GAO washes hands of Defense networking deal

The General Accounting Office has dismissed protests of a controversial networking contract award to WorldCom Inc., deciding it should not get caught up in the legal maneuvers surrounding WorldCom's alleged financial misconduct and other potential legal woes.


The governmental watchdog agency decided "the totality of circumstances make it inappropriate ... to review this matter." The decision was released Oct. 9.


The protests were filed in July by Sprint Communications Corp. of Westwood, Kan., and Global Crossing Ltd. of Bermuda over the April 4 award to WorldCom of the Defense Research and Engineering Network contract.

Under the 10-year, $450 million contract, called DREN, WorldCom will provide telecommunications services to more than 6,000 scientists and engineers at Defense Department laboratories, test centers, universities and industrial sites.


On the heels of WorldCom's filing for bankruptcy protection June 25, Global Crossing and Sprint argued that WorldCom had materially misrepresented its financial condition during the evaluation process, which contributed to DISA's selection.


GAO agreed with those allegations, but said "it appears that the agency had no knowledge of the inaccuracies in WorldCom's financial statements until after award, thus making this matter more one of contract administration ... rather than a protest of the agency's award decision."


Dan Gordon, GAO associate counsel, said there were several factors that led the agency to conclude it would be prudent to decline making a decision. Among them: the ongoing criminal and civil investigations of WorldCom's alleged financial improprieties, and the extreme lateness of the protests, which were filed more than two months after the award.


GAO also said DISA has its own authority to address the alleged improprieties and suggested the agency "may wish to consider whether it needs to take further action to protect the government's interests in connection with this procurement."


When asked about the possibility that DISA would consider further actions, a DISA spokeswoman said WorldCom "is satisfactorily performing the DREN contract," and that the best interests of the government are served by WorldCom's continued performance.


A Sprint spokesman said the company is disappointed with the outcome. "The document makes for interesting reading, in that it acknowledges unusual circumstances," the spokesman said. "We only have a determination that the matter was not appropriate for review by the GAO, and we're presently reviewing this to determine our course of action."


Global Crossing spokeswoman Catherine Berthier said: "We are reviewing the decision and evaluating the possibility for further action on our part."


The DREN contract has been mired in controversy for more than a year. It was awarded twice to Global Crossing and withdrawn, first in the face of multiple protests, then when the company asked the agency to delay the announcement as it filed for bankruptcy just days later.


"We continue to maintain that our financial stability is superior to that of [WorldCom], as we are well along in the process of emerging from Chapter 11 protection," Berthier said.