Defense Dept. Probe Under Way : IBM Gets Unfair Edge on Navy Computer Contracts, Rivals Say
The Defense Department’s inspector general has begun reviewing charges that the Navy is routinely and unfairly funneling its major computer contracts to International Business Machines.
The allegations were made last month in a letter to Defense Secretary Frank C. Carlucci signed by six of IBM’s leading competitors. The six assert that the Navy is wasting hundreds of millions of dollars by using biased procurement practices that favor IBM.
The letter, which reflects a growing frustration among computer companies about IBM’s dominance of the federal government computer market, alleges among other things that Navy personnel routinely “wire” contracts for IBM by drawing computer contract specifications based on IBM products rather than on the government’s actual requirements.
“These specifications are designed to either preclude any real competition for IBM or, at the very least, provide an unfair advantage to IBM,” the letter said.
The companies charged that procurement abuses “have been instrumental in ensuring awards to IBM for all major large-scale general purpose ADP (automated data processing) hardware requirements since 1983.” The letter was signed by the Washington-area offices of Amdahl Corp., NCR Comten, Storage Technology Corp., Memorex Telex Corp., PacifiCorp Capital Inc. and VION Corp.
Jim Turner, a Pentagon spokesman, said the allegations have been referred to the Defense Department’s Inspector General’s Office. The department is awaiting the results of the investigation, he said, before making further comments or taking any further actions.
IBM spokesman Mark Holcomb said: “It would be inappropriate for us to comment on any specific contract awards. We believe that the contracts . . . were awarded based on fair and open competition.”
The computer companies have asked Carlucci to establish an independent investigation of the Navy’s contracting and procurement structure, especially the management of automated data processing contracts, and to establish a special oversight committee independent of the Navy to monitor competition on a controversial $150-million computer contract for the Naval Data Automation Command. That contract has been temporarily suspended because of a protest that the contract solicitation favored IBM; a decision is expected shortly.
In addition, Rep. James J. Florio (D-N.J.) has written to Navy Secretary William L. Ball about the accusations raised by the six computer companies. He and other members of Congress are considering investigations, depending on the results of the inspector general’s probe.
Simmering Frustration
As in the business world, IBM computers have dominated the federal computer market, causing competitors to complain that they are not getting a fair chance to win government business. The letter sent to Carlucci is the most public expression of frustration by computer industry officials about the situation.
In the letter, the computer companies allege that Navy personnel “consistently manipulate the procurement process” to ensure that IBM will get contracts. For example, the companies said the Navy has called for “multiple best and final offers” until IBM’s price is low enough to win.
The companies also said the Navy often selects a small minority-owned firm or a large systems integrator as a “front” for IBM by hiring those companies to purchase IBM equipment for the government. This provides the appearance that business is being given to someone other than IBM.
The companies also complained that the contracts given to IBM often last from 10 to 24 years, locking competitors out of major Navy computer programs for many years--far too long, the said, for a field in which technology is changing rapidly.
