Littleton, Colo.-based TW Telecom (NASDAQ: TWTC) has won the right to participate in a four year contract to provide voice, data, and Internet services to Federal agencies and organizations in the southeast U.S., the company announced Thursday.
The contract, worth up to $550 million initially, includes the possibility of being extended for two additional, successive three-year terms -- 10 years in all -- and begins on April 1, 2013. The particular type of contract involved is known as an indefinite delivery, indefinite quantity (IDIQ), fixed price with an economic price adjustment (EPA) multiple-award contract.
The significance of this is that, while tw telecom has technically "won" this contract, its prize is simply admission to a set of companies, which now have the right to bid on and win further contracts under the umbrella of the original contract awarded today. In other words -- failure to win the several GSA contracts awarded under this one would mean tw telecom gets no revenue at all from today's win.
Investors, however, took the view that "it's an honor just to be nominated," bidding up tw telecom shares 1.1% in Thursday trading, to close the day at $25.01.
