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Sun sidesteps government purchasing problem

Tussle with General Services Administration disrupts sales to government, but parties reach compromise to resolve issue for time being.

A pricing tussle with the General Services Administration disrupted Sun Microsystems' sales to U.S. government customers earlier this month, but the parties have reached a compromise to resolve the issue for now.

The GSA sets federal purchasing policies and negotiates standard price schedules that government agencies can use when buying products from suppliers with GSA contracts. But earlier this summer, the GSA and Sun couldn't come to an agreement during negotiations over a five-year contract extension.

The negotiations were scheduled to be completed in July, said Mike Abramowitz, director of strategic programs for Sun's government division. But as the talks stretched into August, the GSA instructed the 14 resellers that sell Sun products to remove those products from their own GSA price schedules, Abramowitz said.

"It's called leverage," Abramowitz said of the GSA move.

The GSA said price was indeed an issue. "We did have some price negotiation issues while we were negotiating their contract," GSA spokeswoman Mary Alice Johnson said Tuesday. "Those issues were resolved, and their schedule is active and available."

The two parties didn't actually agree to a new contract, though, but rather to an extension of the negotiation deadline to mid-February, Abramowitz said. "I did give additional discounts to the government as part of the negotiations," he said. The parties reached the compromise Sunday night, Aug. 14.

Government customers are one of the key segments Sun wants to attract as it tries to restore revenue growth and consistent profitability. Indeed, the Santa Clara, Calif.-based server and software company used government customers as the theme for a quarterly product launch in May in Washington, D.C.

There are other routes besides the GSA by which federal government customers can purchase Sun equipment, including setting up competitive bids or, under some circumstances, buying products on the open market, Abramowitz said.