Navy's Computer Choices Under Fire : 'Gang of 6' Firms Claim That Bidding Is Stacked in IBM's Favor

The Baltimore Sun

Sidney Wilson said he first noticed a "definite pattern of bias" in favor of International Business Machines Corp. by the Navy six years ago.

As a salesman assigned to the Navy account for Amdahl Corp., a company that specializes in building copies of IBM equipment, Wilson said he soon found that Big Blue was the preferred color in the Navy's computer rooms.

"The Navy never made public statements to that effect, but the practical application of what they were doing was exactly that," said Wilson, who today is vice president of PacifiCorp. Capital Inc., a systems integrator that leases IBM and compatible equipment.

Concerned by what he saw as an institutional bias in favor of IBM, Wilson complained directly to the secretary of the Navy in 1983 about a $50-million contract that called for the winner to supply computer equipment for the Navy Finance Center in Ohio.

Wilson said that the solicitation was "wired" for IBM because it asked for software that only IBM could provide.

The Navy's response to his complaint was a phone call and the implication of a promise for favorable treatment for another, upcoming contract, Wilson said.

Turned Down the Offer

Wilson said he turned down the Navy's offer and the $50-million contract was ultimately awarded to IBM.

Little has changed except his own approach to the problem, according to Wilson. He has embraced what some say is a dangerous ally: publicity, and lots of it.

Armed with an attorney and a high-profile consultant with a long list of Washington contacts, PacifiCorp. and five other companies have joined to tackle what Wilson views as an invisible wall of solid blue at Navy.

The result is a carefully choreographed, highly public campaign to force the Navy to alter its methodology for drawing up, evaluating and awarding contracts. Joining PacifiCorp. are Amdahl, NCR Comten, Storage Technology Corp., Memorex Telex Corp. and VION Corp., companies that specialize in making or providing IBM-compatible equipment.

"We aren't under the illusion that IBM won't continue to have a majority of the market, but we hope to see some changes to at least make it more competitive," said Wilson, the informal spokesman for the group.

Administrative Nightmare

The Navy has denied favoring IBM or any other computer maker. Moreover, it has suggested that some changes sought by the companies--namely that contracts be broken up into smaller components--would result in an administrative nightmare and added costs for the Navy.

IBM, which has not been directly accused of any wrongdoing, has denied that it has a lock on the computer business with the Navy or any other federal agency.

The IBM challengers' group, known as the "gang of six" by detractors, surfaced for the first time last fall with a letter to then-Secretary of Defense Frank Carlucci, and widely distributed to the press, charging the Navy with "wiring" contracts so there can only be one winner: IBM.

This was done, the companies said, by including requirements that could only be met by IBM, such as asking for new IBM software and hardware that the compatible manufacturers have not yet had time to duplicate.

Another way the Navy kept competition at bay, the letter charged, was by asking for a wide range of IBM hardware and software so that compatible companies specializing in just a few products could not bid.

Bidding Was Bypassed

At other times, the Navy simply bypassed the contract-bidding process and awarded IBM contracts on a "sole source" basis. This is permissible in federal contracting, but must be justified.

The letter also accused the Navy hierarchy of condoning favoritism among its officers toward the world's largest computer maker.

"The basic flaw is that the Navy procurement organization is not strong enough and lacks the support of Navy management to correct the abuses," the companies charged.

Carlucci responded by asking the Navy to investigate the points raised in the letter.

Last week, the Navy declined to comment directly on the allegations of the six companies.

But as a result of the inquiry, the Navy has instituted some administrative and procedural changes, such as "minimizing potentially restrictive specifications" in contracts. Officials also have been told to ask the computer industry for more feedback before releasing contracts and to provide vendors equal access to information concerning the Navy's computer needs.

'Intensely Competitive'

In a prepared statement, IBM said it believed that an objective study would conclude that the federal procurement process was "intensely competitive" and that "no single vendor is dominant."

The group weighed the drawbacks of going public with its concerns--primarily the risk of offending a potential customer--but decided to gamble anyway.

"These were people who said, 'We have nothing to lose,' because if the Navy has made a policy determination of only doing business with IBM, then you don't spend a lot of time worrying about whether or not you're making the Navy mad," Wilson said.

Still, the companies are keenly aware of the inherent risks of taking their case to the public.

"Publicity. It's like trying to dance with a bear in a cage--once you get in you can't be sure what's going to happen," one Memorex executive said.

Like the Memorex executive, several people interviewed for this article declined to be identified by name or company. The vendor community is traditionally a closed, tight-knit group that fears offending an existing or potential client.

Newsroom Crusade

Wilson, however, has taken to the battle with relish, carrying his crusade into newsrooms and congressional offices--wherever he can find a listener.

"If I had been spending as much time on my business as I have on this, I'd probably have more business," Wilson said. "But you have to make an investment in your future, and that's what I'm doing."

Part of that investment, paid for by the group, has involved hiring a Georgetown law firm, Cohen & White, and a consultant, Frank Silbey, an aggressive, fast-talking veteran of Capitol Hill. Together, the two are helping the companies wend their way through the legal and political maze of Washington.

The plan seems to be working. Some executives say they have greater success than in past years in reaching senior officers in the Navy's Competition Advocate General's office.

The group recently submitted a list of recommendations to that office, which are reportedly under consideration. Those recommendations include establishing a Navy ombudsman with authority over IBM-compatible procurements and general education of contracting officers about the IBM-compatible industry and the products and services it offers.

Case of Sour Grapes

The only question now is whether that attention will lead to changes that ultimately help--or hurt--the compatible community, which is dependent upon demand for IBM products.

Privately, some IBM officials have complained that the group of six has a bad case of sour grapes because they have been unsuccessful in selling to the Navy, a view that is shared by others within the industry.

Others contend that the government should not be forced to wait the 12 to 18 months it takes for the compatible makers to catch up with IBM after it has released a product. To do so, they say, would mean that the government was always buying old technology.

"This is not a case of six small companies getting beat up by IBM. This is a case of six large competitors trying to forcibly increase their share of the government pie," said one industry executive.

No 90-Pound Weaklings

Indeed, PacifiCorp. and its fellow combatants are not 90-pound weaklings that the system has regularly kicked around over the years. Except for VION, a privately held concern, all of the companies are divisions of billion-dollar corporations. Additionally, Washington-based VION and Amdahl have the backing of two of Japan's largest computer makers, Hitachi Ltd. and Fujitsu Ltd., which compete with IBM in markets worldwide.

And the group of six has never taken issue with the government's seemingly favorable view of IBM-compatible equipment, only that it insists on buying directly from IBM.

Executives of the six companies, in fact, say that they have no problem with the government writing contracts that call for IBM equipment, so long as those specifications do not restrict the bidding to just IBM.

"All we're really saying is that we want it open enough to say 'IBM' or 'IBM-compatible."' one executive said.

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