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entitled 'Telecommunications: GSA Action Needed to Realize Benefits of
Metropolitan Area Acquisition Program' which was released on April 4,
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United States General Accounting Office:
GAO:
Report to the Chairman, Subcommittee on Technology and Procurement
Policy, Committee on Government Reform, House of Representatives.
April 2002:
Telecommunications:
GSA Action Needed to Realize Benefits of Metropolitan Area Acquisition
Program:
GAO-02-325:
GAO Highlights:
Highlights of GAO-02-325, a report to the Chairman, Subcommittee on
Technology and Procurement Policy, Committee on Government Reform,
House of Representatives.
Why GAO Did This Study:
The Metropolitan Area Acquisition (MAA) program, managed by the
General Services Administration (GSA), provides local
telecommunications services to government agencies in selected
metropolitan areas. Under this nonmandatory program, local
telecommunications services are to be transitioned from existing
service providers to MAA contractors within 9 months after contractors
are given notice to proceed. GAO was asked to determine, among other
things, the status of MAA contract implementation and identify reasons
for any delays.
What GAO Found:
Although MAA contract implementation is progressing, in most
metropolitan areas GSA remains behind schedule for completion. Of 19
areas that were to have completed the transition from existing
services to MAA services by or before March 1, 2002, 5 have done so.
In the remaining areas, implementation progress has been slow. For
example, the first three pilot cities—New York, Chicago, and San
Francisco—were to have completed implementation by April 2000. As of
March 1, 2002, New York had converted 37 percent of users to MAA
contracts, Chicago had converted 73 percent, and San Francisco had
converted 68 percent. (The table below shows implementation status for
the 19 areas, as of March 1, 2002.) Prompt implementation of MAA
contracts is central to the major goal of the program: to achieve
immediate and sustained price reductions by taking advantage of
emerging competition in the newly deregulated telecommunications
market. This goal has been met, in that MAA contracts do offer lower
rates; however, savings cannot be fully realized until the transition
to the new contracts is complete.
This transition has been delayed by a range of challenges facing GSA
and the MAA contractors. Some stem from changes in the local
telecommunications market as a result of deregulation and are beyond
GSA's control (such as disputes concerning ownership and access to
cables within buildings). Others include insufficient preparedness on
the part of contractors and customers. However, the timely resolution
of problems causing delays is hindered in part because GSA has not
revised its 9month goal for transition (even though this time has
elapsed in most cases), nor has it devised performance measures for
gauging progress. Without realistic time goals and adequate
performance measures, GSA is hampered in effectively managing
implementation.
Table: Status of MAA Implementation as of March 1, 2002:
MAA city: Albuquerque;
Months since notice to proceed: 17;
Percentage complete: 12%.
MAA city: Atlanta;
Months since notice to proceed: 20;
Percentage complete: 11%.
MAA city: Baltimore;
Months since notice to proceed: 20;
Percentage complete: 22%.
MAA city: Boise;
Months since notice to proceed: 12[A];
Percentage complete: 100%.
MAA city: Boston;
Months since notice to proceed: 18;
Percentage complete: 8%.
MAA city: Buffalo;
Months since notice to proceed: NA;
Percentage complete: 100%.
MAA city: Chicago;
Months since notice to proceed: 32;
Percentage complete: 73%.
MAA city: Cincinnati;
Months since notice to proceed: NA;
Percentage complete: 100%.
MAA city: Cleveland;
Months since notice to proceed: 20;
Percentage complete: 78%.
MAA city: Dallas;
Months since notice to proceed: 18;
Percentage complete: 22%.
MAA city: Denver;
Months since notice to proceed: 18;
Percentage complete: 93%.
MAA city: Indianapolis;
Months since notice to proceed: 20;
Percentage complete: 93%.
MAA city: Los Angeles;
Months since notice to proceed: 20;
Percentage complete: 25%.
MAA city: Miami;
Months since notice to proceed: 20;
Percentage complete: 4%.
MAA city: Minneapolis;
Months since notice to proceed: 12[A];
Percentage complete: 100%.
MAA city: New Orleans;
Months since notice to proceed: 16;
Percentage complete: 81%.
MAA city: New York;
Months since notice to proceed: 32;
Percentage complete: 37%.
MAA city: San Francisco;
Months since notice to proceed: 32;
Percentage complete: 68%.
MAA city: St. Louis;
Months since notice to proceed: 10[A];
Percentage complete: 100%.
Note: NA indicates that Implementation was complete within 9 months of
notice to proceed.
[A] Months from notice to proceed until 100 percent complete.
[End of table]
What GAO Recommends:
To improve MAA program administration, GSA should develop current,
realistic time frames for completing ongoing MAA contract
implementations, and it should develop and apply appropriate performance
measures to monitor and manage the progress of those implementation
efforts.
In written comments on a draft of this report, the administrator of
General Services agreed with our recommendations and indicated that
GSA was acting to implement them.
[This is a test for developing highlights for a GAO report. The full
report, including GAO's objectives, scope, methodology, and analysis
is available at [hyperlink, http://www.gao.gov/products/GAO-02-325.
For additional information about the report, contact Linda Koontz (202-
512-6240). To provide comments on this test highlights, contact Keith
Fultz (202-512-3200) or E-mail HighlightsTest@gao.gov.]
Contents:
Letter:
Results in Brief:
Background:
MAA Implementation Is Progressing but Is Behind Schedule:
Management Fees Vary Widely and Are Not Transparent to Customers:
GSA Has Taken Action to Enable Crossover:
Conclusions:
Recommendations:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the General Services Administration:
Tables:
Table 1: MAA Contracts Awarded as of January 9, 2002:
Table 2: GSA Local Telecommunications Management Fees for FY 2002
(Sorted by Total Fee Percentage):
Table 3: Current MAA Customer and Potential Customer Sites Visited:
Figures:
Figure 1: Implementation Status as of March 1, 2002:
Figure 2: Progress of MAA Crossover by Metropolitan Area as of March
1, 2002:
Abbreviations:
FTS: Federal Technology Service:
GSA: General Services Administration:
MAA: Metropolitan Area Acquisition:
[End of section]
United States General Accounting Office:
Washington, DC 20548:
April 4, 2002:
The Honorable Tom Davis:
Chairman:
Subcommittee on Technology and Procurement Policy:
Committee on Government Reform:
House of Representatives:
Dear Mr. Chairman:
As you know, the Metropolitan Area Acquisition (MAA) program provides
local telecommunications services to federal agencies in selected
metropolitan areas. The MAA program manager, the General Services
Administration (GSA), initiated the program in 1997 to achieve
immediate, substantial, and sustained price reductions for local
telecommunications for agencies, to expand their choices of high-
quality services, and to encourage cross-agency sharing of resources.
Further, service providers that are awarded contracts under the MAA
program are allowed to compete for GSA's FTS2001 long distance service
contracts, so that federal agencies may potentially acquire end-to-end
local and long distance telecommunications services from one source.
On June 13, 2001, we presented testimony on our preliminary work on
the status of the MAA program,[Footnote 1] reporting on three topics:
the status of MAA contract implementations, the fees that GSA charges
customer agencies for managing and administering MAA contracts, and
the steps taken by GSA to enable MAA (local) and FTS2001 (long
distance) contractors to cross over between these programs and
competitively offer both types of services. Following our testimony,
we agreed to pursue three objectives in our continuing evaluation of
the program:
* to determine the status of MAA contract implementation and identify
the reasons for delays encountered,
* to document the fees that GSA charges customer agencies for managing
and administering the MAA contracts and determine the extent to which
those fees are transparent to customer agencies, and,
* to identify the steps that GSA is taking to enable the MAA and
FTS2001 contractors to cross over between these sets of contracts and
offer both local and long distance services.
This report is based on our June 2001 testimony and on further work we
have performed since then. Appendix I contains a detailed discussion
of our objectives, scope, and methodology. We conducted our work from
April 2001 through March 2002 in accordance with generally accepted
government auditing standards.
Although MAA contract implementation continues to progress, in most
metropolitan areas GSA remains behind schedule for completion. Of 19
metropolitan areas that were to have completed the transition from
existing services to MAA services by or before March 1, 2002, 5 have
done so. In the remaining metropolitan areas, implementation progress
has been slow. For example, the first three MAA pilot cities-—New
York, Chicago, and San Francisco-—were to have completed
implementation by April 2000. As of March 2002, New York had converted
37 percent of users to MAA contracts, Chicago had converted 73
percent, and San Francisco had converted 68 percent.
Implementation of the MAA contracts has been delayed by several
significant challenges that have faced GSA and MAA contractors.
Although the program was initiated by GSA to take advantage of
emerging competition in the local telecommunications market, some of
the sizable implementation challenges—access and use of building riser
cabling,[Footnote 2] the transfer of local numbers between service
providers, and the financial difficulties of an MAA contractor—have
their roots in this newly competitive environment. Delays have also
arisen from challenges unrelated to the new market environment,
including the charges associated with service initiation and equipment
replacements, as well as a lack of contractor and customer
preparedness. By delaying contract implementation, these challenges in
turn postpone the realization of savings that could accrue from the
MAA contracts, which can offer significantly lower costs to agencies.
GSA has taken some positive measures to improve contract
administration and implementation. For example, actions taken to
improve GSA's personnel and processes in Chicago and to overcome
contractor performance problems in Los Angeles and San Francisco have
improved implementation progress in those cities. Nevertheless, the
timely resolution of problems causing delays is hindered in part
because GSA has not established current completion schedules and
performance measures for its MAA contracts. Specifically, although its
9-month goal for implementing existing contracts has passed in most
cases, GSA has not revised its targets for completing these
implementations, nor has it established performance measures for
monitoring their completion. Without revised time frames and
appropriate performance measures, GSA managers have no baseline
against which to monitor and more effectively manage the progress of
specific MAA implementation efforts.
To support its MAA contract management services, GSA charges customer
agencies fees that currently range in total from about 9 to 97 percent
or from $1.20 to $8.49 per line per month (depending on the specific
metropolitan area); these percentages are in addition to the cost of
the contract services. Agencies can avoid one type of fee, the "full-
service fee" for ordering and billing services, if they choose to
perform these functions themselves. However, because GSA does not
disclose its management fees unless specifically requested by customer
agencies, these customers do not necessarily have complete information
to help them determine whether using GSA's full range of services is
their most cost-effective approach to these contracts.
GSA has taken action in the past 17 months to allow MAA and FTS2001
contractors to offer services in both the local and long distance
markets, a process termed "crossover." In December 2000, GSA opened
the contracts in the first three MAA cities to crossover from eligible
MAA and FTS2001 contractors. In August 2001, GSA opened its FTS2001
contracts to crossover by MAA contractors, as envisioned in the 1997
strategy. As of March 1, 2002, GSA had opened all of its eligible MAA
cities to crossover.
To address the shortcomings we identified and to improve program
administration, we are making recommendations to GSA to establish
current, realistic contract implementation time frames and to make
management fees and the services they cover transparent to customer
agencies.
In written comments on a draft of this report, the administrator of
General Services agreed with our recommendations and said that GSA was
acting to implement them.
Background:
GSA began planning the MAA program just a few months after passage of
the Telecommunications Act of 1996, which was intended to increase
competition and reduce regulations in the telecommunications industry.
The MAA program sought to take advantage of emerging competition in
the local services market; the program focused on the largest cities
in the country, whose population density would be likely to draw
competitors into their markets. GSA recognized that this emerging
competition would create an opportunity for the government to gain an
immediate price reduction in local telecommunications services.
Further, it envisioned the MAA contracts as a complement to existing
contracts in metropolitan areas, as well as a solution for local
service contracts that were expiring.
The MAA program is a set of contracts offering local voice and
selected data telecommunications services. Each contract is a fixed-
price, indefinite-delivery, indefinite-quantity contract with a base
term of 4 years (48 months) from date of award, with four successive 1-
year options. The contracts state that all initial service locations
identified in these contracts are to be transitioned to the MAA
contracts within 9 months after GSA gives "notice to proceed," which
is an authorization for the contractor to begin implementation.
As indicated in table 1, the initial stage of the MAA program (phase
I) consisted of pilot acquisitions in the New York, Chicago, and San
Francisco metropolitan areas in May 1999. Encouraged by substantially
lower prices in these three pilot cities, GSA expanded the MAA program
to other metropolitan areas throughout the country and awarded
contracts in 17 additional cities (phase II) between February 2000 and
February 2001. In its latest series of MAA acquisitions (phase III),
GSA recently awarded contracts in three cities (San Antonio in August
2001, Detroit in November 2001, and Norfolk in January 2002), and
contracts are planned to be awarded soon in two additional cities
(Salt Lake City and Seattle). GSA estimates that the federal
government could save about $1.1 billion over the 8-year life of the
37 phase I and phase II MAA contracts awarded to date.[Footnote 3]
Table 1. MAA Contracts Awarded as of January 9, 2002:
Phase I (pilot):
Metro area: New York;
Award date: 20 May 1999;
Estimated savings: $150.0 million;
Contractor(s): AT&T.
Metro area: Chicago;
Award date: 20 May 1999;
Estimated savings: $75.0 million;
Contractor(s): AT&T.
Metro area: San Francisco;
Award date: 20 May 1999;
Estimated savings: $32.0 million;
Contractor(s): AT&T.
Phase II:
Metro area: Buffalo;
Award date: 24 Feb. 2000;
Estimated savings: $6.4 million;
Contractor(s): AT&T; Verizon.
Metro area: Cincinnati;
Award date: 23 Mar. 2000;
Estimated savings: $36.6 million;
Contractor(s): Winstar.
Metro area: Cleveland;
Award date: 24 Mar. 2000;
Estimated savings: $20.0 million;
Contractor(s): Ameritech (SBC); AT&T.
Metro area: Los Angeles;
Award date: 24 Mar. 2000;
Estimated savings: $47.0 million;
Contractor(s): Pacific Bell (SBC); Winstar.
Metro area: Baltimore;
Award date: 28 Mar. 2000;
Estimated savings: $44.0 million;
Contractor(s): Winstar.
Metro area: Atlanta;
Award date: 26 Apr. 2000;
Estimated savings: $174.0 million;
Contractor(s): Bell South; Winstar.
Metro area: Miami;
Award date: 26 Apr. 2000;
Estimated savings: $44.0 million;
Contractor(s): Bell South; Winstar.
Metro area: Indianapolis;
Award date: 27 Apr. 2000;
Estimated savings: $51.0 million;
Contractor(s): AT&T; SBC Global; Winstar.
Metro area: St. Louis;
Award date: 27 Apr. 2000;
Estimated savings: $36.0 million;
Contractor(s): Southwestern Bell (SBC); Winstar.
Metro area: Minneapolis;
Award date: 31 May 2000;
Estimated savings: $13.0 million;
Contractor(s): Qwest; Winstar.
Metro area: Metro area: Dallas;
Award date: 30 June 2000;
Estimated savings: $128.0 million;
Contractor(s): AT&T; Southwestern Bell (SBC); Winstar.
Metro area: Denver;
Award date: 12 July 2000;
Estimated savings: $68.0 million;
Contractor(s): AT&T; Qwest; Winstar.
Metro area: Boston;
Award date: 31 July 2000;
Estimated savings: $78.0 million;
Contractor(s): AT&T; Southwestern Bell (SBC); Verizon; Winstar.
Metro area: Albuquerque;
Award date: 31 Aug. 2000;
Estimated savings: $19.0 million;
Contractor(s): Qwest.
Metro area: Boise;
Award date: 31 Aug. 2000;
Estimated savings: $6.5 million;
Contractor(s): Qwest.
Metro area: New Orleans;
Award date: 16 Oct. 2000;
Estimated savings: $11.0 million;
Contractor(s): Bell South.
Metro area: Philadelphia;
Award date: 27 Feb. 2001;
Estimated savings: $66.0 million;
Contractor(s): AT&T; Winstar.
Phase III:
Metro area: San Antonio;
Award date: 13 Aug. 2001;
Estimated savings: [A];
Contractor(s): Southwestern Bell; Winstar.
Metro area: Detroit;
Award date: 19 Nov. 2001;
Estimated savings: [A];
Contractor(s): Southwestern Bell; Winstar.
Metro area: Norfolk;
Award date: 9 Jan. 2002;
Estimated savings: [A];
Contractor(s): Verizon.
[A] According to GSA, it no longer reports estimated savings for MAA
awarded cities because of difficulties forecasting for nonmandatory
contracts.
Source: GSA Federal Technology Service.
[End of table]
Federal agencies are not required to use the MAA contracts. Depending
on their specific requirements, federal agencies may use the
telecommunications services provided through a GSA regional
telecommunications services program[Footnote 4] (using either the MAA
contracts or one of GSA's other local services contracts or
agreements), or they may acquire and manage their own local
telecommunications services and the associated equipment.
GSA's Federal Technology Service (FTS) has responsibility for the MAA
program. FTS headquarters is responsible for planning and program
management, while GSA's field offices implement and administer the MAA
contracts. As a self-sustaining organization, GSA assesses customer
agencies two types of management fees to finance its activities: a
contract management fee and a full-service fee. The contract
management fee is intended to recoup the cost of general program,
acquisition, and contract management activities and is applied as a
percentage of service cost. In addition to the contract management
fee, the full-service fee is an optional fee charged to those agencies
that use GSA staff to support MAA service ordering, implementation
planning and coordination, and billing. It also is applied as a
percentage of the cost of contract service.
Although the MAA program focuses on local services, it also has
implications for increased competition in both the local services and
the long distance markets. Part of the overall FPS program strategy,
developed in 1997 in consultation with industry and the Congress, was
to eventually permit contractors to offer both local and long distance
services through three types of crossover: between the local MAA
contracts; from local MAA contracts to the long distance FTS2001
contracts; and from the FTS2001 contracts to the local MAA contracts.
This crossover was envisioned to yield two important benefits: first,
ensuring the government the opportunity to receive the best contract
price and service for local and long distance services, and second,
maximizing competition for those services in both markets. Crossover
was not intended to go into effect immediately: both the MAA and the
FTS2001 contracts had to be in effect for 1 year, known as the
forbearance period, before they could be modified to permit crossover.
Furthermore, GSA delayed allowing MAA contractors to offer FTS2001
services until it could be sure that the minimum revenue guarantees to
the current FTS2001 contractors would be met.[Footnote 5]
MAA Implementation Is Progressing but Is Behind Schedule:
Although MAA contract implementations continue to progress, in
most metropolitan areas GSA remains behind schedule for completing
these efforts. Specifically, of 19 metropolitan areas that were to
have completed the transition from existing services to MAA services
by or before March 1, 2002, 5 have done so. GSA had planned to
complete the transition of 100 percent of its customer base in all 20
phase I and phase II MAA cities by the end of March 2002. GSA is
unlikely to meet this March deadline, however, because as of March 1,
2002, the MAA program was providing service to about 52 percent of
potential MAA users, so that about 77,000 potential customers are not
yet transitioned.[Footnote 6]
Reasons for delays vary. Although GSA initiated its MAA program to
take advantage of emerging competition in the local telecommunications
market, some sizable implementation challenges arose directly from
this new environment. Challenges unrelated to the market environment
have also noticeably delayed contract implementation: for example, the
customer charges associated with service initiation and equipment
replacements, as well as a lack of contractor and customer
preparedness. Although it has taken some steps to move the
implementation efforts forward, GSA has not established current,
realistic time frames for completing ongoing MAA implementations, nor
has it established performance measures for monitoring implementation.
These gaps inhibit its ability to expeditiously resolve transition
impediments. As a result, federal agencies in many locations are not
realizing the potential cost savings offered by the MAA program.
Contract Implementation Has Been Delayed:
Although the MAA contracts require the transition of initial service
locations to be completed within 9 months after contractors are given
notice to proceed, this transition has not been as fast as
anticipated. The transition goal was achieved in two metropolitan
areas (Buffalo and Cincinnati); three other metropolitan areas
(Minneapolis, St. Louis, and Boise) have also completed MAA contract
implementation, although not within the 9-month goal. Figure 1 gives
the dates that GSA notified the respective contractors to proceed with
contract implementation and the implementation status for each awarded
city. As shown in figure 1, although the goal for completing MAA
contract implementations for the three phase I cities was April 2000,
only 68 percent of users in San Francisco, 73 percent of users in
Chicago, and 37 percent of users in New York had been converted to MAA
contracts by March 1, 2002.
Figure 1: Implementation Status as of March 1, 2002:
[Refer to PDF for image: illustrated table]
Metro area: Chicago;
Notice to proceed date: July 2999;
Nine months after notice to proceed date: April 2000;
Actual completion date: NA;
Implementation status as of March 1, 2002: 73%.
Metro area: New York;
Notice to proceed date: July 2999;
Nine months after notice to proceed date: April 2000;
Actual completion date: NA;
Implementation status as of March 1, 2002: 37%.
Metro area: San Francisco;
Notice to proceed date: July 2999;
Nine months after notice to proceed date: April 2000;
Actual completion date: NA;
Implementation status as of March 1, 2002: 68%.
Metro area: Buffalo;
Notice to proceed date: June 2000;
Actual completion date: March 2001;
Implementation status as of March 1, 2002: 100%.
Metro area: Atlanta;
Notice to proceed date: July 2000;
Nine months after notice to proceed date: March 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 11%.
Metro area: Baltimore;
Notice to proceed date: July 2000;
Nine months after notice to proceed date: March 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 22%.
Metro area: Miami;
Notice to proceed date: July 2000;
Nine months after notice to proceed date: March 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 4%.
Metro area: Cleveland;
Notice to proceed date: July 2000;
Nine months after notice to proceed date: April 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 78%.
Metro area: Indianapolis;
Notice to proceed date: July 2000;
Nine months after notice to proceed date: April 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 93%.
Metro area: Cincinnati;
Notice to proceed date: July 2000;
Actual completion date: February 2001;
Implementation status as of March 1, 2002: 100%.
Metro area: Los Angeles;
Notice to proceed date: July 2000;
Nine months after notice to proceed date: April 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 25%.
Metro area: St. Louis;
Notice to proceed date: August 2000;
Nine months after notice to proceed date: May 2001;
Actual completion date: June 2001;
Implementation status as of March 1, 2002: 100%.
Metro area: Dallas;
Notice to proceed date: September 2000;
Nine months after notice to proceed date: June 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 22%.
Metro area: Boston;
Notice to proceed date: September 2000;
Nine months after notice to proceed date: June 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 8%.
Metro area: Denver;
Notice to proceed date: September 2000;
Nine months after notice to proceed date: June 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 93%.
Metro area: Minneapolis;
Notice to proceed date: September 2000;
Nine months after notice to proceed date: June 2001;
Actual completion date: August 2001;
Implementation status as of March 1, 2002: 100%.
Metro area: Albuquerque;
Notice to proceed date: September 2000;
Nine months after notice to proceed date: July 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 12%.
Metro area: New Orleans;
Notice to proceed date: November 2000;
Nine months after notice to proceed date: August 2001;
Actual completion date: NA;
Implementation status as of March 1, 2002: 81%.
Metro area: Boise;
Notice to proceed date: February 2001;
Actual completion date: February 2002;
Implementation status as of March 1, 2002: 100%.
Metro area: Philadelphia;
Notice to proceed date: June 2001;
Nine months after notice to proceed date: NA;
Actual completion date: NA;
Implementation status as of March 1, 2002: 53%.
Note: Complete implementation is indicated by dark progress bars and
dark boxes around city names.
Source: GSA Federal Technology Service.
[End of figure]
Those cities showing greatest progress with implementation have
typically benefited from simpler transition requirements. For example,
Denver, Cincinnati, and St. Louis were primarily transitioning private
branch exchange trunks,[Footnote 7] which are relatively few in
number, as compared to transitioning individual business lines, which
typically involve higher volumes and additional effort. Buffalo,
Minneapolis, New Orleans, and Boise placed most of their MAA service
orders with the incumbent service providers.
Numerous Causes Contribute to Delays in Implementation:
The challenges facing GSA and the MAA contractors have hampered timely
completion of the MAA contracts and thus the realization of maximum
MAA contract savings. Some of these challenges arose as a result of
the newly deregulated local telecommunications market: disputes over
MAA contractors' access to and use of building riser cabling, problems
in coordinating the transfer of local telephone numbers between
service providers, and the financial difficulties of an MAA
contractor. For example:
* Although the MAA contractor in New York was authorized to proceed
with implementation in July 1999, more than 2 years later that
transition effort is only 13 percent complete. Over half the estimated
21,000 lines to be transitioned were affected by a dispute over access
to and use of building riser cables. That is, following the AT&T
divestiture in 1984,[Footnote 8] Verizon was permitted to retain
ownership rights to substantially all the building riser cabling in
the New York metropolitan area. This riser cabling carries
telecommunications services from the local exchange carrier's
facilities (typically located in the basement of a building) up to the
end user's facilities, located on each floor throughout a building. In
order for AT&T or another competitive local exchange carrier to
provide service to tenants in an affected building, such a carrier
must either construct its own cable riser in the building or
compensate Verizon for access to and use of the existing riser cable.
Clarification of riser cable access and compensation issues was the
subject of a New York State Public Service Commission hearing. In June
2001, this commission issued an order allowing competitive local
exchange carriers such as AT&T to have direct access to riser cable
owned by other carriers. Following that decision, GSA and AT&T reached
agreement on a contract modification in November 2001 recognizing this
added cost; GSA expects this agreement to resolve this long-standing
impediment.
* The riser cable access issue is also a transition impediment in
Atlanta and Miami, affecting about 85 percent of buildings housing
prospective MAA customers in those cities, and about half the total
lines to be served. Although this issue first arose in Miami in
December 2000, efforts are still pending to resolve the cost issue
between GSA and the affected MAA contractor in both cities.
* Our review of program management data in Atlanta, Chicago, and Miami
found problems associated with coordinating the transfer of telephone
numbers from one local carrier to another. These problems have delayed
the MAA contractors' implementations for periods ranging from 3 to 7
weeks.
* In Atlanta and Miami, another implementation impediment has been the
financial condition of an MAA contractor.[Footnote 9] This
contractor's bankruptcy filing prompted several customer agencies to
postpone their participation in the MAA program and caused one
building manager in Miami to deny the contractor building access
required to provide service to agencies in that location.
In addition to challenges associated with the recently deregulated
local telecommunications market, other difficulties are slowing
implementation of MAA contracts: these include the customer charges
associated with initiating services and replacing equipment, as well
as a lack of contractor and customer preparedness. Because costs can
be incurred just to implement the MAA contracts (for example, service
initiation charges and the cost of changing or upgrading customer
telecommunications equipment), the ability of agencies to accommodate
these added costs within their budgets can influence the timing of MAA
implementation and in some cases deter agencies from participating. In
Boston, for example, these costs have delayed implementation of about
half the prospective MAA service lines in that city. Further,
according to GSA records, contractors have not been prepared in some
cases for implementing services or have had problems with their
equipment. These issues have delayed implementations for times ranging
from 12 days to 7 months in Atlanta, Chicago, Indianapolis, New York,
and San Francisco. These records also show that customer preparedness
and delays in making MAA decisions have also been factors slowing
implementations in Chicago, New York, and San Francisco.
Although some factors hindering implementation progress are beyond
GSA's ability to control, its ability to expeditiously resolve
impediments and minimize delays has been constrained by two gaps in
its program management. First, GSA has not established current time
frames for implementing specific MAA contracts. For example, although
only 2 out of 19 metropolitan areas that began implementation 9 months
ago or more actually met GSA's initial 9-month implementation goal,
GSA has not established new time frames that would enable it to manage
the timely completion of the remaining efforts. Second, GSA has not
established performance measures that would enable its managers to
better monitor and measure the completion of specific contract
implementation efforts. Without revised time frames for completing
these specific contract implementations and without appropriate
performance measures, GSA managers have no clear, current, or coherent
measurement baseline against which to monitor and more effectively
manage the progress of the various MAA implementation efforts.
Without such an established baseline, managers may not take prompt
action to resolve impediments before they cause lengthy delays. For
example:
* Although the MAA contractor in Albuquerque was authorized to proceed
with implementation in October 2000, over a year later only 2 percent
of prospective MAA users have been converted. One factor hindering
implementation was higher contract pricing for one required service,
affecting more than 60 percent of prospective MAA users in
Albuquerque. GSA executed a contract modification in August 2001 to
improve pricing for this service and enable its implementation to go
forward. Prompt understanding of the severity of this impediment could
have hastened its resolution.
* A further disagreement between GSA and the Albuquerque MAA
contractor, concerning the network demarcation point,[Footnote 10]
first arose in October 2000, stalling progress on an additional 36
percent of the prospective MAA lines in that area. Although agreement
on a solution was ostensibly reached by GSA regional staff and the
contractors involved in April 2001, it was not until October 2001 that
GSA FPS headquarters finally issued a decision that defined network
demarcation points and brought the matter to a close. Had the extent
of this obstacle been more quickly understood, the problem might have
been resolved more rapidly.
The slow completion of contract modifications is not unique to
Albuquerque; MAA implementations in Chicago and in Indianapolis have
also been held up, pending completion of necessary modifications.
In an effort to improve contract administration and implementation,
GSA has revised its aggregate program-level goals. Specifically, GSA
has changed its goal of completing the transition of 100 percent of
prospective customers in all phase I and phase II MAA cities by March
2002; its new goal is to transition 50 percent of prospective
customers by April 2002. GSA believes that this goal is sufficient to
manage MAA implementation. GSA is also developing aggregate program-
level performance measures and is refining the processes that will be
used for tracking and reporting.
Although these are positive steps, they are not a substitute for
specific contract implementation time frames and performance measures.
Aggregate goals and performance measures are not adequate to manage
MAA implementation, because they do not allow managers to readily
determine (1) when a specific implementation effort is taking more
time than expected, (2) how to measure the loss of potential savings
in such cases in order to prioritize and expedite corrective actions,
or (3) how many resources and how much time they should devote to
overcoming impediments.
Despite this shortcoming, GSA has taken positive measures to improve
contract administration and implementation. In Chicago, for example,
GSA's implementation efforts had initially been hampered in part by
its own turnover in staff, an inadequate approach to managing service
order implementations, and poor communications with its MAA
contractor. By January 2001, GSA began taking steps to solve its
staffing problems and bring order and focus to its regular
communications with its contractor, and in June 2001, it implemented a
new ordering process for MAA services. Our analysis of GSA management
data indicates that after these steps were completed, the pace of MAA
implementation improved in Chicago (although some implementation
problems remain). In San Francisco and Los Angeles, GSA's managers
also took steps to overcome performance problems with the contractors
by exercising existing contractual remedies to prompt performance
improvement.
GSA's positive steps notwithstanding, the implementation delays that
persist lead to increased cost: the loss of the potential savings
afforded by the MAA contracts. GSA had estimated that the MAA program
could save about $1.1 billion, basing its estimate on the difference
between service prices in effect for each of the 20 phase I and phase
II MAA cities at the outset of the program and the total amount of the
lowest MAA offeror's prices for a given city. However, this estimate
did not take into account the time required to implement these
contracts. Because savings are not realized until the service is
actually implemented, delays in implementing the contracts in turn
delay the realization of substantial cost savings and limit what can
be realized over the 8-year term of the contracts. For example, we
analyzed average monthly line rates for all 20 MAA cities within Phase
I and Phase II before and after MAA contract awards, and determined
that federal agencies in these cities may be forgoing as much as $1.1
million dollars per month in cost savings for those users not yet
transitioned to MAA contracts (approximately 75,000 users[Footnote
11]).
Management Fees Vary Widely and Are Not Transparent to Customers:
The two types of management fees that GSA charges vary widely among
the metropolitan areas served. When expressed as a percentage of the
contractor's base rate, GSA's full-service fee ranges from a low of
5.5 percent in St. Louis to a high of almost 51 percent in San
Francisco.
Table 2 identifies the fees that GSA has set for its MAA contracts.
For purposes of comparison, we have also computed a total fee that
combines the contract management and full-service fees.
Table 2: GSA Local Telecommunications Management Fees for FY 2002
(Sorted by Total Fee Percentage):
Metro area: New York;
Fees (%): Contract management: 47.27%;
Fees (%): Full service: 50.13%;
Total fee[A]: 97.40%;
Fees (in dollars): Contractors' line rate[B]: $3.85;
Fees (in dollars): GSA's total fee[C]: $3.75;
Total line rate[D]: $7.60
Metro area: San Francisco;
Fees (%): Contract management: 24.81%;
Fees (%): Full service: 50.95%;
Total fee[A]: 75.76%;
Fees (in dollars): Contractors' line rate[B]: $4.18;
Fees (in dollars): GSA's total fee[C]: $3.17;
Total line rate[D]: $7.35
Metro area: Philadelphia;
Fees (%): Contract management: 33.00%;
Fees (%): Full service: 30.70%;
Total fee[A]: 63.70%;
Fees (in dollars): Contractors' line rate[B]: $9.33;
Fees (in dollars): GSA's total fee[C]: $5.94;
Total line rate[D]: $15.27
Metro area: San Antonio;
Fees (%): Contract management: 15.04%;
Fees (%): Full service: 40.26%;
Total fee[A]: 55.30%;
Fees (in dollars): Contractors' line rate[B]: $6.78;
Fees (in dollars): GSA's total fee[C]: $3.75;
Total line rate[D]: $10.53
Metro area: Boston;
Fees (%): Contract management: 38.12%;
Fees (%): Full service: 15.68%;
Total fee[A]: 53.80%;
Fees (in dollars): Contractors' line rate[B]: $10.97;
Fees (in dollars): GSA's total fee[C]: $5.90;
Total line rate[D]: $16.87
Metro area: Baltimore;
Fees (%): Contract management: 31.96%;
Fees (%): Full service: 17.11%;
Total fee[A]: 49.07%;
Fees (in dollars): Contractors' line rate[B]: $4.85;
Fees (in dollars): GSA's total fee[C]: $2.38;
Total line rate[D]: $7.23.
Metro area: Denver;
Fees (%): Contract management: 8.25%;
Fees (%): Full service: 40.74%;
Total fee[A]: 48.99%;
Fees (in dollars): Contractors' line rate[B]: $17.33;
Fees (in dollars): GSA's total fee[C]: $8.49;
Total line rate[D]: $25.82
Metro area: Albuquerque;
Fees (%): Contract management: 14.98%;
Fees (%): Full service: 32.23%;
Total fee[A]: 47.21%;
Fees (in dollars): Contractors' line rate[B]: $15.95;
Fees (in dollars): GSA's total fee[C]: $7.53;
Total line rate[D]: $23.48
Metro area: Dallas;
Fees (%): Contract management: 17.00%;
Fees (%): Full service: 25.60%;
Total fee[A]: 42.60%;
Fees (in dollars): Contractors' line rate[B]: $10.47;
Fees (in dollars): GSA's total fee[C]: $4.46;
Total line rate[D]: $14.93
Metro area: Buffalo;
Fees (%): Contract management: 32.93%;
Fees (%): Full service: 8.25%;
Total fee[A]: 41.18%;
Fees (in dollars): Contractors' line rate[B]: $13.09;
Fees (in dollars): GSA's total fee[C]: $5.39;
Total line rate[D]: $18.48
Metro area: Miami;
Fees (%): Contract management: 28.00%;
Fees (%): Full service: 11.52%;
Total fee[A]: 39.52%;
Fees (in dollars): Contractors' line rate[B]: $10.50;
Fees (in dollars): GSA's total fee[C]: $4.15;
Total line rate[D]: $14.65
Metro area: Detroit;
Fees (%): Contract management: 30.00%;
Fees (%): Full service: 9.00%;
Total fee[A]: 39.00%;
Fees (in dollars): Contractors' line rate[B]: $12.49;
Fees (in dollars): GSA's total fee[C]: $4.87;
Total line rate[D]: $17.36
Metro area: Chicago;
Fees (%): Contract management: 11.99%;
Fees (%): Full service: 24.85%;
Total fee[A]: 36.84%;
Fees (in dollars): Contractors' line rate[B]: $3.42;
Fees (in dollars): GSA's total fee[C]: $1.26;
Total line rate[D]: $4.68
Metro area: Atlanta;
Fees (%): Contract management: 25.98%;
Fees (%): Full service: 8.80%;
Total fee[A]: 34.78%;
Fees (in dollars): Contractors' line rate[B]: $9.20;
Fees (in dollars): GSA's total fee[C]: $3.20;
Total line rate[D]: $12.40
Metro area: Boise;
Fees (%): Contract management: 5.17%;
Fees (%): Full service: 28.90%;
Total fee[A]: 34.07%;
Fees (in dollars): Contractors' line rate[B]: $15.05;
Fees (in dollars): GSA's total fee[C]: $5.13;
Total line rate[D]: $20.18
Metro area: New Orleans;
Fees (%): Contract management: 14.03%;
Fees (%): Full service: 19.06%;
Total fee[A]: 33.09%;
Fees (in dollars): Contractors' line rate[B]: $12.33;
Fees (in dollars): GSA's total fee[C]: $4.08;
Total line rate[D]: $16.41
Metro area: Los Angeles;
Fees (%): Contract management: 13.92%;
Fees (%): Full service: 13.92%;
Total fee[A]: 27.84%;
Fees (in dollars): Contractors' line rate[B]: $7.55;
Fees (in dollars): GSA's total fee[C]: $2.10;
Total line rate[D]: $9.65
Metro area: Indianapolis;
Fees (%): Contract management: 1.77%;
Fees (%): Full service: 19.40%;
Total fee[A]: 21.17%;
Fees (in dollars): Contractors' line rate[B]: $9.59;
Fees (in dollars): GSA's total fee[C]: $2.03;
Total line rate[D]: $11.62
Metro area: St. Louis;
Fees (%): Contract management: 9.46%;
Fees (%): Full service: 5.49%;
Total fee[A]: 14.95%;
Fees (in dollars): Contractors' line rate[B]: $13.85;
Fees (in dollars): GSA's total fee[C]: $2.07;
Total line rate[D]: $15.92
Metro area: Minneapolis;
Fees (%): Contract management: 1.97%;
Fees (%): Full service: 11.26%;
Total fee[A]: 13.23%;
Fees (in dollars): Contractors' line rate[B]: $16.78;
Fees (in dollars): GSA's total fee[C]: $2.22;
Total line rate[D]: $19.00
Metro area: Cincinnati;
Fees (%): Contract management: 4.27%;
Fees (%): Full service: 8.87%;
Total fee[A]: 13.14%;
Fees (in dollars): Contractors' line rate[B]: $9.13;
Fees (in dollars): GSA's total fee[C]: $1.20;
Total line rate[D]: $10.33
Metro area: Cleveland;
Fees (%): Contract management: 0.89%;
Fees (%): Full service: 7.78%;
Total fee[A]: 8.67%;
Fees (in dollars): Contractors' line rate[B]: $21.33;
Fees (in dollars): GSA's total fee[C]: $1.85;
Total line rate[D]: $23.18
Note: Table 2 does not include Norfolk, which GSA recently awarded.
[A] Total fee equals contract management fee plus full-service fee.
[B] GSA computes a monthly weighted average analog line rate for all
contractors within a single MAA city.
[C] GSA's total fee equals contractors' line rate times total fee.
[D] Total line rate equals contractors' line rate plus GSA's total fee.
Source for contract management, full-service fee percentages, and
weighted average line rate: GSA Federal Technology Service.
[End of table]
Like other federal agencies that provide centralized services, GSA
charges these fees to recover the costs of managing the program. For
example, the contract management fee is meant to cover GSA's cost to
issue the contracts and to resolve contract interpretation issues,
disputes, and discrepancies and to issue contract modifications. This
fee is also intended to recoup the cost of MAA program management and
oversight The optional full-service fee is meant to cover costs
associated with such functions as initiating and executing service
orders and monitoring service implementation, monitoring contractor
performance, coordinating government-furnished property availability,
coordinating site access for contractor personnel, reviewing
contractor invoices, and serving as customer point of contact for
technical issues.
In this type of service model, making the amounts and purposes of fees
transparent to users is appropriate and useful. First, disclosing fee
amounts provides user agencies with key input for deciding whether to
acquire services from the service provider or from alternative
sources. Second, such disclosure helps enable customers to hold the
service provider accountable for providing a level of performance
commensurate with the fees charged.
Because use of the MAA contracts is not mandatory, agencies can choose
to procure local services on their own, if they believe they could do
so more economically than going through GSA. In addition, to avoid
paying the full-service fee, a customer agency can opt to use the MAA
contracts' direct ordering and direct billing option. In so doing, the
agency assumes responsibility for its service ordering, implementation
planning and coordination, and billing management.
Rather than disclosing to agencies the fees that GSA charges, the MAA
contracts require contractors to embed the contract management fee in
their service pricing. GSA took this approach to focus agencies'
attention on making decisions based on the total cost of obtaining
telecommunications services, rather than on the management fee
percentage. Its position was that even with the management fees
included, the total cost of local telecommunications services under
the MAA contracts is dramatically lower than what is available under
its other local service contracts.
As shown in table 2, comparing the fees according to percentages
provides only a partial picture—-it is important to consider also the
dollar amounts. For example, the fee that GSA charges to manage and
administer MAA contracts in New York is 97 percent in addition to the
contractor's monthly line rate. Although this fee appears high when
viewed on a percentage basis, it equals $3.75 per line. In contrast,
MAA customers in Denver are charged a total management fee of 49
percent (about half New York's total fee percentage); this translates,
however, into $8.49 per line—-more than double the dollar amount that
GSA charges in New York.
Of the 12 MAA customer agencies we met with in Atlanta, Chicago,
Dallas, Denver, and New York, none were aware of the actual amounts of
the GSA management fees that they were being charged. However, they
were all pleased with the bottom-line cost savings that they were
receiving by obtaining local telecommunications services through the
MAA program.
The total cost of service is an important factor in making decisions
on how to buy local services, but specific information on fees would
be a further aid to agency decisionmaking. Without such information,
an agency in San Francisco, for example, would not be aware that it
could lower its local MAA monthly service costs by almost 29 percent
or $2.13 per line if it assumed additional service ordering, billing,
and administration responsibilities.[Footnote 12] Lacking full
information on these fees, agencies cannot readily compare the cost of
GSA services with the costs they would incur if they performed these
services themselves. As a result, agencies cannot determine whether it
is more economical for them (1) to procure their own local services,
(2) to procure services through GSA but perform ordering and billing
activities themselves, or (3) to procure services through GSA and pay
GSA for support. If customers were aware of both the fees and rates
for their city, they would be able to make more informed decisions.
At the subcommittee's June 2001 hearing on MAA contract
implementation, we noted that GSA was not disclosing to agencies the
fees it charged for MAA-related services. At that hearing, the GSA FTS
commissioner disclosed the total percentage of fees GSA was charging.
The commissioner further testified that GSA would reveal fees to
customer agencies. Since that time, GSA has revised its policy on
disclosure of fees, and regional telecommunications directors have
been instructed to disclose fees to those customer agencies that
request such information. GSA has also drafted a listing of the
services that agencies can expect in return for these fees.
This action does not ensure adequate disclosure and transparency of
fees for three reasons. First, GSA intends to inform agencies of the
fees being charged only if an agency inquires. Second, GSA has not
informed its customers of this change in policy. As a result, agencies
may be unaware that they can now learn what fees they are being
charged by GSA. Third, the listing of services GSA developed to
describe what customers receive in return for their fees does not
clearly indicate what fees support the cost of which services. For
example, GSA's lists of services bought by its full-service fee and
those bought by its contract management fee overlap considerably. That
is, almost 88 percent of the services it identifies as being supported
by its contract management fee are also identified with its full-
service fee, making it difficult to determine which fee is supporting
which service.
GSA has recently initiated action to reexamine and simplify its
management fee structure. On November 27, 2001, GSA's Local Rate
Setting Redesign Team, composed of GSA FTS financial, program, and
regional telecommunications personnel, held its first meeting. This
group is expected to report to the FTS assistant commissioner for
Local Services in the spring of 2002 on ways to simplify its fee
structure in recouping its costs and to achieve greater consistency in
its fees between regions. At this time, this effort is focused
predominantly on how GSA calculates its fees, rather than on services
rendered in return. However, without disclosure of the management fees
it is charging and a clear delineation of what services are supported
by those fees, the actions taken by GSA will not be adequate to
provide the transparency needed to provide agency decisionmakers with
full information.
GSA Has Taken Action to Enable Crossover:
GSA has taken action in the past 17 months to allow MAA and FTS2001
contractors to offer services in both the local and long distance
markets. In December 2000, GSA allowed FTS2001 and other MAA
contractors to submit proposals to offer local services in the three
pilot MAA cities (New York, Chicago, and San Francisco). In August
2001, GSA published guidance on the submission and evaluation of
proposals to initiate crossover between these local and long distance
contracts, allowing local service providers to offer long distance
services and long distance service providers to offer local services
in MAA markets. Further, as of March 1, 2002, GSA had opened all 20
eligible metropolitan areas to crossover, had received contractor
proposals for 4 of those MAA cities, and had completed a contract
modification to allow crossover in 1 city.
Figure 2 summarizes the current status of MAA crossover activity.
Figure 2: Progress of MAA Crossover by Metropolitan Area as of March
1, 2002:
[Refer to PDF for image: illustrated table]
Metro area: New York;
Initial contract award: May 1999;
End of forbearance period: May 2000;
Period between end of forbearance and opening of crossover: May-
December 2000;
Crossover opened: December 2000;
Contractor proposal submitted: January 2001;
Crossover awarded: April 2001.
Metro area: Chicago;
Initial contract award: May 1999;
End of forbearance period: May 2000;
Period between end of forbearance and opening of crossover: May-
December 2000;
Crossover opened: December 2000;
Contractor proposal submitted: March 2001;
Crossover awarded: NA.
Metro area: San Francisco;
Initial contract award: May 1999;
End of forbearance period: May 2000;
Period between end of forbearance and opening of crossover: May-
December 2000;
Crossover opened: December 2000;
Contractor proposal submitted: March 2001;
Crossover awarded: NA.
Metro area: Buffalo;
Initial contract award: February 2000;
End of forbearance period: February 2001;
Period between end of forbearance and opening of crossover: February
2001-January 2002;
Crossover opened: January 2002.
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Cincinnati;
Initial contract award: March 2000;
End of forbearance period: March 2001;
Period between end of forbearance and opening of crossover: March-
August 2001;
Crossover opened: August 2001;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Cleveland;
Initial contract award: March 2000;
End of forbearance period: March 2001;
Period between end of forbearance and opening of crossover: March 2001-
February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Los Angeles;
Initial contract award: March 2000;
End of forbearance period: March 2001;
Period between end of forbearance and opening of crossover: March-
September 2001;
Crossover opened: September 2001;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Baltimore;
Initial contract award: March 2000;
End of forbearance period: March 2001;
Period between end of forbearance and opening of crossover: March-
August 2001;
Crossover opened: August 2001;
Contractor proposal submitted: October 2001;
Crossover awarded: NA.
Metro area: Atlanta;
Initial contract award: April 2000;
End of forbearance period: April 2001;
Period between end of forbearance and opening of crossover: April-
August 2001;
Crossover opened: August 2001;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Miami;
Initial contract award: April 2000;
End of forbearance period: April 2001;
Period between end of forbearance and opening of crossover: April-
August 2001;
Crossover opened: August 2001;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Indianapolis;
Initial contract award: April 2000;
End of forbearance period: April 2001;
Period between end of forbearance and opening of crossover: April 2001-
February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: St. Louis;
Initial contract award: April 2000;
End of forbearance period: April 2001;
Period between end of forbearance and opening of crossover: April 2001-
February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Minneapolis;
Initial contract award: May 2000;
End of forbearance period: May 2001;
Period between end of forbearance and opening of crossover: May 2001-
January 2002;
Crossover opened: January 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Dallas;
Initial contract award: July 2000;
End of forbearance period: July 2001;
Period between end of forbearance and opening of crossover: July 2001-
February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Denver;
Initial contract award: July 2000;
End of forbearance period: July 2001;
Period between end of forbearance and opening of crossover: July 2001-
February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Boston;
Initial contract award: August 2000;
End of forbearance period: August 2001;
Period between end of forbearance and opening of crossover: August
2001-February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Albuquerque;
Initial contract award: September 2000;
End of forbearance period: September 2001;
Period between end of forbearance and opening of crossover: September
2001-February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Boise;
Initial contract award: September 2000;
End of forbearance period: September 2001;
Period between end of forbearance and opening of crossover: September
2001-February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: New Orleans;
Initial contract award: October 2000;
End of forbearance period: October 2001;
Period between end of forbearance and opening of crossover: October
2001-February 2002;
Crossover opened: February 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Metro area: Philadelphia;
Initial contract award: February 2001;
End of forbearance period: February 2002;
Period between end of forbearance and opening of crossover: February-
March 2002;
Crossover opened: March 2002;
Contractor proposal submitted: NA;
Crossover awarded: NA.
Note: According to the MAA contracts, once the forbearance period is
over, GSA can award crossover contract modifications when it is in the
government's best interests.
Source: GSA Federal Technology Service.
[End of figure]
Conclusions:
GSA continues to make progress in implementing the MAA program.
Nevertheless, in many locations GSA has not met its schedules for
transitioning agencies' telecommunications services to MAA vendors,
because of impediments including challenges posed by recent
deregulation of telecommunications services, as well as a lack of MAA
contractor and customer preparedness. As a result of these delays,
federal agencies may be forgoing substantial cost savings-—as much as
$1.1 million—-for each month of delay in transitioning the remaining
approximately 77,000 prospective MAA customers.
Achieving these cost savings for local telecommunications services-—
the primary goal of the MAA program-—is hindered because GSA managers
are missing opportunities to improve program administration.
Specifically, GSA has not yet established current and realistic
implementation time frames and associated performance measures to
guide and manage the timely completion of specific, ongoing contract
implementations. As a result, GSA lacks a basic yardstick for more
consistent, reliable, and effective measurement and management actions
to address impediments before they cause lengthy delays. In addition,
GSA has not yet made its fees and services transparent to its customer
agencies and disclosed what it charges agencies for the services it
offers.
Recommendations:
To improve MAA program administration, we recommend that the
administrator of General Services direct the commissioner of the
Federal Technology Service to:
* develop current, realistic timeline objectives and schedules for
expeditiously completing those MAA contract implementations that are
currently in progress and;
* use these objectives to develop and apply reliable performance
measures to gauge MAA progress and manage implementations.
To assist federal agencies in making well-informed telecommunications
choices and to improve management of GSA's own support services, we
recommend that the administrator direct the commissioner of the
Federal Technology Service to:
* routinely disclose to MAA customers the fees that GSA charges them
for managing the MAA contracts and for the ordering and billing
services it provides and;
* clarify for MAA customers the services that each of the fees
supports.
Agency Comments:
In written comments on a draft of this report, the administrator of
General Services agreed with our recommendations and indicated that
GSA was acting to implement them. In response particularly to a
recommendation in the draft report regarding opening MAA contracts to
crossover on a consistent basis, GSA agreed to open all eligible MAA
cities to crossover by March 1, 2002. After confirming that GSA had
taken that action, we updated this report to reflect the current
status. GSA also provided a number of technical comments that we have
incorporated into this report as appropriate. GSA's written comments
are presented in appendix II.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we will not distribute it until 30 days from
its issue date. At that time, we will send copies of this report to
the ranking minority member, Subcommittee on Technology and
Procurement Policy, and interested congressional committees. We will
also send copies to the director of the Office of Management and
Budget and the administrator of the General Services Administration.
Copies will be made available to others upon request. This report will
also be available on our home page at [hyperlink, http://www.gao.gov].
If you have any questions regarding this report, please contact me or
Kevin Conway at (202) 512-6240 or by E-mail at koontzl@gao.gov or
conwayk@gao.gov, respectively. Individuals making key contributions to
this report included Scott Binder, Barbara Collier, Michael Koury,
Frank Maguire, Mary Marshall, and Debra Rucker.
Sincerely yours,
Signed by:
Linda D. Koontz:
Director, Information Management Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives of our review were to identify (1) the status of
Metropolitan Area Acquisition (MAA) contract implementation and
reasons for any delays, (2) the fees charged customer agencies by the
General Services Administration (GSA) for the management and
administration of those contracts and the extent to which those fees
are transparent to customer agencies, and (3) the steps being taken by
GSA to enable MAA and FTS2001 contractors to cross over between these
sets of contracts and offer both local and long distance services.
To evaluate the status of MAA contract implementation efforts, we
reviewed MAA contracting, including solicitations, contracts, and
associated modifications. We reviewed an internal GSA management
report on MAA implementation challenges prepared by GSA's Office of
Inspector General and interviewed the staff who prepared this report.
In addition, we reviewed reports generated by GSA's automated MAA
status tracking system and verified the information in the reports
against other documentation gathered, such as tracking reports used by
regional GSA staff.
To better gauge specific MAA implementation efforts, we visited five
GSA FPS regional staff offices. We selected these regional offices
because they were responsible for implementing contracts in 14 of the
22 cities that had MAA contracts in place at the time of our review.
These contracts reflected a range of MAA implementation experiences,
as they encompassed a mix of multiple and single award cities, and
included contract awards to competitive local exchange carriers and to
incumbent local exchange carriers. The staff offices we visited were:
* GSA's Northeast and Caribbean Region in New York, responsible for
two MAA contracts;
* the Southeast Region in Atlanta, responsible for two MAA contracts;
* the Great Lakes Region in Chicago, responsible for five MAA
contracts;
* the Greater Southwest Region in Dallas, responsible for four MAA
contracts; and;
* the Rocky Mountain Region in Denver, responsible for one MAA
contract.
During these visits, we met with responsible GSA management staff and
analyzed information pertaining to each region's MAA marketing and
transition plans, service ordering and billing processes, and
implementation and administration roles and responsibilities. We also
analyzed documentation pertaining to the challenges each faced in
implementing its MAA contracts. In addition to the offices visited, we
reviewed marketing, transition planning, and contract administration
documentation from each of the four other GSA regional offices with
MAA contracts.
To gain customers' perspectives on MAA contract implementation status,
we interviewed 15 agency managers in 5 cities who were responsible for
their agency's local telecommunications services, as shown in table 3.
We also met with officials from the Executive Office for U.S.
Attorneys and the Executive Office for U.S. Trustees, located in
Washington, D.C. Officials in each of these two offices had nationwide
responsibility for local telecommunications services and were able to
offer insight into their agencies' participation in the MAA program
for multiple cities.
In determining which agencies to contact, we chose from a range of
larger and smaller agencies and also selected from both current MAA
customers and potential MAA customers. In our meetings with managers
from these agencies, we obtained documentation and discussed their GSA
contract marketing experience, their transition progress and
challenges, their MAA cost savings, and their knowledge of GSA
management fees, where possible and as appropriate.
Table 3: Current MAA Customer and Potential Customer Sites Visited:
City: Atlanta;
Agency:
Department of Labor, Regional Administrative Services Office;
Natural Resources Conservation Service;
U.S. Fish and Wildlife Service[A].
City: Denver;
Agency:
National Institute of Standards and Technology, Boulder, Colorado[A];
National Renewable Energy Laboratory, Golden, Colorado{a];
U.S. Courts for the Tenth Circuit, Office of the Circuit Executive.
City: Dallas;
Agency:
Health and Human Services, Program Support Center, Administrative
Operations Service;
Social Security Administration, Southwest Regional Office.
City: Chicago;
Agency:
Environmental Protection Agency;
Health and Human Services, Program Support Center, Administrative
Operations Service;
Internal Revenue Service.
City: New York;
Agency:
Internal Revenue Service, Office of the Regional Inspector North East
Region;
Corps of Engineers, New York District[A];
Health and Human Services, Program Support Center, Administrative
Operations Service[A];
Housing and Urban Development, New York Administrative Service Center.
[A] Potential MAA customer; has not converted yet.
[End of table]
To gain additional information and documentation pertaining to
contractor experiences with MAA implementation, we met with AT&T MAA
program managers in Washington, D.C., and in New York; Verizon MAA
program managers in Washington, D.C.; and Winstar MAA program managers
in Herndon, Virginia.
To determine the management fees charged to customer agencies by GSA
and how those fees were derived, we reviewed GSA's method for
calculating its management fees and supporting documentation. We also
reviewed statutory and regulatory guidelines[Footnote 13] governing
the establishment of such program fees. In addition, we reviewed GSA's
MAA management roles and responsibilities and interviewed FPS program
managers as well as the FPS Network Services Financial Services Center
manager responsible for developing the GSA management fees. We also
interviewed customer agencies to determine what information GSA was
disclosing to them regarding the fees that GSA charged and services
rendered.
Finally, to evaluate the actions being taken by GSA to enable MAA and
FTS2001 contractors to cross over within and between these programs,
we obtained and reviewed GSA's contract language on the forbearance
concepts and process and reviewed both its current guidance on the
crossover process and a report on crossover status. We reviewed GSA's
June 2001 and August 2001 presentations to the Industry Advisory
Group, as well as GSA's response to questions raised at those
presentations. We also reviewed documentation pertaining to GSA's
December 2000 decision to lift forbearance in the MAA pilot cities and
its first crossover award.
We conducted our review from April 2001 through March 2002, in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the General Services Administration:
GSA Administrator:
U.S. General Services Administration:
1800 F Street, NW:
Washington, DC 29405-0902:
Telephone: (202) 501-0800:
Fax: (202) 219-1243:
[hyperlink, http://www.gsa.gov]
March 1, 2002:
The Honorable David M. Walker:
Comptroller General of the United States:
General Accounting Office:
Washington, DC 20548:
Dear Mr. Walker:
Thank you for the opportunity to respond to the General Accounting
Office (GAO) draft report entitled "GSA Action Needed to Realize
Benefits of Metropolitan Area Acquisition Program." The report
addressed three primary areas: Metropolitan Area Acquisition (MAA)
contract implementation status, fees charged to customer agencies, and
crossover.
Prior to responding to the recommendations, I would like to outline
some significant accomplishments of the MAA program. From its
inception, the MAA program was designed to obtain the maximum benefit
from the newly deregulated marketplace. The General Services
Administration (GSA) chose to seize this unique opportunity
recognizing the potential benefits and risks. The result was an
immediate, substantial and sustained price reduction for local
telecommunications services to the Federal Government customer.
However, the local competitive environment today has developed more
slowly than anyone expected and is far from mature. Consequently, MAA
implementation progress has been slower than anticipated and overall
savings have been impacted.
Despite the challenges, I continue to believe that the strategy we
jointly crafted with Congress and industry is as sound today, as it
was when we developed it five years ago. We have brought explicit
competition to the local market and have established a new local
service pricing paradigm, I continue to be committed to the program
and to realizing the benefits it has to offer to the Federal
Government customer and the taxpayer.
I agree with the GAO recommendations and will implement additional
actions to improve our program. In response to the recommendation
regarding establishment of realistic timelines, GSA has begun
corrective measures. The Federal Technology Service (FTS) Regional
Offices will submit detailed plans outlining completion timeframes and
milestones on a city-by-city basis. The plans will be evaluated,
approved, and milestones will be tracked by the FTS National Office.
In addition, FTS National Offices responsible for contract
modifications have taken actions for process improvements to expedite
the MM contract modification process. The GAO recommendation on
performance measures is timely as this effort has been underway and is
consistent with my emphasis on performance measures. GSA has included
measures specific to MAA in its fiscal year 2002 performance goats and
measures, which have been reviewed by the Office of Management and
Budget. The three MAA performance measures are timely and effective
service delivery, cost savings, and timeliness of contract
modifications.
I agree with the GAO recommendations on disclosing fees and clarifying
associated services. Through our cooperative working relationship with
the GAO review team, concerns regarding the MM fees were identified
early in the review and corrective measures have been initiated. GSA
has established a team tasked to develop a simplified rate setting
process to be implemented for fiscal year 2003. Fiscal year 2003 fees
and clarification of associated services will then be published.
Regarding the GAO recommendation on local services crossover, I agree
and will open all remaining eligible cities to crossover by March 1,
2002. A city is considered eligible for crossover one year after
contract award. A detailed crossover schedule is enclosed.
In conclusion, I would like to commend the professionalism and
diligence of the GAO Review Team. I believe the openness of the
dialogue between GSA and GAO enabled the collective focus to be on
substantive improvements to the program, This open dialogue also
facilitated GSA's initiation of corrective measures throughout the
review process. We believe that the relationship developed during this
review process served GSA and GAO well.
Sincerely,
Signed by:
Stephen A. Perry:
Administrator:
Enclosure:
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Telecommunications: Metropolitan
Area Acquisition Program Implementation and Management, [hyperlink,
http://www.gao.gov/products/GAO-01-798T] (Washington, D.C.: June 13,
2001).
[2] A riser cable carries telecommunications services from the network
demarcation point to distribution facilities within a building. The
network demarcation point, which is typically in the basement of a
building, is the point of interconnection between the local exchange
carrier's facilities and the wiring and equipment at the end user's
facilities.
[3] GSA based these savings estimates on the difference between
current service prices in effect for each of the first 20 MAA cities
and the total amount of the lowest offeror's prices for a given city.
For the phase III cities, GSA did not estimate total savings.
[4] FTS offers a variety of programs through which agencies can
acquire local telecommunications service. For example, the Aggregated
System Procurement Program consolidated local requirements into an
overall system procurement based on the Bell Operating Company
boundaries. The Individual System Procurement Program serves locations
that the aggregated program does not. In addition, regional FTS
offices have also obtained Rate Stabilization Agreements that allow
agencies to acquire local tariffed telecommunications services at
short-term discounts.
[5] Each FTS2001 contractor is guaranteed minimum revenues of $750
million over the life of the FTS2001 contract. The implications of
these revenue guarantees on GSA's decision to allow other service
providers to compete in the FTS2001 market were addressed in a
previous report: U.S. General Accounting Office, Telecommunications:
GSA's Estimates of FTS2001 Revenues Are Reasonable, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-123] (Washington, D.C.: April
2000).
[6] The figure for currently serviced users is based on the number of
users converted to MAA contracts as of March 1, 2002 (84,409),
compared to the total number of potential MAA users identified by GSA
(161,582), as recorded by GSA's MAA management reporting system.
[7] A private branch exchange (PBX) is a piece of equipment that acts
as an organization's own internal telephone switch, handling internal
calls and all the connections to and from the public telephone network.
[8] As a result of an antitrust suit by the U.S. government, in
January 1984 AT&T divested itself of the Bell operating companies that
provided local exchange service, yielding an AT&T corporation
providing long distance services and seven independent regional
telephone companies providing local services.
[9] In April 2001, Winstar Communications, Inc., voluntarily filed for
protection under Chapter 11 of the U.S. Bankruptcy Code with the U.S.
Bankruptcy Court for the District of Delaware. In December 2001, the
IDT Corporation acquired substantially all the operating assets of
Winstar Communications pursuant to a sale order by the U.S. Bankruptcy
Court. Winstar MAA services continue to be provided to GSA and its
customers at this time.
[10] A network demarcation point is the point of interconnection
between the local exchange carrier's facilities and the wiring and
equipment at the end user's facilities.
[11] These 75,000 potential users are those in the first 20 MAA
awarded cities; the figure of 77,000 potential users, given earlier,
represents users in all MAA cities.
[12] An agency's total local MAA service cost could include the cost
of contractor service, GSA's contract management fee, and GSA's full-
service fee. In San Francisco for example, GSA's full-service fee (51
percent as high as the cost of contractor service) would represent 29
percent of an agency's total monthly MAA service cost.
[13] P.L. 99-500, October 18, 1986, 100 Stat. 1783-340, and OMB
Circular No. A-25, Revised (July 8, 1993).
[End of section]
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