Sun Microsystems and Senator Charles Grassley crossed swords over the prices that Sun is charging the Feds. At issue is the government contention that Sun has sold products to non-GSA customers at prices lower than the current GSA contract. The contract requires vendors to give the government their best pricing. Violation of this clause isn’t trivial and can have substantial negative consequences, ranging from steep fines to suspension of rights to sell to federal entities.

Sun’s pricing practices are the topic of a Justice Department lawsuit and a GSA contract. The latest shot from Grassley is an open letter to Scott McNealy asking for more cooperation from Sun. For their part, Sun responds that they are fully cooperating and “The contract provides GSA with extremely competitve pricing that we believe is, in many cases, substantially more favorable to the government than our competitors’ pricing on similar products…” While Sun is bravely spinning away, their quote above seems to miss the central point. I’m not a GSA expert, or a lawyer, or even a doctor, but, in general, if you’ve sold products to non-federal customers at prices better than the GSA contract – and you get caught – you’ve got some serious explaining to do. Sun may find some air cover in the terms and conditions of their particular deal. According to The Federal Times, Sun’s deal required them to provide average discounts that ‘similar’ customers would receive. Supposedly, these average customers do not include large IT shops – which doesn’t make a whole lot of sense when you consider that the federal government is definitely a large customer with a huge amount of purchasing power.

Another interesting wrinkle is that the disputed time period is from 1997 through 2005. Sun’s 25th Anniversary Sale offered 50% (or larger!) discounts on many servers, storage devices, software, and even services for a couple of weeks in April/May ’07. Business partners weren’t invited to this particular party and they were more than a little unhappy. This strategy was ill-advised for a wide variety of reasons…but now it gains special significance in light of Sun’s beef with the feds. Sun offered the 50% off deals to pretty much anyone who bought directly from them, regardless of purchase amount or organization size. Could the commissars use the anniversary sale prices as justification for further action against Sun?

My recommendation to Sun is that they fix this thing as soon as possible – wow, I’m really going out on a limb here with such radical advice… But tangling with the federal government is almost always bad news; they buy lawyers by the metric ton and don’t mind long and drawn out prosecutions. And while there’s an old saying that goes “there’s no such thing as bad publicity”, there definitely is such a thing…headlines with the words “fraud” and “overcharging taxpayers” and the like. Settle up and get on with life…