"The fraud, the corruption, the
thievery, the mismanagement, and downright abuse of the public
trust that have been exposed to this date are only the
beginning. The ugly and disgusting saga will further
unfold during the days ahead at GSA."
The Administrator of General
September 19, 1978 1
It was 1978 and the General Services Administration (GSA) was on its back
with Washington in full attack. The media, the auditors,
and just about anyone with pen and paper were after GSA. It was Washington at its
best and everyone was piling-on. GSA was being accused of
contract fraud and bribery. One allegation was that GSA's
warehouses were clogged with defective office furniture.
In the Washington
Post of July 3, 1978, an article ran with the heading Firm Wins
GSA Contracts Despite Quality Complaints. Leading
off the article were stories about furniture supplied by one
specific company--Art-Metal - USA, Inc. For example, the
"Last year, the
General Services Administration provided the U. S. Army with 20
new steel filing cabinets for use in areas where classified
documents are stored. Upon opening the cartons, the Army
found that 11 of the cabinets had come with locks that stuck,
drawers that did not open properly and finishes that were peeling
and exposing rusted metal underneath.
But what really,
concerned the security conscious agency was the fact that some of
the file cabinets occasionally came open even though they had been
locked with the built-in combination locks."
In the article, GSA's
director of the National Furniture Center claimed that Art Metal
generated a higher rate of quality complaints than other companies
and that "They have a sloppy manufacturing process." However, the director also claimed
"We could never
prove any wrongdoing, so we could not debar them from
In 1978, GSA acquired
office furniture, including desks and filing cabinets, for its
"Stock" program. The items were acquired through
requirements contracts that had terms of a year and placed in GSA
depots. In a typical year, several annual procurements would be underway at the same time.
Additionally, GSA had a quality assurance program called the
Quality Approved Manufacturing Program. Under this program,
approved manufacturers could ship items to GSA without an
inspection by a government quality assurance inspector. To
qualify for the program, suppliers were required to maintain a
quality control system that met the requirements of a federal
standard. Art Metal was certified under GSA's Quality
Approved Manufacturing Program.
During the summer of
1978, GSA conducted various procurements including 5
on which Art Metal submitted bids. On August 24, 1978, GSA
awarded a requirements contract to Art Metal valued at $9.4
million for file cabinets. Art Metal already had the existing
contract for these items and this new contract would replace the
existing one. Art Metal also was the low bidder
on 3 of the other four procurements. However, no awards had
been made on these procurements.
On August 24, 1978,
the same day that Art Metal was awarded the $9.4 million file
cabinet contract, GSA terminated this contract for the convenience
of the government. Shortly after its contract had been
terminated, Art Metal went to court and alleged that GSA had
implemented an unlawful debarment against it and sought a
preliminary injunction enjoining GSA from continuing the
In deciding the case,
the court looked at the actions surrounding the termination for
convenience. The court determined that on August 24, 1978,
the Commissioner of the Federal Supply Service (the agency housing
the National Furniture Center) told the Administrator of GSA that
Art Metal had been awarded the file cabinet contract. The Administrator's response
"how in God's
world could there be an award to Art Metal in view of the fact
that there is so much going on in the papers?" and with
"us getting ready to go to the Senate oversight
confidential assistant chimed in that "in light of the recent
publicity" such an award to Art Metal "wouldn't look
very good." During the course of a meeting dealing with
the contract award, various alternatives were discussed,
including informing the company that it was debarred or that it
would not receive contracts because an investigation was in
progress. However, GSA's Special Legal Counsel warned
GSA's management that there may not be "adequate legal grounds
for suspension or debarment." As a result, it was
decided to simply terminate the contract for the convenience of
the government. In its decision, the Court concluded that the
deposition testimony of the Director of the National Furniture
Center best described the atmosphere in the upper level echelons
at GSA at that time. Some questions and answers from the
Director's testimony follow.
"Q: What occurred at this meeting?
A: It commenced with the Administrator asking who was responsible for making the award to Art Metal.
Q: Who volunteeered?
A: I raised my hand.
Q: Did anybody else volunteer.
Q: And what was the Administrator's response to your having indicated that you were responsible?
A: He asked me why I did it.
Q: What was your answer?
A: My answer was that I didn't know of any reason why I should not.
Q: What was the Administrator's reaction to that?
A: He said, "Don't you read the newspapers?"
Q: Had you read the newspapers?
Q: To your knowledge, and in light of your experience and your position, did the
appearance of those articles indicate any reason why you shouldn't have permitted the award of the file cabinet contract?
A: We had nothing in our files to substantiate the article . .
The Court also
looked at GSA's actions in regard to the procurements without
awards and said
"Art Metal's bids on four
additional contracts--have been in 'what is probably described
as either status quo or suspended animation [for] a point in
time [which] has not been set'" 3
"GSA's managers candidly
state in their deposition that they have no intention of
awarding these or other contracts to Art Metal as long as that
company is 'being investigated' --a process they concede could
continue for an unspecified period of time." 4, 5
On October 6, 1978,
the Court issued a preliminary injunction, and found that GSA
had debarred Art Metal from contracting with them effective
August 24, 1978, without proceeding in the manner prescribed by
law and federal regulation. 6 The Court ordered
GSA to cease its unlawful acts, to reinstate the contract award
wrongfully terminated, and to allow Art Metal to bid, receive,
and maintain contracts in the same manner and under the same
standards applicable to other contractors.
On January 9, 1979,
the Court converted the preliminary injunction to a permanent
was partially correct when he told the Senate on September 19,
1978 that "The ugly and disgusting saga will further
unfold during the days ahead at GSA." In reality,
the saga continued for years into the future. In
Washington, once you are down, no one lets up on you until you