A congressional subcommittee has asked Interior Secretary Manuel Lujan Jr. to investigate why SMS Data Products Group Inc. of Reston was paid to walk away from a computer contract under a deal that appeared to reveal a department bias toward Data General Corp.
The dispute highlights the rare but controversial practice of paying losing bidders in computer procurements to go away rather than to pursue costly and time-consuming appeals.
In a letter sent this week, Rep. Peter Kostmayer (D-Pa.), who heads the investigations subcommittee of the House Interior Committee, asked Lujan to review a questionable settlement reached in July by the two firms and the Interior Department.
Kostmayer indicated the SMS-Data General case seems to stand out as an example of unfair procurement practices because the go-away deal was struck after the General Services Administration's Board of Contract Appeals had upheld a protest by SMS, the lowest initial bidder.
The case involves a $127 million contract awarded to Data General of Westboro, Mass., last December. Under the contract, the company is to supply several thousand workstations for use by the U.S. Geological Survey to collect and analyze data concerning the nation's water resources.
SMS, a small firm that does most of its work for the government, protested to the GSA appeals board, winning a ruling that required the Interior Department to clarify its technical requirements.
Bids on the revised requirements are due later this month.
Meanwhile, Data General appealed the GSA board's finding to federal court, but within months had reached a settlement with SMS and the Interior Department. Under the pact, Data General would pay SMS about $1 million, according to sources, and the Interior Department would pay SMS roughly $275,000, as required by law, to cover the legal costs associated with its successful GSA appeal.
The settlement would allow the department to award the contract to Data General, and SMS would withdraw from the bidding.
But in August, the court rejected the settlement, at least in part because the accord had ignored the third bidder, Lockheed Corp. As a result, Data General's appeal with the court is still pending.
Kostmayer, who asked Lujan to temporarily halt the new procurement proceedings, wrote that he was "concerned at the appearance that this settlement gives, i.e., that Interior and Data General offered to pay SMS to go away, so that Interior could reinstate the contract award to Data General -- an award that has already been judicially determined to be unlawful."
Jim Dunlap, a Data General spokesman, said an investigation was "unwarranted" in light of the "full, fair and open bidding process" that he expects will ultimately result in an award to Data General.
Similarly, James Daniel, an Interior Department hydrologist involved with the contract, said no excessive money was being paid and that "we're trying to play this above board." Daniel said the original award to Data General was "right and proper."
SMS attorney Cyrus Phillips, saying he welcomed the subcommittee's inquiry, said the Interior Department "changed the rules of the game long after the game had started." The department altered its technical requirements in such a way that SMS could not compete even though SMS had under-bid Data General in the original competition, he said.