IBM 'Blindsided' by Federal Contract Suspension

By Sharon Linsenbach  |  Posted 2008-04-01 Print this article Print

Big Blue is suspended from seeking federal work pending an investigation into bid-rigging charges surrounding a March 2006 EPA contract.

IBM is banned from bidding on federal government contracts while the U.S. Environmental Protection Agency investigates a charge Big Blue colluded with EPA employees to win a March 2006 contract with the agency for $80 million.

The computer services vendor said in a statement it was "blindsided" by the  suspension that bars the vendor from seeking any new federal contracts with all U.S. agencies while the investigation proceeds.

According to IBM and the EPA, the investigation stems from an $80 million bid it made to modernize the EPA's financial systems in March 2006. The contract in question has yet to be awarded. IBM spokesman Fred McNeese confirmed in a statement that the value of IBM's bid was around $80 million and was for a system-wide EPA project, but referred any further questions to the EPA.

EPA Press Secretary Jonathan Shradar confirmed in a statement that his agency temporarily suspended IBM from receiving new federal contracts on Thursday, March 27, but declined to comment further. IBM said it only learned of the suspension Friday, March 28.

IBM also said it would cooperate with the U.S. Attorney's Office for the Eastern District of Virginia, which served IBM and select IBM employees with grand jury subpoenas requesting their testimony and documents on interactions between EPA and IBM employees.

IBM Won't Fight Ban

McNeese said in a statement that though IBM would cooperate with the investigation, the company did plan to fight to limit the scope of the suspension from bidding on new contracts.

The temporary suspension applies to all federal agencies and IBM business units. IBM may continue work on existing contracts as of the date of the suspension, unless a particular agency directs otherwise, the company said in the statement.

IBM has 30 days to contest the scope of the suspension under federal procurement rules, and the suspension could last as long as one year. Depending on the length of the suspension, IBM stands to lose out on potential contracts to rivals EDS or Affiliated Computer Services Inc. 

IBM said in the statement that all employees receive business conduct training, and that specialized training is provided for employees who seek federal government business.

Sharon Linsenbach Sharon Linsenbach is a staff writer for eWEEK and eWEEK Channel Insider. Prior to joining Ziff Davis, Sharon was Assistant Managing Editor for CRN, a weekly magazine for PC and technology resellers. Before joining CRN, Sharon was an Acquisitions Editor for The Coriolis Group and later, Editorial Director with Paraglyph Press, both in Scottsdale, AZ. She holds a BA in English from Drew University and lives in the Philadelphia suburbs with her significant other and two neurotic cats. When she's not reading or writing about technology, Sharon enjoys yoga, knitting, traveling and live music. Sharon can be reached at

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