Ogilvy earlier agreed to some unusual requirements, including that it hire an "ethics adviser." Even so, the legislators and some losing agencies maintained Ogilvy's earlier billing problems, which prompted it to settle civil accusations for $1.8 million and left the shop open to a continuing criminal investigation, should have led the government to award the account elsewhere.
Losing agencies declined to comment on whether they will make formal protests. This week, the losers will be told by the U.S. Navy, which picked Ogilvy, why they were not chosen. Losing bidders have five days after being briefed to file a protest, which could put the award to Ogilvy on hold for months.
Contenders included Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, New York, pitching with Initiative Media; Interpublic's McCann-Erickson Worldwide, New York, pitching with Universal McCann; Cordiant Communications Group's Bates Worldwide, New York, pitching with Zenith Media; and Publicis Groupe's Saatchi & Saatchi, New York, also pitching with Zenith. Zenith is owned by Cordiant and Publicis.
The furor extended to Congress, where panels of the House and the Senate demanded explanations and a panel of the Senate Appropriations Committee cut the program's budget to $100 million from the $180 million requested for the fiscal year starting Oct. 1. Only a portion of the money goes for media, but the media campaign alone is normally worth slightly less than $145 million annually. Ogilvy does research and planning for the effort with most advertising coming from the Partnership for a Drug-Free America.
The panel's chairman, Sen. Byron Dorgan, D-N.D., said the Senate might be willing to restore the funding in conference committee but warned he may take additional action against Ogilvy as soon as this week as the legislation moves through the Senate Appropriations Committee. He declined to say whether he will add language that would require the contract to be rebid. At the hearing, Sen. Dorgan said he had "great heartburn" about retaining Ogilvy. He accused the office of weighting proposal evaluations to lessen the impact of past performance.
The Navy said Ogilvy agreed to appoint an ethics adviser in connection with its earlier settlement. A Navy spokesman said: "The agreement requires Ogilvy to appoint an ethics adviser responsible for reporting violations related to government contracts, establish a hotline for reporting misconduct, submit to external audits of their accounting system and time sheets, institute employee training and develop a written code of conduct."
Ogilvy had no comment on reaction to its win or the appropriation cuts other than, "We are in compliance with all the rules and regulations as certified by the Navy."
In the House, Rep. Mark Souter, R-Ind., chairman of a panel of the Government Reform committee, demanded the Navy provide all documents related to the award to the committee for evaluation, while an angry Rep. Bob Barr, R-Ga., demanded a meeting of the full committee to discuss the award. He called the award "an affront to the U.S. taxpayer."
The latest appropriation moves are likely to leave funding for the program up to a House-Senate conference committee. The House Appropriations Committee had earlier cut funding to $170 million. A drug-office spokesman said the office is still hoping for the full amount.
Ad agencies were also angry about the award. An agency executive who asked not to be identified said at least one of the four other bids received varied "less than 1%" from the $151,913,165 cost-plus-fixed-fee annual contract awarded to Ogilvy. The government said Ogilvy's bid offered the best value, but declined to say if it was the lowest or explain Ogilvy's selection until the protest period passes.
"Ostensibly, there was a pitch because it appeared Ogilvy had done something inappropriate. If that was the case, why were they even in the pitch?" said an executive from one losing shop.
contributing: lisa sanders