Equifax loses appeal on $7M IRS contract: Here's why

Equifax Headquarters AP FBN

The Government Accountability Office (GAO) released the full text of its decision to deny Equifax’s (NYSE:EFX) appeal to preserve its $7.25 million anti-fraud prevention contract with the IRS, rejecting the credit reporting agency’s technical challenge against rival Experian.

“Based on the evaluation of the vendors’ quotations, the [source selection authority] stated that both firms met the technical requirements, demonstrated an ability to connect to the IRS systems via an API that had been vetted prior to award, and showed the ability to provide support and services associated with the integration of the contractor identity data services into the existing IRS business environment,” the GAO said.

Equifax was initially granted the IRS sole-source bid despite ongoing concerns about the security of its own programs. However, despite a public outcry over the contract, the IRS temporarily suspended that contract last week, following reports of a second hack at Equifax. The IRS said it would continue to monitor security at the credit reporting agency.

Meanwhile, the IRS had initially hoped to award the contract to Experian, but Equifax filed a protest with the GAO on July 7, just two days after being notified of the IRS’ decision, according to the filing. Equifax claimed that Experian should be considered unqualified because it did not “meet the [application programming interface] requirement and did not offer services required by the solicitation.” After a review of the complaint, the GAO concluded that these arguments were not solid enough to sustain a protest.

Compared to Equifax’s $7.25 million IRS contract, Experian’s is worth only $795,200 for the same service, which is given as the reason why the company was selected for the contract in the first place. As part of its complaint, Equifax said that its rival’s low price should have caused the IRS to question whether the firm “understood” the complete nature of the tasks it was responding to.

In former Equifax CEO Richard Smith’s testimony before the Senate Banking Committee earlier this month, Sen. Elizabeth Warren (D-Mass.) called out Equifax over its contract with the IRS, saying the only reason it retained that deal was because of its protest with the GAO. She suggested that Smith let other companies take over the contract while Equifax dealt with the consequences of the breach.

Equifax’s massive data breach revealed last month included the personal information of 145.5 million Americans.