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10/4/2010
02:51 PM
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Feds Suspend Major IT Contractor From Government Work

GTSI participated in a scheme to siphon off government work and dollars, intended for small businesses, according to government allegations against the IT services company.

The federal government on Friday suspended major government systems integrator and IT service provider GTSI Corp. from receiving contracts and doing business with the government over allegations that GTSI used small companies as fronts to do work and earn money that had been supposed to be set aside for small businesses.

GTSI has said it will fight the charge, but the company is already seeing negative effects from the suspension. Alaska's Eyak Technology announced Monday morning that it had withdrawn an offer to buy GTSi, which, along with the company's suspension, sent GTSi's stock down more than 40% from Friday's close.

The suspension came just one day after the Washington Post reported that GTSI had agreements in place to do all of the work and receive as much as 99.5% of the revenue on certain contracts that had been set aside for small businesses, and that top GTSI executives were aware of these deals.

At the same time, the Small Business Administration, which initiated the suspension, has been working over the last 18 months to strengthen its oversight and enforcement of federal contracts, its administrator said in an emailed statement. “The Small Business Administration has no tolerance for fraud, waste and abuse in any of our programs," SBA administrator Karen Mills said in a statement. "In line with that, SBA suspended GTSI Corporation from federal government contracting."

In a letter to GTSI, the Small Business Administration's suspension and debarment official alleges that, in "various" Department of Homeland Security contracts with small businesses where GTSI was a subcontractor, those subcontractors were little but fronts for a "scheme" participated in by GTSI. "There is evidence that GTSI's prime contractors had little to no involvement in the performance of the contracts, in direct contravention of applicable laws and regulations," the letter said.

According to the letter, GTSI represented itself as the small businesses to third parties, resorted to using email addresses attributed to the small businesses to avoid allegations of impropriety, prepared and sent proposals and quotes to the government as if it were the small businesses itself, and created invoices on the letterhead of the small businesses so the invoice would appear as though it came from the small businesses instead of GTSI.

In addition, the letter said, GTSI prepared and even received and sent, on behalf of the small businesses, responses to contract officers regarding contract opportunities. "There is ample evidence to suggest this scheme subverted the competitive process and directly affects the integrity of any procurement these prime contractors were or are involved in," the letter said.

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