Procurement policy chief signed off on Treasury telecom contract agreement

The government's chief procurement policymaker signed an agreement with officials from two federal agencies about how the Treasury Department will procure telecommunications services from the private sector, according to an administration official.

David Safavian, the administrator of the Office of Federal Procurement Policy, signed a memorandum of understanding with officials from the Treasury Department and the General Services Administration. The memorandum states that Treasury, at the end of the second year of a recently awarded telecom services contract, will decide whether to renew the contract or let it expire and buy the services instead from a contract overseen by GSA, according to the official, who is familiar with the issue and asked not to be identified.

The memorandum states that Treasury and GSA will study whether it is cheaper for Treasury to continue buying telecom services on its own after the second year of its Treasury Communications Enterprise contract, the official said. If the agencies determine that Treasury should use a new GSA contract called Networx, which the agency plans to award in 2005, Treasury would complete the third year of TCE's base period but wouldn't exercise any renewal options, the official said. Under the terms of the contract, Treasury could extend TCE up to seven additional years.

The administration official explained that Safavian signed the memorandum because agencies are moving toward a centralized method for buying telecom services from GSA. "Governmentwide, we're moving toward a telecom contract," the official said, referring to Networx. "Any individual contracts, in the short term, we want to make sure are consistent with that overall move."

It's unusual for OFPP administrators to get involved in individual agency contracting decisions. Some previous OFPP administrators have interpreted the law creating the position as prohibiting their involvement with any procurement activities at the department or agency level.

The law states that the OFPP chief cannot "impair or interfere with the determination by executive agencies of their need for, or their use of, specific property [or] services…" The administrator also cannot "interfere with the determination by executive agencies of specific actions in the award or administration of procurement contracts."

The administration official, though, said Safavian's involvement wasn't related to the specific procurement in question. He was never informed which company would win the TCE contract, and he sat in on only one meeting with Treasury and GSA officials.

Safavian's involvement reflected "broader policy, rather than specifically telling Treasury to contract with a specific vendor," the official said. "OFPP's role here is not with regard to the specifics of this particular contract." Treasury awarded the contract to AT&T Corp.

Treasury has refused to release the memorandum of understanding. The telecom contract is under protest by several of the losing bidders, and typically procurement-sensitive documents aren't released during the protest process. However, Treasury officials haven't said whether the memorandum is procurement-sensitive.

The TCE contract has aroused controversy. Earlier this month, Treasury selected AT&T to manage its telecom infrastructure, a piece of business potentially worth more than $1 billion. But soon after, other bidders protested, and some indicated that they felt their proposals weren't evaluated properly. Five companies now have protested the TCE award: Northrop Grumman Information Technology Inc., Broadwing Communications LLC, Qwest Government Services Inc., Level 3 Communications LLC, and MCI WorldCom Communications Inc.

The memorandum could be pivotal to the protests, sources said. If the bidders hadn't been notified that Treasury's future telecom strategy had materially changed, and if they weren't given an opportunity to respond with modified proposals, that could provide grounds for protest.

If the bidders based their pricing on the assumption that Treasury would exercise all the renewal options, or at least that the department didn't have a plan to consider ending the contract after three years, they presumably would have reevaluated their bidding strategy.

Treasury officials only sought one round of offers, a move that has inspired criticism from telecom experts, who said that it's rare not to seek multiple rounds of offers for a procurement as technically complex as TCE.

Treasury has drawn criticism for buying telecom services on its own rather than moving toward GSA. House Government Reform Committee Chairman Tom Davis, R-Va., whose panel oversees federal telecom procurement, has chastised the department in public comments, and has said that GSA should become the central telecom buyer for federal agencies.

In addition to Safavian, Karen Evans, OMB's administrator for electronic government and information technology, signed the document, the administration official said. Evans signed because her office wants to ensure that federal telecom systems have consistent standards for security and interoperability, the administration official said.