Bloomberg News

IBM Wins Protest of $543 Million Award to Hewlett-Packard

October 03, 2012

IBM Wins Protest of $543 Million Award to Hewlett-Packard

Pedestrians walk past International Business Machines Corp. offices in New York. Photographer: Scott Eells/Bloomberg

International Business Machines Corp. (IBM:US) won a protest seeking to overturn the award of a $543 million federal contract for wireless tracking to Hewlett-Packard Co. (HPQ:US)

The U.S. Government Accountability Office agreed with IBM’s argument that the U.S. Department of Veterans Affairs didn’t properly evaluate proposals from vendors seeking the contract, Ralph White, the GAO’s managing associate general counsel for procurement law, said in an e-mailed statement today.

“GAO sustained, or upheld, IBM’s protest, finding that the VA had made several prejudicial errors in its evaluation,” White said. “Those errors led to a source selection decision that GAO found was unreasonable since it relied on the erroneous evaluation conclusions to support the award decision.”

The decision was a coup for Armonk, New York-based IBM, which failed to secure a spot last year on a $12 billion umbrella contract with the VA. The five-year deal is important because the winners will get a substantial amount of the department’s technology spending in the fiscal year that began Oct. 1, Roger Baker, the VA’s chief information officer, has said.

More than 90 vendors competed for seats on the contract. The winners included HP, No. 22 on a Bloomberg Government ranking of the biggest federal vendors, and McLean, Virginia-based SAIC Inc. (SAI:US), the eighth largest. IBM ranks No. 38.

Wireless Tracking

The GAO, which arbitrates contract disputes, recommended that the VA reevaluate proposals for the wireless tracking contract and potentially reopen the competition so vendors have a chance to revise their proposals, White said.

HP is “disappointed with the GAO decision,” Jane McMillian, a spokeswoman for the company, said in an e-mailed statement. It will “continue to proudly serve the VA in support of its mission to enhance veteran patient care,” she said.

Shares of IBM rose less than 1 percent to close at $210.51 in New York.

Shares of Hewlett-Packard, the world’s largest maker of personal computers, fell almost 13 percent to close at $14.91 in New York, and earlier reached $14.85 for the lowest intraday price since November 2002. Meg Whitman, the company’s chief executive officer, today forecast fiscal 2013 profit that missed analysts’ expectations.

Deirdre Murphy, an IBM spokeswoman, didn’t return an e-mail or phone call seeking comment.

Phil Budahn, a VA spokesman, didn’t provide comment.

HP beat five other companies in June to win the work to provide veterans hospitals with wireless tracking systems, according to VA documents.

The VA ordered Palo Alto, California-based Hewlett-Packard to stop work on the project in June, after IBM executives protested the decision with the GAO.

The wireless technology would help minimize lost equipment, track whether medical devices are properly sterilized and identify patients that may have received recalled products, according to documents posted online.

The contract is valued at as much as $543 million over five years.

To contact the reporter on this story: Kathleen Miller in Washington at Kmiller01@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net


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Companies Mentioned

  • IBM
    (International Business Machines Corp)
    • $158.51 USD
    • 0.83
    • 0.52%
  • HPQ
    (Hewlett-Packard Co)
    • $39.9 USD
    • 0.08
    • 0.2%
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