Networx...or what else?

As everyone looks ahead to the era of Networx — to a time after the contract has been awarded and agencies have moved their network requirements to it from other vehicles — some wonder what chances other telecommunications contracts will have to thrive.

In principle, Networx is not mandatory; agencies have the option of finding competitive offerings. But most observers believe that political pressures to use Networx will keep agencies from exploring the market.

The Treasury Communications Enterprise contract is Exhibit A.

TCE was long envisioned to be Treasury's successor to the Treasury Communications System, a contract to address he agency's specific needs and bring it performance-based contracting and managed services in a big way.

Treasury officials talked up the contract for almost two years before finally awarding it to AT&T late in 2004. But a series of protests and increasing pressure from Rep. Tom Davis (R-Va.) led Treasury officials to surrender. In May, the department canceled the TCE project and, in a letter to the Government Accountability Office, promised to use the General Services Administration's contract vehicles to meet its networking needs.

"You already saw [Treasury] abandon their TCE program, and we see it going that way for telecommunications," said Chris Campbell, senior analyst for federal market analysis at Input. The Office of Management and Budget "is pushing for everybody to consolidate things, and telecom really is a place they can do that."

TCE foreshadows the Networx era

In the future, agencies will have less choice in how they buy, Campbell said. "The only reason OMB has indicated they would let agencies procure certain things on their own again is if they can make a business case for it," he said.

"I think that TCE is a picture of the future," said Phil Kiviat, a consultant at Guerra, Kiviat, Flyzik and Associates. "That is to say, there is the feeling in the administration, in the Congress, that consolidation of certain things is in the government's best interests."

It's the same philosophy that led GSA to create its SmartBuy enterprise software-licensing program, he said.

As the trend evolved from diverse procurement opportunities to a more centralized environment, "TCE got caught on the cusp," Kiviat said. "It's unfortunate that it was."

As GSA officials enter the home stretch of evaluating bids before awarding Networx, observers point to Davis' effort to change Treasury's mind as evidence that no agency will be able to issue any kind of a competing contract without good reason. But they all quickly add one critical caveat: elections.

If the lawmakers who are pressing most forcefully for business to move through GSA are voted out, the climate could change. When President Bush leaves office in January 2009, his successor could implement new policies.

Most agree, however, that the general trend that the Bush administration and Davis' House Government Reform Committee have established is likely to continue.

"When a new administration comes in, they could always change things," Kiviat said. "We could go back to decentralization. I personally don't think that's going to happen. Can a new administration come in and say, 'Results are no longer important?' There are certain things you can't turn around."

The history of large telecom contracts has been one of pendulum swings, said Don Scott, a senior vice president at EDS and a former associate administrator at GSA.

Scott ran the FTS 2000 contract, which was GSA's first attempt to create a sweeping telecom vehicle.

DOD presents unique challenges

Networx is not mandatory, but agencies will be expected to use it unless they need services that the contract simply does not provide, Scott said. The Defense Department is a case in point.

"DOD will continue to have justifications, such as command and control and national defense, as a reason to use their own contracts," Scott said.

Denny Groh, who ran acquisition programs at the Defense Information Systems Agency in the 1980s and 1990s then worked as assistant commissioner of service delivery at GSA, said customers like having choices, but GSA presents a compelling offering.

Groh, now vice president of governmentwide acquisition contracts at STG, a small systems integrator, ran his programs at DISA during the time that FTS 2000 and its mandatory-use provisions were in force. Command and control functions were exceptions to the mandatory-use rule.

"What we did was leverage what they didn't do," he said.

GSA officials became less sensitive to customer needs when FTS 2000 was in effect, because they had no competitive pressures, while DISA contracts had to remain efficient and effective, Groh said.

GSA might have learned a needed lesson in those years, he said. "GSA flipped completely" when FTS 2000 expired, Groh said. "FTS 2001 was about choice, and it began to get into the data world as well as the voice world."

As telecom procurements become more complex and incorporate more network services, information technology and other components with the old-fashioned voice and data services, customers are increasingly eager to get an end-to-end offering through a single contract. That will make it difficult for other agencies to effectively field Networx rivals, Groh said.

With GSA, "you get a very professional, very expert group of people that, unless you have a lot of resources aimed at that target, you can't get somewhere else," he said. "I'm not sure you can effect that same outcome doing it an agency at a time. There will be those who try it from time to time."

Congress adds Networx heft

Warren Suss, president of Suss Consulting, said that Davis' support for GSA is broad-based. "There certainly has been political pressure coming from the Davis committee to encourage agencies to make use of GSA contract vehicles," he said. "Networx is just one of them. I think if that committee could control all the variables, they would have all the government acquisition going through GSA. We know that's not going to happen in general. The question is to what degree it will happen for network-related business."

Despite pressure to use GSA vehicles, if it isn't mandatory, not everyone will comply, Suss said.

"There's no question but that the different parts of the government are going to approach their network requirements in different ways, and many of these are not going to flow through GSA," he said.

GSA has other contract vehicles through which agencies can purchase network services, Suss said. An additional concern is that GSA is due to award Networx and another governmentwide acquisition contract called Alliant as the agency is moving ahead with a massive reorganization that will collapse FTS and the Federal Supply Service into a single division — the Federal Acquisition Service.

"One of the things I've been complaining about is that in this GSA reorganization they need to establish clear lines of authority to bring those [contracts] all under one umbrella," Suss said. "You don't want to create conflicts between contracts. I'm not at all confident that they understand how important this is."

DOD's business is even more of a concern than it was in the past because it is building its own network through the Global Information Grid-Bandwidth Expansion (GIG-BE) project.

DOD has been GSA's single largest customer. But GIG-BE could change that, Suss said. Some DOD officials are troubled by reports of GSA employees disregarding procurement rules in recent years, which was one of the factors that moved GSA into its current reorganization, he said.

In addition to data, DOD is "also likely to be putting voice traffic over that network, as well as private line traffic, which would really eliminate downstream a significant portion of the DOD business that flows through GSA," Suss said. "Unless GSA can fix their problem with the Defense Department, they are in hot water."

Industry looks ahead

Companies are not ignoring opportunities to compete for other contracts, but they see Networx as the key telecom contract of the next decade.

Tom Kreidler, vice president of government at Juniper Networks, said there are too many variables to predict. "It all depends on how it's enforced," he said. "It could be the only contract government uses."

Diana Gowen, senior vice president of government services sales at Qwest Communications International, said most agencies will need GSA.

"Unless you're the Department of Defense with your own networks, most agencies are going to be pressed to use GSA vehicles," Gowen said. GSA does not necessarily mean Networx, she added.

But it is going to be the first choice for most agencies seeking telecom and network services, said Tony D'Agata, vice president and general manager of Sprint's Government Services Division.

"There's a lot of interest on the part of the Hill to make Networx successful and for it to be a preferred contract vehicle under which agencies can procure telecommunications services," he said. However, "there will always be competitive vehicles. Sometimes agencies may feel their requirements are rather unique and warrant a separate contract."

Both GSA and companies that win Networx will be responsible for making sure the contract continues to be desirable as time passes, he said. Networx will have to keep up with technological advances and continue to offer a broad range of services to meet agencies' changing needs.

"The telecommunications world is very dynamic," he said. "When you have a 10-year contract, you need to be able to adapt or modify the capabilities in the contract so that it stays current with what agencies want. I think GSA has plans to allow for that."

As for alternatives, D'Agata said he expects to see some but not many.

"There are and will continue to be competing vehicles," he said. "That's probably a given. I don't think there will be a lot of those, provided of course that Networx remains competitive and refreshed and provides the management tools that are helpful to the agencies so that there's no compelling reason for agencies to drift from Networx."

Perhaps the most basic truth, D'Agata said, is that GSA specializes in procurement. "In general, it is difficult for an agency to run a rather large procurement and be able to handle the myriad issues that surround a large procurement," he said. "They don't have the staff to do it adequately, and it just doesn't seem to make sense in a broad sense for them to do that. Why not leave procurement to people who know what they're doing, rather than have these renegade procurements?"

'Mandatory' revisited

Agencies won't be forced to use the Networx contracts, but they will be strongly encouraged to take advantage of them. That's a middle position, compared with FTS 2000, which was mandatory, and FTS 2001, which was not mandatory and came about at a time when choice was emphasized.

Rep. Jack Brooks (D-Texas), who is best known for the Brooks Act of 1972, was the General Services Administration's early congressional champion, said Don Scott, a senior vice president in EDS' U.S. Government Solutions division and formerly an associate administrator at GSA.

"Jack Brooks was a great advocate of GSA," said Scott, who worked on the FTS 2000 contract. "They got great support and they beat up agencies pretty severely if they didn't fall in line. I received some criticism from the Hill for permitting [the Federal Aviation Administration] to go out on their own, but I couldn't provide them timely service and I'm a service guy, so I let them go out on their own."

The Clinton administration undertook its Reinventing Government project around the time that FTS 2000 gave way to FTS 2001.

"I don't know that mandatory use is necessary anymore," said Tony D'Agata, vice president and general manager of Sprint's Government Services Division. "The reason mandatory use was initially very important was that the providers generally had to spend quite a bit of money to get in the game."

Sprint and MCI were initially awarded the FTS 2001 contract. Companies preparing to compete for government business would spend up to $100 million to revamp their back-end financial and billing systems to comply with government requirements, D'Agata said.

By now, "I think that most of the companies have put those system capabilities in place over the years," D'Agata said.

Although Networx is not mandatory by design, it has 10 years to evolve, said Phil Kiviat, a consultant at Guerra, Kiviat, Flyzik and Associates.

"I find it's very hard to look into a crystal ball on these things," he said. "Look at SmartBuy. The government said that SmartBuy contracts were not going to be mandatory, that it was just good economics. But when it came down to the SmartBuy contract with Oracle, they made the SmartBuy contract mandatory for anybody who wanted to buy Oracle. That is not anything like making Oracle mandatory, but the word 'mandatory' snuck in. That's the point."

— Michael Hardy

GSA has its own alternatives

Although other agencies may be hard-pressed to issue alternatives to Networx, the General Services Administration is happy to offer some.

Some of the services featured on Networx already appear as offerings on GSA's schedule contracts and on governmentwide acquisition contracts (GWACs), including GSA's forthcoming Alliant contract. The National Institutes of Health's Chief Information Officer Solutions and Partners 2 contract also provides some options, said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc.

Alliant, which will go to about 20 contractors and have a $50 billion ceiling, is designed to offer federal customers a broad suite of information technology services.

But despite the presence of these and other GWACs, plus the availability of telecommunications services through the GSA schedules program, Networx offers the best options in managed services and comprehensive solutions, observers say.

Therefore, competing vehicles pose little risk to the new contract's success, said John Johnson, assistant commissioner for service development and delivery with the Federal Technology Service. "GWACs and the schedules program offer commodity-type services and don't come close to the prices that can be attained from a heavily negotiated contract, such as Networx," he said.

Along with the carrot of lower prices and end-to-end solutions to promote the use of Networx, there is also a stick.

"The focus and direction we are getting from Congress and OMB is that the first choice for building network service platforms will be the Networx contract," said David Cheplick, director of the Department of Veterans Affairs' Telecommunications Operations Management Service.

— Jennifer Jones


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