GSA to Closely Eye WorldCom

The federal government may have dropped its proposal to debar WorldCom Inc. from future contracts.

The federal government may have dropped its proposal to debar WorldCom Inc. from future contracts, but officials in Washington said the accounting- and scandal-laden company is not out of the woods yet.

Because of the gravity of WorldComs corporate malfeasance, the U.S. General Services Administration decided it was necessary to enter into a three-year administrative agreement with the telecommunications company, said David Drabkin, deputy associate administrator for GSAs Office of Acquisition Policy. The agreement will allow the government to keep a close watch on WorldComs progress, Drabkin said.

"Its a very significant oversight role that we still have with this company," Drabkin said, adding that there have been companies in the past that have failed to live up to similar administrative agreements. "This is kind of like a probationary period where we have a very short leash on WorldCom."

The news from GSA came just days before WorldCom, which now does business as MCI, would lose the ability to exercise an extension of its FTS (Federal Technology Services) 2000 contract.

GSAs administrative agreement with WorldCom includes regular reporting requirements and interim reports if changes are made in the board of directors or executive management, Drabkin said.

WorldCom has made several important changes in the period since it revealed its massive accounting fraud and subsequent bankruptcy, including implementing internal controls and an ethics program, Drabkin said. Ten weaknesses that were outlined in the proposed debarment, which was issued in July, have been corrected, he said.

"What this means for GSA is that we have a corporate citizen that has corrected the way they do business, and the government can deal with them safely in the future," Drabkin said.

The federal government is WorldComs largest customer, and in fiscal year 2003, WorldComs FTS contract alone was worth $396.5 million. Several large agencies indicated to GSA that they would be adversely affected if WorldCom were debarred from future contracts, Drabkin said, adding that it would cost $100 million to $200 million for the government to switch service providers.

Responding to the news, WorldCom Chairman and CEO Michael Capellas said his company has taken extensive steps to become a good government contractor.

"We enhanced our corporate ethics program and accounting controls, hired a new chief ethics officer, and completed companywide ethics training," Capellas said.