Sun cancels its GSA schedule

Experts vary on how Sun’s long dispute with GSA could affect schedule program

Timeline of the Sun Microsystems/GSA dispute

Sun Microsystems and the General Services Administration’s Office of Inspector General have had a running dispute about Sun’s GSA schedule contract for years, but the disagreement has heated up in the past few months.

2004 to 2006: The OIG conducts a detailed audit of Sun’s sales transactions with the government dating back to 1996.

April 2007: OIG notifies Sun of the audit’s findings.

June 13: OIG announces it will conduct a new audit of Sun.

June 25: Sun sends a letter to GSA IG Brian Miller requesting a third-party review and asking him to recuse his office from performing the audit because of public statements critical of Sun’s
contract.

June 25: Sun files a complaint with the President’s Council on Integrity and Efficiency.

July 24: Sen. Charles Grassley (R-Iowa) says the OIG should perform the audit.

July 25: Sun Chairman Scott McNealy offers to meet with Grassley to discuss the dispute.

Aug. 24: Grassley asks GSA Administrator Lurita Doan to cancel Sun’s contract.

Sept. 7: Doan asks the President’s Council on Integrity and Efficiency to review the dispute and sends letter to Grassley stating she won’t get involved in contracting issues.

Sept. 14: Sun cancels its GSA schedule contract effective Oct. 12.

— Matthew Weigelt

Sun Microsystems notified the General Services Administration last week that it was canceling its GSA multiple-award schedule contract, effective Oct. 12. The decision came suddenly, just as GSA Administrator Lurita Doan sought help from an outside party to deal with a long-running contract pricing dispute between Sun and GSA.

“We took this step reluctantly, as we have always valued our relationship with GSA,” a Sun spokeswoman said. “Sun and GSA have enjoyed a successful relationship as partners for a number of years.”

The effect of the decision is unclear. Sun is not ranked among the top 140 information technology schedule contractors, according to fiscal 2006 figures from Eagle Eye Publishers.

Some federal procurement experts say they were frustrated by the news and concerned about its potential effect on government acquisition.

“That sets a dangerous precedent for government acquisition,” said Larry Allen, president of the Coalition for Government Procurement. “It doesn’t matter if you make a good faith effort to comply, if an official or the [inspector general] has it in for you, you’re in trouble.”

Doan commented on Sun’s contract cancellation in a statement Friday. “Taxpayers get the best deal when we allow our professional contracting officers to negotiate and manage the relationship with our vendors,” Doan said. “Unfortunately, this process was taken in another direction.”

Some observers of the contract dispute between Sun and GSA say they thought GSA was not treating Sun fairly.

Others said federal agencies could be the biggest losers in the dispute if Sun’s products become more difficult to buy.
However, Sun products are available on other governmentwide acquisition contracts. Allen said NASA’s Solutions for Enterprisewide Procurement governmentwide acquisition contract would likely experience an uptick in business. But SEWP and its contractors now have to watch their step, he added.
“You can dot all your I’s and cross all your T’s — if there’s a vendetta against you, it won’t matter one bit,” Allen said.

Other contracting experts say the
Sun dispute is not likely to have widespread repercussions on GSA’s schedule program.

“This is an isolated case with a lot of political attention,” said John Howell, a government contracts attorney and partner at law firm McKenna Long and Aldridge. Government contractors and IGs constantly wrangle about pricing issues, he said.

Whatever the long-term effects of Sun’s decision, Doan made an astute move by asking the President’s Council on Integrity and Efficiency to review the case, Howell said.

Sun’s decision to cancel its GSA schedule contract came just as Doan asked the President’s Council on Integrity and Efficiency to address the larger issue of companies not complying with the IG's requests for pricing information.

“Her decision [was] like a Hail Mary pass when at least there’s a chance of success,” said Neal Fox, former assistant commissioner for acquisition in GSA’s defunct Federal Supply Service and now an independent consultant.

In a letter to the council’s Integrity Committee, Doan said she didn’t understand why Sun apparently was unresponsive to the IG’s requests for pricing information. She said Sun’s lack of responsiveness was indicative of a larger problem.

Sun’s dispute with GSA’s IG centers on how much pricing information the company should give to the IG about its GSA schedule contract.
“It is imperative, given our core mission, for GSA to have a fully capable, competent, independent and respected OIG, capable of gaining industry and GSA employee cooperation for investigations and audits,” Doan wrote in her letter to Kenneth Kaiser, chairman of the council’s Integrity Committee and assistant director of the FBI’s Inspection Division.

Doan also expressed concern that the dispute was becoming politicized. “Sadly, there have been several instances when confidential information provided to the GSA IG was immediately leaked to media outlets,” fostering a bad impression of the OIG, she wrote in a separate letter to Sen. Charles Grassley (R-Iowa). In August, Grassley asked Doan to cancel Sun’s contract.

Grassley said he was surprised by Sun's decision to pull out of its contract. “I don't know why Sun made this decision,” he said in a statement Friday. “Government contractors should be expected to fully cooperate with inquiries by government officials and congressional oversight.”

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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