By Steven Overly
Capital Business Staff Writer
Monday, October 4, 2010; 8:43 PM
Shares of GTSI plummeted Monday after a federal agency temporarily barred the information technology company from new government contracts, and a potential suitor withdrew an offer to buy the Herndon-based company.
EyakTechnology of Dulles, or EyakTek as the company is known, has tried repeatedly in recent weeks to acquire GTSI and a spokesman said any future bids will depend on the impact of the suspension, which the U.S. Small Business Administration disclosed Friday afternoon.
GTSI stock tumbled 40 percent, or $2.90, Monday to close at $4.35 per share.
EyakTek had offered to buy GTSI for as much as $7.50 a share before rescinding the offer. GTSI had repeatedly rebuffed EyakTek's unsolicited offers, deeming them too low. GTSI owns 37 percent of EyakTek, a provider of infrastructure, security and information technology systems to the government.
The decision to temporarily suspend GTSI from new federal work came after the company's relationship with smaller contractors became the focus of an internal SBA examination and the subject of a report by The Washington Post.
In Friday's notice of suspension, the SBA accused GTSI of inappropriately using other firms to gain access to contracts allotted for small businesses. The Post report said GTSI had teamed up with an Alaska native corporation called Eyak Corp. to form EyakTek and pursue government work. Under federal law, Alaska native corporations are eligible for certain contracts without competition.
In an open letter Friday, GTSI chief executive Scott W. Friedlander pledged to fight the allegations and "restore our good name." He added: "Until tonight, no government agency had made an allegation that GTSI had violated any law or regulations regarding this matter."
Eyak Corp., based in Cordova, Alaska, issued a response Monday to the Post's report. "We embrace a solemn responsibility to protect the interests of our shareholders, chief executive Rod Worl said in a statement. "We are proud to have observed both the letter and the spirit of the legal requirements of all of the government programs, specific contracts, and relevant legislation pertaining to our business."