U.S. Removes Contract Ban Against WorldCom

The U.S. government Wednesday lifted a ban that prevented telephone and data company WorldCom Inc. from receiving lucrative federal contracts because of a massive accounting scandal.

The General Services Administration, which handles federal procurement, agreed to lift the suspension after the company agreed to several conditions for monitoring its business ethics and internal controls, conditions that would last three years.

WorldCom “really isn’t out of the woods yet. They still are tied very closely to us and our ability to monitor their business ethics and their internal controls,” said David Drabkin, deputy associate administrator for acquisition policy at the GSA.

If the company steps over the line, the agency could move quickly to suspend the company from government contracts again, Drabkin said.

The GSA in July suspended WorldCom, which offers telecommunications services to agencies such as the Defense Department, from gaining new contracts and extensions of existing ones while the agency reviewed whether a longer suspension was needed because of its lapses in ethics and internal controls.

The Ashburn, Va.-based company filed for bankruptcy protection in 2002 after revealing accounting irregularities that have amounted to $11 billion. WorldCom hopes to emerge soon from Chapter 11 as MCI Inc.

The timing of the federal decision was excellent for WorldCom. The government probably will extend a contract with WorldCom in which the company provides telecommunications services to various federal agencies. WorldCom earned about $395 million in the fiscal year ended Sept. 30 from the contract, which is set to expire Saturday.

The company, which receives about $1 billion in annual revenue from government contracts, implemented several reforms to get back in the government’s good graces, including appointing an ethics officer, giving its workforce ethics training and adding internal checks and balances.