Hughes, ZDS grab $1B Desktop V prize

Hughes Data Systems and Zenith Data Systems last week won the richest federal PC prize of the year: the Air Force's Desktop V program, valued at roughly $1 billion.

The Air Force awarded Hughes a contract valued at $924.4 million and ZDS a contract valued at $1 billion. Each of these contracts covers the total number of systems—360,000 desktops and portables—that the Air Force expects to be ordered under the program.

Hughes took the Air Force up on its challenge to bid advanced, non-Intel Corp. computers and plans to offer a Digital Equipment Corp. workstation at the high end of its Desktop V line, along with Intel Pentium-powered PCs from Micron Corp. on the low end, industry sources said. Hughes offers a full line of Digital Alpha workstations on the Air Force Workstations contract it won earlier this year.

ZDS based its offering on an all-Intel Pentium architecture, with a high-speed Pentium Pro on the high end and a 120 MHz Pentium on the low end, these sources added. Neither company would provide any details of its offerings last Friday, pending clearance of press releases by the Air Force.

History of Winning

ZDS has won four out of the five Air Force PC contracts; Desktop III went to Unisys Corp. Tom Buchsbaum, ZDS' executive vice president, said he believes "our past experience helped. We plan to offer the government high-quality products, with aggressive pricing, which will give the Air Force tremendous value."

A Hughes spokesman said, "We're pleased...but we were not overconfident about winning."

Only the Beginning

These awards mark the completion of just the first phase of the Desktop V procurement, the full and open competition. In mid-July, the Air Force plans to award the small-business portion of the contract, with all three winning vendors then competing head to head to sell the 360,000 desktop and portable PCs covered by the contract.

This three-way split "means continuous competition on price and technology refresh," according to Bob Dornan, senior vice president of Federal Sources Inc.

The Desktop V procurement attracted a field of at least seven bidders for the full and open contract and at least two for the small-business award. Considering the heavyweight players involved and the prize at stake, some vendors view a protest—one of the last that could be filed under the Brooks Act—as almost inevitable.

Such a protest could delay ordering into the peak summer buying season. Dornan said one or more losing vendors could launch a pre-emptive protest to protect their General Services Administration schedule sales.

But, Dornan said, such a move—unless a company had strong legal grounds—could backfire. "The Air Force could hold it against you in future procurements. It sometimes pays to have longer-term objectives." Dornan also pointed out that the chances of winning a protest are slim.

George Fuster, president of International Data Products Corp., which bid on both the full and open and small-business procurements, said he doubts a protest will succeed. "The Air Force did a hell of a job on this, and anyone who protests will have a tough time knocking these guys out of their seat."

Dendy Young, chief executive officer of Government Technology Services Inc., which along with ZDS held the Desktop IV contract, said that "we are very disappointed about the DT V decision.... We don't understand what they wanted that we didn't offer...and we offered it for less than Zenith."

Asked if he intended to protest, Young said, "We look forward to our debriefing.... My inclination is not to protest."

Losing a large-scale contract such as Desktop V is not as significant as it has been in the past, Dornan said, because of the pressure the Air Force has put on margins and the newly liberalized GSA schedule, which gives any vendor who lost on Desktop V new freedom to keep pace with other contracts in the federal marketplace.

GTSI's Young said he believes the new GSA schedule now "offers a very serious alternative to DT V, and we're going to take that message to our customers."

Still, Desktop V does offer a rich prize, with the Air Force estimating the winners can sell 120,000 systems in a year for the next three years.

Other teams bidding on Desktop V besides Hughes, IDP, GTSI and ZDS were: Electronic Data Systems Corp., offering its own line as well as PCs from Compaq Computer Corp.; NCR Corp., bidding its own brand; and Sysorex Information Systems Inc., bidding PCs from IBM Corp.