GSA tips hand on Networx

Seven companies could win contracts

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General Services Administration officials revealed last week that they plan to award the Networx telecommunications contracts to as few as seven companies while noting that the contract is still not finalized and that the numbers could change.

As of now, the telecom industry can expect that two companies will get places on the Networx Universal contract, through which agencies will purchase common telecom services across a wide geographic area. Networx Enterprise, which will provide more specialized services in a localized range, will go to about five companies, GSA Administrator Stephen Perry said in testimony last week before the House Government Reform Committee.

Those numbers, although approximate, address one concern that industry officials have frequently raised: Because the Networx minimum revenue guarantees are to be divided among all holders of each contract, industry officials have not been able to predict how much their companies can expect if they win one of the awards. GSA officials have set a minimum revenue guarantee of $525 million for Networx Universal and $50 million for Enterprise.

However, many telecom officials still worry that the contract will be too costly and will offer too small a guaranteed return. At the committee hearing, several company leaders said that heavy reporting requirements, low minimum revenues and other factors are giving them pause.

A few industry officials said they have not decided whether to bid on the opportunity. Instead, they are waiting to see whether the final requests for proposal — one for each of the two contracts that will make up Networx, both due April 1 — will address their objections to draft versions of the RFPs released late last year.

"I cannot recommend to senior management of Sprint that our shareholders assume the risks inherent in the current draft request for proposal," said Anthony D'Agata, vice president and general manager of Sprint's government systems division.

Rep. Dan Burton (R-Ind.) said that Sprint's position as an incumbent on the FTS 2001 contract, which Networx will replace, makes D'Agata's objections especially worrisome.

Echoing his counterparts at other companies, D'Agata summarized his reporting concerns. Networx, as described in the draft RFPs, would require contractors to deliver up to 240 reports per agency to GSA and customer agencies. That means a company like Sprint, which has a large volume of government work, would have to produce about 75,000 reports a month, he said.

The contract also would require the contractors to submit reports that have no equivalent in the commercial marketplace, which could mean that companies would have to set up back-end systems to accommodate the new requirements.

Not every vendor shares those concerns, however. Robert Collet, vice president for engineering at AT&T Government Solutions, expressed support for Networx, saying, "GSA got it right."

Several industry officials said, however, that GSA should create stronger links between the Universal and Enterprise portions of Networx. They pointed to a crossover mechanism that allows holders of Metropolitan Area Acquisition contracts for local telecom services to become part of FTS 2001 under some circumstances. Similarly, Networx could offer a way for Enterprise contract holders to graduate to Universal, some suggested.

Shelley Murphy, vice president for federal markets at Verizon, said the current structure could shut an Enterprise contract holder out of many opportunities once agency officials decide to use Networx Universal, even if the holder can meet some of the agency's requirements. Allowing competition among Universal and Enterprise contractors, or providing a graduation process, would help, she added.

Another concern is that industry officials still lack some critical information for making decisions about Networx, said Linda Koontz, director of information management issues at the Government Accountability Office. For example, GSA officials have not provided criteria on how Networx proposals will be evaluated. And they have not reported on the communication traffic volumes at agency locations, which company officials need to know before they can finish their bids.

Perry said GSA officials are unlikely to have the traffic volume data before May.

Rep. Tom Davis (R-Va.), chairman of the committee, also expressed doubts about Networx. Emphasizing his support for the concept, he said that agency officials must continue to refine their plan.

"I am not sure that the evolution [of the strategy so far] has been sufficient to ensure that Networx will become the best choice for customer agencies," Davis said.

Small businesses identify Networx barriers

Small companies that haven't had a place on the FTS 2001 telecommunications contracts are at a disadvantage in competing for the forthcoming Networx contracts, said Jeff Storey (at left), president and chief executive officer of WilTel Communications. His company could end up spending more than $1 million to compete for Networx.

Storey said he wondered why officials chose to set minimum revenue guarantees for Networx Universal considerably higher than those for the Enterprise contract. Competitors for Universal probably have federal business already and can expect continued business with their existing customers, he said.

He recommended that officials increase the guarantee for Networx Enterprise from $50 million to at least $125 million and reduce Universal's $525 million minimum guarantee.

The billing and reporting requirements specified in the draft Networx requests for proposals, including those that have no commercial equivalent, force companies to invest upfront in back-end systems to handle the additional reporting, said Diana Gowen, president of government solutions at Broadwing Communications. For small companies with limited financial resources, those investments could be a barrier, she said.

If General Services Administration officials don't make significant changes before they issue the final RFPs, federal agencies might find it difficult to get the latest technologies under Networx, Storey said. "If there's going to be innovation introduced to the government, it's going to come from the Enterprise side," he said.

— Michael Hardy

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