Federal Phone Pact May Be Split : Sources Say New Round of Bids Is Likely by End of Year

The proposed $4.5-billion federal telecommunications network that has been put up for bids by the government will apparently be divided between two competing groups of communications companies because of a political brouhaha over the contract, sources said this week.

The sources said the contract would likely be split into two separate procurements and then opened for a new round of bids, probably before the end of the year.

The proposed government phone network, known as FTS-2000, has been the subject of extensive lobbying by the large corporations involved in the bidding, resulting in a tense, months-long standoff between Rep. Jack Brooks (D-Tex.), chairman of the House Government Operations Committee, and Terrence C. Golden, chief of the General Services Administration.

Brooks and Golden have been at odds over GSA’s proposed winner-take-all approach to the huge FTS contract, one of the largest ever let by the government. Brooks favors a multivendor approach in which several companies would share revenue from the system. Bidding has been delayed several times because of the disagreement.

The government’s present phone system is considered expensive and outdated.

Two teams of companies are bidding for the FTS contract--one led by American Telephone & Telegraph Co., the other by Martin Marietta Corp. A third consortium, led by U.S. Sprint Communications Co. and Electronic Data Systems Corp., dropped out earlier this year.

Demand Weakens

The current deadline for bids is Wednesday, but AT&T; said it hoped that the deadline would be postponed again because of what spokesman Herb Linnen called “the absence of a consensus and the presence of confusion.”

“Why should we lay our cards on the table when the dealer hasn’t decided what the game is?” Linnen said.

The confusion seen by Linnen and others involved is one result of an apparent weakening this week of Golden’s demand for a winner-take-all approach to the contract.

Following a series of meetings with Brooks earlier this month, at which the congressman pressed Golden to split up the work, the GSA chief this week contacted the chief executives of the communications giants involved in the bidding to propose a new, multivendor procurement, sources familiar with the talks said Wednesday.

But Golden’s sudden about-face on the multivendor issue, rather than pleasing Brooks, angered the congressman, according to sources closely involved in the situation. Golden is pressing the bidding companies to accept a multivendor approach that is different from Brooks’, the sources said.

Brooks and Golden declined to comment.

According to sources, Golden now favors dividing the FTS procurement into two separate bids: one for a phone network that would handle calls between government phones and another for a network that would carry traffic from government phones to outside phones.

The outside network would handle between 60% and 65% of the government’s phone calls, while the inside network would carry the other 35% to 40%, according to sources involved in the FTS bidding.

Brooks has been pushing Golden for weeks to accept a different multivendor procurement, one that would divide the FTS contract into two parts on the basis of revenue, not whether a call was directed inside or outside the government.

Like Golden’s, the Brooks approach would create two separate contracts that would be put out for a new round of bids. One contract would be for 70% of the government’s phone business, the other for 30%. No single group of companies would be allowed to obtain both contracts.

Although the two proposals are similar, sources involved in the negotiations said that animosity between Brooks and Golden has clouded attempts to compromise on the two ideas. Moreover, the bidding companies disagree about which approach would be best.

“We strongly support Congressman Brooks’ solution for continuing competition and a multivendor approach,” said AT&T;’s Linen. He added that, “based on what we heard,” AT&T; opposed Golden’s proposal.

A Martin Marietta spokesman said his company did not yet have enough information about the two proposals to choose between them. However, the spokesman said, “We believe that it is a late date to be making any radical changes.”

Sources close to both GSA and Brooks, however, said that is what is being contemplated. They said GSA has already begun drafting alternative procurement documents that the agency believes could be ready within 60 days once a compromise is reached.

Two important forces in the push for a new round of bids and a multivendor approach to the FTS contract have been U.S. Sprint and EDS, which would be left no piece of the contract if the pending procurement were to go forward. Sources involved in the bid process said that Sprint and EDS have been lobbying Brooks to overturn Golden’s winner-take-all procurement, opening the door for the companies to re-enter the bidding.

Lobbyists for Dallas-based EDS, a major employer in Texas, are said by sources involved in the bidding to have worked extensively with Brooks, a longtime Texas congressman. An EDS spokesman in Washington, Mark Fox, said the company had responded to information requests from Brooks and others but was not pushing its own agenda on FTS.