GSA, Sun and More Questions To Come

The troubles with the General Services Administration's contract with Sun Microsystems became well known this spring.

Investigators for Rep. Henry A. Waxman, the Democratic Chairman of the House Oversight and Government Reform committee, turned up evidence in documents and interviews that appeared to show that the giant software maker had overcharged taxpayers for years.

The amount of alleged gouging -- involving charging the government more than the private sector for the same stuff -- could be tens of millions.

A federal prosecutor in Arkansas is pursuing similar allegations, claiming that Sun and other companies worked together in violation of the False Claims Act.

Sun has acknowledged past problems with pricing and told agency officials it has spent nearly $2 million to fix them. The company also said it submitted a plan to avoid a recurrence.

What has been almost overlooked is the fact that Sen. Charles E. Grassley, a Republican, is conducting his own probe of the Sun contract with the GSA. Grassley has expressed outrage that GSA officials appeared to press to renew the Sun deal last summer, despite repeated warnings from the agency's own auditors and contracting officers that taxpayers likely would pay millions more than necessary under the terms offered by Sun.

Top GSA officials differ, saying they agreed to good terms and are looking out for the interests of taxpayers.

Though Grassley is in the minority on the Senate Finance Committee, he is using his legislative chops to press hard on the matter. Sources say that his investigators have interviewed key GSA officials. That includes at least three of the agency's procurement officials, two of whom argued against the contract renewal last year. The third contracting official, Shana Budd, actually signed off on the deal.

Grassley wrote in a letter to the GSA that Budd "allegedly agreed to terms that could cost the government tens of millions in lost savings," something that Budd and GSA officials say is incorrect.

So far Budd's most public remarks on her decision came in an e-mail that was read aloud at a hearing of Waxman's oversight committee in March. "I know beyond a shadow of a doubt that every action I took was in the best interests of the Government and the American taxpayer," she wrote.

A report from Grassley's staff apparently will be forthcoming this summer. It will be interesting to learn what the contracting officials are telling Grassley's investigators -- and whether the GSA stands by its handling of the deal. Sources say the report will almost surely reveal other issues with the way the agency handles its many high-tech contracts.

By Robert O'Harrow |  July 10, 2007; 6:17 AM ET GSA
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As an avid reader of the Post, I hope this blog will maintain a fair and balanced reporting of Federal Procurement issues. I work as an advisor in this field and am infuriated by some media coverage, which has jumped on Representative Waxman's witch-hunt pertaining to Federal Procurement. It is assumed that the Bush Administration and all contractors are to blame for anything that is wrong with the procurement process.

Any attempt to link Federal Procurement issues with the current administration should be viewed with skepticism.
The simple fact of the matter is that many of the issues pertaining to Federal Procurement are a result of the misapplication (on the part of the Government) of reforms to procurement regulations that were reformed during the Clinton administration. The KBR/Halliburton LOGCAP contract- which is the Post and Representative Waxman's favorite whipping post was awarded during the Clinton administration.

Many of the Clinton era reforms were in an attempt to increase competition by streamlining the acquisition process to allow commercial companies to sell to the Fedeal Government rather than having the Federal Government incurr unnessary developmental costs to buy items that are readily available in the commercial marketplace. No one in their right mind would want to go back to the "ill wind" days of when the Government purchased hammers for $10,000.

The fact of the matter is that the Government and Government auditors are as much to blame for current procurement issues as contractors. If we return to an era where commercial companies are inclined not to sell to the Government, we will return to the days when the Government truly waste tax payer dollars.

- The Federal Procurement Guru
("FP GURU")

Posted by: The Federal Procurement Guru | July 10, 2007 8:42 AM

I can't comment on the allegations of overcharging. But I have to point out that Sun is primarily a hardware company. We do make software, but most of our revenue still comes from selling computer systems -- mostly servers these days.

Posted by: Anonymous Sun Employee | July 10, 2007 11:26 AM

Sun Microsystems has been a rip-off for years. Agencies keep going back to Sun for compatibility with existing equipment.

Posted by: Anonymous | July 10, 2007 2:33 PM

FP guru:
What do you suggest, to stop auditing and oversight of contracts? Time and time again it has been proven that companies do overcharge, if they think they can get away with it. I have had to purchase equipment/supplies for work using GSA pricing practices for years, and have never had this hypothetical problem of a contractor being unwilling to work with me. Are some of the regulations tedious? Yes. Are they important? Again, yes. You seem to forget that it is not your money being spent, to do with as you will. It is taxpayer money, and should not be used wastefully.

Posted by: anon | July 10, 2007 3:11 PM

Sun may be a hardware company but they sell both hardware and software maintenance contracts. Sun Services is a large part of what is procured by the government for Solaris and Sun hardware maintenance.

Posted by: Fate | July 10, 2007 4:54 PM

I am happy to see a general-interest news organization get interested in trying to make sense of a complex topic that only a very specialized segement of the trade press has covered up until now. Without wading into the equally complex (and lawyerly) question of who might be to blame, I think that enough government technology Big Digs have fallen victim to the Ozymandias syndrome ("half-sunk, a shattered visage lies") in the last six years that it is about time we wondered aloud whether the system might not be broke, at least. I will follow your efforts with interest: Making extremely nerdy subjects accessible to the non-nerd public is the ultimate journalistic challenge. I wish you the best in taking a run at it.

Posted by: CB | July 10, 2007 4:59 PM

1) If Sun is investigated, then GTSI needs to be investigated as being distributors for SUN (both hardware and software) and piggy-backing off of Sun's FSS.

2) FSS pricing has constantly been higher than open market for years. Granted, procurement offices can negotiate the pricing down, but FSS's are a scam in that they start with high pricing and by the time they are negotiated down, you end up paying a similar price that you would via open market.

3) FSS's has outlived their purpose (whatever that intended purpose may have been). Granted, the Schedule-E Library is an excellent way to locate small businesses and other socio-economic businesses, FSSs are also awarded to large businesses. Other than the fact that you do not have to post your requirements to Fedbizopps (or other GPE) if you chose a FSS set-aside, how do you really know if you are getting the best value? Let alone the best price? The money you may save in administrative costs to process a FSS set-aside can be eaten up by the high FSS costs. Oh, wait, that's the subject of this article, isn't it? Hmmmm.

Posted by: contracting know-it-all | July 10, 2007 7:19 PM

Why did we have to wait for Waxman when government contractors have been paying Congressmen to rip off taxpayers with impugnity? Oh, because the former Committee chair, VA-11 Congressman Tom Davis was their biggest customer. When he wasn't blocking investigations and making Dems investigate Abu Gharib in the basement of the Capitol, one of 3 subpeonas he issued was to Terri Schiavo. Now he's spropped up his wife to collect campaign contributions when the contractors hit federal campaign limits.
http://www.dailykos.com/tag/churning
http://www.tomdavistruth.com/
See O'Harrow's story here: http://www.washingtonpost.com/wp-dyn/content/article/2006/07/27/AR2006072701846_pf.html

Posted by: AndreaC | July 10, 2007 8:48 PM

Sun MicroSystems paid handsomely for protection from the Committee on Government Oversight when Tom Davis was supposed to be chairing the meetings. Unless Terri Schiavo was being subpoened, he didn't seem to keen to take any testimony. He's no Henry Waxman. http://www.raisingkaine.com/showDiary.do?diaryId=8644

Posted by: Not Henry Waxman | July 10, 2007 11:10 PM

I do not suggest stopping Government oversight. I only suggest that Government auditors and Government Contracting Officer join industry and start familiarizing themselves with the regulatory requirements of the contract. In the case of the Sun deal, as is the case with many contracts - the contracting officer negotiated a poor deal on the part of the Government. This does not necessarily translate into Sun cheating the Government. It means the Govenrment did not do its job and the auditors - who audited the initial Sun award (if they even did) did not do their job. You should not punish a contractor for negotiating a favorable contract on its behalf. Now if it's proven that Sun defectively priced its contracts - that's another story. However, no such proof exists. Instead, the auditors have assumed that, because the contract as negotiated was not easy to administer - then it must mean that Sun intentionally negotiated a complex contract to avoid compliance. This falacious jumping to conclusions is something that the GSA OIG is notorious for doing. Unfortunately it means that companies are continously scruitinzed, referred to the DOJ, have their names tarnished, only find out that they did nothing wrong.

When GSA Adminstrator Doan referred to the GSA OIG as "terrorists" - she was not that far from the truth. While most GSA OIG auditors are fair and knowledgable, others are nothing more than McCarthy-istic witch hunters.

Posted by: FP Guru | July 11, 2007 8:35 AM

And I've seen a lot, both good and bad, during my tenure at the agency. Working at GSA now is, frankly, quite demoralizing. We have an Administrator who can't remember what she says at meetings, agency-wide reorganizations that are, at best, empire building, and political leadership that makes all of us look incompetent or unethical.

We at GSA have been through bad times before, and we will survive this. GSA has, among career employees, some of the most talented and dedicated people I've ever known. It's the politicization of the Executive branch in general, and of our leadership in particular, that is hard to stomach right now.

Posted by: 22 Years at GSA | July 11, 2007 11:52 AM

First of all any agency buying off of GSA is paying the most. Most companies and agencies view the GSA price as the highest acceptable level of pricing to the government. Then we find ways to bypass it either through an agency specific contract (First Source, ITES, MMAD, PCHS, etc.)or through BPA's. Second, if its on Fedbizopps you've already lost it or everyone else has taken a pass.
The biggest problem is GSA allowed everyone and their brother to get on contract. The problem becomes how do I audit the many GSA schedule 70 holders and how do I determine the value these companies bring to the agencies. The answer is they don't and then all these small contractors cry foul because they don't understand the business. Someone told them get a GSA schedule and the dollars roll in and that is not true. You still have to sell into the agencies develop contacts, take low dollar or low margin work to get your past performance up etc.
Am I saying that small companies don't have a legitimate gripe? Of course not, even other large contractor get shut out when they shouldn't be, but lets look at what we're dealing with. Most agencies are going to have a lot of their staff turnover in the next five to ten years. Look at one of the previous posts, 22 years at the GSA and a lot of other career employees? And they are all rolling off without younger employees to take their place. Who's left contractors, so we let the contractors oversee the contractors? Could we be any more out of touch with FAR?

Posted by: congovman | July 11, 2007 12:12 PM

Curious why Sun has become the blacksheep? MICROSOFT, HP, IBM, and partner companies all deal w/ GSA. Equal attention and review should be assigned to all.

Posted by: realitycheck | July 11, 2007 2:23 PM

Ah there in lies the rub - Sun had the misfortune of having its contract come up at the wrong time and assigned to the wrong oversight office.

Posted by: FP Guru | July 12, 2007 10:10 AM

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