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From Suspended Animation to Debarment

by Robert Antonio

March 2000

 

"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 Services
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 article began 

"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 bidding."

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 debarment. 2    

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 was 

"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 hearings."

The Administrator's 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.

A:  No.

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?

A:  Yes.

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 injunction.   

The Administrator 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 are forgotten.

 
  1 Statement made before the Subcommittee on Federal Spending Practices and Open Government, Senate Committee on Governmental Affairs.

2 Art-Metal - USA, Inc. v. Solomon, 473 F. Supp. 1 (1978) 

3 Quoted material within the quotes is taken from deposition of the Commissioner of the Federal Supply Service.

4 At the direction of the Commissioner of the Federal Supply Service, all pending Art Metal contracts were referred to an Assistant Commissioner.  The Assistant Commissioner stated that he had not looked at the contract files since he had received them four weeks earlier and did not plan to look at them until another matter under deliberation had been completed.

5 Art Metal also claimed that GSA had ceased doing business with it under the contracts that it held.  In this regard, it noted that it received no purchase orders on existing contracts from August 24, 1978 to the date of this court case.

6 The current procedures for debarment and suspension are included in the Federal Acquisition Regulation Subpart 9.4.

Copyright 2000 by Robert Antonio
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