GAO sustains protest of Treasury telecom contract

The Government Accountability Office has upheld several protests of a telecommunications contract recently awarded by the Treasury Department, a GAO official confirmed Thursday, dealing a setback to the department's plans to manage its giant telecom apparatus, and potentially buoying a rival contract managed by the General Services Administration.

Six firms protested Treasury's December 2004 award of the Treasury Communications Enterprise to AT&T Corp. The protests were fueled in part by a memorandum of understanding that Treasury reached with GSA, before the contract was awarded, whereby the department would agree to reevaluate its telecom needs and consider moving over to a GSA contract at a later date.

That memorandum, obtained by Government Executive in January, showed that the two agencies agreed to closely cooperate on the development of their contracts, sharing such information as pricing and technical requirements, in an apparent effort to make the contracts more compatible.

Not all the companies bidding on the Treasury contract were notified of the memorandum, which could have constituted a material change in the contract. Bidders also complained that they were not given the opportunity to submit revised offers after the first round of proposals, which is customary on a contract of that size. The Treasury Communications Enterprise potentially is worth $1 billion.

Dan Gordon, associate general counsel at GAO, confirmed that all of the companies' protests were sustained. Gordon didn't discuss the details of GAO's decision, but he said the agency planned to release more information in coming days. There were indications that the contract would be re-competed, but a Treasury spokesperson couldn't be reached for comment. The protest decision does not cancel the award to AT&T.

Treasury's plans to procure telecom on its own, rather than use GSA's Networx contract, which is scheduled to be awarded next year, drew criticism from House Government Reform Committee Chairman Tom Davis, R-Va., who has said he favors Networx as the "backbone" of the federal government's telecom infrastructure. A spokesman for Davis' committee said the congressman played no part in the crafting of the agreement between the two agencies, but he had repeatedly chastised Treasury's approach.

Lou Addeo, president of AT&T Government Solutions, said in a statement that the company was "disappointed in the GAO's decision, but we fully intend to compete vigorously to retain this award as the Treasury Department amends it and collects additional information from bidders."

"We strongly believe we submitted far and away a superior solution to Treasury's networking needs," said Addeo, "and we look forward to making our case again to Treasury."