IBM Suspended From New Federal Government Contracts

In addition, the U.S. Attorney's Office for the Eastern District of Virginia has served IBM and a number of IBM employees with grand jury subpoenas that request "testimony and documents regarding interactions between employees of the EPA and certain IBM employees," according to a statement IBM issued late Monday.

An IBM spokesman said the company's understanding is that the suspension only applies to IBM's own direct business with the federal government and IBM's channel partners that resell IBM products to the government are unaffected.

IBM said it just learned of the suspension on Friday, which applies to all IBM business units and all federal government agencies, and the company has been in discussions with the EPA and U.S. Attorney's Office to find out more about the issue. Notice of the suspension was posted on the General Services Administration's "Excluded Parties List System" Web site on March 27. The posting lists the termination date of the suspension as "indefinite."

The suspension only applies to new contracts with the federal government and does not affect contract work that is already in progress. The ban can last up to a year, pending the completion of the government investigation.

IBM said that before last Friday it was unaware of the suspension or that the U.S. Attorney's Office was conducting an investigation. The company said it is cooperating with the investigations, but added that it "intends to take all appropriate actions to challenge the suspension and limit its scope." IBM has 30 days in which it can contest the scope of the suspension.

The investigation and suspension are related to an investigation by the EPA of "possible violations of the procurement integrity provisions of the Office of Federal Procurement Policy Act" concerning a contract bid submitted to the EPA in March 2006, IBM said in its statement.

The investigation involves a contract to modernize the EPA's financial IT systems for which IBM issued an $80 million bid, according to a Reuters news service story. That contract was won by CGI Group, which bid $84 million, in February 2007, according to "WashingtonTechnology," a government procurement news Website. But IBM filed a protest and the contract has not been issued.