest Status Update — B-422187; B-422187.2 (November 2023) [Engagement No. 1019-00003]

I hope this message finds you well. Below is our monthly status update on the GAO bid protest (Case No. B-422187; B-422187.2) challenging the Air Force's award of Contract No. FA8222-23-D-0193 — the advanced IRCM pod assembly IDIQ with a $387.5 million ceiling — to Halcyon Defense Systems Inc. under Solicitation No. FA8222-23-R-0087. We are now approximately two months into the protest since our filing on September 2

**1. Agency Report and Document Production**

The Air Force filed its Agency Report on October 30, 2023 (AR Tabs 1–47), and protective-order versions were distributed to outside counsel on October 31. On November 6, we filed a Request for Partial Document Production seeking unredacted versions of AR Tabs 22, 23, and 28 — specifically, the SSEB evaluation notes concerning Halcyon's Supply Chain Risk Management subfactor and its reliance on Meridian Semiconductor

GAO ruled on November 9, ordering production of Tabs 22 and 28 in unredacted form but denying our request for Tab 23 as cumulative. This was a favorable outcome. The unredacted tabs confirmed that the SSEB internally identified a "significant concern" about Halcyon's sole-source foreign subcontractor dependency — material that directly supports our unequal discussions argument under Ground 2.

As a reminder, these documents are subject to the GAO Protective Order issued October 12, 2023, and cannot be shared with Whitmore personnel. Our outside counsel team can discuss the substance and implications with you in general terms, but we cannot provide copies of, or quote directly from, protected material.

**2. Protester's Comments on the Agency Report**

We filed our Comments on the Agency Report on November 17, 2023. The filing addressed all four protest grounds:

- **Ground 1 (Unreasonable Best-Value Tradeoff):** The Source Selection Decision Document's best-value tradeoff analysis was unreasonable. The Source Selection Authority merely restated adjectival ratings without identifying the specific technical benefits or discriminators justifying the $17.4 million price premium (4.82%) paid for Halcyon's proposal over Whitmore's lower-priced proposal ($343.8M vs. $361.2M), in vi

- **Ground 2 (Materially Unequal Discussions):** The Air Force issued two Evaluation Notices to Whitmore (EN-WAL-001 and EN-WAL-002) identifying alleged weaknesses in Manufacturing Readiness, yet failed to issue any ENs to Halcyon regarding its lower-rated Supply Chain Risk Management subfactor — rated only "Acceptable" — despite the SSEB's documented significant concern about Halcyon's supply chain configuration.

- **Ground 3 (Organizational Conflict of Interest):** Halcyon Analytical Services LLC's prior Analysis of Alternatives study (Contract No. FA8222-21-C-0018, valued at $2.3M) directly informed the IRCM pod requirements, creating an unmitigated OCI.

- **Ground 4 (Failure to Evaluate Labor Rate Realism):** The Air Force failed to evaluate the realism of Halcyon's proposed labor rates under CLIN 0002.

The team feels strong about the arguments as presented, and we are particularly confident in the record we have built on Grounds 1 and 2.

**3. Intervenor's Comments and Supplemental Agency Report**

Halcyon Defense Systems Inc., through its counsel at Kessler, Pratt & Dunaway LLP (led by Ted Dunaway), filed Intervenor's Comments on November 22, 2023. The Air Force followed with a Supplemental Agency Report on November 27, 2023, responding to our comments.

Our team is currently reviewing both filings in detail, and we plan to file our Supplemental Comments on or before **December 4, 2023**.

One additional note: on November 20, we sent a letter to Kessler, Pratt & Dunaway raising concerns about a potential inadvertent disclosure of protected information that we observed during our initial review of Halcyon's intervenor comments. We are monitoring the situation and Halcyon's counsel's compliance with the Protective Order, and we will escalate to GAO if necessary.

GAO Senior Attorney Angela M. Palermino has scheduled an outcome prediction ADR conference call for **December 8, 2023**. This is a standard part of the GAO protest process — Ms. Palermino will provide a preliminary, non-binding assessment of the likely outcome based on the briefs filed to date. The purpose is to explore whether the parties might resolve the protest without a formal decision.

The client does not participate directly in this call, but we will want to brief both of you ahead of it. In particular, we would like your input on whether Whitmore would consider any settlement outcome short of full corrective action. Based on the strength of the record as it currently stands, our preliminary recommendation is to proceed to a decision unless the agency voluntarily proposes meaningful corrective act

**5. Possible Hearing on Ground 3 (OCI)**

GAO may schedule a hearing on Ground 3 given the factual disputes involved in the OCI allegation. If a hearing is ordered, Don, you would likely be called as a witness. We will prepare a full witness preparation memorandum well in advance so that you have ample time to review and we can schedule a prep session.

Potential opposing witnesses include Greta M. Holloway, President of Halcyon's Sensor Solutions Division, and Col. Diane W. Prescott, the Contracting Officer. We will advise you as soon as hearing scheduling is confirmed.

A summary of where we stand against the engagement fee cap:

- **Fee cap (voluntary, fees only; excludes costs/expenses):** $425,000 - **Approximate fees incurred through November 30, 2023:** ~$268,000 - **Remaining fee cap balance:** ~$157,000

The remaining balance should be sufficient to carry us through the decision phase, including supplemental briefing, any hearing, and the post-decision cost claim process. A detailed billing summary and fee cap tracker is maintained and available upon request — just let me know or reach out to Ian Blackwood, who is copied on this email for billing-related inquiries.

As a reminder, our blended rate structure is as follows: partners at $695/hr, of counsel at $475/hr, senior associates at $385/hr, and associates at $315/hr.

Costs incurred to date (outside the fee cap) include the Ridgeline Consulting Group expert engagement, travel for document inspection at Wright-Patterson AFB in Dayton, Ohio, transcript costs, and filing/reproduction expenses. A detailed breakdown of these costs will accompany the protest cost claim in the event GAO sustains the protest.

The full engagement team remains actively staffed and working:

- **Nathan Yardley** (Of Counsel, Government Contracts) — continuing as subject matter lead - **Megan Zhao** (Senior Associate, Litigation) — handling brief drafting and hearing preparation - **Alan Burke** (Lead Associate) — managing the ITAR/EAR compliance overlay analysis relevant to Factor 3(c) and the export control implications of Halcyon's use of a German subcontractor - **Sara Hendricks** (Working Associate)

- **December 4, 2023** — File Supplemental Comments responding to the Supplemental Agency Report and Intervenor's Comments - **December 8, 2023** — GAO outcome prediction ADR conference call - **TBD (likely late December or early January)** — Possible hearing on Ground 3 (OCI) - **Early January 2024** — GAO 100-day decision deadline (from September 26 filing), though extensions may push the decision date slightly lat

I would like to schedule a call early next week — Monday or Tuesday if possible — to discuss our strategy for the ADR conference and the supplemental briefing. We are in a strong position, particularly on the tradeoff and unequal discussions grounds, and I want to make sure we are aligned on the path forward before the December 8 conference.

Please let me know your availability, and we will get something on the calendar.

Claudia Merritt Partner, Government Contracts & Disputes Calderwood & Harkness LLP Direct: (202) 555-0147 Email: cmerritt@calderwoodharkness.com

Ian Blackwood, Billing Partner, is copied for billing-related inquiries: iblackwood@calderwoodharkness.com

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