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State Phone Pact Award Is Challenged

Telecom: Rejected bidders are suing, others are voicing objections to selection of PacBell-MCI.


Even as California officials touted the groundbreaking move to transfer the statewide phone system to Pacific Bell and MCI on Tuesday, a court battle and other possible challenges by spurned bidders threatened to slow or derail the plan.

The project--called the state's largest privatization effort--would turn over California's internal telecommunications network, called Calnet, to private companies to run and upgrade.

The state Department of General Services and the California Department of Information Technology on Tuesday awarded the contract--worth $929 million over 10 years--to the PacBell-MCI team. The team beat out finalists GTE Corp. and AT&T.

The plan must receive approval from the state Department of Finance. The proposed contract has already met with opposition.

NEC America Inc. and Siemens, both makers of phone equipment, have filed a lawsuit in Superior Court in Sacramento to block the contract's award, arguing that the selection process unfairly shut out many equipment makers.

"The state ruled out all PBX [equipment] suppliers, so we never had the opportunity to participate," said Tom Burger, associate vice president of NEC America's Corporate Networks Group in Dallas. "The purpose of the lawsuit is to get the state to issue a new [request for bids], and we're obviously looking to enjoin any award also."

Local phone company GTE, which, along with state employees, currently operates the state's network, placed second in the bidding.

"We have some serious concerns about the fairness and validity of the procurement process," said Larry Cox, spokesman for GTE, which bid $1.3 billion for the project.

"We think it deserves further reflection, and we hope the state does that," he added.

GTE complained of unequal access to relevant information and vague selection criteria and claimed the savings under the plan will be "substantially lower" than the state estimated Tuesday.

At AT&T, spokeswoman Kathleen Oram said the company will review the results, but she downplayed the possibility of a formal challenge.

Wendell McCullough, deputy director of the state Department of General Services, acknowledged that contracts of the size and scope involved in the Calnet deal often draw protests from unsuccessful bidders.

But, he said, "The choice was so clear that they may decide not to challenge."

State officials said PacBell and MCI's bid was superior in price and technical merit to proposals submitted by GTE and AT&T.

The deal would save the state about $117 million over the life of the contract, officials said.

The 10-year deal includes long-distance and local phone service for 300,000 government lines, as well as video conferencing, calling cards and data, Internet and wireless services.

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