Sysorex: Desktop V pricing unrealistic

The heavily censored protest filed by Sysorex Information Systems Inc. against the Air Force's Desktop V contract—released last week by the General Services Administration's Board of Contract Appeals—offered some intriguing, if incomplete, insights into the winning solutions proposed by Hughes Data Systems and Zenith Data Systems.

The Sysorex protest revealed that the total adjusted value of the Desktop V contracts awarded to Hughes and ZDS was far lower than the prices first released by the Air Force.

The protest put the adjusted price of the Hughes contract at $654 million and the value of the ZDS contract at $703 million, vs. estimated contract prices released by the Air Force on May 3 of $924.4 million for Hughes and $1 billion for ZDS. Both contracts cover the purchase of 360,000 computers, peripherals and software, with the final value of each award determined by how well each vendor does selling to Air Force commands over the next three years.

ZDS provided the Air Force with bargain pricing on the Microsoft Corp. Windows 95 operating system, in the range of $5 to $10 for a package that Microsoft sells for $182.

`Pure Judgment Call'

Sysorex said this did not meet Air Force requirements that Desktop V pricing be "realistic and reasonable." But Bob Dornan, senior vice president of Federal Sources Inc., said, "There is nothing wrong with selling below cost.... This is a pure judgment call by the vendor."

ZDS will manufacture its own line of desktop PCs for the Desktop V contract in a California factory owned by its new parent, Packard Bell. The company will also offer a notebook from Gateway 2000 Inc.

Hughes bid desktops from Micron Electronics Inc. and offered Zeos International Ltd. notebooks.

The Air Force intends to acquire as many as 72,000 notebook PCs from the Desktop V contract.

The Sysorex protest stated that the Gateway notebook model bid by ZDS, the Liberty DX4/100, and the Zeos model offered by Hughes, the Meridian 1000, should be deemed "noncompliant" because production of both models has been discontinued.

Sysorex also argued that several other products offered by both vendors did not meet the requirements of the contract due to discontinuance. Sysorex included a lengthy list of products offered by both vendors that it said failed to meet key provisions of either the Buy American Act or the Trade Agreements Act. One vendor, who declined to be identified, said, "Fighting over BAA or TAA compliance is like a theological argument.... You can spend months at it, get various interpretations and never come to agreement."

Sysorex, which offered PCs from IBM Corp. on its Desktop V bid, said in its protest that due to these and other factors, the cost and technical trade-off the Air Force used to make the award to Hughes and ZDS was "totally flawed because it was based upon incorrect and unlawful cost and technical evaluations."

Alternate Routes

With the protest not due for resolution until July 17—well into the peak federal summer buying season—vendors have started to craft programs to sell computers to the Air Force from their General Services Administration schedules.

Compaq Computer Corp. has dropped prices on selected commercial and GSA products by up to 24 percent, said Gary Newgaard, director of federal sales.

"There are compelling reasons for the Air Force to look at Compaq desktops. We're offering competitively priced, feature-rich PCs," he said.

The latest price reduction drops a ProLinea Pentium 100 on the Compaq GSA schedule to $1,276, and a Deskpro Pentium 133 now sells for $1,980 on the schedules. This prices Compaq products 11 to 18 percent below similar products from IBM and Hewlett-Packard Co.