OMB encourages Networx use

Policy points

According to the Office of Management and Budget’s Aug. 28 memo that requires agencies to justify using any contract other than Networx, a suitable cost/benefit analysis must include:

1. A description of the requirements that must be satisfied.

2. A full comparison of comparable acquisition costs and prices of pre-priced services on alternative contracts.

3. An assessment of the risks or risk factors associated with each possible course of action. These assessments should include cost, technical, schedule and overall mission support risks.

Source: Office of Management and Budget

A recent memo from the Office of Management and Budget doesn’t quite make the Networx contract mandatory but will give agencies a strong incentive to favor it over other options, according to experts.

The memo, issued Aug. 28, requires agencies to use Networx for services that they had been getting through FTS 2001 as they move from the old contract to the new one. In the future, agencies must perform a cost/benefit analysis to justify using contracts other than Networx for new requirements.
The memo leaves little wiggle room for agencies to sidestep it, said analyst Warren Suss, president of Suss Consulting.

“The first thing it says is, ‘thou shalt.’ There’s no ambiguity here,” he said.

Karen Evans, OMB’s administrator for e-government and information technology, issued the memo. In it, she said Networx had satisfied a cost/benefit analysis that the CIO Council conducted. Therefore, Evans issued the memo to give agencies blanket authorization to use Networx without any further cost/benefit study. The agencies will have to support any decisions to use other vehicles with the analyses.

The memo also addresses OMB’s Trusted Internet Connections initiative. The General Services Administration is adding TIC-related services to the Networx program, and the OMB memo urges agencies to use the contracts for TIC, requiring a cost/benefit justification for taking another course.

The TIC initiative requires agencies to eliminate as many of their Internet connections to the public Internet as possible. The theory behind this move is that the fewer connection points there are, the easier they will be to keep secure and monitor.

GSA announced in July that it was adding TIC services to Networx, but vendors on the contract are still working on the details. According to GSA, the vendors will offer Internet access, host required security appliances that monitor traffic, and provide secure data transport from the vendor’s data center back to an agency.

“Some of the large departments have been able to specify the exact Internet interfaces they want to use and what security products they want to use and build their own,” Frank Tiller, acting director of contract development in GSA’s network services division, said in an earlier interview. “There’s five or six building their own solutions, but we wanted to put something together that would be directly orderable through the contract.”

Under the OMB memo, agencies must justify any decision not to use Networx to meet TIC requirements.
GSA’s earliest attempt at a governmentwide telecommunications program, FTS 2000, was mandatory. FTS 2001, the successor to FTS 2000 was not. Networx originally was not, but the OMB guidance essentially changes that, Suss said.

“For any replacements for FTS 2001, it is virtually saying mandatory use,” he said.

“Then, for the Trusted Internet Connections, the approach they’re taking is that they’re putting up speed bumps for agencies that are using other solutions.

Basically, they’re blessing the Networx services.”

Consultant Phil Kiviat, a partner at Guerra and Kiviat, said OMB’s move is intended to make it difficult for agencies to choose any contract other than Networx.

“Agencies will now have to do paperwork — studies, economic analyses, etc. — that they perhaps should have done but weren’t necessarily required to,” he said. “I can’t see how it will interfere with transition work very much.”

However, GSA’s Karl Krumbholz, director of network services, objected to the use of the word mandatory.

“There’s been some discussion about mandatory, and I don’t read the word mandatory anywhere here,” he said. “What I see is that if you’re moving services from FTS 2001, you move to Networx. I don’t know any agencies that were not doing that.”

OMB requires cost/benefit analyses for any major agency investment, he added, so the memo is not imposing any new burden there.

“What this is saying is you don’t need to justify using Networx, [because OMB has] already done that cost/benefit” analysis, he said. Although he rejected mandatory as a description, Krumbholz said it is fair to say that OMB endorses the Networx contract and has made it easier for agencies to choose Networx over other vehicles.

Agencies that do choose to try to justify using a different contract must submit their cost/benefit analyses to their acquisition officials, Evans wrote in the memo. The agency chief information officer must then approve the alternate contract choice.

For independent agencies, the CIO Council will serve as the review and approval authority, according to the memo. The council also will serve as an independent review body to evaluate analyses at the request of any council member or the chairman.

Agencies are not allowed to contract for services not currently met by FTS 2001 until completing the analysis and having it approved, Evans wrote. When receiving approval analysis indicates that a source other than Networx is the better course, agencies should use those other sources she wrote.

GSA was aware that OMB was considering the cost/benefit analysis but did not play a role in the decision-making that led to Evans’ memo, Krumbholz said.

From the providers’ point of view, the memo makes little difference, said Jeff Mohan, Networx program director at AT&T.

“On the transition piece, it’s hard to say because all the agencies are in the middle of transition exercises anyway,” he said. Long term, “what it does mean is they’ll have to put more rigor into choices that they make. There’s an extra step in there.”

However, consultant Bob Woods, president of Topside Consulting and a former commissioner of what was then named the Federal Telecommunications Service at GSA, said the mandatory use provision of the FTS 2000 contract was similar to the OMB memo’s effect on Networx.

“When we had mandatory use before, it allowed you to go off the network if you did the things OMB is asking for this time,” he said. “This is essentially the same result.”

Woods said he had heard rumors that OMB was considering issuing such a directive.

“I’d heard a fair amount of chatter that agencies would be required to use it unless they could show it wouldn’t meet their needs,” he said. “This was not a total surprise. I was not sure they would actually carry through with it.”

The problem with making contracts mandatory, or even favored, is that such a designation shouldn’t be necessary if the contract offers a good deal for agencies, he said. However, Woods said, the memo implies nothing about the quality of the Networx program. “It’s just the way the government wants to manage” it.

Suss said problems could arise because the scope of services available through Networx is much broader than what was offered by past telecom contracts.

“Specifically, they’re including things that up until now have been considered [information technology] services,” he said. “Such as storage. Such as collaboration. Most of these things have been purchased by agencies completely separate from FTS 2001.”

Agencies that want to continue buying those services through other contracts might find themselves pushed toward Networx, he said.

“According to the letter of this memo, it says agencies shall not contract for these services until they’ve done the cost/benefit analysis, if they want to use a vehicle other than Networx,” he said. “I believe the agencies are going to be very unhappy with this. It reduces their independence.”

Woods also mentioned that concern. “That’s one of the complications of enforcement of this,” he said. “What if I’m buying cell phones? What if I’m buying something available through the [GSA schedule contracts]? Does this mean I can’t use the schedules? There are some details still to be worked out. No matter how much research you do, there’s always the exception you didn’t think of.”

On the other hand, the memo adds to the already-existing pressure agencies feel to buy managed services, which might be a long-term improvement, Suss said.

Suss said OMB could ultimately soften the language in the memo. It seems to contradict GSA’s general approach, he said.

“The GSA philosophy has been, ‘have it your way,’ ” he said. “It’s been to give the agencies as many different ways to buy the services as they want. For almost a decade, GSA has been expanding the range of options available to agencies.”

In the past, GSA tried to essentially force agencies to use a single, preferred contract to buy certain things, and agencies rebelled, he said.

“Here I think we see the pendulum swinging back to OMB using a heavy hand to force agencies to use a particular vehicle as a first option.” 


  • Government Innovation Awards
    Government Innovation Awards -

    Congratulations to the 2021 Rising Stars

    These early-career leaders already are having an outsized impact on government IT.

  • Acquisition
    Shutterstock ID 169474442 By Maxx-Studio

    The growing importance of GWACs

    One of the government's most popular methods for buying emerging technologies and critical IT services faces significant challenges in an ever-changing marketplace

Stay Connected