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July 25, 2007
Senator Charles Grassley
135 Hart Senate Building
Washington, DC 20510-1501
Senator Grassley:
Thank you for your letter of July 24, 2007. I understand your concerns and want to assure you that we have been taking all appropriate steps to cooperate with a full and fair examination of the issues you raise. Your key concern is whether our current contract with GSA is a good deal for the American taxpayer. I can assure you, it is. It provides GSA with extremely competitive pricing that we believe is, in many cases, substantially more favorable to the government than our competitors' prices on similar products. The contract resulted from a long, arms length negotiation that was concluded only after GSA had the benefit of all the results of a two year audit in which GSA and the Office of the Inspector General (OIG) reviewed thousands of documents and records. The contracting officer who finalized the negotiations, whose integrity has been unfairly maligned during this process, has emphasized that she is very proud of the end result, as are others in GSA, and that it represents a great value to the taxpayer. We too are confident it is a great contract that provides compelling value. We have always been honored to be a government contractor and remain so today.
Senator, underlying many of your stated concerns is the presumption that Sun is not cooperating with attempts to independently confirm our performance under this contract. I can assure you that is not the case, and I must conclude based on several of the statements in your letter that you and your staff have been given incomplete and inaccurate information. We are, in fact, cooperating with the contracting officer's audit request, which we received less than two weeks ago. Her audit request was sent to us on July 12, 2007. We have since responded twice, in writing, verifying that we intend to cooperate and confirming that would begin producing documents this week. As with the demand from the OIG, the proposed audit encompasses voluminous records, yet we were given only days to respond. As promised, Sun will be making a substantial production this week of approximately 10,000 documents. Our cooperation specifically encompasses the operation of the Price Reduction Clause, which was one of the issues called out in your letter. Rest assured, we will provide the contracting officer with the information required for her to assess the operation of that clause under the terms of the contract. Keep in mind, we already send GSA thousands of pages of reports and supporting data on a quarterly basis, data that is more than sufficient to verify our compliance and the effective operation of the Price Reduction Clause. I can assure that any information you have received that suggests Sun has not or will not cooperate with the contracting officer and does not intend to provide information on the operation of the Price Reduction Clause is demonstrably false. Moreover, we continuously monitor and assess our rigorous compliance process, including those processes previously approved by GSA, and have engaged a prominent public accounting firm to help us in those efforts.
We share the same goal of a fair and transparent process. Our only dispute is over how to get there. As you know, we have raised serious concerns regarding the objectivity of this particular Inspector General on this particular issue. As stated in our June 25, 2007 letter to you, we welcome any impartial government agency, such as the Government Accountability Office. We feel strongly, however, that this particular Inspector General and his staff have a significant and well documented conflict of interest and a demonstrated predisposition regarding our contract. They have publicly stated that this contract is a bad deal for the American taxpayer, and they are participants in the case pending against us in Arkansas that includes allegations related to their audit. They have clearly prejudged the very issues you have asked to have addressed, and under those circumstances their participation in this proposed audit would be not only unfair, but we believe unlawful. Unfortunately, this week's events prove our concerns are justified. Instead of responding to our June letter and well documented concerns, OIG provided us with no response whatsoever until the day before your letter was sent, and then only a terse statement that they intended to go ahead with their proposed audit. No attempt was made to address our documented concerns over their lack of objectivity or to respond to our position that their participation in this proposed audit would be outside the law.
I want to thank you for noting Sun's well acknowledged, and, frankly, well deserved reputation for ethical business practices and its culture of compliance. I in turn admire your lifetime of public service and vigilance on behalf of the taxpayers. Again, we share the same goals of ensuring that our GSA contract is a good deal for those taxpayers and that the government agencies that GSA supports can continue to purchase the world's best computer products at extremely favorable pricing. Although we differ on the means, I am certain we desire the same thing -- an honest review of this contract and our performance under it.
I renew our previous offer to meet with you to explain our cooperation with the General Services Administration, and our highly specific, easily confirmable concerns with the Office of Inspector General. Thank you for allowing me this opportunity to respond. I hope this can be the beginning of a constructive dialogue.
Sincerely,
Scott G. McNealy
Chairman
Sun Microsystems, Inc.
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