Feds Lift IBM Contract Ban

Big Blue bows out of a disputed EPA pact.
By Ivy Lessner ,

Updated from 3:55 p.m. EDT

SAN FRANCISCO - A federal agency has lifted the ban that shut

IBM

(IBM) - Get Report

out of new contracts.

The Armonk, N.Y., company said Friday that the Environmental Protection Agency agreed to lift a

ban imposed on March 27

, which prevented IBM from bidding on new projects with any federal agency. The company declined to comment further.

The decision came only after Big Blue took itself out of contention for a contract for a financial system valued at $84 million. IBM may have been about to get that contract, which had previously been awarded to a Canadian firm.

The contract for the system, destined for the office of the EPA's chief financial officer, had been awarded in early 2006 to Montreal-based

CGI Group

(GIB) - Get Report

, according to an EPA spokesperson.

IBM had filed a protest, giving the company another shot at the contract. But the Justice Department has begun an investigation into whether IBM employees were given inside information about competitors' bids.

IBM has now agreed to forego the business associated with the contract.

When EPA official Robert Meunier, who is responsible for barring companies from procurement, was alerted recently to a federal investigation of IBM employees regarding bid-information sharing, the final award of the disputed contract was "imminent," according to an EPA document dated April 3. Meunier "determined that immediate action was necessary to preclude award of a federal contract to

a bidder whose employees may have participated in illegal activities in receiving and using information about its competitors' bid," the document states.

IBM is cooperating with the dual investigations of the EPA and Justice Dept. of information shared with IBM by agency employees prior to the awarding of the contract to CGI.

IBM has put five employees connected with the investigation on leave, according to the EPA document.

The U.S. Attorney's Office for the Eastern District of Virginia has served IBM and some of its employees with grand jury subpoenas in its investigation of the procurement process, an IBM spokesperson said on Monday.

Shares of IBM were up 38 cents, or 0.3%, to $116.40 in late trading.

The ban had affected only new contracts up for bid. IBM did nearly $1 billion in "transaction-type" business with the federal government in 2007, according to IBM.

Know What You Own:

IBM operates in the application software industry, and some of the other stocks in its field include

Red Hat

(RHT) - Get Report

,

Oracle

(ORCL) - Get Report

and

Microsoft

(MSFT) - Get Report

. These stocks closed Friday at $20.32, +0.59%, $20.35, -1.60% and $29.16, +0.55% respectively. For more on the value of knowing what you own, visit TheStreet.com's

Investing A-to-Z

section.

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