The recent order to suspend IBM from any new federal contracts reflects a belief that agencies should be informed that the company acted irresponsibly so they can protect their interests, and should not be viewed as a punishment against IBM, said the top procurement official with the General Services Administration.
But many government contractors believe the suspension will financially punish companies that rely heavily on IBM products when bidding on government work, will slow federal buying and, ultimately, will hurt the government's ability to obtain the products it wants.
On March 28, the Environmental Protection Agency placed IBM on the Excluded Parties List System, which GSA maintains to track reprimands given out to federal contractors. The suspension, which was initiated by EPA and extends governmentwide, bars IBM from receiving new federal contracts or modifications to new contracts.
David Drabkin, GSA's deputy chief acquisition officer and senior procurement executive, did not comment on the circumstances of IBM's suspension, but he said, hundreds of suspensions and debarments are issued every year, and most affect small businesses, which do not have the money to quickly resolve a violation an agency may raise. What's important, he said, is the fact that such suspensions are intended to protect government, not punish companies.
"This is a temporary measure taken when an agency believes there is sufficient evidence to indicate that a company is not presently responsible, but an investigation or inquiry into that lack of responsibility has not yet finished," Drabkin said. "The reasons for a suspension can involve anything relating to how the business operates. It can stretch from failure to pay taxes, to an [Occupational Safety and Health Administration] or EPA violation, to defective pricing or some sort of felony allegation. It runs the gamut. But regardless, all decisions are based upon facts at hand. … Suspensions are prophylactic measures designed to protect government; that provide a snapshot of the company today."
Every agency has a suspension and debarment official who has the authority to take action against individuals, a part of a company or a company as a whole, as is the case for IBM. Specifically, agencies were instructed to not solicit offers; award new contracts; place new task, delivery or purchase orders; consent to subcontracts; evaluate pending proposals, quotations or offers; add new work; exercise options; or extend the duration of current contracts or orders with IBM. Agencies also cannot modify existing contracts with IBM, or use federal purchase cards to acquire goods or services from the company.
Drabkin confirmed that the suspension extends to resellers, who can no longer include IBM products on bids for federal work.*
That latter restriction has some contractors angry at EPA's action. "The whole thing stinks, and someone ought to ask EPA, 'Who are you to shut down critical components of government IT, and stick people like us with this problem?'" said one federal IT contractor who resells IBM products and declined to be identified. "We have no ethical violation, so why are we getting zapped? And why does one [official] in an agency have the ability to shut down an entire operation? This is gross misapplication of contract law."
Daniel Serpico, president and chief executive officer of Jeskell, an IBM premier business partner based in Sunnyvale, Calif., said he has received calls from customers indicating they won't be purchasing products until its suspension is resolved, and they find out whether they need to switch to platforms other than IBM. "We're a 60-employee business that is focused on selling good products to the federal government," Serpico said. "Certainly, I'm not condoning unethical behavior, but it wasn't us that did anything unethical. This just doesn't seem right. It hurts everyone -- including government."
The suspension will most likely cause a shake-up in the federal IT market, says Bob Laclede, vice president and general manager of public sector business for IT distributor Ingram Micro. "There's definitely going to be a delay in business [for resellers], or even a shift to another manufacturer," he said. "I hope IBM will get it solved very quickly. It can definitely hurt a reseller that is focused on that vendor's business. There will be a lot of people calling their congressmen and senators and saying, 'I had nothing to do with this.'"
If there are compelling reasons for doing business with IBM, agencies can submit requests for determinations for approval by the agency administrator. But, "those determinations aren't frequent," Drabkin said.
"Suspensions are by their very nature temporary, and usually last for the period of time it takes to complete the investigation," he said. "They can last a day, though typically they don't; or they can last six months or a year."
Drabkin was involved in the suspension of Enron, which lasted more than a year while investigations into the energy company's financial misconduct took place. "Suspension can lead to ultimate debarment; it all depends on the facts," he said.