Report: It’s Do or Die for Ogilvy

A government report issued last week is urging the Office of National Drug Control Policy to fire Ogilvy & Mather if the agency does not develop an accounting system that complies with government billing practices.

The shop’s accounting practices first came under scrutiny last September when a former employee told government officials the agency had hiked billable hours. Ogilvy has denied wrongdoing, attributing any discrepancies to its unfamiliarity with billing practices on a government account of that size.

The General Accounting Office, which released the 64-page report on June 26, has referred the situation to the Justice Department, which will determine if it should be handled as a civil or criminal matter, a source said.

A department representative could not be reached. The ONDCP said it agreed with the recommendations.

ONDCP’s contract with Ogilvy has annual renewal options. The next one is up in January.

The GAO report cites mismanagement on both the agency and client side in regard to the five-year contract, which has estimated bill ings of $684 million.

The report says the government “poorly managed aspects of the award and administration of the con tract” and should not have given the agency the account before determining if Ogilvy were capable of complying with government billing practices. Whether that determination was made is itself a source of the dispute among the government agencies involved in administering the contract.

The report states that when government officials interviewed some Ogilvy employees about hours added to their time sheets for the ONDCP account, “employees said they did not make those changes … and could not explain who made the changes and why.” The report said Ogilvy submitted an invoice for one freelancer’s hours that resulted in $11,000 worth of charges for 15.5 hours of work on the account, “an effective labor rate of $716 per hour.”

An attorney for Ogilvy said this particular invoice involved a freelancer and that the overall invoicing for that employee does not work out to $716 an hour. In the report, Ogilvy claims that its unfamiliarity with government accounting practices caused it to not only overbill, but also underbill the government on some portions of the campaign.

Ogilvy’s attorney said that the agency had its billing system in compliance with government accounting practices as of March and that it was waiting for the government to review and certify the system.

In a statement, Ogilvy said it accepts “full responsibility as a first-time government contractor for the fact that some of our accounting aspects did not meet the special record-keeping requirements imposed on federal contractors. We look forward soon to completing final discussions with the government moving ahead.”