GSA suspends Enron and Andersen from new business

The General Services Administration Friday temporarily suspended Enron Corp. and the auditing firm Arthur Andersen from doing future business with the federal government.

GSA suspended Enron for one year from receiving government contracts, while Andersen's suspension lasts for the duration of its criminal indictment. The agency announced its decision a day after federal prosecutors indicted Andersen for alleged obstruction of justice, including shredding documents related to the Enron investigation.

Enron and Andersen officials have engaged in activities that "seriously impact their suitability to receive government contracts," according to a GSA statement. "A contractor that does not have adequate internal controls cannot provide such assurances to the government, and should not receive government contracts."

The suspension applies only to future government business and does not affect existing contracts between agencies and the two companies. Ten agencies, including GSA and the Justice Department, had almost $60 million in contracts with one or both of the companies as of the third quarter of fiscal 2001.

The government can suspend or debar contractors for misconduct and mismanagement. Suspension is temporary, while debarment is for "a reasonable period," according to the Federal Acquisition Regulation. Contractors can be debarred for activities such as fraud, embezzlement and forgery.

Existing contracts are not automatically terminated if a suspension or proposed debarment notice is issued. Contractors that receive a federal notice of suspension or proposed debarment can defend themselves in writing or in person within 30 days.

In January, the Office of Management and Budget directed GSA to review 106 existing contracts with Enron and Andersen and, if necessary, begin suspension or debarment proceedings against the two companies.

"GSA is continuing the review of Andersen and Enron officials to determine whether their business practices meet the standards required to do business with the government in the future," Raymond J. McKenna, GSA's general counsel, said Friday. "At this time, it is inappropriate to comment further about this continuing review."

The General Accounting Office released new rules in January 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.

In December, 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.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.