Qwest won approval yesterday to continue providing federal agencies with telecommunications services, a development that could make a renewed...

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Qwest won approval yesterday to continue providing federal agencies with telecommunications services, a development that could make a renewed bid by Qwest for MCI more appealing to that company’s board of directors.

The General Services Administration (GSA) had investigated whether Denver-based Qwest should be barred from government contracts because of its past accounting problems.

Qwest paid $250 million in October to settle an accounting case with the Securities and Exchange Commission, but the Justice Department continues to investigate some of its former executives.

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In a letter to Qwest Chief Executive Richard Notebaert dated yesterday, Joseph Neurauter, the GSA’s suspension and debarment official, indicated the phone company will remain eligible for federal contracts.

“I am satisfied that Qwest has taken adequate remedial measures, including significant changes in the company’s management, the implementation of an ethics program, and continuous disclosure to the government regarding new issues that Qwest may face,” he wrote.

This month, MCI’s board of directors turned down Qwest’s $8 billion bid to buy the company. Ashburn, Va.-based MCI accepted Verizon’s $6.75 billion offer, but Qwest has said it intends to make another bid.

A source close to MCI, who spoke about the private deliberations on condition of anonymity, had said the MCI board’s concerns included the prospect of a ban on federal contracts to Qwest that could put MCI’s extensive government work at risk.

“We look forward to winning some of the major government business that is up for bid in 2005,” Notebaert said in a statement yesterday. A source close to Qwest said company executives believe the GSA decision will strengthen its bid for MCI.

Last week, several MCI shareholders filed lawsuits against MCI’s board, alleging it did not act in the best interest of shareholders. An MCI spokesman declined to comment on the GSA action or the shareholder suits.