U.S. Suspends IBM Pact for Air Traffic Control Equipment
A $3.6-billion Federal Aviation Administration contract won by IBM last month for air traffic control equipment was suspended by a government board Wednesday while it considers a protest of the award filed by Hughes Aircraft, the competing bidder.
As a result of the suspension, the FAA will order IBM to halt work on the Advanced Automation System, which includes the development and production of new computers, radar screens and software for FAA centers across the nation.
Observers considered the suspension routine, even though Justice Department attorneys argued against it in a hearing Wednesday before the Board of Contract Appeals, an agency of the General Services Administration that hears protests of federal contract actions. The suspension will last a maximum of 45 days.
El Segundo-based Hughes alleged in a 20-page complaint filed last week that the FAA disregarded its own selection criteria in awarding the contract to IBM and granted IBM a series of unfair advantages that allowed the firm to cut its prices by several hundred million dollars.
“We are pleased by the decision and are looking forward to pleading the case on its merits,” Hughes Vice President Lee Pitt said. A hearing on the merits of the protest has been set for Sept. 9.
IBM spokesman Jim Elder said the decision by administrative law Judge Anthony Borwick “in no way reflects on the case and we are confident that the protest is without merit.”
Under federal procurement law, if a contract award is protested, the government must convince the board of “urgent and compelling circumstances” for the contract to remain in effect while the protest is reviewed.
In this case, the government failed to make its case, an offical at the GSA said.
Elder said he could not comment on whether IBM has stopped its work, but he added, “We anticipate hearing from the FAA in the next couple of days.” IBM has a longstanding policy against layoffs that will prevent any furloughs resulting from the contract suspension, Elder said.
IBM asked Borwick to impose only a partial suspension that would limit IBM’s staffing level to 400 employees until the dispute is resolved. Borwick rejected the request.
The Advanced Automation System contract was the biggest in IBM history. Under the program, IBM was to produce equipment for software for 23 area control facilities and up to 250 airport towers across the nation.
The system, which will be completed by the turn of the century, is intended to improve air safety and reduce air controllers’ workloads by replacing obsolete equipment.
IBM officials said the computer giant intended to subcontract about 50% of the total award, with most of that money to be divided between Raytheon and Computer Sciences Corp. of El Segundo.
Deputy Transportation Secretary Mimi Dawson said on the day after the contract was awarded that the proposals by IBM and Hughes were equal in technical merit and management capability. She said IBM’s bid was lower than Hughes, but declined to say by how much.
Reliable sources estimated that IBM was about a half billion dollars lower than Hughes. But Hughes alleges that most of the difference resulted from unfair advantages that IBM was granted by the FAA.
Hughes said IBM was allowed to offer used computers in its bid, while Hughes was required to offer new computers. As a result, Hughes said its bid for that portion of the system was $309 million, compared to IBM’s $127 million.
Another key issue was IBM’s role as subcontractor to Hughes for computer hardware. Hughes said IBM offered to sell the FAA spare parts for $11 million, but told Hughes the same parts would cost $223 million.
FAA and IBM officials have declined to comment on the allegations.
