IBM barred from federal contracts pending investigation on EPA bid

In an extraordinary move last Thursday, the US federal government placed IBM on an "excluded parties" list after having learned a grand jury issued a subpoena to the company, reportedly regarding a contract with the Environmental Protection Agency on which it had placed a bid.

The list effectively prohibits the company from doing business with any US government agencies for an indefinite period.

Very little further information is known about the bid at this time. IBM has only acknowledged that it received the subpoena, though on what day is unknown. An IBM spokesperson told the Associated Press that its press office had only just learned about the ban last Friday, and that it was pressing its own superiors for further information about it and the EPA bid.

Just how serious the ban will be depends on the length of the grand jury investigation, but as you can imagine, those affairs rarely take place quickly. A test of the US government contractors' database this morning shows that in the government's fiscal year 2007, IBM alone conducted $1.427 billion dollars of business with its various agencies, nearly $420 million of that business comprised of everyday data processing services.

IBM's biggest federal customer last year was the US Customs Service, with which it did about $308.5 million in business. $136.8 million of business was done with the US Army, and nearly $109 million with the Center for Medicare and Medicaid Services.

If the grand jury investigation were to last a year, IBM could conceivably lose as much as $2 billion of business, which would be about 2% of its annual revenue by 2007 standards. IBM shares traded lower yesterday, but rebounded throughout the day and into this morning.