Google-gate(s): In any jurisdiction or language governments that purchase Microsoft products become a target for lawsuits?

Posted on January 28, 2011


This is the English translation of today’s post from the new Aperçus des achats blog.

In my November 2nd, 2010 post Is Google’s recent suit against DOI based more on an entitlement mindset or a misguided understanding of transparency?, I asked the title’s question of our readers and I must admit that the answers I received made it difficult to discern between an actual violation of government procurement policy and a palpable dislike for Microsoft and perceived monopolies in general.  In short, if it was any other company being awarded a government contract besides a Microsoft, would it have drawn the same level of attention?


The DOI's Google-gate(s)

Google of course sued the the U.S. Department of the Interior (DOI) over a bid for a new hosted e-mail system which they claimed was unfairly skewed towards Microsoft.  The contract was to span five years and was worth a reported $49.3 million.  Apparently the courts agreed with Google, as US Court of Federal Claims Judge Susan Braden issued a court order blocking at least temporarily, the DOI from moving forward with the Microsoft application.

While challenges of this nature are nothing new in the realms of public sector purchasing  (according to a December 1st, 2010 article in Government Executive, contract disputes reached a 15 year high in 2010), the Google action raises a number of questions that transcend the case in point regarding the motivation behind supplier complaints.

From a big picture perspective, some experts according to the Government Executive article believe that this increase in protests correspond with the findings from a Congressional Research Service report which found that the number of contracts signed between fiscal 2001 and fiscal 2008 increased by almost 600 percent to more than 4 million, while the total value of those contracts nearly doubled.  Obviously there is bound to be a corresponding increase in supplier challenges given the increasing level of contracts being awarded.

However, other industry pundits suggest that there are factors beyond rising activity levels that are playing an equally important role in award dissension.  These include contracts that are higher in dollar value being awarded for longer periods of time.  This means that in conjunction with the tough economy, disenchanted vendors are more prone to challenge government purchasing decisions.

According to the law firm Gowling’s, there are in Canada what their website refers to as the five “most common reasons” why suppliers take formal protest action against the government including:

  1. Suppliers who launch a formal bid protest have a genuine feeling of grievance, and believe they have a good case.
  2. Many federal government contracts are vitally important, not only in terms of their monetary value, but also in terms of positioning the successful bidder as an industry leader for the foreseeable future. In many cases, Canadian government contracts are intended by a supplier to serve as a springboard for marketing services or products to other public and private sector customers in Canada and abroad. In addition, gaining a situation of incumbency through winning a competition confers a substantial advantage in future competitions.
  3. Bidders spend a very substantial amount of money and time preparing a bid. They are not prepared to write off that large an investment if they believe they have been treated unfairly.
  4. Bidders become extremely frustrated with government officials who are either not forthcoming with information, appear loath to admit error, or seem unresponsive and disinterested in the concerns that bidders raise.
  5. In many cases a lack of transparency makes bidders suspicious that the government is hiding something. In many cases, officials appear reluctant to release even basic information about the evaluation to bidders because they fear the bidder will use the information to initiate a challenge. Many times, bidders are forced to resort to the Access to Information Act to obtain information about the evaluation and scoring of their own proposals. This attitude is ironic, because the lack of transparency heightens, rather than diminishes, the prospect of a challenge. If it is demonstrated to bidders that the process was carried out fairly, then they will usually accept the outcome.

While complaints involve all types of companies bidding to provide governments with a diverse range of products and services, few actually gain the public’s attention to the degree that a lawsuit involving a big player such as a Microsoft garners in terms of media coverage.

Consider another lawsuit in which Microsoft found itself at the center of a government contracting controversy, involving the Province of Quebec.

According to a June 4th, 2010 CBC news story the vendor filing the complaint, Savoir Faire Linux, accused the Province of illegally spending $720,000, beginning in the fall of 2006, on the migration of 800 workstations to Microsoft software.

Filed in 2008, the small Montreal-based firm which deals in open-source software, requested in their suit that the purchases be reversed as the tender was only offered to authorized Microsoft dealers.

While the presiding Judge Denis Jacques denied the vendor’s request to reverse the contracts based on the fact that the software installation was complete, he did conclude that the Province did not perform a “serious and documented search” for alternatives, which it must do with any expenditure over $25,000.  In essence the judge agreed with the illegality of the government’s conduct, and in so doing awarded the vendor court costs.

The bigger story here according to Savoir Faire Linux’s executive vice president is that going forward Quebec will now have to “follow purchasing rules, and won’t be able to pass over them anymore.”  This contends the VP “frees” the administration from the multinational’s fiefdom.  A David over Goliath victory if you will, that represents what is being heralded as a major win for both government and taxpayers.

While outside the jurisdiction of Quebec and Canadian law, the above decision (at least in principle) bodes well for Google in their recent US claim against the DOI in that the software as yet to be delivered and installed.  One could reasonably assume that given the Quebec judge’s finding that the Province did indeed act illegally by limiting the bid to Microsoft authorized vendors only, that had the Savoir Faire Linux suit been filed prior to the software’s implementation, the reversal request would have been granted.

Again, and while there are to be certain differences in legalities as well as the circumstances surrounding the two cases a new trend fueling vendor challenges appears to be emerging in which perceived monopolistic advantages are being questioned by vendors whose products offer an alternative outside of the established standard.  In the case of Microsoft, the company’s monopoly is tied to its product lines’ ubiquity, which may very well paint a big red target on all contracts involving the Redmond, Washington landmark.

There are of course many questions relating to this fiefdom liberation, including what the long term fallout for governments (whose purchasing departments are generally overworked and lack the prerequisite skill sets relative to create complex acquisition contracts) is likely to be.  Or to put it another way, is the cure sought by grievous vendors involved in the public sector bid process going to be worse than the malady it purports to address by way of increased administration costs linked to the belt with suspenders mindset of a market that is already hyper-sensitively adverse to any kind of risk?

As a taxpayer who is facing the possibility of a reduction in services provided by governments whose budgetary shortfalls have pushed many states and municipalities precariously close to the edge of bankruptcy, the jury is still out on whether challenges by vendors such as Google will ultimately harm more than it heals.


Posted in: Commentary