Tough Business

There is a kind of attention no one wants. And in May, as the Abu Ghraib prison abuse scandal widened, a little-known organization in the Interior Department got it. The National Business Center, which provides administrative and procurement services to federal agencies, administered the contract used to hire some interrogators at Abu Ghraib. That in itself wasn't so remarkable. But the center used a contract for technology services, under which agencies can award work quickly and with little competition. Army investigators found that an employee of CACI International Inc., the interrogator provider, helped write the contract's requirements, which they said provided few means to control the contractors. The investigation also accused three CACI employees of abusing prisoners.

NBC, which has canceled the contract, played a critical, if unwitting, role in the scandal. Yet the center's history largely has been overlooked. It begins in 1997, when Interior ran three administrative "service centers," which supplied payroll processing, building maintenance, parking management and other assistance for Interior bureaus. The centers sustained themselves by charging fees.

At the time, changes to procurement regulations were paving the way for fee-based shops to work for other agencies. Paul Denett, Interior's procurement chief in 1997, proposed merging the three service centers into one megacenter to reduce costs and eliminate redundancies-fundamental tenets espoused by successful U.S. corporations. It was the essence of the Clinton administration's "reinvention" of government by making it more businesslike.

To Denett, the need was clear. At the U.S. Geological Survey, which ran one of the three service centers, "Top scientists were saying, 'Why are we doing this administrative stuff?' " Denett says. " 'What does this have to do with science? Why do I need this pain in the neck?' " The sentiment was echoed by other agencies, too.

But Denett needed an enterprising executive to head NBC, and he found one in Tim Vigotsky.

Vigotsky, then 41, was the assistant director for management at the Bureau of Engraving and Printing, running administrative operations. He had entered the Senior Executive Service at only 35. In the private sector, Vigotsky would have been a poster boy for the late-1990s boom. "He had an entrepreneurial spirit," Denett says. Vigotsky, a talented golfer, also had a competitive streak and a habit of setting increasingly difficult goals.

Under Vigotsky, NBC acquired other government operations, including the land appraisal division of the Interior Department. It got into the payroll business and today processes checks for 35 agencies. All the while, it reinvested its fees in improvements-new computers and data systems, for instance-and offered financial rewards to top-performing employees. NBC's goals, shared by fee-for-service shops governmentwide, were to reduce the administrative workforce and save money by letting agencies outsource work that wasn't vital to their missions.

Interior opened other shops, too. In 1996, the Minerals Management Service launched GovWorks, which targeted the procurement services market. Denett says he wanted to run NBC and GovWorks for a few years, to see whether they "lived up to the concept" of businesslike government. But the operations attracted eager customers faster than expected. "They kind of grew a life of their own," he says.

In 1999, NBC and GovWorks reached a critical juncture. Vigotsky says he was approached by Army officials who wanted to jettison a contracting shop based at Fort Huachuca, Ariz., home to the Army's intelligence training center. Fort Huachuca had a stellar reputation among military and civilian agencies and was doing a brisk business managing information technology contracts.

But Army officials had begun asking the same question as those Geological Survey scientists: Why are we running technology contracts? The military services had their own procurement divisions. The Defense Department managed weapons acquisition. But information technology? "It was sort of an offshoot," says Denett, an administrative function.

Vigotsky wanted to take over Fort Huachuca's procurement operations. He'd keep the employees at the base, but assimilate them into NBC's business culture. It seemed like an obvious marriage of two entrepreneurial agencies. Indeed, it was so obvious that others had already thought of it.

GovWorks, Vigotsky learned, also was vying to run Fort Huachuca's business. Like Fort Huachuca, GovWorks was making its name in technology contracting. Each shop made its pitch. In a contest that Denett describes as "close," the Army went with NBC. Fort Huachuca gave NBC credibility, Vigotsky says. It also brought huge sales, breaking the $1 billion sales mark in 2004. In fiscal 2003, NBC saw $600 million in sales without Fort Huachuca's business.

But Fort Huachuca also gave NBC its biggest fiasco. Prior to the takeover, it administered the contract under which the Abu Ghraib interrogators were hired. So NBC acquired it, unbeknown to Vigotsky and, apparently, other managers. Vigotsky is sensitive about the matter. He winces when recalling press accounts of Abu Ghraib that named NBC. But he believes there is no way to have foreseen the contract problems. NBC inspected Fort Huachuca's operations following the acquisition, he says. The interrogator work was a small piece of NBC's overall business-worth about $45 million-and one that Vigotsky is happy to lose. "We're getting out of it," he says.

NBC's critics, however, are using the debacle to assail businesslike government altogether, many observers believe. In a July memo, the Interior inspector general, Earl Devaney, criticized NBC management's "lack of monitoring and oversight." Devaney said there's an "inherent conflict in a fee-for-service operation" that encourages government employees "to enhance organization revenues" by short-circuiting federal regulations.

"I think there was too much looseness," Denett admits. NBC management thought, "Here's the vehicles; we don't have to police them," he says. But Denett insists the interrogator procurement was "an abnormality. It will be corrected." In that sense, Denett says the mess was a blessing in disguise for NBC, which is, by entrepreneurial measurements, one of government's most successful fee-for-service shops. Now NBC has tightened its internal controls, Vigotsky says, acknowledging they weren't tight enough in the first place.

Vigotsky, 50, took early retirement and a buyout from Interior at the end of September-a move he'd been planning for many months. But he remains resolute. He believes he raised the standard of performance for government employees, and that NBC has made a mark on government bureaucracy. He says his proudest achievement was winning, in 2003, one of four coveted slots to provide electronic payroll services to agencies.

But how will NBC fare under new leadership? Douglas Bourgeois, formerly the chief information officer of the Patent and Trademark Office, will take Vigotsky's place. The Interior inspector general isn't going anywhere, and he may end up asking the same questions those scientists posed years ago: "Why are we doing this administrative stuff? Why do I need this pain in the neck?"