New Deal

With the giant Networx contract on the horizon, GSA rewires its approach to telecom services.

Hanging telephone wires transmit the death and laughter of men and women, says a poem from the last century. Telephone service was relatively straightforward then-a basic technology operated by a monolithic system.

Today, telecommunication is different. Where once mandatory General Services Administration telephone service contracts lasted for decades, now a deregulated industry undergoing spasms of consolidation is fiercely competing for government telecom. Voice, data and video communications increasingly converge into a single Internet whole. Until recently, traditional voice services accounted for the majority of GSA telecom services. Now it is more like 30 percent. Emotion still thrums through the telephone, but at a digital pace.

At the center of the uncertain federal telecom future lies GSA's Networx, the largest government telecom program in history. GSA is evaluating which companies it will allow into the competitive arena created by federal agencies looking for those services.

The Networx contract is slated to last four years, followed by three two-year extension options. "GSA is trying to be very forward- looking," says Warren Suss, president of Suss Consulting Inc. in Jenkintown, Pa. "They are trying to include not just today's telecommunications services, but also the kind of services that may be in demand tomorrow."

In an organization suffering tumult due to a massive reorganization and the Oct. 31 departure of its administrator, Stephen Perry, Networx appears to be one of the agency's anchors.

The massive contract actually is two related procurements. Networx Universal is a comprehensive services vehicle of about 50 core functions ranging from toll-free phone service to wireless Internet. Teams led by AT&T, MCI, Qwest and Sprint Nextel all want a stake in Universal's minimum revenue guarantee of $525 million. Networx Enterprise is targeted at small companies and requires bidders to proffer only some Internet-related services. The procurement community expects both Networx contracts to be awarded next year.

That optimism is largely attributable to John C. Johnson, the GSA assistant commissioner heading up the procurement. "You've just got to hunker down . . . and not pay too much attention to the fireworks that are going on around you," he says.

Publicly, Johnson emphasizes that GSA expects to award two or three Universal contracts-that is at least one less than the number of major bidders. Privately, industry players say all four major bidders probably will get a slice of the pie. "Everyone knows if you're in the competitive price range, you have a pretty good shot at it, but [Johnson] wants to keep this air of competition up," an industry official says on condition of anonymity. Although Networx's predecessor contract, FTS 2001, technically was awarded only to MCI and Sprint Nextel, GSA left open a back door through regional contracts that allowed AT&T and Qwest to effectively attain incumbent status.

GSA wants to include as many Networx bidders as possible, the industry official says. "Who knows if all four are going to be independent entities at the end of 10 years?" the official adds. Since the Oct. 5 due date for Universal bids, merger activity has sped along with the Federal Communications Commission approval of AT&T's merger with SBC Communications and Verizon Communications' acquisition of MCI. Johnson says GSA anticipates industry consolidation over the lifetime of Networx. "We're not looking at it pessimistically, but optimistically," he adds.

Price is likely to be the overriding factor in GSA's evaluation of contract bids, most telecom analysts agree.

Johnson's biggest challenge probably will come after the contracts are awarded. Networx Universal winners will be announced in July, Enterprise in September. Bad memories fester of a botched governmentwide telecom contract transition in 2001. "We're planning to conduct transition as efficiently as it can be conducted," Johnson assured an industry luncheon audience in late October.

GSA hired McLean, Va.-based consultancy Booz Allen Hamilton to help the agency and its clients switch from the old telecom contract to Networx. "When you think about how a large agency operates in the telecommunications environment-whether they have local or distributed billing, what authorities are centralized throughout the agency, how they structure their hierarchy codes and billing-all these things are details that need to be worked through and understood," says John Feeney, principal at Booz Allen. Planning for the transition began well over a year ago, according to Johnson.

Because Networx is not mandatory for agencies, it faces competition within the government, most notably from the Treasury Communications Enterprise, which the Treasury Department recently revived after its apparent death last May. Treasury officials have said GSA is unable to meet its communications needs, an argument that Johnson rejects. "We could have met Treasury's technical requirements," he says. "[The department] didn't want to come to us because of time considerations."

Treasury's decision to go it alone probably raised Networx's services price, enterprise detractors say. "But, there is so much volume on the current FTS contracts that I don't think it's a significant risk," Johnson says.

Another potential competitor is the Defense Department's Global Information Grid Bandwidth Expansion program. As Defense begins relying on digitally transmitted Voice over Internet Protocol for phone service, the department likely will cut back its use of GSA contracts, consultant Suss says. Defense is a major customer of FTS 2001 voice services. The challenge is long term rather than immediate, Suss says, but it "will create a hole for GSA."

But the Pentagon still will rely somewhat on GSA, some government analysts say. GIG network nodes end at military locations, so Defense officials would need a mechanism to communicate with the outside world. The Defense Information Systems Agency had no comment.

Industry insiders also have wondered about the potential for duplication between Networx and another major procurement GSA is prepping, the $65 billion Alliant and Alliant SB contracts for information technology services.

In a letter to then-GSA administrator Perry in April, Rep. Tom Davis, R-Va., said he worried that the two programs would lead to confusion over where to buy IT services. Since then, GSA has delayed issuing the Alliant request for proposals in order to rethink the program. The agency also named Johnson as the executive in charge of Alliant, a step that allayed some of Davis' fears. Overlap between the two programs will inevitably exist. "The key is to manage the programs so the common elements are complementary," says Davis spokes-man Drew Crockett.

In Congress, scrutiny promises to be tight as long as Davis remains in office and chairs the House Government Reform Committee. The congressman says he will run for reelection in 2006, despite reports that he was considering returning to the private sector. Davis initially approached Networx with some skepticism, but now supports the program. Crockett says Davis "believes GSA has the capacity and capability to pull this off as long as GSA's management continues its solid focus on the tasks at hand."