Sun Cancels GSA Contract After Price Abuse Probe

By Robert O'Harrow Jr.
Washington Post Staff Writer
Saturday, September 15, 2007

Sun Microsystems, one of the government's top technology vendors, canceled its contract with the General Services Administration after months of questions from investigators and lawmakers over allegations it had overcharged taxpayers in recent years.

In brief letter to the GSA, Sun said the cancellation date would be Oct. 12, "unless a more lengthy period is mutually agreed to in order to ensure minimal disruption to GSA's customers."

"We took this step reluctantly," the company said in a statement. "Sun remains honored to be a federal contractor and, like other companies in our industry who do not have a GSA multi-award schedule, we look forward to continuing to serve our government customers."

Sun sells software and offers services to agencies across the government through GSA menus called schedules. Those schedules, which list products and services and their approved prices, enable agency officials to easily buy what they need. The GSA earns a fee for everything sold.

Auditors in the GSA's inspector general's office told agency leaders more than two years ago that Sun had abused the schedule system and billed the government millions more than it had charged its commercial customers. Auditors said that, if true, the allegations were grounds to terminate the contract.

But GSA officials disputed those findings. Citing the importance of Sun products, they pressed hard to renew the contract. A contracting official at the agency approved a renewal of the arrangement a year ago, despite complaints from some colleagues and auditors that it was a bad deal for taxpayers.

News that Sun was canceling the contract, contained in a letter sent to GSA on Thursday, set off a scramble inside the agency. In a statement, Lurita Alexis Doan, the GSA's administrator, suggested that taxpayers would suffer as a result of the decision.

"I believe American taxpayers get the best deal when we allow our professional contracting officers to negotiate and manage the relationship with our vendors," Doan said. "Unfortunately, this process was taken in another direction."

"As I have said from my first day on the job, GSA has the best contracting officers in the government, and we will continue to support our government customers," she said. "We are communicating directly with our customers on how we will move forward from today and continue to meet their needs."

Sun officials have denied wrongdoing. A GSA official told congressional investigators who took an interest in the contract last fall that a Sun vice president acknowledged problems with pricing. The Sun official said the company had spent nearly $2 million to fix the problems and had submitted a plan to avoid recurrence.

A Washington Post examination of the contract found that senior GSA officials paid close attention to the negotiations between GSA contracting officials and Sun last year. After one contracting official balked at the deal that Sun was offering, a senior GSA official told him that Doan "wants this contract awarded."

When an agency leader asked the contracting officer if he wanted to continue working on the negotiation, he declined. Hours later, a new contracting officer was assigned. The deal was approved a short time later.

In April, the U.S. attorney for the Eastern District of Arkansas filed suit against Sun, alleging that the company violated the False Claims Act when it "made false statements to the government about its commercial sales practices and the discounts it offers to its commercial customers."

The company has not commented about that case, saying it still is in litigation.

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