GAO Upholds XPO Protest of Military Freight Contract
This story appears in the April 3 print edition of Transport Topics.
A multibillion-dollar contract recently awarded to Crowley Logistics to handle freight shipments for the Department of Defense is being reopened after the Government Accountability Office upheld a challenge filed by XPO Logistics Government Services.
In a March 14 decision, GAO said the process used by the U.S. Transportation Command failed to properly evaluate Crowley’s past performance before awarding a contract that covers truckload, less-than-truckload, expedited and refrigerated shipments moving to and from military installations in the continental United States, Alaska and Canada. The term of the contract is for two years with five option years after that and was valued at about $2.3 billion, according to a statement issued by Crowley at the time the award was announced in November.
In protesting the award, representatives of XPO Logistics, which ranks No. 3 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, argued that Crowley lacked the experience to handle such a large contract.
Crowley Logistics is part of Crowley Maritime Corp., a $2 billion company based in Jacksonville, Florida, that primarily provides ocean and barge shipping, vessel design and salvage operations. The company generates only about $200 million in gross revenue from logistics services, according to data from Armstrong & Associates Inc.
In explaining its decision to overturn the contract award to Crowley, Susan Poling, GAO’s general counsel, faulted the U.S. Transportation Command for not providing enough justification for a “satisfactory confidence” rating. The government needs to “re-evaluate Crowley’s past performance in a manner that is reasonable and consistent with both the solicitation and this decision and then make a new source selection determination,” Poling wrote in her ruling.
Crowley officials say they aren’t giving up on the contract.
“The government is undertaking its review,” David DeCamp, manager of corporate and marketing communications for Crowley, said in a March 24 statement to Transport Topics. “Upon completion of that decision, Crowley is prepared to provide effective freight transportation services to the U.S. Department of Defense.”
DeCamp noted that Crowley, in fact, was awarded the contract after successfully challenging the initial award to Genco Infrastructure Solutions, a company that is now part of FedEx Corp., which is No. 2 on the for-hire TT100. Genco withdrew its bid for the contract after the GAO upheld Crowley’s protest in April 2016.
The original logistics contract, known as the Defense Transportation Coordination Initiative, was awarded to Menlo Worldwide Government Services, a part of Con-way Inc., in 2007 and was due to end in April 2015, but was extended for two years while the government solicited bids for a new freight transportation service contract. A spokeswoman for XPO Logistics said the current contract now is slated to end in April 2018.
“We’re pleased that the GAO upheld our protest,” said Ashfaque Chowdhury, president of supply chain for XPO Logistics. “Our long-standing working relationship with the DOD combined with our expertise and competitive pricing make us the best choice for this program.”
Representatives of American Trucking Associations have long been critical of the logistics outsourcing program because it has made it more difficult for some carriers to haul DOD freight. Federal auditors also found evidence that the government paid more than it should have for shipping between 2007 and 2016. A lawsuit filed by the government to recover overcharges was settled last year with XPO Logistics, which had picked up the contract through its acquisition of Con-way Inc. in 2015, and Estes Forwarding Worldwide, which served as a subcontractor to XPO. The two companies settled the case for $13 million.
Representatives of both XPO and Estes, a unit of Estes Express Lines, which is No. 14 on the for-hire TT100, have denied any wrongdoing in the case.
