IBM Suspended

IBM is suspended from contracting with federal agencies.

A notice on the Excluded Parties List says IBM is indefinitely ineligible to receive federal contracts or subcontracts.

The Environmental Protection Agency submitted the listing Thursday to the system, which is run by the General Services Administration.

"The Environmental Protection Agency temporarily suspended International Business Machines Corporation (IBM) from receiving new federal contracts or assistance," said an EPA spokesman.

The action was taken by the EPA suspending official as a temporary measure while the agency reviews concerns raised about potential activities involving an EPA procurement. As the matter is currently pending before the suspending official, the agency will have no further comment at this time.

Federal rules say Big Blue is suspended because of, "an indictment or other adequate evidence to suspect the commission of an offense that is a cause for debarment or that other causes for debarment under the agency regulations may exist."

The rules also say:

Listed persons are excluded as participants or principals in all primary and lower tier covered transactions of all agencies and may not receive contracts under federal procurement programs. Further, agencies and participants shall not renew or otherwise extend the duration of covered transactions or consent to lower tier covered transactions with such persons. Exceptions to this treatment require a written determination by the head of the federal agency or designee stating the reasons for entering the transaction.

IBM in a statement says The U.S. Attoney's office for the Eastern District of Virginia also served IBM and certain employees with grand jury subpoenas requesting testimony and documents regarding interactions between employees of the EPA and certain IBM employees.

IBM also says they did not know about the suspension until March 28. IBM says:

IBM was not aware that the EPA or U.S. Attorney's office were considering any action against IBM. Upon learning of the suspension, IBM initiated discussions with the EPA and the U.S. Attorney's office to obtain additional information and is cooperating with the investigations.

IBM says the situation relates to an investigation by the EPA of possible violations of the procurement integrity provisions of the Office of Federal Procurement Policy Act regarding a bid for business with the EPA originally submitted in March 2006.

IBM says it has 30 days to appeal the scope of the suspension, which can continue for an initial period of up to one year pending the completion of the investigation. IBM intends to take all appropriate actions to challenge the suspension and limit its scope.

IBM's major federal clients include the Customs Service, the Army, Centers for Medicare and Medicaid, and National Oceanic and Atmospheric Administration. Overall, IBM received more than $1.4 billion in federal contracts in 2007.

Alan Chvotkin, Executive Vice President and General Counsel with the Professional Services Council, says EPA's actions are fairly significant and highly unusual.

It is rare for entire companies to be suspended. Suspending operating units of large companies is less rare and for smaller companies where all operations in one place we see an entire company suspended more often.

Chvotkin says Enron is one of the most recent cases where a large company was debarred or suspended.

I am hoping there was a lot of communication between EPA and IBM. I have the impression that there was not which would be unusual.

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