GSA: Politics to blame for collapse of Sun contract

Politics is to blame for the collapse last week of Sun Microsystems' contract with the General Services Administration, agency officials said Monday.

In a statement issued to Government Executive, GSA Administrator Lurita Doan said, "This experience has convinced me that we need to do a better job of helping Congress understand how our contracts work, the roles and responsibilities of our professional contracting officers, and what steps we take to ensure that American taxpayers get the best deal for their investment."

Another high-level GSA source, who spoke on the condition of anonymity, said Sun's contract was a good deal for taxpayers and for federal agencies that purchased the contractor's IT services through GSA's Multiple Award Schedule.

The contract fell apart not because of the alleged interference of Doan or Sun's perceived lack of cooperation with congressional investigators, but because a toxic political environment made the situation untenable for the embattled technology contractor, the source argued. Sun notified GSA on Friday that it was canceling its contract as of Oct. 12.

"Those people on the Hill that you hear pontificating about whether or not this is a good or bad deal don't understand if it's a good deal or not," the GSA source said, in apparent reference to Sen. Charles Grassley, R-Iowa, who last month urged GSA to cancel Sun's contract. "They haven't seen the numbers."

The source concluded that "we didn't do anything wrong at GSA. Things got misdirected and subverted."

That opinion was echoed Friday by another source outside GSA but familiar with the contract, who said Sun's decision to cancel was predicated on a number of issues unrelated to the legitimacy of the actual contract, including Grassley's inquiry and the expanding political role of the investigation.

In a brief statement issued Friday, Grassley said he was surprised that Sun had canceled the contract, adding "I don't know why Sun made this decision."

The dispute dates back more than two years, when auditors in the GSA inspector general's office concluded that Sun had overbilled the government millions of dollars by failing to offer the same discounts it provided to commercial customers. GSA officials disagreed, and moved to renew the contract.

But their efforts did little to quell the controversy. The IG found that the first contracting officer assigned to the Sun case refused to extend the contract, concluding that the company still was not offering enough discounts to the government. A second contracting officer reportedly reached the same conclusion.

Investigators charged that in August 2006, Doan intervened, replacing the second contracting officer and assigning a third officer to resume contract negotiations. Nine days later, a new contract was signed.

Critics, including Rep. Henry Waxman, D-Calif, chairman of the House Oversight and Government Reform Committee, said the deal was financially unfavorable to the government and included terms rejected by the preceding contracting officers. GSA, meanwhile, argued it was a sound deal for taxpayers.

The controversy was reignited in June when Grassley requested a new IG audit of the contract.

Grassley later accused Sun of refusing to hand over relevant documents to the IG, while company chairman Scott McNealy countered that he had "serious concerns regarding the objectivity of this particular inspector general on this particular issue."

Three weeks ago, Grassley wrote to Doan urging her to cancel the contract. The administrator rejected the request, arguing that she would not "interfere in decisions made by GSA's warranted contracting officers."

Instead, Doan asked Kenneth Kaiser, chairman of the Integrity Committee for the President's Council on Integrity and Efficiency, to examine allegations that Sun was not cooperating with the IG investigation. Kaiser, who serves as assistant director of the Criminal Investigative Division at the FBI, also was asked to investigate the "the systemic and disturbing problem of the lack of cooperation" between industry and the IG.

The FBI refused to comment on the letter or say if Kaiser will take up the inquiry.

The GSA source said the perceived lack of cooperation can be attributed to a distrust many federal contractors have with the IG's office. The source said many industry officials fear that any confidential information shared with the IG could be leaked to the media. The perception, the source said, is that "the IG is on a mission to make industry look bad and that they are looking for headlines." The IG's office declined to comment.

Grassley spokeswoman Beth Levine, meanwhile, said the PCIE lacks the jurisdiction to investigate Doan's request.