What you can learn from GTSI's contracting ban

Industry insiders see a variety of lessons from GTSI's recent contracting troubles. What steps should both large and small companies take to make sure they steer clear of trouble?

Scott Friedlander voluntarily stepped down today as GTSI president and chief executive officer as part of an agreement for the Small Business Administration to end its ban on the company from doing further government work.

New leadership now begins the process of trying to answer SBA allegations that GTSI fraudulently received contract dollars meant to go to its small-business partners, such as EyakTech, an Alaskan Native Corporation.

Some industry insiders say the episode could provide a lesson for government contractors to tighten their corporate oversight. Others say contractors do a good job of policing themselves and instead are critical of the SBA’s handling of the situation.


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“I don’t see this kind of an event having a significant effect on most companies” because they have good processes in place for checking and double-checking for violations, said Warren Suss, president of Suss Consulting.

“My experience is the community is aware of the rules of the road. They’re very literal in the way that they follow them,” he said.

“We always have to be vigilant in regard to complying with the federal practices and upholding ourselves, frankly, to a high ethical standard mainly because we’re working on behalf of the taxpayers,” said Greg Baroni, chairman and CEO of Attain LLP.

Baroni called the GTSI-SBA situation is a teaching moment because it spotlights the importance for management to have complete visibility for all contractual relationships within the company.

“This situation, I think, is instructive because it raises the awareness of the complexities involved in relationships with small businesses, and how the interaction has to play back and forth,” Baroni said.

“We’ve got to make sure that we are holding ourselves up to an incredibly vigilant standard of playing by the rules, and we’re going to hold ourselves accountable when we don’t,” he said.

“There are some out there who have not built those strong checks and balances as well as reinforcing corporate cultures, and those are the ones who should take notice and get their act together,” Suss said.

As for potential fallout, it’s possible the biggest reaction will come from Capitol Hill because “sometimes when these things happen there is an overreaction on the legislative side,” Suss said. “We’re always vulnerable to some political grandstanding after an event like this."

Mark Amtower, president of Amtower & Co. and a Washington Technology contributor, said he believes some companies already are attempting to learn from what has happened to GTSI.

“Those companies that have used sort of sham companies as a front end are definitely trying to figure out what they can do, when they need to do it, and how they can extricate themselves,” he said.

But, he added, “If [SBA is] trying to say they had no clue that there was alleged abuse of the Alaskan Native program, if they think there’s been no other instance of this, they’re either Pollyanna or blind.”

“I don’t that anybody knowledgeable about the market in D.C. was unaware of the Eyak connection with GTSI and the rather unbalanced way it was being used,” Amtower said.

Nevertheless, he added, “this is not a massively widespread issue. It is a problem and it’s a problem not only for Alaskan Native [Corporations]. But there’s been abuse throughout the history of the set-aside programs that SBA has done little to investigate and or stop.”

SBA’s action should make all federal contractors adhere more closely “to the white part of the line as opposed to crossing over the line,” Amtower said.

That advice could apply especially to some new players in the federal contracting space.

The federal sector accounts for about 80 percent of the work Attain is pursuing.

Baroni, an experienced government contracting executive, emailed the following suggestions to help small businesses increase visibility throughout the lifecycle of their contracts by putting in place a number of internal control procedures:

  • During the pre-award phase, create a deal review board that includes senior leadership to evaluate the terms and conditions, nature of teaming relationships, and financial obligations of each contract and make a “bid”/ “no-bid” decision that determines whether to pursue the opportunity and prepare a proposal.
  • During the pre-award phase, repeat the evaluation of terms and conditions, nature of teaming, and financial obligations of a contract to make a “submit”/ “no-submit” decision based on your current ability to meet all terms and conditions.
  • During the post-award phase, ensure quality and manage risk using “pre-flight” and quarterly “in-flight” reviews of the status of a contract.

Baroni said his biggest concern is the already tense environment between the government and the contracting industry as a whole.

“And unfortunately I hate to say this,” he added, “but I believe it will continue to fuel this negative sentiment between the two and create more tension rather than less.”

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