Sun withdraws from GSA Schedule

Sun Microsystems Inc. is canceling its General Services Administration schedule contract, the company has confirmed.

The cancellation will take effect Oct. 12, according to Sun. A brief statement the company issued said, "We took this step reluctantly, as we have always valued our relationship with GSA and its team of committed professionals. Sun and GSA have enjoyed a successful relationship as partners for a number of years during which Sun has provided government agencies with some of the industry's most innovative, energy-efficient, open source and secure computing systems."

The company has come under fire recently for allegedly not giving government customers its lowest prices, as the schedules program requires.

Sen. Charles Grassley (R-Iowa) had been pushing both GSA and Sun to address his concerns over the company's pricing strategy. He has criticized the vendor for foot-dragging and refusing to turn over documents as part of a GSA Inspector General inquiry. In an exchange of letters between Grassley and Sun chairman Scott McNealy earlier this year, McNealy expressed concern that GSA IG Brian Miller had a conflict of interest and a bias against Sun.

The IG recently concluded that Sun had overcharged government agencies by more than $25 million for its products, leading Grassley to call on GSA to cancel the contract. GSA Administrator Lurita Doan had earlier this week asked the President's Council on Integrity and Efficiency to help sort out the conflict. Doan, however, had said she would not cancel the contract.

The contract would have expired in August 2009, according to GSA.

Consultant Mark Amtower, partner at Amtower & Co., said Sun's decision comes as no surprise.

"Although this issue was probably resolvable, it became less so with each statement from Sun or GSA, and worse when Grassley stepped in," Amtower said.

"GSA is the big loser," because Sun has other governmentwide acquisition contracts to sell through, he said.

Amtower said other manufacturers may consider leaving GSA now that Sun has shown it to be possible.