DHS Cancels Multibillion-Dollar Cybersecurity Contract Following Legal Challenge

Connor Jones reports in The Register that the Department of Homeland Security recently canceled a $2.4 billion cybersecurity contract awarded to Leidos, citing shifts in organizational needs and priorities.

The seven-year Agile Cybersecurity Technical Solutions contract, intended to support the Cybersecurity and Infrastructure Security Agency, was initially awarded in February but subsequently terminated in May following a formal protest by rival bidder Nightwing.

Although the DHS denied any connection between the legal challenge and the cancellation, the timing raised significant questions for government contractors.

The ACTS contract was advertised in late 2022 to replace a prior contract known as Domino. Nightwing, a cybersecurity company spun off from Raytheon, filed a protest arguing that the DHS’s procurement process was fundamentally flawed.

The protest alleged that Leidos had an unfair competitive advantage, potentially stemming from insider knowledge acquired through a former DHS employee who allegedly joined Leidos shortly after leaving the agency.

Nightwing also contended that DHS evaluation metrics were improperly applied and that Leidos’s cost proposal was unrealistically low.

The DHS ultimately canceled the contract, rendering the legal protest moot. While it claims the decision was unrelated to Nightwing’s challenge, the move avoids a potentially messy legal battle over procurement integrity.

According to The Register, a separate $8.4 million legal settlement involving Raytheon over alleged cybersecurity noncompliance may have indirectly impacted Nightwing’s bid credibility.

The cancellation of the cybersecurity contract illustrates how allegations of unfair advantage or prior noncompliance, even without judicial resolution, can influence agency decisions. Lawyers representing government contractors should ensure that their clients adhere to conflict-of-interest guidelines and cybersecurity requirements, particularly when navigating high-stakes federal contracts involving sensitive data and national security.