Kilpatrick Stockton gave legal advice to AT&T Inc. on its successful bid for a $346 million technology-outsourcing contract with the state of Georgia.

Partner Jim Steinberg, chair of the firm’s technology practice group, led the team. Counsel Jim Paine and partner Dorinda Peacock in Raleigh, N.C., were also involved.

Gov. Sonny Perdue awarded a five-year contract to AT&T to provide wide area network, local area network and voice services. The contract comes with two, one-year options to renew, according to Perdue’s office.

A 2007 audit of Georgia’s information-technology operations revealed “aging infrastructure, inability to meet minimum industry standards, lack of processes and skills, little coordination of spending and deficiencies in disaster recovery,” according to Perdue’s office.

AT&T will work with the Georgia Technology Authority, a state agency. AT&T will offer jobs to 33 Georgia Technology Authority employees. The authority’s remaining 92 employees will be laid off, according to the Associated Press.

Combined with a separate, $873 million contract with IBM, the state expects to save about $180 million by outsourcing its information technology.

The U.S. economy may be in the doldrums, but the federal government keeps plugging away, signing contracts and purchasing assets and services from private companies.

While McKenna Long & Aldridge partner Jeremy Silverman wouldn’t say the federal government is water-tight safe from the recession, he did offer that federal government contractors seem to be immune from the current economic downturn. Moreover, Washington is increasingly privatizing many of its functions, creating a boon for government contractors.

“There has been a huge increase in federal spending with private firms over the last decade,” said Silverman, an M&A partner in Atlanta.

Federal spending on government contracts increased from $209 billion in 2000 to $430 billion in 2007, according to USAspending.gov.

The steady stream of business generated by federal contracts has caught the eye of investors. One such deal involved i2S Inc., a Columbia, Md.-based company that provides information-technology services to federal agencies like the Defense Intelligence Agency and the National Reconnaissance Office, as well as private government contractors like Northrop Grumman.

In the transaction, the management of i2S acquired control of the company from the Grosvenor Funds of Washington. Silverman and other McKenna Long attorneys advised i2S on the deal.

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Hewlett-Packard’s proposed buyout of Electronic Data Systems is prompting many companies to question whether now’s the time to dump HP or EDS as their technology-outsourcing vendor, says Sutherland partner Scott M. Hobby.

Whether many companies actually pull the trigger is another question, Hobby said.

HP on May 13 said it had agreed to acquire EDS for $13.9 billion, making the company the second-largest provider of computer services to corporations and governments. After the merger announcement, Pillsbury Winthrop Shaw Pittman partner Robert E. Zahler published a client alert that said that HP and EDS customers should review the change-of-control provisions in their contracts with HP and EDS to assess whether now is the time to dramatically restructure the contracts or terminate them.

Hobby, an outsourcing partner at Sutherland (formerly Sutherland Asbill & Brennan), said that while it's true companies should review the contracts, it’s extremely expensive for a company to switch technology providers.

“It’s really a big undertaking to leave your service provider, so a lot of this is more apparent than real,” Hobby said. “You’d have to be really unhappy with HP or EDS to pull this trigger.”

That won’t prevent some HP and EDS customers from, at the very least, trying to wring new concessions from their vendors. HP and EDS executives are in the midst of road shows to pitch to clients why the newly merged company will be able to provide better service than before, Hobby said. In these meetings, companies will take the opportunity to raise complaints.

“There is going to be a lot of saber-rattling when HP or EDS come calling,” Hobby said.More...