WorldCom wins DREN bid
Controversial contract gives struggling firm a shot in the arm<@VM>A coup de grace for Global Crossing
- By Patience Wait
- Apr 11, 2002
"If I were WorldCom, I would be spinning this to the analysts right now ... as some kind of imprimatur from the federal government that, 'See? We're hunky-dory.' " | Lisa Crawford, president of the Crawford Group, a telecommunications consulting company
With its capture of the controversial $450 million Defense Research and Engineering Network contract, WorldCom Inc. won some much-needed bragging rights in the telecommunications market.
"This is really good for WorldCom. This is the kind of business all the major carriers are fighting over. [It's] a statement on their digital capabilities," said Rex Mitchell, a telecommunications analyst with BB&T Capital Markets in Richmond, Va. "This is a prize worth getting, even besides the direct revenue. WorldCom can use it to say, 'We're still the digital leader.' "
The Defense Information Systems Agency awarded the 10-year, $450 million contract on April 4 after numerous delays, including protests and contract extensions.
The award came the same week WorldCom of Clinton, Miss., announced it was laying off 3,700 employees. In March the Securities and Exchange Commission asked for information on its finances. And the company's stock price, which had a 52-week high of $21.52, is now trading in the $6.10 range.
Lisa Crawford, president of the Crawford Group, a telecommunications consulting company based in Washington, said the win is very important for WorldCom. "If I were WorldCom, I would be spinning this to the analysts right now ... as some kind of imprimatur from the federal government that, 'See? We're hunky-dory,' " Crawford said.
WorldCom spokeswoman Natasha Haubold said she did not know when the contract would be switched to WorldCom from AT&T Corp., the current service provider.
DISA representatives did not return messages asking for comment.
A major question remaining now is whether any of the losing bidders will protest the award. "Losing bidders have 10 days from the time they identify a protestable event," Crawford said. "To facilitate the process, they should be getting debriefings scheduled as quickly as possible."
The DREN network, which provides long-haul communication service for more than 5,000 users of the Defense Department's high-performance computing network, has been a source of ongoing controversy. It was awarded in July 2001 to Global Crossing LLC, Hamilton, Bermuda, but DISA withdrew the award less than two weeks later, after all four of the losing bidders filed protests.
AT&T of New York, Qwest Communications International Inc. of Denver and Sprint Communications Corp. of Westwood, Kan., also vied for the contract.
DISA invited the five bidders to recompete. Washington Technology learned that the agency planned in January to re-award the contract to Global Crossing. However, sources close to the process said the company told the agency in late January it should hold off on the announcement, because the company was going to release news of its own that would be "of material importance." On Jan. 28, Global Crossing announced it was filing for bankruptcy.
Once Global Crossing's financial situation became known, the original contract award came under scrutiny. On March 12 the House Energy and Commerce Committee sent Global Crossing a series of questions concerning its overall financial reporting, including several questions regarding the DREN award.
In the meantime, DISA twice requested bid extensions ? after Global Crossing's Jan. 28 announcement and again in February ? and asked all the companies to provide additional financial information.
Global Crossing representatives would not say whether the company would file a protest over losing the contract a second time.
"We are still studying the letter that we received from the Department of Defense," said Global Crossing spokesman John Schmidt. "While we are naturally disappointed that the DREN contract went to another provider, we proudly continue to provide world-class communications support to government agencies in the United States, Europe and the United Kingdom."
Industry observers say incumbent AT&T, which in 1997 won the DREN contract for five years, was also stung by the loss. DISA gave AT&T a bridge contract following last summer's fiasco, so the current system would stay up and running.
AT&T declined to comment on the award.
Sprint spokesman John Polivka said that while his company is sorry it lost the contract, he did not think protests were inevitable.
"I think everyone's going to move forward," Polivka said. "We're disappointed, but we did provide an attractive proposal and we understand the decision was close. We probably will [request] a debriefing ? it's always helpful to have one."
Jim Payne, senior vice president for Qwest's government solutions unit was philosophical about losing the award.
"This has just been the most incredible ride I've ever been involved in," Payne said. "Qwest is ... disappointed, but we didn't think it was our turn. We sensed this from the beginning."Staff Writer Patience Wait can be reached at email@example.com.
It was Global Crossing LLC's financial failings, not managerial or technological problems, that ultimately led the federal government to award the Defense Research and Engineering Network contract to WorldCom Inc., said the man responsible for guiding Global Crossing's proposal to fruition.
"If you go down in competition, it should be hostile fire that brings you down. For us, it was the bullets coming from behind," said Tony George, the former program director for Global Crossing's DREN team. "We could not prove our ability to perform financially."
The original decision by the Defense Information Systems Agency in July 2001 to award the $450 million DREN contract to Global Crossing appears to have been based on a straightforward assessment that the company submitted a superior technical solution at the lowest price, according to sources familiar with the composite ratings prepared by DISA.
After the award, some questioned whether Global Crossing's corporate connections to high-ranking Democrats and Republicans helped the company win the contract. However, the technical assessment ? the most important consideration in evaluating proposals ? was conducted by staff from the Defense Department's High Performance Computing Modernization Office, the end user of the DREN system, not by DISA.
Of the five proposals submitted for last summer's competition ? from Global Crossing, WorldCom, AT&T Corp., Sprint Communications Corp., and Qwest Communications International Inc. ? WorldCom came in second to Global Crossing on both performance and price considerations.
George dismissed allegations that the company could not meet security requirements. He said he was AT&T's team leader on its successful bid for the first DREN contract, awarded in December 1995, and that Global Crossing had put together a team of subcontractors, including Computer Sciences Corp., which had been working with AT&T on the original contract, to meet the security requirements.
George said much of the credit for the win should go to Jim Cook, the design architect for the Global Crossing proposal, for crafting a superior solution for a company new to the field of government contracting.
In the second round, when the government asked the five competitors to recompete for the award, George said changes to the specifications were not made to assist Global Crossing but to provide guidance for the other companies.
"Modifications to the statement of work were not changes ? they were an effort by the government to give sight to the blind," George said. "It was clear that three of the respondents didn't understand the requirement, just as it was clear that Global Crossing and WorldCom did."
After the contract was recompeted, DISA decided again to award DREN to Global Crossing, George said, but the company suggested the agency put off making the announcement because of the company's financial crisis. DISA subsequently decided to award the contract to WorldCom.
Now Global Crossing's government group has been effectively disbanded, George said. Paul Kayatta, the president of the group, left to take the presidency of McLean, Va.-based Pragmatics Inc., effective April 1. George, Cook and the DREN team have also left.