Firm reviews GSA contracts as IG probe of funding practices expands

A Bethesda, Md., technology company is reviewing its business dealings with a regional office of the General Services Administration that misused almost $40 million in federal funds, according to a company executive. Meanwhile, the agency's inspector general is investigating contracting practices at other offices across the country.

After learning that Information Systems Support Inc. was named in a GSA inspector general's report on the abuses, employees are examining a series of task orders that were issued by a regional office of GSA's Federal Technology Service (FTS) in Bremerton, Wash., said Eric P. Whittleton, the firm's chief operating officer. The company is one of three firms listed by name in the report.

Information Systems Support had been working with FTS on a contract the agency managed for the Washington National Guard. The company won an FTS contract four years ago that allows it to sell technology products and services to the government.

However, the GSA inspector general found that FTS officials used that contract to procure architectural, engineering and general construction services in order to build an office building for the Guard.

FTS, which awards and manages contracts on behalf of other agencies for a fee, completed work on the one-story building about November 2001, according to the inspector general. When finished, the structure, meant for 25 to 30 employees, cost approximately $950,000, the investigation revealed.

Whittleton said his company received no task orders from FTS related to construction services. The majority of orders were for "courseware development" for an online Army training program, he said.

Nevertheless, the company is reviewing all records related to the project in order to determine if any work was subcontracted to other firms. Whittleton said he's closely examining line items called "other direct costs," essentially miscellaneous costs that could be considered part of a contract's scope of work, such as subcontracted labor.

"I've asked everyone to gather all the facts and we're going to review them," Whittleton said. He said the inspector general's office told him the company is not under investigation, although it has requested all communications between the firm and the FTS office that awarded the work.

The Bremerton office was closed in May, 11 months after managers there discovered contracting problems and alerted the inspector general, a GSA spokeswoman said. Employees at the Bremerton office have been moved to GSA's regional headquarters in Auburn, Wash., but are still assigned to their same duties, she said.

Asked whether GSA would take disciplinary action against any of those employees, the agency's spokeswoman said GSA was "continuing to review the facts of the case. Once our review is completed, we [will] determine whether any personnel actions need to be taken."

Information Systems is still being awarded work by the FTS' Bremerton employees, who now are working in the Auburn office, Whittleton said.

The Bremerton office had aroused suspicion among headquarters officials for years because employees "pushed the envelope" of acceptable contracting behavior, said Charles Self, a former FTS deputy commissioner who retired last month.

Whittleton said that, in his experience, the FTS office was "very, very aggressive" in pursuing business. FTS rewards its employees with bonuses for selling contracting services. The agency records those sales in financial statements as "revenue."

"They seemed to be all about revenue generation," Whittleton said. "It was all about business growth." He added, "It was almost like the way a contractor would view the world."

Whittleton said the office "reached out beyond their region" and awarded work in other jurisdictions. Self said headquarters officials reprimanded FTS Bremerton employees for such practices, but that his office was rebuffed when it attempted to investigate. "They just blew us off," he said.

In addition to using technology contracts to procure construction work, the inspector general found that Bremerton employees improperly used more than $37 million in the FTS IT Fund, a revolving account that is supposed to be used solely for technology-related work.

Federal law allows agencies to place appropriated money in the IT fund for use at a later date. Any agency that uses the IT Fund must conduct the work through FTS, which collects a 2 percent fee. Over the past several years, FTS has relied heavily on the fund to pay for billions of dollars in technology and telecommunications work. At times, the fund has come close to running a negative balance, GSA records show.

Whittleton also said that, in years past, the FTS Bremerton contracting officers seemed to work "hand-in-hand" with the office's managers. The managers are supposed to interact only with their customers in agencies and with contractors, handing off requirements to contracting officials that award work "without bias," Whittleton said.

Recently, a noticeable "firewall" has been placed between the two sides, Whittleton said. "It seems to be the way it always should be." The contracting officers are working "purely by the book," he added.

GSA's inspector general currently is examining FTS contracts and offices across the country, according to officials participating in the investigation. Part of that investigation is focusing on the IT Fund.

Whittleton said contractors place their trust in the government to issue orders that comply with federal regulations. Of the FTS Bremerton office, he asked, "How would we know that they were misusing funds?"

"Everything we got from [FTS] was executed by a duly authorized contracting officer," Whittleton said.