GSA to Keep Close Eye on WorldCom

The government ditches its proposal to debar the company from future contracts after its accounting scandals, but the General Services Administration will still be keeping tabs on WorldCom.

The federal government on Wednesday dropped its proposal to debar WorldCom Inc., doing business as MCI, from future contracts. Nevertheless, officials in Washington, D.C., said the accounting scandal-laden company is not yet out of the woods.

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 telecom 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, he 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 who 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 comes just days before WorldComs Federal Technology Services (FTS 2000) contract is set to expire. With the proposed debarment in place, the government would not have been allowed to exercise a contract extension, but now it is likely that it will, Drabkin said.

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

WorldCom has made several important changes in the period since it revealed it 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," he said.

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

Responding to the news, WorldCom Chairman and CEO Michael Capellas said that 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 company-wide ethics training," Capellas said. "We will continue to provide our federal and state government customers with best-in-class service and support that they have come to expect from MCI." Discuss This in the eWEEK Forum