WASHINGTON (AP)--IBM Corp.'s (IBM) ban from all new federal work stems from an $84 million Environmental Protection Agency contract the company lost last year and is protesting.

The EPA last week temporarily banned IBM from receiving any new government contracts while it investigates "potential activities involving a procurement." IBM said it is also cooperating with the U.S. Attorney's Office for the Eastern District of Virginia, which served grand jury subpoenas seeking documents and testimony relating to interactions between agency and IBM employees.

An EPA official confirmed on Tuesday that the suspension is related to a 10- year, $84 million deal awarded Feb. 12, 2007 to CGI Federal, a wholly owned U.S. subsidiary of Canada-based CGI Group Inc. (GIB). The contract is to modernize the agency's financial management system.

IBM, which was also vying for the contract, protested the award two months later to the Government Accountability Office, according to information provided by market research firm Federal Sources Inc.

Fed Sources said it learned that the GAO upheld IBM's protest in October, but then said earlier this month that investigators there had not made a decision yet on IBM's protest.

A message left at GAO was not immediately returned.

IBM spokesman Fred McNeese referred any details of the case to the EPA, but said the company is cooperating in both investigations. He declined to comment further.

Armonk, N.Y.-based IBM had federal contracts last year that amounted to at least $1.3 billion, roughly 1 percent of its 2007 revenue.

Under a reciprocal agreement among federal agencies, when one agency issues a ban, the others follow it. The company has 30 days to contest the scope of the suspension, which can continue for up to one year pending the completion of EPA's investigation.

  (END) Dow Jones Newswires
  04-01-08 1739ET
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