A congressional subcommittee has asked the Interior Department to suspend a $127 million computer contract while it investigates reports that Data General Corp. and the federal government tried to pay a smaller Virginia computer supplier to drop out of the bidding.
Representative Peter H. Kostmayer, D-Pa., chairman of the General Oversight and Investigations Subcommittee of the House Committee on Interior and Insular Affairs, asked Manuel Lujan Jr., secretary of the Interior, yesterday to "block further action" on the contract until questions can be answered about a controversial proposed settlement among Data General, Interior and SMS Data Products Group Inc. of Reston, Va.
"I am 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," Mr. Kostmayer wrote in a letter sent yesterday to Mr. Lujan and received by The Sun from a government source.
The Interior Department contract, which originally was awarded to Data General last December, calls for the acquisition of hardware, software and services for the U.S. Geological Survey, a division of Interior.
Data General, SMS and Lockheed Missiles and Space Co. Inc. were competitors for the contract, one of a series of contracts at Interior for completion of a multiagency computer system.
Shortly thereafter, SMS complained to the General Services Administration's Board of Contract Appeals, saying it should have won the contract instead of Data General.
In March, the board directed Interior to rebid the contract. Data General appealed that decision in federal court. But before the court could make a decision on the merits of Data General's argument, Data General, SMS and Interior reached a settlement.
The settlement, submitted to the court July 3, called for Interior to pay SMS $275,000 in attorney's fees that the company incurred in the original protest and for Data General to pay SMS an undisclosed fee to cover bid and proposal costs and "further reimbursement of bid and proposal costs."
An attorney familiar with the case confirmed that Data General's payment would have been about $1 million. Data General's attorney,Richard Webber, declined to comment.
The court rejected the settlement agreement, however, because it did not include the only other bidder for the contract, Lockheed. Court documents indicate that Lockheed knew nothing of the proposed agreement until after the fact.
Since then, Interior has amended the original contract and asked for a new round of bids. Those bids are due Oct. 16.
Data General's appeal is pending.
The case at Interior has caught the attention of many contractors, in part because the settlement agreement with SMS came so late in the procurement process -- after the board had decided the contract should be rebid.
In government contracting, it is more common for payments to competitors for contracts to be arranged among parties before board decisions. Even that practice is highly controversial.
Cyrus Phillips, attorney for SMS, expressed surprise yesterday that a congressional subcommittee is gearing up to examine the contract, saying he saw "nothing particularly unusual" about the settlement.
"This is the consequence, and it's kind of sad in a way, of what agencies are doing when they don't like the outcome of a procurement," Mr. Phillips said. "Agencies faced with that outcome are simply ponying up, paying fees, costs and making vendors start over again. . . . It's an unfortunate circumstance."
An SMS official, who declined to be identified, confirmed that his company was prepared to accept payments from the government and from Data General in connection with the dispute. The company's decision to enter into a settlement agreement resulted from a combination of "economic, political and personnel" factors, he said.
According to the SMS official, SMS plans to bid on the new Interior contract if the contract isn't canceled before then.
In his letter yesterday, Mr. Kostmayer cited the "tangled history" of the procurement and urged Mr. Lujan to "consider seriously the immediate cancellation" of the contract. The congressman suggested that the contract should be completely rewritten and rebid.
Mr. Kostmayer has asked Interior to respond to his questions by next Friday.