MZM loses contract amid investigations

The Pentagon has stopped work under a $250 million blanket purchase agreement with Washington contractor MZM Inc. amid news that the company's founder is under investigation by the U.S. Attorney's Office in Southern California.

A California grand jury has issued subpoenas for documents related to MZM founder Mitchell Wade's purchase in 2003 of a home owned by Rep. Randy Cunningham (R-Calif.), the Washington Post and several other newspapers reported this week. Wade paid $1.7 million for the home, which he later resold for $1 million, according to the Post.

Cunningham's attorney, K. Lee Blalack of O'Melveny & Myers' in Washington, confirmed that the grand jury had issued a subpoena to Cunningham, but he offered no description of the contents sought. "My client has directed me to comply with the subpoena as expeditiously as possible," Blalack said in a statement.

However, the Pentagon's decision to cut off further work on the Defense Information Systems Agency (DISA) blanket purchasing agreement with MZM was based on a change in contracting regulations and had nothing to do with the reports of any investigations, said Michael Thiem, a public affairs officer for DISA.

"DISA is not a law-enforcement agency and has no knowledge of any federal investigation into Congressman Cunningham or MZM," Thiem wrote in a statement for Washington Technology. "Our actions in awarding the blanket purchase agreement, executing the contract paperwork and finally stopping the contract had no relationship to anyone on Capitol Hill whatsoever."

MZM had received $163 million to date for IT-related work performed under the blanket purchase agreement, which was awarded in September 2002, Thiem said. DISA sought proposals from two companies, but only MZM submitted a proposal that was considered competitive under regulations at the time, he added.

But under Section 803 of the National Defense Authorization Act of 2002 the rules changed, requiring "at least three proposals in order for the award to be considered competitive," Thiem said.

In November 2002, the agency's Office of the General Counsel advised that the MZM award was "legally awarded" under existing rules at the time, according to Thiem. However, in June 2005 the Defense inspector general recommended the MZM blanket purchase agreement be cancelled to comply with Section 803.

"Although we had followed the pre-Section 803 rules in awarding the MZM blanket purchase agreement, we discontinued ordering directly from this blanket purchase agreement because it could no longer be considered competitive," Thiem wrote in the statement.

MZM officials did not respond to a phone call seeking comment. The company is ranked No. 100 on Washington Technology's 2005 Top 100 list equals on Washington Technology's 2005 Top 100 list of the largest government contractors.