By Timur Abimanyu, SH.

MH

The Washington Post

SBA suspends major contractor GTSI from government work

By Robert O'Harrow Jr. Washington Post Staff Writer, Friday, October 1, 2010; 11:17 PM

Federal officials on Friday suspended one of the nation's largest government contractors
from receiving new work, alleging that the Northern Virginia company inappropriately went
through other firms to gain access to contracts set aside for small companies. The U.S. Small
Business Administration's action imperils hundreds of millions of dollars in revenue for
GTSI Corp., a top-50 contractor that has relied on the Pentagon and the rest of the federal
government for more than 90 percent of its sales in recent years.
At issue is work GTSI did as a subcontractor for small businesses serving as the prime
contractors on government contracts. "There is evidence that GTSI's prime contractors had
little to no involvement in the performance of contracts, in direct contravention of all
applicable laws and regulations regarding the award of small business contracts," an SBA
official wrote in a letter to GTSI's chief executive, Scott W. Friedlander. "The evidence
shows that GTSI was an active participant in a scheme that resulted in contracts set-aside for
small businesses being awarded to ineligible contractors."
In an "open letter" to employees, customers, partners and investors Friday night, Friedlander
said, "Until tonight, no government agency had made an allegation that GTSI had violated
any law or regulations regarding this matter." He said that the company looks forward "to
providing you with a report on our activities as the situation warrants" and that "we
appreciate your support during this time." He added: "Please be assured that we will fight to
restore our good name."
The temporary suspension is one of the strongest contracting enforcement steps taken by the
government in recent memory. GTSI can challenge the action, which could lead to a longer-
lasting ban from government work, contracting specialists said.
"It's the first time in decades that the government has completely suspended a significant
player, a legitimate top-tier contractor," said Steven Schooner, a contracting law professor at
George Washington University. "It puts everybody on notice."
The move follows an internal SBA examination of GTSI activity over the past few years. It
comes after a Washington Post investigation that detailed the relationship between GTSI and
three small businesses, two of them entities known as Alaska native corporations. The Post
story cited an internal GTSI e-mail in which a company vice president said one of its small-
business partners was "very open to the concept of GTSI doing ALL the work" on a
contract. Another document cited in the story called for GTSI to receive 99.5 percent of the
revenue, even though it was a subcontractor to a small business. The SBA suspension is
based in part on those documents and The Post's findings, officials said.
"The Small Business Administration has no tolerance for fraud, waste and abuse in any of
our programs," said SBA Administrator Karen G. Mills in a statement. "This action is based
on information the agency has compiled regarding GTSI's business practices." Among other
allegations, the SBA said that GTSI used e-mail addresses of small businesses "so that
employees of GTSI could appear to be employees" of those companies while doing
government work.

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