GSA to review agencies’ contracts with Enron, Andersen

The General Services Administration will review agencies' existing contracts with Enron and auditing firm Andersen to determine whether the government should do further business with them. The Office of Management and Budget has directed GSA to review 106 existing contracts with Enron and Andersen and, if necessary, begin suspension or debarment proceedings against the two companies. Recent allegations of document-shredding and shoddy accounting practices by Andersen and Enron have called into question the companies' business practices, OMB Director Mitch Daniels said in a Jan. 25 letter to GSA Administrator Stephen Perry. Andersen audited Enron's financial statements. "Some of these allegations are serious in nature…and could reflect poorly on these corporate entities and their ability to provide quality work," Daniels wrote. Ten federal agencies, including GSA, had almost $60 million in contracts with one or both of the companies as of the third quarter of fiscal 2001, according to the letter. GSA's review of the companies' business practices with agencies could prevent them from winning future federal business. If GSA finds evidence that either company violated the government's Federal Acquisition Regulation (FAR), it can issue a suspension or proposed debarment notice to the contractor. Contractors can be debarred for activities such as fraud, embezzlement and forgery. Contractors who are suspended or debarred by the government cannot receive federal contracts. Suspension is temporary, while debarment is for "a reasonable period," according to the FAR. Existing contracts are not automatically terminated if a suspension or proposed debarment notice is issued. Contractors that receive a notice of proposed debarment can defend themselves in writing or in person, and GSA then has 30 days to decide the matter. The Contract Services Association, which represents government contractors, said it supports the administration's review of the Andersen and Enron contracts. "We stand behind ethical and compliant contractors, and we apply those standards to all of our members," said George P. Sigalos, the association's counsel and spokesman. The group does not represent Andersen or Enron. GSA pledged to review the contracts "as expeditiously as possible," according to an agency statement. Daniels also sent the letter to the nine other agencies that currently have contracts with Andersen or Enron, urging them to ensure that existing projects are performed in accordance with proper business practices. Last week, the General Accounting Office released new rules designed to make sure auditors who review federal agencies do not perform management functions or make management decisions. The rules expressly prohibit auditing organizations from providing bookkeeping, recordkeeping and payroll services, although auditors can continue to provide routine advice and answer technical questions. Last month, the Bush administration overturned a controversial Clinton-era regulation requiring government contractors to meet strict ethical standards. The repealed regulations required government contracting officers to review a firm's compliance with labor, employment, tax, environmental and antitrust laws before awarding a federal contract. The business community had argued that the regulation would lead to a "blacklist" of companies banned from government contracts, even if the companies resolved concerns over labor, environmental and other issues. They also argued that the rules were unnecessary since the FAR already includes a provision on contractor ethics. The existing provision in the FAR still requires contracting officers to determine whether a potential contractor is "responsible," but it does not force officers to research the legal practices of companies.