GSA to review federal contracts with WorldCom

The General Services Administration is reviewing all contracts the federal government holds with telecommunications company WorldCom to determine if the firm can meet its obligations and continue competing for government work, according to a GSA spokeswoman. Last week, WorldCom revealed that it had improperly accounted for about $3.9 billion in expenses this year. The Securities and Exchange Commission has charged the company-the second biggest telecom firm in the United States-with defrauding investors. "GSA is conducting a review of all WorldCom government contracts and other related information for purposes of determining present responsibility," the agency's spokeswoman said. Responsibility refers broadly to a company's financial and ethical capabilities to perform under the terms of its contracts. Given WorldCom's recent disclosures and the current federal investigation of the firm, analysts believe WorldCom will have no choice but to file for Chapter 11 bankruptcy protection. A spokeswoman with the Office of Management and Budget said GSA's investigation was prompted by recent events and the SEC investigation. GSA suspended Enron and its auditor, Arthur Andersen, from future government work in March. Andersen was convicted on obstruction of justice charges last month for shredding documents pertinent to an investigation of Enron, which collapsed amid revelations of fraudulent bookkeeping. "Under federal acquisition regulations, there are certain corporate standards for companies to live up to," the OMB spokeswoman said regarding GSA's WorldCom inquiry. President Bush last week said that WorldCom's actions emphasized the "need for renewed corporate responsibility in America." WorldCom holds billions of dollars in contracts with the federal government, including several high-profile agreements with the Defense Department, and an $11 billion contract with GSA to provide federal agencies with long-distance telephone and data service. WorldCom shares that contract with rival firm Sprint. Defense is also conducting a "detailed legal analysis" of a $450 million contract awarded to WorldCom in April to operate a high-speed research network. WorldCom's accounting practices came under SEC scrutiny a month before Defense awarded that contract. The department also awarded the same contract a year earlier to Global Crossing, the telecom company that filed the fourth-largest bankruptcy in United States history in January. That award was rescinded after losing bidders protested that Global Crossing couldn't fulfill security requirements stated in the agreement. While the Bush administration has derided WorldCom, Global Crossing, Enron and other companies for their fraudulent accounting practices and for violating the public's trust, the government continues to do business with a host of firms that are under federal investigation or have filed for bankruptcy. In December, the administration overturned a Clinton-era regulation that required government contractors to meet the strict ethical standards of laws involving labor, employment, tax, environmental and antitrust issues before doing business with the government. Neither GSA nor OMB gave any indication that the WorldCom inquiry would give rise to a broader inspection of the accounting and ethical standards of federal contractors.