FTS' culture clash

A clash of cultures between General Services Administration officials in Washington, D.C., and the leaders of some of the Federal Technology Service field offices has led to increased tension and may have prompted the ongoing inspector general investigation into rule-breaking by some FTS employees.

According to sources close to the regional offices, some of whom asked not to be identified, officials in Washington have been asking the regions to send increasing amounts of revenue back to headquarters to cover the operating expenses of programs such as FTS 2001.

Some regional managers, notably former Region 10 manager Jim Swartwood, began to push back. That's when the entrepreneurial spirit, which had been the hallmark of the field offices, became cause for concern, sources said.

"When the battle started about who was going to get the money, you can't win against the central office," one source said. "People in the regional offices clashed with [FTS Commissioner Sandra Bates], and she replaced them."

The result of the pressure was that "clients were being stiffed" through higher fees, and the regional operating budgets were being held down so that more money could go to headquarters, said another source.

Swartwood, who stepped down from FTS over a year ago, declined to comment.

The first public signs of trouble with FTS surfaced in a 2003 inspector general's report on Region 10, which is based in Bremerton, Wash., and covers the Pacific Northwest and the Arctic. The report said that FTS employees had misused the Information Technology Fund to cover construction projects, among other improprieties.

Since then, the IG has found similar problems in two other regions and is evaluating the remaining eight regions. Preliminary reports are due in the summer, according to FTS spokeswoman Mary Alice Johnson.

"What [Bates] and her crew were doing, very logically, was to say, 'We're running a deficit here, let's shift the surplus over,' " another source said. "That would have been fine if they had been reasonable."

According to some sources, the effect of the tension between headquarters' and regional officials has created a climate of fear for some employees. There were implied threats that regions would be punished, or that managers would get unfavorable performance reviews if they did not accede to headquarters' demands, one source said, adding, "It was really ugly."

In the old days, under Swartwood, "Region 10 just boomed," said Sandra Green, chief executive officer and founder of

N-Link Corp., an IT outsourcing firm based in Bellevue, Wash. "They were like a for-profit business. They were out to find customers and serve those customers. They were in marketing and sales, and they relied on contractors as partners. It was a breath of fresh air to find a contracting agency that could be quick and responsive."

The regions have always been encouraged to be entrepreneurial and creative in marketing their services, but they have not been told to break the rules, said Dennis Fischer, a consultant at Grant Thornton LLP who served as FTS commissioner from 1997 to 2000. "When I was there, we always said, 'Grow the business responsibly,' " he said, but the emphasis was on growing the business.

The regional offices "were, in different degrees, aggressive and entrepreneurial, as you would expect when you had 11 separate organizations," he said. In some cases, "I concluded our folks were kind of complacent and I would push at them."

Fischer said that based on the IG reports that have been issued so far, he believes that some employees behaved inappropriately, but "the vast majority [of possible violations] that were examined were okay."

He declined to take a position in the conflict between headquarters' officials and the sources alleging pressure. "There was always sort of an endemic love/hate relationship between headquarters and the field," he said.

Employees at the regions take their responsibility seriously, a source said. "Contrary to what's been written," the source said, "the regional people have been very concerned about the taxpayers' money."

Sources said that employees who broke the rules may have done so because of the demand for revenue back in Washington, D.C. The IG report on Region 10 suggested that an entrepreneurial emphasis on developing business and increasing sales may have contributed, and Rep. Tom Davis (R-Va.) has expressed similar concerns.

Bates and other FTS officials deny having put any undue pressure on the regions to send money home. Both expected revenues and operating budgets are determined based on projections from the four business units that make up FTS — long-distance telephone, regional telecommunications, regional IT and national IT, Johnson said.

FTS' chief financial officer, Tony Tisone, will question projected revenues that seem unexpectedly high or low, she added.

The fee that customers pay to FTS is based on the projected operating expenses of the business unit, FTS and the larger GSA organization, Johnson said. In Region 10, sources said the fee in recent years was 4 percent. It could have gone lower, the source said, had headquarters' officials not asked for so much.

Officials also rejected the charge that the IG probe, launched last year after at least one Region 10 manager alerted the office to possible wrongdoing, had anything to do with disagreements between headquarters and the regions.

The IG's office was examining the regional offices anyway, Johnson said. In 2001, Bob Suda, assistant commissioner for IT solutions at FTS, asked the IG's office to prepare a report card on the regions as part of an annual audit plan, she said.

"FTS' overriding goal has been and remains to help agencies better serve the public by providing our customers with the most efficient, effective products and services at the lowest possible cost," Bates said in a written statement. "This is the driving force behind our operations whether at the regional or national level. As FTS commissioner, I have emphasized the importance of responsible growth as our high-

performing organization continues to grow and find new ways to serve our customers."

The cost of administering FTS 2001 has been steadily rising, from $19.2 million in fiscal 2001 to $25.4 million in fiscal 2004, according to FTS officials. Those numbers are direct program expenses and do not include indirect costs.

Green, who once worked closely with the Bremerton office, has moved most of her contracts to vehicles run by other agencies, she said.

The region's entrepreneurial spirit is gone, she said, replaced by contracting officers who act like "old biddy school teachers watching, dotting every i and crossing every t. All of the old-school contracting officers took hold, and as a result, GSA came to a halt," Green said. Now, "their revenues are going to be cut in half. Whatever their point is, the losers are the customers and the taxpayers."