IBM and the EPA

Everyone in the acquisition world has heard this story by now.

On March 27th, 2008, the Environmental Protection Agency added IBM’s name to the Federal Government’s Excluded Parties List and effectively suspended the company from receiving any new contract awards from the Federal Government.

The suspension was in connection with an $84 million EPA contract to modernize the agency’s financial management system that the CGI Group won in February 2007. IBM filed a protest of that award in response to which GAO issued a stop work order.

As a result of the suspension, agencies were prohibited from evaluating pending proposals, quotations or offers from IBM. They were also prohibited from accepting any bids IBM had submitted in response to invitations for bids. Furthermore, agencies could not add new work, exercise options or extend the duration of current IBM contracts. They couldn’t modify existing contracts or use purchase cards to buy goods and services from IBM.

Click here for the story from GovExec.com.

The USASpending.gov web site reports that IBM sold more than $1.42 billion in goods and services to the Federal Government in fiscal 2007. A quick “back of the envelope” calculation tells me that the suspension could have cost them as much as $3.8 million per day!

On April 3rd, IBM and the EPA reached an agreement to lift the suspension. Click here for the text of the agreement between EPA and IBM from the WashingtonTechnology.com web site. According to this document, the EPA concluded that there was adequate evidence to support allegations that IBM received protected source selection information and improperly tried to use it in negotiations, which is a clear and serious violation of Federal procurement procedures and the Federal Procurement Integrity Act. It also appears that IBM has suspended 5 employees and has withdrawn its protest and bid on the EPA procurement.

Much has been written about how rare this kind of suspension is. One source commented to NextGov that "You don't see this very often, particularly for large companies.” If we don’t see this very often, it’s simply because we’re not looking.

I’m sure the average person has no concept of how many firms and individuals are suspended from Federal contracting each year. Let me give you a hint. Between the time that IBM was suspended on March 27th and the time the suspension was lifted on April 3rd, the Federal Government added ninety-one other firms and individuals to the excluded parties list! The act of suspending a firm or an individual from doing business with the Federal Government simply does NOT qualify as rare. The only reason this suspension was even noticed was because of the company involved.

Even more has been written about the lack of due process in suspending IBM without giving them fair warning that it was about to happen. I researched a few of the other suspensions that occurred in the same time frame. Whenever there was any kind of investigation involved, the suspension was without notice. It not only isn’t unusual, it’s standard practice.

Another article stated that the secrecy preceding the suspension was necessary because EPA had to follow a Justice Department requirement. Of course they did. And the shock associated with a suspension without notice probably served a very deliberate purpose. Am I the only one who reads John Grisham novels or watches Law and Order on television? Does anyone else suspect that the $3.8 million per day cost of the suspension had anything to do with IBM’s nearly instant compliance with the subpoenas issued by the U.S. Attorney?

Go back up the page to the link to WashingtonTechnology.com and read the text of the agreement between IBM and the EPA. No company enters into an agreement like that without someone leaning really hard on a long lever. IBM’s suspension was that lever and the EPA and the U.S. Attorney were both leaning into it for all they were worth.

All that said, I agree with some of the commentators on this story that the suspension and debarment process needs some clarification and perhaps some additional structure. But I agree with Robert Meunier, the EPA’s debarring official when he said “Nothing is broken.” As the processes of the Federal Government go, it might need a little tuning, but it’s not broken.

I’m as concerned as anyone about the prospect of the Federal Government running roughshod over the companies that sell to it. But, I think I’m equally concerned about the integrity of the procurement process. It’s a tough balance to achieve.