GovWorks Files Bankruptcy, Will Sell Payment Business

Electronic government services portal GovWorks Inc. of New York has filed for Chapter 11 bankruptcy protection, calling itself a victim of the "growth-at-any-cost craze" that has killed a slew of Internet companies. In documents filed with the U.S. Bankruptcy Court in the Southern District of New York, GovWorks claimed assets of $8 million and liabilities of $40 million. In mid-November, GovWorks reduced its staff to fewer than 60 people and drastically cut expenses in hopes of cooling the burn rate to less than $1 million per month, court papers said."Like many Internet companies, GovWorks fell prey to the growth-at-any-cost craze," the bankruptcy filing said. Despite its accomplishments as a "pioneer" of the e-government marketplace and strong brand recognition, "GovWorks was not able to overcome unanticipated client needs, high costs and a distressed private equity environment," the company said. Business and information technology consulting firm American Management Systems Inc. of Fairfax, Va., and emerging payment technologies developer eOne Global LP of Menlo Park, Calif., disclosed plans last week to buy GovPay, the transaction processing business of GovWorks. Terms were not revealed.AMS and eOne signed a letter of intent for GovPay because certain documents still need to be finalized by the bankruptcy court. In March 2000, AMS took an undisclosed equity stake in GovWorks, declining to release financial details of its "significant minority position" in the company.GovWorks, founded in late 1998 as Public Data Systems, employed 250 people in April 2000 and worked out of a four-floor headquarters in New York's Silicon Alley. Soon GovWorks was forced to lay off 60 people as part of a restructuring to shift to an application services provider model. But competitors offering the same services at lower or no cost proved to be too much for GovWorks, and the staff cuts and cost reductions continued. A plan devised last summer to raise $25 million in financing fell flat, and efforts to find a buyer were to no avail.