Judge Spikes Pentagon's PC Deal With Zenith : Defense: Cancellation of the huge contract means other computer makers, including AST Research in Irvine, will get another shot.

Judge Spikes Pentagon’s PC Deal With Zenith : Defense: Cancellation of the huge contract means other computer makers, including AST Research in Irvine, will get another shot.

L.A. Times Archives

Dec. 25, 1992 12 AM PT

From Times Staff and Wire Reports

WASHINGTON —

A federal administrative judge on Thursday canceled the Pentagon’s $741-million award to Zenith Data Systems Corp. to provide the federal government with personal computers.

The decision is a victory for six competitors that appealed the award, including AST Research Inc. in Irvine. Judge Catherine Hyatt, who reviews contract appeals for the General Services Administration, canceled the Desktop IV contract for 300,000 PCs to be delivered to the Pentagon through 1995.

Besides AST, computer makers CompuAdd, Apple, Electronic Data Systems, Memorex-Telex Corp. and GTSI Inc. also contested the award.

The cancellation is the second time the Desktop IV contract has been canceled. Austin, Tex.-based CompuAdd won the first time, but the Air Force decided to put the contract out for bids after initial protests and subsequently awarded the contract to Zenith in September.

The contract may now go out to bid again. The ruling itself is sealed until Jan. 4.

“She evaluated our protests and has given us another chance,” said John Pope, spokesman for CompuAdd. “We’re confident the Pentagon will now evaluate other bids, or we’ll just have to wait until Desktop V.”

Spokesmen for Zenith Data Systems, who had earlier said they expected Judge Hyatt to uphold their award, said the company was “shocked, baffled, and disappointed” by the decision.

Bob Dornan, executive vice president of Federal Sources Inc., a McLean, Va., federal contract database compiler, said the judge’s decision was unusual because it did not spell out specific remedies for the appealing PC companies.

“The ruling just says the protests were granted, but it doesn’t say whether Zenith did anything wrong to obtain the bid,” Dornan told Bloomberg Business News. In 25 years of monitoring large federal contract awards, he said he’s rarely seen such a ruling.

CompuAdd, a closely held PC maker, teamed with Sysorex Information Systems Inc. of Fairfax, Va., last year and won the initial Desktop IV award, with respective bids of $398 million and $268 million.

The Air Force solicited new bids from the PC vendors and awarded the latest Desktop IV contract to Zenith Data Systems, a Buffalo Grove, Ill.-based subsidiary of France’s Groupe Bull, on Sept. 8.

Subsequently, AST Research and the other firms protested the Zenith award.

Losing the Desktop IV award “is a real tragedy for Zenith,” said Dornan of Federal Sources. “They won the Desktop II award and they really wrote the book on how to make money on a federal PC contract. But they haven’t won anything substantial since.”

Dornan said the PC makers “are in nirvana if they win, but if they lose, they do everything in their power to nuke” an award to a competitor. In the future, he said the Pentagon might scrap Desktop IV, set up a new Desktop V bidding round, or adopt a different strategy that allows agencies to solicit bids through electronic bulletin boards.