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The Lectern:

The Lectern: The IBM shocker

By Steve Kelman
Published on April 2, 2008 - 10:18 AM

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I have been in Washington this week for some meetings, and the story about IBM's governmentwide suspension from contracting has been the big topic of conversation. Folks are pretty shocked. (I saw an amazed post from one government contracting officer on Facebook.)

We don't know too many details at this point. Possibly, there is some really egregious behavior by IBM that resulted in this extreme step. But possibly, this move reflects the hyper-fear, hyper-punishment procurement environment right now that affects vendors (assumed now to be rapacious crooks until proven otherwise) as well as career public servants.

Somebody mentioned to me a recent meeting involving a number of industry folks where the topic was which information technology firms are going to withdraw from selling to the federal government. Obviously those contractors who are completely dependent on government business -- the IT divisions of the defense contractors, and government-unique small businesses -- will stay on. But are we going to start to see predominantly commercial firms, who have only a small percentage of business in the government marketplace, conclude that in the present environment, the risks simply aren't worth it? (During Katrina, the government was unable to use Wal-Mart for supplying the region because the company refuses to do business with the government for other than micropurchases.)

This would of course be terrible. The last thing the government needs is to revert to the days when government contracting was the preserve of government-only companies. For innovation, competition, and customer-orientation, the government needs predominantly commercial firms. The current procurement environment threatens the big gains in terms of lower prices, innovation, and customer service that we made in the 90's in attracting these firms to government contracting.

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Steve, "Possibly egregious behavior? Looks like a US Attorney office and grand jury thought it was real bad, even criminal. The FBI doesn't get involved in run-of-the-mill Fear Industry mongering activity. This IBM issue is clearly different from what IGs, the GAO, Congress, and the unknowing press feed on. Fair or not, the industry's image is poor because of perceived lousy performance on a minority of contracts, perceived low value, perceived ethics and COI issues, and, for "competing" with the civil servants. Alleged egregious, even criminal, behavior involving acq-sensitive info is not why the industry gets beat up by your Fear Industry. Let's hope there really is no case to take to trial.

Posted by Michael Lent on April 2, 2008 - 09:30 PM

This is an interesting and vitally important story that is still unfolding. I don't know any of the facts, but if the US Attorney and FBI are involved as Mr. Lent asserts, then something serious has happened. However, the "possibly egregious behaviour" might well be misplaced, because, even if there is a criminal case before a court, unless and until a guilty verdict is rendered, there is a tenent of our Constitution that one is innocent until proven guilty. We may well find that a government employee has jumped the gun by entering what is patently uncorroborated data into the Excluded Parties List system.

Posted by t1234 on April 3, 2008 - 09:40 AM

Steve, a considerable amount of emphasis is placed on government workers being honest and demonstrating a high level integrity, yet we do not seem to hold those with whom we conduct business to the same creed. I appreciate the fact that there are limited numbers of companies that can provide the specialized services sought by the governement, especially in defense. In my "Pollyanaish" world of what is fair, and as a taxpayer, it is about time that some of the large firms are taken to task. If firms are in a mode where they take advantage of us, maybe we should consider not doing business with them in the future.

Posted by FlashGordon13 on April 3, 2008 - 10:25 AM

I was a little torn when this first came out. Part of me was thinking, maybe this will stop all the frivolous protests (to my knowledge, the basis of THIS protest was actually sound). The more reasonable part of me fears how this could impact government acquisition.

With major vendors leaving the GSA schedule contracts and the strong-arming of contractors that some agencies promote, one must wonder if this is a tipping point.

If the actions of a few can force the suspension of an entire company with a previously untarnished record, then the risk associated with govt business has increased dramatically.

I find it incredibly believable that EPA didn't discuss the issue with IBM beforehand. But I also find it disturbing that they probably didn't discuss their plans with other procurement executives. Think of all the other ongoing procurements and contracts. There's going to be a lot of extra work for a lot of Feds. Do you think EPA even considered the impact on these agencies? My opinions could easily change as the facts emerge, but it appears that EPA was way out of line.

By the way, Congress was debating this issue less than 2 wks ago: http://www.govexec.com/dailyfed/0308/032108rb1.htm

Anonymous

Posted by jsmeditor on April 3, 2008 - 08:31 PM

I guess many years of working in small business (max # of employees 20, NOT the fed definition) has made me cynical about Washington's addiction to big business.

My view on this is 'so what?'. If any branch of the government has become that dependent on a particular contractor, then something's amiss with the agency. Truthfully, most of us on the front line don't give a rat's patooty about machinations like this - we'll get the job done in spite of what happens in the beltway.

Posted by oldcoastie on April 4, 2008 - 09:13 AM

Re t1234's comment. Yes, the USA for the Eastern District of VA (Alexandria) evidently, from several news reports, has a grand jury sitting. In cases of alleged public corruption by feds or alleged contractor attempts to obtain or use, or even passively receive, acq-sensitive info, the Bureau is involved. Especially in Paul McNulty's former turf, they are quick to make prelim investigations. We should be happy with this morning's news that the suspension has been lifted because it was vast overkill in scope, even if the allegations, whatever they are, are sustained. But the investigation and attempt to make a case appear to be proceeding. I hesitate to suggest this, Steve, but perhaps the FI includes some government customers, too, not just IGs.

Posted by Michael Lent on April 4, 2008 - 09:29 AM

Good riddance to IBM and the rest of the bandits.

The government has become FAR, FAR too dependent on these criminals. They charge ten times as much and take ten times as long as government employees. Unfortunately they have been all too successful in displacing those dedicated government employees over the years. Mostly due to kickbacks and a revolving door policy where top level political appointees find a golden parachute waiting for them, just as soon as they clear house. Luckily for most of those people have found jobs working for the very same contractors who replaced them, doing the same jobs. Only costing the taxpayer many times more.

That's the real crime, except it's all legal.

Posted by Kevin117 on April 4, 2008 - 09:26 PM

Steve:

There's a lot to be learned from the IBM matter and it may prove to be another watershed event in t he evolution of our acquisition systtem, although it's hard to tell whether it will be for the better or worse. There is evidence that the process didn't work like it was designed too, even though there appears to be evidence to establish grounds for suspension.

Perhaps what's more important about the IBM case is the way in which it shows the polarization within and without our community. On the one end there are those who see the IBM case as an example of how we are backing away from the great strides we took in the 90's toward accessing the commercial market and on t he other therre are those who argie that it is a long overdue reaction to companies that lack ethics and make money from the government. Of course, as is always the case, the truth is somewhere in the middle, but there are few who are focused on the truth or the middle. How did we get here? Where are the leaders who are trying to focus on truth and finding and holding the middle ground? There don't seem to be many. Maybe Drabkin at GSA and Soloway and Preston at PSC, but who else is standing up for both the integrity of the process and reasoned reaction to problems that arise in the day-to-day operations of government?

Even you, one of my heroes, seem to lose sight that government procurement is not just a back office business function of government, we all wished it were, but it isn't. We're spending taxpayer dollars and now we are doing it during a War and in an economic crisis. People have a right to have an expectation that when we are spending their money we are doing it with reputable companies and we are getting value for their money.

Posted by Shep on April 13, 2008 - 09:33 AM

Shep -- Thanks for your thoughtful comments; I also endorse your words of praise for Dave Drabkin, Stan Soloway, and Colleen Preston. I certainly agree that taxpayers have a right to expect that we get best value for spending taxpayer dollars on contracting. Where I differ from the control freaks is in thinking that the main way to do that is through ever-more rules, audits, and controls. Not that we don't need all three in moderation -- however, the current environment is driving out good business decisions and driving away civil servants from the government.

Steve Kelman

Posted by jsmeditor on April 15, 2008 - 12:47 PM

Look at this...

Posted by ruttSoisose on May 30, 2008 - 12:46 AM


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