GSA keeps options open for Networx contract
For the General Services Administration's much-anticipated Networx contract, all options are open.
Federal officials have been developing the basic foundation of the telecommunications contract that will replace agreements under FTS 2001 and the FTS Satellite Service that expire in 2006 and 2007. They also are receiving many suggestions from telecom companies.
Company executives offered their suggestions at a hearing of the House Government Reform Committee late last month.
Some of those ideas would require GSA's Federal Technology Service to scrap much of its work and start over with a different approach. According to industry observers, FTS' plan and two major alternatives, proposed by MCI and Verizon, have strengths and weaknesses.
FTS plan benefits GSA
The original plan that FTS outlined is the best option for the agency, said Frank Dzubeck, a telecom consultant and president of Communications Network Architects Inc. in Washington, D.C.
"The benefits are to GSA, not vendors, through simplified management and cost control," he said. "This is still the best alternative for GSA."
The FTS proposal retains the continuity and buying power of a governmentwide contract, but allows specialized firms and those covering a limited area to compete, said another industry observer. It also "allows performance-based services contracting, which has advantages for both agencies and vendors, if used properly and done well," he said.
But the plan has critics. Some vendors worry that companies on the Universal side could dominate the contract, earning loyalty from agencies and shutting out the more limited offerings available on the Select side. Such a scenario is more likely if FTS sticks to its intention to award the Universal and Select contracts months apart.
David Page, vice president of federal sales at BellSouth Corp., expressed that fear at a House Government Reform Committee hearing last month.
"Under this scenario, the Networx Universal awardees will have established themselves as vendors of choice for almost a year prior to the Networx Select awardees being able to begin," he said.
Consultant Warren Suss, president of Suss Consulting Inc., echoed Page's concern. "The main complaint...is that many agencies will go for the Universal option, and the companies that offer a limited suite of services and/or that cover a limited geographical area will be closed out of the competition," he said. "This could be addressed by making both Universal and Select awards at the same time."
Larry Allen, executive vice president of the Coalition for Government Procurement, an industry group based in Washington, D.C., also argued for awarding the Universal and Select parts of Networx simultaneously.
"The coalition tends to agree with industry concerns that this approach puts companies that can't offer a total solution upfront at a disadvantage," he said. "There will be a tendency on the part of government agencies to hit the ground running once the first new contracts are in place."
In addition, he said, the planned nine-month gap could easily grow through any number of unforeseen circumstances. "As a result, small firms and those offering cutting-edge solutions in a market niche will miss out on business," he said. "The government could miss out on innovations available in the private sector if they lock themselves into total solutions upfront."
MCI plan: Tiers
If FTS adopted MCI's three-tiered approach, GSA would be assuming work it has previously left to agencies, Dzubeck said. MCI officials advocate putting customized work into a top-level tier of what they envision as a three-tier contract. Right now, that work is generally not part of FTS 2001 but is handled by the agencies that need the services, he said.
"Right now, GSA doesn't have responsibility over those customized bids," he said. "They're agency responsibilities. This takes everything and puts it under the umbrella of GSA."
However, the plan could create more flexibility for agencies, Suss said.
"Agencies that want to buy commodity-like commercial services as is don't have to pay for the added costs of government-unique features," he said. "Agencies that are looking for fixed-priced services with some government-unique features, such as a hierarchical billing system, can buy these services in the same way they buy most FTS 2001 services today. The structure also provides agencies with the option to conduct more extensive competitions among Networx vendors to address their more complex network requirements."
But there are no clear definitions and delineations of what offerings should go into which tier, said another observer. "One could argue forever" about which offering should go into what group, he said.
Verizon plan: Back to the future
Verizon's suggestion to eliminate the distinction between Universal and Select in favor of an unspecified number of service categories would be "a management nightmare for GSA but one that spells opportunity for Verizon," Dzubeck said.
"This is a return to business as usual pre-FTS 2000," he said. "All the benefits
belong to the vendors and none to GSA. Even price competition can get squashed by only a single vendor bidding on a single service."
The Verizon proposal is self-serving in that it makes it easier for companies like Verizon, which cannot offer nationwide coverage, to compete, observers said.
Its biggest flaw, Suss said, is that by offering no universal option, the plan increases administrative costs for agencies that have to deal with multiple points of contact for individual projects. It also raises the risk of coverage gaps. Agencies could try to procure a service at a specific location and find that no vendor offers it.
"This second problem would be exaggerated if vendors were allowed to cherry-pick their geographical as well as their service coverage," he said.
However, Shelley Murphy, president of Verizon Federal, said agencies could define universal requirements as necessary.
"If there were an agency that needed a ubiquitous approach, if you needed something at the bottom of the Grand Canyon and in the far northeast corner of Maine, they can define that in the requirements," she said. "In my mind, that mitigates" the problem Suss raised.
Allen said his organization would like to see telecom offerings made available through the GSA's multiple-award schedules program. Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee, has also raised that possibility.
"The lines separating telecom from [information technology] are being breached nearly every day," Allen said. "There's no real reason why GSA should have an artificial barrier up separating telecom services. Multiple awards have proven to be very popular with agencies buying IT. Why not let them have a shot at buying telecom solutions the same way?"
GSA officials, including Administrator Stephen Perry and FTS Commissioner Sandra Bates, have said they want to hear from the telecom industry leaders as work continues on Networx. Observers say the decisions made in the coming months will illustrate whether or not they listened.
Universal vs. Select
A significant area of debate is FTS' vision of Universal and Select categories for Networx. As FTS plans it, Networx Universal will cover national and worldwide services, and Networx Select will be for offerings that cover a limited area.
Critics have two main concerns about the idea. Some say that the Universal vendors would win the high-value business quickly, shutting Select vendors out of many competitions. Others take an opposing view, warning that Select vendors could cherry-pick the best opportunities in their areas, weakening the business base that the Universal vendors would be factoring into their pricing calculations.
That latter risk could be addressed by limiting Select contracts to small or small disadvantaged businesses and services that complement but don't compete with those offered on the Universal side, said Anthony D'Agata, vice president and general manager of Sprint's Government Systems Division.
Kevin O'Hara, president and chief operating officer of Level 3 Communications Inc., said Networx should allow vendors to supply only products that are central to their business and limit the geographical areas they serve. Requiring all vendors to provide all products creates an artificial barrier to entry, he said.
O'Hara also recommended that the contract take a performance-based approach, in which agencies will describe the services they need without specifying technologies. That offers vendors flexibility as old technologies fade and new ones emerge, he said.
Lou Addeo, president of AT&T Government Solutions, said FTS should add a contracting system similar to the GSA schedules for agencies to use to make quick and easy purchases of basic products and services.