Changes Spurred Buying, Abuses

General Services Administration contracting officer Herman S. Caldwell Jr. urged superiors not to renew the Sun Microsystems contract, even though it would have meant more money for the GSA.
General Services Administration contracting officer Herman S. Caldwell Jr. urged superiors not to renew the Sun Microsystems contract, even though it would have meant more money for the GSA. "When a government buying office becomes a profit center, then bad things are likely to happen," he said. (By Kevin Clark -- The Washington Post)

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By Robert O'Harrow Jr. and Scott Higham
Washington Post Staff Writers
Wednesday, May 23, 2007

In February 2005, an auditor at the General Services Administration presented evidence to agency leaders that one of the government's top technology contractors was overcharging taxpayers.

GSA auditor James M. Corcoran reported that Sun Microsystems had billed the government millions more for computer software and technical support than it charged its commercial customers.

If true, the allegation was grounds to terminate the contract and launch a fraud investigation. Instead, senior GSA officials pressed last summer to renew the contract.

That decision meant the government's leading contracting agency would be able to continue collecting millions of dollars in what are called industrial funding fees from Sun under rules that permit the GSA to take a percentage of every sale made to the government. It also meant that taxpayers would pay millions more than necessary, according to congressional investigators.

"We thought of ourselves as being, not a part of the government, but as being a business, and we looked to profit on our customers," said GSA contracting officer Herman S. Caldwell Jr., who warned his superiors against renewing the Sun contract. "When a government buying office becomes a profit center, then bad things are likely to happen."

The circumstances surrounding the Sun contract are now being scrutinized by the GSA's inspector general, the Justice Department and members of Congress.

"Why did GSA agree to do business with Sun despite warnings of possible fraud?" Sen. Charles E. Grassley (R-Iowa), ranking minority member of the Senate Finance Committee, said in a statement to The Washington Post.

GSA officials declined to comment for this article. In testimony before Congress in March, GSA Administrator Lurita Alexis Doan said the agency made a good decision on behalf of taxpayers by renewing the contract. She also said a top aide had looked into the auditor's allegation and told her "nothing was there."

Sun also declined to comment. A GSA official told congressional investigators that a Sun vice president acknowledged past problems with pricing. The Sun official also said the company spent nearly $2 million to fix the problems and had submitted a plan to avoid a recurrence.

The Sun contract illustrates some unintended consequences of efforts a decade ago by Congress and the executive branch to streamline government buying at a time when reinventing government was the rage. The changes expanded the kinds of items that could be purchased through the GSA's buying programs and narrowed the government's ability to audit contracts and verify that federal agencies were getting the best possible prices.

The changes spurred a boom in buying. During the past decade, corporate sales to federal agencies through the GSA's flagship contracting program, known as the Multiple Award Schedules, rose from $5 billion to more than $35 billion. Interviews, audit reports and contracting documents show that agencies have used the GSA to avoid true competition and steer work to preferred companies, resulting in cases of waste, fraud and increased cost to taxpayers.

"This has been a scandal of great proportions," said David E. Cooper, until recently the director of acquisition and sourcing management at the Government Accountability Office, the investigative branch of Congress. "Our work and the work by the Defense Department inspector general and the GSA inspector general all show hundreds of millions, if not billions, that has been wasted."


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© 2007 The Washington Post Company

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