USPS quietly cancels 18-year network outsourcing deal

The U.S. Postal Service has quietly terminated an 18-year, multibillion-dollar network services contract with Lockheed Martin that was to provide all of its data, voice, video and wireless services.

Dubbed Universal Computing Connectivity (UCC), the contract was awarded to Lockheed Martin with much fanfare in October 2004. UCC had an estimated value of between $3 billion and $6 billion.

USPS terminated the UCC contract in July 2006.

Here’s all USPS will say about its change of heart:

“Due to changing business objectives/conditions, USPS and LM have agreed that the UCC contract cancellation is in their mutual best interests, and that it will not preclude the two parties from entering into other contracts in the future.”

Lockheed Martin has no comment on the UCC contract cancellation.

Lockheed Martin, a leading supplier of automated mail sorting equipment, was supposed to integrate networks that serve 38,000 postal locations nationwide. On its UCC team were leading network vendors, including BellSouth, Qwest, SBC Communications, Verizon, AT&T, HP and Hughes Network Systems.

At the time it awarded the UCC contract, the Postal Service was trying to migrate away from a network outsourcing contract held for many years by MCI. USPS leadership was troubled when MCI’s parent company WorldCom filed for bankruptcy in 2002.

The UCC deal was supposed to be a harbinger of the new role that systems integrators would play in the telecommunications arena. Telecom industry observers say the UCC approach failed.

``Lockheed Martin has a great track record with the USPS for its mail handling systems, but obviously Lockheed Martin screwed up on the telecom stuff,’’ says Ray Bjorklund, senior vice president at Federal Sources, a McLean, Va., market research firm. ``USPS has a long-term relationship with Lockheed Martin, but they’re not going to be counting on them as a network integrator.’’

With the failure of UCC, the Postal Service in October extended its Managed Network Services contract with the old MCI, now owned by Verizon Business, for an additional four years. USPS also has awarded contracts to AT&T so it can pursue a dual-sourcing strategy for its network infrastructure.