Failure to win a spot on a major government contract doesn’t often become an opportunity for corporate growth and a boon to the company’s later fortunes. But that’s how some AT&T Corp. executives view missing out on FTS 2001, the governmentwide telecommunications contract that is being replaced by the new multimillion-dollar Networx contracts.

“We did not win a spot on [FTS 2001],” said Don Herring, senior vice president at AT&T Government Solutions. “So what did we do? We went out and purchased another company.”

To expand its footprint in the federal government market, AT&T acquired GRC International Inc. in March 2000 for $220 million. It was one of the company’s first forays into the professional services business “and one of the best things we ever did,” Herring said. “It helped diversify our company a little more and helped buoy our business for a period of time.”

“We were fortunate enough to have the hindsight — or foresight at the time — to buy GRCI,” he said, noting the company had the expertise to combine AT&T products and services into solutions.

Herring said acquiring GRCI was a wise move also because of the rapid and increasing complex improvements in information technology. AT&T believed government agencies would be hard pressed to keep up with the advances on their own, he said.

The rapid changes in technology mirrored those at AT&T, which grew through mergers with SBC, BellSouth and Cingular Wireless. The reconstituted AT&T has annual revenue of $125 billion and employs 300,000 people, about 4,000 of whom are assigned to the federal sector.

Herring declined to disclose AT&T Government Solutions’ revenue figures because the company does not break down its numbers by division or percentages. “But we’re certainly in the billions of dollars.”

The company ranks No. 38 on Washington Technology’s Top 100 list of the largest government contractors with more than $500 million in prime contracting revenue.