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MAKING NETWORX WORK: COUNTDOWN TO THE

RFP FOR THE FEDERAL GOVERNMENT’S TELECOMMUNICATIONS PROGRAM

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

MARCH 3, 2005

Serial No. 109–5

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

GINNY BROWN-WAITE, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

MELISSA WOJCIAK, Staff Director

DAVID MARIN, Deputy Staff Director/Communications Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

(III)

C O N T E N T S

Page

Hearing held on March 3, 2005 .............................................................................. 1

Statement of:

Hogge, Jerry, senior vice president, Level 3 Communications, LLC; Robert Collet, vice president, engineering, AT&T Government Solutions;

Shelley Murphy, vice president, Federal Markets, Verizon; Jerry

Edgerton, senior vice president, government markets, MCI; Jeff Storey,

CEO, Wiltel Communications; and Anthony D’Agata, vice president

and general manager, Sprint GSD .............................................................. 68

Collet, Robert ............................................................................................. 78

D’Agata, Anthony ...................................................................................... 123

Edgerton, Jerry .......................................................................................... 96

Hogge, Jerry ............................................................................................... 68

Murphy, Shelley ........................................................................................ 86

Storey, Jeff ................................................................................................. 109

Perry, Stephen, Administrator, U.S. General Services Administration, accompanied by John Johnson, Assistant Commissioner for Service Development and Delivery, Federal Technology Service, and Barbara

Shelton, Acting Commission, Federal Technology Service; and Linda

Koontz, Director, Information Management Issues, U.S. Government

Accountability Office, accompanied by James Swedman, Senior Analyst,

U.S. Government Accountability Office ...................................................... 11

Koontz, Linda ............................................................................................ 32

Perry, Stephen ........................................................................................... 11

Scott, Donald, senior vice president, EDS, U.S. Government Solutions;

David Bittenbender, vice president, Network Services, Computer

Sciences Corp., Federal Sector; James Courter, CEO & vice president,

IDT Corp.; Michael Cook, senior vice president & general manager,

Hughes Network Systems; Diana Gowen, president, Broadwing Government Solutions, Broadwing Communications, LLC; and Greg Baroni,

president, Global Public Sector, Unisys Corp. ............................................ 139

Baroni, Greg .............................................................................................. 176

Bittenbender, David A. ............................................................................. 151

Cook, Michael L. ........................................................................................ 160

Courter, James .......................................................................................... 155

Gowen, Diana ............................................................................................ 168

Scott, Donald ............................................................................................. 139

Letters, statements, etc., submitted for the record by:

Baroni, Greg, president, Global Public Sector, Unisys Corp., prepared

statement of ................................................................................................... 179

Bittenbender, David, vice president, Network Services, Computer

Sciences Corp., Federal Sector, prepared statement of ............................. 153

Burton, Hon. Dan, a Representative in Congress from the State of Indiana, prepared statement of .......................................................................... 194

Collet, Robert, vice president, engineering, AT&T Government Solutions,

prepared statement of ................................................................................... 80

Cook, Michael, senior vice president & general manager, Hughes Network

Systems, prepared statement of .................................................................. 162

Courter, James, CEO & vice president, IDT Corp., prepared statement

of ..................................................................................................................... 157

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 202

D’Agata, Anthony, vice president and general manager, Sprint GSD, prepared statement of ........................................................................................ 125

Page

IV

Letters, statements, etc., submitted for the record by—Continued

Davis, Chairman Tom, a Representative in Congress from the State of

Virginia, prepared statement of ................................................................... 5

Edgerton, Jerry, senior vice president, government markets, MCI, prepared statement of ........................................................................................ 100

Gowen, Diana, president, Broadwing Government Solutions, Broadwing

Communications, LLC, prepared statement of ........................................... 170

Hogge, Jerry, senior vice president, Level 3 Communications, LLC, prepared statement of ........................................................................................ 72

Koontz, Linda, Director, Information Management Issues, U.S. Government Accountability Office, prepared statement of .................................... 34

Murphy, Shelley, vice president, Federal Markets, Verizon, prepared

statement of ................................................................................................... 88

Perry, Stephen, Administrator, U.S. General Services Administration,

prepared statement of ................................................................................... 14

Porter, Hon. Jon C., a Representative in Congress from the State of

Nevada, prepared statement of .................................................................... 201

Scott, Donald, senior vice president, EDS, U.S. Government Solutions,

prepared statement of ................................................................................... 142

Storey, Jeff, CEO, Wiltel Communications, prepared statement of ............. 111

(1)

MAKING NETWORX WORK: COUNTDOWN TO

THE RFP FOR THE FEDERAL GOVERNMENT’S TELECOMMUNICATIONS PROGRAM

THURSDAY, MARCH 3, 2005

HOUSE OF REPRESENTATIVES,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 10:05 a.m., in room

2154, Rayburn House Office Building, Hon. Tom Davis (chairman

of the committee) presiding.

Present: Representatives Tom Davis, Burton, Gutknecht, Cannon, Marchant, Dent, Waxman, Maloney, Cummings, Clay, Watson, Lynch and Norton.

Staff present: David Marin, deputy staff director/communications

director; Ellen Brown, legislative director and senior policy counsel;

Rob White, press secretary; Drew Crockett, deputy director of communications; Edward Kidd, professional staff member; John

Brosnan, GAO detailee; Teresa Austin, chief clerk; Sarah D’Orsie,

deputy clerk; Corinne Zaccagnini, chief information officer; Leneal

Scott, computer systems manager; Kristin Amerling, minority deputy chief counsel; Karen Lightfoot, minority communications director/senior policy advisor; Nancy Scola and Mark Stephenson, minority professional staff member; Earley Green, minority chief

clerk; Jean Gosa, minority assistant clerk; and Cecelia Morton, minority office manager.

Chairman Tom DAVIS. The committee will come to order.

Good morning, and welcome to the Government Reform Committee’s hearing and ongoing oversight of the General Services Administration’s Networx procurement, one that carries with it the potential to be both the largest telecommunications procurement ever, as

well as the one that creates the Federal Government’s first digital,

government-wide interoperable communications network.

This hearing is our third in the committee’s continuing efforts to

gather information from industry and other stakeholders to find

out whether Networx program, as it has evolved from that contained in its request for information issued last October 2003, and

the draft request for proposals issued last November will become

the government’s acquisition infrastructure for information exchange in today’s dynamic telecommunications environment.

First, I would like to briefly set out my expectations for this program and the role I envision for Congress.

Networx must be the driver that facilitates the deployment of

communications and information technologies effectively across

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government. I firmly believe that the communications infrastructure is the most critical component of the government’s Enterprise

architecture, and it is the purpose of this hearing today to hear

how Networx will fit the government’s requirement for an enterprise-wide communications environment.

Networx must be the agent to enable us to better intersect technologies with sound management practices and effective governance principles. To ensure Networx success we need to provide the

leadership and resources for those things the government should

and must do as an Enterprise, such as the building of a centrally

managed telecommunications infrastructure. Networx must be the

backbone of that infrastructure. Congress must be an engaged and

aggressive partner with the executive branch and industry in ensuring the success of this program. To ensure this success we must

think about establishing a governance structure that removes the

heavy hand of mandatory use, but puts discipline in the objective

of a centrally managed communications environment.

Now, where are we in this oversight of Networx? Since the committee’s last hearing and the release of the draft RFP, GSA has

spent months listening to industry, customer agencies and congressional and other stakeholders; as a result, the strategy has continued to evolve.

During this time my staff and I have monitored the progression

of Networx, conferring with all of the stakeholders and GSA, and

consulting with experts, including the Government Accountability

Office. The committee intends to continue to monitor Networx

closely as it progresses from a strategy to an acquisition, and on

to an operating program.

As it stands now, Networx will be a two-part program, with both

portions to be awarded concurrently. The full-service portion is

called the Universal and will provide the full range of domestic and

international network services. GSA has reduced somewhat the

much-criticized billing and other management requirements as the

strategy has progressed. The smaller, more focused service portion

is called Enterprise. It is designed to allow participation by providers who offer specialized services with less extensive geographic

coverage than required by Universal. Enterprise does, however,

mandate that its participants comply with the same billing and

management requirements as Universal.

Both Universal and Enterprise provide for multiple award contracts with relatively low minimum revenue guarantees. The current plan is for a total minimum revenue guarantee of $525 million

to be shared by all Universal awardees, and a recently increased

MRG of $50 million of all Enterprise awardees. The contracts are

to span 4 years, with three 2-year options. The planned schedule

provides final solicitation to be issued on April 1, 2005, and for

award by April 2006.

So far GSA has made substantial changes to the program as the

comment process has advanced. I am not sure, however, that the

evolution has been sufficient to ensure that Networx will become

the best choice for customer agencies as they design telecom plans

to meet their diverse management challenges.

It is not at all clear that Networx, as currently configured, particularly Enterprise, will encourage the broadest participation from

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industry, include a broad spectrum of technologies and services,

and allow for the introduction of evolving technologies. I have consistently heard from the industry that Enterprise, with its single,

rather low minimum revenue guarantee and onerous management

and billing requirements is a barrier rather than a gateway for the

nontraditional innovative segments of the market.

GSA has moved to improve Enterprise. It has increased the origi- nal, rather meager $25 million minimum revenue guarantee to be

divided among all awardees to $50 million, and it plans to provide

for flexibility within Enterprise by allowing awardees to expand the

number of optional services offered during the life of the program.

Nevertheless, these changes may not be sufficient to rescue the

program. I am not sure that merely providing what is, in effect,

Universal with more modest mandatory requirements and narrower geographic coverage will get the job done.

Some argue that Enterprise needs to be fundamentally different

from Universal to succeed. They contend that innovation is stifled

by complex management and billing requirements, by specifying requirements instead of setting forth a statement of objectives, by dividing the minimum revenue guarantee among an unknown number of participants.

Finally, while I believe that GSA should be the government’s

agent to manage the government’s communications environment,

GSA must get its house in order so that it is up to the task. Because of the revelations of contract management challenges at

GSA, particularly at the Federal Technology Service, I, along with

GSA’s top leadership, am reviewing options to resolve the agency’s

structural and management challenges. I intend to further explore

issues relating to GSA’s management structure in an upcoming

hearing on March 16.

We must be able to assure the American taxpayers that GSA will

provide the kind of leadership and management capability a program like Networx demands. We must ensure that GSA exercises

financial self-discipline. GSA must not cripple Networx with exorbitant management fees.

Once the program is ongoing, GSA must consider administrative

and overhead charges regularly, and adjust them downward as volume targets are achieved. GSA must handle the selection properly,

the transition must be as smooth as possible, and the right program performance measures must be developed and consistently

applied. I am prepared to take whatever action is needed to ensure

that GSA is up to the job.

We hope to receive enlightenment this morning on these challenges, as well as others, such as transition, access to the most current technology, and the impact on the program of the ever-converging and merging telecommunications marketplace. We will examine whether GSA has the capacity to advance from the current

planning stage to the execution of what will be a complex and challenging acquisition.

The key to success here is for GSA to take advantage of the

wealth of information that has been made available to it throughout the comment-and-discussion process and through these hearings. It is crucial for GSA to design and implement this program

properly. It is more important for GSA to do this right than it is

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to do it on schedule; timeliness is important, doing it right is imperative.

We have a solid line-up of witnesses today, experts from industry

and government. They have a range of views and a breadth of experience. I look forward to their input, and I look forward to working with the government and industry to ensure that Networx

achieves its potential.

[The prepared statement of Chairman Tom Davis follows:]

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Chairman TOM DAVIS. I now recognize the distinguished ranking

member, Mr. Waxman, for an opening statement.

Mr. WAXMAN. Thank you, Mr. Chairman.

I am pleased to join you today to assess the administration’s continuing plans on how to purchase telecommunications services for

the Federal Government when its current telecommunications contract expires. I look forward to working with you, the administration and the private sector to ensure that the Federal Government

continues to receive the best price and highest quality service telecommunications needs.

The telecommunications industry and marketplace have seen

dramatic change over the last decade. A startling array of new

services and technology has become available, everything from the

widespread use of the Internet and cell phone technology to today’s

emerging satellite security and voice-over Internet protocols.

Along with this rapid technological advance have come changes

to the industry as well from the rise of the so-called Baby Bells to

the large-scale pending mergers we read about in the newspapers.

These changes will no doubt continue and may even speed up. The

challenges of structuring an acquisition that will ensure best value

in the complex and evolving environment are immense, but I believe GSA is meeting this challenge.

The Federal Telecommunications Service at GSA that has administered the current Federal telecommunications program, FTS2001,

and its predecessor, FTS2000, were not totally without problems.

These programs have largely been a success. The Federal Government pays between 11⁄2 and 2 cents per minute for long-distance

service, well below the best commercial rate. Over its lifetime the

program has saved the American taxpayer close to $2 billion.

GSA issued a draft request for proposals last fall that outlines

an acquisition strategy for the new program. This was one step in

an ongoing process of consultation between industry, government

clients and GSA that will culminate next month with the release

of the final request for proposals.

GSA has made revisions to its acquisition strategy that take into

account many of the concerns of industry and the government

users, and points at the strategy as retaining two critical elements,

leveraging Federal buying power and encouraging continuous competition over the life of the contract.

I thank you, Mr. Chairman. I look forward to hearing from our

witnesses today.

Chairman Tom DAVIS. Thank you.

Any other opening statements?

Mrs. Maloney.

Mrs. MALONEY. First of all, I thank the chairman and ranking

member for holding this hearing.

And just very briefly, more than any other, procurement FTS

network has the potential to greatly impact the way that Federal

Government agencies conduct their missions and interact with U.S.

citizens.

Being from New York, Manhattan and Queens, I understand

firsthand the need for more vigorous continuity of operations, disaster recovery and security capabilities. As many of you know,

after September 11 the phone system failed for many days in New

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York City, and the ability to communicate with firefighters and fire

officers, many believe, could have saved their lives and more civilian lives. So this is critically important not only for the utility of

government and communications, but in this time of homeland security threats, it is absolutely vital to improve on the system.

I look forward to hearing from GSA and industry on how the procurement will ensure a network program that is responsive to

agency mission and security needs, will deliver on the promise of

better service for my constituents, and leverage the buying power

of the Federal Government.

I would add that oftentimes localities will follow the new innovations that we bring to the Federal Government; so I believe it’s

critically important to the communication systems to New York

City and other areas that may face problems.

Let me close by saying that we’ve been preparing for Networx for

several years now, and I am concerned that we are beginning to

eat into valuable transition time. I know there have been a number

of mergers, but we need to get this going. And we need to give

agencies ample time for transition if they are to effectively take advantage of all the new technologies and benefits and innovations

that may be out there to help us to better communicate.

This is an important hearing, and I thank the leadership for putting this together.

Chairman Tom DAVIS. Thank you very much.

Ms. Norton.

Ms. NORTON. I thank you, Mr. Chairman, for calling this hearing, an important hearing, as we move toward Networx. I have an

interest not only in my Federal, but also because the District of Columbia has used the system with considerable savings.

Federal Government is in the catbird seed here, and I think

that’s really the most important thing for us to remember here.

The savings to the Federal Government and to the District of Columbia as a result of how the system works and has been managed

is what I look to. It is the bottom line by which I judge the system.

At the same time, I think GSA deserves credit, given the complexity of the technology and of the industry it faces, truly mindblowing. One wonders after a while, as new opportunities to use

technology comes about, whether we really need all of this in every

agency all the time, but as it comes out, we’ve got to be prepared

to take advantage of it. This hearing will be important in assessing

whether we are able to do so efficiently, and with a cost saving that

the Federal Government is entitled to.

Thank you very much, Mr. Chairman.

Chairman Tom DAVIS. Thank you very much.

It’s the policy of the committee that all witnesses be sworn before

their testimony, and we will do that in a minute, but I want to recognize today our outstanding panel.

We first have the Honorable Stephen Perry, the Administrator of

the U.S. General Services Administration, accompanied by Mr.

John Johnson, the Assistant Commissioner for Service Development and Delivery, Federal Technology Service; and Barbara

Shelton, the Acting Commissioner of Federal Technology Service.

We also have Ms. Linda Koontz, who is the Director of Information Management Issues, U.S. Government Accountability Office;

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and Mr. James Swedman is accompanying her as the Senior Analyst, Government Accountability Office.

Now it’s our policy that all witnesses be sworn again, so would

you rise with me and raise your right hands.

[Witnesses sworn.]

Chairman Tom DAVIS. Commissioner Perry, we will start with

you, and then go to Ms. Koontz.

Thanks for being with us, Stephen, and thanks for your leadership on this.

STATEMENTS OF STEPHEN PERRY, ADMINISTRATOR, U.S.

GENERAL SERVICES ADMINISTRATION, ACCOMPANIED BY

JOHN JOHNSON, ASSISTANT COMMISSIONER FOR SERVICE

DEVELOPMENT AND DELIVERY, FEDERAL TECHNOLOGY

SERVICE, AND BARBARA SHELTON, ACTING COMMISSION,

FEDERAL TECHNOLOGY SERVICE; AND LINDA KOONTZ, DIRECTOR, INFORMATION MANAGEMENT ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE, ACCOMPANIED BY

JAMES SWEDMAN, SENIOR ANALYST, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

STATEMENT OF STEPHEN PERRY

Mr. PERRY. Thank you, Mr. Chairman, Mr. Waxman, members of

the committee. Thanks for this opportunity for GSA to present information about the acquisition of telecommunications services for

the Federal Government agencies.

GSA Acting Commissioner Barbara Shelton is here, as well as

John Johnson, who is GSA’s Assistant Commissioner for Networx

Services. And we will respond to your questions, both as they relate

to the acquisition strategy that we are developing, and as it relates

to our work to finalize the request for proposals that both the government and the industry will have to work with in order to provide the quantity and quality of telecommunications services needed by the government at the best value for taxpayers.

I have submitted a copy of my written statement for the record,

so I will be brief in my opening remarks, but I do want to take a

moment to thank you, Mr. Chairman, and members of this committee, for holding these hearings, and for your continuing recognition

that telecommunications services are indeed critical to the success

of day-to-day operations of every Federal agency. And consequently,

the telecommunications acquisition process and this Request for

Proposal must be developed and executed very well, with careful

consideration to many factors involved, with active involvement of

Federal agencies, with active involvement of industry contractors,

with the oversight of this committee, and the input of other interested stakeholders.

Additionally, GSA must continue to apply every ounce of our

market knowledge, our acquisition expertise, and our judgment to

develop an acquisition process which will yield the quality services

agencies require at best value.

Let me take a moment to mention just four of the highlights that

are in my written testimony.

First, the government has a strong track record for acquisitions

of telecommunications services, which has been established by GSA

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with direction and support from this committee, and with the collaboration of many Federal agencies and industry contractors.

While the new Networx acquisition builds on the success of its

predecessor program, FTS2001, it is by no means merely an extension of those contracts; rather, Networx is designed to provide

agencies with more than three times the service offerings that are

in FTS2001, and this includes new technology, and particularly

new technology for security.

Also, the Networx acquisition is designed to attract new entrants, to meet the revolving requirements of Federal agencies with

the solutions and emerging technologies of industry, and to move

the government’s telecommunications system to the next generation network environment.

Second, Federal agencies have worked together to define and document their key requirements and program goals that this acquisition must achieve, and these include service continuity. There is a

zero tolerance for loss of service by agencies during the transition

from FTS2001 to Networx.

Second, highly competitive prices, quality service; the contracts

will include performance measures that will be constantly monitored to make sure that we are receiving continuous quality service.

The contracts will provide for access to full-service providers, as

well as access to all alternative sources for leading-edge technology

and services. It provides for operating support and the need to improve our processes for ordering, for billing, for inventory management and for accountability. And then there are provisions for

transition support, including use of the lessons learned from the

last transition, including the need for accurate inventories of services; and then performance-based contracts with enforceable service-level agreements.

A third highlight from my written testimony is that since the request for information was issued in October 2003, industry review

and input has been obtained at conferences, hearings and other forums, and based on that industry input we have revised the original plans and improved the Networx acquisition process on several

occasions. We issued the draft RFP October 29th, and since that

date we’ve continued to solicit industry feedback, and this has resulted in substantial additional revisions and improvements.

Last, as you know, the Networx acquisition consists of two conjoined and simultaneous acquisitions. Networx Universal meets the

needs of agencies needing access to full-service providers who provide a broad range of services, including 37 mandatory services,

and a wide geographic area of coverage. Networx Enterprise, on the

other hand, meets the requirements of Federal agencies needing access to alternative sources for leading-edge services, including nine

mandatory Internet protocol and wireless-based service areas. And

this will apply in cases where a broad range of service or wide geographic coverage is not a primary requirement.

We think this two-pronged approach will, in fact, attract robust

competition from the traditional service providers, from the emergent new service providers, and from systems integrators. The competitive participation of all of these providers is critical to help the

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government move its telecommunications system to the next-generation network environment.

Mr. Chairman, members of the committee, I will conclude my remarks here so that we can discuss these and other matters, including the schedule for issuing the RFP, awarding the contracts, and

transitioning to the new Networx telecommunications system.

Chairman Tom DAVIS. Thank you very much.

[The prepared statement of Mr. Perry follows:]

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Chairman TOM DAVIS. Ms. Koontz, thanks for being with us.

STATEMENT OF LINDA KOONTZ

Ms. KOONTZ. Thank you, Mr. Chairman, and members of the

committee.

I am pleased to participate in today’s hearing on GSA’s Networx

program.

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 in technology, and potentially in the regulatory environment. In this context Networx initiative can be viewed as a significant opportunity for Federal agencies

to acquire and apply innovative telecommunications services to

support mission needs.

Since we last testified, GSA has made progress in addressing the

management challenges we identified and our recommendations.

GSA has articulated a strategy for addressing billing concerns and

plans to complete transition planning and training for agencies on

the identification of service inventories by February 2006. It has

also drafted performance measures for each of its program goals.

In the course of our work, we identify three issues that are critically important to the short-term progress of the Networx program.

If these issues not are resolved, they could affect the ultimate success of the program.

First, contract size. As you know, Mr. Chairman, vendors commenting on the draft RFP express concerns about what they perceived as the relative small size of the Enterprise minimums compared to the cost of developing proposals and fulfilling the administrative requirements of the contracts. GSA subsequently raised the

Enterprise minimums to 50 million, and is examining the administrative requirements to make sure that they are all needed.

While raising the minimum may help address industry concerns,

uncertainties remain. These include the Enterprise administrative

requirements, the number of awardees, and how business will be

allocated between Universal and Enterprise. As a result, whether

GSA’s actions today are sufficient to encourage robust competition

for the Enterprise contracts remains an open question.

Second, GSA has not yet finalized the criteria against which proposals will be evaluated and has not shared this information with

prospective offerors. GSA does plan, however, to provide this information in the final RFP.

Third, GSA has not yet determined the location-specific traffic

volumes required by agencies due to delays in developing our related system. This information may not be available until mid to late

May.

These uncertainties represent risk to potential offerors which

may inturn affect the quality of their proposals, particularly their

ability to offer the best price 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.

Given the relatively short timeframes before proposals will be

due, leadership from GSA and commitment from stakeholders will

be critical to resolving these issues and ensuring that the Networx

program realizes its potential.

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That concludes my statement. I will be happy to answer questions.

Chairman Tom DAVIS. Well, thank you very much.

[The prepared statement of Ms. Koontz follows:]

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Chairman TOM DAVIS. Anybody else want to add anything? You

have your—I think we’re ready to move with the questions.

Let me start, Commissioner Perry, with you.

In your statement you indicated that GSA anticipates two

awards on Universal and maybe five on Enterprise; is that correct?

Mr. PERRY. Yes. That is an estimate.

Chairman Tom DAVIS. It could be three; it could go back and

forth?

Mr. PERRY. Yes, it is in that range. But we believe the service

that the government would require, has required, and will continue

to require in the future could be met easily by the two.

Chairman Tom DAVIS. But it could be three, it could be four,

could be five, it could be six, correct?

Mr. PERRY. Yes.

Chairman Tom DAVIS. Those are just your estimates.

Did you derive these numbers based on your assessment of the

likely competitive market, or is this just what you would like to

see?

Mr. PERRY. No. It’s based on the government need and our sense

of the competitive marketplace.

Chairman Tom DAVIS. You indicated that GSA will raise the

minimum—the MRGs on Enterprise to $50 million for all offerors

and will guarantee $10 million to each offeror in the event there

are five Enterprise awards. What does that mean? Does that mean

that you wouldn’t go to six awards and divide it, or is that, again,

a flexible number?

Mr. PERRY. Well, the minimum guarantee amount of $50 million

would be divided equally among however many awardees there are;

so in your example of five, then it would be $10 million each. The

larger number of awardees, that minimum guarantee would decrease proportionately.

I think on the subject, if I may add——

Chairman Tom DAVIS. Sure.

Mr. PERRY. The things that competitors—and Enterprise, for example, or for that matter Universal—will look at in making their

determinations to compete first of all will be their view or their

perception of how well their product or service matches up with the

government need. That is going to be preeminent. The second thing

would be for them to take an assessment of their ability to provide

those products and services to the government in a superior package as compared to their competitors. If they assess that is the

case, then they go to the third question, which is to see that there

is an opportunity for them to have a profitable return on their investment by investing. That is the time in which the minimum revenue guarantees come into place.

Ideally their profit, their return on their investment will come

from the sale of their products and services, not from the minimum

revenue guarantees. The minimum revenue guarantees are there to

ensure that there will be robust competition. Our assessment is

that will be the case at the level that they have now established.

Chairman Tom DAVIS. Thank you.

Ms. Koontz, you have been reviewing the program for us for over

a year now. Based on that experience, how would you rate GSA’s

overall performance in developing their Networx strategy?

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Ms. KOONTZ. I think that GSA has followed a very good course

of events in developing their strategy. They spent a lot of time, I

think, with industry, they spent time with us in terms of developing a strategy. I also think that they have listened to the stakeholders as they have moved forward.

Chairman Tom DAVIS. Do you think that they have been responsive, then, to suggestions from industry and from you?

Ms. KOONTZ. I think they have been; and I think that they’re not

done yet. So I don’t know what their final proposal is going to be,

but I sense that they are attentive to what industry is telling them.

Chairman Tom DAVIS. Do you think that GSA currently has adequate resources to manage the program and the anticipated transition; and if not, what else would you think would be required?

Ms. KOONTZ. I don’t think that we’ve taken a detailed look

enough at the resources at this point for me to give you a good answer on that, Mr. Chairman.

Chairman Tom DAVIS. OK. Compared to the last transition, do

you think—is GSA better prepared for the transition to Networx?

Do you think that GSA will have the transition management plan

completed in time for the award?

Ms. KOONTZ. GSA seems to have a greater recognition this time,

given what happened last time, of what it is going to take to transition. They also have a plan this time, they have a schedule for completing it. If they adhere to what they say they’re going to do, and

if they stay on time, they should be in a much better position to

manage the next transition than the one that we saw a number of

years ago.

Chairman Tom DAVIS. Well, you noted the number of issues that

have been raised concerning the draft RFP regarding such matters

as the size of the minimum revenue guarantees, the lack of evaluation criteria, the traffic volume data. Do you think they can resolve

these matters and still issue an RFP by April 1st?

Ms. KOONTZ. Obviously not all the issues will be resolved by

April 1st because GSA has already told us that the traffic volumes

for specific locations won’t be available until mid to late May; however, it seems to us that there is probably enough information for

them to release the draft RFP on April 1st. I think they need to

remain sensitive, though, given the short time that they have for

prospective offerors to do their proposals, to perhaps looking at

having to lengthen that time if it becomes necessary.

Chairman Tom DAVIS. Do you think it would be appropriate for

GSA to issue a second draft RFP to allow comment on such matters

as the evaluation criteria?

Ms. KOONTZ. I don’t think that is necessary. I think that they

have heard the comments that they need to have at this point.

Chairman Tom DAVIS. All right. Thank you.

Mrs. Maloney.

Mrs. MALONEY. First of all, I saw in one of your letters, the letter

to the GSA and your performance accountability report, that the

contracts literally save the government money in the last term. So

I would like to understand the timeframe a little better. You’re

going to come out with the RFP on April 1st, and then how long

do the contestants have to respond to it?

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Mr. PERRY. The request for proposals would be issued on April

1st, and at that point, as has been pointed out, there would be

some information that GSA would not yet have available, and we

would make that information available in no later than the end of

May, and then the respondents would take that information and

complete that and then submit their proposals by July 5th.

Mrs. MALONEY. By July 5th.

Mr. PERRY. Yes.

Mrs. MALONEY. And then how long will the government review

these proposals and make a decision?

Mr. PERRY. My plan would be to make the review and actually

issue the awards in April 2006.

Mrs. MALONEY. In April 2006.

And I understand you are allowing for competition, new ideas,

new innovations in order to move us more into the 21st century.

And if there is a transition period, what is the length of the transition period allowed for agencies? Say Homeland Security wants to

get into a new system that is more secure, how much time would

they have to get into a system that may be more secure? And who

pays for the transition cost; does the government pay for it, or does

the contractor pay for it?

Mr. PERRY. Well, in terms of the time that would be allocated for

transition, we’re allocating 18 months.

Mrs. MALONEY. Eighteen months?

Mr. PERRY. And that would be a period of time that enables us

to complete the transition without having to extend the existing

contracts, which is our plan. As a contingency, we do have the ability to extend the existing contracts should that become necessary,

but we don’t expect that to be the case.

So the last transition that we’ve talked about took almost 3

years; it took over 21⁄2 years. We are saying this one will be done

much more quickly not only because GSA has worked with industry and with customers, agencies to develop a better transition

plan, but because agencies themselves are better prepared for the

transition. So we believe that it all can be accomplished within the

18 months that’s in this schedule as we projected it, but we have

contingencies to deal with——

Mrs. MALONEY. And who would pay for the transition?

Mr. PERRY. The cost is paid for, in effect, by the government because we have a fund that GSA accumulates as a result of the fees

that we charge to agencies for telecommunications acquisition services, and those funds would be used to pay for transition costs.

Mrs. MALONEY. Let me ask you something. You said it took 3

years for the first transition to take place, and now you’re only allowing 18 months. That’s a huge discrepancy.

Mr. PERRY. It is, it is. But the previous transition had a number

of things happening, including a major strike of a provider during

that period of time. It was not—we didn’t have the benefit of the

lessons that we’ve learned now. So by virtue of the fact that we

started probably at 2 years ago to begin preparing for this new

transition, we have worked to streamline it, make it such that it

can be done more quickly. Still 18 months is more like it.

Mrs. MALONEY. I want to say that our country has changed dramatically since the last time we reviewed these contracts, and I

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would say that the priorities have changed dramatically. I mean,

there’s more of an emphasis on security and communications during times of possibly a tragedy, and just moving into the 21st century, so I question the length of your contracts.

I’m glad that we’re coming back and looking at new technologies

and new security items in these contracts. I understand you’re proposing a 4-year base period, with 32-year options, and what is the

rationale for that particular contract length, given the speed of

change in the telecommunications industry? It’s hard to keep up

with all the mergers and what they mean and how it’s going to

change the telecommunications industry, and what you’re proposing is a potential 10-year contract. And is that wise, given the

speed with which telecommunications changes, the speed of new

startups and new ideas and new protocols, or whatever, in the industry? Do we want to tie ourselves into a 10-year contract given

the massive speed and change of this particular industry, and

given the fact that as we, as a Nation, evolve, our priorities may

change in how we want to communicate in the future, given the

world situation and security and so forth?

Mr. PERRY. Let me kind of just briefly, first on the first part of

what you were discussing, namely the transition issue and the

tradeoff that we have to make between how quickly we launch the

award, because, as you pointed out, the more that gets delayed, the

less time we have for a transition, which is the reason why we do

need to proceed.

On your second point—and I’ll ask John to followup on this a

bit—even though the contracts have a duration, there is nothing

that prevents the continuous refreshment of technology during the

course of that first 4 years and subsequently. So technology is not

frozen in place; in fact, quite the contrary, the project is designed—

or contracts are designed to allow for the continuous refreshment

of technology as these technologies emerge and mature.

Mrs. MALONEY. But what if the technology comes from a competitor company? I mean, obviously the company that gets the contract

can build on their technology. Say a new company comes out with

a new technology and patents it, you understand what I’m saying,

and we’re tied into a 10-year contract?

Mr. PERRY. Well, that would be the case. It probably wouldn’t

prevent the government from having access to that company and

that technology, provided that it wasn’t available under the

Networx contract.

John, do you want to comment on that?

Mr. JOHNSON. Let me just add to that. First of all, we’ve anticipated the types of security requirements that we believe are necessary to carry us forward into the future. Now that being said, we

can’t anticipate the future completely, so we do have a very robust

modification process to make sure that we can introduce new technologies and services over time to remain current, such as we have

with FTS2001.

With regard to the new technologies that are security technologies, for example, that could be introduced, it’s likely that because we will have a robust portfolio of service providers, those

service providers would be motivated to form teaming arrangements or other arrangements to provide the requisite services reVerDate 11-MAY-2000 10:03 May 09, 2005 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 D:\DOCS\20144.TXT HGOVREF1 PsN: HGOVREF1
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quired under the contract to meet customer demand. So I can’t

imagine that would be a large problem. If it were a large problem,

however, we would take action to correct it by perhaps considering

an additional contract for security services.

Mrs. MALONEY. My time is up.

Mr. BURTON [presiding]. The gentlelady’s time has expired.

Ms. Koontz, you indicated that the criteria was going to be ready

when?

Ms. KOONTZ. The evaluation criteria will be released with the

final RFP.

Mr. BURTON. And when will that be?

Ms. KOONTZ. April 1st.

Mr. BURTON. When will the committee get a chance to take a

look at that.

Ms. KOONTZ. I think that’s a question for GSA.

Mr. BURTON. Well, I think because of the interests of the committee, all the members, Democrat and Republican alike, we would

like to see that as quickly as possible so if there is a problem that

we visualize, we would like to respond to it.

Mr. JOHNSON. We are nearing the completion of the evaluation

criteria, and as was indicated, it would—it’s planned to go out coincident with the release of the final RFPs, but certainly it could be

available for the committee to review prior to that time.

Mr. BURTON. Yes. It would be great if we could have it a little

ahead of time; it would be, you know—the chairman, I’m sure, and

everybody on the committee would like to have that.

I understand that the telecommunications industry has expressed concern regarding the price management mechanism in the

contract. And some members of the industry feel that the mechanism, as they understand it, allows the government to reduce

prices unilaterally. Is that accurate?

Mr. PERRY. I would not characterize it that way. It’s part of the

effort that the government makes as a major purchaser, not only

in telecommunications, but in a variety of other areas, to attempt

to obtain the best pricing that a particular company offers to any

of its customers, if we’re their biggest customer. What the price

mechanism enables us to do is to compare the prices that GSA or

the government is being charged with the prices that same company is charging to its commercial customers, and in the event that

those prices to commercial customers were as much as 5 percent

below the government price, then we would expect that the government would be offered the better price. But it’s not beyond that. In

fact, that’s a concept that’s used in our multiple award schedules

and a variety of other government purchasing vehicles; the expectation is that if we are a large purchaser, as comparable to their

many large commercial buyers, then we try and negotiate that we

get a price that’s at least the same as their commercial customers.

Mr. JOHNSON. I might add, if I may, that there has been a criticism about the inclusion of the price management mechanism

based on previous history. And the fact remains that we haven’t

had to use the price management mechanism because our prices

have been very attractive. But the uncertainty of the future market

just causes us to believe that the price management mechanism for

the future is much more important because we don’t really know

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where the industry is headed, and we think that it is at least a

good tool for us to keep prices at bay and competitive.

And I might also indicate that it’s generally not our practice—

or it isn’t our practice to unilaterally adjust prices without negotiation with our service providers. We do create a dialog to make sure

that our perceptions of prices are accurate, and that the price adjustments that we would want to make are necessary to maintain

attractive pricing.

Mr. BURTON. Well, I understand that we want to get the very

best price for the taxpayer, we want to save the taxpayers money,

and we want to make sure that the service is quality, while keeping the price low; but once those contracts are negotiated, you

know, a company may have a small margin of profit regardless of

what they’re charging corporate America. And so I think it’s very

important that you don’t put some company—and I know that

hasn’t happened in the past, but don’t put some company into an

economic trick bag that might drive them out of business because

you’re arbitrarily and unilaterally lowering those prices. I mean,

the contract should be negotiated in good faith so that the companies don’t have to worry too much about that.

I understand that the draft RFP doesn’t contain a section M,

which is the customary section that spells out the evaluation criteria that will be used to choose the contract awardees. Is this accurate; and if so, why was this omitted from the RFP?

Mr. JOHNSON. The evaluation criteria, the RFP has not been released yet. We released a draft RFP that did not include the evaluation criteria. One of the reasons for that is because when we released the draft RFP, we knew that as a result of industry comment, that the RFP would change significantly, and it has. As a

matter of fact, many of the issues that we’re discussing today have

been resolved. We received roughly 2,500 comments from industry

as a result of the draft RFP, of which we’ve accepted about 40 percent in terms of changes that have been made to the RFPs.

So we knew that we would be making substantial changes, of

which we have. So the criteria that we would develop obviously

would be necessary with regard to the new or the revised RFP, so

we thought that would create a lot of confusion.

The second part is that we just have not completed the evaluation criteria to be released in time for the draft.

Mr. BURTON. Maybe we will see that in advance.

Mr. JOHNSON. Yes.

Mr. BURTON. Who is next up?

Ms. NORTON. I think I’m next, Mr. Chairman.

Mr. BURTON. Well, then, we will recognize the gentlelady from

the great city of Washington, DC.

Ms. NORTON. Mr. Perry, I have a question. I look at pages 4 and

5 of your testimony where you outline the Networx program goals,

the last of the goals is performance-based contracts. As you know,

government has been traditionally far better at awarding contracts

than in monitoring contracts; it’s very difficult to monitor contracts.

We’re dealing with a mammoth contract here. We were very concerned last session in discovering just how difficult it is and just

how easy it is for the contractor to, frankly, get away with not

meeting the expectations of the government, largely because of the

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difficulty the government has in monitoring what the contractor

does. Now, that is difficult in the ordinary ABC contract. I really

have a question about this contract, particularly in light of the

GAO report.

We saw, for example, in Iraq huge difficulties; you can see that

there would be larger difficulties there than here, but the size and

complexity here, it seems to me, are of some concern when it comes

to what the GSA says about performance measures. It says that

you have developed draft performance measures, but it goes on to

recommend—the GAO goes on to recommend that the GSA finalize

your efforts to identify—and here I’m using the GSA’s language—

identify measures to evaluate progress toward program goals and

develop strategy for using those measures for ongoing program

management.

That is a huge challenge, and I would like you to speak about

how far you are along in identifying measures to evaluate progress.

Are they written down? How are you going about doing it for a contract this large and complex?

Mr. PERRY. Yes. Thank you for that question, and I will start and

ask John to maybe fill in a bit.

You are correct that in any performance-based contract, it may

be difficult to measure. First of all, the first difficulty is to establish

what the metric should be, what are the indicators as to what are

good services being provided? We’ve worked together collaboratively with all of the other Federal agencies to understand what’s

important to them in terms of what these goals should be, and then

obviously we worked with the industry to understand their perspective on how they should be held accountable and what they

should be held accountable to achieve.

Measures are beginning to be developed. We have measures—

maybe these are sort of mundane or routine, but in the transition

period we have measures on various transition steps that have to

occur, and we would be measuring whether or not those various

steps are taking place within the time standard allowed, and have

very high expectations. In many cases the measure says that 98

percent of the modifications will be made within the standard time

allowed. And then in some measures—in my own view, the measures should say 100 percent, but a couple of them are at this point

at 98 percent. But those measures, in this case we are able to track

some of them because they are things like what is the time interval

for accomplishing this modification; and if they are not able to accomplish them in that time interval, then the record will show that

measure was not achieved, and it will have consequences.

John, you may want to add to your thought there.

Mr. JOHNSON. I appreciate the recognition of the complexity of

measuring a program of this magnitude. As Mr. Perry indicated,

some of our program measures, such as transition success or the

ability to have alternate service providers and so forth, have been

clearly stated, and the GAO testimony referred to that in terms of

our maturing the measures in terms of how we class success at

some point in time.

But also we have internal operational measures that we use to

evaluate the effectiveness of our operation in terms of monitoring

SLA compliance and other such things; in other words, making

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sure that we’re getting what we asked for and paying for what

we’ve asked for appropriately.

Ms. NORTON. Do you get feedback from the agencies that use the

service?

Mr. JOHNSON. Yes, ma’am. And we also receive feedback from

the agencies in terms of the quality of service that they receive,

and the overall operational characteristics of the program itself.

So we have these measures, and as a result of these measures,

we make adjustments to the program for continuous improvement.

But I might state that moving from the traditional contract environment to a service-level agreement environment does require a

certain amount of restructuring, if you will, of infrastructure in

terms of how you manage contracts; and we are working on that

right now in terms of our operational systems.

Ms. NORTON. This is a big challenge, and I think this is where

the—this is how the contract should ultimately be measured.

Mr. JOHNSON. Right.

Ms. NORTON. I thank you very much, Mr. Chairman.

Mr. BURTON. I thank the gentlelady.

Mr. Cannon.

Mr. CANNON. Thank you, Mr. Chairman.

Mr. Perry, as you know, agencies are not required to use

FTS2001 for their telecommunication needs, despite the fact that

GSA offers better pricing than other contract vehicles. I would put

some bites in that becoming a commodity; basic economics suggest

that we don’t want to factualize the government’s buying power if

we’re seeking the lowest possible prices.

One suggestion I heard is that the administration use a buysmart approach where agencies would be required to use Networx

unless they provided justification as to why going it alone would

provide a better value for taxpayers. What are your thoughts on

that idea?

Mr. PERRY. Well, first of all, I certainly agree that government

agencies should work together, and we should leverage the purchasing power of the government. And I also agree that in this

area the item being purchased is sufficiently similar that there

shouldn’t be wide deviations from agency to agency.

Now, as to my feeling about that, I think that we are making

really good progress in terms of getting more and more agencies to

recognize just the point that you’re making, that this is the only

appropriate and smart way to go. I think some of the reason why

we might not have achieved that to the extent that we would have

liked to up to this point, first of all it starts, I believe, with a general notion that agencies have historically had that we are independent, we operate independently, we don’t do things across agency boundaries. But that is changing; that’s changing rather dramatically partly because in an environment of constrained resources, and in an environment where agencies recognize that we

do have to collaborate in the future much more than we have in

the past, now that is changing. I think the nature of technology is

enabling that change, not only in the telecommunications arena,

but in financial management systems, in human resource management systems, in all the e-government initiatives that the administration has taken on. Agency boundaries have been crossed in order

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for agencies to collaborate and get a better deal. And so all of that

serves coming together and making this an idea whose time has arrived.

And I also would say—I’ll compliment our GSA team in not only

engaging with the industry, but engaging very much with agencies,

including some agencies that did not participate in FTS2001, to

help them be a part of crafting this Networx acquisition, and as a

result I think we’ll have much more buy-in from other agencies

than we may have had in the past.

Now, without going all the way to a mandatory requirement,

there is a very significant emphasis by OMB on agencies to, in fact,

present a justification if they plan to deviate from a governmentwide acquisition initiative, and I would expect that would be adhered to on Networx.

Mr. CANNON. So you don’t feel that you need us to create a requirement; OMB, you think, is sufficient for that purpose?

Mr. PERRY. I think it starts, again, with the agencies themselves.

I think a lot of this is agency initiation, but I think OMB is a backstop to that; and hopefully the combination of GSA, the agencies

and OMB would make our compliance happen even without congressional action.

Mr. CANNON. I’m really excited, I think, as you know, about

Internet protocol and what we can do with that to work with you

there.

What do you see happening with IP and Networx and the services being made available that way; and what do you expect happening to cost over time because of new IP services?

Mr. PERRY. I will also ask John, as the expert, to talk about that.

But the little bit I know will tell me that we are moving from a

telecommunications system where you try to get the line cost down

as low as you possibly could, and you switch services, a means of

delivering; whereas today, with IP protocols and with other packet

delivery systems, you can have a very ubiquitous telecommunications system that operates actually for, I would say, fractions of

the cost of what used to be the case. We’ve seen the costs come

down dramatically during the period of time of FTS2001, and the

expectation is that some of that will continue as new technology

comes on.

Mr. CANNON. John, as you begin to approach that question, I was

talking to a guy in the industry the other day who was very sure

that the cost would be a thirtieth, at least, and after some discussion sort of concluded that you actually end up with maybe a hundredth the cost for IP. What do you see that coming out as?

Mr. JOHNSON. With industry behind me, I’m afraid to answer

that question, but certainly I think there are many opportunities

to save on the cost per megabit, if you will, of delivery, whether it

be voice, video, data, as a result of converging our traditional applications toward an IP-based environment.

And as we all know today, for example, as was mentioned in the

chairman’s opening comments, voice, for example, is between 21⁄2

and 2 cents per minute, and as that voice migrates over to IP, it

could be that it is far less than that. I don’t know what the actual

cost per minute would be if that were the measure.

63

The idea is that by moving all of our applications to an NPLS

IP environment, it will allow us a great opportunity to save on each

service that’s migrated that path, as well as on infrastructure costs

that’s traditionally developed and maintained in terms of managing

each service separately.

So I think that there is great promise in savings for both government and industry in the cost per delivery.

Mr. PERRY. Congressman, if I may add to that question just a

second.

A lot of the emphasis that we were just talking about is as it

would relate to industry bringing forth technology at reduced cost.

Some of the opportunity for savings is also on the customer side;

that is, that as agencies are smarter in the use of this technology

and telecommunications area, the same thing will happen.

You’ve already mentioned the issue of agencies collaborating and

participating fully. That will help. But the other is that agencies

will move from handling each of their bureaus independently, going

to agencywide or enterprise-wide acquisitions for both their voice

data and video, and that will also bring savings to the government.

Mr. CANNON. And perhaps save us some travel; that would be

good.

Thank you very much. I see my time has expired, Mr. Chairman.

I yield back.

Chairman Tom DAVIS. The Chair will recognize Mr. Clay.

Mr. CLAY. Thank you very much, Mr. Chairman.

Let me hear from anyone on the panel. What are the unique benefits of a centrally managed telecommunications acquisition program that could not be obtained in other models; in other words,

is there a firm that can do it all? Could somebody attempt to answer that?

Mr. PERRY. I’ll start with that. But the way we would interpret

the phrase ‘‘centrally managed telecommunications system’’ is centrally within the government; that is, that as opposed to each of

the agencies independently acquiring their own telecommunications

system and operating it and maintaining it separately, we are following a model, and have for some time, that tries to centralize

that, at least to the extent that GSA and a collaboration of the

agencies form this centralized operation. It’s not that one company

would be asked to do it, but that the government would act in unison in acquiring its telecommunications services.

Mr. CLAY. And you think that is more efficient?

Mr. PERRY. Yes, I certainly do. I think that’s a model that has

been successful in a variety of organizations that are complex and

far flung; that if you have a particular activity that’s occurring in

20 or 30 places, if you can consolidate that expertise and at the

same time continue to be sensitive to the needs of those 20 or 30

end locations, if you can do both sides of that equation, then, yes,

it can be very effective. If you centralize and lose sight of the needs

of those independent units, then you have a big problem; but if you

do both, you can.

Mr. CLAY. I see. Thank you.

Can anyone give us your best estimate of the number of companies that will be able to compete for Networx? Does anyone want

to take a stab at it?

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Mr. JOHNSON. I am fairly confident that there are a large number of companies that can compete for Networx. I would have to answer that question by the responses that we received to the draft

RFP, which we received responses from 40 companies with regard

to their interest and making comments. So I would say that there

is the potential for very robust competition.

Mr. CLAY. Can you name several of them today and then just

give me the names, which ones are they? I mean, which ones just

pop up in your head?

Mr. JOHNSON. I could name many of them. They range from

large carriers to systems integrators, as well as some of the traditional smaller carriers; but it’s across the board, quite frankly, in

terms of who those companies are and who responded.

Mr. CLAY. You don’t want to say specific names? That’s fine.

Mr. JOHNSON. I’d prefer not to.

Mr. CLAY. Let me say that GSA has indicated that relatively

small minimum revenue guarantees will be provided to winning

contractors, $525 million for Universal and $50 million for Enterprise. These MRGs will be split equally among all awardees. Would

you please explain the rationale for these decisions on minimum

revenue guarantees to the committee?

Mr. PERRY. Yes, if I may, Congressman, I will try to put it in

context. What we are trying to achieve in this is robust competition, and to make it attractive to not only the traditional carriers

who have provided telecommunications services to the Government,

but also to the emerging companies that may have leading-edge

technology to participate in this arena.

And to my mind, there are two or three things that a company

would think about before they would decide to participate in this

competition. One is that they would see a match between the Government’s needs and requirements and their own products and

services. And as John says, there are at least 40 companies who

potentially see a match there.

A second issue they would look at before they get to MRGs would

be whether or not they would be, in their judgment, able to compete in offering a value proposition to the government that would

be superior to that of some of their competitors. If they get past

that hurdle, then they would say, is there a way in which I can

do this and do it profitably and derive a return on my investment.

That is where the MRG may come in. And I think they would want

their profit on their investment to be derived from the sale of their

products and services, not necessarily from a guaranteed minimum

revenue amount.

However, we believe that the minimum revenue guarantee needed to be added in order to sweeten the whole proposal, if you will,

so that some companies who have a high hurdle in terms of the

cost of putting together a bid proposal, and there is—and they

would confront a great deal of uncertainty as to whether or not

they would be able to generate enough revenue to make this all

worthwhile, the minimum revenue guarantee is intended to bring

those people into the competition.

We think having established that the way we did is reasonable.

We took the projected total revenue and then we divided that, 95

percent to the Universal group and initially 5 percent to the EnterVerDate 11-MAY-2000 10:03 May 09, 2005 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 D:\DOCS\20144.TXT HGOVREF1 PsN: HGOVREF1
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prise group, and subsequently increased the Enterprise group to

$50 million. But hopefully in that context one would say, OK, if all

of those other things are in place, if companies believe they can

compete, they have a product, they have a value proposition, and

there is some assurance that they will be—have at least some

amount of minimum revenue, we believe that will generate the robust competition that we need.

Mr. CLAY. OK. I thank the panel for their response.

Thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you very much.

Mr. Marchant, any questions?

Mr. MARCHANT. No.

Chairman TOM DAVIS. Mr. Lynch, any questions?

Mr. LYNCH. Thank you, Mr. Chairman.

The ability of customers to utilize new technologies and to have

that flexibility in cost-saving technology as well depends, I think,

in part on the ease of transition to actually adopt some of those

technologies and, if necessary, to change carriers.

The last time that we were here on this matter, I know Ms.

Koontz had identified some transition challenges that we still—at

that point I believe your statement was that GSA had not developed procedures or a time line or contractor support to allow people

to actually transition to the advantage of the customer and use

some of these new technologies and change carriers.

I am wondering, have we made any progress on that? And do we

see any other obstacles that need to be addressed with respect to

that transition occurring?

Ms. KOONTZ. Since we we last testified on this subject, I think

GSA has made some progress; first, in mapping a schedule out and

mapping a strategy for preparing for the transition. I also think

that one of the things that was a very fundamental problem in the

prior transition was the lack of service inventories or adequate

service inventories so that agencies had identified exactly what

services needed to be transitioned to the new carriers.

I think GSA, based on the experience that they had last time,

have a recognition that this is important. They spent a lot more

time in developing service inventories, and again they have a strategy and a deadline for getting those completed in time for the transition.

Mr. LYNCH. OK. Just going back just to the lessons learned from

previous transition efforts, what have we learned? What were the

major obstacles or major challenges in transition before, and how

have we overcome these obstacles going forward?

Ms. KOONTZ. Again, I thought one of the issues was the lack of

adequate inventories, but I can—do you have anything to add

about the challenges?

Mr. SWEDMAN. There are a few more. A lot of it has to deal with

the agencies, just recognizing the scope of the challenge, recognizing that it is hard. And there has been a lot of talk within the

Interagency Management Council. GSA has been putting in some

contractor support to help them with their portion of the transition

management. There are a few things, and GSA is working on a

plan on that. They expect that to be finished by February 2006,

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which would put it in place a few months before the transition has

to actually begin.

Mr. LYNCH. OK. Thank you.

Thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you.

Mr. Burton.

Mr. BURTON. Mr. Chairman, thank you.

I just have one quick question. You said in these contracts you

were putting in minimum revenue projections to help entice bidders to bid; is that correct?

Mr. PERRY. That is correct.

Mr. BURTON. Now, can the government reduce that minimum

revenue projection unilaterally?

Mr. PERRY. No.

Mr. BURTON. They cannot? That is a floor?

Mr. PERRY. It would be in the proposal, the document. Whatever

we determine it to be, once that is final, then we would not change

it.

Mr. BURTON. OK. Thank you very much.

Chairman TOM DAVIS. Let me just followup on that. If you intend

to keep the minimum revenue guarantees pretty much where they

are, and to maintain substantially the same level of management

and operations requirements, is it realistic to expect to obtain robust competition, particularly in the Enterprise, from a market

that almost universally maintains that the expense of competing is

prohibitive?

Mr. PERRY. Thank you very much for that question. The first

point is that some of the continued changes that we are making in

the area of management and operation requirements are not even

yet known to the industry, because we haven’t had an opportunity

to communicate that to them. In other words, we are continuing to

look at the objections that they have raised in these areas, and we

are continuing to bring that number down so that we have fewer

and fewer government-specific requirements in that area.

My hope is that when they see the changes that we have made

or the changes that we will continue to make that will make this

less onerous, and at the same time meet the needs of the Government, that they will find that we have met or certainly moved a

great distance toward meeting their expectation in that area.

I think that is going to be good news. That obviously then takes

some of the pressure off of the minimum revenue guarantees, because if we take some of the onerous things that are driving up

their costs, then that should help. So I would hope, while we would

look at all aspects, everything is still on the table, we would look

at all of those things, I would hope that they are going to see a

much better balance than was in the RFP that they have in front

of them now.

Chairman TOM DAVIS. Also, just one other issue, it is a concern

to me the fees that GSA charges its customer agencies. Do you

have any plans to review the process GSA uses to calculate the

management fees charged to the agencies under Networx?

Mr. PERRY. Yes. We do review them annually now, but the review that we have in the future, I think, will be much more substantial, because certainly, as you know, Mr. Chairman, we are

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doing some things—first of all, let me back up and say that the

fees that we charge are intended to cover our out-of-pocket or our

total expense of providing acquisition services, nothing more than

that. In fact, we have no incentive to charge anything greater than

that. It is not the way we operate. It should be a break-even operation.

We are doing things that we believe will help to continuously improve the efficiency of our agency, which would help continuously

reduce our own costs, which will have some impact on the fee. In

fact, in the schedules area, over the last couple of years we have

reduced those fees already once, and we will reduce them again in

2006.

The review that will happen as a result of the efficiency changes

that we make in GSA as a whole will also be reflected in the next

time that we take a look at what that charge should be. We expect

it will continue to be contained.

Chairman TOM DAVIS. OK. Also knowing that there is a tendency

in agencies to avoid transition difficulties by just keeping their incumbent vendors, how do you feel about the Enterprise acquisition

being successful, and why are the mandatory Enterprise services

also mandatory on Universal? Does that reduce the chance that the

agencies would use the Enterprise? That is my concern.

Mr. JOHNSON. The services on both contracts are very similar, as

you indicate, but the mandatory offering on—or the services on Enterprise, in terms of how—the number of them that are mandatory

are fewer than in Universal. The reason for that was that we wanted to open up competition and give some of those service providers

that do not have the full breadth and scope of ability to meet our

broad demands the ability to enter the marketplace.

It is hopeful, however, that based on the services that we have

cited as mandatory, the advance technology such as IT and wireless services, VPN-type services and what have you, that the agencies will be motivated to move toward that technology to improve

their infrastructures and their operations.

So I think that it allows industry, one, to enter with relative ease

as compared to Universal, and also it hopefully will motivate agencies to look seriously at the Enterprise providers because of the

emerging technologies that they offer.

Mr. PERRY. Let me just add to that. If you look at it from the

point of view of—let’s say of a potential Enterprise contractor, if

the only thing we had available was Universal, with 37 mandatory

requirements, there would be some companies who would have a

particular sweet spot among those 37, but they wouldn’t be able to

take on all of them.

So we go to Enterprise and say, OK, you don’t have to take on

all 37; you only have to take on 9. Now, yes, they are nine that

are also on the Universal, but from the Enterprise contractor that

gives them the opportunity of saying, OK, well, I do not have to

worry about those other 26 and/or 28, and I don’t have to worry

about wide geographic application, I can bid in my sweet spot area.

Chairman TOM DAVIS. Who knows where technology will be 4 or

5 years down the road? The real question is that the more vendors

you have, the more opportunity you are going to have to take care

of that down the road.

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So those are, I think, all of the questions that I have for this

panel. Anyone else want to ask a question? If not, I will dismiss

this panel. I appreciate very much your continuing to work with us.

I know you are going to be listening to all of the testimony today

so that we can factor that into the final RFP.

Linda, thanks for being with us. We appreciate all of the work

that you’re doing. And, Mr. Swedman, thank you.

We will take a 2-minute break and get our next panel up.

[Recess.]

Chairman TOM DAVIS. We are ready to move to our second panel.

We have Mr. Jerry Hogge, senior vice president, Level 3 Communications; Mr. Robert Collet, who is the vice president of AT&T;

Ms. Shelley Murphy, vice president, Federal Markets, Verizon; Mr.

Jerry Edgerton, senior vice president, Government Markets, MCI;

Mr. Jeff Storey of WilTel Communications; and Mr. Anthony

D’Agata, who is the vice president and the general manager from

Sprint.

It is our policy that we swear everyone in.

[Witnesses sworn.]

Chairman TOM DAVIS. Thank you very much.

Your entire statement is in the record. Not only do we read it,

but we are making sure that GSA reads it as we go through this.

If you could try to hold it to 5 minutes, we can try to move through

this quickly and then get into questions.

Jerry, we will start with you, and we will move straight on down

the line. We appreciate your patience in being with us today.

STATEMENTS OF JERRY HOGGE, SENIOR VICE PRESIDENT,

LEVEL 3 COMMUNICATIONS, LLC; ROBERT COLLET, VICE

PRESIDENT, ENGINEERING, AT&T GOVERNMENT SOLUTIONS; SHELLEY MURPHY, VICE PRESIDENT, FEDERAL MARKETS, VERIZON; JERRY EDGERTON, SENIOR VICE PRESIDENT, GOVERNMENT MARKETS, MCI; JEFF STOREY, CEO,

WILTEL COMMUNICATIONS; AND ANTHONY D’AGATA, VICE

PRESIDENT AND GENERAL MANAGER, SPRINT GSD

STATEMENT OF JERRY HOGGE

Mr. HOGGE. Thank you. Good morning, Chairman Davis and

members of the committee, and thank you for inviting me here

today to speak about the Networx program. My name is Jerry

Hogge, and I am senior vice president and general manager of

Level 3 Communications, Government Markets.

In prior testimony, Level 3 praised the GSA for revising its

Networx strategy for incorporating the best elements of past programs’ successes while building in flexibility and choice for the future. We believe that GSA has taken positive steps in many areas

of this procurement, and that Networx, through the competitive

benefits of both Universal and Enterprise, holds great promise for

realizing the Government’s stated goals of encouraging competition,

creating new sources of supply, and achieving the best value for the

taxpayer’s dollar.

In its current form, however, the draft RFP requires two fundamental revisions. First, the minimum revenue guarantee for EnVerDate 11-MAY-2000 10:03 May 09, 2005 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 D:\DOCS\20144.TXT HGOVREF1 PsN: HGOVREF1
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terprise awardees should be increased to ensure vigorous and

broad-based participation by existing and new entrants.

Second, the final RFP should clearly describe the mechanism

that will be used to ensure full and fair competition between and

among Enterprise and Universal contract awardees, especially the

fair opportunity process that will be used to transition from

FTS2001 to Networx.

In our judgment, unless those issues are properly resolved,

Networx is not likely to achieve the best value for the Federal Government, and is not likely to attract aggressive competition from

new bidders.

In order for Networx to achieve its stated goals, they must be

structured to encourage competitive bids from a wide range of potential bidders. Incumbent and nonincumbent bidders are most

likely to compete vigorously for a Networx contract if an award carries with it a reasonable expectation of business commensurate

with the market opportunity and appropriate to the unique costs

and investments associated with complying with the contract requirements.

Based on our understanding of the draft RFP, Networx will require bidders to make a substantial amount of program-specific investment, as well as incur sufficient upfront bid and proposal costs.

As such, Networx will attract bidders, particularly new entrants,

only if success in receiving a contract award carries with it a corresponding assurance of business through the contract.

The threshold measure of this business expectation is the contract’s minimum revenue guarantee. Accordingly, Level 3 recommends a minimum revenue guarantee of at least $25 million for

each Enterprise award, to be satisfied over the base contract period. An MRG of this size is appropriate to the size of the market

for Enterprise services, does not present undue budgetary risk to

the government, and is necessary given the unique investments

and costs required.

Even more important than the government’s minimum expression of business commitment is the successful bidder’s expectation

to be given a fair opportunity to compete and win business

throughout the life of the program. GSA’s acquisition strategy acknowledges this important aspect to the program in the deliberate

and substantial overlap that has been created between the Universal and Enterprise RFPs.

Level 3 fully supports this concept, but believes that the expected

competitive benefits of the program will be realized only if Universal and Enterprise are formally linked. The need for a formal direct

linkage is essential, particularly for purposes of transition-related

fair opportunity bidding. Agency decisions made during the

FTS2001-to-Networx transition period will significantly impact the

ultimate value of each Networx contract.

In our judgment, a direct linkage can be achieved either by reforming the procurement at the outset, by designing a single contract vehicle with multiple vendor categories, or by keeping the

separate contracts for Universal and Enterprise, but linking the

two sets of contracts through a cross-over approach similar to that

used to connect the FTS2001 and MAA contracts. As we noted in

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our formal comments on the draft RFP, ample precedent exists for

both approaches.

Finally, the RFP must define a clear process for ensuring that

the competition among and between Universal and Enterprise contracts is robust and fair. The fair opportunity process should not

only set forth clear guidelines to require agencies to solicit fair opportunity proposals from all Universal and Enterprise winners capable of meeting the stated requirements, but it should also set

forth objective guidelines for how bids will be evaluated and how

the results will be tracked and communicated. Such a process will

allow both Universal and Enterprise winners to compete on a level

playing field for agency business post award. An equitable approach would make it unnecessary, indeed would not permit a single company to receive prime contract awards for both Universal

and Enterprise.

Properly resolving these key issues, as well as the many detailed

issues raised by the comments GSA received in response to its

draft RFP, is at the heart of the Networx program’s future success.

We are less than a month away from the schedule release of the

final RFP, and the two fundamental elements I described remain

either partially or wholly unresolved. Other essential information,

such as the evaluation criteria, the instructions for proposal preparation, a detailed site inventory, and GSA’s response to over 2,500

detailed comments, has not been released.

As a prospective nonincumbent bidder, it is certainly our preference for this procurement to move forward without delay. However, given the profound nature of the issues I have discussed, I believe it is even more important to take reasonable time for these

issues to be properly resolved before a final RFP is issued. The

strategic importance of the Networx program in terms of its estimated $10 billion value, its broad-based agency use, and 10-year

duration require elevating substance over strict adherence to a predetermined time line. Accordingly, I recommend that GSA clarify

its final position on these issues in the form of a second draft RFP.

Doing so will minimize the number and complexity of amendments

that would otherwise be required, and ensure that all potential bidders are presented with a comprehensive and clear statement of

GSA’s requirements.

In summary, GSA has listened to industry, to the Federal agencies, and has made many improvements to the initial procurement

strategy. However, a few strategic issues remain to be resolved.

Left unchanged, these issues are likely to significantly limit the

success of Networx, particularly Networx Enterprise, and potentially deter both existing and new bidders from pursuing these contracts.

Level 3 is hopeful that the leadership of GSA and this committee

will recognize the importance of these issues, and that they will be

favorably resolved before Networx moves forward. Level 3 looks forward to continuing to work with GSA and Chairman Davis and the

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Government Reform Committee to ensure that Networx is a success.

Thank you, Chairman Davis and the committee, for your time

and consideration, and I am happy to answer any questions.

Chairman TOM DAVIS. Thank you very much.

[The prepared statement of Mr. Hogge follows:]

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Chairman TOM DAVIS. Mr. Collet, thank you for being with us.

STATEMENT OF ROBERT COLLET

Mr. COLLET. Well, good morning, Mr. Chairman and members of

the Committee on Government Reform. My name is Bob Collet, and

I am leading AT&T’s FTS Networx proposal team. AT&T has been

asked by the committee to provide our views on the Networx procurement.

The strategy and vision contained in the draft RFP are consistent with our view of both the government’s needs and the industry’s evolution. The message I am here to deliver is that GSA got

it right, and it is time to move forward with the procurement; let’s

not delay.

Today I want to highlight three reasons why the acquisition

strategy is the right one. First, it increases competition. Second, it

brings to the Federal agencies new and much-needed capabilities.

And, third, it is the right procurement for the times. Let me briefly

address each of these points.

First, the procurement’s three-part structure, Universal, Enterprise and schedules, maximizes competition and choice for the Federal customers, assuring the Federal Government the opportunity

to leverage the combined buying power of the agencies.

We believe the number of Universal offerors will be greater than

experienced in FTS2001. By cultivating cross-over contractors, GSA

has expanded the pool of viable Universal competitors; consequently the Government can expect vigorous competition for Universal awards.

GSA and the Interagency Management Council’s Networx acquisition strategy further maximizes competition by means of the procurement’s Enterprise component. Enterprise opens up a whole

new set of opportunities for competition by giving companies without geographical service scope a way to meet evolving government

needs and enhance competition. In addition, we expect spirited

competition from system integrators because of declining costs in

telecommunications and information technology that have reduced

the barriers to Enterprise market entry.

Finally, for those providers that cannot be responsive to Enterprise requirements, GSA’s intent to establish a telecommunications

multiple awards schedule results in yet another contract vehicle to

enable agencies to obtain telecommunications services. Therefore,

with the Universal, Enterprise and schedule vehicles, Federal

agencies will have a wide variety of acquisition options.

The second reason that the procurement is ready is that it brings

significant new capabilities to the agencies. These agencies’ capabilities include enhanced security solutions, technologies to meet

agency needs, and to advance information-sharing among the agencies. These enhancements will enable mission performance gains to

ensure that agencies have the security and survivability tools they

need to guard against cyberattacks and to facilitate continuity of

government during emergencies.

The third reason is that the procurement is right for the times

because it anticipates and accommodates industry evolution. Since

the inception of the Networx strategy several years ago, GSA and

the agencies anticipated that industry structure could and indeed

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would change and evolve. The multivehicle, multiple award structure of Networx reflects this thinking and positions Federal agencies to reap the benefits of industry consolidation and rationalization.

So while GSA and the Interagency Management Council should

be commended for developing a responsive and forward-looking acquisition strategy, we do recommend a few adjustments in the procurement. We believe, however, that these adjustments can be

made without delaying the release of the RFP. These suggested adjustments are detailed in my written testimony.

Notwithstanding these modest suggestions, we believe the procurement is on target and ready to be released. GSA should move

forward now to issue the RFP. A delay would result in loss of cost

savings likely to flow from competition of Networx awards. In fact,

the delay would necessitate an extension of the incumbent contracts, and recent experiences indicate that incumbents will seek

major, major price increases as the agencies will have no practical

alternatives.

The benefits of the procurement are clear: improved agency access to integrated security solutions, improved mission performance, improved e-gov capabilities and efficiencies, and improved

cost savings. For all of these reasons the procurement is sound.

In addition to the benefits the government will reap by moving

forward in an expeditious manner, I want to underscore the investment that we have made to prepare for this procurement. Industry

has invested significant financial resources in human capital to get

to this point, and we continue to make these investments in anticipation of the April RFP release. Simply put, the acquisition strategy is sound, and GSA and industry are well prepared to get on

with the competition.

So, thank you, Mr. Chairman, for the opportunity to participate

in today’s hearing. I welcome any questions that you or other members of the committee may have.

Chairman TOM DAVIS. Thank you.

[The prepared statement of Mr. Collet follows:]

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Chairman TOM DAVIS. Ms. Murphy, thanks for being with us.

STATEMENT OF SHELLEY MURPHY

Ms. MURPHY. Mr. Chairman and members of the committee, my

name is Shelley Murphy, and I the president of Verizon Federal

Markets. Verizon continues to be pleased with the open communication by Congress and the GSA during the Networx procurement process.

Although we appreciate that the GSA has listened to the concerns expressed by industry, the draft RFP show that issues still

remain. A major concern is the tens of millions of dollars that each

awardee will have to spend on billing and back-office systems.

Verizon’s position is that to maximize competition and reduce

prices, the GSA must either bring those requirements into line

with industry practices or go forward with a separate procurement

for a GSA-provided billing system.

The issue surrounding the requirements for back-office systems

are especially concerning from a wireless perspective. The GSA is

on record stating that the Universal and Enterprise programs are

designed to provide multiple options for both technologies and vendors to the government. Based on the draft RFPs, the procurement’s current structure does not serve the stated GSA purpose.

By GSA’s design, more companies can bid on the Enterprise RFP

than on the Universal RFP, but because of this design, the major

mission-critical networks will most likely be competed for under

the Universal contract. Once an agency decides to use the Universal contract, vendors holding only the Enterprise contract are precluded from bidding on those agency’s requirements, even if the

Enterprise vendors can meet those requirements. With no direct

way to compete for Universal business, the Enterprise contract

does not provide the government with sufficient options and makes

the contract less attractive to potential bidders.

This issue could be corrected by allowing direct competition by

Universal and Enterprise awardees for an agency’s requirements,

or by the ability to graduate from the Enterprise to the Universal

contract. Enterprise awardees would have an incentive to expand

their services to match those of the Universal contract offerings.

Either approach would benefit the government by providing a large

expanding pool of companies that could compete for Universal business over the term of the Networx contracts. These approaches are

similar to the current successful GSA practice under FTS2001.

The current structure of the draft RFPs requires vendors to bid

to a predefined set of feature service level agreements and prices.

This commoditizing of services will result in fewer options for the

agencies and potentially increased prices. As a result, agencies may

decide not to use Networx and instead issue their own separate

procurements.

With more commercial-like offerings, agency choices will increase, and prices will remain low. Individual agencies can then determine which combination of features, service level agreements

and prices meets their individual requirements, thereby providing

more flexibility and lower costs using the Networx contracts.

Another issue that may limit competition and increase cost to the

government is that the mandatory performance requirements of the

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Networx draft RFPs are generally more restrictive than in the commercial marketplace. These restrictive requirements are pervasive

through the draft RFPs, especially in the required standards, the

service level agreements, and the pricing format. The structure of

the Networx draft RFP is directly opposite the Federal Government’s goals of reducing expense and gaining flexibility by adhering to commercial practices.

Emerging services create an additional issue when the GSA tries

to predefine combinations of features and service level agreements

and then requires 10-year pricing. Features for these emerging

services are still evolving, and, more importantly, the pricing structures are not fully developed. Verizon is concerned that the GSA

may move the procurement forward too quickly in order to meet an

artificial deadline.

Approximately 2,500 comments were submitted by the industry

on the draft RFPs. Due to the importance of Networx over the next

decade, after incorporating any changes, the GSA should issue another set of draft RFPs. This will help ensure that the GSA sets

forth an RFP which will maximize competition and minimize cost

of service to the government.

To summarize Verizon’s main points, in order to get sufficient

competition and reduce expenses that would be passed on to the

government, the billing and operating system requirements should

either mirror industry practices, or the billing system should be

made separately by GSA.

To maintain competition and flexibility for the largest systems,

Verizon believes that the relationship between the Universal and

Enterprise contract should be tighter with a way for Enterprise

awardees to either directly compete with or graduate to the Universal program.

Letting the commercial marketplace establish feature and service

level agreement requirements at market-driven prices will provide

the government with significantly more price-competitive options.

Such an approach will also encourage agencies to maximize the use

of the Networx contracts rather than establish their own procurement vehicles.

And, finally, the GSA needs to issue another set of draft RFPs.

This will result in clearer, higher-quality final RFPs, and will expedite the overall procurement process.

I thank the committee for the opportunity to discuss the Networx

procurement and would be pleased to answer any questions.

Chairman TOM DAVIS. Thank you very much.

[The prepared statement of Ms. Murphy follows:]

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Chairman TOM DAVIS. Jerry, welcome back.

STATEMENT OF JERRY EDGERTON

Mr. EDGERTON. Thank you, Mr. Chairman.

Mr. Chairman and members of the committee, good morning. My

name is Jerry Edgerton, and I am the senior vice president of

MCI’s Government Markets Division. Thank you for the opportunity to provide you MCI’s perspective on Networx.

MCI applauds the committee for its continuing leadership in

overseeing this important Federal program. In the 6 months since

I last testified before this committee on this matter, MCI has continued to aggressively prepare for the Networx procurement. For

example, we have analyzed the draft RFP and submitted detailed

comments and suggestions for improvement to the GSA.

We have assembled a top-flight Networx team so that we can

expertly provide all of the 53 products and services desired by

agencies by partnering with highly regarded small and large businesses, emphasizing the use of minority businesses, and we have

invested in developing the complex service order billing and operating systems that are required under this procurement.

MCI strongly believes that the Networx structure being proposed

by GSA will continue to provide the competitive environment, flexibility, innovation, technology refreshment and, more importantly,

value that the agencies need to perform their mission-critical operations.

MCI is currently one of the largest telecommunications providers

to the U.S. Government, both as an FTC vendor and as a provider

of numerous other Federal contracts. MCI supports more than 75

Federal agencies and has designed and implemented some of the

most complex government networks in the world.

Our guiding principle is to make sure that Government users get

the full benefits of competition on which MCI thrives: world-class

service, quality, the best available technology, and innovative problem-solving all at a competitive price. And MCI has delivered, providing quality innovation and over $1 billion of savings over the life

of the FTS2001 contract.

MCI has thoroughly evaluated the Networx draft RFP. The

Networx strategy demonstrates a careful, detailed examination of

the comments and issues that have been raised by interested parties in order to minimize cost, maximum efficiency and technological advancement. Because it properly focuses on the needs and

expectations of the agency customers, we encourage GSA to maintain the base structure of the Networx strategy, specifically compete two separate network contracts, Universal and Enterprise; demand continuity of services on the Universal contract; streamline

the requirements for the management and operations support requirements; and mandate a fixed set of service capabilities for both

Universal and Enterprise contracts.

There are three major areas of unresolved issues that can adversely impact the effectiveness and the viability of the Networx

program, and the ability of government to attain the best possible

prices. GSA has not clearly set forth the number of awardees either

under the Universal or the Enterprise procurements. GSA has not

offered many details on the proposal to add telecommunications

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services to the Federal supply program. And GSA must resolve the

lack of clarity on how agencies will use the two contracts if the contracts provide duplicative services.

On these outstanding issues, we make the following recommendations. GSA should set clear limits on the number of

Networx contracts awarded. Networks like FTS2001 can provide

agency users with the lowest possible prices by aggregating the

massive volumes of service demand for much of the Federal Government onto a single contract vehicle.

GSA should maximize competition by encouraging as many bids

as possible from potential service providers. At the same time, GSA

must limit the number of awardees in order to make each contract

award financially viable for the successful contractor. Unless they

are meaningful limits, the industry will not be able to give GSA its

best prices. In order to lock in rock-bottom prices for the contract’s

10-year term, providers must be confident in their ability to win a

certain level of revenue. The greater the number of awardees, the

less each business will be able to capture, and the more the government purchasing power is diluted.

While MCI supports the GSA decision to award large minimum

revenue guarantees, the absence of high guarantees necessitates a

limited number of awardees in order to assure that each awardee

has a significant portion of traffic.

GSA must strike a balance between giving agencies as wide a

choice of providers and coaxing the lowest possible prices from industry and set a meaningful limit on the number of awards.

GSA should also place limits on the number and types of services

that will be included in the Federal Supply Schedule. GSA has discussed a major change in policy by including telecommunications

services on the multiple award program. MCI supports the inclusion of commoditylike services on the FSS, but it is important that

clear limits be placed on the numbers and types of services that are

included in the FSS.

For example, simple inbound 800 toll-free services have become

well established as commodities and could be included in the FSS.

However, more complex, enhanced services like those using intelligent routing should not be treated as a commodity. Instead they

should be placed into the Networx umbrella to ensure service quality, enable comparisons among vendors, and allow GSA oversight

of vendor performance.

Furthermore, in the absence of clear, precise definitions, the FSS

program will create uncertainty for Networx bidders by creating an

unpredictable and uncontrollable back-door path for entry into the

Federal telecommunications space. Again, in order to make the

business case of the lowest possible prices, bidders must have a

level of certainty as to the number and types of services, and thereby the potential revenue under the contract.

GSA should also ensure that agencies can obtain services from

Networx awardees. The current Federal Acquisition Regulations

prohibit an agency from using two different contract vehicles to

procure the same services. Under the program currently outlined

by GSA, an agency will have to select between the Universal and

Enterprise contracts during the fair consideration portion of the

procurement process. This will effectively prevent the awardees of

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the nonselected contract from competing for that agency’s business,

thereby reducing the competitive options for the agencies. GSA

should ensure that an agency has the ability to obtain services

from all of the Universal and Enterprise networks.

Some of you have expressed concerns that Networx does not encourage the creative integration of complex services into an Enterprise solution. I believe this is inaccurate and contrary to practice

of the government agency. Agencies are now using FTS2001 to procure and implement telecommunications solutions that integrate a

full range of services, capabilities and performance measures. For

example, the Department of Justice, with the assistance of GSA,

used the FTS2001 contract to compete, award and begin the implementation of the JutNet Program, a complex network design requiring a full range of traditional integrator services and capabilities.

MCI has used FTS2001 to deliver a series of integrated solutions

for the Department of Interior that include a new private IP Wide

Area Network, a dedicated Network and Security Operations Center, and 20 security engineering and program management employees.

Networx, with its greatly expanded number of potential services

will allow agencies and providers to meet any need for integrated

and complex solutions.

Although this issue is somewhat beyond the scope of the hearing,

I would be remiss if I did not address the industry consolidation

issue and its effect on Networx and the Federal Government. As

you know, 2 weeks ago Verizon and MCI announced an agreement

to merge, which followed similar announcements by Sprint and

Nextel and SBC and AT&T. And Qwest has resubmitted a competing offer for MCI.

The Networx procurement is presently structured to take full advantage of the competitive forces that exist in the marketplace

today, and that will exist in the marketplace following the contract

award. MCI plans to build on the Networx procurement and will

do so as a completely independent entity.

MCI has teamed with Bell companies on other procurements,

and any teaming arrangement on the Networx procurement will be

at an arm’s-length transaction. In fact, the timing of the MCIVerizon merger and perhaps other mergers as well as relate to the

Networx procurement is such that the contracts for the Networx

procurement are likely to be awarded long before these transactions are consummated. Accordingly, GSA need not delay the

procurement process as a result of the recent merger announcements.

Networx is structured in a manner that accommodates and takes

full advantage of the changes in technology in the marketplace.

Like FTS2001, it is designed to be a dynamic program that allows

for the inclusion of new offerings as well as new offerors. Government customers will see the benefits of future advancements, both

anticipated and unanticipated.

Furthermore, consolidation—

Chairman TOM DAVIS. Jerry, can you sum this up? You are 4

minutes over.

Mr. EDGERTON. OK.

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In conclusion, I wanted to show the committee that MCI is fully

committed to participating in the Networx program. MCI has maintained steadfast communications with our government customers,

and we have delivered superior network performance and customer

service and will continue to do so.

I will be glad to answer any questions.

[The prepared statement of Mr. Edgerton follows:]

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Chairman TOM DAVIS. I just want to remind everybody, your entire statement is the record. So we are ready to go ahead. Jeff,

thanks for being here.

STATEMENT OF JEFF STOREY

Mr. STOREY. Good morning. My name is Jeff Storey. I am the

president and CEO of WilTel Communications. Thank you for inviting me to speak this morning. We appreciate the committee’s dedication to ensuring the Networx program encourages the widest possible participation. By broadening the program’s scope to include

specialized network providers like WilTel, both government and

taxpayers will reap the benefit of an intensely competitive market.

We look forward to working with the committee and GSA to provide government greater choice, innovative services and competitive prices.

WilTel is headquartered in Tulsa, OK, and specializes in widearea networking for carriers, enterprises, media and entertainment

companies, and the government. We provide a full suite of data,

voice, IT, video, management and professional services across our

30,000-mile next-generation fiberoptic network.

Drawing on 20 years of experience in engineering specialized solutions to solve our customers’ complex networking needs, WilTel

is an ideal telecommunications supplier for the Federal Government. Nationwide telecom carriers, broadcast television networks,

Fortune 100 businesses, and Internet giants, companies whose entire business is their network trust WilTel.

Although not a household name, WilTel provides telecommunications carriers with the capability they need to serve over 40 million voice and data customers and video transport for major events

like the SuperBowl and the Academy Awards. Just last month,

WilTel outdistanced many of the government’s incumbent suppliers

to provide DISA critical high-capacity services between mainland

military bases and bases in Hawaii and Japan, the program known

as TOT-P.

Networx represents a tremendous opportunity for the Federal

Government to access the most reliable, innovative and cost-efficient network solutions available. To realize this potential, however, the current process must change. Instead of simply extending

the practices followed in prior FTS procurements, Networx must

foster the introduction of new technology and promote new methods of procurement by engaging new industry partners with specialized expertise.

Although improvements have been made, the Networx program

still creates barriers that preclude nonincumbent suppliers from

successfully competing for government contracts, even when they

offer the best solution. These deficiencies lie in three key areas.

First of all, we need a level playing field that fosters competitive

bidding so that specialized providers like WilTel can participate.

Because of the small minimum revenue guarantee for new Enterprise vendors, the detailed mandatory technical service features

discourage involvement of new providers. These requirements favor

the incumbents and Universal providers with much higher revenue

guarantees.

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Second, the regimen and pricing table and structures currently

embodied in the Networx program strongly favor incumbent solutions. To encourage competitive pricing the government should use

the same method employed by commercial enterprises across the

country, define the communications problem, allow firms to bid solutions, and evaluate them based on the total cost of ownership.

Also, replacing the burdensome price management mechanism

with a streamlined commercial-based price renegotiation arrangement allows providers to craft innovative pricing that will lower

the government’s cost to purchase Networx services.

Finally, the government can benefit greatly by adopting commercial service standards instead of nonstandard government procurement mandates which impose unnecessary costs and force providers to fundamentally alter their services. These increased costs preclude government agencies from obtaining cost-effective, secure and

reliable services commonly available to large enterprises.

By adopting the recommendations detailed in my written testimony, the Networx program can be much more attractive to new

providers, enhancing competition and ensuring that the government will realize better prices and more innovative services. By addressing these important issues, the government will achieve its

objective of upgrading its communications solutions in a timely

manner and at the most competitive prices.

WilTel wants to compete, and we are well positioned to meet the

needs of the government if given a fair opportunity to win. Thank

you.

Chairman TOM DAVIS. Thank you very much.

[The prepared statement of Mr. Storey follows:]

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Chairman TOM DAVIS. Mr. D’Agata, thank you. Last but not

least.

STATEMENT OF ANTHONY D’AGATA

Mr. D’AGATA. Thank you, Mr. Chairman. Good morning, members of the committee. My name is Tony D’Agata. I am the vice

president and general manager of Sprint’s Government Systems

Division. I would like to express my appreciation for the opportunity to share with you Sprint’s views on Networx, the follow-on

program to FTS2001.

Sprint appears before the committee today in a unique position

as the only provider to have served both FTS2000 and FTS2001

customers over the last 16 years. Today we probably serve 314

agencies, provide service to well over a million government employees, and deliver over 500,000 circuits to Federal agencies.

Although we support the Networx program structure, today I

must report that the draft takes the program further down the

road of a government-unique path and makes it even more difficult,

if not impossible, for the contract to achieve a positive financial position.

Sprint wants to continue to serve our customers well into the future. However, at this time I cannot recommend that our share

owners assume the risk inherent in the current Networx draft.

Our concerns are as follows: The draft management reporting

and billing requirements exceed commercial requirements. The

FTS2001 requires the delivery of 14 monthly reports to GSA and

user agencies; however, the Networx requires up to 240 reports for

each agency. This would result in the Government mandating that

Sprint provide up to 75,000 reports per month.

The draft also increases the notice reporting that must be provided to the government. Notice reporting informs the government

of the status of new service installations. Whereas FTS2001 requires three separate notifications be provided to the government

for each service installation, the Networx requires the contractor to

provide five separate notifications to the government for each service installation.

In addition, the draft qualitatively increases the reporting obligations. It mandates that the contractor produce reports on the performance elements of services not required by anyone else in the

marketplace.

The draft RFP substantially increases the billing requirements

beyond FTS2001 and current industry commercial requirements.

This will require substantial systems development in the tens of

millions of dollars before an award.

The draft service performance requirements exceed commercial

requirements. The draft contains 240 requirements for services

specified; 87 percent exceed the performance requirements of the

equivalent commercial service. Over half of all of the requirements

are either unachievable or not measurable given the current state

of technology.

The draft contains onerous business terms and conditions. The

credit provisions of the draft do not conform to commercial practice.

The failure to provide just one of the five installation notices mentioned earlier will result in forfeiture of the entire recurring

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charges for the month for that site. This is true even if the site was

installed on time, and the government enjoyed all of the beneficial

use of the service.

The credit provisions for failure to comply with the service performance requirements are no less punitive. A network outage will

result in forfeiture of one-quarter of the entire recurring monthly

charges for the affected agency.

Finally, the draft contains a price management mechanism that

gives the government the unilateral right to set prices for all services.

The draft simply asks too much. It requires tens of millions of

dollars of capital investment to deliver noncommercial products,

and provides special billing and management reporting required by

no one else in the marketplace. In addition, the government has

the discretion to assess punitive credits and unilaterally set

Networx prices.

Mr. Chairman, we sincerely hope that the Networx draft is modified in a manner that will enable Sprint to continue its partnership

with the GSA, the agencies, and this committee on this vital government program.

I would be happy to answer any questions that you might have.

[The prepared statement of Mr. D’Agata follows:]

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Mr. BURTON [presiding]. Is there anything about this thing you

like?

Mr. D’AGATA. Well, we do like the fact that we are able to serve

a lot of government agencies today. And we are, you know, hopeful

that we can continue to provide services to them in the future.

Mr. BURTON. You said that—how many reports per month?

Mr. D’AGATA. 75,000.

Mr. BURTON. I had 7,500. I thought that was high; 75,000. I hope

GSA is listening; 75,000 reports a month. My gosh, the paper alone

would negate making a profit.

Mr. D’AGATA. Mr. Chairman, 240 to each billing entity.

Mr. BURTON. Do all of you agree with that? Is that what you figure, 75,000 reports a month or a large amount?

Mr. D’AGATA. It depends, Congressman, on the volume of business that you have today.

Mr. BURTON. Well, everybody is going to be bidding and so we

don’t know who is going to get what.

Mr. D’AGATA. Potentially, if they have as much as Sprint, they

would have to provide as many reports.

Mr. BURTON. Does everybody agree with that?

Mr. COLLET. I know the number is a very large one, but I think

most of that would be delivered electronically from automated systems. So it is true that investment is necessary in the operational

support systems, but we have not concluded that it was overly excessive. We are making investments in the systems right now, in

anticipation of having to pass an operational capabilities demonstration 2 months after award.

Mr. BURTON. So AT&T does not think the reporting mechanism

is excessive?

Mr. COLLET. Oh, it is, it is excessive, and there will be some costs

associated with it, and that cost will be recovered in the prices.

Mr. BURTON. So the costs will be borne by the taxpayers, ultimately.

Mr. COLLET. Ultimately, yes.

Mr. BURTON. And it is not necessary. Do any of you agree that

it is not necessary to have that many reports?

Mr. COLLET. Agreed. There are too many reports. We have been

in some dialog with GSA, and the response we received is that this

is going to change. Everybody is trying to be reasonable and meet

agency requirements.

Mr. BURTON. Is anybody still here from the GSA? I hope you are

making notes, because it seems like, to me, that is excessive. You

may need more than one sheet of paper.

You said something, Mr. D’Agata, about reports that others don’t

have to report. I guess you are talking about commercial entities?

Mr. D’AGATA. Yes, sir.

Mr. BURTON. I wish GSA was up here. I would like to ask them

why they are requiring reports that the private sector does not report, and if you are making notes back there, I would like to have

personally, as former chairman and one who has been interested

in this for a long time, I would like to know why they are asking

to report and issue reports that are not required in the private sector, because we are trying to make government more businessfriendly instead of more bureaucratic.

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You said that the cost is high before an award. What kind of cost

are you talking about in the bid process?

Mr. D’AGATA. I am talking about investing millions of dollars,

sir, on operation support systems that one really has to develop

now, before award, so you really have to spend the money in advance of an award to be able to demonstrate at award or right after

award that you have the capabilities.

Mr. BURTON. Mr. Storey, you have a smaller company than

AT&T, Sprint and MCI. How does a smaller company afford the

costs that are incurred before they make the bid?

Mr. STOREY. Well, it is very difficult, and that is why, in my comments, I said that the onerous provisions that are on small companies make it difficult for us to win business, especially with relatively small minimum revenue commitments.

So we will have to make these decisions on a speculative basis.

We will have to decide that this is something that is worthy of the

investment of our dollars and with a hope of a return.

Mr. BURTON. It is like shooting craps in Vegas, only higher

stakes.

Mr. STOREY. Yes, it is.

Mr. BURTON. You are talking about millions of dollars to prepare

for the bid, and you have all of these reports, and then you don’t

get it, so you are out of luck.

Mr. STOREY. Right.

Mr. BURTON. We use stronger language than that back in Indiana, but I will not go into that right now.

It seems like, to me, that GSA ought to try to make this as userfriendly as possible while trying to make sure that they are trying

to get the best price for the taxpayer. And to literally force smaller

companies that might be able to provide very, very good services

to the government and agencies are priced out of the market because they can’t come up with the money to make the initial bid.

So I would like for GSA, if you would make a note of this, to respond to that as well. I mean, why is it that the cost of proposing

a bid is going to be so high that some companies that could provide

good services will not be able to be involved in the bid process?

Let’s see. Mr. Storey, you had some other questions here or comments. The minimum revenue guarantee for the network enterprise is too small. Can you go into that in a little more detail?

Mr. STOREY. Well, it is related to the same issue. We have huge

investments to win this business, to make a proposal.

Mr. BURTON. How do you think they should come up with a minimum revenue guarantee, or should they even have one?

Mr. STOREY. You know, I think that they should have one, because it gives us encouragement to bid and to prepare proposals

knowing that we will have something. I think that they should look

at the percentage of the traffic that they have that will go to nonuniversal providers, and I think they should increase that level of

percentage.

Mr. BURTON. Could you give the committee some kind of a formula that we can look at and see what would be good in coming

up with a minimum revenue bid? I don’t know if you can do that

or not, but if you are talking about raising the minimum revenue

bid or guarantee, rather, minimum revenue guarantee, we have to

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have something as laymen up here to take a look at so we can say

to GSA, you know, maybe they are right. Do you see what I am

talking about?

Mr. STOREY. Yes. I don’t have a formula for you today, but I

would suggest that more of the business be committed to Enterprise as opposed to Universal, and that will increase the pool of

Enterprise businesses that are out there.

Mr. BURTON. One of you, I can’t remember which one it was, said

that you ought to be able to bid on both Universal and Enterprise.

Can you explain to me why? I would like to know why you can’t.

Ms. MURPHY. Mr. Burton, I think the issue is during the period

of fair consideration, an agency has to decide whether they are

going to recompete their business under Universal or Enterprise,

and once they have chosen one, then only awardees under that particular contract are in a position to compete for the business.

Mr. BURTON. I see.

Ms. MURPHY. So even if there are subsequent requirements that

an awardee, for instance, on Enterprise might be able to meet, if

the agency has selected Universal as their contract vehicle, then

that Enterprise awardee is prohibited from competing. So our position is that lessens overall competition for the government.

Mr. BURTON. I see. And you think that is good?

Ms. MURPHY. No, I think that is bad.

Mr. BURTON. I thought that was what you were going to say.

So I would like to say to GSA, can you explain to me why that

is the case, and if you could, let us know. I mean, remember that

I am a neophyte in this, even though I have been working on this

for about 7 or 8 years as chairman and now on the committee, but

I would like to know why, since they brought this up, industry has

brought that up, why that is a problem?

Let’s see what else we have here. You guys came up with so

many problems here.

I think, Mr. Storey, you said there is a bias, or you indicated that

there was a bias toward larger companies who have more resources

so that they can be more competitive and biased toward companies

that might already have part of the market share with government

already. Can you go into that in a little more detail?

Mr. STOREY. Sure. The bias is incumbent in the technical requirements that are in the proposal. When you specify that every

company has to be able to do every product in a certain way with

the operational support system requirements along with it, it creates a set of products that not every company has. We do not provide every product. WilTel does not provide every product out there

that the government might want to use. We provide some products

extremely well, and it may be the best solution for the government

for those products, but when you tack on a whole series of other

products, other requirements, it just makes it too onerous to compete.

Mr. BURTON. Well, once again, if GSA could give the committee

or me in particular, if you want to, the reasons why smaller companies that don’t provide all of these services can’t be competitive, I

would like to see that. There might be a reason for that. You might

say that the overall pricing structure is going to be lower if one

company can provide all of the services; I don’t know what the anVerDate 11-MAY-2000 10:03 May 09, 2005 Jkt 000000 PO 00000 Frm 00136 Fmt 6633 Sfmt 6633 D:\DOCS\20144.TXT HGOVREF1 PsN: HGOVREF1
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swer is, but I would like to have an answer to that if we could get

that as well.

I see my time has expired. Mr. Marchant, do you have any questions at the moment?

Mr. MARCHANT. I would like to address the issue of the amount

of money that it takes to prepare the bid. I think the gentleman

from Sprint was—you are saying basically that, in order to even

approach the bid, you have to in essence make sure that you can

have the support systems, if you do get the bid in place, virtually

before you get the bid.

Mr. D’AGATA. Yes. There are two forms of expenses, Congressman. One is the actual labor costs that you have internally to prepare the bid itself that, I think, all of us are, you know, more than

willing to spend to prepare the bid. The other is the operation support systems requirements. One needs to be able to demonstrate

soon after award that you have the capabilities that were specified

in the contract. To do that requires a lot of time and software

changes and development activities that, to make the deadline or

the schedule that is laid out by the government, you really have

to spend that money in advance of an award to be able to meet

those requirements when you are asked to demo.

Mr. MARCHANT. Well, do you foresee a situation where a company would come in and scrape up enough money to put together

the bid, get the business and then really not have the capital or

the internal capital in the company to put those systems in place

and virtually have to drop out, back out or prove that they couldn’t

meet that standard after they had already won the bid?

Mr. D’AGATA. I would hope that they would, you know, solicit

from their leadership that they have the money before they submit

the bid, because you become committed to the extent of your proposal, and so you better have that authority before you submit your

bid.

Mr. MARCHANT. And then the other question I had goes back to

Ms. Murphy’s comment about the billing system and your suggestion that maybe the billing function could be taken over by GSA.

Ms. MURPHY. GSA has recently released a sole-source request for

billing systems and there has been a lot of conversation here about

minimum revenue guarantees versus the operation support systems and billing systems requirements. So there is a couple of different ways to solve that. Yes, you can raise the minimum revenue

guarantee; you can also alleviate the billing requirements and the

operation support system requirements such that minimum revenue guarantees are not such an issue.

So if the GSA were willing to look at handling going in a different way, then that would be a solution that we would very much

be in favor of.

Mr. MARCHANT. Is that a solution that you specifically would be

in favor of, or is there some consensus on that among the other

panel members?

Mr. COLLET. I don’t see how a system like that would be practical, because billing is intimate to how a network is constructed

and operates. If GSA had to operate as a Universal biller, then

they would have to get really close to all of the internal systems

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of all of the operating carriers, and I think it would be an absolute

disaster, a nightmare for them to do.

Mr. MARCHANT. They would have to have a lot of proprietary information about your company and your systems to even get to

that point, wouldn’t they?

Mr. COLLET. Agreed. Agreed. I mean it is difficult enough to

meet government requirements with commercial systems, even

within a vertically integrated company. It would be extremely difficult, and I have spent most of my life as an engineer, so maybe

I am a little more terrified of it than others would be, but it would

be very, very difficult and, operationally, I think very impractical.

Mr. MARCHANT. If I could just raise one more question, Mr.

Chairman.

The whole issue in this bid process, RFP process, do you feel like

that the process begins to intrude on your proprietary information

to the point where you would not bid on this because there is too

much information that has to be divulged about your systems before you can even win the bid?

OK. Thank you.

Chairman TOM DAVIS [presiding]. Thank you very much. I am

trying to think of where to start.

We have heard varying positions on the network’s draft RFP

from all of you. Your concerns with the draft RFP, I will just go

down and ask each of you, do you think they can be resolved before

releasing the final FRP on April 1?

Mr. HOGGE. Well, our recommendation is that if there is a document that is ready, that it be released as a second draft. I mean,

there were 2,500 or so detailed comments, some fundamental

issues that have been raised in this forum that if the document is

ready to be released, one more go-around through a second draft

I think would overall abbreviate or make sure that the overall procurement process occurs in accordance with an endpoint that is

useful to GSA and to industry.

Chairman TOM DAVIS. Thank you.

Mr. COLLET. We believe it should be released on time. Over the

last several months, GSA has evaluated approximately 2,500 comments, as disclosed earlier, and has expressed an inclination that

I think up to 40 percent of those comments were being accepted.

I think most of those would be in the operational support system

area. So we are hopeful that these comments will reflect well in the

operational support system requirements, and if they do not, then

the cost of those additional requirements simply get reflected in the

price of the service that is presented to the government.

Ms. MURPHY. Mr. Chairman, we favor an additional draft RFP,

and we think it could actually lead to a more concise final RFP

process. In any major procurement, you always end up with a lot

of questions once the final RFP comes out, and there are usually

amendments that lead to delays. We feel that with one more round

of draft RFP, many of those issues could be put to rest before the

final RFP, and we could stay on schedule even with an additional

round.

Mr. EDGERTON. We are committed to the process. If April 1 is the

date, we are going to meet it. However, I think, as a result of the

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hearings and other comments, that there will probably be some

delays, which will actually reflect a more improved RFP.

Mr. STOREY. In general, I think that we would like to see the

RFP come out on time. However, we would like to see it right, so

if we can delay a little bit and get a much better competitive environment where all competitors can compete and bid on business,

that would be a better outcome for us.

Chairman TOM DAVIS. You don’t care if it comes out on April 1,

as long as it is right.

Mr. STOREY. Exactly.

Mr. D’AGATA. We think it is absolutely possible for GSA to incorporate our comments into the final RFP and deliver it on schedule.

I think one of the difficulties that industry has right now is that

we provided to the GSA numerous comments. We don’t know how

many of those have been incorporated into the final version, so we

are—you know, right now, we don’t know what will be acceptable.

Chairman TOM DAVIS. We heard today that location-specific traffic volumes won’t be made available until mid to late May. How

does that impact your ability to develop your proposals? I will start

with you, Mr. D’Agata, and move on down the line.

Mr. D’AGATA. Mr. Chairman, it is less of a factor for us in that

we enjoy an incumbent status, so we pretty much know the volumes at each agency.

Chairman TOM DAVIS. So mid-June is fine with you.

Mr. STOREY. The more information we have, the better able we

are to make a competitive bid that makes sense. Being a non-ubiquitous provider like some of the others, the geographic information

is important to us. So the sooner that is available, the better off

we will be in making sure that not only will we make competitive

offers, but once we win an award, we will be able to really satisfy

that demand.

Mr. EDGERTON. I just need to know Tony’s volumes.

Chairman TOM DAVIS. Do you want to ask him right now?

Ms. MURPHY. As a relatively new crossover entrant and really

playing a new entrant role on the network’s procurement, that traffic information is really critical to us to finalize our strategy.

Chairman TOM DAVIS. Does this give you enough time?

Ms. MURPHY. It makes it more difficult. If you have an RFP that

comes out in April and your traffic information isn’t available until

mid-May at the earliest, that means you—we really aren’t in a position to finalize business decisions about even whether we can or

can’t bid until we really get our hands on that data.

Chairman TOM DAVIS. OK.

Mr. COLLET. We have been doing our homework, so we have a

pretty good idea of what the traffic is from our competitors but, in

general, there is a lot of work that is necessary to complete the

technical volume, the management volume, the business volume responses. So if we can get that earlier rather than later, that will

certainly help in the development of the proposal. If we obtain volume information let’s say mid-May, we would certainly have to confirm or review it vis-a-vis what we already know, and then we are

looking at perhaps a month and a half to produce a final pricing

proposal. It will be tight, but I think it will be manageable.

Chairman TOM DAVIS. OK.

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Mr. BURTON. Mr. Chairman.

Chairman TOM DAVIS. Let me yield to Mr. Burton.

Mr. BURTON. I just wanted to followup on that. It seems to me,

and any of you can answer this question, that the amount of traffic

is important if you are going to be able to bid on this. And for one

company, even though they are great people, to have that information gives them the real inside track.

So, Mr. Chairman, it seems like to me that GSA or whoever it

might be ought to make the information available to all of the bidders so that they can be—so that there is fairness in the bid process. If one of them has it and the others don’t, they know what the

problems are, they know what the costs involved are, and they

have a real leg up in the bid process. So it just seems like, to me,

that the ones who are going to be legitimate bidders ought to have

access to the same information. That should not be something that

is held secret.

Chairman TOM DAVIS. OK. Thank you. Mr. Hogge.

Mr. HOGGE. Yes. As another potential nonincumbent bidder,

knowing the traffic and where it originates and terminates is absolutely fundamental to developing our business case which is fundamental to committing the corporation and the capital required to

do this. If memory serves, last time around, it took many weeks,

if not many months, to get the traffic models to work right. So getting that information, having an accurate forecast of what the requirements are and where they come from is absolutely essential.

So it is impossible to sit here today not knowing any of that to tell

you whether or not we have enough time to meet the deadline if

it comes out in mid to late May.

Chairman TOM DAVIS. Mr. Hogge, you stated that for Networx to

be successful, there should be clear guidelines that would require

that agency customers consider proposals from both Universal and

Enterprise awardees. Would such a ‘‘crossover’’ process allow Enterprise awardees who can enter Networx with a much smaller

commitment of resources than Universal participants cherry pick

the most desirable requirements to the detriment of the Universal

awardees?

Mr. HOGGE. Well, what we are advocating is a full and open task

order process. As I said in my prepared remarks, there is a deliberate overlap in the service content from Universal to Enterprise.

The Enterprise is a smaller set designed to entice smaller or next

generation competitors into the mix. Post-award, when vendors go

through their vendor process through fair opportunity, that is the

point at which competition really—the rubber hits the road; it is

the point at which it is not just a transition of like for like, potentially like for a new product converging or converting a circuit

switch service to an IP-based service, an MPLS service. That is the

point at which technology infusion, innovation, and new competition from new entrants comes into play. We are simply advocating

that we get a shot to participate in that process post-award.

Chairman TOM DAVIS. Mr. Burton.

Mr. BURTON. If I might make a formal request—and I don’t know

to whom I direct this, Mr. Chairman, but you are the boss, so

maybe you can help us out with this—I would urge that the information that will create a level playing field regarding the traffic inVerDate 11-MAY-2000 10:03 May 09, 2005 Jkt 000000 PO 00000 Frm 00140 Fmt 6633 Sfmt 6633 D:\DOCS\20144.TXT HGOVREF1 PsN: HGOVREF1
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volved, that be given to all of the legitimate bidders, and if GSA

is the one that has that information, I would make a formal request that they do that. And if they can’t, I would like for them

to contact me as former chairman and as a member of the committee and let me know why they can’t do that. If there is a reason

you can’t, I would like to know the reason why.

Chairman TOM DAVIS. I will ask the staff to followup on that.

That is appropriate.

Do you want to add anything else?

Mr. HOGGE. No.

Chairman TOM DAVIS. Mr. Collet, let me ask you, in your statement, you recommend that GSA award only the number of contracts that it can manage well, which I think is appropriate. They

have asked two Universal, maybe five on the Enterprise. Do you

think that is reasonable?

Mr. COLLET. I think it is very reasonable at this point.

Chairman TOM DAVIS. Would AT&T consider submitting offers

on both Universal and Enterprise?

Mr. COLLET. Absolutely.

Chairman TOM DAVIS. OK.

Mr. COLLET. I think it is a prudent option on our part.

Chairman TOM DAVIS. Ms. Murphy, you suggest that GSA needs

to make some major alterations to the service order, billing and reporting system requirements before you could reasonably compete

on this. Is that correct?

Ms. MURPHY. Yes.

Chairman TOM DAVIS. And that these requirements should more

closely mirror commercial practices. Any particular requirements

that you want to focus in on that you find problematic?

Ms. MURPHY. Well, we really focused on the billing requirements

as one area of particular concern. Certainly, we addressed detailed

comments to GSA in these areas when we submitted our response

to the draft RFP. So, you know, I think the problem that Mr.

Storey mentioned earlier, we have certainly been open with our

comments. We are just not quite sure how much of our comments,

how many of our comments will be accepted and what the magnitude of the changes will be.

Chairman TOM DAVIS. You also suggested that Networx should

allow Enterprise contractors to be able to graduate into Universal.

Ms. MURPHY. It is a process that seems to have worked well, if

you look at the FTS 2001 crossover. The contract has been in place

for a number of years now. The number of services provided under

the contract have expanded. I think it has more than doubled, and

it has managed to keep competition robust and prices very competitive over that time.

Chairman TOM DAVIS. OK. Mr. Edgerton, do you think—I gather

from your comments that you think GSA should set a clear limit

on the number of contracts to be awarded under Universal and Enterprise. You heard Commissioner Perry earlier talk about maybe

two Universal, five Enterprise. Do you have a number in mind, or

do you just think they——

Mr. EDGERTON. That is the first time we have heard a definitive

number.

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Chairman TOM DAVIS. Do you think that is a reasonable number

from your perspective?

Mr. EDGERTON. Yes.

Chairman TOM DAVIS. You note that, as Networx is currently

configured, Universal awardees can’t participate in Enterprise requirements and vice versa. You state that GSA should ensure that

a customer agency has the ability to obtain services from all of the

Universal and Enterprise awardees. Do you have any suggestions

on how to accomplish this?

Mr. EDGERTON. I think there is a prohibition that needs to be

looked at as to how the process takes place.

Chairman TOM DAVIS. OK. Mr. Storey, how can the GSA justify

reducing the Universal MRGs in favor of Enterprise when the Universal program, with its far more extensive list of mandatory requirements and geographic coverage, will likely generate more revenue? That is your question, isn’t it?

Mr. STOREY. Yes. And I think that the Enterprise sector is the

place where innovation is going to come into the government. If you

look at the Universal, that is going to be the incumbents and the

large companies, and if there is going to be innovation and new

technology introduced to the government, it will come through the

Enterprise part of this contract.

Chairman TOM DAVIS. You mentioned that GSA’s small business

subcontracting goal of 39 percent would be unduly burdensome for

a smaller company like yours. What would be a reasonable goal for

small business subcontracting?

Mr. STOREY. The 20, 25 percent range.

Chairman TOM DAVIS. All right. Thank you. And Mr. D’Agata, in

your statement, you indicated that Sprint may not participate in

Networx as presently configured since the program requires too

much capital investment for noncommercial products and special

billing and management reporting. In your new company, that concerns us, in that an incumbent such as Sprint would not submit

an offer.

Have you shared these concerns with GSA prior to today.

Mr. D’AGATA. Yes I have, sir.

Chairman TOM DAVIS. And what was their response?

Mr. D’AGATA. That they would look into those issues in the final

RFP.

Chairman TOM DAVIS. And is this both Universal and Enterprise?

Mr. D’AGATA. Yes, it is, although we are primarily focused on

Universal, but it would apply to Enterprise as well.

The other thing, sir, that is of concern are the service level provisions where a number of them just are not achievable. They defy

the laws of physics and are not achievable.

Chairman TOM DAVIS. OK. I think those are the questions I

wanted to ask. Do you have any more, Dan?

Mr. BURTON. No, Mr. Chairman.

Chairman TOM DAVIS. Does anybody want to add anything before

we go on to the next panel? This has been very helpful to us. I hope

it has been helpful to GSA as well, and I appreciate everybody’s

taking the time to come here. As I added before, your entire statements will be in the record and made part of the record, and we

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will continue to work with you. And we would like to have you all

in here at the end. Thank you.

We will take a 2-minute recess as we move to the next panel.

[Recess.]

Chairman TOM DAVIS. The hearing will come to order.

This is our final panel. We have Mr. Donald Scott, the senior vice

president of EDS for government solutions; Mr. David

Bittenbender, vice president, Network Services, for Computer

Sciences Corp., Federal Sector; Mr. James Courter, a former member of this body and CEO and vice president of IDT Corp.; Mr. Michael Cook, senior vice president and general manager of Hughes

Network Systems; Ms. Diana Gowen, president, Broadwing Government Solutions, Broadwing Communications, LLC; and Mr.

Greg Baroni, president of the Global Public Sector, Unisys Corp.

It is our policy we swear you in. If you would rise with me and

raise your right hands.

[Witnesses sworn.]

Chairman TOM DAVIS. Again, your entire testimony is in the

record and questions are based on that and that will all get put

into the permanent record. So if we can just take 5 minutes, I am

going to try to beat our votes on the House floor so we can dismiss

you and not have to keep you. Thank you for your patience, and

thank you so much for being here.

STATEMENTS OF DONALD SCOTT, SENIOR VICE PRESIDENT,

EDS, U.S. GOVERNMENT SOLUTIONS; DAVID BITTENBENDER,

VICE PRESIDENT, NETWORK SERVICES, COMPUTER

SCIENCES CORP., FEDERAL SECTOR; JAMES COURTER, CEO

& VICE PRESIDENT, IDT CORP.; MICHAEL COOK, SENIOR

VICE PRESIDENT & GENERAL MANAGER, HUGHES NETWORK

SYSTEMS; DIANA GOWEN, PRESIDENT, BROADWING GOVERNMENT SOLUTIONS, BROADWING COMMUNICATIONS,

LLC; AND GREG BARONI, PRESIDENT, GLOBAL PUBLIC SECTOR, UNISYS CORP.

STATEMENT OF DONALD SCOTT

Mr. SCOTT. Thank you, Mr. Chairman. I have a good bit to say,

but I will try to be as brief as possible. I am offering EDS’s recommendations in the interest of making Networx more effective

now and in the future. I have submitted a more complete copy of

course for the record.

First, I want to commend the committee for the continued high

level of interest that you have in this program. We know you have

a broad scope of responsibilities, but you have seen fit to give

Networx a good bit of attention, and we appreciate it. And we also

commend Administrator Perry and the FTS program for their diligence in getting to the optimum contract.

Chairman TOM DAVIS. I take it everybody commends the GSA for

this. I mean, we all have to bid on this, so I am just going to assume everybody does that.

Mr. SCOTT. However, the two contracts are not where we think

they should be at this point in time. For example, in the focus on

wireless communications, we find that they have kind of stuck to

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primarily voice services rather than look forward to broadband

wireless, PDAs, etc., that is now becoming widely available.

Also, on the security requirements, we felt like they were offered

in a very narrow manner in the draft and that they should, in addition to having preventive methods like firewalls, they ought to

have also more aggressive efforts to prevent them happening and

detecting intrusion and that sort of thing.

However, adding these new features such as I just mentioned to

Networx will not be enough to make it effective for the future. The

program also must support the new next generation era, and the

Networx that we have today are not built for that purpose. Technology change has taken us from legacy telecom, which existed to

provide transport and connectivity, to the world of next generations, which exist to provide effective information handling and

sharing. This is a world in which Networx procurement will function in the next decade.

These new Networx are distance-insensitive, wired and wireless,

packet driven, IP-based with converged services, and are solutionsoriented. The key concepts driving next generations within this information-sharing business model are end-to-end solutions, convergence, collaboration and ease of information sharing.

We are becoming customer and information focused in an information society. We demand that information be easily obtained and

shared, and we expect effective information convergence, storing

and processing, messaging and collaboration. The challenge GSA

faces is how to offer the services needed in this future, facing procurement, but also how to offer the legacy services that are still required by many of the government agencies.

EDS recommends a strategy which should have little impact on

the timely release of the final RFPs. GSA should structure Enterprise to enable the procurement of information solutions. Legacy

services along with other services traditionally offered by carriers

would be offered on Universal.

EDS recommends that Enterprise become a performance-based

contract using solutions-focused models which can be premisedbased or network-based. Task order requirements would be provided in the form of statements of objectives. This can provide

GSA’s customers the benefit of a full complement of innovative solutions found in the commercial next generation marketplace. The

components, transport, last-mile access, wireless and security, for

example, would be incorporated in these solutions. The agencies

will obtain total solutions needed to satisfy their objectives and

their mission requirements rather than obtain the individual components of the solution. Taken together, these recommendations define a program that will enable Networx to offer next-generation at

the same time it provides components for the legacy generation.

EDS’s approach would lead to more satisfied government agencies,

greater contract volume, and become the foundation of the administration’s goal of a common government IT architecture.

To summarize, Enterprise and Universal should provide two

tracts: the Universal to take care of the legacy stuff, and the Enterprise to take care of the forward-looking.

So, Mr. Chairman, EDS looks forward to participating in this

competition as soon as possible. However, we recommend that GSA

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concentrate on getting it right. EDS believes that restructuring the

network procurements according to our recommendations will increase competition by enabling more carriers, integrators and small

businesses to compete.

Mr. Chairman, thank you for the opportunity, and I look forward

to your questions.

[The prepared statement of Mr. Scott follows:]

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Chairman TOM DAVIS. Thank you very much. Mr. Bittenbender.

STATEMENT OF DAVID A. BITTENBENDER

Mr. BITTENBENDER. Mr. Chairman, members of the committee,

we appreciate the opportunity to appear here today. I am here on

behalf of Computer Sciences Corp. where I work as vice president

of Federal Network Services, but I am also here as former chairman of the FTS 2001 Interagency Management Council and as a

former government telecommunications executive. I personally feel

very strongly about the effective use of communications and information technologies in contributing to a more responsible and responsive government.

Mr. Chairman, you set the vision for such a government at a

breakfast we attended just a few months ago. There, you spoke of

the need for a communications infrastructure, one that meets new

and demanding national security and economic competitiveness demands imposed on an effective, 21st century government. Yours is

a strong and important vision and message, and I applaud you for

it.

For a myriad of reasons, your vision will not be easy to achieve.

Important and substantial initiatives rarely are. GSA, though, is to

be commended for its attempt to structure so major a procurement

in such turbulent times internal to its own organization and across

government as well.

Networx can and should be the flagship initiative for government

to dramatically improve its ability to share information. It has that

potential. To achieve that potential, the procurement should move

from its current position as essentially an enhanced schedule of

stove-pipe commodity services, to a horizontally defined standardsbased initiative that can evolve with a rapidly and dramatically

changing communications industry.

Leaders in the communications industry today may not be the

leaders of tomorrow. Twenty-five years ago, when the GSA first

considered replacing the original FTS contract, there was only one

service provider. At the time of the FTS 2000 procurement in 1988,

there were three providers. Today, there are dozens, many offering

services that did not exist in 1988. And the original service provider of 25 years ago will likely not exist when Networx is awarded. This trend continues apace, and the government must develop

procurement structures that adapt to this environment.

We do not believe that the Networx procurement in its present

form encourages the objective of a government-wide, or even system-wide integration of communication services. This is not so

much the fault of GSA as it is the reality that GSA faces in its customer market. Like it or not, stove-pipe culture in government and

the telecommunications industry is strong. Yet, this culture must

be addressed in terms of communications infrastructure if we as a

government are to truly be able to share information across boundaries and jurisdictions.

We believe Networx suffers from some of the same weaknesses

as its predecessors. Although the procurement mandates a standards-based service solution and specifies interoperability, many aspects of service provisioning, operation and management make

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practicable and, actually, not readily supported even by the vendors themselves.

In addition, the requirements of the Enterprise component,

which is essentially a subset of the Universal requirements,

present significant barriers to innovation and to the entrance of

small and other businesses who could offer niche service with significant potential value to the government.

The Universal component, which is largely commodity services,

can and probably should move forward, given the impending expiration of the existing contracts.

However, we believe that government would be better served

through restructuring the Enterprise component as a statement of

objectives rather than a statement of requirements. It is the Enterprise procurement we believe that offers the greatest potential to

the government for innovation, contract flexibility, and sound infrastructure management over the duration of Networx.

CSC supports a delay in the issuance of the Networx RFP or certainly the Enterprise component, so as to allow its careful and adequate consideration by the GSA, Congress, this committee in particular, and by the broader government and industry. Networx is

moving forward with a rapidly evolving realization at senior levels

of the executive branch and Congress, a realization fueled by this

committee, that our infrastructure today is not adequate. A brief

time-out might be in order.

Mr. Chairman, once again, I thank you for the opportunity. I

look forward to any questions you may have and working with you

in any manner that is appropriate.

[The prepared statement of Mr. Bittenbender follows:]

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Chairman TOM DAVIS. Thank you much. Mr. Courter.

Mr. BURTON. Mr. Chairman, I would like to welcome our friend,

Jim Courter. He was a former colleague of ours and he has not

aged a bit since he left.

Chairman TOM DAVIS. He hasn’t, has he? That is because he is

not here. He is in the private sector.

Whatever your secret, Jim, you look great, and good to have you

here.

STATEMENT OF JAMES COURTER

Mr. COURTER. Mr. Chairman, it is good to be here on a different

venue.

Obviously, I was on the Committee on Armed Services and did

not often testify. I will not read my statement. Obviously, it is

there for the record. There are a few things that I would like to

point out that I think are very important in the next 2 or 3 minutes.

First of all, although our company has been successful, and both

of you know something about our company; we started about 10

years ago. We are a very small company. Six and a half years ago

when I went there, revenue was $52 million; now it is $2.2 billion.

There was less than 100 people 6 years ago, we have 4,500 now in

18 countries around the world, and we have a very strong balance

sheet.

We are a diversified company. It is a good thing we are. Otherwise, I would not be here today. If we just stayed in telecommunications, traditional, plain old telephone, not going into voice, VOIP,

without a transaction that we had with our good friends at AT&T

a few years ago in selling a controlling interest of net-to-phone,

which was one of the premier voice-over IP telephone companies in

the United States, we would have gone bankrupt with so many others, because of the MAA contract. And so I am speaking to you

from—I am the poster child. You know, it wasn’t individuals’ fault.

Everybody at GSA was well-intentioned, but it was a catastrophe

for our company.

One, we bought Windstar out of bankruptcy 3 years ago and 3

months ago. I remember very specifically. We were overjoyed by

our success in buying it out of bankruptcy. We thought it would be

the perfect fit for our network. We are basically an international

telecommunications provider. We route telephone traffic, voice traffic for all of the major PTTs, including the ones in the United

States, and all of the RBOCs around the world. What we did not

have was that last mile of connectivity that would make us a real

national and global player.

So we bought Windstar out of bankruptcy for $521⁄2 million, and

the good part of it was that day, after that, we realized we were

in a heck of a situation because the expectation of the amount of

revenue and the expectation of the amount of traffic that we were

going to route for the Federal Government under the NAA contract

was woefully less than anybody anticipated, thus making it inevitable that we would burn significant sums of money each and every

month. To this very day, and it is almost 31⁄2 years later, IDT is losing in the government sector with the GSA contracts $21⁄2 million a month.

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We had 4-year contracts with four 1-year options to renew. We

went to GSA and said, we can’t renew this; we can’t continue to

burn hundreds and hundreds of millions of dollars, because we are

not getting the revenue, we are not getting the traffic under this

program. GSA some time ago told us they, in fact, were going to

extend and exercise their option year after year after year for 4

more years, so we could sit here and burn an additional $21⁄2 million a month for 4 additional years.

Now, I have sat down with Mr. Perry. He understands that we

have a terrible situation. He understands the fact that IDT and

other companies like it were terribly misled by the Federal Government as to the quantity of business we would get, and he assures

us that we will work something out with the Federal Government.

So my basic message is, there has been a lot of testimony, a lot

of comments about the amount of business and the amount of traffic. No. 1, bidders have to know the amount of traffic that they are

going to get. It cannot be a secret, because you don’t want to turn

innovative communications companies, like IDT and some at this

table and some on the prior panel, and put them in a situation

where they are forced to go bankrupt again.

It happened because of the fact that—I will give you one example. In Atlanta, in the city of Atlanta where we still are, the maximum GSA estimated was $520 million of business for IDT; now, of

course, Windstar. The estimated value, and that is the one that

contractors look at, was $170 million of revenue in Atlanta for

Windstar, old Windstar. Our gross revenue is $11⁄2 million. Now,

how can you make money under those types of circumstances?

So my point here is, you have an opportunity to get it right this

time, and indeed, I hope that you do.

There is another comment I would like to make, and that is,

there has been great talk about Universal and Enterprise, and we

look at Enterprise. of course, we will be very cautious this time and

very circumspect, and we will be looking very carefully as to what

the real traffic numbers are going to be; we will not be deluded a

second time. It seems to me, under Enterprise, it is more the equivalent, as far as I am concerned, if the government is going to get

the best product at the best price, it is not the decathlon. You do

not need a company to be expert in nine different areas. I understand there are nine categories, nine requirements when it comes

to Enterprise. If you want to win the 100-yard dash, you don’t put

a shot putter in the Olympics. You got someone who is the very

best at that particular event. So I would suggest that GSA review

the nine requirements when it comes to the Enterprise program.

So one is lessons learned, and the other is, you have a chance

to do it right this time. If you need additional input from myself,

I am obviously at your disposal. Thank you very much.

[The prepared statement of Mr. Courter follows:]

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Chairman TOM DAVIS. Jim, thank you very much. Mr. Cook.

STATEMENT OF MICHAEL L. COOK

Mr. COOK. Mr. Chairman, thank you very much.

My name is Michael Cook, and I am senior vice president of

Hughes Network Systems and general manager of the Government

Markets Group for Hughes. So, Mr. Chairman and members of the

committee, I appreciate and value the opportunity to appear here

today and talk on behalf of Hughes Network Systems about

broadband satellite services.

You have made it clear, Mr. Chairman, in recent months how important it is to improve communication amongst government agencies and departments, and you have been equally clear in setting

your belief that Networx must be the gold standard on which government communication requirements are based.

My purpose here today is to urge that satellite broadband technologies and that satellite services be equally treated with the

other prominent broadband technologies; that is DSL and cable.

The inclusion of satellite services is where the Networx procurement needs to be modified and improved, and this is the purpose

of my testimony today.

Broadband is today’s powerhouse communications technology. It

is driving the economy and will continue to do so for the foreseeable future. Networx recognizes this. In both the Universal and the

Enterprise Networx component procurements, bidders are required

to provide DSL and cable services. However, in both procurement

processes, satellite broadband stands as an optional offering. This

does not make sense for the government as a customer, either

today or over the projected duration of Networx. Nor does it reflect

the reality of today’s and tomorrow’s communications environment.

Regardless of claims, hopes or even spin, terrestrial broadband

technology such as DSL is simply not available to every consumer,

business or government location throughout the United States.

Satellite broadband is not a niche technology nor an emerging

one. It is here. It is real. It is reliable. It is everywhere. It is in

wide-use in commercial, consumer and government markets, and

its use will grow significantly over the coming years. Over 20 million consumers appreciate satellite-delivered TV, and these numbers are growing rapidly as people are embracing new high-definition technologies. Already today more than a quarter of a million

Americans rely on satellite broadband communications at home,

and these customers primarily reside in rural and suburban areas

where DSL and cable are not available.

A further 200,000 business locations rely on satellite broadband

for mission-critical communications. Hughes alone transports over

61⁄2 million credit card transactions each day across its satellite

Networx. If you are a business or a government agency, large or

small, satellite gives you the communications capabilities that the

21st century, commerce, and egovernment demand: high speed,

high quality service and availability everywhere.

Critical large-scale business operations depend on satellite communications. Chances are that you as individuals benefit from satellite communications every time you fill your car with gas. Over

90 percent of all gas stations in all 50 States of virtually every

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major oil company employs satellite communications at the pump

for the electronic transaction purposes and in the back office for

stock control and monitoring. The retail industry, the hospitality

industry, the automotive industry, the financial services industry,

the broadcast industry all rely on satellite broadband. Why should

government be any different? Well, it isn’t. Government departments and agencies, including, among many others, Agriculture,

Interior, Homeland Security, the Department of Defense, the National Weather Service, and the Postal Service, are all using satellite technologies and services for day-to-day Enterprise applications.

Also remember that, as a back-up network, satellite communications is essential in a world where heightened national and homeland security risks are ever present, as well as natural disasters.

As an example, in Hendry County in Florida last year, hard hit by

four hurricanes, the county director of operations coordinated all

county activities for 4 days from his home using HNS’s

DIRECWAY broadband satellite communications services. The

landbased communications network was completely incapacitated

by the weather for those 4 days.

Satellite broadband is also the most portable of technology

choices, and we have supported many emergency situations, such

as the search for parts of the space shuttle Columbia with small,

portable, fly away units.

My point with these examples is this: Satellite communications

is a viable technology. It is widely deployed. It is deployed in consumer, commercial and government sectors, improves communication for primary communications, for backup and continuity of operations function as well as for audio and video applications and

others.

If Networx requires broadband technology, it should require all

technologies now in wide commercial and government deployment.

Satellite broadband offerings should stand side by side with DSL

and cable in this procurement, and satellite broadband is not, nor

should it be, optional.

Now, I know that Networx or rather the GSA procures satellite

through other contract vehicles, but our point is this is the most

important telecommunications procurement for government as we

go forward, and it is essential that satellite broadband is there

alongside all of the other technologies.

Mr. Chairman, thank you very much.

[The prepared statement of Mr. Cook follows:]

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Chairman TOM DAVIS. Thank you very much.

Ms. Gowen, you may be our last speaker.

And, Mr. Baroni, we may need to go vote.

If it is agreeable, we will recess for an hour, because we have a

series of votes and everybody can get some lunch, and we can wind

it up, and we can do questions.

Can everybody do that on their schedule?

You will be our final speaker, and then, Mr. Baroni, you will

have an hour to prepare your testimony.

STATEMENT OF DIANA GOWEN

Ms. GOWEN. Good afternoon, Chairman Davis, and members of

the committee. Thank you for the opportunity to be here. I am

Diana Gowen, president of Broadwing Government Solutions,

Broadwing Communications.

Broadwing, while small relative to legacy carriers here today, is

a robust, wholly owned, all-optical, nationwide network. Because of

our advanced technology and size, we are nimble and innovative in

ways some of the legacy carriers cannot be. So we applaud GSA for

showing clear vision in creating an Enterprise version of Networx

to improve the government’s access to new technologies. While a

new entrant in the Federal space, it provides advanced networking

solutions to very sophisticated customers such as General Electric,

AT&T Wireless and Bank of America. They entrust their missioncritical Networks to us.

However, in spite of the trust those large commercial customers

place in us, we approach Networx with some trepidation. The risks

are large, and the market uncertain but, more critically, we see an

uneven playing field. The GSA has been working for 2-plus years

on this acquisition and has very consistently sought council from

all quarters, and there are marked changes that have resulted. Yet,

some fundamental issues remain: The competitive playing field is

not level. Universal, while it is the continuity of service contract,

is unduly favored in many ways. The MRGs, fair consideration, the

ability to modify the contract early on, fair opportunity or consideration across two separate and unequal contracts is our greatest

concern.

The major objective for Universal is continuity of service, and a

major objective for Enterprise is new and innovative technological

solutions. Because of the agency’s well-founded concerns with continuity of service, the dominant contract vehicle in all probability

will be Universal, and agencies could miss opportunities to avail

themselves of creative technological solutions when upgrading their

networks.

Consider the case of a new innovative network service, QPLS, offered only by Enterprise providers, and one of the Universal providers, in this case the agency’s incumbent carrier. The agency

could either provide the incumbent a sole-source award or abandon

its incumbent and issue a task order under Enterprise. A solesource award certainly would not promote the benefits of competition. But, at the same time, the incumbent, if able to provide,

should be able to compete with the Enterprise bidders.

Networx should be changed from two separate and unequal contracts to one, either conceptually or in reality, by adopting some of

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the following approaches: Structure the contract along the lines of

the Millennia Light and Connections, or GSA could administratively direct an agency to consider all network awardees, regardless

of whether they are Universal or Enterprise. The current FTS 2001

and MAA contracts offer a good example. JUTNET, AT&T, and

Qwest, MCI and Sprint all competed. AT&T and Qwest were MAA

awardees, and Sprint and MCI were FTS 2001 awardees. Networx

could adopt a version of this strategy to broaden the competitive

playing field during the fair opportunity competitions, or GSA

could approach the Office of Federal Procurement Policy and request a modification or exception to the Federal acquisition regulations.

We have all recommended that the government accept commercial capabilities and eliminate many of the noncommercial requirements, yet many agencies remain firm in their noncommercial desires, so that GSA should pay for the unique, government-only development through special cleanse or increased revenue guarantees. If GSA chooses the MRG path, then the MRGs are too low for

Enterprise. The operational support requirements are exactly the

same for both Enterprise and Universal, and there is room to expand the MRGs, since the combination of the proposed MRGs today

is less than 1 year’s revenue under the current FTS 2001 contract

and well below the government’s estimates of how much will be

spent under this program.

Our last concern is forbearance from modifications to the Enterprise contracts for the first 24 months. These are the innovation

contracts, yet Universal awardees will be allowed to modify their

contracts.

The contract modification process under FTS was successfully

streamlined; the number of mods negotiated doubled on an annual

basis, so I think GSA knows how to modify contracts. Tech change

is not going to slow down for 2 years, and therefore, both Universal

and Enterprise should be able to modify their contracts as necessary.

So Broadwing is eager to work with you, Mr. Chairman, and the

members of the committee and with the GSA to help bring about

a fair and balanced competitive environment for Networx. Thank

you.

[The prepared statement of Ms. Gowen follows:]

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Chairman TOM DAVIS. Thank you very much.

We are going to recess now. It is 1 p.m., we will come back here

at 2 p.m., give everybody a chance to eat lunch except for you, Mr.

Baroni. I know you will be preparing your testimony. Thanks.

[Recess.]

Chairman Tom DAVIS. Well, Mr. Baroni, have you had enough

time to prepare your remarks?

Mr. BARONI. I think so.

Chairman Tom DAVIS. Well, we’re ready—at least I’m ready.

STATEMENT OF GREG BARONI

Mr. BARONI. Well, Mr. Chairman, many thanks for the opportunity to appear before you today to share Unisys’ views on GSA’s

proposed government-wide telecommunications program, Networx.

My written testimony, which you’ve already included in the formal record, highlights Unisys’ best practices in the telecommunications and networks services, the challenges facing the current

legacy procurement vehicles, such as FTS2001, our analysis of the

Networx draft RFP and recommendations to improve Networx services.

Unisys is uniquely qualified to be a key partner in this acquisition, and I believe, given the fact that we are a major global solutions provider to 9 of the top 10 telecommunications organizations—and I say that recognizing that it’s rapidly dwindling—we

are, in our view, very expertise in this area.

In addition, we’ve been a global leader in delivering highly complex managed services and network services, both to the private

and the private sector, under performance-based contracting arrangements, the most notable of which is the Transportation Security Agency, where we established an innovative approach to link

our performance directly to mission outcomes.

Let me briefly outline the challenges associated with the current

network or the legacy network contracts and the need for transformation.

Current procurement vehicles typically provide legacy voice and

data services that traditionally have been offered by the commodity

vendors who supply hard-wired physical networks and are not wellsuited to deliver converged communications.

Unisys believes that the GSA Networx contracts should be a key

enabler of this transformation that balances world-class services

with innovation in a cost-effective manner. Networx must address

these challenges faced today with the FTS2001 contract, such as

access to a limited number of direct commodity telecom providers

unable to exploit full convergence, the inability to access valueadded services, and, of course, the billing issues and the lack of

flexibility in reducing pricing over time.

As you requested, and I’m sure you’ve surmised by now, we have

a few comments on the draft Networx RFP. First, for the Universal

contract, as proposed, a robust network footprint in competitive

pricing will be the minimum required for a winning proposal. Because systems integrators and outsources typically do not own the

underlying assets, and because margins are typically razor thin on

these kinds of awards, we believe it’s unlikely that modern transformational service providers are in a position to make a competiVerDate 11-MAY-2000 10:03 May 09, 2005 Jkt 000000 PO 00000 Frm 00180 Fmt 6633 Sfmt 6633 D:\DOCS\20144.TXT HGOVREF1 PsN: HGOVREF1
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tive bid relative to traditional—to large traditional telecommunications service providers.

Second, for the Enterprise contract, significant impediments still

exist because of the complex billing and back-office system requirements for Networx. Billing and back-office systems requirements

appear to be similar for both Universal and the Enterprise procurements. In both cases vendors are being asked to conduct an operational capability demonstration of their operation support systems

that will require very robust and government-specific requirements, thereby adding significant upfront investment for an opportunity that in the case of the Enterprise solicitation appears to

have limited initial opportunity for significant revenue.

Third, the minimum revenue guarantee which, admittedly, was increased from $25 to $50 million still offers little motivation to

move customers from the Universal to the Enterprise contract.

Given bid proposal and investment requirements, the business case

for a systems integration to prime the contract is, at best, very

challenging.

Fourth, an effective transition to the Networx contracts will be

vital. As pointed out by GAO, the transition elements will need to

be specifically taken into account to include the transition from the

FTS contract to the new Networx contract, from circuit centric solutions to IP and value-added solutions, and from circuit billing

and support systems to a more managed services billing and support system.

Finally, it appears GSA is looking for more next-generation and

modern solutions. It seems, though, that the Enterprise contract favors legacy firms—i.e., the carriers—that can provide robust and

cost-efficient network connectivity solutions because the majority of

the core services are, in fact, connectivity centric rather than complex value-add services.

In summary, Mr. Chairman, Unisys is very supportive of the government’s approach and strategy for telecommunication and network services. We acknowledge the significant progress GSA has

made, and emphasize the following recommendations.

The Networx contract should be designed with a transformational approach, balancing the value of added services to the

clients with optimal price points, as opposed to being merely a commodity-priced vehicle favoring the carriers.

Second, increase the minimum revenue guarantees for the Enterprise contract to significantly higher than $50 million so that the

incentives to use the contract are in place. Further, specific minimum revenue guarantee goals in the first 2 years of the contract

will greatly increase the incentive for innovation and cost-effective

long-term solutions.

Third, reduce the burden on contractors by simplifying the overall billing requirements, limiting the requirements during the operational capability demonstration to required core services, and only

those services that the vendor plans to implement in the initial 2

years of the procurement.

And finally, the government should consider options such as performance-based managed services contracting and critical security

services by not limiting the Networx contracts to vendors with legacy and commodity telecommunications services. Also, we recVerDate 11-MAY-2000 10:03 May 09, 2005 Jkt 000000 PO 00000 Frm 00181 Fmt 6633 Sfmt 6633 D:\DOCS\20144.TXT HGOVREF1 PsN: HGOVREF1
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ommend that greater weight be given to the evaluation process to

critical value-added services such as security.

Thank you for the opportunity and inviting us to share observations and recommendations. I look forward to any questions you

might have.

[The prepared statement of Mr. Baroni follows:]

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Chairman Tom DAVIS. Well, thanks for bearing with us.

Let me start the questioning.

Mr. Scott, you state that Networx should be reconfigured so that

Universal and Enterprise provide different tracks. Under your

plan, as I understand it, Universal would maintain its current

form, but Enterprise would be transferred to a next-generation network, information-sharing, solutions-based model, which I think

that’s an interesting concept. How long do you think it would take

GSA to transform the Enterprise strategy into a viable next-generation network acquisition vehicle?

Mr. SCOTT. Are you saying to change the contract requirements?

Chairman Tom DAVIS. Right.

Mr. SCOTT. I would think they should be able to do that in 3 or

4 months, at the max.

Chairman Tom DAVIS. OK. Could they do that while the Universal acquisition goes forward?

Mr. SCOTT. Well, I think that could happen, and perhaps even

Universal could go forward as scheduled; but I have some concern

about getting Universal in place and then the other one drags on,

I have some great concern about that.

Chairman Tom DAVIS. I do, too.

How do you think that the next-generation network could be different from what FTS provides today?

Mr. SCOTT. As I said in the testimony, it’s focused more on solutions, which you’ve heard from some of the other speakers here

today. And it will supply solutions, total solutions, and not just a

telecommunications component. The telecommunications component would be a part of it, along with the other elements of the

total solution; the total solution being to provide some sort of capability from user to user, a total capability which provides information sharing among them.

Chairman Tom DAVIS. OK.

Now Mr. Bittenbender, do you think your company is likely to

participate in Networx if Enterprise were not restructured as you

suggest?

Mr. BITTENBENDER. Do I think we would? We would not be able

to be prime in the contract. We would, you know, we would have

to presume that we would take a subcontractor role with one of the

components.

Chairman Tom DAVIS. What are the special technologies that you

all would bring to a procurement like this?

Mr. BITTENBENDER. Well, on top of bringing innovation, we bring

the ability to manage large numbers of disparate services and

bring them together into a coherent service delivery mechanism.

Chairman Tom DAVIS. So it’s more of an integration role?

Mr. BITTENBENDER. Yes.

Chairman Tom DAVIS. OK.

Mr. Courter, based on your firm’s unfortunate experience under

the GSA’s MAA program, you expressed concern about whether

GSA has realistically estimated the agency requirements in

Networx, so that was an eye opener, I think, to some of our members.

Do you think that the $50 million MRG in Enterprise is realistic?

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Mr. COURTER. I think it’s too small. You’re talking terms, it’s my

reading of what I have read is $50 million, it could be, as the testimony was set up——

Chairman Tom DAVIS. Cut up five ways. Five contractors.

Mr. COURTER. Over 5 years? It’s minimal, I mean, it’s not—and

if you add the cost of preparation and that which you need as far

as back office to support this, it’s probably not something anybody

could make money on. And my greatest fear right now is that I

know there’s going to be crossovers, so the large enterprises, you

know, the large incumbent carriers who are going to probably take

the whole thing and nothing will have changed.

Chairman Tom DAVIS. Mr. Cook, you make a good case for the

treatment of satellite broadband equal to DSL and cable in the

Networx procurement. I know it’s hard to forecast, but do you see

satellite broadband 3 years from now in consumer, commercial, and

government markets?

Mr. COOK. Very definitely, yes. We in the industry are spending

a lot of efforts, a lot of R&D money, continuing to develop the technology. We’re continuing to see the performance of the services increase in terms of speed and capabilities. The costs are coming

down. We’re making more efficient use of the spectrum that we’re

using.

And certainly in about 2 years’ time we will have a brand-new

type of satellite to use as well. We’re building something called

Spaceway, which, again, in terms of spectrum efficiency, is about

10 times more efficient than the sort of satellites we’re using today;

and that in itself will help us to drive down costs and so on. So

we definitely see that the market for satellite broadband is going

to be significantly bigger in 2 or 3 years’ time than it is today.

Chairman Tom DAVIS. If you look at the draft RFP as it is today,

would you consider participating as a prime under Enterprise the

way it is today, or would there have to be provisions probably——

Mr. COOK. I think the answer is we would like to, but it’s very

difficult today for us to participate as a prime for many of the reasons we’ve heard, all the way through from billing systems through

to coverage of the services and so on.

Chairman Tom DAVIS. Now, Ms. Gowen, let me just ask you for

your company. You talked about a number of changes that GSA

could make in Networx, Enterprise, raising the minimum returns,

allowing Enterprise and Universal awardees to compete for agency

customer requirements, permitting firms to offer only on Universal

and Enterprise, but not both. Which is most important for your

firm to keep you in the bidding?

Ms. GOWEN. The most important thing for us is to get a level

playing field post-award; and to me that means that the fair consideration process has to be different than the way it’s outlined in

the draft. An Enterprise awardee who is qualified for the offer, as

well as the Universal, should both be able to compete, just as I

cited in the example of JutNet with the MAA providers, as well as

the FTS providers. And our position is if the GSA can figure out

administratively how to adjudicate fair consideration across both

contracts, then we are a happy bidder of Enterprise.

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I would add that it would be nice to see higher MRGs if we’re

going to have all these noncommercial requirements remain in the

contract.

Chairman Tom DAVIS. Right. I think a couple of previous panels

ago that Commissioner Perry talked about knocking those requirements down, and that obviously—I don’t know what the correct

mix is, but that would make it a little more palatable, I gather?

Ms. GOWEN. Well, right now in just billing alone there are 194

requirements; 54 of them are noncommercial requirements, just to

give you an example. So if we get rid of the 54, then I think we

could all be happy.

Chairman Tom DAVIS. Now Mr. Baroni, both of the Networx

RFPs include managed network services among the list of mandatory services. Could you provide the same types of managed services you offer to private customers using these provisions?

Mr. BARONI. At this point, no; because again, the requirements,

as was just pointed out by Diana, that even if you looked at things

as simple as the billing system, the complexity added to that almost becomes prohibitively expensive to get in that game.

You know, the thing that I’m concerned about is that when you

look at the way the RFP is currently drafted, it is requirement-centric, not outcome-centric. And when you think about managed services, you’re really oriented much more toward a performance-based

contracting model; and that’s really not embedded in this current

RFP.

Chairman Tom DAVIS. I asked this of the previous panel—we

heard today that location-specific traffic volumes won’t be made

available until mid-to-late May; how does this impact your ability

to develop your proposals?

Mr. BARONI. Can you repeat that again?

Chairman Tom DAVIS. Sure. We heard the location-specific traffic

volumes are not going to be available until mid-to-late May; how

does this impact your ability to develop your proposals?

Mr. BARONI. Rather significantly, because you really need to—in

order to properly price any solution, you really have to understand

scope. And so that becomes a necessary ingredient.

Chairman Tom DAVIS. OK. I assume everybody is on the same

wavelength——

Ms. GOWEN. I have a slightly different position there.

You know, Enterprise is principally a data-centered requirement

set, it’s Universal that has the voice requirements in them. And it

is absolutely required, in order to do a voice bid, that you have all

the traffic data, the to’s and the froms. In a data-centric environment I think they probably have the right data for us today. If they

don’t, then we all really need the data before you can price your

proposal and develop your solutions.

Chairman Tom DAVIS. OK. Mr. Cook.

Mr. COOK. Again, I think I would agree. The only, again, addition maybe I would make to it is this is a long-term contract, and

traffic patterns change and data changes. So to some extent the

proposals that we all make are going to have to take into account

those changing patterns over time. What we need to do is have a

real good understanding of where we start from.

Chairman Tom DAVIS. Mr. Courter.

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Mr. COURTER. Yes, I 100 percent agree, you need that data in

order to price your bid properly.

Chairman Tom DAVIS. Or you end up with the Atlanta situation.

Mr. COURTER. Exactly.

Mr. BITTENBENDER. As an integrator it’s critical to us, because

we don’t deliver telecommunications services, we choose the appropriate company that delivers them and then put all those appropriate companies together. Not knowing what the geographic footprint is does not give us the ability to choose what we believe to

be the best supplier.

Chairman Tom DAVIS. So basically the government is not going

to get their best offers——

Mr. BITTENBENDER. The longer they wait, I believe that’s true.

Chairman Tom DAVIS. OK. Mr. Scott.

Mr. SCOTT. Mr. Chairman, as he says, going beyond just the capability of bidding, it is seriously impacting the teaming process because people can’t decide whether they want to bid or whether they

want to prime or whether they want to sell. That is, along with the

evaluation stuff, affecting that decision process.

Chairman Tom DAVIS. Anyone else want to add anything? Basically my questions as we walk through this thing.

Mr. BARONI. I guess I would say under the current construct, I

can’t imagine any integrator prime in this bid. And maybe, Don,

you may say otherwise, or Dave——

Chairman Tom DAVIS. That’s what I read from hearing the way

it’s currently structured. And we want to have integrators, obviously, looking at this thing. OK.

Mr. COURTER. Congressman, Mr. Chairman, if I could just add

one further thing. I think it was Congresswoman Maloney was

talking about on September 11th, communication redundancy. And

as you know, and I have spoken to you about it, Congress did pass

legislation to start the process of requiring redundant connections,

physically diverse redundant connections for safety reasons in certain Federal buildings. And I would hope that the specifications

would give GSA the ability in certain circumstances that require a

redundant connection for safety purposes.

Chairman Tom DAVIS. That’s a good point. And I will make sure

that we emphasize that with GSA.

OK. Anything else?

I want to thank you all for being patient and sitting through

this. And the meeting is adjourned.

[Whereupon, at 2:42 p.m., the committee was adjourned.]

[The prepared statements of Hon. Dan Burton, Hon. Jon C. Porter, Hon. Elijah E. Cummings and additional information submitted for the hearing record follows:]

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