Amid Contract Scandal, A Shakeup And Lingering Questions

A suspension on systems integrator GTSI is lifted following an agreement to be monitored independently and the resignation of two top company executives.

John Foley, Editor, InformationWeek

October 22, 2010

3 Min Read

The U.S. government has lifted a 19-day suspension that prevented systems integrator GTSI from pursuing new business with federal agencies. But GTSI isn't out the woods yet, and it's still unclear just what went down in what the Small Business Administration described as a "scheme" involving GTSI and its contracting partners.

The SBA cracked down on GTSI earlier this month, charging that the company had been providing services to the Department of Homeland Security in partnership with contractors that qualified for work as small businesses, yet where GTSI, as a subcontractor, was actually providing most of the services and receiving most of the fees.

"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 SBA stated in an Oct.1 letter to GTSI. According to the SBA, GTSI went so far as to use the e-mail addresses and letterhead of its small business partners in an effort to conceal the true nature of its involvement.

The SBA's suspension was a serious hit to GTSI. CEO Scott Friedlander, an in interview with Federal News Radio, said "there wouldn't be a GTSI" if the SBA suspension continued through the end of this month.

On Oct. 19, GTSI revealed that it had reached an agreement with the SBA that resulted in the suspension being lifted. To facilitate that agreement, GTSI said it "reluctantly accepted the voluntary resignations" of CEO Friedlander and senior VP and general counsel Charles DeLeon. Friedlander, a nine-year veteran of the company, had only been appointed CEO in February. GTSI has named temporary co-CEOs while it searches for a replacement.

The 18-page administrative agreement outlines a long list of other requirements, including the suspension of three other GTSI execs; the assignment of an independent monitor, an ethics officer, and other governance measures; and a ban on future contracts in which GTSI teams with small businesses functioning as prime contractors.

GTSI chairman John Toups, in a statement announcing the compromise, said "the cloud of uncertainty" had been lifted from the company. And, in a remarkable display of loyalty to two executives who are departing under murky circumstances, Toups described the resignations of Friedlander and DeLeon as "extraordinarily unselfish" actions.

I say murky circumstances because it's still unclear just what happened. GTSI hasn't responded in detail to the serious allegations brought by the SBA. In the agreement reached with the SBA, GTSI doesn't admit to wrongdoing (though it doesn't deny it, either).

Without explanation, it's unclear who bears responsibility for what happened. If not Friedlander and DeLeon, why did they become the fall guys? And if they do shoulder responsibility, why describe their resignations as being voluntary and unselfish? And what about the three executives who were suspended? Suspended for what?

I've asked GTSI for its response to the specific charges laid out by the SBA—the improper use of e-mail addresses and letterhead, for example. The company didn't seem prepared for my questions, and I'm still waiting for answers. Meanwhile, the SBA investigation is ongoing, and the full story is yet to be disclosed.

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About the Author(s)

John Foley

Editor, InformationWeek

John Foley is director, strategic communications, for Oracle Corp. and a former editor of InformationWeek Government.

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