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US Government: Defending WorldCom?

Several months after changing its mind with Global Crossing Holdings Ltd., the U.S. Department of Defense (DOD) appears to be standing by its contract with WorldCom Inc. (Nasdaq: WCOME) -- a 10-year deal worth a maximum of $450 million. The latest public comment from the agency on the contract came in a June news briefing and, at that time, the DOD didn't look to be changing its mind again.

"This is not the first time in the history of the Department of Defense that contractors of various kinds have gotten into difficulties," said Dov S. Zakheim, Under Secretary of Defense, in a June 27 news briefing. "We've had many contractors in many areas, and we always build in protections. So I think it's safe to say that those who use the services of WorldCom or of any contractor of a kind like WorldCom are protected."

Defense Department spokespeople did not return calls on Friday.

In early April, WorldCom announced it had won a contract for the Department of Defense's Defense Research and Engineering Network (DREN), a network connecting more than 6,000 DOD scientists and engineers across the U.S. (see WorldCom Wins DoD Deal).

The deal's minimum guarantee was $6 million. WorldCom said at the time that an estimated $70 million in orders will be issued during the three-year base period of the contract, with a $450 million ceiling price over the entire ten-year period.

Global Crossing initially won the contract in July 2001, but the deal was put up for bid again after other carriers protested the DOD's decision (see Global Crossing DOD Contract Hits Snag). Global Crossing lost the deal in early April after it filed for bankruptcy protection.

But the DOD seemed to leap out of the frying pan and into the fire. It walked away from Global Crossing, after that company filed the fourth largest bankruptcy in U.S. history, and gave its business to WorldCom, which later filed the largest bankruptcy in U.S. history (see WorldCom Files for Bankruptcy).

Global Crossing and Sprint Corp. (NYSE: FON) are among the carriers that have protested the DOD's decision with the U.S. General Accounting Office.

At the moment, WorldCom's other defense-related contracts appear intact. One telecom equipment vendor, Alidian Networks Inc., confirms that it has already sold gear to WorldCom for use in another network with Defense Department ties, the Defense Information System Network (DISN). A spokesperson for Alidian says it has billed WorldCom for the gear and has been paid in full.

WorldCom provides voice, video, data, and other services to several government agencies including the Social Security Administration and the Department of Agriculture.

— Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com
switchrus 12/4/2012 | 10:00:27 PM
re: US Government: Defending WorldCom? GǣGlobal Crossing initially won the contract in July 2001, but the deal was put up for bid again after other carriers protested the DOD's decision (see Global Crossing DOD Contract Hits Snag ). Global Crossing lost the deal in early April after it filed for bankruptcy protection.Gǥ

The protest was upheld, thatGs why the contract was re-bid. Bidding Government contracts have very specific rules, you get caught bending those rules or out-right lying you loose big time. The Government has many ways to punish contractors that break the rules, from loosing contracts to out-right bans. A company called FEI used to supply precision oscillators, got caught faking test data, government put a outright ban on any new contracts for the company and put government watchers on everything in production at the time. Message here: USG puts up with a lot from it's contractors, but when you go over the line they will fry you.

GǣBut the DOD seemed to leap out of the frying pan and into the fire. It walked away from Global Crossing, after that company filed the fourth largest bankruptcy in U.S. history, and gave its business to WorldCom, which later filed the largest bankruptcy in U.S. history (see WorldCom Files for Bankruptcy ).Gǥ

I donGt think the bankruptcy was the prime issue, I think USG got so upset over what was found as a result of the protest investigation on the earlier contract protest, they all but put a ban on GC as a result. Not to mention that if GC had won the protest with all the dirt that was found there would have been a congressional investigation, no civil servant wants one of those.
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