This is the accessible text file for GAO report number GAO-05-361T 
entitled 'Telecommunications: GSA Has Made Progress Planning for a New 
Governmentwide Program, But Critical Issues Remain' which was released 
on March 3, 2005.

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

United States Government Accountability Office:

GAO:

Testimony:

Before the Committee on Government Reform, House of Representatives:

For Release on Delivery :

Expected at 10 a.m. EST March 3, 2005:

Telecommunications: 

GSA Has Made Progress Planning for a New Governmentwide Program, But 
Critical Issues Remain:

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

GAO-05-361T:

GAO Highlights:

Highlights of GAO-05-361T, a testimony before the Committee on 
Government Reform, House of Representatives

Why GAO Did This Study:

In October 2003, the General Services Administration (GSA) issued a 
request for information describing its plans for a new governmentwide 
telecommunications program known as Networx, which is to replace 
expiring contracts. The program consists of two simultaneous 
acquisitions: Networx Universal, which is to provide a full range of 
national and international network services across the United States, 
and Networx Enterprise, which is to provide agencies with mainly 
Internet-based services with less extensive geographic coverage

In September 2004, GAO testified on GSA’s actions to address challenges 
related to this program and made recommendations intended to improve 
transition planning, performance measures, and billing procedures.

GSA subsequently issued a draft request for proposals (RFP) in October 
2004. In response, the telecommunications industry and federal agencies 
provided more than 2,500 comments, covering technical issues such as 
the inclusion of certain standards and more general topics, such as the 
level of small business set-asides.

GAO was requested to provide a progress report on GSA’s planning for 
this program.

What GAO Found:

Since GAO’s testimony in September, GSA has made progress in addressing 
the program’s challenges and our recommendations. GSA has articulated a 
strategy for addressing billing concerns and has plans to complete 
transition planning and guidance for agencies on the identification of 
service inventories by February 2006. It has also drafted performance 
measures for each of its program goals.

Critically important to the short-term progress of the Networx program 
are three issues that could, if unresolved, affect the ultimate success 
of the program:

* Contract scope. In commenting on the draft RFP, vendors indicated 
concerns about the potential size of the acquisitions as proposed by 
GSA. Subsequently, GSA doubled the minimum amounts to be bought under 
the Enterprise acquisition and is reexamining certain aspects of the 
acquisitions’ requirements to ensure that they are all necessary.
* Evaluation criteria. GSA has yet to identify the evaluation criteria 
and share this information with prospective offerors. 
* Traffic volumes. GSA has not yet determined the traffic volumes 
required by agencies at specific locations. Agency officials estimate 
that this information on the government’s needs may not be ready until 
mid to late May 2005, after the final RFP is scheduled to be released.

These uncertainties represent risks to potential offerors which may, in 
turn, affect the quality of their proposals particularly their ability 
to offer the best prices to the government. In addition, delays in 
establishing evaluation criteria and traffic volumes could affect GSA’s 
ability to award the contract by April 2006 as planned.

www.gao.gov/cgi-bin/getrpt?GAO-05-361T.

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

[End of section]

I am pleased to participate in the Committee's hearing on the General 
Services Administration's (GSA) next generation, governmentwide 
telecommunications acquisition program, which is 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 federal agencies--GSA's customers--to 
acquire and apply innovative telecommunications services to improve 
their operations.

We previously reviewed, at your request, GSA's initial planning efforts 
for Networx and identified several challenges GSA faced in ensuring a 
successful outcome for the program.[Footnote 1] In September 2004, we 
testified that GSA had addressed the initial concerns about the timing 
and structure of the Networx acquisition.[Footnote 2] While work was 
under way to address the challenges related to the need for transition 
plans, an inventory of current services, and effective measures of 
performance and billing procedures, GSA had not yet completed its 
efforts. We made several recommendations to GSA to assist it in 
addressing these challenges. In November, you requested that we assess 
GSA's progress in addressing the challenges that we previously 
identified, our recommendations, and other outstanding issues. My 
testimony today presents our results to date on these topics.

Results in Brief:

Since we testified in September 2004, GSA has continued to make 
progress in addressing the program's challenges and our recommendations.

* Transition planning. As we recommended, GSA developed a transition 
time line. It has also recently awarded a contract for support in 
transition planning and expects to develop procedures that apply the 
lessons learned from previous transitions by February 2006.

* Inventories. GSA continues to work with agencies to develop accurate, 
detailed inventories of current services to enable an effective 
transition. It is also developing guidance for agencies on gathering 
this information and plans to provide the agencies with further 
training on inventory issues. The guidance is expected to be included 
in the transition management plan scheduled for completion in February 
2006.

* Billing issues. In response to our recommendation that GSA develop a 
strategy for addressing billing issues, it has made plans to first, 
attempt to resolve billing issues internally, and second, refer 
unresolved issues to a working group of agency officials. It has also 
begun a long-term effort to identify changes to its current billing 
process.

* Performance measurement. As we recommended, GSA has drafted an 
initial set of performance measures intended to address the program's 
eight goals. GSA is continuing to work on these measures and plans in 
order to begin using them in 2006.

Critically important to the short term progress of the Networx program 
are three issues regarding the requirements underlying the Networx 
acquisitions. These issues could, if unresolved, affect the ultimate 
success of the program:

* Contract scope. In commenting on the draft RFP, vendors indicated 
concerns about the potential size of the acquisitions as proposed by 
GSA. Subsequently, GSA doubled the minimum amounts to be bought under 
the Enterprise acquisition and is reexamining certain aspects of the 
acquisitions' requirements to ensure that they are all necessary.

* Evaluation criteria. GSA has yet to identify the evaluation criteria 
and share this information with prospective offerors.

* Traffic volumes. GSA has not yet determined the traffic volumes 
required by agencies at specific locations. GSA officials currently 
estimate that this information will not be available until mid-to-late 
May, even though the final request for proposals is scheduled for 
release on April 1.

These uncertainties represent risks to potential offerors which may, in 
turn, affect the quality of their proposals, particularly their ability 
to offer the best prices to the government. In addition, delays in 
establishing evaluation criteria and traffic volumes could affect GSA's 
ability to award the contract by April 2006.

My remarks today are based on audit work conducted at GSA headquarters, 
where we reviewed program planning documents, public presentations, and 
comments on GSA's plans. We also interviewed program officials and 
representatives of four vendors who provided comments to GSA and we 
reviewed analyses conducted by GSA as well as our previous work on 
FTS2001 and related contracts. We conducted our work in Washington, 
D.C., and Fairfax and Arlington, VA, between December 2004 and February 
2005 in accordance with generally accepted government auditing 
standards.

Background:

GSA's Federal Technology Service (FTS) is responsible for ensuring that 
federal agencies have access to the telecommunications services and 
solutions needed to meet mission requirements. Currently, GSA uses a 
series of contracts intended to meet agency needs for various 
telecommunications services. Specifically, it awarded two large, 
governmentwide contracts for long-distance services--one to Sprint in 
December 1998 and one to MCI in January 1999--known together as 
FTS2001. According to GSA, federal agencies spent approximately $614 
million on FTS2001 services during fiscal year 2003 and $780 million 
during fiscal year 2004.

Related governmentwide telecommunications services are provided through 
additional 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 such as agency-sponsored laboratories. 
Satellite services are provided through a series of contracts for a 
variety of commercial off-the-shelf satellite communications products 
and services, including mobile, fixed, and broadcast services.

Figure 1: Time Periods for GSA's Current and Planned Telecommunications 
Contracts:

[See PDF for image]

[End of figure]

GSA has begun the process of replacing all of these expiring contracts 
with a new set of contracts, collectively known as the Networx program. 
In October 2003, GSA released a request for information (RFI) that 
describes its initial strategy for Networx. In the request, GSA 
proposed two indefinite delivery/indefinite quantity acquisitions-- 
Networx Universal and Networx Select. Awards under the Universal and 
Select acquisitions were to be staggered, with the Select acquisition 
to be awarded 9 months after the Universal acquisition. The Universal 
acquisition was expected to satisfy the requirements for a full range 
of national and international network services and, according to GSA, 
was intended to ensure the continuity of services and prices found 
under expiring contracts that provide broad-ranging services with 
global geographic coverage. By contrast, GSA planned to award multiple 
contracts for a more geographically limited set of services under the 
Select acquisition. The services required under these contracts focus 
on Internet-based offerings and related security and management 
services. This would provide agencies with leading-edge services and 
solutions and less extensive geographic and service requirements than 
Universal.

GSA has worked with representatives of federal agencies, the 
telecommunications industry, and other interested parties to lay the 
groundwork for the Networx program. Agencies work directly with GSA and 
through the Interagency Management Council (IMC), a group of senior 
federal information resource officials who advise GSA on issues related 
to telecommunications contracts. GSA and the IMC have agreed on eight 
goals for the Networx program that include an emphasis on ongoing 
support and performance-based contracts. Table 1 lists each of the 
program's goals.

Table 1: Networx Program Goals:

Goal: Service continuity; 
Description: Contracts should include all services currently available 
under FTS2001 to facilitate a smooth transition.

Goal: Competitive prices; 
Description: Prices should be better than that available elsewhere in 
the telecommunications marketplace.

Goal: High quality services; 
Description: Contracts should ensure a high quality of service 
throughout the life of the contracts by using enforceable agreements.

Goal: Full service vendors; 
Description: Vendors should be capable of providing a broad array of 
services and provide follow-on services to avoid duplication of 
administrative and contracting costs.

Goal: Alternate sources; 
Description: Agencies should be able to choose from a greater number of 
competing vendors that provide new, enhanced services and emerging 
technologies throughout the life of the contract.

Goal: Operations support; 
Description: GSA should provide fully integrated ordering, billing, and 
inventory management.

Goal: Transition assistance and support; 
Description: Contracts should include provisions that facilitate 
transition coordination and support.

Goal: Performance-based contracts; 
Description: Contracts should be performance-based and include service 
level agreements where possible.

Source: GSA.

[End of table]

In our September 2004 testimony, we reported that GSA had made progress 
in planning the acquisition by responding to industry and agency 
concerns over the nine-month lag between the release of the Networx 
acquisitions, the geographic coverage requirements for the Universal 
acquisition, and the number of billing elements that vendors were to 
provide. Specifically, GSA decided to release the Universal and 
Enterprise (the current name for the contract formerly called Select) 
acquisitions simultaneously. It also reduced the geographic coverage 
requirements for the Universal acquisition by 76 percent. In addition, 
through a collaborative effort with the IMC and the Industry Advisory 
Council, GSA reduced the number of required billing elements by 62 
percent.

However, we also stated that additional efforts were necessary to fully 
address the management challenges we identified. We recommended that 
GSA finalize and implement processes for managing transition efforts, 
develop measures to monitor program performance and a strategy for 
using them, and develop and implement a strategy for resolving agency 
concerns about the usability of billing data.

GSA released the draft requests for proposals (RFP) for Networx in 
October 2004, providing industry and agencies an additional opportunity 
to comment on the structure and content of the Networx acquisition 
prior to the release of the final RFPs. In response, the 
telecommunications industry and federal agencies provided more than 
2,500 comments, covering technical issues such as the inclusion of 
certain standards and more general topics, such as the level of small 
business set-asides.

The draft RFPs were described by GSA as nearly complete versions of the 
final RFPs, which are scheduled to be released on April 1, 2005. 
According to program officials, GSA provided as much detail as possible 
in the drafts because potential offerors will have only 3 months to 
submit proposals once the final RFPs are released. After evaluating the 
submitted proposals, GSA plans to award contracts under both 
acquisitions in April 2006.

GSA Is Addressing Networx Management Challenges:

Since we testified in September 2004, GSA has continued to make 
progress in addressing the program's management challenges and our 
recommendations on transition planning, inventory development, billing 
procedures, and performance measures.

GSA Continues to Plan for Contract Transition:

As we testified previously, adequate transition planning is one of the 
challenges that GSA must address to effectively complete the move to 
Networx. Further, experience demonstrates the need for comprehensive 
transition planning and an effective transition strategy. For example, 
the current FTS2001 contracts got off to a rocky start when efforts to 
transition services to the new contracts took more than 24 months, 
hindering timely achievement of program goals. Subsequently, a subgroup 
of the IMC--the Transition Working Group--identified past transition 
issues and documented 22 lessons learned, including that the magnitude 
of the effort was not fully appreciated. The working group recommended 
that the findings of the lessons learned effort be used as input to the 
Networx program management strategy and specifications. In testimony 
before you in September 2004, we recommended that GSA develop a 
transition time line and use the lessons learned to develop procedures 
to prevent the reoccurrence of transition difficulties.

In response, GSA has taken steps to begin preparing for the transition 
to the planned Networx contracts. For example, GSA has developed a 
document that defines the transition cost elements and identifies how 
those elements will be allocated to the GSA Networx program and its 
customer agencies and has also developed an outline of a transition 
management plan. Also, in response to our recommendation regarding a 
transition time line, GSA developed a high-level transition time line 
that depicts 28 tasks, beginning with the development of the document 
that defines transition cost elements and ends with the disconnection 
of services under the FTS2001 contract (transition end). These tasks 
span the time from July 2004 through January 2008. GSA estimates that 
the transition from the FTS2001 contracts to Networx should require at 
least 18 months.

Additional steps are in progress. For example, GSA has begun work on 
the outline of a transition management plan, which is intended to be 
used as a guide by GSA, customer agencies, the Transition Working 
Group, and the contract awardees to facilitate a smooth transition. The 
outline identifies planning steps that agencies should undertake and 
lists the lessons learned from past transitions. GSA has also recently 
awarded a contract for transition planning assistance. This contractor 
is to assist in finalizing the transition management plan, including 
developing procedures to address lessons learned as we recommended. The 
plan is scheduled to be finalized in February 2006. If completed as 
planned, this should position GSA to effectively implement the planned 
transition.

Collection of Inventory Information is Ongoing:

When we last testified on this program, we noted the importance of GSA 
and its customer agencies having a clear understanding of agency 
service requirements in order to make properly informed acquisition 
planning decisions. This 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. In addition, the FTS2001 transition 
lessons learned document identified the lack of a good starting 
inventory as the cause of problems in a number of areas and a 
contributing factor to the slow start on the FTS2001 transition.

GSA is addressing the need for inventory information in several ways. 
It first developed an inventory of the services currently used by its 
customers by reviewing the existing contracts, modifications to them, 
and billing information. Then, GSA used the inventory information from 
these sources in acquisition planning, for example, to justify GSA's 
decision on which services to include in the proposed Networx contracts 
and which to make mandatory.

In addition, GSA recently asked agencies to provide and verify detailed 
inventory information that includes the geographic locations of those 
services that are used and how much they are used. In January, GSA 
released a preliminary list that identified the geographic locations of 
required services.

GSA will need to continue to work with its customer agencies to gather 
the even more detailed information that will be needed to conduct an 
effective transition, including the specific location of equipment 
within a room, provisions for accessing the equipment, and contact 
information for personnel authorized to access the space. According to 
the Networx program manager, GSA expects agencies to use site plans 
developed by the incumbent vendors to assist in developing this 
information. In addition, GSA is developing guidance for the agencies 
on gathering this information and plans to provide further training to 
the agencies on inventory issues. This guidance, according to GSA, will 
be included in the transition management plan scheduled for completion 
in February 2006.

GSA Has Developed a Strategy to Address Billing Issues:

Clear, accurate, and complete billing records are an important internal 
control: they record the detail of each telecommunications transaction 
for later verification and management oversight. However, bills and 
billing systems have been a problem in the current generation of FTS 
programs and continue to be a concern for their proposed replacement. 
Agencies have commented that, in the past, billing information they 
received hampered their efforts to reconcile invoices, resulting in 
hundreds of thousands of dollars of additional costs. In testimony 
before you in September 2004, we recommended that GSA develop and 
implement a strategy for addressing the billing data issues raised by 
its customer agencies.

Under FTS2001, GSA resolved agency billing problems by establishing a 
Billing Issues Team that was responsible for tracking issues through to 
resolution. GSA stated that, for example, due to the efforts of this 
team, it has already altered the way it processes the vendor-provided 
billing data so that it now aligns with agency needs.

In response to our recommendation, GSA officials identified several 
methods for addressing possible billing data issues, including:

* service level agreements that hold the contractors accountable for 
the accuracy of the billing data they provide and:

* a requirement that contractors assign a unique identifier to each 
transaction, which agencies believe will improve both billing and 
inventory management.

Further, according to GSA officials, it will first attempt to address 
internally any future billing issues raised by customer agencies after 
contract award. Any unresolved issues will be raised to the IMC for 
additional action.

GSA has also initiated a long-term strategy to address the billing 
process as a whole. In January 2005, GSA issued a RFI that asked 
vendors to identify potential alternatives to the way it currently 
consolidates carrier billing data and provides the data to agencies. 
GSA is considering several billing options, including the option of 
contracting out bill consolidation and the potential costs and benefits 
of those options. The study is a part of a larger GSA effort to define 
the requirements of FTS's future operating environment.

GSA Has Developed Draft Performance Measures:

Our research into recommended program and project measurement practices 
highlights the importance of establishing clear measures of success to 
aid acquisition decision making as well as to provide the foundation 
for program management. Such measures define what must be done for a 
project to be acceptable to the stakeholders and users affected by it; 
these measures enable measurement of progress and effectiveness in 
meeting objectives. In our testimony before you in September 2004, we 
recommended that GSA finalize its efforts to identify measures to 
evaluate progress toward program goals and develop a strategy for using 
those measures for ongoing program management.

In response, GSA provided the first draft of a Networx strategic 
business plan that lists performance measures for the eight program 
goals previously discussed. (These preliminary measures are listed in 
table 2.)

Table 2: GSA's Initial Draft Performance Measures for Networx:

Strategic goal: Service continuity: contracts should include all 
services currently available under FTS2001 to facilitate a smooth 
transition; 
Performance goal: 98% of agency transition orders filled without the 
need for contract modification; 
Performance measure: Number of modifications compared to services 
transitioned.

Strategic goal: Competitive prices: prices should be better than those 
available elsewhere in the telecommunications marketplace; 
Performance goal: Average prices attained on Networx are at least 25% 
less than comparable, negotiated commercial prices; 
Performance measure: Quarterly price comparison of commercial and 
Networx for like services.

Strategic goal: High quality service: contracts should ensure a high 
quality of service throughout the life of the contracts using 
enforceable agreements; 
Performance goal: 95% of all service metrics met on an annual basis; 
Performance measure: Contractor performance per annual service level 
agreement report.

Strategic goal: Full service vendors: vendors should be capable of 
providing a broad array of services and provide follow-on services to 
avoid duplication of administrative and contracting costs; 
Performance goal: Awardees deliver 98% of services ordered under 
Universal; 
Performance measure: Services delivered by transition end.

Strategic goal: Alternative services: agencies should be able to choose 
from a greater number of competing vendors that provide new, enhanced 
services and emerging technologies; 
Performance goal: Awardees can provide 98% of mandatory services 
offered under Enterprise; 
Performance measure: Transition end.

Strategic goal: Transition support: contracts should include provisions 
that facilitate transition coordination and support; 
Performance goal: 98% of services transitioned within planned 
transition period; 
Performance measure: Quarterly audit of services that do not have 
disconnects completed before contract expiration date.

Strategic goal: Performance-based contracts: contracts should be 
performance based and include service level agreements where possible; 
Performance goal: 95% of contracted services have metrics; 
Performance measure: Audit of contracts at contract award.

Strategic goal: Operations support: GSA should provide fully integrated 
ordering, billing, and inventory management; 
Performance goal: Ordering: 90% of orders provisioned within standard 
intervals in contract or by firm order commitment in project plans. No 
more than 5% annual growth in ordering data elements; 
Performance measure: Ordering: monthly service level agreement 
compliance report. Data elements added annually through contract 
modification; 
Performance goal: Billing: 90% of monthly billed revenue is without 
error. No more than 5% annual growth in data elements for billing; 
Performance measure: Billing: monthly service level agreement 
compliance report. Data elements added annually through contract; 
Performance goal: Inventory: inventory audits produce at least 95% 
match with agency inventories; 
Performance measure: Inventory: annual audits of FTS inventory with 
service order completion notices, billing data, and downloads from 
industry partners, then comparison with agency inventories.

Source: GSA.

[End of table]

GSA is continuing to work on these measures. For example, the draft 
measures for the operations support goal--which calls for GSA to 
establish integrated ordering, billing, and inventory management-- 
address the individual functions without addressing the overall 
management of the services or their integration. GSA officials are 
aware of the need to refine the measures and are working to determine 
how to address integrating ordering, billing, and inventory. They 
stated, however, that this is a longer-term effort and will not be 
resolved by contract award. GSA does not yet have an expected 
completion date for the measures but plans to begin using them in 2006.

Critical Issues Regarding Requirements Have Not Yet Been Addressed:

Critically important to the short-term progress of the Networx program 
are three issues that could, if unresolved, affect the ultimate success 
of the program. These issues involve setting the scope of the contacts, 
establishing the criteria against which proposals will be evaluated, 
and determining the traffic volumes required by agencies at specific 
locations.

GSA Has Not Released Information on the Estimated Scope of Networx that 
Potential Offerors Need to Estimate Business Risks:

Federal acquisition regulations require indefinite-quantity contracts 
such as Networx to estimate the minimum and maximum levels of goods or 
services that will be purchased by the government. The minimum must be 
more than a nominal quantity, but it should not exceed the amount that 
the government is fairly certain to order.[Footnote 3] In addition, 
reasonable minimum quantities provide potential competitors with an 
understanding of what will be required of them and allow them to 
compete on a reasonable basis.[Footnote 4]

GSA has not yet estimated contract maximums; it proposed minimums in 
the form of minimum revenue guarantees (MRG) for each contract, 
subsequent to the release of the draft RFP. GSA proposed a minimum for 
the Universal acquisition of $525 million for all awardees over the 
life of the acquisition and a minimum of $25 million for all awardees 
for the life of the Enterprise acquisition. According to the Networx 
program manager, these figures were derived by taking 75 percent of the 
estimated total revenue (less fees, taxes, and surcharges) expected 
under the two acquisitions in their first year. The total was then 
allocated between the two acquisitions based on estimates of the 
relative level of business during that first year. He added that GSA 
was purposefully conservative in defining the minimums for several 
reasons:

* it experienced program delays when it did not fulfill the MRGs as 
fast as originally estimated on the FTS 2001 contract,

* it was unsure how much agencies will use the Enterprise contracts and 
did not want to risk being unable to recover the MRGs within the 4-year 
base period of the contract, and:

* vendors are aware of the overall level of revenue generated by 
FTS2001 which should provide them with an indication of the scope of 
the new acquisitions, regardless of the size of any MRGs.

In commenting on the draft RFP, vendors expressed concerns about the 
potential size of the acquisitions as proposed by GSA. In addition to 
noting the absence of maximum amounts, vendors commented on:

* uncertainty over how business will be allocated between the two 
acquisitions and the number of awards to be made under each;

* the time period during which the MRGs will be paid; and:

* the relatively small size of the Enterprise MRG compared to the costs 
of developing proposals and fulfilling the administrative requirements 
of the contracts. (Administrative requirements in the RFP call for the 
contractors to provide, for example, training, management reporting, 
and systems to perform billing, ordering, and other functions.)

These vendors commented that, because of such uncertainties, they have 
difficulty estimating the revenue potentially available to them. This, 
according to their comments, may cause difficulties in developing 
viable business cases to support proposals, particularly on the 
Enterprise acquisition. Vendors also raised the possibility that their 
proposed prices for the Enterprise acquisition would need to be raised 
to account for the risk of not recovering initial costs.

Subsequently, GSA took several actions. Specifically, it recently 
raised the MRG for Enterprise to $50 million. In addition, according to 
GSA officials, GSA is also reexamining the acquisitions' requirements 
to ensure that they are all necessary. Finally, the program manager 
indicated that maximum amounts would be included in the final RFP.

Establishing the required maximums should help offerors determine the 
potential size of the contracts; however, until GSA fully resolves the 
issues surrounding the Enterprise MRGs and administrative requirements, 
uncertainty about contract requirements could result in proposals that 
limit the government's ability to leverage its buying power and obtain 
necessary services at favorable prices.

GSA Has Not Finalized its Evaluation Criteria for Networx Proposals:

Federal acquisition regulations require that, when an agency plans to 
base award decisions on factors other than price, it must describe in 
its solicitation:

* all evaluation factors and significant subfactors that will affect 
contract award and their relative importance and:

* whether all evaluation factors other than cost or price, when 
combined, are significantly more important than, approximately equal 
to, or significantly less important than cost or price.[Footnote 5]

The draft Networx RFP released by GSA did not include information on 
the evaluation criteria GSA planned to use. According to the Networx 
program manager, GSA thought it would be premature to release the 
evaluation criteria at that time, given its state of development. He 
added that GSA plans to identify the necessary evaluation criteria in 
time to include them in the final RFP.

In commenting on the draft RFP, vendors asked that GSA should make the 
evaluation criteria available to them in draft form. For example, one 
vendor commented that the evaluation criteria and other instructions to 
offerors drive the strategy and framework for technical and business 
offers. The earlier the service provider community receives such 
information, the more time can be spent on refining offers and arriving 
at the solution set that provides the best value to the government.

While GSA's approach will fulfill FAR requirements, it is inconsistent 
with the broader strategy for Networx, which has featured several 
opportunities for interested parties to review different aspects of the 
program and comment on them; public forums, the October 2003 RFI, and 
the October 2004 draft RFP. Because the selection criteria will receive 
limited outside input and vendors have only a 3-month time period to 
prepare proposals, GSA risks delaying contract awards should any 
unanticipated concerns arise that require it to revise the criteria. In 
addition, continued uncertainty about the criteria could affect the 
quality of the proposals received in response to the Networx RFPs.

Information on Traffic Volumes May Be Delayed:

As previously indicated, an accurate inventory of current services is 
critical to defining the government's requirements for Networx. The 
inventory should identify the level of services needed at each location 
(traffic volumes) to allow offerors to assess the government's 
requirements and submit a proposal that accurately reflects those 
requirements. Further, information on the level of service needed at 
each location is necessary for GSA to ensure achievement of the goal of 
service continuity, which requires all services currently available 
under FTS2001 be included in the Networx acquisition.

GSA has yet to finalize its assessment of the volume of traffic that 
will be necessary at each location. In January, GSA released a 
preliminary list of the locations to which offerors must provide 
services under the Universal acquisition to ensure continuity of 
existing services. GSA provided the list to allow potential offerors to 
begin assessing how they can meet the government's needs. However, 
according to the Networx program manager, the additional analysis 
needed to finalize traffic volumes has not been completed due to delays 
in developing an underlying software system. He estimated that the 
traffic volumes would not be available until mid-to-late May.

Since this information is critical to developing proposals, delays in 
providing this information to potential offerors further diminishes the 
time frames they have to respond to the RFP and may ultimately affect 
the quality of their proposals. Further, if GSA decides to provide 
offerors with additional time to prepare and submit proposals, it could 
ultimately delay GSA's ability to award contracts by April 2006.

In summary, since our testimony in September, GSA has made progress in 
addressing the management issues we previously identified, as well as 
our previous recommendations. However, several critical issues present 
significant short-term hurdles to GSA's timely achievement of the 
program's goals. GSA has not yet fully resolved issues concerning the 
MRGs, including determining the validity of administrative 
requirements. In addition, less than one month before the scheduled 
release of the final RFP, GSA has yet to finalize its assessment of 
traffic volumes and to share evaluation criteria with potential 
offerors. Resolving these issues will be a significant challenge for 
GSA considering the tight schedule it has outlined. However, if these 
issues are not resolved promptly, GSA risks limiting its ability to 
deliver improved services to its customer agencies at favorable prices.

Mr. Chairman, this concludes my statement. I would be pleased to answer 
any questions from you or other members of the Committee.

Contacts and Acknowledgements:

Should you have any questions about this testimony, please contact me 
by e-mail at koontzl@gao.gov or James Sweetman at sweetmanj@gao.gov. We 
can also be reached at (202) 512-6240 and (202) 512-3347, respectively. 
Other major contributors to this testimony were Jamey Collins, Nancy 
Glover, and Nicholas Marinos.

FOOTNOTES

[1] GAO, Telecommunications: GSA Faces Challenges in Planning for New 
Governmentwide Program, GAO-04-486T (Washington, D.C.: Feb. 26, 2004).

[2] GAO, Telecommunications: GSA Has Made Progress in Planning 
Governmentwide Program But Challenges Remain, GAO-04-1085T (Washington, 
D.C.: Sep., 15, 2004).

[3] FAR 16.504, 48 C.F.R. 16.504

[4] B-244710, Nov. 13, 1991; and B-291185, Nov. 8, 2002.

[5] FAR 15.101-1, 48 C.F.R. 15.101-1