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Testimony:

Before the Committee on Government Reform, House of Representatives:

United States General Accounting Office:

GAO:

For Release on Delivery Expected at 10:00 a.m. EST:

Thursday, February 26, 2004:

Telecommunications:

GSA Faces Challenges in Planning for New Governmentwide Program:

Statement of Linda D. Koontz 
Director, Information Management Issues:

GAO-04-486T:

GAO Highlights:

Highlights of GAO-04-486T, testimony before the Committee on 
Government Reform, House of Representatives 

Why GAO Did This Study:

The Genera1 Services Administration (GSA) has initiated planning for 
its next-generation telecommunications acquisition program, known as 
Networx, which will replace the current Federal Telecommunications 
System (FTS) 2001 for long-distance and international services. It 
will also replace contracts for wireless and satellite communications 
products and services.

Planning for this acquisition is occurring within an environment of 
tremendous change—in the industry, in underlying services and 
technology, and potentially in the regulatory environment. In this 
context, Networx can offer a significant opportunity for the federal 
government to flexibly acquire telecommunications services at 
competitive rates and apply innovative solutions to improving agency 
operations.

At the request of the committee Chairman, GAO is providing an overview 
of acquisition planning steps completed to date, along with its 
assessment of challenges facing GSA and federal agencies as this 
acquisition proceeds.


What GAO Found:

Over the past year, GSA has acted to ensure that all interested 
parties—including industry and agency users—have had a chance to 
comment on the development of the successor to FTS2001 and associated 
contracts. In its planning for the Networx acquisition, GSA cited five 
goals for the program: (1) continuity of telecommunications services, 
(2) best value, (3) strong competition, (4) a broad range of services 
and providers in a changing marketplace, and (5) expanded 
opportunities for small businesses. To achieve this, GSA plans two 
acquisitions: Networx Universal—broad-ranging services with global 
coverage, and Networx Select—leading-edge services but more 
geographically limited. The table below displays GSA’s proposed 
schedule for the two contracts.

To take full advantage of the opportunities offered in these new 
contracts, GSA will need to address four key challenges:

* Ensuring that an adequate inventory of information about existing 
telecommunications services and assets is available, to give planners 
an informed understanding of governmentwide requirements.
* Establishing specific measures of success to aid acquisition 
decision making and effective program management.
* Structuring and scheduling the contracts to ensure timely delivery 
of competitively priced telecommunications services that meet agency 
mission needs.
* Ensuring a smooth transition from the current contracts by 
initiating appropriate implementation planning actions.

Both leadership from GSA and commitment from stakeholders in resolving 
these issues will be essential to establishing efficient, cost-
effective, and secure telecommunications services. If this can be 
achieved, the Networx contracts will be optimally positioned to 
leverage the power and creativity of today’s telecommunications 
marketplace to carry the federal government forward well into the 21st 
century. 

www.gao.gov/cgi-bin/getrpt?GAO-04-486T.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Linda D. Koontz at 
(202) 512-6240 or koontzl@gao.gov.

[End of section]

Mr. Chairman and Members of the Committee:

I am pleased to participate in the Committee's hearing on the General 
Services Administration's (GSA) next generation governmentwide 
telecommunications acquisition program, known as Networx. As you know, 
GSA's planning for this program is taking place within an environment 
of tremendous change--in the telecommunications industry, in underlying 
services and technology, and potentially in the regulatory environment. 
In this context, the Networx initiative can be viewed as a significant 
opportunity for the federal government to flexibly acquire and apply 
innovative telecommunications services offered by industry to improve 
agency operations. As requested, today I will discuss the background 
for this current initiative and provide an overview of the acquisition 
planning activities completed to date. I will also describe four 
challenges that GSA and executive branch agencies will need to address 
in the next few months as planning for this major acquisition proceeds.

In brief, over the past year, representatives of GSA, federal agencies, 
the Interagency Management Council (IMC), the telecommunications 
industry, and other interested parties have engaged in planning and 
dialogue over the replacement for the current Federal 
Telecommunications System (FTS) 2001 and associated contracts. This 
replacement acquisition program is known as FTS Networx.[Footnote 1] 
GSA and the IMC have taken steps to ensure that all interested parties 
have had an opportunity to comment on at least a portion of their plans 
for this major initiative and to help refine their acquisition 
strategy. Nevertheless, significant challenges remain for GSA and the 
IMC to address in the coming months to help ensure a successful outcome 
for a more clearly and fully defined Networx program with respect to:

* ensuring that adequate inventory information is available to planners 
to provide an informed understanding of governmentwide requirements;

* establishing measures of success to aid acquisition decision making 
and enable effective program management;

* structuring and scheduling the Networx contracts to ensure that 
federal agencies have available to them the competitively priced 
telecommunications services they need to support their mission 
objectives; and:

* initiating the implementation planning actions needed to ensure a 
smooth transition from current contracts to Networx.

My remarks today are based on our previous reviews of GSA's federal 
telecommunications programs, including implementation of the current 
FTS2001 contracts, as well as research to date into sound 
telecommunications planning and management practices that you recently 
requested. In addition, we reviewed comments submitted by industry and 
federal agencies to a request for information issued by GSA last 
October to provide information to potential industry offerors regarding 
its Networx program plan, and to solicit comments from industry 
regarding its acquisition strategy. We also attended the Industry 
Advisory Council's February 17, 2004, forum held to obtain additional 
industry views on the Networx program and strategy.[Footnote 2] We 
conducted our work in January and February 2004, in accordance with 
generally accepted government auditing standards.

Background:

According to GSA, its Federal Technology Service, in conjunction with 
the IMC, is responsible for ensuring that federal agencies have access 
to the telecommunications services and solutions needed to meet mission 
requirements. Its current program to provide long-distance 
telecommunications services--FTS2001--has two goals: to ensure the best 
service and price for the government, and to maximize competition for 
services.

In implementing this program strategy, GSA awarded two contracts for 
long-distance services--one to Sprint in December 1998 and one to MCI 
WorldCom in January 1999. Under the terms of these contracts, each firm 
was guaranteed minimum revenues of $750 million over the life of the 
contracts, which run for four base years and have four 1-year-extension 
options. If all contract options are exercised, those contracts will 
expire in December 2006 and January 2007, respectively. According to 
GSA, federal agencies spent approximately $614 million on FTS2001 
services during fiscal year 2003 alone.

Related governmentwide telecommunications services are provided by 
other GSA contracts: the Federal Wireless Telecommunications Service 
contract and the FTS Satellite Service contracts. The wireless contract 
was awarded in 1996 to provide wireless telecommunications products and 
services to all federal agencies, authorized federal contractors, and 
other users. The satellite services contracts are a series of contracts 
for a variety of commercial off-the-shelf satellite communications 
products and services, including mobile, fixed, and satellite services. 
According to GSA, these contracts will expire in late 2004 and in 2007, 
respectively.

We have periodically reviewed the development and implementation of the 
FTS2001 program and assessed its progress. In March 2001 we reported to 
you on the delays encountered during the government's efforts to 
transition from the previous FTS 2000 to the FTS2001 contracts, the 
reasons for those delays, and the effects of the delays on meeting 
FTS2001 program goals of maximizing competition for services and 
ensuring best service and price.[Footnote 3] We recommended that GSA 
take numerous actions to facilitate those transition efforts. In April 
2001 in testimony before you, we reiterated those recommendations and 
noted that the process of planning and managing future 
telecommunications service acquisition would benefit from an accurate 
and robust inventory of existing telecommunications services.[Footnote 
4] Ultimately, GSA acted on our recommendations and the transitions 
were successfully completed.

GSA's Network Program Development Actions Are Continuing:

GSA is now planning its FTS Networx acquisition program, including the 
awarding of new governmentwide contracts for a broad range of long 
distance and international voice and data communications services, 
wireless services, and satellite telecommunications services. These 
contracts are intended to replace the existing FTS2001, Federal 
Wireless Telecommunications Service, and FTS Satellite Service 
contracts. GSA and the IMC has identified five goals for the Networx 
acquisition program:

* Meet agency needs for a comprehensive acquisition that provides 
continuity of current telecommunications services and solutions.

* Obtain best value (lowest prices while maintaining quality of service 
levels) for all services and solutions.

* Encourage strong competition for the initial contract award(s), and 
ensure continuous competition throughout the life of the program.

* Respond to the changing marketplace by providing agency access to a 
broad range of services and service providers.

* Provide expanded opportunities for small businesses.

To achieve those goals, the program calls for two acquisitions--Networx 
Universal and Networx Select. The Networx Universal contracts are 
expected to satisfy requirements for a full range of national and 
international network services. According to GSA, Networx Universal 
seeks to ensure the continuity of services and prices found under 
expiring contracts that provide broad-ranging service with global 
geographic coverage. GSA expects all Networx Universal offerors to 
provide a full range of voice and data network services, managed 
networking services and solutions, and network access, wireless, and 
satellite communications services. This acquisition is expected to 
result in multiple contract awards to relatively few offerors because 
few are expected to be able to satisfy the geographic coverage and 
comprehensive service requirements. GSA also intends to apply 
competitive incentives to obtain best value for its customer agencies, 
although those incentives are not yet defined. Further, GSA expects to 
establish minimum revenue guarantees for these contracts.

In contrast, GSA plans to award multiple contracts for a more 
geographically limited set of services under Network Select. GSA 
generally describes these Select contracts as providing agencies with 
leading edge services and solutions with less extensive geographic and 
service coverage than that required by Networx Universal; specific 
Networx Select service requirements have not yet, however, been 
defined. Details of pricing structures and Select service delivery 
mechanisms are planned to be provided in the Networx Select request for 
proposals, which GSA intends to release in the summer of 2005.

GSA anticipates awarding both the Networx Universal and the Networx 
Select contracts well before the expiration of the FTS2001 contracts. 
Networx Select will be awarded approximately 9 months after Networx 
Universal. Table 1 displays GSA's schedule for these two acquisitions:

Table 1: GSA's proposed schedule for Networx Universal and Networx 
Select acquisitions as of February 2, 2004:

Milestone: Draft RFP[A] released; 
Networx Universal: Spring 2004; 
Networx Select: Winter 2005.

Milestone: Draft RFP responses due; 
Networx Universal: Summer 2004; 
Networx Select: Spring 2005.

Milestone: Final RFP released; 
Networx Universal: Fall 2004; 
Networx Select: Summer 2005.

Milestone: Final RFP responses due; 
Networx Universal: Winter 2004; 
Networx Select: Fall 2005.

Milestone: Source selection complete; 
Networx Universal: Fall 2005; 
Networx Select: Summer 2006.

Milestone: Contract award(s); 
Networx Universal: Winter 2005; 
Networx Select: Fall 2006.

Source: GSA:

[A] Request for proposals:

[End of table]

Challenges Remain Before Finalizing the Network Acquisition Program 
Strategy:

Notwithstanding the acquisition planning activities completed by GSA 
and the IMC to date, these entities face significant challenges in 
finalizing their program strategy to ensure that Networx is 
appropriately defined, structured, and managed to deliver those 
telecommunications services and solutions that will enable federal 
agencies to most efficiently and effectively meet their mission needs. 
Specifically, these challenges include:

* Ensuring that adequate inventory information is available to planners 
to provide an informed understanding of governmentwide requirements.

* Establishing measures of success to aid acquisition decision-making 
and enable effective program management.

* Structuring and scheduling the Networx contracts to ensure that 
federal agencies have available to them the competitively priced 
telecommunications services they need to support their mission 
objectives.

* Initiating the implementation planning actions needed to ensure a 
smooth transition from current contracts to Networx.

Ensuring Adequate Inventory Information:

It is important that GSA and its customer agencies have a clear 
understanding of agency service requirements in order to make properly 
informed acquisition planning decisions. According to our ongoing 
research on best practices in telecommunications acquisition and 
management, clear understanding comes at least in part from having an 
accurate baseline inventory of existing services and assets. More 
specifically, an inventory allows planners to make informed judgments 
based on an accurate analysis of current requirements and capabilities, 
emerging needs that must be considered, and the current cost of 
services. Although leading organizations acknowledge that establishing 
and maintaining such an inventory may be difficult, they view this 
baseline as an essential first step to high-quality telecommunications 
requirements analysis, and subsequent sourcing decisions associated 
with meeting those requirements.

Despite this importance, it is not clear whether GSA and federal 
agencies have yet established the comprehensive, accurate inventories 
needed to support Networx planning. Mr. Chairman, you followed up on 
this issue in your December 17, 2003, letter to GSA asking to what 
extent such detailed inventories were currently being maintained and 
kept accurate and up-to-date for use both in acquisition planning and 
future contract transitions. In his response, the Administrator of 
General Services identified sources of information provided by GSA and 
the FTS2001 vendors--for example, monthly billing information--that 
would be helpful to agencies in developing inventories of existing 
services. In addition, the Administrator noted that GSA is examining 
methods of incorporating better billing and inventory data into the 
Networx program where practical. However, the Administrator did not 
provide specific information on the extent to which these inventories 
exist, or whether agencies are periodically validating that information 
to ensure that it is accurate and complete. Further, the Administrator 
acknowledged that the accuracy and completeness of telecommunications 
service inventories varies among agencies. As a result, without a clear 
understanding by GSA and its customer agencies of the FTS2001 services 
used today and the applications they support, it is unclear how 
properly informed Networx acquisition planning decisions can be made.

Establishing Measures of Success:

Our research into recommended program and project measurement 
practices, which we affirmed in discussions with private-sector 
telecommunications managers, highlights the importance of establishing 
clear measures of success to aid acquisition decision making as well as 
to provide the foundation for accountable program management. Such 
measures define what must be done for a project to be acceptable to the 
stakeholders and users affected by it, and in so doing enables 
measurement of progress and effectiveness in meeting objectives.

Although GSA has established program goals, it has not yet defined a 
comprehensive set of corresponding performance measures for the Networx 
acquisition program. According to GSA's Assistant Commissioner for 
Service Delivery/Development, one of the criteria for measuring Networx 
success will be identical to that used for FTS2001--that is, savings as 
measured by contract service costs compared with best commercial 
pricing. Further, according to this official, this was the sole measure 
reported to the Office of Management and Budget for FTS2001. While low 
pricing is an important criterion reflected in program goals, GSA has 
not yet defined measures about how well its final acquisition plan will 
deliver the value (service plus price) that agencies need to improve 
their operations and meet their mission needs. For example, GSA's 
Networx environmental assessment indicates that agencies want this 
program to support network planning and optimization, include simple 
and understandable fees, provide management of contracts and 
contractors on the agencies' behalf, and include other elements of 
value. GSA's Assistant Commissioner for Service Delivery/Development 
recognizes the importance of having such measures, and told us that GSA 
would be establishing such measures coincident with its actions to 
finalize the Networx Universal RFP in the coming months. It will be 
important that GSA follow through on this commitment to establish that 
appropriate set of measures to evaluate the intended business value of 
the Networx program and enable the effective management of this 
significant program over time.

Structuring and Scheduling Contracts to Deliver Needed Services:

Once agency requirements are adequately understood and measures of 
success defined, structuring and scheduling the Networx contracts to 
successfully encourage industry competition to obtain low prices and 
high-quality, innovative services becomes the next challenge. The 
varying views of industry representatives commenting on the request for 
information raised fundamental questions about the soundness of the 
proposed acquisition approach for accomplishing this. For example, 
large, interexchange carriers, like those that hold the current FTS2001 
contracts, generally agreed with the broad scope of the Universal 
contracts. They further suggested that services offered under Networx 
Select and Universal should be mutually exclusive, and that all 
carriers should be allowed to compete for both.

In contrast, other carriers criticized the approach. These carriers 
asserted that some major telecommunications providers might be 
precluded from bidding on the Networx Universal contracts because of 
the broad service and ubiquitous geographic coverage requirements 
described in the request for information. For example, one vendor 
stated that it was quite possible that only traditional long distance 
carriers could effectively bid for Universal, thus denying many players 
in the industry a realistic chance to compete for major portions of the 
federal long distance business. One carrier noted that, based on the 
procurement timetable, the timing of the award for the Select contracts 
would minimize the opportunity to compete for long-distance 
telecommunications services. Because of the 9-month lag between the 
Universal and Select acquisitions indicated in the proposed acquisition 
schedule, agencies could be asked to make decisions regarding their use 
of awarded Universal service contracts before information is available 
regarding Select leading edge services and solutions that may be more 
suitable for their needs.[Footnote 5]

Defining an acquisition strategy that appropriately balances the need 
to ensure the continuation of existing telecommunications services in 
all current government locations with encouraging strong competition to 
obtain best value is a daunting challenge. However, proceeding from a 
clear understanding of requirements and measures of success--as I 
previously discussed--should aid in meeting this challenge by providing 
guideposts for a decision that strikes an appropriate balance on 
contract scope, program structure, and acquisition schedules that can 
deliver to agencies competitively priced solutions that meet their 
mission needs. Further, continuing to solicit and effectively implement 
feedback from stakeholders should help GSA achieve this goal.

Initiating Implementation Planning to Ensure Smooth Transition:

As we reported to you in March 2001, the current FTS2001 contracts got 
off to a rocky start as significant delays in transitioning to the new 
contracts hindered timely achievement of program goals.[Footnote 6] 
Factors contributing to those delays included a lack of data needed to 
accurately measure and effectively manage the transitions, inadequate 
resources, and other process and procedural issues. Ultimately, GSA did 
take action on all of our recommendations and the transition to the 
FTS2001 contracts was finally completed. In subsequent testimony before 
you in April 2001 we noted the importance of incorporating the lessons 
learned from this transition into future procurements. Specifically, we 
stated that "the process of planning and managing future 
telecommunications service acquisitions--both by GSA and by the 
agencies themselves--will benefit from an accurate and robust inventory 
of current telecommunications services. Further, the value of this 
critical program to customer agencies will be improved through the 
application of lessons learned in streamlining and prioritizing the 
contract modification process, in effectively and expeditiously 
resolving billing problems, and in holding contractors accountable for 
meeting agency requirements in a timely manner."[Footnote 7] Those in 
industry who commented on the Networx request for information also 
noted the need for strong and comprehensive program management to 
ensure successful transition, including not only the availability of 
accurate inventories but also defined contractor and government 
responsibilities.

While GSA recognizes the importance of transition planning, it has not 
yet fully addressed these issues. GSA has emphasized that its 
development of the Networx program included an analysis of lessons 
learned from existing programs and previous acquisitions. Further, in 
his February 11 letter in response to your inquiry about agency 
inventories, the Administrator outlined the proactive steps GSA plans 
to take, including actions to establish a working group and to improve 
the availability of accurate inventory information to support the 
transition. According to the GSA's Associate Commissioner Service 
Delivery/Development, these actions will also include developing 
processes and procedures, identifying funding needs, and training 
agency personnel in order to support a smooth contract transition. As 
acquisition plans are finalized in the coming months, it will be 
important that GSA follow through on these initial steps to ensure that 
the transition to the new contracts proceeds efficiently and 
seamlessly, and that a repeat of the FTS2001 transition difficulties is 
avoided.

In summary, Mr. Chairman, Networx represents a critical opportunity to 
leverage the strength and creativity of the telecommunications 
marketplace to make the vision of delivering to agencies the 
telecommunications business solutions they need to perform their 
missions better and more cost-effectively a reality, and in so doing to 
carry the federal government forward well into the 21st century. To 
accomplish this, however, GSA will need to overcome significant 
challenges and demonstrate solid leadership. Likewise critical will be 
stakeholder commitment. Actions taken and decisions reached in the 
coming months to more fully define the Networx program and finalize an 
appropriate acquisition strategy will significantly influence the 
telecommunications choices federal agencies will have for the next 
several years. Unless GSA follows through to resolve the challenges 
outlined today, the potential of Networx may well not be realized.

Mr. Chairman, this concludes my statement. I would be pleased to answer 
any questions that you or other members of the Committee may have at 
this time.

Contact and Acknowledgments:

Should you have any questions about this testimony, please contact me 
by e-mail at koontzl@gao.gov or Kevin Conway, Assistant Director, at 
conwayk@gao.gov. We can also be reached at (202) 512-6240 and (202) 
512-6340, respectively. Another major contributor to this testimony was 
Michael P. Fruitman.

FOOTNOTES

[1] The IMC consists of senior government information resources 
management officials from agencies using FTS 2000. The council provides 
guidance to GSA officials in administering telecommunications 
contracts.

[2] The Industry Advisory Council is a broadly based organization of 
information technology professionals representing more than 400 
companies nationwide that provide products and services to the 
government. Member firms include telecommunications companies, 
hardware and software providers, systems integrators, and professional 
services companies.

[3] U.S. General Accounting Office, FTS2001: Transition Challenges 
Jeopardize Program Goals, GAO-01-289 (Washington, D.C.: March 30, 
2001).

[4] U.S. General Accounting Office, FTS2001: Contract Transition Delays 
and Their Impact on Program Goals, GAO-01-544T (Washington, D.C.: April 
26, 2001).

[5] GSA plans to award the Networx Universal contracts at about the 
same time that it releases a draft request for proposals to solicit 
public review and comment on the Select services segment of this 
acquisition program.

[6] GAO-01-289.

[7] GAO-01-544T.