The Lectern: The IBM shocker

I have been in Washington this week for some meetings, and the story about IBM's governmentwide suspension from contracting has been the big topic of conversation. Folks are pretty shocked. (I saw an amazed post from one government contracting officer on Facebook.)

We don't know too many details at this point. Possibly, there is some really egregious behavior by IBM that resulted in this extreme step. But possibly, this move reflects the hyper-fear, hyper-punishment procurement environment right now that affects vendors (assumed now to be rapacious crooks until proven otherwise) as well as career public servants.

Somebody mentioned to me a recent meeting involving a number of industry folks where the topic was which information technology firms are going to withdraw from selling to the federal government. Obviously those contractors who are completely dependent on government business -- the IT divisions of the defense contractors, and government-unique small businesses -- will stay on. But are we going to start to see predominantly commercial firms, who have only a small percentage of business in the government marketplace, conclude that in the present environment, the risks simply aren't worth it? (During Katrina, the government was unable to use Wal-Mart for supplying the region because the company refuses to do business with the government for other than micropurchases.)

This would of course be terrible. The last thing the government needs is to revert to the days when government contracting was the preserve of government-only companies. For innovation, competition, and customer-orientation, the government needs predominantly commercial firms. The current procurement environment threatens the big gains in terms of lower prices, innovation, and customer service that we made in the 90's in attracting these firms to government contracting.