Sprint Nextel suffers major federal loss

Carrier left in the cold as AT&T, Verizon Business and Qwest win Networx contracts

Sprint Nextel’s loss of a multibillion-dollar federal telecommunications services buy has left Washington, D.C., industry insiders stunned.

Sprint Nextel was the only bidder on the so-called Networx Universal program that didn’t receive a contract.

The General Services Administration announced at a press conference on Thursday that the Networx Universal winners are AT&T, Verizon Business and Qwest.

Networx Universal will provide domestic and international voice, data, video and wireless services to federal agencies for the next 10 years, and could be worth as much as $48.1 billion over that time. GSA officials, however, estimate that Networx Universal and its Networx Enterprise companion contract will be worth $20 billion over the next decade.

“This is a pretty significant loss for Sprint,” says Ray Bjorklund, senior vice president with FedSources, a market research firm. “People are scratching their heads a little bit about why Sprint didn’t get it. We don’t have enough of the facts to know, but over the next couple of days more details will come out about that.”

GSA says Networx is the largest federal telecommunications acquisition ever completed, and that it will support 135 agencies across 191 countries.

The Sprint Nextel team for Networx Universal included Lockheed Martin, Hughes Network Systems and InterCall.

GSA declined to comment on why the Sprint Nextel team was eliminated from the Networx Universal program. “The three [companies] that we awarded to addressed the objectives of our program more readily,” said John Johnson, assistant commissioner for Integrated Technology Services with the GSA’s Federal Acquisition Service.

Sprint Nextel is the only incumbent on the GSA’s predecessor contracts, FTS 2000 and FTS 2001, having served the U.S. federal market for 18 years on these contracts. Indeed, it was the FTS 2000 win in 1988 that put the then-fledgling carrier Sprint on the map.

Industry watchers guessed that Sprint Nextel may have been distracted by its recent merger, or that it failed to put together a comprehensive-enough team for the massive Networx Universal program.

“Sprint Nextel has had a bit of a struggle with trying to integrate those two companies,” Bjorklund says. “But Sprint has a great legacy of long-haul support, both terrestrial and space-based, for the government. I don’t quite know how to read their loss. Maybe their team members didn’t put together a broad-enough suite of services.”

The Sprint Nextel team spent millions of dollars and nearly three years preparing its Networx Universal bid.

In an interview in early March, Tony D’Agata, vice president of federal government operations at Sprint Nextel, said he had a team of 50 employees dedicated to putting together the Networx Universal bid, which was more than 5,000 pages long and contained more than seven million individual prices.

The Networx Universal loss probably will be personal for Sprint Nextel’s management team because CEO Gary Forsee was in charge of Sprint’s original FTS 2000 bid in the mid-1980s.

Sprint Nextel officials said they were disappointed with the loss, but congratulated the winners in a statement released Thursday.

“The Sprint team spent significant time and energy on the program and has made large investments to meet the diverse requirements of the agencies,” Sprint said in the statement. “Federal agencies have come to rely heavily upon our high-performing network, our strong portfolio of converged IP solutions, and mobile enhancements.”

GSA’s Johnson estimated that Sprint Nextel holds 30% of the FTS 2001 contract, which it shares with Verizon Business Sprint Nextel’s federal customers under that earlier contract can choose to move to one of the other Networx carriers, or they can choose to stay with Sprint Nextel under a different contracting vehicle.

For Sprint Nextel, there’s a lot of revenue at stake if its largest FTS 2001 customers switch to a Networx carrier. According to FedSources’ data, Sprint Nextel took in $7.6 million in fiscal 2006 from the Defense Information Systems Agency, $1.9 million from the Department of the Interior, $1.8 million from the Executive Office of the President, and $700,000 from the Department of Veterans Affairs.

Despite the bad news about Networx Universal, all is not lost in the federal market for Sprint Nextel.The company still has a bid outstanding on the Networx Enterprise contract, which includes emerging IP and wireless services. GSA plans to award that contract in May.

“We are confident that Sprint will be awarded the forthcoming Networx Enterprise contract,” Sprint said in the statement. “Sprint will continue to provide its customers with the most reliable and advanced technologies in the industry.”

Sprint also will continue to support its federal customers for at least three more years under an extension of its FTS 2001 contract.

“Sprint will support the FTS 2001 Bridge contract, which allows us to potentially serve our existing customers for up to the next forty months,” the company said. “Sprint also has several contractual platforms in place that give us the opportunity to continue serving wireline services to our customers.”

Sprint Nextel has the right to request a debriefing from the GSA about why it didn’t receive a Networx Universal contract. GSA officials said on Thursday morning that they had not yet received a debriefing request.

In addition, Sprint can choose to protest the Networx Universal award to the GSA, the General Accountability Office or U.S. federal court.

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