The FBI has decided to pay an extra $1 million for a new computer system rather than buy equipment made by Hitachi Ltd., which was implicated in an FBI "sting" last month involving allegations of stolen International Business Machines Corp. trade secrets.

The FBI gave IBM the $17 million contract for a new computer system for its investigative, fingerprint and crime information units, rejecting a $16 million bid by Vion Corp., a Washington-based computer systems packager. The system offered by Vion included equipment made by several companies, including Hitachi.

Vion is protesting the contract award, saying that the FBI's decision was "arbitrary and capricious and was motivated solely by political considerations." That charge is contained in a complaint filed with the General Accounting Office's bid-protest control unit asking that the contract award to IBM be overturned.

"The government's evaluation of the offerer's proposals was motivated by a desire to avoid possible embarrassment that could arise through the purchase of any equipment manufactured by Hitachi," Vion said in its complaint. Vion supplies packages made up of equipment from a variety of companies, including both Hitachi and IBM, and has no direct connection to Hitachi.

Vion President P. David Pappert said yesterday that if the GAO does not act on the company's complaint, Vion may soon file suit over the matter. "There's no resource we wouldn't spare on this one," said Pappert, whose company has long been a supplier of computer systems to federal agencies, including the FBI. "This is patently unfair.

"We were walking down the street when lightning struck us," Pappert said. "We're a small business, and we feel we're being used and abused in either a trade war between the U.S. and Japan or a corporate fight between either Hitachi and IBM or, for those who want to lump it together, 'Japan Inc.' and IBM."

The dispute stems from an FBI undercover operation in California, which last month led to the indictment of more than a dozen Hitachi officials on charges that they purchased IBM trade secrets from undercover agents. Several officials of Mitsubishi Electric Corp. of Japan were indicted on similar charges in a related case that arose from the same undercover operation.

On July 8, two weeks after the FBI made the "sting" public, the bureau told Vion that its bid to supply the new FBI computer system had been rejected in favor of IBM's offer. The FBI said Vion's package--which was made up of equipment from several companies--"included technology improperly obtained through an FBI undercover operation."

Eight days later, Kier T. Boyd, the FBI contracting officer involved in the computer purchase, wrote a letter to Pappert saying that the decision "is based on the totality of circumstances which led to the conclusion that IBM offered the highest evaluated proposal, price and other factors considered."

Pappert says he believes the FBI sent the second letter arguing that IBM's proposal was a better deal in an attempt to avoid implying guilt by the Japanese firm and prejudicing the case against Hitachi.

An FBI spokesman said yesterday that the bureau stood by both statements. "We don't think that there's any conflict in the two of them," the spokesman said.

Boyd, who yesterday would not comment on the situation, also wrote that the FBI was concerned that Vion could not deliver two features of the package as promised. Pappert said the two features cited by Boyd, extended architecture and extended feature microcoding, were both offered to Hitachi as bait in the FBI's sting operation. But neither piece of technology was mandatory in the FBI's request for proposals for the new computer.

"Our proposal to the FBI did not include any of the technology that was allegedly contaminated by this industrial espionage," Pappert said.

Pappert said that in between the two announcements by the FBI, the bureau's purchasing department re-evaluated the Vion bid twice--an "unprecedented" action, he said. The re-evaluations tilted the point system on subjective criteria of the bid against Vion's favor, he charged.

"Vion's offer was evaluated superior to IBM's not once, but twice before political considerations completely took control over this procurement," Vion said in its complaint to the GAO. "The evaluation

Further, Vion charges, the FBI undervalued the costs of providing electricity to and cooling the IBM system at $120,000. The true cost, according to Pappert, could be more than $1 million, thus increasing the overall cost of IBM's bid.