An article in Washington Business Monday misspelled the name of Ivan Selin, chairman of American Management Systems Inc.

Congress last year gave teeth to the watchdog that supervises the purchases of goods and services by federal agencies, but for an Arlington computer software company, that watchdog is still all bark and no bite.

American Management Systems Inc. is finding that it cannot go to either the General Accounting Office or the General Services Administration for action on a software contract the Department of Health and Human Services awarded last year to Cullinet Software Inc. of Westwood, Mass. AMS alleges that the contract was not awarded on a competitive basis.

The problem is that the Arlington software firm's complaint arose last September, before enactment of the Competition in Contracting Act of 1984 which gives the agencies more authority over contract awards.

The act establishes "full and open" competition as the standard for awarding federal contracts. It was drafted as a way to open up the $100 billion in annual procurements -- roughly two-thirds of all procurements -- now awarded on a noncompetitive basis, said a Capitol Hill source.

The law is supposed to eliminate misuse of taxpayer money by requiring competitive bidding, rather than allowing procurements from a single source that may overcharge for services or products.

Ivan Sellin, chairman of AMS, a $100-million software company that has done work for a mix of federal agencies including HHS, alleges that HHS "entered into an illegal contract" with Cullinet to provide a fully integrated accounting system software package.

Sellin has charged the federal agency paid Cullinet $2.2 million for a data-base management and accounting system software package, when the company did not have portions of the software accounting system developed and deliverable on time.

"They gave money for software that was not deliverable, which violates the rules of the GSA schedule" that sets out products and manufacturers from whom they can be bought, he said. The software the agency was seeking did not exist, so Cullinet was asked to develop it, Sellin said.

Sellin said that the agency should have considered outside bids, but didn't. Instead, HHS decided that Cullinet would get the contract.

Although the agency advertised in the Commerce Business Daily -- the bidder's Bible -- it put in "frivolous" restrictions on the job, such as having both software capabilities come from one vendor, and had already decided in advance to make the award to Cullinet, said Sellin. "They never even opened a full proposal from us using Cullinet's system," he said.

But AMS has an existing program that could easily be integrated into Cullinet's data-base management program, he said. "It's compatible with the Cullinet system, and we have integrated it into Cullinet's system for the Railroad Retirement Board," he said.

The Comptroller General's Office twice has issued decisions, the first of which was appealed by HHS, upholding AMS' right to a competitive bid and advising the agency to reconsider its award. But the comptroller has no legal power to block the agency from proceeding with the award.

The decisions held that the agency cannot refuse to require competition for "its software requirements on the basis of a determination that its preferred contractor can best meet its needs, without first permitting the protester to submit a formal proposal in response to a written solicitation setting forth the government's needs."

"It should have been competed for , that's the bottom line," said one official at the GAO.

Campbell Gardett, an HHS spokesman, said the agency was "looking for a department-wide management information system and wanted a single contractor so you could hold one firm accountable."

The agency felt Cullinet's system was the best, he said, and though "a number of companies came forward, nothing changed our minds." The decision was "in the best interests of the taxpayers' money," he said, but is being reevaluated in light of the GAO's opinion.

Said Jacqueline Holz, deputy assistant secretary for management analysis and systems at HHS: "What GAO has told us is that we may keep the data-base management system and we must recompete the applications software. We are . . . now getting ready to do a reprocurement of that portion of our needs."

Cullinet said it is "an innocent bystander" in the dispute. Although the company has received $1.6 million for the data-base management portion of the software, it has not been paid for portions of the accounting system software it is developing -- and won't be until it is delivered, said Robert Hughes, manager of public and investor relations for Cullinet. "They've contracted for the software, but they haven't paid for it.

"We are basically awaiting the HHS decision with respect to the advisory opinions," he said. The company believes another company's accounting software package could not be "as tightly integrated" with their data-base management system as theirs will be, he said. "Therefore, we believe we will be able to provide HHS with a technically superior application."

No other federal agency can direct HHS to bid the job competitively, but the Competition in Contracting Act will help in future cases, said one Capitol Hill source.

The source admitted that the problem of awarding contracts on a noncompetitive basis is continuing, although the law is helping greatly. "Agencies have a bias towards sole-sourcing: It's easier. It's a major problem -- you see it with the $400 hammers, $600 toilet seats and $900 wrenches."

"If this happened now, there are remedies in place at GSA for future cases, but this occurred prior to the implementation of the act," the source said. "The GAO has upheld it, but has no authority to make them do it." In the future, "GSA could withdraw the authority to procure and force them to recompete and the appropriations committees could withhold HHS funding," the source said.

The act streamlines the process by which the GAO processes complaints and issues opinions. The act automatically stops an award from proceeding until a protest is resolved; allows the comptroller general to declare the entitlement of bid protest costs to the successful protester and establishes specific time frames for deciding protests. Most opinions are followed, say GAO officials.

Said one GSA spokesman: "We need a little bit of legislation that would let us deal with problems that occur with contracts after they awarded -- we're hamstrung right now."