BellSouth Corp., saying that an internal investigation had found signs of wrongdoing in a subsidiary's successful bid for a federal telephone contract, yesterday offered to give up the contract.
"Our bid may have been influenced improperly by information passed to the company," BellSouth said in a statement. The company's handling of the information showed ignorance of federal rules and in some cases violated company policy, it said.
BellSouth said it would not object to the contract being transferred to American Telephone & Telegraph Co., a step AT&T has been seeking in legal proceedings it brought before the federal government's Board of Contract Appeals last October.
Its announcement came several days after the General Services Administration and congressional investigators said there was evidence that a GSA employee had passed proprietary information from a bid by AT&T to employees at Southern Bell Telephone and Telegraph Co., a subsidiary of BellSouth, and to Chesapeake & Potomac Telephone Co., a subsidiary of Bell Atlantic Corp., the Washington area's regional company. Bell Atlantic has denied any wrongdoing.
On Thursday, GSA said it had learned that the official, a telecommunications division chief named Sureshar L. Soni, had a daughter who was employed at Southern Bell.
The disclosures are part of a months-old investigation into $55 million in contracts that GSA awarded in October for operation of 12 computerized switching centers for the federal government's private phone network. AT&T bid for all 12 but won only five. Southern Bell won a single contract for two, in Atlanta and New Orleans, while Bell Atlantic won two, in Philadelphia and Washington.
AT&T challenged the awards before the board. Separate probes were begun by GSA's inspector general and the Justice Department.
The switches were intended to upgrade the phone system pending the letting of contracts estimated to be worth $5 billion to $10 billion to create an all-new federal phone system, known as FTS-2000. The investigation is being watched closely by the telecommunications industry and Congress as a sign of how fairly GSA will handle contracts for the larger job.
BellSouth said it would continue to cooperate in the investigation.
Bell Atlantic, meanwhile, has vigorously denied the allegations against it. An employee who received a tip from a GSA official that $40 was "the price to beat," Bell Atlantic said, believed the figure referred to a published rate that Bell Atlantic already knew must be bettered to win the contract.
Yesterday, Bell Atlantic took the unusual step of disclosing its bids, which were $18.40 per line per month for a switching center in Washington and $30.50 for one in Philadelphia. It offered the numbers to bolster its statements that its bids were so far below the $40 figure that knowing that figure could not have influenced its decision on how much to bid.
Congressional investigators have never said they believe Bell Atlantic used the material in setting its bid, only that it received the information.
BellSouth, which declined to disclose the findings of its investigation, said it was making its offer to withdraw "with great reluctance." The company is an $11 billion holding company that is one of seven regional telephone giants created from the breakup of AT&T in 1984.
"BellSouth Corp. demands high ethical conduct from its subsidiaries and all its employees and deviations from guidelines -- even though naive or unintentional -- are simply not acceptable," the company said.
The procedures for transferring the contract were unclear last night. BellSouth said GSA must issue an order to effect a transfer, but GSA said only that the contract appeals board had such authority.
GSA officials said they hoped the board would continue an inquiry into the allotting of bids, including that of BellSouth. "GSA believes that the most important thing is that the discovery process be allowed to continue so that we can determine the truth," said GSA deputy administrator Paul K. Trause.
GSA said that Soni is the only official suspected of wrongdoing. But in a letter to GSA yesterday, AT&T attorney C. Stanley Dees said such assertions "strain credulity."