IBM in EPA Soup, Faces Temporary Suspension

The biggest computer services provider in the world, IBM, is in trouble with authorities in the United States, facing temporary suspension from country's Environmental Protection Agency.

The suspension order from the EPA disallows IBM from pursuing new contracts from U.S. agencies, and is possibly related to a probe the agency is conducting into a multi-million dollar bid the company had placed with it in 2006. The bid at the time had been worth $80 million, and was for modernizing the financial systems at the EPA.

IBM officials said that besides barring the company from pursuing new contracts, the company and some of its employees had received grand jury subpoenas from the office of the U.S. Attorney for the Eastern District of Virginia. The subpoena was for testimony and documents pertaining to any interactions between the company and the EPA.

As a result of the suspension, shares of IBM dropped by $1.75 in extended trade, a fall by 1.5 percent, ending up at $113.39 a share. At the end of regular trading at the New York Stock Exchange prior to the announcement of the suspension, the company’s shares had closed at $115.14 a share, an upward revision by about 57 cents.

With the temporary suspension in place, none of the IBM business units would be able to pursue new contracts with any of the federal agencies. They would, however, be able to work on any existing contracts with various government agencies unless a specific agency voices a problem, the company said in a statement Monday.

The suspension decision handed down by the government had caught the company unawares, according to company spokesman Fred McNeese. While stating that his company would cooperate with the government in the investigation, McNeese said they would work towards ensuring the temporary suspension involved only bidding for new contracts.

Speaking over telephone, McNeese said, “We are going to cooperate with investigators but we are also going to take all appropriate actions to challenge the scope of this action.” He said company officials first came to know of the temporary suspension order handed down by the government through calls company officials started receiving Friday from external parties.

The external parties mentioned to them that the IBM’s name featured on a Government Services Administration website that contained a list of companies that had been banned from placing bids on federal projects, according to McNeese. The company later received an official letter from the EPA informing it about the temporary suspension, McNeese said.

McNeese said, “What we are saying is that the case stems from information provided by an EPA employee to IBM employees. Prior to Friday, there was not a hint that there were any types of issues with this contract.” He requested that any more questions about the suspension be directed to the EPA itself.

Jonathan Shradar, the EPA Press Secretary, said through a statement that the EPA had issued the suspension order to IBM on March 27. He said there was no question of awarding the contract to IBM once questions surfaced about its bid itself. He excused himself from commenting further on the subject as the matter was currently pending before the authority issuing the suspension.

The company has a time frame of 30 days to contest the suspension order’s scope. On completion of the investigation, the ban on procuring federal contracts can be on for a whole year.

The temporary suspension, depending on its total time period, has the potential to cause losses to IBM, in the form of government contracts, running into hundreds of millions of dollars.