FirstSource III protesters lose bid to revive $10B DHS contract

A federal judge has put the proverbial nail into the coffin for $10 billion FirstSource III, an IT hardware contract the Homeland Security Department awarded and then canceled.

DHS made one round of awards for the contract in September 2024. More than a dozen companies filed protests at the Government Accountability Office and 30 firms eventually filed at the U.S. Court of Federal Claims to challenge the award decisions.

With the protests, DHS could not begin using FirstSource III. The contract essentially was frozen.

Then things got more complicated. President Trump signed an executive order in March 2025 directing agencies to consolidate purchases of common goods and services through the General Services Administration's schedules and government-wide contracts.

Judge Edward Meyers paused the proceedings for 60 days to allow DHS to determine how to move forward with FirstSource. DHS' Strategic Solutions Office began reviewing the department's contract portfolio and recommended canceling 11 contract vehicles, including FirstSource.

DHS’s chief procurement officer wrote that the department was already using other government-wide contracts with no negative impact on operations.

After DHS cancelled FirstSource III in mid-2025, 23 remaining protesters amended their complaint.

They dropped their challenges to the evaluations and instead argued that the executive order does not require the cancellation or elimination of agency-specific contract vehicles. With the awards gone, the protesters sought only reimbursement of their bid-and-proposal costs.

They also argued that DHS was canceling FirstSource to avoid the litigation of the original bid protests.

But the protesters conceded the record contained no evidence that DHS considered the protests when it decided to cancel.

“While plaintiffs are correct that E.O. 14240 did not compel the cancellation of this procurement, that is not the issue before the court,” Meyers wrote in his ruling. “The question for the court is whether E.O. 14240 provides a rational basis for the cancellation of FirstSource III. It does.”

The protesters also argued that DHS did not follow its own market research when it was developing the FirstSource III solicitation.

That research from 2020 supported DHS’s original rationale for FirstSource and the value of an agency-specific contract. DHS argued then that its own vehicle would reduce acquisition lead times and leverage its buying power.

But Trump's consolidation order has undermined that stance.

“DHS concluded that available government-wide contract vehicles would ‘ensure no critical gaps in vendor accessibility, minimizing the strategic reliance on FirstSource III as a standalone contract vehicle,’” the judge wrote.

The protesters continued to point to the 2020 market research, but Meyers said the research does not reflect how the current procurement landscape has been changed by the executive order.

DHS’s review of its portfolio also found that FirstSource III was redundant. Of the 15 companies that won FirstSource III awards, 14 are available through NASA SEWP or GSA schedules. DHS can reach the 15th through joint ventures.

DHS has been buying through other vehicles such as NASA SEWP and GSA Schedules since FirstSource II expired in September 2024, without disrupting operations.

Much of the protesters’ case, however, centered on DHS’s claim that canceling FirstSource III would avoid $10 billion in costs — the contract’s full ceiling — even though the department still plans to buy the same equipment through other vehicles.

GAO has agreed that DHS overstated cost avoidance from its contract cancellations.

But Meyers said he did not need to settle that question. He wrote the contracting officer who made the cancellation decision based it on redundancy, not cost avoidance, and nothing in the record shows the $10 billion figure reached her.

“In the end, the court concludes that DHS had a rational basis to cancel FirstSource III,” Meyers wrote. He also denied the protesters’ request for bid and proposal costs.

Rest in peace, FirstSource.