IBM dust-up ripples through government

Buylines | Policies, strategies and trends to watch

The federal procurement system is the largest and among
the cleanest public-sector procurement systems in the
world. It counts transparency and competition as its highest
values.

It also gives a single agency debarment
official an unchecked ability to completely
halt a company's business across the federal
government. In the event a single company
employee, out of tens of thousands, is given
or receives competitive information during
the procurement process, a federal suspension
and debarment official can suspend the
entire company without notice and without
fully considering the impact on other federal
agencies.

IBM found itself in this situation March 27
when an Environmental
Protection Agency debarment
official posted IBM's name on
the Excluded Parties List
System, halting sales of IBM
products and services.

Contracting officers are instructed to check
the EPLS before awarding contracts or issuing
orders to verify that the company with
which they are about to perform a contract
action is not on the excluded-parties list.

Companies and individuals can be placed on
this list with scant notice. IBM first learned
of its suspension through a third party.
The purpose of the suspension and
debarment system is to protect the government
by preventing contracting officers
from continuing to do business with a company
suspected of illegal or fraudulent
behavior. The EPLS includes more than
66,000 names of individuals and companies,
mostly small businesses, so it was
big news when a company the size and reputation
of IBM appeared on the list.

Because IBM is also a manufacturer of
commercial products, this action immediately
impacted the operations of other federal
agencies. Contracting officers from agencies
in the process of routine buying, updating
and upgrading IBM hardware and software
couldn't determine whether orders for IBM
products could be placed with IBM resellers
via non-IBM contracts or not.

The General Services Administration's
guidance on the matter blew one way and
then the other. A week later, the high drama
was over, and IBM's name was removed from
the EPLS. But in the process, $10 million to
$20 million worth of IBM product sales were
delayed; some agencies had begun developing
contingency plans.

The far-reaching, and I suspect, unintended,
consequences caused by the EPA's suspension
of IBM reminds us that a few government
employees have the power to effectively
put a company out of business with the federal
government while causing other agencies
immediate hardship.

Government procurement watchdogs seem
to be encouraging more widespread use of
the suspension and debarment tool. For
instance, the proposed Contractors and
Federal Accountability Spending Act
would use suspension and debarment to
prevent repeat offenders from continuing
to do business with the government.

My concern is the process behind the
use of this unchecked and possibly arbitrary,
if not capricious, authority.

I have two suggestions: First, a suspension
or debarment official should be
required to fully consider how the intended
action would affect the
operations of agencies that
depend on products manufactured
by the accused.

This would make the
process a bit more business-like and, hopefully, less disruptive to
other agencies.

Second, there ought to be a use-it-or-lose-it
limit on how long the government can sit
on evidence of wrongdoing before making
charges.

For example, the government puts the burden
on contractors to file sustainable protest
actions within 10 calendar days of when the
contractor knew, or should have known, rules
were violated.

Why not hold government employees to
the same 10-day timeliness standard after
which they would lose the right to use
that information to suspend or debar a
contractor?

Steve Charles (steve_charles@immixgroup.com)
is co-founder of consulting firm ImmixGroup Inc.

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