Despite proposed debarment, MCI sees itself a contender

The General Services Administration's proposed debarment of WorldCom Inc. from future government work has caused a stir in the systems integration and the telecommunications service provider communities. But despite the threat of being ousted, the company remains optimistic about its future in the federal space.

On July 31, GSA proposed barring WorldCom from pursuing future federal contracts, stating concerns that the company lacked the necessary internal controls and business ethics to meet federal standards of conduct for contractors.

Ashburn, Va.-based WorldCom, which operates under the brand name MCI, has 30 days to challenge the decision. It has stated it will not challenge the decision, but rather will work to address the concerns.

WorldCom is in bankruptcy and under investigation by the Securities and Exchange Commission. It expects to emerge from bankruptcy in October.

WorldCom spokeswoman Natasha Haubold said WorldCom can still bid for select federal contracts. The terms of the proposed debarment stipulate that agencies may not consider bids from the company unless there is some compelling reason to do so, therefore the company can bid on those contracts that it is uniquely qualified to execute.

"We will continue to bid on government contracts," Haubold said. "We anticipate we will not win some government contracts, but we will continue to be a contender in the marketplace."

Haubold said the company is taking measures to meet the GSA standards. "We are accepting GSA's concerns, and working to address those very quickly," she said.

The company is putting all 55,000 employees under ethics training and is hiring an additional 400 people to tighten its accounting controls.

The company's government unit also will continue to serve its existing client base, although it is doubtful if agencies can exercise options for additional years, said Ray Bjorklund, vice president of market intelligence with Federal Sources Inc., a McLean, Va., research and consulting firm. There is some gray area, however, that exercising an option may lead to scrutiny by contracting officials and oversight agencies.

GSA has estimated that MCI WorldCom is doing about $700 million to $1 billion in federal business for fiscal 2003. The company ranked at No. 8 on Washington Technology's 2003 Top 100 list.

It also holds a spot on GSA's Federal Technology Service contract, FTS 2001, a comprehensive domestic and international telecommunications services deal. In November 2002, GSA extended the WorldCom contract for one additional year.

Warren Suss, president of IT consulting company Suss Consulting Inc., Jenkintown, Pa., said the debarment will change dramatically the competitive landscape for other service providers. For instance, as WorldCom's FTS contract finishes at the end of the year, agencies will look to other providers to fill the gap until the GSA's follow-on contract to the FTS is issued in 2005. Much of WorldCom's federal business is done through FTS -- $500 million annually, according to Suss.

"This really changes the competitive mix. The leading provider is crippled. The new players can't enter the fray. It's a giant win for AT&T, Qwest and Sprint," Suss said.

WorldCom is not the only company under scrutiny. The GSA's inspector general also recommended that Sprint Corp., Overland Park, Kan., be considered for debarment. The action against Sprint is based on its June settlement of a whistleblower lawsuit, which alleged the company had overcharged the government for long-distance services under the FTS 2001 contract.

Sprint officials said that the recommendation is unfair, especially when compared to the actions that got WorldCom into trouble.

"We think this is outrageous to link the settled billing error to more than $11 billion in fraud that was perpetuated by MCI," said Steve Lunceford, a spokesman for Sprint's government services unit.

Staff Writer Joab Jackson can be reached at

jjackson@postnewsweektech.com. Staff Writer Patience Wait contributed to this story.