The General Accounting Office last week denied a bid protest by Qwest Communications Inc. over a contract awarded to AT&T for the government's long-distance phone service. In December 2000, the General Services Administration issued a one-time payment of $8 million to AT&T to continue long-distance service under the FTS 2000 contract. Qwest immediately filed a protest with GSA, charging that contract was awarded unfairly because it was not competed. The bridge contract allows AT&T to provide long-distance service while agencies switch from FTS 2000 to FTS 2001. FTS 2000 is the predecessor to FTS 2001, awarded in December 1998 and January 1999 to Sprint and MCI WorldCom, respectively. AT&T claimed the $8 million was required to keep its long-distance network up and running to serve federal customers during the transition to the new contract. But Al Olson, assistant commissioner of GSA's office of acquisition, said that officials from AT&T told him that if the company wasn't paid, it would cut off the government's phones. A Qwest senior executive balked at the AT&T bridge contract. "It was blackmail," said Jim Payne, vice president of Qwest's government systems division. Payne said GSA's willingness to pay an amount that other industry experts say is exorbitant "reveals an incredible naïveté" on the part of the agency and its ability to successfully negotiate the $11 billion FTS 2001, one of the largest non-defense contracts in history. Agencies were supposed to make a transition from FTS 2000 to FTS 2001 by Dec. 2000, but the process is more than a year behind schedule and has cost the government $74 million in lost savings, according to a March GAO report
. AT&T's bridge contract expires this December, and GSA has said it will not renew it. Testifying before the House Subcommittee on Technology and Procurement Policy in April, John Doherty, vice president of AT&T government markets, said the government's payment would have been higher had AT&T charged the total cost it incurred maintaining the system. "We looked at the balance of upsetting the agencies and their budgets, etc., so the number was much lower than it would have been," Doherty said. GSA dismissed Qwest's protest last March. The company re-filed with GAO, which Thursday dismissed the protest again, finding that Qwest couldn't provide long-distance service in all 50 states as required by FTS 2001. Qwest is classified as a Bell Operating Company due to its acquisition of US West last year and is prohibited from providing long distance in 14 states. Agencies can now buy long-distance and data services under FTS 2001 at drastically reduced rates-an average of 3 cents per minute for long distance, according to GSA. GAO reports that agencies still operating with AT&T under the FTS 2000 bridge contract risk seeing their long distance rates shoot up to $1.00 per minute or more by year's end. For more than two years, GSA has urged all agencies still using AT&T for long distance to switch to FTS 2001 providers. Sandra Bates, commissioner of GSA's Federal Technology Service, which manages the contract, said the transition is 99 percent complete. AT&T did not return calls to comment on GAO's decision.