GSA close to awarding FTS 2000 contract extensions

General Services Administration officials said last week that they were on the verge of awarding extensions to AT&T and Sprint to allow the FTS 2000 vendors to provide long-distance service for up to two years after the FTS 2000 contract expires in three weeks.

Sandy Bates, deputy commissioner of GSA's Federal Technology Service, said she believes the contract extensions will not require federal agencies to pay substantially more for long-distance telecommunications service than they now pay through FTS 2000. But Bates added that GSA has not yet completed negotiations with AT&T and Sprint for pricing on the extensions, which will kick in Dec. 7 and will run until agencies make the transition to the next-generation FTS 2001 pacts.

Bates said neither vendor has indicated that it would jack up prices after FTS 2000 expires. "We're not experiencing those kinds of discussions," she said. "No one is talking about any substantial increase in rates."

Government and industry sources said the negotiations, particularly between GSA and AT&T, have been contentious. The two organizations still have not settled AT&T's claim that GSA owes it about $120 million due to a failure to move all of the Treasury Department's long-distance traffic from Sprint's FTS 2000 network to AT&T's. A government source said the disagreement stalled negotiations temporarily, but the two sides have since moved on.

"Hold the Government Hostage"?

Although some sources said they had been concerned that the vendors might "hold the government hostage" and demand higher rates than those charged through FTS 2000, Bates said the vendors did not see such a strategy as in their best interest.

"I think both Sprint and AT&T are concerned about their customers, and they want to keep them," Bates said. "They've worked hard to establish good customer relationships, and it wouldn't play very well for them to go for the throat at a time when the government is transitioning. They are not doing that."

Neither Bates nor FTS Commissioner Dennis Fischer would comment on when they expected to complete discussions with the vendors. Spokespersons from AT&T and Sprint refused to comment on the negotiations.

Ron Hack, director of systems and telecommunications management at the Commerce Department, said users of the FTS 2000 contract are not extremely concerned about paying more for long-distance service after the contract expires. He said FTS personnel briefed the Interagency Management Council, a group of federal telecom executives led by Hack, and indicated that pricing on the extensions would not represent a dramatic increase over FTS 2000 prices.

"That was a major concern at first, but we don't anticipate a significant increase," Hack said.

Hack said agency representatives are more concerned about the transition to the FTS 2001 contracts, which are slated for initial award by the end of the year. He said agencies that move to the new contracts early may suffer until volume discounts kick in after additional agencies come on board. Meanwhile, agencies left on FTS 2000 may lose their volume discounts as agencies move off that network and onto FTS 2001.

"We certainly have some money in our [fiscal 1999] budget for transition costs," Hack said. "The transition isn't going to be free."

Warren Suss, president of Warren H. Suss Associates, Jenkintown, Pa., said agencies should be more concerned about the cost of the transition than about the cost of the contract extensions.

"The agencies are going to have to go through a lot of headaches, and it's going to be costly no matter how well the transition is managed," Suss said.