180-MHz PCs for IWS/LAN? If price is right

Sure, the Social Security Administration would take the latest PCs for its Intelligent
Workstation/LAN contract--if Unisys Corp. would sell them to the agency at the contract's
specified Year 2 price.

D. Dean Mesterharm, deputy commissioner for systems, said SSA would accept PCs that are
faster than the 100-MHz Pentiums Unisys is installing for ISW/LAN.

But the agency refuses to pay anything extra, he said.

"If [Unisys] wants to give us 133-, 166- or 180-MHz processors for for basically
the same price, then we would accept it," he said.

Mesterharm said Unisys has proposed upgrading to 233-MHz Pentium II PCs for the
seven-year, $280 million contract. But the price for the faster systems would be an extra
$27 million during the contract's second year, he said.

SSA can upgrade its 100-MHz PCs later at a price lower than what Unisys has proposed,
Mesterharm said. Unisys officials would not comment on the contract.

"We are continuing to have discussions with SSA and are continuing to work closely
with them," Unisys federal systems division spokesman Mark Root said.

SSA and Unisys officials knew Intel would release faster processors during the course
of IWS/LAN, Mesterharm said.

"We've met with Intel, and we know about their road map," he said.
"Would you go out and change your computer every three months? Would you go out and
buy a new car every six months? Why should we?"

The contract does have a technical substitution clause, he said, under which Unisys has
added hard drives, monitors, notebook computers, servers and other products.

Changes to the contract must undergo rigorous testing, Mesterharm said, to ensure
performance and compatibility with SSA's installed systems.

Industry officials said the conflict is shaping up as a classic agency-contractor
confrontation, driven by the government's fiscal conservatism and industry's tight profit
margins on PC sales.

"Unisys went in at a very low price," said Thomas Dunne, president of Dunn
Computer Corp. "They knew damn well [the processors] would eventually go
obsolete." Dunne's Sterling, Va., company has sold 1,300 166-MHz PCs to SSA through
two contracts; Unisys provides Dunn's maintenance.

When Unisys submitted the winning IWS/LAN proposal, it likely counted on selling newer
technology at a higher price than the 100-MHz systems bid, he said.

"SSA is very good at playing the game" with vendors, Dunne said. "SSA is
a stickler for keeping configurations identical."

Unisys has delivered 31,600 systems out of a total of 56,500 under the
indefinite-delivery, definite-quantity contract, Mesterharm said.

As outlined in the solicitation requirements, the company must cut its prices further
during IWS/LAN's third year--the final year for product deployment--although not as much
as the 50 percent decrease in the second year.

IWS/LAN subcontractor Win Laboratories Ltd. of Manassas, Va., would not say where it is
getting the phased-out processors.

"To go back and spend millions more for something we don't have a bona fide need
for would be a waste of money," Mesterharm said, echoing the statements that SSA
Commissioner Kenneth S. Apfel made at a recent House hearing [GCN, March 23, Page

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