Contractor GTSI suspended; who is next?

As we reported earlier on our Twitter feed, the SBA has suspended GTSI from government work based on allegations of contracting fraud. According to a Washington Post article:

"There is evidence that GTSI's prime contractors had little to no involvement in the performance of contracts, in direct contravention of all applicable laws and regulations regarding the award of small business contracts," an SBA official wrote in a letter to GTSI's chief executive, Scott W. Friedlander. "The evidence shows that GTSI was an active participant in a scheme that resulted in contracts set-aside for small businesses being awarded to ineligible contractors."

The article goes on to say it's the first time in decades that such an action has been taken.

This comes as no surprise to government contracting newshounds. This administration has stated many times that stopping contracting fraud, waste, and abuse is a priority. President Obama's memorandum back in March challenges federal agencies to ferret out companies that don't follow contracting rules.

Contracting and subcontracting, including small business contracting, have become increasingly important targets in Congress; as we reported earlier, the new Small Business Jobs and Credit Act aims to enforce subcontracting plans. Congress is looking at agencies like the Department of Homeland Security to ensure proper management and oversight of contracts. And Congress may yet pass a version of the DoD's payment withholding plan in the National Defense Authorization Act 2011 for contractors who don't follow the rules.

If a large contractor like GTSI can be taken to task under this increased oversight, it is likely that other contractors will as well. Furthermore, knowledge of the Federal Acquisition Regulations is increasingly at a premium; even the smallest subcontractors could stand to lose business if they are not followed. No prime contractor will want to assume the risk of being suspended because of a failure to follow regulations along the supply line. Contracting officers will be on the lookout for companies that can demonstrate good management of the applicable regulations. An effective FARS management system reduces the regulatory burden and ensures compliance, which in turn protects against suspension.

It will be interesting to see what other companies may be suspended by the SBA; if what is alleged against GTSI is true, it is possible there are many other "GTSIs" out there that could be suspended. Time will tell, but in the meantime, contractors and subcontractors should take a close look at their FARS management and ask themselves if they can prove their competence in this era of increased oversight.