Company says it was unaware of change to Treasury telecom deal

Telecommunications company Sprint Corp., which lost a recent bid to run a major telecom network for the Treasury Department, was not informed about a potential change to the department's procurement plans until after the contract was awarded to a rival company, a Sprint spokeswoman said Tuesday.

Treasury last week tapped AT&T Corp. to run the Treasury Communications Enterprise, or TCE, a deal potentially worth $1 billion to provide telecom services and support across the department. But following the public announcement of the award, Sprint learned that Treasury had reached an agreement with the General Services Administration to consider using a telecom contract that the agency plans to award next year.

The agreement, known as a memorandum of understanding, was brokered among Treasury, GSA and the Office of Management and Budget. "We were not informed about the [memorandum] until after the TCE award was made," said Stephanie Taliaferro, the Sprint spokeswoman.

Taliaferro said a Sprint representative first heard about the agreement at a telecom industry event last week, when Rep. Tom Davis, R-Va., the chairman of the House Government Reform Committee, spoke about it in public comments. The committee oversees the government's purchase and use of telecom, and Davis has advocated using GSA's planned telecom contract, known as Networx, to procure telecom services for agencies throughout the government.

The memorandum could represent a material change to the TCE procurement, according to telecom industry sources and experts who are following the procurement. If Treasury officials didn't notify the bidders that its future telecom strategy had changed, and if those companies weren't given the chance to modify their proposals, it could prompt protests of the award, because the bidders would have calculated their offers assuming that Treasury would continue using TCE for the set length of the contract, which is 10 years, the sources said.

Three companies have protested the TCE award, and more are expected to follow. Northrop Grumman Information Technology, Treasury's current telecom provider, filed a protest on Dec. 10 with the Government Accountability Office. Qwest Government Services Inc. and Broadwing Communications LLC followed suit three days later.

A Treasury spokeswoman, Brookly McLaughlin, didn't respond to Sprint's statement and declined to comment on the memorandum. However, a spokeswoman for GSA confirmed that it was signed on Dec. 2. The TCE award was publicly announced the following day.

The agreement states that once GSA awards Networx, presumably in 2005, the agency will work with Treasury to conduct a "best value analysis" to determine if exercising an option to extend TCE is in the best interest of the government, said Mary Alice Johnson of GSA.

Despite Sprint's contention that it wasn't informed of Treasury's future plans while it was preparing its bid, the company has decided not to protest the TCE award. "We were disappointed in the award disposition and are not surprised that someone is protesting," Tony D'Agata, the vice president and general manager of Sprint Government Systems Division, said in a statement. "We…would look with interest in [the GAO's] ruling."

D'Agata noted that Treasury only sought one round of offers from bidders. While the department reserved the right to do so, experts said that not seeking subsequent offers and modifications could have cost the government money, because those offers can result in lower prices and enhanced services.

"To not have discussions or a 'best and final offer' on a large program like TCE does not appear to be in the government's best interest," D'Agata said. "It was obvious that industry did not interpret the requirements in the same manner."

A spokeswoman for Qwest, while declining to comment on the memorandum, said, "The requirements [of the TCE contract] changed during the analysis period."

Calls to Broadwing went unanswered, and a Northrop Grumman spokeswoman was unable to respond to questions about the company's protest in time for publication.