AT&T exec to retire; possible reorg looms

AT&T Government Markets president Richard Lombardi plans to retire Nov. 1. He told FCW that the decision was made "over a month ago" - well before his division agreed to pay the Defense Department some $66 million to offset costs associated with a year's delay in fielding a new long-haul wideband domestic communications network. In a telephone interview from his North Carolina beach house Aug. 22 Lombardi said his departure should not be linked to the long-haul network problems or the payment described by industry sources as "the largest cash settlement ever paid" by a contractor to the federal government on an information technology system. Lombardi said he decided to retire at age 55 (his current age) "a long time ago" and that recent changes in the AT&T pension plan and retirement package helped solidify that decision. AT&T corporate headquarters has "not yet determined my successor " Lombardi said although insiders believe that a decision on a candidate is close and will be named soon. Lombardi announced his resignation to AT&T Government Markets employees at 5 p.m. on Aug. 22. Lombardi also called key federal users with the news late that day. Bob Woods commissioner of the General Services Administration's Federal Telecommunications Service said "We expect a high level of service from our contractors and we will monitor any changes in management to see how these changes affect performance and customer care." Industry sources said the Government Markets division has been hit hard not only by the large payment to the Defense Information Systems Agency for delays on the Defense Information Systems Network Transmission Services-Continental United States (DTS-C) but also by the "aggressive" prices bid by AT&T on that procurement - $970 million or $500 million below the competition. Sources said AT&T Government Markets was squeezed by increasingly tight margins on the governmentwide FTS 2000 network run by GSA where the cost of a long-distance phone call has dropped from a high of 28 cents a minute to 5 or 6 cents a minute or less. Some FTS 2000 customers have questioned AT&T's service as prices plummeted. GSA's Woods said "What a company decides to bid on any contract is an internal business decision. Our job is to see that once we make an award people deliver on the contracts they made." Lombardi said AT&T as a whole has experienced "tight margins" in business areas where it faces competition. "Government Markets continues to return a profit " he said. Margin pressure in the federal market may run ahead of the commercial market but Lombardi said this made the experience a "good learning curve" for the rest of the company. While some critics in the industry faulted Lombardi for the bid strategy on the costly DTS-C bid he said the pricing and type of service was approved ahead of time by his superiors in New Jersey. "We received the appropriate levels of approval...and we thought we would have [a Synchronous Optical Network or Sonet] in place" to meet the terms of the contact. Pentagon sources said AT&T promised to provide users in all three military services and the Defense agencies with an all-Sonet network which provides 50-millisecond restorative time for DTS-C. Although start-up of the network was originally scheduled for June 1997 AT&T said it cannot deliver those circuits until next June a delay attributable not only to the slower rollout of an AT&T nationwide Sonet network - which Lombardi said he had counted on - but also to an "industrywide" Sonet shortage. Some observers speculate that AT&T will take this opportunity to restructure its Government Markets division and that further changes in management and organization would be normal with new leadership. Sources familiar with the situation said AT&T's corporate headquarters may take tighter control of the division and its bidding strategy in the future.


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