C3 Inc., a Reston computer systems firm that does almost all of its business with the Pentagon, was allowed by the Army yesterday to resume bidding on defense contracts, but the company is the subject of a second investigation by an unnamed government agency.
The Army said it lifted its suspension of C3 after two weeks only because the fact-finding connected with the company's appeal might have jeopardized the other investigation.
"There is an outside investigation ongoing against C3. . . . We thought if we went through fact-finding at this time we would prejudice that investigation," an Army spokesman said. "In basic fairness we lifted the suspension until the ongoing investigation is completed." The spokesman would give no details on the other investigation.
An attorney for C3 said the company was unaware that it was still being investigated. "That's the first we've heard of any investigation by anyone outside the Army," said the attorney, Milton Eisenberg. "Our assumption was it was an Army investigation" that prompted the suspension. C3 Chairman and President John G. Ballenger could not be reached for comment.
The Army suspended C3 from bidding on Pentagon contracts on Oct. 15, charging that the company had made "false and misleading statements" in connection with an Army contract. The suspension -- which one observer said "was a highly unusual move" -- applied to bids on contracts for all U.S. military services, but was announced by the Army because one of its contracts was in dispute. The company's current contracts with the Pentagon were not affected.
"The suspension order came as a shock to the company; it was totally unexpected," said Eisenberg, who said the disputed contract involved the supply of a computer system to be used by the Defense Supply Service in keeping track of inventory and supplies.
Eisenberg said the Army charged that the company was not delivering the kinds of equipment it had promised to deliver under the contract. He gave no other details of the contract.
In its appeal of the suspension, Eisenberg said, C3 "showed that we delivered exactly what we had promised we would deliver and what it was agreed at all times that we would deliver."
But the Army spokesman said the information contained in C3's appeal "raised some genuine disputes over facts material to the suspension." He said the differences could only be resolved through additional investigation, but that that would affect the other probe.
"Since there was a genuine dispute over our side versus their side, it would have to involve fact-finding, and we could not do that without prejudice to an ongoing investigation," the spokesman said.
C3 -- the name is short for "computers, communication and control" -- is a 14-year-old company that packages computer systems and supplies computer equipment, software and management, primarily to government customers.
Through June 30, C3 had 60 current contracts with the Army, worth $3.6 million, according to the Army spokesman, but it has since received a $45.7 million pact to supply video microprocessors to be used in Army recruiting offices around the world.
A prolonged suspension from bidding on defense contracts would likely have been highly damaging to the fast-growing company, which had sales last year of $48.6 million. "The important thing is that they have lifted the suspension," Eisenberg said.
C3 stock, which tumbled $6.75 to $9.75 the day the suspension was announced, closed yesterday at $10 bid, unchanged from the day before.