GSA nearly delists Sun Microsystems

A spat between the General Services Administration and Sun Microsystems over prices nearly resulted in the Silicon Valley computer giant’s products being pulled from the popular GSA schedule contracts in the heat of the federal buying season.

Last month, GSA notified the 14 government technology resellers that within 30 days, Sun products would no longer be authorized for reselling to federal customers using the schedule contracts. A routine government audit found that Sun was granting deeper discounts to commercial customers than to the government, according to sources close to the situation. GSA requires the private sector to offer the same or even deeper discounts to government buyers as it provides to its most favored commercial customer.

A reprieve from cancellation was granted Aug. 14, when negotiations resulted in Sun agreeing to drop some of its prices. Sun’s general schedule contract itself is being renegotiated as part of a review that occurs every five years when it comes time to consider extending the periodic option on companies’ 20-year general schedule contracts.

The terms under which Sun would remain on the GSA schedule for another five years must still be determined. The deadline for that is Feb. 15, which is when a temporary extension of Sun’s general schedule contract expires.

“I don’t think that GSA is where they want to be with discounts," said Julie Akers, a vice president of consultancy Federal Schedules. But because "Sun was willing to give a little bit and there was a lot of pressure out there to put Sun back on,” the agency agreed to back off outright removing Sun from list of approved vendors, she added.

“Basically GSA got pushback from industry and also perhaps from the government – we’re at the end of a busy buying schedule,” Akers said. Notifying resellers that a particular company will be canceled is a dramatic step rarely seen, she added.

Mike Abramowitz, director of Sun Microsystems Federal’s strategic program, said Sun has granted some greater discounts to other private sector entities than to GSA. “But there’s always a rationale to why certain companies get certain discounts,” he said.

As for the letters notifying resellers that they would no longer be able to list Sun products, “GSA was just doing what they normally would have to do to advise people that Sun’s contract was running out,” he said.

Some sources familiar with the situation said Sun took a cavalier attitude toward GSA pricing demands and threats to remove it from the general schedule. Others have said a power vacuum created by an ongoing reorganization of GSA’s acquisition services has allowed the pricing disagreement to boil over at the worst moment possible, during peak government buying season.

Abramowitz said he believes the GSA contracting officer responsible for the Sun contract is acting professionally. “If I were sitting in his position, I would negotiate in a very similar manner,” he said. “We’re both seeking to get the best things for our constituency, him for the government and me naturally representing Sun Microsystems.”