Treasury pulls $1 billion TCE contract

The Treasury Department has terminated its controversial $1 billion, 10-year networking contract with AT&T Corp., bowing to the will of the Office of Management and Budget to shun departmentwide telecommunications contracts in favor of governmentwide vehicles.

Treasury notified the Government Accountability Office in a letter May 20 that it intended to terminate the Treasury Communications Enterprise contract with AT&T, said Dan Gordon, GAO associate general counsel and head of the bid protest unit.

"Treasury intends to use General Services Administration contracting vehicles to acquire the wide area network communications requirements delineated in Treasury's TCE solicitation," according to the letter from David Grant, head of Treasury's procurement office in the IRS.

AT&T said it still wanted to work with Treasury to develop its next-generation network. "With that in mind, we'll be awaiting further word on how it plans to proceed with this acquisition. We'll do what it takes to win this business again," AT&T said in a statement.

GAO had recently upheld the protests of five bidders for the contract [see WT story]. Treasury did not reveal an 11th-hour agreement with OMB and GSA that significantly reduced the possibility that Treasury would exercise options to extend the lucrative contract beyond the three-year base period. GAO recommended that Treasury revise its proposal and reopen the competition.

The agreement, signed on the eve of the award, put Treasury on a course to move to GSA's governmentwide Networx contract, which is to be awarded in 2006, when the contract's three-year base period expires in 2007. The Treasury Communications Enterprise contract contained seven option years.

Bidders who filed protests with GAO were contract incumbent Northrop Grumman Corp.; Qwest Inc. of Denver; Broadwing Communications Corp. of Columbia, Md., whose communications subsidiary, Broadwing Communications LLC, is based in Austin, Texas; Level-3 Communications Inc. of Broomfield, Colo.; and MCI Inc. of Ashburn, Va. Sprint Corp. bid for the contract but did not file a protest.

OMB has made it clear that it will steer agencies toward the Networx contract instead of letting them strike separate deals to modernize their networks. "We don't necessarily come out and say it's mandatory. What we say is that you have to have a good business case to show why you're not using the common solution," Karen Evans, OMB's administrator for e-government and IT, has said.

Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee, which has oversight over federal telecommunications issues, also has criticized Treasury for proceeding alone on a network deal.

In a March 22 letter to Treasury Secretary John Snow, Davis said he did not support agencies "erecting stovepipe infrastructure that too often are not interoperable" and asked him to drop TCE and support the Networx initiative.

If Treasury had followed his recommendation to use the existing GSA FTS 2001 telecommunications contract and work on Networx, "Treasury would likely have recorded immediate savings, met its short-term requirements and provided leadership to a most important governmentwide initiative," Davis said.