Hung Up: a $25 Billion System

By Janice Castro

In his job as chief network engineer for the General Services Administration, Sureshar Soni helps analyze costs for the vast federal telephone system used by 1.3 million Government workers. Because the GSA is preparing to replace that system for the first time since 1963, a deal worth up to a whopping $25 billion for the companies that will build the new network, Soni was destined to play a significant role. Instead he is embroiled in a byzantine scandal that is paralyzing the giant phone project. According to investigators for the GSA and a Senate committee, Soni leaked secret bidding information in a mysterious pattern that may take probers months or years to untangle.

The phone mess is frustrating not only the Government but also the 14 corporations eager to snare a piece of the project, called FTS-2000, for Federal Telecommunications System. As the largest telecommunications contracting job in U.S. history, the proposed deal has attracted a Who's Who of bidders that includes AT&T, all seven local phone companies, MCI, GM/EDS, Boeing and Martin Marietta. The winning contractors will replace the old system with a showpiece network that will enable federal workers to transmit computer data, conduct video conferences at their desks, send facsimile images and even transfer funds. Says Fritz Ringling, a private telecommunications consultant: "Whoever builds this thing will win the bragging rights to the world's most advanced telephone system."

The trouble at the GSA apparently started last spring, when bidding began for a separate but somewhat related project, a $55 million contract to build a dozen telephone-switching installations. According to one of Soni's co- workers, the engineer made photocopies at GSA headquarters of the confidential AT&T bid documents on the switching devices. Soni allegedly leaked the information to two or more of the regional telephone companies competing against AT&T for the jobs, thus enabling them to tailor their bids accordingly. He reportedly told an official of Southern Bell, a subsidiary of the regional BellSouth company, exactly how much the parent firm would have to bid in order to win. (BellSouth denies adjusting its bids.)

In any case, Soni was not necessarily a champion of the underdog. On at least one occasion he shared information with AT&T as well, though AT&T claims the information was public and not particularly useful. When the GSA awarded the contracts last October, AT&T was assigned to build five of the switches, while the other seven were divided among four Baby Bells -- Pacific Telesis, Bell Atlantic, U S West and BellSouth.

What was in it for Soni? GSA probers allege that he accepted free entertainment from bidders who eventually won. Officials of Southern Bell, for example, reportedly regaled him five times at restaurants in Atlanta and Washington. But investigators are not convinced that a few free meals explain Soni's behavior. Some believe that since Soni seemed to leak information on an equal-opportunity basis, he may have been trying, in a perverse fashion, to save the Federal Government money by manipulating all of the potential contractors.

Whatever the motive, the manipulation has backfired. The GSA must now determine whether to start the bidding over again on the $55 million contract. The installation of FTS-2000 could be delayed a year or two while the investigations take place. The Government has estimated that it will lose $100 million for every year that it must go on using its antiquated phone system. Says Ringling: "Government workers could end up using cans and string waiting for them to settle this." As for Soni, the enigmatic engineer faces potential criminal charges.

With reporting by Jerome Cramer/Washington and Thomas McCarroll/New York