Losing bidders cry foul over NSA switch pact

A National Security Agency networking contract awarded to Cisco Systems Inc. last month has come under sharp attack by the losing bidders with Fore Systems Inc. filing suit with the U.S. Court of Claims and Cabletron Systems Inc. accusing Cisco of engaging in "predatory pricing" with its winning bid. Calling Cisco's bid a "buy-in " Fore challenged the NSA award on technical grounds. Richard Bibb vice president for operations at Fore Federal Systems said network interface cards provided by Cisco did not meet the technical requirements of the proposal.

"The NSA contract should not have been awarded to Cisco because they were technically deficient " Bibb said. "We believe we provided the best solution evidenced by the fact that Cisco tried to buy our interface cards after the award.... This demonstrates the government should have awarded the contract to us."

Details of the Fore lawsuit were not available because the case is sealed.Cisco won the NSA "Light Core" contract to supply thousands of high-speed Asynchronous Transfer Mode switches and devices to the agency's Fort Meade Md. campus with a low bid of $34 million on a contract valued by the agency at $117 million.

FCW has learned that Cisco slashed prices on its NSA bid offering discounts of up to 90 percent off list prices. Sources said a product typically priced at $15 000 was offered on the NSA pact for below $800 and another product typically priced at $1 250 was priced at $25.

John Riddle director of Cabletron Systems federal systems division which served as a subcontractor to TRW Inc. on its Light Core bid described Cisco's discounts on the NSA contract as "predatory pricing.... Their prices are way below cost."

Riddle said it would be in the NSA's best interest to "start over again with the procurement " predicting that Cisco would soon try to make up for its initial low bid "with engineering change proposals at higher prices."

Jim Massa director of Cisco's federal operations said he could not talk about the terms and conditions of the NSA contract because the contract contains a clause prohibiting such discussion. But speaking in general he said the company uses "very aggressive pricing under certain circumstances...if we can make money at it."

Asked if Cisco engaged in predatory pricing Massa answered: "No. Cisco would not even consider such a practice...[but] Cisco does offer low prices that are very favorable to the customer " Massa added.

Cisco's pricing on the NSA contract reportedly also miffed other federal customers including the Air Force Electronic Systems Center which last year bought more than $30 million worth of Cisco routers and switches primarily through the Unified Local-Area Network Architecture II contract held by Electronic Data Systems Corp.

The Navy however sees an opportunity to acquire the plumbing for its Information Technology for the 21st Century (IT-21) program which will tie together Navy operations with a seamless network through the Cisco NSA contract which is open to any federal agency engaged in intelligence. Rear Adm. John Gauss director of allied and fleet requirements in the Navy's Space Information Warfare Command and Control directorate said he would be "very interested" in using the Cisco contract to acquire IT-21 components at rock-bottom prices.

The protest has resulted in NSA issuing a stop-work order on the Light Core contract FCW learned.

At deadline NSA had not replied to questions faxed to it by FCW.


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