Treasury ends telecommunications contract

The Treasury Department is terminating a telecommunications contract with AT&T Corp. that was beset by controversy and criticized by an influential member of Congress.

In a May 20 letter to the Government Accountability Office, Treasury's procurement director said the department would end the contract, known as the Treasury Communications Enterprise, which was slated to run the department's vast telecom system and its secure networks. Instead, the department will use contracts with the General Services Administration to acquire wide area network communications, said David Grant, the director of the Office of Procurement.

The TCE contract was embroiled in controversy from the moment it was awarded in December. Losing bidders protested, some alleging that Treasury had materially altered the requirements of the contract. It was later revealed that Treasury had signed a memorandum of understanding with GSA that said the department would consider moving off TCE and onto a telecommunications contract called Networx, which GSA has yet to award.

GAO auditors found that the agreement materially changed the requirements of TCE, which was envisioned as a multiyear contract. The losing bidders were not told of the memorandum's existence and were not asked to submit modified offers to their proposals, according to the watchdog agency.

The memorandum also attracted attention because it was signed by David Safavian, the head of the Office of Federal Procurement Policy. It's unusual for OFPP administrators to get involved in individual agency contracting decisions. Some previous administrators have interpreted the law creating the position as prohibiting their involvement with any procurement activities at the department or agency level. The memorandum was also signed by Karen Evans, the administrator for electronic government at the Office of Management and Budget.

While Grant, the Treasury procurement director, didn't specify which GSA contracts would be used, it seems likely the department will go with Networx, since it is designed to be a central telecom procurement for federal agencies. Networx has the backing of House Government Reform Committee Chairman Tom Davis, R-Va. Davis was sharply critical of Treasury for attempting to set up its own telecom contract.

In March, Davis wrote to Treasury Secretary John Snow saying the department should "put aside TCE and work toward a Networx strategy." Davis said TCE and systems like it cost more and were less efficient than a central telecom system.