Vendor Sought to Build, Run Federal Phone System

The federal government, the world’s largest long-distance telephone customer, started shopping Wednesday for $4.2 billion worth of service by opening the bidding process for a contract that will go to one--and only one--vendor.

The General Services Administration, the government’s procurement office, asked telephone executives to come up with a plan for replacing the 22-year-old Federal Telecommunications System, essentially provided by American Telephone & Telegraph Co.

“We want only three things,” said Bob Bushelle, one of the team of GSA officers briefing the 350 executives interested in the contract.

What the government wants is a one-stop telecommunications company, operated by a single prime contractor, which can provide and manage a total system service for 1.3 million government workers for 10 years starting in 1989.

Those federal employees and their computers talked long-distance for 1.5 billion minutes last year at a cost of $424 million.

The government wants private industry to design, own and run the long-distance system and sell nothing but service to Uncle Sam. “We are not interested in setting up a government system,” said Frank J. Carr, assistant GSA administrator in charge of information resources management.

Carr said: “We haven’t found it terribly funny the way costs have gone up.”

Noting the size of the contract, Dr. Bernard J. Bennington, who is in charge of the government’s phone system, said: “We expect big leverage from this . . . and, therefore, good prices.”

The contract will be awarded in late 1986.

In an interview, Bennington said the government decided to open up the contract for bids now because the long-distance telephone market has enough mature competitors.

AT&T;, which has 88% of the government’s long-distance business, is expected to be among those bidding on the contract. “We have to see what the government wants,” said Edith Herman, an AT&T; spokeswoman in Washington. She refused to comment on what effect the loss of the contract could have on the company.

Glenn Pafumi, an analyst with Dean Witter Reynolds Inc. in New York, said a complete loss of the business, if that happened, would amount to about 1% of AT&T;’s total business. And, he pointed out, “you don’t just pull out circuits in one day,” so the effect would be gradual.