Business Notes CONTRACTS

Did IBM and the Federal Aviation Administration play fair when the company won a $3.6 billion contract to upgrade the computers in the U.S. air-traffic- control system? No way, according to losing bidder Hughes Aircraft, which last week persuaded the General Services Administration to suspend the contract pending an investigation.

Hughes, a subsidiary of General Motors, contends that its proposal was technically superior but that it lost out because the FAA gave IBM "preferential treatment" that helped the firm submit an unfair lower bid. For one thing, Hughes says, it was not informed by the agency of changes in specifications that favored IBM. The complaint also focuses on the fact that if Hughes had won, it was going to buy many of the necessary computers from IBM. Hughes says that in preparing its bid, it received inflated cost estimates from IBM on equipment needed from the computer maker. According to Hughes, while IBM said it would charge the GM unit $223 million for spare parts, Big Blue's own bid to the FAA placed the cost for those same spare $ parts at $11 million. IBM called the Hughes charges baseless.

The GSA may need as long as 45 days to make a decision. Its options range from reinstating the IBM contract to throwing it out. The delay has drawn criticism from the FAA, which is eager to start overhauling its antiquated air-traffic-control system.