A contest of wills

Sun's fallout with GSA won't hurt but might raise some eyebrows

Although the news of Sun Microsystems Inc.'s decision to cancel its General Services Administration schedule contract was dramatic because of the prominence of both the vendor and the contract, industry experts say the action's impact is not certain.

Some question whether the move will weaken Sun's ability to reach its customers and whether other companies that are dissatisfied with their GSA schedule sales will be inspired to follow Sun's lead.

Sun did only modest business through its Schedule 70 contract, earning $8.1 million in fiscal 2006, according to GSA records.

The Santa Clara, Calif., information technology developer is a major player on other governmentwide acquisition contracts, including NASA's Solutions for Enterprisewide Procurement IV vehicle. The company does not hold a direct SEWP contract, but eight partners on the vehicle can provide Sun products through it, according to NASA officials.

GTSI Corp. is one of Sun's partners on SEWP. Scott Friedlander, GTSI's executive vice president, said he expects Sun's federal business and its relationships with partner companies to survive the loss of the GSA schedule contract.

Friedlander said he's optimistic about his company's future with Sun partly because GTSI is transitioning from being a reseller to a service provider. Rather than simply fulfilling customer orders for specified hardware, GTSI now takes the lead in developing technology solutions for agency problems, he said.

"We're driving the business and can use Sun technology whenever it's appropriate to," he said, adding that agencies will use any vehicles necessary to get the products they want.

Sun chose to cancel its contract after months of sometimes acrimonious interplay among the company, GSA and Sen. Charles Grassley (R-Iowa) about Sun's pricing. Under the schedule program's terms, vendors must offer their lowest pricing to government buyers. Grassley and GSA's inspector general accused Sun of withholding documents that the IG had requested, a charge Sun denies.

Many of Sun's partners will still be able to sell Sun products through their own schedule contracts, said Jonathan Aronie, a procurement attorney and partner at Sheppard Mullin Richter and Hampton in Washington.

"Unless Sun is suspended or debarred, there's no reason that another company can't sell Sun products through their schedules," he said. Some schedule contracts require the reseller to provide the same commercial pricing data for Sun products that Sun would have had to, but others do not, he said.

Meanwhile, Sun should not expect the inquiry into its earlier actions to end with the contract cancellation. "I suspect that the IG does not want to set a precedent that says if you cancel your schedule, we drop our audit." he said.

The cancellation takes effect Oct. 12, after the traditional September buying rush at the end of the fiscal year. That means agencies will have ample time to consider options and find new ways to get the Sun products they need.

"I think it's a temporary logistical inconvenience," said Alan Bechara, president of PC Mall Gov. The risk to agencies that use Sun products is minimal to nonexistent, he added.

Olga Grkavac, an executive vice president at the IT Association of America, said Sun got caught up in an ongoing political battle between GSA Administrator Lurita Doan and her adversaries in oversight roles.

"Clearly, it is a chilling decision, the fact that it's become so political," Grkavac said. "Taking the Sun decision aside, it's another sign that we live in a very highly charged political environment. The GSA administrator remains a target for some on Capitol Hill."

"I don't think it means anything specific to anyone else," Friedlander said. "What we are seeing is every [original equipment manufacturer] is looking at the best ways to go to market, and that doesn't necessarily mean GSA."

"I don't advise any manufacturer to hold a direct schedule," Bechara said. "If you have a good program with select partners, you don't need a direct schedule."

Associate Editor Michael Hardy can be reached at mhardy@1105govinfo.com.

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