Feds lift week-old ban on new business with IBM

ByDibya Sarkar, AP Business Writer

WASHINGTON -- The government has lifted a week-old ban that prevented IBM ibm from getting new federal contracts in an exchange for an agreement from the company to drop its protest of an $84 million Environmental Protection Agency contract it lost last year.

The ban stemmed from an alleged ethical violation in connection with IBM's protest of the EPA contract. Under a reciprocal agreement among federal agencies, when one agency issues a ban, the others follow it.

IBM said it is continuing to cooperate with the EPA and the U.S. Attorney's Office for the Eastern District of Virginia, which served grand jury subpoenas seeking documents and testimony relating to the contract.

The two sides on Thursday signed an agreement in which IBM agreed to withdraw its protest from the Government Accountability Office and drop any interest in competing for the contract. The company will also refund the EPA any attorneys fees and costs the agency paid to IBM in regard to the filing of the protest.

"The agreement also requires IBM to conduct a full examination of its federal compliance program and allows EPA to reinstate the suspension in the event of a material breach of the agreement," EPA spokesman Jonathan Shradar said in an e-mail.

Several IBM employees allegedly obtained protected information from an EPA employee, "which IBM officials knew was improperly acquired, and used the information during its negotiations to improve its chance of winning a contract," according to the agreement. Such an act would violate federal procedures.

IBM has placed five individuals on administrative leave pending its own internal investigation and any federal probe, the agreement said.

The EPA's decision likely means the incident being investigated is isolated, and the agency acted so as not to "adversely affect a whole multinational corporation," said Ray Bjorklund, a senior vice president at market research firm Federal Sources.

If the company being investigated was smaller and the potential violations touched most of its officials and employees, the government would have been less inclined to lift such a ban, Bjorklund said.

IBM spokesman Fred McNeese declined to comment beyond the company's press release. The EPA did not immediately have any comment.

IBM's federal contracts last year amounted to at least $1.3 billion, roughly 1% of its revenue.

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events