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Impending telecom RFPs keep company officials busy preparing

FTS Networx page

With long-awaited requests for proposals for the federal government's next major telecommunications contract due in April, industry officials are moving into high gear.

They are conducting "gap analyses" to see where their capabilities meet the expected requirements, cultivating partners to fill in some spaces, adding new capabilities and pondering a few unanswered questions about the final shape of the contract.

There are two Networx solicitations. Networx Universal will provide federal agencies with a sweeping range of telecom services anywhere they are needed, and Networx Enterprise will offer a range of localized services. Analysts estimate that as much as $20 billion in business could flow through the 10-year contracts, to be awarded in April 2006.

Company officials have been studying the more than 2,000-page draft RFPs to understand the details of the contracts.

Networx has been a constant topic of conversation for nearly two years. Industry officials have had mostly unfettered access to government architects of the contract. Meetings, periods of written comments and congressional testimony have given leaders at the General Services Administration's Federal Technology Service a detailed and unambiguous view of what companies want.

For all that, however, GSA officials know they can't please everyone. When the final RFP hits the street, some companies will be at a disadvantage, some will be unhappy and some may not bid.

Companies on hold

Officials at Sprint, a holder of the current FTS 2001 telecom contract, may choose not to bid on Networx, said Tony D'Agata, vice president and general manager of Sprint's government systems division.

Sprint spent more than $100 million to meet the requirements for FTS 2001 and the earlier FTS 2000 contract, D'Agata said. And although the company has earned significant business through the FTS 2001 contract, Sprint officials have seen the prices they can charge drop to levels that they never expected. D'Agata said the result has been a good deal for the government, but not for contractors.

D'Agata saw several provisions in the Networx draft RFP that he objected to, particularly a price management mechanism that, as he reads it, allows the government to reduce prices unilaterally.

"That is unacceptable to us," he said. "The current contract has been challenging from a pricing standpoint. We're not going to enter into business where it's impossible to make a return."

John Johnson, assistant commissioner for service development and delivery at FTS, said that D'Agata's fears are misplaced.

"The government doesn't just unilaterally adjust prices without discussion with the industry," he said. "We've demonstrated over time that we've always been amenable to having discussions with our service providers. I'm not aware of any practice where we would just unilaterally adjust it."

Sprint officials have submitted their written comments to FTS. But whether Sprint's objections to the RFP are addressed won't be known until the final document is released, D'Agata said. "The government's response will determine whether we pursue the opportunity or not," he said.

Jim Payne, senior vice president of Qwest Communications International's government services division, is weighing similar concerns. The draft RFP lacks a "section M," which is the customary section that spells out the evaluation criteria that will be used to choose the contract awardees. The document is also vague on the system, billing and reporting requirements that carriers will have to meet, Payne said.

"The system requirements are generically described, but they're not specifically" defined, he said.

Payne is also concerned that FTS officials have not specified the number of companies they expect to win places on the contracts. He said FTS officials set very low minimum revenue guarantees for the two Networx vehicles and that the minimum will be shared among all contract holders.

FTS 2001 was awarded initially to two companies — Sprint and MCI — which were guaranteed a minimum of $750 million each. Contractors who win a place on the Networx Universal contract will share a minimum of $525 million. Enterprise contractors have a guaranteed minimum of $25 million, shared among them.

However, companies will also have to set prices 10 years into the future and abide by their forecasts, regardless of how the market changes, Payne said.

Payne said he is concerned that the Networx RFPs, if not amended from the draft form, could discourage smaller and newer companies from bidding and make it harder for agencies to obtain new technologies.

"It's very important for GSA to generate the next tier of competition," he said. "The next-generation technology almost never comes from the existing vendors. It comes from the next tier."

Warren Suss, president of Suss Consulting, said FTS officials are unlikely to make big changes over the objections of individual companies, particularly not this late in the contract development process.

"The price management mechanism has been in place for a long time," Suss said. "It's designed to ensure that the government continues to get the best deal or a very good deal compared to other users. I can't imagine that FTS is going to back away from the overall concept. There may be some differences in details, but it's hard for any one company to blackmail GSA."

Ready to bid

Officials at other telecom companies say they are eagerly awaiting the final RFP. Robert Collet, vice president of engineering at AT&T Government Solutions, said the contract opens doors to opportunities.

"I've brought in an enormous amount of firepower to do it right," he said. "I've got the right consultants. I've got resources throughout AT&T. We lost it last time. It'll be over my dead body if we lose it this time."

Like most other companies, AT&T has created a small group of experts specifically for the purpose of developing the bid.

AT&T officials shifted into high gear when the first request for information, the document FTS officials used to begin gathering industry's opinions, came out in 2003. At that time, Collet said, an initial team was assembled to research relevant issues internally. The team ultimately wrote the company's response to the RFI. The same team responded to the draft RFPs.

Now the company is prepared to respond to the final RFPs by filling in the spaces as the remaining unknowns become defined, Collet said.

The team is also negotiating partnerships with niche companies to augment the technologies that AT&T can offer, Collet said. When the team submits the final proposal to FTS, the document must include an explanation for each team member's presence.

"They are rightfully expecting a logical approach to this," he said. "We can't present a dysfunctional family."

Susan Zeleniak, vice president of civilian networks at MCI, is also preparing to bid. "It's a very complex task," she said. "In a proposal of this size, you really have to know how you're going to parcel out the various tasks. The big task is to figure out how to price it. That's another major, complex effort."

Networx RFPs could be delayed

Officials plan to issue final requests for proposals for Networx on April 1, but the volume of public comments that Federal Technology Service officials have received could force them to push back the date, said John Johnson, assistant commissioner for service development and delivery at FTS.

About 2,500 written comments have come in since FTS officials issued draft RFPs last October. Johnson said the goal is still to release the final documents on April 1 and award the contracts in April 2006.

— Michael Hardy

Room for the small and new

Some smaller companies are viewing the Networx contract from a different vantage point than their larger counterparts.

Shelley Murphy, president of Verizon Federal, said she plans to bid as a prime contractor on Networx Enterprise. The smaller contract is a natural fit for the company's capabilities, she said.

But not all of the newer players are limiting themselves to the smaller contract. Global Crossing officials are working just as feverishly as the more established companies, said Ed Bursk, vice president of the company's government sales division. He plans to bid on both the Universal and Enterprise contracts.

Bursk is leading an effort to sign other companies onto Global Crossing's team. He said his priority is to bring in partners with capabilities that will be mandatory on one or both of the Networx contracts, but he would consider partnerships with companies that can offer more than the required minimums.

Company officials have decided not to develop new capabilities internally, he added. "You can never be ready enough, but we certainly feel positive about it," he said. "We have people working hard every day."

At Verizon, Murphy hasn't ruled out trying for Universal. Right now, she said, she is planning in a vacuum because some of the specific requirements for Networx won't be revealed until the final request for proposals is issued.

There is a chance the company would bid on Networx Universal, "but I would say the chances are slim," she said. "The likelihood is that we would try to be a strong subcontractor on someone else's team."

— Michael Hardy

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