GTSI-SBA agreement puts company under the microscope

Company will face closer scrutiny of operations, ethics

GTSI Corp. will live for the next three years under close scrutiny from inside and out as federal officials watch the contractor's every move in the government marketplace and an independent monitor stands over the company.

GTSI entered into an agreement with the Small Business Administration Oct. 19 in order to lift its suspension from receiving new government work.


Read SBA's agreement with GTSI

SBA lifts GTSI ban; CEO, general counsel resign

How SBA action led GTSI leader to fall on his sword

Nevertheless, the SBA inspector general’s office will continue to probe SBA’s charges against GTSI for using small-business prime contractors as a front to funnel work and revenue back to itself. The agreement also gives SBA access to company books, records and other documents.

GTSI and SBA officials must also agree on an independent company monitor who will ensure that the company is compliant with acquisition rules and the agreement. The monitor will have full access to inspect the company on an ongoing basis and report to SBA without interference from GTSI.

GTSI won’t see the monitor’s monthly reports before they go to SBA, and they will be proof of whether the company is or is not complying.

“The monitor shall have unfettered, immediate and, if requested, real-time access to all company documents, information and personnel,” the notice states.

In addition, the agreement requires GTSI to give the monitor management-style office space and it must pay, among other things, all monitor fees, retainers and other reimbursements, including any legal fees, the agreement states.

Inside the company, GTSI must name an employee as ethics officer and adopt a code of ethics.

The agreement demands other high-profile moves. More specifically, it forces out GTSI’s CEO Scott Friedlander and general counsel Charles DeLeon. It also suspends three top company employees: Tom Kennedy, vice president of civilian sales and general manager; Scott Schmader, senior sales manager; and Patrick Berg, program manager, until the agreement ends.

By signing the agreement, government officials said they believe GTSI gave enough assurances to lift the four-week-old suspension. GTSI doesn’t admit to any wrongdoing or breaking the law, but the government still reserves the right to extend the scope of  the case if it comes across any additional revealing facts.

The agreement would remain in effect even if GTSI were to file for bankruptcy.

After signing the agreement Oct. 19, GTSI said in a statement that the agreement allows it to put these issues behind it.

“The lifting of the suspension gives GTSI, its vendors and clients the ability to move forward,” said John Toups, chairman of GTSI’s board of directors.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Thu, Oct 21, 2010 Small Business Owner

I am shocked at how quickly GTSI was able to get going again. According to the FAR if any company falsely represents itself as a small business then there are fines to pay and potential jail time. I am seeing none of these. Where are the fines? Oh, did I mention the fine is PER INCIDENT? Fine them, imprison if needed, and uphold the law. Let's not make it politics as usual.

Thu, Oct 21, 2010

According to the Washington Post, two of the three small businesses involved were Alaskan Native companies, one being named EyakTek. One agreement apparently called for GTSI to receive 99.5 percent of the revenue. Part of the problem is old-fashioned greed, but much of it is structural. The deliberately fuzzy small business participation requirements look like they are written for the 1950s, when America had a large manufacturing base and mom & pop businesses could still make a decent profit. Those days are gone... let's fix the system.

Thu, Oct 21, 2010 Small Business

The Federal Government gave these CROOKS a Thirty Day Time Out!

Now if I stole a Million Dollars from the Federal government would they give me a Thirty Day Time Out? I thought Corporations have the same rights as people. Justice Scalia, Justice Thomas…?

What the SBA just did was to tell EVERY large business that it’s OK to screw over all small business and to cheat the American Taxpayer out of Billions of Dollars in small business savings. The SBA also told them that the snatch & grab is back on and that large businesses can return to the Bush era ways of doing times and that they can completely disregard the economy.

What’s Next? Is the Federal Government going to pass a law forbidding Contracting Officers to award contracts to small businesses?

The Obama Administration, like the Bush Administration, really, really hates small business.

Thu, Oct 21, 2010

I thought when a company received more than 5 million per year from Federal Government in contract work it was required to have a Ethics Compliance Program in place. I run the GSA schedule for a small company and we play by the law, maybe that's why are growth is meager compared to the these rule breakers.

Wed, Oct 20, 2010 Observer

It's unclear whether the government is pulling the strings of the business relationships of the company's directors to other companies, small and large. Also, are the Feds looking into other companies in the prime role and their old, recent, and emerging roles with GTSI. All of this is to say that a thorough examination of the company's web of business relationships, and whether the government finds fault with them, has tremendous implication for the many large companies that sub to small businesses. There may not be enough staff to pull all of these threads. Who wants to do ex-post compliance reviews to determine if small-biz primes actually followed through with teaming agreements and subcontracts. Some large companies do not have a great track record as primes when it comes to passing through, and taking responsibility for, their subs' work.

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