Government lifts proposed ban on MCI contracts

The General Services Administration Wednesday lifted a proposal to prohibit telecommunications firm MCI from doing business with the federal government. Last summer GSA had proposed barring the company from bidding on federal contracts.

GSA reached a final agreement with MCI late Wednesday afternoon. In a telephone briefing with journalists, the agency's head of acquisition policy, David Drabkin, said GSA had determined that MCI was a "responsible" contractor after the firm corrected a number of flaws the government found with its internal accounting controls and business ethics.

MCI isn't entirely "out of the woods," however, Drabkin noted. The company now is effectively in a probationary period, having entered into an agreement with GSA that lets the agency "keep a very close watch on their progress," Drabkin said. MCI, formerly known as WorldCom, declared the largest bankruptcy in U.S. history last year in the wake of revelations of mammoth financial and accounting irregularities.

Drabkin said MCI had completely revamped its ethics program. He noted that all employees have received new ethics training. The company responded to 10 areas of concern GSA raised and made "substantial changes" to its business practices, Drabkin said. He reiterated, however, that the company is still "on a very short leash," and that GSA retains the right to consider a contracting ban, known as a "debarment," if MCI fails to adhere to its new policies.

The lifting of the proposed debarment is a major victory for MCI as it struggles to emerge from bankruptcy and redeem its public image. Effective immediately, Drabkin said, MCI "can now submit offers on all government contracts." The company has earned billions of dollars in government work over the years. One of its biggest contracts, FTS 2001, which provides long-distance telephone service for federal agencies, is up for renewal Jan. 10.

GSA officials had indicated that, if the debarment proposal were lifted, the agency would renew the contract. In fiscal 2003, MCI had sales of almost $397 million through FTS 2001, Drabkin said.

GSA also had sent a letter to federal agencies asking them if they would be adversely affected if MCI were declared ineligible to continue working on FTS 2001. A few large agencies said they would be, Drabkin said. GSA estimated that the government would have to spend $100 million to $200 million to switch agencies from MCI to another provider.

But such cost factors did not affect GSA's decision to lift the proposed debarment, Drabkin said.

Drabkin defended the government's process for dealing with troubled companies. He said GSA had no way to predict MCI's "gross corporate behavior" before news of financial irregularities broke in the media last year.

"I can't keep somebody from breaking the law," Drabkin said. "I can protect the government by keeping us from doing business with them."

In the future, Drabkin added, "If we have this kind of information" about corporate wrongdoing, "we will act on it."

Sen. Susan Collins, R-Maine, who heads the Senate Governmental Affairs Committee, questioned GSA's decision in a statement released during Drabkin's briefing.

"I am pleased that MCI will be monitored closely under the terms of the agreement with GSA," Collins said. "I question, however, whether GSA made the right decision in reinstating MCI when allegations involving the company remain under investigation by federal authorities. Until those issues are resolved, it is difficult to assess MCI's suitability for federal contracts."