IBM is back, but what happened?

The Environmental Protection Agency lifted its weeklong suspension of IBM from government work after the information technology mainstay agreed to concessions with agency officials.

Richard Kaplan, IBM’s vice president and assistant general counsel, said the company agreed to withdraw its offer and protest of an $84 million EPA financial management modernization contract, which the agency awarded to CGI Federal in 2007.

EPA lifted the suspension April 3, easing fears about how it would have affected agencies. Some agency officials and procurement experts had worried that EPA’s action could seriously disrupt agency projects.
“This doesn’t happen often with companies of this size that have the kind of impact this would have on how we do business,” said David Drabkin, senior procurement official and acting chief acquisition officer at the General Services Administration.

“This is an absolutely startling thing,” said Joseph Petrillo, a federal contract attorney at Washington law firm Petrillo and Powell.

According to the text of the agreement, EPA suspended the company because IBM employees allegedly obtained protected source-selection information from an EPA employee and then used it to their advantage in contract negotiations with the agency. As part of the deal, IBM has placed five employees on administrative leave until investigations by the company and government are finished.

EPA’s debarring official, Robert Meunier, took immediate action March 27 to suspend IBM once he determined there was sufficient evidence against the IBM employees, according to the text of the agreement. He placed IBM on the Excluded Parties List that day.

In determining the scope of the suspension, Meunier decided that suspending only one internal component of IBM would be ineffective. Because IBM as a whole submitted the offer for the contract, it is the only legal entity capable of receipt and performance of the award, the agreement states.
Surprised by the suspension, IBM officials quickly launched an internal investigation and promptly met with EPA officials about the problem. IBM’s investigation is ongoing.

Besides withdrawing from competition for the modernization contract, IBM agreed to examine its compliance program and correct it as needed. IBM pledged to cooperate with the investigations by EPA and the U.S. Attorney’s Office for the Eastern District of Virginia. In addition, IBM will reimburse the government for the costs of the investigation and costs associated with the protest it filed at the Government Accountability Office, the agreement states.

The suspension’s end calms concerns rampant throughout the government IT and acquisition communities. EPA’s suspension startled chief acquisition officers, senior procurement officials and chief information officers.

EPA did not inform GSA before suspending the company, Drabkin said. Furthermore, many in government and industry learned about the suspension April 1 — April Fool’s Day — and some thought it was a prank.

IBM’s federal sales in fiscal 2007 reached more than $1.4 billion. The sales numbers have increased steadily following a decline after fiscal 2004. That year IBM had $1.5 billion in sales. In first quarter of fiscal 2008, IBM has $100 million in sales, according to USASpending.gov.

IBM schedules contracts’ sales hit $537 million in fiscal 2007 — a 31 percent increase from 2006, according to General Services Administration schedule sales figures.

Suspending a company of that size ultimately hurts the government more than the company, Petrillo said. 

About the Author

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

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