Telecoms Fight GSA To Block Price Disclosures

Several of the country's largest telecommunications companies are quietly waging a legal battle with the General Services Administration to prevent the agency from disclosing their rates on government contracts.

The fight could have ramifications far beyond the telecommunications industry, because the companies are challenging requirements in the Federal Acquisition Regulations that federal agencies tell unsuccessful bidders the prices provided by the successful contractor.

The information would be considered public because of disclosure during debriefing, so it also would be subject to the Freedom of Information Act and could be released upon request to any individual or company.

AT&T Corp., Sprint Corp. and WorldCom Inc. all filed complaints beginning in April 2000 after GSA notified the companies that it intended to release the rates that each company had bid on a variety of federal telecommunications contracts. These contracts include the eight-year FTS2001 contract to provide long-distance and other services to federal agencies, recently estimated by GSA to be worth $2.3 billion, as well as the Metropolitan Area Acquisition contracts and the Access Certificates for Electronic Services contract.

GSA said it would release the information in response to a FOIA request, according to the AT&T complaint to the court, and that in future it would not notify the companies when pricing information is released.

In their complaints, the telecom companies asked the U.S. District Court for the District of Columbia to block disclosure of rates bid for future years in multiyear contracts. Other telecommunications companies, including Winstar Communications Inc., Verizon Communications and SBC Communications, have joined the primary plaintiffs in their complaints.

The companies argue in their court filings that release of the price rates will put them at a competitive disadvantage against other telecom companies.

"AT&T's concern is that [releasing the information] may have a chilling effect on companies wanting to submit proposals or pricing under this regulation, thus meaning less competition," said AT&T spokesman Wayne Jackson. "We believe it would have a counterproductive effect."

"Part of the impetus behind this suit is to try to protect the companies from cherry picking by their competitors," said Warren Suss, president of Suss Consulting Inc. of Jenkintown, Pa. The FTS2001 contract, won by Sprint and WorldCom for four years, plus four one-year extensions, is not a mandatory contract, he said.

Consequently, once the prices are revealed, agencies would be free to strike cheaper deals with other telecommunications companies.

A similar problem applies to the eight-year MAA contracts, which provide local voice and data services in cities around the country. While there is a one-year forbearance period, during which other telecom firms cannot compete for MAA business, agencies can consider other providers once that period ends.

The six-year ACES contract, which was won by AT&T but not the other telecommunications companies, is a public-key infrastructure contract with AT&T and two other vendors competing for task orders. Again, AT&T argued in its complaint that releasing its pricing information for the out years would give the other vendors a competitive advantage in bidding on the orders.

Also, if prices are revealed, their commercial customers will try to use that information to negotiate lower prices for themselves, Suss said. The telecom companies are saying to themselves, "If we really open up the kimono and allow everybody to see [the prices], it would erode our profitability," he said.

The federal government has always had some disclosure requirements for its contracts. However, this conflict arose from changes made in September 1997 to the acquisition regulations. Then, the Justice Department made it clear that "the unit prices of each award are to be disclosed to unsuccessful offerers during the post-award notice and debriefing process and, most significantly, are also to be made publicly available upon request," according to a summary that Justice released in its FOIA newsletter that fall.

A GSA spokesman said he could not comment on the litigation, but the GSA's response to the AT&T complaint stated that the regulations were changed according to law and do not violate either exemptions in the FOIA law or the provisions of the Trade Secrets Act because they were modified legally.

"They're battling over something that's one of the most controversial issues in government contracts, and that's the release of competitive information. The law is still unsettled," said Jim Fontana, vice president and general counsel for Getronics Government Solutions LLC, in McLean, Va. The revised regulation made it "quite clear" that unit prices may be released if it is practical, he said.

It is unclear whether other companies outside the telecommunications industry have similar concerns about possible disclosures by the GSA. A search of district court records turned up no indication that companies in other industries have filed similar complaints.

Not all telecommunications companies who hold government contracts are fighting the GSA over disclosure. Jim Payne, senior vice president of Qwest Corp.'s government systems division, said his company holds several MAA contracts but did not jump into the legal battle because he thinks the prices should be made public.

Payne said the fight is to keep smaller competitors out of the federal market.

"What you have here is that all the insiders have all the inside information they need," he said. "The outsiders [such as Qwest] won't get this information."

"This is very high stakes stuff," Fontana said of the legal battle. "GSA felt compelled to release it, so they said they were going to release it. If they had turned down the request, they would have faced a FOIA lawsuit."

The WorldCom and Sprint complaints are moving forward. The judge in the case has placed the other complaints on hold on the grounds they cover the same legal issues as the Sprint and WorldCom cases.

A Sprint spokesman wouldn't comment on the case but said the company anticipates a ruling in April.

A WorldCom spokesperson also declined to comment.