Air Force cancels suspension of FedBid

FedBid and the Air Force came to an agreement to end the reverse auction company's stay from bidding on new contracts. FedBid must implement and maintain a code...

The Air Force has lifted its suspension of reverse auction vendor FedBid after more than three weeks.

The Air Force and FedBid announced today that they had reached an administrative agreement to end both the suspension and debarment proceedings as long as the company continues to “maintain the business honesty and integrity required of a government contractor and that the company operates in strict compliance with all applicable laws, regulations and terms of its governance contracts and subcontracts.”

Joe Jordan, FedBid CEO, said in a statement his company demonstrated that it took the allegations seriously and took actions to remediate any concerns.

“We appreciate U.S. Air Force officials moving expeditiously on their review and consideration,” Jordan said. “We will continue to work with USAF, within the terms of our administrative agreement, to ensure the highest possible commitment to the integrity and transparency of our operations and our entire FedBid team.”

While the Air Force lifted FedBid’s suspension, it has not changed its plans to propose former FedBid CEO and founder Ali Saadat for debarment.

In fact, in the agreement, the Air Force instructs FedBid not to have anything to do with Saadat.

“To the extent Mr. Saadat has business relationships, either directly or indirectly, with FedBid, including in his capacity as consultant to EPS Commerce, Inc., a wholly-owned subsidiary of FedBid, those business relationships shall be reflected in arm’s length arrangements that do not provide in any manner whatsoever for Mr. Saadat to control or to influence either the day-to-day or long term operation or management of company during the term of this agreement,” the agreement stated. “To ensure Mr. Saadat is unable to exercise control over FedBid through stock ownership or otherwise, the proxy and voting agreement executed on Feb. 12, 2015 shall remain in effect for the duration of this agreement or until Mr. Saadat is no longer suspended, proposed for debarment or debarred.”

FedBid said it accepted the resignation of former chairman of the board Saadat on Feb. 5.

The Air Force initially suspended FedBid and proposed them for disbarment on Jan. 26 after taking the lead in the governmentwide review of the company’s actions highlighted by the Veterans Affairs Department’s inspector general reports from September.

In one of those reports, the VA IG found a tawdry tale of alleged procurement fraud, lies to investigators, retaliations against whistleblowers and misuse of agency resources.

The IG found FedBid promised to pressure Jan Frye, VA’s deputy assistant secretary in the Office of Acquisition and Logistics after he suspended the use of reverse auctions twice — once in March 2012 and again in December 2013. The IG found FedBid said it would “‘storm the castle,’ use a ‘heavy-handed- puncher,’ to ‘rally the troops up on the Hill,’ have ‘enough top cover to overwhelm,’ to ‘unleash the hounds,’ to ‘assassinate [Mr. Frye’s] character and discredit him,’ and to keep ‘close hold’ of nonpublic information Ms. Taylor provided FedBid executives, as well as repeatedly and falsely tell VA leadership that there was ‘no cost to VA for its use of FedBid,’ all for the ‘indomitable world of FedBid.'”

The interagency suspension and debarment committee asked the Air Force to take the lead in the investigation. The service’s suspension and debarment official decided enough evidence existed to suspend FedBid and propose them for debarment.

Over the last three weeks, the Air Force and FedBid have negotiated a way out of the suspension. FedBid, before the suspension hit, reorganized and split into two companies on Jan. 1, one focusing on federal business and one on commercial business. Jordan was named CEO of the federal business and the executives in the middle of the VA scandal, Ali Saadat, the founder and former CEO of FedBid, took over the commercial company.

FedBid also said it took specific actions to ensure integrity and lawfulness of its business practices, including hiring the law firm Arnold and Porter to assess the situation and make recommendations.

Under terms of the agreement with the Air Force, FedBid said it would institute, maintain and improve an information and education effort designed to assure all employees are aware of laws, regulations and standards of business conduct.

“Training consists of at least one hour of annual, scenario-based ethics training to all employees taught by management, compliance training as needed, plus at least one hour of initial ethics and compliance training for every new employee,” the agreement stated. “If this education effort is updated or enhanced during the period of this agreement, FedBid will provide descriptions of the enhancement and copies of training materials to the Air Force.”

The Air Force also wants FedBid to maintain a code of conduct, circulate it to employees and within 30 days have all of them sign it. Employees will be required to re-read and sign the code of conduct annually.

FedBid also will establish a 24-hour ethics hotline and will notify employees of the hotline.

Finally, FedBid also shall hire a third-party auditor to monitor its compliance and ethics programs, and ensure Saadat doesn’t exercise influence or control over the company. For the first 12 months of the agreement, FedBid’s third part auditor shall submit monthly reports to the company and the Air Force describing measures taken by the company to ensure compliance.

FedBid’s statement said it has implemented recommendations from Arnold & Porter, including appointing a chief compliance officer. All employees have been counseled and signed a code of business ethics and conduct, and it has created an ethics and compliance steering committee, which includes the chief compliance officer and the CEO, with responsibility to oversee and implement changes in FedBid’s ethics and compliance program, policies and training.


Air Force suspends, begins debarment process of FedBid

VA IG unwinds tale of procurement fraud, abuse involving senior agency officials, FedBid

FedBid splits into two, names Jordan CEO of new public sector company

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