Changes Spurred Buying, Abuses

"One of the biggest problems is there are too few federal employees to administer this program," said D. Kent Goodger, a contracting official for 35 years who now teaches procurement classes for the federal government. "The contractors are able to take advantage of Uncle Sam and the American taxpayer."

The GSA benefited from the surge in business. In 1996, the agency began funding its operations by collecting a percentage of the sales it handled. These industrial funding fees -- about $266 million last year -- pay the agency's budget.

Contracting experts contend the fee structure creates a powerful disincentive for the agency to negotiate lower prices with vendors.

"You couldn't design a better system to make accountability impossible," said Daniel Guttman, a government contracting expert at Johns Hopkins University Center for the Study of American Government. "We simultaneously increased the incentive to get masses of contracts out the door and assured no one will look and see how the money is being spent."

Last fall, the GSA reorganized the buying program to improve financial controls and make federal purchasing easier. Rep. Thomas M. Davis III (R-Va.), who helped write the legislation, said the reorganization would allow the agency to operate more like a business.

Davis, the ranking minority member of the House Oversight and Government Reform Committee, said the reorganization "will transform federal purchasing by bringing GSA in line with the commercial market it must capture for its federal agency customers."

At an Impasse

When the issue with Sun Microsystems's prices first surfaced in an audit in 2004, it raised a dilemma for the GSA.

Sun was selling tens of millions of dollars a year in software and services to agencies across the government, and the GSA stood to lose millions in industrial funding fees. Details on the prices remain secret because they are considered to be proprietary information. But the audit findings -- that Sun's commercial customers were getting discounts not provided to the government -- could not be ignored by agency officials.

The GSA extended the existing contract and began extensive negotiations with Sun. But after more than a year of talks, Caldwell, the GSA contracting officer assigned to the deal, lost his patience. In February 2006, he wrote an e-mail warning a top GSA official that the contract was likely to be referred to the Justice Department for "civil fraud action."

A short time later, senior GSA officials removed Caldwell from the negotiations.

"The message that contracting management is sending to contracting officers is that if you play too rough with contractors, you will be given a bad report card and sent to a 'reform school,' " Caldwell said in a written complaint to a lawmaker.

In May 2006, Lurita Doan became the administrator of the GSA. Doan, the former owner of a technology company, came to the job pledging to work more closely with industry to make it easier to do business with the government.