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Tech Industry

Lockheed may still fight for IRS deal

The aerospace giant is debating whether to appeal last week's loss of a contract to revamp the IRS's computer systems.

After meeting with the Internal Revenue Service, Lockheed Martin is now debating whether to appeal last week's loss of a contract to revamp the agency's computer systems.

The contract--with an estimated $3 billion value--was awarded last week to a team of vendors led by Computer Sciences (CSC), which is about one-third the size of Lockheed. Lockheed Martin reserves the right to file an appeal for an internal IRS review of the decision and is now considering its options.

CSC spokesman Jon Gulick said Lockheed's meeting with the IRS is a standard debriefing. He said CSC has heard nothing about a possible Lockheed appeal.

Lockheed spokeswoman Judith Gan said the company is reviewing its options.

"We will leave that totally in Lockheed's capable hands," Gulick said. "It's totally up to the company [to appeal]."

Gulick said CSC rarely appeals contract losses.

"We've lost a lot of tough bids over the years but we hitch it up and move on," Gulick said.

Bob Dornan, senior vice president at Federal Sources, a market research company based in Mclean, Virginia, that follows federal computer and telecommunications deals, said he would not be surprised if Lockheed appealed.

"With something of this magnitude--when you've devoted years of your life to go after this piece of business--it would not surprise me if Lockheed did something they ordinarily did not do to make sure there's been adequate review," he said.

Reasons for awarding federal contracts can be subjective, yet the decisions are rarely overturned, he said.

"So long as the agency did what they said they were going to do in making their decision it's pretty much a done deal," he said. Any internal appeal will be resolved quickly so CSC can move forward with work on modernizing the IRS's outdated computer systems, he predicted.

Lockheed also has several other methods of appeal, including filing a formal protest with the government's General Accounting Office, an arm of Congress. Challenges filed there typically have a one in ten success rate and can take many months to resolve. While a dispute in under consideration by that office, the contract winner is typically allowed to start work on a project.

In addition, Lockheed could appeal in federal claims court or district court to try to halt the contract immediately, which, due to the large amount of evidence required, would be "a large hill to climb," Dornan said.

"There's a pretty good chance that work will begin fairly quickly regardless of what Lockheed tries to do," he said.