IBM suspended from US federal contracts

IBM, the world's biggest computer services provider has been checkmated by one of its biggest clients, the US government, or rather one of its agencies, the Environmental Protection Agency (EPA), amidst an investigation into possible procurement irregularities.

However, IBM's losses are not limited to EPA contracts. Under a reciprocal agreement among federal agencies, when one issues a ban, the others follow it. So, effectively, IBM has been banned from seeking any future contract from any federal agency until the investigation is completed.

This ban stems from a $80-million bid IBM had made in March, 2006 to modernise EPA financial systems, and during which it had possibly violated ethical bidding provisions. The contract was finally cancelled after questions rose over IBM's bid.

EPA press secretary Jonathan Shradar said in a statement that his agency temporarily suspended IBM from receiving new federal contracts or assistance on 27  March. He did mention the cause as being a possible issue with the 2006 contract, but declined further comment saying ''the matter is currently pending before the suspending official''.

IBM said that the US attorney's office served ''IBM and certain employees with grand-jury subpoenas requesting testimony and documents'' related to interaction between EPA and company employees. IBM said it plans to contest the suspension, which can continue for an initial period of up to one year.

IBM said it was unaware of any potential action by the EPA or the US Attorney's office until 28 March, when it received information of its name appearing on a list of blacklisted companies on a  government services administration website. The company declared its intention to cooperate in the investigation, but at the same time fight to limit the scope of its suspension from bidding on new contracts.

Under federal procurement rules, IBM has 30 days to contest the scope of the suspension. The ban on federal contracts can last up to one year, pending the completion of the government investigation. If the suspension remains in place, the company stands to lose billions of dollars in US government contracts that may be snapped up by its rivals like CSC, EDS, etc. IBM had earned an estimated $1.4 billion from federal contracts in the last financial year, up from $1.3 billion in the year before that.

IBM said it has served the federal government for many decades as a vendor in good standing and is ''committed to the highest standards of business ethics.'' All employees receive business conduct training with special training for employees seeking federal government business, it added. This is especially relevant in light of this case, which is rumoured to be based on disclosures made by an EPA employee to IBM employees.