The General Services Administration yesterday extended WorldCom Inc.'s lucrative contract to provide telecommunications services to federal agencies for another year, a defeat for competitors that have been lobbying for WorldCom to be banned from government work.
Under the contract, bankrupt WorldCom will continue to compete against Sprint Corp. to provide agencies with basic telephone service, Internet access and other services. WorldCom already includes the Defense Department and the Federal Aviation Administration among its customers.
It is one of WorldCom's largest deals with the government and part of its annual $1.7 billion in federal contracts, which account for 8 percent of the company's annual revenue. In fiscal 2002, WorldCom took in $331 million in revenue under the contract, according to the GSA. Overall, the contract, which began in 1999, has generated more than $780 million for the company.
The extension will last through January 2004, when the GSA could extend the contract for another year.
Federal agencies aren't required to get their telecom services through the contract vehicle, known as Federal Technology Services 2001, but about 15 percent currently do, according to the GSA. And of those that do, WorldCom captures about two-thirds of that business.
It is unclear how much revenue the contract could generate for WorldCom next year since agencies can choose between WorldCom and Sprint, company and agency officials said.
WorldCom's standing as a government contractor has been criticized by competitors and industry officials since the firm announced it had overstated earnings. The SEC recently charged WorldCom with improperly accounting for at least $9 billion back to at least 1999.
The company's competitors failed to have it removed from a $450 million Defense Department contract to operate a high-speed classified research network for scientists. The GAO dismissed the protests last month, despite acknowledging that the Pentagon had relied on "grossly inaccurate financial information" in making the award.
"GSA's decision means the American public will continue to subsidize the excesses and abuses of WorldCom's executives, many of whom are facing criminal charges in addition to civil fraud liability," Candice Johnson, a spokeswoman for the Communications Workers of America, said in a statement.
WorldCom also said yesterday that it plans to lay off 390 of its 1,800 employees in the Asia-Pacific region and move its customer service operations from Australia to Singapore.
The number of layoffs could be less than estimated if Australia-based employees are willing to move to Singapore, a company spokeswoman said.