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44–262 CC 1997

OVERSIGHT OF THE POST-FTS2000

TELECOMMUNICATIONS CONTRACT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, 

INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON 

GOVERNMENT REFORM 

AND OVERSIGHT 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

APRIL 30, 1997

Serial No. 105–46

Printed for the use of the Committee on Government Reform and Oversight

(

(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT 

DAN BURTON, Indiana, Chairman 

BENJAMIN A. GILMAN, New York 

J. DENNIS HASTERT, Illinois 

CONSTANCE A. MORELLA, Maryland 

CHRISTOPHER SHAYS, Connecticut 

STEVEN SCHIFF, New Mexico 

CHRISTOPHER COX, California 

ILEANA ROS-LEHTINEN, Florida 

JOHN M. MCHUGH, New York 

STEPHEN HORN, California 

JOHN L. MICA, Florida 

THOMAS M. DAVIS, Virginia 

DAVID M. MCINTOSH, Indiana 

MARK E. SOUDER, Indiana 

JOE SCARBOROUGH, Florida 

JOHN B. SHADEGG, Arizona 

STEVEN C. LATOURETTE, Ohio 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

PETE SESSIONS, Texas 

MICHAEL PAPPAS, New Jersey 

VINCE SNOWBARGER, Kansas 

BOB BARR, Georgia 

ROB PORTMAN, Ohio 

HENRY A. WAXMAN, California 

TOM LANTOS, California 

ROBERT E. WISE, JR., West Virginia 

MAJOR R. OWENS, New York 

EDOLPHUS TOWNS, New York 

PAUL E. KANJORSKI, Pennsylvania 

GARY A. CONDIT, California 

CAROLYN B. MALONEY, New York 

THOMAS M. BARRETT, Wisconsin 

ELEANOR HOLMES NORTON, Washington, 

DC 

CHAKA FATTAH, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland 

DENNIS J. KUCINICH, Ohio 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

JOHN F. TIERNEY, Massachusetts 

JIM TURNER, Texas 

THOMAS H. ALLEN, Maine 

HAROLD E. FORD, JR., Tennessee 

———

BERNARD SANDERS, Vermont 

(Independent) 

KEVIN BINGER, Staff Director 

DANIEL R. MOLL, Deputy Staff Director 

JUDITH MCCOY, Chief Clerk 

PHIL SCHILIRO, Minority Staff Director 

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY

STEPHEN HORN, California, Chairman 

PETE SESSIONS, Texas 

THOMAS DAVIS, Virginia 

JOE SCARBOROUGH, Florida 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

ROB PORTMAN, Ohio 

CAROLYN B. MALONEY, New York 

PAUL E. KANJORSKI, Pennsylvania 

MAJOR R. OWENS, New York 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California 

J. RUSSELL GEORGE, Staff Director and Chief Counsel 

MARK BRASHER, Professional Staff Member 

JOHN HYNES, Professional Staff Member 

ANDREA MILLER, Clerk 

DAVID MCMILLEN, Minority Professional Staff Member 

MARK STEPHENSON, Minority Professional Staff Member 

(III)

C O N T E N T S 

Page 

Hearing held on April 30, 1997 .............................................................................. 1

Statement of: 

Barram, David J., Administrator; and Robert Woods, Commissioner, Federal Telecommunications Services, General Services Administration ...... 6

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

Burton, Hon. Dan, a Representative in Congress from the State of Indiana, letters referred to .................................................................................. 20

Maloney, Hon. Carolyn B., a Representative in Congress from the State 

of New York, prepared statement of ........................................................... 12

Stevens, Hon. Ted, a U.S. Senator from the State of Alaska, prepared 

statement of ................................................................................................... 3

Woods, Robert, Commission, Federal Telecommunications Services, General Services Administration: 

Information concerning awards ................................................................ 9

Information concerning language ............................................................. 32

Letter from the Industry Advisory Council ............................................. 17

(1)

OVERSIGHT OF THE POST-FTS2000 

TELECOMMUNICATIONS CONTRACT 

WEDNESDAY, APRIL 30, 1997 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, 

INFORMATION, AND TECHNOLOGY, 

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT, 

Washington, DC. 

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

2154, Rayburn House Office Building, Hon. Stephen Horn (chairman of the subcommittee) presiding. 

Present: Representatives Horn, Sessions, Davis of Virginia, 

Maloney, and Davis of Illinois. 

Ex officio present: Representative Burton. 

Staff present: J. Russell George, staff director; Mark Brasher and 

John Hynes, professional staff members; Andrea Miller, clerk; and 

David McMillen and Mark Stephenson, minority professional staff 

members. 

Mr. HORN. A quorum being present, the Subcommittee on Government Management, Information, and Technology will come to 

order. I apologize for the delay, but we are having a meeting of the 

Conference at this time, and a lot of us had to be tied up there. 

The drafting and negotiating stage of the Post-FTS2000 telecommunications process is finally coming to a close, or so we hope. 

Today, we will hear from the two people who have been intimately 

involved throughout the long process, who can tell us whether or 

not that is the case. 

In the past, I have noted that a high level of attention to this 

matter is clearly warranted. This is a multibillion dollar procurement. The General Services Administration must do what is in the 

best interests of the taxpayers. GSA observed in its December 1996 

report to Congress that the future environment is uncertain. 

Maybe we can learn today whether this uncertainty still exists. 

Now that we are on the verge of the new contract, we look forward to hearing from the key agency on how it maximizes competition and leaves the Government the flexibility it needs in order to 

take advantage of the quickly changing telecommunications environment. We are going to hear from David Barram, the acting Administrator of the General Services Administration. After a successful career in Silicon Valley, Mr. Barram has joined the Department of Commerce as Deputy Secretary, Chief Operating Officer. 

He has been acting Administrator at the General Services Administration since March 4, 1996. 

2

Mr. Barram is accompanied by Robert Woods, who is Commissioner of the Federal Telecommunications Service of the General 

Services Administration. Mr. Woods knows this issue backward 

and forward. He has appeared before this committee a number of 

times, and we salute his diligent efforts on the Post-FTS2000. 

A word of thanks is also due to Chairman Burton, who will probably be along shortly when the Conference adjourns. He has devoted careful attention to this issue over the past several months. 

We welcome our distinguished witnesses. As you know, under the 

traditions of this committee, we would ask all witnesses to be 

sworn in. So if you will raise your right hands? 

[Witnesses sworn.] 

Mr. HORN. Thank you. We are inserting in the record at this 

point a statement of Senator Ted Stevens, who cannot make it. 

Without objection, that is inserted in the record. 

[The prepared statement of Hon. Ted Stevens follows:]

3


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4


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6

Mr. HORN. Is there an opening statement from Mr. Davis of Illinois? 

Mr. DAVIS OF ILLINOIS. No, thank you. 

Mr. HORN. I thank the gentleman. 

We will proceed then, however you would like, Mr. Administrator. 

STATEMENTS OF DAVID J. BARRAM, ADMINISTRATOR; AND 

ROBERT WOODS, COMMISSIONER, FEDERAL TELECOMMUNICATIONS SERVICES, GENERAL SERVICES ADMINISTRATION 

Mr. BARRAM. Thank you Mr. Chairman, and good morning. If I 

could make an opening statement, I would appreciate it. 

On March 12, you initiated a process that had as its purpose 

achieving a consensus strategy that would allow the Post-FTS2000 

program to proceed. You asked us, under your leadership, to meet 

with industry to forge this consensus. Moreover, you requested this 

be accomplished within a 30-day period so as to minimize the effects of potential delay to the program. 

Thank you for that, by the way. 

Mr. Chairman, I am here to report to you on the outcome of this 

process. At the outset, please permit me to offer a perspective on 

what is ahead for us all. 

Nothing I know will better describe the new world order than 

how we use and how we cope with telecommunications. Everything 

we do in our regular work, and probably our lives, will be affected 

by the changes ahead. We have been very successful with FTS2000. 

It has given us excellent services and great prices. 

The next step would not be possible without the platform we 

built with FTS2000. But I believe the next step, which is FTS2001 

and the MAA, will be exciting, unpredictable, satisfying and challenging. Because we all want a Government that works better and 

costs less, this is the right step to take. We will save money, provide productivity-enhancing services and give Government employees the tools to do their jobs as this country turns or as we cross 

the bridge to the 21st century. 

You know that famous bridge; it is a big deal to us and to the 

industry. Companies will merge, make alliances, get in and out of 

markets, innovate and generally keep all of us on our toes. If history is our guide, we will all benefit as these changes occur. 

Mr. Chairman, I believe the consensus-building process of the 

last month has worked and that we have achieved success. Under 

the leadership of this committee, representatives from a broad 

range of industry, the Interagency Management Council, various 

congressional committees and the General Services Administration 

attended the consensus development session. Collectively, we reviewed and considered the concerns and comments of industry and 

the FTS users. There was considerable discussion on the detailed 

provisions of strategy, and my staff provided clarification on these 

provisions as needed. 

Based on the comments and suggestions offered at the consensus 

development session, we formulated enhancements to the February 

1997 refined Post-FTS2000 program strategy. These enhancements 

were incorporated as specific changes to the FTS program statement of principles and were presented in writing to the industry 

7

and Government representatives on April 4, 1997. A followup discussion among all parties was held on April 7, to explain the 

changes and seek additional comments. 

Copies of the statement of principles and the supplement developed following the consensus development session have been provided to the committee. I am satisfied, Mr. Chairman, that the program principles, as supplemented by the consensus development 

process initiated at your direction, continue to allow the future 

FTS2001 and metropolitan area acquisition contractors to move toward offering true end services. As of this moment, these final provisions are being incorporated within the contractual language of 

the solicitation documents and we are prepared to proceed with release of those documents on schedule this Friday, May 2. 

Mr. Chairman, the concerns and comments of all interested industry and user parties have been heard. An important illustration 

of this give-and-take process occurred when industry suggested 

that we incorporate a prequalification process within the MAA program to increase the speed and enhance the competitiveness with 

which MAA contracts may be awarded. That was an excellent suggestion, Mr. Chairman, and we have heard industry and incorporated this process. 

With this suggestion and others, I believe we now have a strategy that is in the best interests of the American taxpayer, the Federal Government users, and the industry providers. In consultation 

with the attending congressional staff, we believe it is time to release the final FTS2001 solicitation and a draft MAA solicitation 

on May 2. Release of the FTS2001 RFP should ensure that the 

FTS2001 contracts are awarded and transition planning is under 

way prior to expiration of the current FTS2000 contracts. As we 

move forward, we will continue to receive and consider industry 

comments and questions as a normal part of the Federal acquisition process. 

There are times in life when we need to get on with it. This is 

one of those times. We have been listening and we will keep on listening. We have insisted on broad, deep and fair competition, and 

we will keep on insisting. 

Mr. Chairman, we have constantly aimed to achieve innovation, 

and we will keep on aiming for that innovation. Again, let me 

thank you and the committee for your leadership during the March 

hearings and the April meetings. Bob Woods and I will be happy 

to answer any questions you may have. 

Mr. HORN. We thank you for that statement. 

Mr. Woods, do you have anything else to add to that? 

Mr. WOODS. No, Mr. Chairman, I don’t. 

Mr. HORN. Let me just go through a few questions. We are going 

to take 10 minutes to a side; I don’t think this is going to last too 

long. 

Just for the record, does the current strategy you have described 

represent the acquisition structure which will best promote Federal 

interests and get the best deal? 

Mr. WOODS. Mr. Chairman, I believe that it will. We have 

worked hard with the industry and with our customers, and we believe that the refinements will add. So we are quite confident that 

the enhancements made serve the interests that were broad, and 

8

that we worked those in a way that I think will serve this Government well. 

I think the Administrator said it well when he said we have got 

a good base and the current program has been successful. But if 

we don’t change in this environment, the next generation won’t be. 

So we have had to change from a base of success, and sometimes 

that is awfully hard to do. 

When you fail, change is fairly easy. We have been successful, 

and this change has come in consultation with a lot of interested 

parties. So we have a lot of confidence in what has been done. 

Mr. HORN. Have any segments of the industry expressed reservations regarding the current strategy, and what are their concerns? 

Would you like to respond to them? 

Mr. WOODS. I think as we go along in this, it is not so much 

whether they express reservations as it is a matter of dimension. 

They agree with most of it, but there are some parts of it they don’t 

agree with. You are always going to get some of that. If I am representing my organization effectively, whether I am in industry or 

in Government, I am always going to want the part that is good 

for me. 

My job and the Administrator’s job is to represent the Government’s interests well. As we have gone through this, I don’t think 

anybody got the whole loaf, but I think they all got something out 

of it; and I think we will always have some reservations, and there 

are always going to be some fine points that have to be worked out. 

That is going to happen. 

Mr. BARRAM. Let me add just one comment. The Federal Telecommunications Act and our proposals here are both designed to 

respond to an incredibly different environment, where long distance 

providers can offer local service and local can offer long distance, 

and there are all kinds of new technologies. 

So this is a time of incredible change. It would be illogical not 

to have everyone wondering just how they are going to play in that 

new environment. 

What we have tried to do is concoct a program with all kinds of 

consultation that gives everybody a chance to compete, which is 

what we found really works, and that is no surprise, and that we 

end up with the best service for our customers, the Federal Government agencies. 

Mr. HORN. When do you expect to make the awards for the 

FTS2001 contract? 

Mr. WOODS. Right now, we are looking at early next year, next 

calendar year. We have not announced a formal time on that, although our web page does show dates for those, and we could get 

you, for the record, those exact dates. 

Mr. HORN. Without objection, it will be inserted at this point. 

[The information referred to follows:]

9


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10

Mr. HORN. When do you anticipate migrating the traffic from the 

incumbents to the FTS2001 winners? 

Mr. WOODS. After the award of the new 2001. At that stage, you 

have really got to sit down and take stock. You have to have a 

sense of what you have got and who the current providers are and 

who the new providers are going to be. 

At that stage, we anticipate it is going to take anywhere from 3 

to 4 months to put together a transition plan; that is ambitious. We 

have staff working to do everything they can do without knowing 

who the players are. And then, from that point on, from that 3- or 

4-month planning period, it will take, we think, about 12 months 

to do the actual transition. 

Mr. HORN. Can you predict how long distance rates will go under 

the proposed FTS2001 contract? 

Mr. WOODS. How far they will go in terms of reduction? 

Mr. HORN. I am sorry, predict how low long distance rates will 

go under the proposed FTS2001 contract? 

Mr. BARRAM. Don’t look at me. Zero. 

Mr. WOODS. I hope very low. I think the economics of this business are that you have very high capital investment and you have 

very low operational unit costs. So as you buy volume, your rates 

would go down substantially. 

We have not predicted at this point, Mr. Chairman, what might 

happen, but my personal belief is that the industry is sitting on top 

of tremendous capacity that is unsold, and I think as we begin to 

sell the rest of the capacity, that some areas, like switch voice, will 

begin to decline significantly. When we say 5 cents a minute and 

2 cents a minute on-Net, I still believe those rates are going to 

come down. 

Federal agencies—and I spent 20-some years, 25 years, in Federal agencies as a customer of this type of service; I still believe 

that the agencies are looking for declines in those kinds of prices, 

and they are either going to get them from us or from other 

sources. So I believe the expectation of customers is for continuing 

declining prices. 

Mr. HORN. Just as the last general question, perhaps a softball 

question, how did you arrive at the changes encompassed in the 

current strategy? 

Mr. WOODS. Well, as we went through it—and I think both of us 

have something to say on that—but as we went through the development of the strategy some 3 or 4 years ago, we have genuinely 

tried to bring the customer into this process as deeply as we can, 

and it is in fact part of how I got to be in this job; I sort of got 

lured into being one of those customers who participated heavily. 

And the customers 3 or 4 years ago said, your main requirement 

in the next generation is flexibility. They were concerned at that 

time about the great changes that were coming. 

So we got here by trying to read where the industry is going; 

and, quite frankly, the changes have been significant, as you know, 

over the last 18 months. As we have listened to different groups 

and moved ahead with interpretations of the Telecommunications 

Reform Act and others, we made those changes based on the best 

interpretations we could find from the people that actually were 

there and actually worked it. 

11

So it happened by nature, its very nature of consultation with 

Congress, with the industry, and with customers. 

Mr. HORN. When you look at the contract, is there a thought on 

what is the total limit of time of that contract? Or do you think 

smaller time periods will permit more flexibility in taking advantage of technology? How do you deal with that problem? 

Mr. WOODS. My personal belief is that—and this sounds like a 

very Washington answer—you have got to do both. There are some 

services in which you need long-term stability. 

Switch voice is going to be here in some form forever. Will it be 

here in the form exactly as we have today? Probably not. So for 

some things, that kind of service, especially advanced 800 routing 

where you call in to the Social Security office at 5 o’clock in the 

afternoon and it starts switching you to different offices that are 

still open in order to save money and still provide the service, those 

are very complicated arrangements. You can’t take agencies in and 

out of those contracts at the drop of a hat. 

There are other services, we believe, that should be much more 

dynamic and much more responsive. So we really have to mix that. 

We can’t take one silver bullet and hope for the best. We have 

got to go after the contract length that matches the product. As the 

Administrator said, we found competition works and we are going 

to continue to bring that to bear; as we move ahead, we will bring 

new players in. 

Mr. BARRAM. Let me add one thought. I think one of the powerful 

and exciting opportunities we have ahead of us is trying to keep 

some stability while we are dramatically changing the way people 

use telecommunications. I have a hard time imagining after the 

turn of the century that most of us will not be carrying our telephone with us most of the places we go and have numbers that are 

identified with us. 

This is different than we operate today. So we will have a lot of 

different kinds of switching. 

The providers who get contracts are going to have to play in that 

arena, because that is what is going to be happening. So they are 

both going to want some stability and have to be making dramatic 

changes within what they are doing. 

We are going to have a real challenge managing this, and we are 

going to have to be very focused on the services rather than facilities on our own side, so that we don’t end up with what we call 

‘‘stranded investment.’’ We want the providers to be telling us what 

the next great thing is, and there will be enough competition that 

I think we will keep getting the next great thing. 

Mr. HORN. That is very helpful. 

I now yield 10 minutes to the ranking minority member, the gentlewoman from New York, Mrs. Maloney. 

Mrs. MALONEY. First, I would like to ask that my opening statement be put in the record, as read. 

Mr. HORN. Without objection, it will be put with the rest of the 

opening statements. 

[The prepared statement of Hon. Carolyn B. Maloney follows:]

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Mrs. MALONEY. I would like to really congratulate GSA for winning one of Vice President Gore’s Hammer Awards for lowering the 

price for long distance phone calls from 27 cents a minute to 5.5 

cents per minute today. It is an extraordinary achievement and 

what is really the largest procurement contract ever undertaken by 

Government, a staggering 10-year, $25 billion contract. 

But in that process, you succeeded in lowering the cost to the 

American taxpayer, and I congratulate you. 

I would like to really ask some questions about the outcome of 

the task force that Chairman Burton put in place to reach a compromise on the final stages; and particularly I would like to talk 

about the prequalified bidders list and the use of a prequalified 

process for the metropolitan area acquisition program, which is intended to increase speed at which contracts can be awarded and to 

ensure that the telecommunications services will be subject to fair 

competition. 

First of all, how are you going to devise this prequalified list and 

how will this prequalified bidders list increase speed and increase 

competition? 

Mr. WOODS. The idea behind the prequalified list came out of the 

task force work sessions that we held up here, that Chairman Burton’s staff hosted. The suggestion actually came from the industry 

side over their concern that if every one of these procurements— and there are going to be about 20 or so, or maybe more—that it 

was going to take too long a period of time; that every time we did 

one of these, they would look 90 percent like the last one, but you 

would be going through the whole process from the start. 

The idea here is not to exclude anyone or that you get some exclusive list. It is simply to try to do some front-end work that lets 

you say that company X, that is qualified technically from a managerial standpoint in the first city certainly hasn’t lost that qualification when you get to the third city. 

So the idea was that we would develop this list, it would allow 

the Government to move fairly rapidly in getting through what is 

90 percent of the routine work that it takes to do the evaluation. 

Mrs. MALONEY. Do all the industry groups support the prequalified bidders list concept? Are they on board on that? 

Mr. WOODS. I think they are. We have heard no objection to that 

yet. Its function does not exclude anyone. 

Let’s say we have eight people, eight companies on the list, and 

a qualified company comes along and wants to bid. They can either 

get prequalified ahead of time or they can bid at the time of the 

solicitation. 

Mrs. MALONEY. So it is not anticompetitive. People can come into 

the process. 

Do you have to have certain qualifications to get on the 

prequalified list? Do you set a standard that people must reach before they can get on the list? That cuts down Government’s work, 

too, by not having to look at contractors’ bids that cannot handle 

the job. 

Mr. WOODS. That is correct. The only caveat I would see there 

is that we would not take it forever. In other words, if you get 

prequalified and 4 years later you have had doubtful performance, 

the Government has left itself the option that we may go back to 

14

a specific company and say, we would like to see you requalified 

because we have had some problems. 

But other than that, it really does make our work a lot easier. 

Mrs. MALONEY. Do you have sort of a list of qualifications to 

make this fertile to the prequalifying? 

Mr. WOODS. Yes. Essentially what we do is take the qualification 

and take everything but the specifics for the particular city, and 

they have to pass the technical marks for everything within that 

basic solicitation. 

What is happening is, they are almost doing what they do on a 

bid on a regular proposal, but they do it as though they are bidding 

to a specific city. In fact, when we bid the first one in New York, 

it is very possible that companies that come in, they will in effect 

be prequalified during that actual bidding. So we would keep them 

prequalified. 

Mrs. MALONEY. This sounds like a good solution of Government 

and private industry working together to come up with a solution 

that will solve many of the six questions we went over at the last 

hearing. 

As you know, I am interested in having GSA conduct a pilot 

project which would test the feasibility of allowing State and local 

governments to purchase telecommunications through the FTS2000 

program or any successor to it. You have been so tremendously successful for Government on the Federal level, I was thinking probably some of our localities would likewise like to benefit from your 

work in this area. 

First of all, is this something that GSA has the legal authority 

to test, without legislation? 

Mr. WOODS. Without trying to get out of my bounds and get into 

the legal arena of trying to be an attorney, the basic rules to date 

are that, under our current programs, we do not have specific authority to sell to States, and without the specific authority, we are 

precluded from doing it. 

In the next generation, 2001 and MAA, we have said in the solicitation we will sell to State, local and other Government entities as 

the law permits. So we have left our door open from a contracting 

standpoint to do this. 

I would have to tell you that not a month goes by that I don’t 

get a letter, a call, an inquiry from a State or local government 

about the use of FTS2000. 

Mrs. MALONEY. I have some draft legislation that would allow 

some pilot programs across the country for localities. I would like 

to know if you could look at it and get back to me. 

And also could you get back to the subcommittee with sort of 

general pricing data so that we can begin to gauge the possible 

benefits to State and local governments? 

Mr. WOODS. We would be happy to do so, and we have, in fact, 

run some traffic from States that compare the current prices with 

our prices. So we have actually done that on a request basis from 

several States already. 

Mrs. MALONEY. Great. 

Mr. WOODS. We would be happy to present that to you. 

Mrs. MALONEY. I would love to look at that. 

15

Mr. BARRAM. Could I add one comment? The whole idea of selling 

not just telecommunications, but a lot of stuff we are involved with, 

to States, is an important issue that I think we need to resolve in 

the next year. As you know, we are in suspension on an overall 

procurement opportunity for States to buy off our schedules; and 

so I think we need—I think it is inevitable, and we need to get 

moving on that. 

Mrs. MALONEY. Prior to the latest round of meetings, the regional Bell Operating Co.’s expressed some concern that the long 

distance companies would be able to offer local services as 

unevaluated options after winning a FTS2001 contract. At those 

latest meetings, Mr. Woods emphasized the fact that this was not 

accurate and that any options would be evaluated as contract modifications. 

How will these contract modifications be evaluated by GSA, what 

is the normal process, what is the existence of prequalified bidders, 

enhanced competition, in this process? 

Mr. WOODS. There were in fact two issues at stake when we 

talked about this. One was, you are the winner of a contract, and 

immediately that region can be opened to competition from other 

companies. In other words, if I won, what have I won? 

During the negotiations and the work sessions with industry, we 

have decided to go into a forbearance period for a year in which 

the winner of a contract has time to get on board and sell and have 

a minimum revenue guarantee. 

The idea that we would just add service without evaluating it, 

our answer on that before dealt with just what you said, that we 

would not do it without evaluating it. In effect, if we already have 

providers in an area, which is what we are talking about, and we 

are talking about other providers being offered the opportunity to 

do that, first of all, you would have to start out with the idea if 

you don’t offer better terms than we currently buy at, the Government would not have any interest in pursuing it. 

So we look at what we pay, we look around the industry and we 

do a price analysis. So we do evaluate it and we evaluate quite 

carefully. 

If we had service offered in, say, the Washington, DC, area, and 

we paid $13 a line and somebody comes in and tries to sell it for 

$16, we just will not buy. We will look at this strictly as a business. 

So we will evaluate. They are not unevaluated options. 

Mrs. MALONEY. Some people complain to my office or argue that 

the February 1997 strategy violated the Competition and Contracting Act. What is your reading of that law’s requirements in 

light of the latest revisions? 

Mr. WOODS. I believe we are on solid ground. Our counsel has 

been involved in this probably more than they wished, but we have 

been into this in great depth, and we believe we are on solid 

ground with the Competition and Contracting Act and we are prepared to move forward. 

So we have gone over this issue, we have listened to the specific 

arguments from different companies. We have sat and listened to 

the line-by-line argument, not the sort of general idea, but we have 

gone into that. Our counsel is confident that we have done what 

it takes to move ahead. 

16

Mrs. MALONEY. And when you have the final draft RFPs, will 

you make them available to this subcommittee? 

Mr. WOODS. Yes, we will, and we will make them available both 

electronically on our web site and make them available in paper, 

if needed. 

Mrs. MALONEY. Since the last meeting and the conclusion and 

the strategy that was put in place then, have you received a lot of 

statements, pro and con, on that; and, again, could the committee 

look at those statements? 

Mr. WOODS. We are happy to share any of those. We, in fact, received late yesterday from the Industry Advisory Council, which 

represents some 200 of those companies, a letter in general about 

the process; and in fact they thought it was open and worked, and 

they in fact were lauding our efforts on this. 

We have listened. We will continue to listen. We have taken comments without the sort of supposedly open and closed comment periods that you see in some procurements. We have taken them 

whenever we have gotten them, and we have gotten a lot. 

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Mrs. MALONEY. Well, congratulations. My time is up. 

Congratulations on your Hammer Award. You are up for another 

one. Having 5 cents a minute is quite an achievement. I congratulate you over this long process. I think GSA has done an excellent 

job. 

Mr. WOODS. Thank you. 

Mr. BARRAM. Thank you. 

Mr. HORN. I now yield 10 minutes to our distinguished chairman, 

who has come from another subcommittee. We would welcome his 

thoughts on this. 

Mr. BURTON. Thank you, Mr. Chairman. 

Let me state at the outset that I strongly endorse the GSA’s plan 

to release the FTS2001 RFP and the MAA draft RFP on May 2, 

1997. I believe Congress, the GSA, and the vendors have done an 

outstanding job, and I want to commend all of you, because there 

was some controversy over this in crafting these proposals that 

allow this process to move forward. 

At our last hearing, I asked all the interested parties to sit down 

and attempt to narrow their differences, to negotiate in good faith 

and come up with an agreement that would result in the RFPs 

being released. 

When I initially became involved in this issue, I stressed four 

principal goals that this procurement must meet in order to move 

forward. 

First and foremost, it must be the best possible deal for the 

American taxpayer. 

Second, it must take advantage of emerging market forces in the 

telecommunications industry. 

Third, it must allow as many vendors as possible to compete for 

it while ensuring a level playing field. 

Fourth, it must take advantage of the leverage provided by the 

Federal Government’s purchasing power. 

Through working together, I believe we have met these conditions, providing the American taxpayer with the most technically 

efficient and cost-effective telecommunications system, and I am 

pleased to see that this process is going to move forward. This procurement promotes competition and innovation in order to secure 

lower prices and higher quality services for the Federal Government and the taxpayer. 

I sincerely want to commend my good friend and colleague, Mr. 

Horn, for his outstanding work. He has shown tremendous leadership on this subject. I also want to thank our colleague, the senior 

Senator from Alaska, my good friend Ted Stevens and his staff, my 

committee staff, and of course Commissioner Bob Woods of GSA 

and his staff, all of whom displayed professionalism and tremendous patience throughout this entire process. 

I thank Mr. Barram and Mr. Woods for appearing before us 

today, and, I have one quick question for Mr. Barram. Has the criteria I laid out been met? 

Mr. BARRAM. Yes. 

Let me also thank you, Mr. Chairman, for your leadership in getting us to build this consensus strategy in and the work of your 

staff. It has been a really very profitable activity. I think we are—

19

I am convinced, I am satisfied we are operating from the principles 

you laid down. 

This is the best deal for the American taxpayers, and it will be 

very competitive. We have got a structure in place that will let us 

do that—we have talked a little bit about that today and have been 

very successful in the FTS2000 program that gives us a platform 

to build on for this one. 

Second, because this is a services-based contract, it meets your 

principles of innovation and using technology well. Because we are 

focused on services, as I mentioned earlier, we will not end up with 

what we call a ‘‘stranded investment’’ in the Federal Government, 

so that as things change, as services change, we will be able to get 

them from the service providers. 

As I said in my opening statement, there is nothing as powerful 

to describe the new world order as telecommunications, with all the 

innovation and changes that are taking place. So we are going to 

have a lot of competitors in this business, and that is one of your 

principles as well. 

It has worked for us in the past, and we are going to have some 

significant factor times the number of competitors we had in the 

past. 

Finally, the strategy has always been predicated on leveraging 

the Government’s purchasing power. That is why we have been 

able to get great prices and great services. The combination of two 

is great value, which is what we are heading for. 

So, I think this consensus process has really done a great job of 

strengthening our ability to make a more powerful proposal for a 

contract. We are going to have, I think, very great success in the 

marketplace for our Federal Government customers. 

So I think it passes your principles, the strategy, with flying colors, and we thank you very much for your leadership. 

Mr. BURTON. I thank you. Mr. Woods had to put up with an 

awful lot. Once again, thank you for all your help. 

Mr. Chairman, thank you very much. 

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Mr. HORN. We thank you again for your leadership in getting 

this consensus-building put together. I think everybody is happy 

with the result, and ultimately that result is what will satisfy the 

American taxpayers that pay all the bills around here. 

I now yield 10 minutes to the gentleman from Illinois, Mr. Davis. 

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Chairman. 

I, too, would want first of all to commend and congratulate GSA 

on what I would consider to be an outstanding job, not only in 

terms of what we appear to be seeing at the bottom line, but also 

in terms of the process itself. I think that those involved in the industry would have to be pleased with the process, even if it turns 

out that they are not absolutely excited about all of the outcome 

in terms of where they are. 

I think it is one of the most fascinating approaches to arriving 

at a conclusion that I have seen, and I hope that it is one that we 

will continue to use, not only in Government, but also I think it 

can be used in the private sector as well. 

I also would want to commend and congratulate Chairman Burton for his outstanding leadership on this issue in terms of helping 

to bring it to where it is at, and certainly to you as well, Mr. Chairman. 

The question that I have as we look at where we are is whether 

or not we are certain or we are comfortable that adequate safeguards have been built in that will allow small businesses, womenowned businesses, minority businesses to actually have a real shot 

at a piece of the action. 

So that is the question: Are we comfortable with those kinds of 

safeguards built into the process? 

Mr. WOODS. I believe we are. We have, in fact—I think you have 

been briefed or brought into this before, that we have a number of 

procurements that fit under this mantra of Post-FTS2000, and it 

includes everything from professional services, to cable and wiring, 

to international services, and so forth. 

We have made not only conscious efforts to make sure that there 

are small business contracting plans in any bid that comes in. We 

have on several of these services made sure that there were small 

business awards and that we encouraged small business to participate. 

We believe, as we did in FTS2000 where we exceeded the goals 

we set by a large margin with AT&T and Sprint, that this is not 

something that you get satisfied with and that you sit on. You have 

got to keep at it, you have got to stay diligent and moving ahead. 

So we not only believe the safeguards are there in terms of the 

contracting, but we believe the attitude is there in terms of staff 

and the program and we are going to continue to go down that 

path. So we have in fact lately talked about some of the other procurements coming. And although 2001 is an enormous procurement 

and, as Chairman Horn said, one of the biggest in the Federal Government, we have got some others coming that are also likewise 

very complicated and very large in their size; and we intend to 

make sure that small business is part of that. 

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ness and others, and continue to do that. So we are committed to 

it. 

I don’t think just language in a contract is enough. I think you 

have to go beyond that, and we are. 

Mr. DAVIS OF ILLINOIS. I certainly appreciate that position, because I too don’t believe it is something that we can leave to 

chance. It is not something that will ever be accomplished, unless 

we are diligent and unless we actually pursue it and stay on top 

of it. 

I also note that the FTS2001 contractors will be able to offer and 

price local services by interconnects; that is, the three-digit local 

exchange, and not across the entire MAA. By structuring and setting up the options this way, does that open GSA up to the charge 

of allowing for cherry-picking or maybe during the basketball season, crimp-shooting? 

Mr. WOODS. My Administrator is a great basketball fan, so I am 

afraid he may want this one. 

I would say on that, that is one way to look at it. But this is a 

question that is often referred to as the ‘‘universal service’’ or ‘‘ubiquity’’ issue; if you provide one spot you have to provide everywhere. Our sense is, that is a barrier to entry for other competitors. 

We in fact are protecting the initial awardees that have competed for that area by having a 1-year cooling-off period where no 

one else can move in on that territory. It is our belief that we have 

to allow competition, and by allowing us to go in at that three-digit 

level that you referred to, we believe that that functionally meets 

our customer requirements. The new entrant must compete and attract away the customer. The customer is already an incumbent 

somewhere else. 

So we believe it is a good balance, and we believe requiring ubiquity-type service throughout an area really constitutes a barrier to 

entry and decreases competition. 

So we believe it is a reasonable balance. We are protecting the 

initial awardee for some period of time, for a year, and we are giving them a minimum revenue guarantee. And we believe that is 

enough. We believe if you guarantee it forever and you don’t allow 

anyone else to compete, that is not good for our customer and not 

good for the prices we pay. So we have consciously thought about 

that issue and we believe it is best to do it at the three-digit level. 

Mr. DAVIS OF ILLINOIS. Thank you. I notice that GSA has maintained that the February 1997 strategy was required due to the 

Telecommunications Act of last year, and I assume that the revisions we are talking about and the changes we are talking about 

today are also consistent with that law. I guess the question is, 

could you elaborate on that in terms of the consistency of where we 

were, as well as where we are? 

Mr. WOODS. Well, as you will recall, the Telecommunications Reform Act was passed about this time last year, in fact February 

1996. And as with any new law that comes out, and it was one that 

replaced one that was decades old, it has taken some time to decide 

what specific parts of that law mean. A lot of what we went 

through in the February timeframe was looking at interpretations 

of that, that had never been challenged and never been dealt with. 

30

So when we got some questions from the other Chamber, it was 

along the lines of what was intended in the act, and we sat down, 

listened to that, went through it; and from our perspective legally, 

we could have gone either way. I mean, we were not in violation 

of any law no matter which way we went. 

The question was, what is in the spirit of the law, what is in the 

best interests of the Government; and those things, they are sometimes deep subjects with not easy answers. As we went through it, 

it was our sense that the industry is going to allow this, offerings 

from one sector into the other sector and so forth, the contractor 

was going to be around for a while or set of contracts. We wanted 

to be flexible enough to do the same thing that the private sector 

was going to do. That was the issue. 

After a lot of deliberation, we agreed with that point of view that 

we ought to be flexible and let each segment of the industry offer 

other services, and then we at that point restructured to meet that. 

So we not only believe it is in compliance with the letter of the 

act, we believe it is in compliance now with the spirit of the act. 

So that is really what we were doing, was fine-tuning at that point. 

Mr. DAVIS OF ILLINOIS. Again, I think you have demonstrated a 

high level of flexibility and the ability to work with the industry, 

the ability to bring the industry together. Overall, it is an outstanding piece of work, and I certainly commend and congratulate 

you, and also would reiterate, Mr. Chairman, the commendation to 

you for the outstanding role that I think you have played in the 

process. 

That concludes my questions. I thank you very much. 

Mr. HORN. I now yield 10 minutes to the gentleman from Texas, 

Mr. Sessions. 

Mr. SESSIONS. Mr. Chairman, thank you. 

Mr. Barram, Mr. Woods, I would like to pile on with the nice 

words that have been put on you today, not only by Chairman Burton, but also by other members of this subcommittee, including our 

subcommittee chairman, Mr. Horn. 

Mr. BARRAM. Please do. 

Mr. SESSIONS. Please take from the tone of my message that you 

should be patted on the back. This has been a difficult process and 

you have made good progress, and as an outsider looking in, let me 

say you responded to my letter very nicely. Thank you, Mr. Woods. 

I would like to, if I could, just direct my comments in two specific 

areas. When I first walked in, I heard the word ‘‘forbearance,’’ this 

1-year period of time we are talking about where a person, the winning contractor of the FTS2001 contract, at the end of a 1-year period would be allowed to get in. 

Can you define for me—and I know I have got this agreement, 

this statement of principles in front of me which is wonderful, as 

Mr. Davis suggested. Can you tell me, when does this year start 

and what the process is? 

I know when someone signs a contract, it may take a period of 

time before they are on line, before revenue starts. When does the 

gun go off? 

Mr. WOODS. Typically, from a contractual standpoint and a legal 

standpoint, we have started at contract signing, which means the 

31

day you sign the contract, the time at that point would be ticking. 

But contractually you have a lot of flexibility. 

A lot has to do with what you agree to ahead of time. 

At this point, we have not nailed that down totally, and from my 

perspective, I think we would rather get you back the best answer 

we can. I am just telling you typically what we do, but we have 

not drafted that language. 

That language is not set yet, so contractually the Government 

has not entered into a contract. So until we do that, it is kind of 

what you say it is, and what you agree to. 

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Mr. SESSIONS. I guess my comment would be that I would encourage you to get closer to understanding what that means, because in some instances, there may be a statement of principles 

that is easier to read than some of these. 

You may have a different circumstance in a different area based 

upon a switch performance or ordering. Someone may order some 

set of services, the switch, outside an operating entity’s ability; 

something may come into play. I would encourage you to look at 

defining that, and probably—maybe the preference would be after 

you have begun billing, when the first bill goes out, because there 

may be some line of demarcation. 

I would encourage that to be within either a statement of principles or more clearly, closely defined. 

Second, I think my words—and I heard your response to this 

cream thinking or cherry picking, is it possible that you would have 

one—I will wait until this buzzer finishes. 

Is it possible that you would have one of your customers within 

an area paying one set of prices and another FDS or Federal Government entity paying a separate set of prices? And do you think 

that this would mean that this would be in the best interest of the 

taxpayer or not? Or how do you view that circumstance that potentially could occur? 

Mr. WOODS. First of all, in answer to your question, Congressman Sessions, it is absolutely possible and happens today. We 

have, within rock throwing distance of this Capitol, agencies who 

pay different rates. And that happens. 

What we try to appeal to from a GSA standpoint is good business 

sense that you’re getting what you pay for and more. And that is, 

in fact, what I believe our competitive advantage is, that we offer 

the best deal in town. 

When someone here in this city pays greater than $13.73 a line 

for dial tone service on the desk a month, I’m looking to hound 

them, because I believe they’re not getting the best deal, because 

that’s what I sell it for. 

So we have that. We have, in fact, created within our reinventing 

effort this competitive atmosphere. We are encouraging agencies to 

go after the best deal. They have gone at it, I think, with great energy. But I—there’s no guarantee that you won’t get different rates. 

And sometimes they believe they’re getting greater value with 

greater rates—with higher rates if other services are there. 

And with all your years in this business, you know how selling 

that ends up. You’ve got to convince that customer that you get 

greater value. 

Mr. BARRAM. Let me interject one thought. As you know, these 

are nonmandatory services. 

Mr. SESSIONS. I am sure. 

Mr. BARRAM. They will not be. So that has a big effect. 

And the rest of our business at GSA, we have a lot of nonmandatory activities, which is very powerful for us to be better and very 

good for our customer. So that will help too; that will probably ensure that there may be, that there will be different rates at different places. But if we think about value, price, and service, if we 

think about value, price may not be the determinant. 

37

Mr. SESSIONS. Good. I am completely satisfied that both of you 

and the people who work for you, as well as those people in the 

process, feel like it has been fair, it has been open. 

One thing that I am concerned about and the reason why I 

talked about in the first place about this forbearance period, just 

know what the deal is that was cut. 

Mr. WOODS. Yes. 

Mr. SESSIONS. There is nothing worse than walking out to signing a deal and then walking out later saying, ‘‘I wonder what we 

really meant in a certain circumstance.’’ So I encourage you to be 

open in this period, also to take everybody’s comments about cutting the tightest deal that you can, not only on behalf of yourself 

and those people who are competitors, but the taxpayers of the 

country. 

Mr. Chairman, thank you so much for your time. 

Mr. HORN. Quite welcome. I now yield 10 minutes to the gentleman from Virginia, Mr. Davis. 

Mr. DAVIS OF VIRGINIA. Thank you very much. And this is a 

much different hearing than some of the ones we have had before. 

And, again, thank you very much for the work. I know it has been 

difficult. 

Let me ask a couple questions. Tell me how Bell Atlantic comes 

out under this, under the MAA, and how the District of Columbia 

and their ability to use this? In the past, they have declined to sign 

up. What are their options now? And what savings can they accrue? 

Mr. WOODS. Well, the District has, unlike Mrs. Maloney’s question about State usage, the District of Columbia actually can use 

our services today. And so they have, in effect, special privilege in 

that regard. 

We have over time, as you know, put some effort into trying to 

get the District on board with what we’re doing because we believe 

there not only are savings but, Congressman Davis, there are functional differences. We have at least the legend—and I have not personally observed it—the legend is we still have rotary phones in 

many of the schools. 

Mr. DAVIS OF VIRGINIA. That is accurate. 

Mr. WOODS. Well, we believe we can take them beyond rotary 

phones very quickly. But we also believe that distance learning, 

how speed telecommunications capabilities and other things that 

we’re planning for the next generation for agencies and the Department of Defense, and so forth in this exact geographic area should 

be made available to them. And we need them on the planning 

team to do that. So we’re offering that up to them. And we’re working that fairly hard. 

In the Bell Atlantic set of questions, as a regional Bell, they will 

obviously be competitors for a number of our metropolitan area acquisitions. And we hope as time goes on and they deregulate, they 

will be competitors for other services we’ve got. But they are a very 

large provider. 

And the merger with NYNEX will cover a trail of territory. And 

I believe over time will—they’re in the position to be in 60 percent 

of our long distance market; about 60 percent of our service is in 

that geographic territory. 

38

Mr. DAVIS. Super. Well, thank you very much. I thank both of 

you very much. 

Mr. WOODS. Thank you. 

Mr. HORN. I thank the gentleman very much. I have one last 

question. Mention was made of large purchases in the future and 

we might apply the same technique. 

Could you give us an idea of what areas those are? 

Mr. WOODS. I believe that when you look at 2001, as significant 

as it is, we have some coming attractions that I think are going to 

be significant in the Federal arena. Right now, one that we are 

moving forward with is something called seat management. And I 

know that that term will probably invite some ridicule. But its idea 

is to provide desktop computing services on a service basis. And it, 

in effect, says you’re not going to lease it. You’re not going to buy 

it. You are, in effect, going to buy the service. The Gartner Group today projects at about $12,000—it costs 

about $12,000 a seat. And the reason you use seats is most organizations have more seats than they’ve got people. And so you’re paying for the computer that sits there. 

And our belief is we can buy those seats on a service basis for a lot less than $12,000 a seat. Our rough and very crude estimates 

at the moment are that that’s a roughly $10 billion Federal market. If we bring those prices down 10 percent, I don’t have to do 

the math, I think you’d see that’s a very significant area. So we believe that is an area we need to move ahead on. 

The second area I believe is very significant is the Washington 

area communications ability. Washington, DC, represents one-third 

of my local telephone service business. And if we don’t do this well, 

we don’t do anything else well. And so as we provide high-speed 

capability for the next generation, I believe we ought to be linking 

up with the District. We ought to be linking up with our partners 

in defense and we ought to be making that a model for what the 

rest of the Government looks like. 

So we’re ambitious to do that well. And I have deep appreciation 

for what we’ve been through with 2001 to get it to the market as 

well as the MAA’s, but there’s more coming. It’s going to be significant for this Government. And it’s going to take leadership on all 

our parts to make it work. 

Mr. HORN. Well, would Commissioner or—— Mr. BARRAM. No, I’d just—I agree with Bob. There’s a lot of 

things that are going to happen in the next couple of years that are 

huge changes in the way we all function and work and these are 

two of them. 

As soon as we get this RFP out, we take a deep breath and work 

on the next big complicated issue. 

Mr. HORN. Well, I want to thank you in particular, Mr. Administrator, and Bob Woods as Commissioner, also. And I hear some of 

his fine staff is in the first row right behind him. And I know these 

things would not have happened in building a consensus if it 

wasn’t for Commissioner Woods and his staff taking the time to sit 

around the table with congressional staff, as the various people 

that have a real stake in this come in. And you are representing 

the stake of the taxpayers. And so I want to thank you two first 

and your staff. 

39

And then I would like to thank the congressional staff that participated in these meetings on both sides of the aisle. Starting with 

Bill O’Neil, the director of procurement for the full committee reporting to Mr. Burton. And Earl Comstock is here who is the legislative director for Senator Stevens, who also participated. And then 

nothing happens on this subcommittee without the leadership of J. 

Russell George, the staff director and counsel right here. And the 

gentleman on my left and your right, Mark Brasher, is our specialist in this area, who is seated next to me. And then Patricia 

Delgado represented the ranking Democrat on the full committee, 

Mr. Waxman. Mark Stephenson, professional staff member for the 

subcommittee, minority, headed by Mrs. Maloney. 

And then in preparation of this hearing, we also thank John 

Hynes, who is the professional staff member in communications. 

And Andrea Miller, our clerk. And we thank the reporters who 

have to try and untangle what we are saying: Vicky Stallsworth 

and Bob Cochran. 

Also thank you to Janet Javar who is working with the clerk on 

the minority side. So thank you all. And with that, this hearing is 

adjourned. 

[Whereupon, at 11:12 a.m., the subcommittee was adjourned.]

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