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ENSURING PROGRAM GOALS ARE MET: A REVIEW

OF THE METROPOLITAN AREA ACQUISITION

PROGRAM

HEARING

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY AND

PROCUREMENT POLICY

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

JUNE 13, 2001

Serial No. 107–41

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

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

DAVE WELDON, Florida

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

C.L. ‘‘BUTCH’’ OTTER, Idaho

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, Tennessee

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

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

JANICE D. SCHAKOWSKY, Illinois

WM. LACY CLAY, Missouri

——— ———

——— ———

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT POLICY

THOMAS M. DAVIS, Virginia, Chairman

JO ANN DAVIS, Virginia

STEPHEN HORN, California

DOUG OSE, California

EDWARD L. SCHROCK, Virginia

JIM TURNER, Texas

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

MELISSA WOJCIAK, Staff Director

AMY HEARINK, Professional Staff Member

JAMES DECHENE, Clerk

MARK STEPHENSON, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on June 13, 2001 ............................................................................... 1

Statement of:

Doherty, John, vice president, AT&T government markets; James F.X.

Payne, senior vice president, government systems, Qwest Communications; Randall L. Lucas, vice president, sales, Federal market, Verizon

Federal Inc.; Jerry Hogge, vice president, government solutions and

enhanced service providers, Winstar; and David Page, vice president,

Federal systems, BellSouth Business Systems .......................................... 91

Koontz, Linda, Associate Director, Government-wide and Defense System

Information Systems, GAO; Sandra Bates, Commissioner, Federal

Technology Service, General Accounting Office; Louis DeFalaise, acting

director, executive office, U.S. attorney’s office; and Commander Robert

Day, Commanding Officer, Coast Guard Electronic Support .................... 7

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

Bates, Sandra, Commissioner, Federal Technology Service, General Accounting Office, prepared statement of ....................................................... 29

Davis, Hon. Thomas M., a Representative in Congress from the State

of Virginia, prepared statement of .............................................................. 4

Day, Commander Robert, Commanding Officer, Coast Guard Electronic

Support, prepared statement of ................................................................... 75

DeFalaise, Louis, acting director, executive office, U.S. attorney’s office,

prepared statement of ................................................................................... 65

Doherty, John, vice president, AT&T government markets, prepared

statement of ................................................................................................... 94

Hogge, Jerry, vice president, government solutions and enhanced service

providers, Winstar, prepared statement of ................................................. 148

Koontz, Linda, Associate Director, Government-wide and Defense System

Information Systems, GAO, prepared statement of ................................... 9

Lucas, Randall L., vice president, sales, Federal market, Verizon Federal

Inc., prepared statement of .......................................................................... 138

Page, David, vice president, Federal systems, BellSouth Business Systems, prepared statement of ........................................................................ 167

Payne, James F.X., senior vice president, government systems, Qwest

Communications, prepared statement of .................................................... 117

(1)

ENSURING PROGRAM GOALS ARE MET: A REVIEW OF THE METROPOLITAN AREA ACQUISITION PROGRAM

WEDNESDAY, JUNE 13, 2001

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT

POLICY,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2 p.m., in room

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

of the subcommittee) presiding.

Present: Representatives Tom Davis of Virginia, Turner, Mink,

Jo Ann Davis of Virginia, and Horn.

Staff present: Melissa Wojciak, staff director; Amy Hearink, chief

counsel; Victoria Proctor, professional staff member; David Marin,

communications director; James DeChene, clerk; Mark Stephenson,

minority professional staff member; and Jean Gosa, minority assistant clerk.

Mr. TOM DAVIS OF VIRGINIA. Good afternoon.

I would like to welcome everyone to today’s oversight hearing on

the Metropolitan Area Acquisition Program. As many of you know,

this program is the local telecommunications component of the

FTS2001 Program.

As a result of the delays and cost overruns discovered at the

committee’s April 26 hearing on the FTS2001 Long Distance Program, we decided to undertake a review of the MAA Program and

the progress of the transition in local user cities.

Unfortunately, preliminary results indicate many of the same

contract management administration issues that plagued the 2001

Program exist in the MAA Program. Today’s hearing is going to examine the problems in user cities and explore potential solutions

to bring this ambitious program back on track.

To date, the GSA has awarded 37 MAA contracts in 20 user cities. The total value of these contracts is estimated to be $4 billion.

The program is being implemented in three phases. Phase 1 and

2 contract awards are now complete and GSA is preparing to begin

phase 3 awards.

We are concerned that GSA is moving into phase 3 without evaluating the progress of the program, the delivery of services to the

Federal agencies and the overall cost savings to the Government.

The MAA Program was designed to capitalize on the goals of the

1996 Telecommunications Program. That act was intended to foster

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greater competition in the telecommunications marketplace and to

accelerate the deployment of new telecommunications technologies.

The MAA Program grew out of several meetings between industry, GSA and Congress. It was intended to bring competition to the

local telecommunications marketplace by providing Federal agencies in high density population cities a choice of contractors using

multiple award contract vehicles.

If this program is successful, the Federal Government will be at

the cutting edge of procurement for these types of services. Early

evidence suggests this will not be the case. Instead of reviewing

program problems and working to update strategies, it appears

that GSA has not tried to understand the rapidly changing marketplace, nor to realize the competitive landscape envisioned for the

MAA cities.

GSA states that the MAA Program is estimated to save the Gov- ernment $1.1 billion over 8 years. This figure does not account for

transition delays or for additional charges agencies may face and

the new equipment costs for upfront cutover fees. Transition numbers seem to indicate that actual cost savings are likely to be markedly lower as GSA has missed its transition deadline in all but two

cities.

The MAA Program set a 9-month transition phase for each city

once notice to proceed was issued to a vendor. Nearly 2 years after

phase 1 contract awards in New York, Chicago and San Francisco,

transition is only at 11 percent, 42 percent and 65 percent respectively.

While I think it is important that we don’t judge the success or

failure of the MAA Program by these cities alone, we have to assess what is occurring in each city to generate these delays and immediately utilize this knowledge to update the MAA Program to

bring about real cost savings for taxpayers.

Moreover, phase 2 transition numbers indicate similar problems

exist. For instance, significant regulatory delays in New York have

hindered transition progress and service cutover fees have slowed

progress in Dallas. I could offer anecdotal evidence for delays in

each of the awarded cities but clearly each city has its own soap

opera but no attempt at redrafting has been made.

Similar to the FTS2000 Program, I have no doubt that a healthy

blend of issues has contributed to ongoing programmatic problems

but I am concerned with the lack of solutions. Once again, it is as

if performance goals have no place within a large Government program.

As we discuss next step in acquisition reform, we often talk

about moving toward horizontal acquisition to achieve greater

economies of scale and government efficiencies. GSA is uniquely positioned to move government in that direction but the continued

failures in the FTS2001 Program suggests that contract management administration presents serious challenges for the Government’s procurement agencies.

In particular, agency communications appears to be an obstacle

for GSA between regions, the headquarters and the services. GSA’s

Office of Inspector General cited communication difficulties as having a significant impact on the MAA Program in its April 2001

Consulting Services Report.

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I also looked at the contract management fees and the full service fees that GSA charges user agencies in MAA cities. It is too

early to judge whether Federal agencies are being charged too

much for services but I strongly disagree with keeping the amount

of these fees hidden from user agencies.

GSA has made it clear that it is not a mandatory provider of

local or long distance telecommunications services. Agencies are

consumers in this program and they should be able to make informed decisions with their limited budgets. Moreover, agencies

seem to have been denied important information about upfront

transition and equipment costs that further impact its severely constrained budgets and diverted valuable resources away from mission goals.

I am told the U.S. Coast Guard had to grapple with disconnected

search and rescue telephone lines on Staten Island. I can only speculate but I imagine they would have profited from a better understanding of the services that the contract fees provided at the time.

Once again, I am concerned that taxpayers continue to pay for

failures in the program. Impediments to acquiring end to end telecommunications services means the Government continues to lag

behind the private sector in service delivery to citizens.

Today, the subcommittee is going to hear testimony from the

GAO, from the GSA, U.S. Coast Guard and the U.S. Department

of Justice. On our second panel, we will be hearing from John

Doherty of AT&T; James Payne of Qwest; Randall Lucas of

Verizon; Jerry Hogge of Winstar; and David Page of BellSouth.

I will now yield to Congressman Turner.

[The prepared statement of Hon. Thomas M. Davis follows:]

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Mr. TURNER. Thank you, Mr. Chairman.

I appreciate the fact that you have chosen to have a hearing on

this subject. As you stated, it has been estimated that we can save

upwards of $1 billion if we fully implement the Metropolitan Area

Acquisition Program, so we are talking about real money.

It does seem to me that a hearing on the subject is critical because with the changing technology, clearly government, not only

within the GSA but the agencies themselves, need to be much more

aggressive in taking advantage of the lower prices now being offered in this industry, the ultimate beneficiary being the taxpayer.

I understand that GSA has awarded 37 contracts for services in

20 cities with a potential value of more than $4 billion. However,

in many of these instances, the implementation time has been

much longer and slower than was provided for in the agreement

between the agency and the GSA.

Unfortunately, the promised savings cannot be realized if the

contracts are not fully implemented and the purpose of this hearing

today is to get to the bottom of the reasons for the delays that have

occurred.

I am also going to join the chairman in expressing an interest

in the issue of the disclosure of fees by the GSA. It seems to me,

as it did to the chairman, that the agency should have the right

to know what the contract management fee and full service fee

charge by GSA is so they can make an evaluation as to whether

or not they want to participate in the GSA-sponsored contract program.

I look forward to hearing from our witnesses today and hopefully

this will be another step forward in what I think has overall been

a very positive move on the part of the Government to try to save

in the cost of local services to our Federal agencies.

Thank you.

Mr. TOM DAVIS OF VIRGINIA. Thank you.

Does anyone else wish to make an opening statement? Hearing

none, I would like to call our first panel of witnesses: Linda Koontz

of the GAO; Sandra Bates of the General Services Administration;

Commander Robert Day of the U.S. Coast Guard; and Louis

DeFalaise of the Department of Justice. We appreciate your being

here.

I would like to have everyone rise because it is the policy of this

committee that all witnesses be sworn before they testify.

[Witnesses sworn.]

Mr. TOM DAVIS OF VIRGINIA. To afford sufficient time for questions, we would like you to limit your statements to not more than

5 minutes. We have the total statements here and will be asking

questions based on the total statement which will be entered into

the record.

We also may undergo a vote before everyone has testified. What

I will try to do is maybe if one of my colleagues can go vote as soon

as the bell sounds and get back here, we can have a brief recess

and then they will reconvene the meeting but we will keep going

for about 10 minutes into it and as soon as they get back, we will

reconvene it so we can get all the testimony and then get to questions as quickly as possible.

Linda, why don’t we start with you? Thanks for being with us.

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STATEMENTS OF LINDA KOONTZ, ASSOCIATE DIRECTOR, GOVERNMENT-WIDE AND DEFENSE SYSTEM INFORMATION SYSTEMS, GAO; SANDRA BATES, COMMISSIONER, FEDERAL

TECHNOLOGY SERVICE, GENERAL ACCOUNTING OFFICE;

LOUIS DE FALAISE, ACTING DIRECTOR, EXECUTIVE OFFICE,

U.S. ATTORNEY’S OFFICE; AND COMMANDER ROBERT DAY,

COMMANDING OFFICER, COAST GUARD ELECTRONIC SUPPORT

Ms. KOONTZ. Mr. Chairman and members of the subcommittee,

thank you for inviting us to participate in today’s hearing on the

implementation of GSA’s Metropolitan Area Acquisition Program.

As you know, GSA initiated the MAA Program to achieve immediate and substantial price reductions for telecommunications in selected metropolitan areas. It further envisioned that as part of its

overall FTS strategy, contractors under the MAA Program would

eventually be allowed to compete for FTS2001 long distance service

so that agencies could procure telecommunications end-to-end from

one source.

At this subcommittee’s request, we have been reviewing the MAA

Program and specifically we have focused on three issues: the status of the MAA implementation; the fees GSA charges to customer

agencies for managing and administering these contracts; and the

steps taken by GSA to enable the MAA and the FTS2001 contractors to crossover between these programs and offer both long distance and local service.

My testimony this afternoon provides the interim results of our

review which is largely focused on the New York City MAA. This

work is continuing and should be completed sometime later this

year.

In brief, GSA has awarded 37 MAA contracts for 20 metropolitan

areas. Although the contracts require transition to the MAA contracts within 9 months after the contractors have been given authorization to begin implementation, this transition has not occurred as quickly as anticipated. For example, MAA transitions in

New York, Chicago and San Francisco are not yet complete almost

2 years after contractors were given notice to proceed.

GSA and the MAA contractors have faced significant challenges

in implementing this program. First, in New York the newly deregulated telecommunications environment has produced unexpected barriers to implementation that are taking time to resolve.

In addition, both GSA and the contractors have raised numerous

issues they believe contributed to implementation delays. These include contractor performance issues, inadequate customer budgets

and the length of the process used by GSA to allocate business

among contractors in multiple award cities.

We have not yet begun to completely unravel these issues but we

will continue our work both on implementation barriers and on

GSA’s efforts to address them.

With regard to fees, GSA charges customer agencies two types of

fees to recover the cost of contract administration and management. These fees, in total, range from about 28 to 84 percent. According to GSA, while these percentages appear substantial, the

total cost of services including these fees is substantially lower

than the prices under other GSA local service contracts. GSA, howVerDate 11-MAY-2000 10:16 Apr 11, 2002 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 C:\DOCS\77353.TXT HGOVREF1 PsN: HGOVREF1
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ever, does not separately disclose these fees but requires contractors to embed them in the prices.

We believe agencies would benefit from having specific information on fee amounts. It is a key input to agency decisionmaking on

whether to use MAA contracts which are not mandatory and it

makes GSA accountable to the agencies for the amounts of fees

they charge. In the coming months we will be performing a more

complete assessment of the fees to determine what costs are included in the fees as well as the support GSA provides to agencies.

Last, in regard to crossover, GSA has not yet allowed MAA contractors to offer FTS2001 services. However, in December 2000,

GSA permitted FTS2001 and MAA contractors to offer local services in three of the MAA markets. In addition, GSA has drafted a

paper stating it now believes it is appropriate to proceed with determining when to allow additional competition for FTS2001. One

of the first steps will be to share this draft with industry representatives at the end of this month.

Mr. Chairman, that concludes my statement. Kevin Conway, the

Assistant Director responsible for our MAA study, will be assisting

me in answering any questions you might have.

[The prepared statement of Ms. Koontz follows:]

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Mr. TOM DAVIS OF VIRGINIA. Thank you very much.

Ms. Bates.

Ms. BATES. Mr. Chairman, thank you again for this opportunity

to appear before you today to discuss the Metropolitan Acquisitions

Program. In my remarks this afternoon, I will briefly address the

strategy, the results of the competitions, the implementation status

and our fees.

The collaborative effort that led to the development of the FTS

program strategy in the spring of 1997 occurred in the context of

the newly enacted Telecommunications Act of 1996. That strategy

gave us the framework for bringing the Government’s use of telecommunications technology forward into this new century. The

MAAs were conceived for three purposes. First, they fulfilled the

MAA program goals of maximizing competition to provide the best

services and prices to Government users. Second, the MAAs were

the first ever competitions designed specifically for the deregulated

local markets. They provided an opportunity for public policy leadership by FTS. We stimulated the development of competition by

offering government requirements to emerging metropolitan markets. Third, the program crossover provisions anticipated the introduction of additional future competition to incumbent MAA providers.

Since 1999, we have awarded 38 contracts in 21 metropolitan

areas across the Nation with price reductions ranging from 30 to

70 percent. By the end of this year, we will have completed 28 cities. At that time, two-thirds of the Federal work force will be within reach of an MAA with attractive prices and state-of-the-art service offerings. Following on the heels of the acquisitions have come

the many significant challenges associated with implementation.

MAA implementation progress to date reflects the regulatory environment under which the local services industry operates. This environment has been characterized by the need for labor intensive,

time consuming, site by site negotiations and problem-solving causing implementation delays.

The local competitive environment today has developed more

slowly than expected and is far from mature. The aspects of deregulation that have proved especially challenging for the MAA

Program include building access rights, resale of facilities, local

number portability and customer issues. Challenges associated

with contract initiation, contractor planning and customer-related

activities have required more time than we anticipated. In August

2000, we asked the GSA Inspector General to review the program

implementation. The IG recently issued their findings and suggestions. We agree with their overall findings and will incorporate

their suggestions to improve our program.

Finally, let me comment on our fee structure. Local service is a

labor intensive operation, whether managed by FTS or a large private business. Over the past 5 years, we have reduced our fees by

about 30 percent. In fact, MAA fees are lower than pre-MAA fees

in every city but one. Mr. Chairman, I believe the strategy that we

jointly crafted is as sound today as it was when we developed it

4 years ago. The MAA acquisitions continue to be successful in

terms of new providers, services and prices. We have brought explicit competition to the local market through multiple award conVerDate 11-MAY-2000 10:16 Apr 11, 2002 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 C:\DOCS\77353.TXT HGOVREF1 PsN: HGOVREF1
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tract vehicles. We have brought agencies real choice of providers

and we have state-of-the-art service offerings. We have taken the

lead in stimulating competition in the local arena and have gained

unparalleled and unique expertise as a result.

It is taking longer than we expected to achieve the benefits of

local services competition. We have more work to do. We are committed to staying the course with the MAA Program and to realizing the benefits the program has to offer.

Mr. Chairman, I look forward to your continued leadership and

support and I am happy to address any questions you have at this

time. With me today is Ms. Margaret Binns, Assistant Commissioner for Regional Services. In that capacity, Margaret is the GSA

executive responsible for the MAA Program. She will assist me in

addressing questions you and the other Members may have.

[The prepared statement of Ms. Bates follows:]

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Mr. TOM DAVIS OF VIRGINIA. Thank you. Ms. Bates is welcome.

I also want to recognize Steve Perry, the new head of the General

Services Administration who is in the audience. Congratulations on

your appointment and your confirmation. We look forward to working with you. Your staff is doing a good job.

Louis, you are on.

Mr. DEFALAISE. Thank you.

Members of the subcommittee, I appreciate the opportunity to be

here on behalf of the Executive Office of the U.S. Attorney’s Office

and for the 93 U.S. attorneys.

We are very concerned as a consumer with telephone operations

for our several hundred locations, our offices and connected locations throughout the country, all the way to Guam where we have

to usually call at 6 p.m. because it is 8 a.m. there.

Our concern to our personnel, the approximately 5,000 Federal

prosecutors and litigators, is that they primarily be free to do what

they are being paid to do and that is prosecuting cases and litigating on behalf of the Government. Their only concern when they

pick up the phone is that there be a dial tone and reliable service.

From the central operation point, since we have a very deliberate

policy of keeping our headquarters personnel very low so that we

can put more people into the field, we are concerned about being

able to get a turn key operation where we can buy the service and

expertise so that our staff doesn’t have to deal with it and the

price. Obviously the more resources we can save from an operational side is more money we can spend doing what we are intending to do, protect the public weal.

We have had a number of offices that have completed the transition to the MAA carriers. In our experience, we have had a few

technical difficulties in a couple of instances where there have been

delays and my staff advises me in terms of the types of infrastructure and regulatory questions that existed, that this is not unusual

in terms of what we experienced in the past. We are constantly updating our systems, doing it all over the country so we seem to be

in a constant process of change and we encounter these things

quite often.

The one good thing we can say about this program in the one location where we now have sufficient data to analyze the cost impact is that it has been highly successful. That is in the Islip location in New York where I am informed we had been paying $35

a month a line and now we are down to about $10 to $12 a line.

So while we are interested in the issue of what GSA is charging

us, the savings has been so great in that location that we are very

pleased by the results and the outcome. By the fact we can take

it as a turn key operation, we don’t have to have additional numbers of staff to deal with these issues directly but all of these services are provided to us by the GSA.

We have had some difficulties in a couple of locations, but I have

been informed by our staff we think those are manageable ones.

With the request that the longer statement be included in the

record, I would be happy to answer any questions.

[The prepared statement of Mr. DeFalaise follows:]

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Mr. TOM DAVIS OF VIRGINIA. Thank you.

Commander Day, thank you for being with us.

Commander DAY. Mr. Chairman, distinguished members of the

subcommittee, the Coast Guard took advantage of the GSA MAA

Program when we learned of its existence through GSA, region II

in New York in July 1999. A thorough review by my staff, which

is responsible for the telecommunications services in the New England Region, basically found the pricing was extremely attractive

compared to the services we had before. On average we acheived

a 76.5 percent savings on our analog telephone lines.

Based on those indicated recurring savings, I initiated action to

move with our MAA Program with region II. We started in the October 1999 timeframe and started moving forward with the contractors in cutting over Coast Guard lines. Our extensive command

post in Staten Island, NY, has roughly 751 lines servicing that

area.

We did have some problems. There were problems during the initial transition and recurring problems over a period of 4 or 5

months we had minor outages here and there but then we did have

one major outage in April 2000 which required some attention by

both GSA personnel as well as the contractor at the time. I had a

joint meeting with these personnel, and requested understanding of

the severity of the potential impact on Coast Guard operations. We

requested rapid resolution. We had very good communication between all three parties. I was able to get things cleared up in terms

of a pathway to make sure we no longer had these types of issues.

Within a 2-day period, all the problems had been resolved. Since

that time period, we have experienced essentially 18 months of

very good service under the MAA Program and are experiencing

savings of $150,000 per year recurring, which is why I started this

initiative.

That is all I have. I appreciate the opportunity to speak before

the subcommittee and I would be happy to answer any questions.

[The prepared statement of Commander Day follows:]

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Mr. TOM DAVIS OF VIRGINIA. Mr. DeFalaise, I understand you

have a time issue, so let me ask you a few questions.

Can you comment further on the situation in which you have

asked transition to be reversed and what are the service problems

you have had in that instance?

Mr. DEFALAISE. I understand those included such issues as

dropped lines where we didn’t get a dial tone or the connections

failed; there was some crossing of lines and a number of other technical difficulties. This was in one section of an office. This was a

particular location so we stopped the conversion for the larger part

of the office and asked for a reversal on that particular setup until

the problems were solved. It seems it is more a matter of technical

difficulties that need to be resolved.

Mr. TOM DAVIS OF VIRGINIA. Do you think it would be helpful if

we allowed vendors to market directly to your regional facilities?

Mr. DEFALAISE. The way the U.S. attorneys offices are set up,

because the telecommunications expertise is mostly in our Washington office, I think the results would be pretty much as they are

today. Either we find there is something new to be done or some

cost savings at the Washington end and go out to our offices or

they get offers and come to us asking us to evaluate them so I don’t

know that procedure would change that much. It is pretty much a

cooperative effort between our technical people in our Washington

office and our field offices. For presentations, I suspect at some

point the field offices would call in and ask our Washington people

to come and help evaluate them anyway.

Mr. TOM DAVIS OF VIRGINIA. Do you think the lack of cost comparison data made it difficult for you to encourage regional offices

to transition?

Mr. DEFALAISE. It certainly would be much easier to encourage

the regional offices if we could tell them up front what the cost

comparisons were and what they might save in overall operations,

so yes, that would be a very attractive feature if it could be done.

Mr. TOM DAVIS OF VIRGINIA. It is a new program and obviously

it is going to have its problems getting started and getting the bugs

out but I think that sheds some light.

Let me turn to GAO for a minute. Estimated cost savings in the

MAA cities is actually quite high. They set a pretty high goal for

themselves, do you agree with that?

Ms. KOONTZ. Yes.

Mr. TOM DAVIS OF VIRGINIA. You note in your testimony total

cost savings is an estimated $1.1 billion over 8 years. What impact

have significant transition delays had on the actual cost savings to

agencies or do you think they are just delayed?

Ms. KOONTZ. It is difficult, at this time, to project what the impact is going to be on total MAA savings. The GSA originally projected $1.1 billion. To the extent you have delays it limits the

amount of savings you can realize within an 8-year period. However, the estimate GSA put together was based on existing business they have under contract. The potential for business may actually be much greater than that and if the program is able to exploit this larger amount of business, it could be that savings would

be greater over the 8 year period. We haven’t yet been able to

quantify what the impact has been thus far.

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Mr. TOM DAVIS OF VIRGINIA. Clearly if it started faster, you

would get more savings?

Ms. KOONTZ. Yes, you can only get savings after people are on

the program.

Mr. TOM DAVIS OF VIRGINIA. Given some of the difficulties that

have been encountered, if you would move ahead and not be ready

for it, then you are better off waiting, so I guess the chapter is unwritten.

The up-front cost of transitioning along with the often unanticipated cost of provisioning of new telecommunications equipment is

cited as a barrier to transition. Do you follow me? In your view,

should GSA have better prepared agencies for these costs? Aren’t

these additional costs likely to lower overall cost savings?

Ms. KOONTZ. It is true that the savings estimate does not include

one-time transition related costs like service initiation charges, any

termination fees you have on other contracts, and equipment modifications that need to be done. For that reason, that will reduce the

amount of potential savings available over the 8 years.

Under the FTS2001 contracts, GSA was able to plan in advance

and collect money from the agencies in order to cover these kinds

of transition fees. This did not happen this time and as we understand it, some of the agencies have cited this as a barrier to

quicker implementation because they do not have the money budgeted to take care of these one-time transition fees.

Mr. TOM DAVIS OF VIRGINIA. GSA has stated it is moving forward

to phase 3 contract awards this year. In your view, are there steps

GSA ought to be doing to improve the MAA Program before it

moves to phase 3 and what would those be?

Ms. KOONTZ. As you know, our work is continuing, we are not

done yet but I think we do have one observation that is based

largely on what we did in New York. This is not rocket science by

any stretch of the imagination but what we saw there was a real

need for improved communications particularly between the MAA

contractors and GSA. When you talk to each of the parties, you get

quite a different impression of what is going on and I think that

indicates there is a need for increased quantity and quality of communications.

One thing we noted in New York was that the GSA region there

does not conduct routine scheduled meetings with the contractors

to identify, discuss, and track problems that come up, although this

is done in other regions. That might be one thing the GSA region

could do.

Mr. TOM DAVIS OF VIRGINIA. Thank you.

Mr. Turner.

Mr. TURNER. Ms. Koontz, the GSA is providing basically management consulting services. Would an agency have an option to secure that kind of assistance from some other source and perhaps

be able to have another option in terms of their local service?

Ms. KOONTZ. Built into the MAA Program are two types of services that you can get from GSA, that is why there are two different

fees. One of these fees, the full service fee, is for GSA assistance

in ordering and billing. Agencies can decide if they prefer to deal

more directly with the contractor on those issues, and they can do

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so more economically, they can do that and avoid the fee. That is

one possible option they can pursue.

The other option may be that because MAA is not mandatory,

agencies can use any other contract vehicle if any are available but

also they can choose to procure their own services, buy tariff services, or to run their own procurement if they believe the services

provided under the MAA contracts are not as economical as if they

did it on their own.

Mr. TURNER. I noticed today we have raised a lot of issues regarding the GSA’s implementation of this program but has your investigation in this area allowed you to take a look at how aggressive individual Federal agencies have been with regard to pursuing

options or dealing with the GSA? It seems to me it could be that

part of the problem we are seeing here is not solely on the GSA

shoulders but perhaps on the shoulders of agency personnel who

don’t put this as a great priority in terms of what they are doing

at their particular agency.

Ms. KOONTZ. Because we have only focused on the New York

MAA at this point, I don’t think I could generalize on that point

at this juncture.

Mr. TURNER. What kind of activities do we have to really encourage the agencies to move aggressively with regard to taking advantage of the services provided by GSA or, in the alternative, to pursue other alternatives on their own? What is it that builds a fire

under them to say this is something that is going to save some

money, you need to move on it, get with it and spend some time

on it, that this needs to be a priority in your agency?

Ms. KOONTZ. One of the things is already present in the MAA

contracts. I think you heard the agency people testify to the fact

that the prices are quite good under those contracts. The data we

have seen, even inclusive of the fees, it is much more favorable in

many cases than any other existing vehicle.

It seems to me if that isn’t sufficient to entice Federal agencies

into the MAA Program, I don’t know what would be.

Mr. TURNER. As a percentage, what percentage of the Federal

agencies do we know have pursued participation in the MAA Program?

Ms. KOONTZ. I don’t know.

Mr. TURNER. Ms. Bates, do you know?

Ms. BATES. I don’t know the specific percentage.

Mr. TURNER. Can you give me some indication? Do we have the

vast majority of our agencies trying to participate or working with

you or do we have the vast majority of them still out there not worried too much about utilizing the services you are providing?

Ms. BATES. I will try and set the stage for you, sir, by example.

Within the Washington metropolitan area our WITS Program,

which is the MAA in Washington, we have significant participation

by the Federal agencies, including the Department of Defense. I

would say within Washington, which I might mention the WITS

Program, the transition is complete, we have significant participation.

In the other areas, because of the nature of this program, it is

local service and it is managed locally in many cases much as my

colleagues here at the table have stated, so the decisions are made

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locally and in small unit levels. To date, as a rough order including

the Washington area, we have 215,000 lines converted to MAA and

most of that is in Washington.

I think our challenge in the future is getting out the word by

talking to the Interagency Management Council, the local Federal

executive boards, really spreading the word on this program because as I stated in my oral testimony, by the end of phase 3, we

will have an MAA program within the grasp of the majority of the

Federal agencies and it is the responsibility of FTS/GSA to make

sure that awareness is out there so people can take advantage of

that opportunity.

Mr. TURNER. Thank you.

Mrs. JO ANN DAVIS OF VIRGINIA [assuming Chair]. Ms. Bates, I

have a question for you. Can you tell us about the fair consideration process, what qualifications does GSA consider during the

process, and is this process clearly defined to the vendors?

Ms. BATES. Fair consideration is a process used to determine in

a multiple award contract, which we have several within the Metropolitan Area Acquisition Program to determine which of the

awardees would receive a specific set of business. The criteria is

contained in the request for proposals and in the contract which

says that fair consideration can be conducted one of three ways.

The first way is to assess, after the requirement has been defined,

take that requirement and match it against the price tables assuming the technical qualifications are met, and that is the case most

of the time, and look at the price tables in the MAA. I need to remind you that we do have out year pricing so that we do have price

tables, so one can easily assess the total price of that specific requirement. That is one way.

A second way is to take the requirement and form it into a task

order and ask each of the multiple awardees to respond with a

technical and cost proposal. The third is for any of the companies

at any time to come in and lower their prices and enter. No. 1 and

No. 2 are the methods we are using. I believe the process is very

well defined to the industry.

With regard to our customer agencies, I think this is a new process to the telecommunications environment coming off a monopoly

environment into a deregulated environment and multiple award

contracts. This is a new process for our customers and we have had

to spend time working with them to ensure them that we go

through this process and that it is completed.

Mrs. JO ANN DAVIS OF VIRGINIA. I think I have time to ask you

one other question.

Back to the fees. I believe Ms. Koontz said the fees are on several

levels, so the agency could determine if they could save more

money and wanted to do the work themselves. I think I understood

in the testimony that you don’t disclose your fees? How would the

agency know if they could afford to do it better themselves or how

much money they would save? How can they know how to make

an informed decision if you don’t disclose your fees to them?

Ms. BATES. Let me state that our fees are embedded in the bills

the customers receive. We have never made an attempt to my

knowledge to in any way not disclose those fees to customers as we

sit down and talk with them in terms of evaluating alternatives.

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Mrs. JO ANN DAVIS OF VIRGINIA. Let me butt in there just a second. If your fees are embedded in the bills, that is after the fact,

they have already made the decisions?

Ms. BATES. Right.

Mrs. JO ANN DAVIS OF VIRGINIA. So are they told what the fees

are up front before they make their decision?

Ms. BATES. Yes.

Mrs. JO ANN DAVIS OF VIRGINIA. I guess that is not what I was

hearing in the testimony. Maybe I should go to Commander Day.

Were the fees disclosed to you by GSA when you made your decisions?

Commander DAY. They were embedded in the bill.

Mrs. JO ANN DAVIS OF VIRGINIA. By embedded in the bill, are

they spelled out.

Commander DAY. This is before and we know they are there before we enter the agreement.

Mrs. JO ANN DAVIS OF VIRGINIA. Are they spelled out dollarwise

or percentagewise so you do know exactly before you make your decisions what you are going to be paying?

Commander DAY. The exact dollar amount, I have not been

shown. I do know a percentage of the recurring fee for phone service is related to GSA overhead which we consider as the management portion of our fee, so I don’t have to manage the billing, I

don’t have to manage the vendor. It is sort of expected that is the

amount they utilize for the personnel necessary to oversee these

contracts. We know they are in there. The exact amount, I have not

been shown.

Mrs. JO ANN DAVIS OF VIRGINIA. Not the exact dollar amount,

but do you know the percentage?

Commander DAY. Yes, ma’am.

Mrs. JO ANN DAVIS OF VIRGINIA. You do know the percentage in

advance?

Commander DAY. The exact percentage, I have not been privy to

either.

Mrs. JO ANN DAVIS OF VIRGINIA. Mr. DeFalaise.

Mr. DEFALAISE. I will double check and get back to you on this

but my general understanding is we are aware there is an embedded fee, we do not know in advance and it would be nice to know

in advance the specific overall cost of GSA fees, but we will nearly

always eventually learn what the actual costs of these fees are is

after the fact. I will double check and if I am wrong, I will get back

to you but that is my understanding at this time.

Mrs. JO ANN DAVIS OF VIRGINIA. Ms. Bates, if they choose to let

you do the managing and go with your fee and after the fact get

the bill and find out what your fee is and decide they can do it

cheaper themselves, can they drop you and do theirs at that point?

Ms. BATES. Yes. I would like to add that in my previous answer

to your question, while I stated yes, the fees are known, it is not

our intent to hide the fees and if we are not being as forthright in

every case with our customers as we should, we will definitely take

that as a corrective measure.

Mr. TOM DAVIS OF VIRGINIA [resuming Chair]. One of the cited

factors that seems to be impairing MAA implementation progress

has been contractor performance which has resulted in untimely

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service delivery and service outages in some cases. In some cases

it is not even the contractor’s fault, it is just transition through

other things they have to do.

What steps have we taken to try to hold the contractors accountable for their performance and prevent the recurrence of these

problems and are there other context issues where you have to

hook up with other lines and so on, building access as you mentioned? What role is that playing?

Ms. BATES. You are right when you state that each issue is difficult. I think we have to keep in mind here that we really are

plowing new ground. The competition in the local market is new,

it is new to everyone. We have broken the price barriers in the

market and we are plowing new ground. It is local. Each situation

stands on its own and can be quite lengthy. I won’t attempt to go

into any of that.

Our first goal has been to really get the barriers, the problems,

whatever it is cleared up so we can all get on with the implementation. As we get into these situations, there are very few, if any,

that we can ever say this is a problem with you that you are totally

accountable for, there is no one else involved in that. Many times,

it is very entwined in a lot of issues as you have acknowledged.

I believe our contractors are doing their best. They are a good set

of contractors and they too are plowing ground. We are making it.

As far as contractor performance issues in the true legal and contractual area, at this time, we have not chosen to pursue them.

However, the door is always open for that.

Mr. TOM DAVIS OF VIRGINIA. What is the relationship between

GSA’s current local service contracts and the rate stabilization

agreements and the MAA contracts for local services? Are these

being allowed to expire and those requirements moved to your

MAA contracts or are you exercising contract options or otherwise

extending those agreements?

Ms. BATES. The Rate Stabilization Program was put into place

several years ago prior to deregulation when in our attempt to

manage the program and bring lowest prices to the government, we

negotiated with the local services provider at that time to stabilize

the rates over a given period. Those are with the traditional provider and are single award by definition.

It was our program intent to have the MAAs in place to let the

rate stabilization programs expire and move over. We have had to

extend some of those because of the delays in the MAA implementation. That is the program goal.

Mr. TOM DAVIS OF VIRGINIA. The MAA contracts are awarded out

of GSA’s national headquarters office but they are administered

and implemented regionally?

Ms. BATES. Correct.

Mr. TOM DAVIS OF VIRGINIA. What guidelines have you established for the regional contract administrators to ensure some uniformity in the process or are they given great flexibility and are

their particular management or administrative practices used by

one region with greater success that you have promoted for use

elsewhere?

Ms. BATES. This is one of the areas of centralized management

with decentralized operation, a lesson we have learned since the

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beginning of the MAA Program where we have made significant

changes since the beginning to where we are now. While the service is delivered locally, we have learned it is very critical to the program to have centralized program and project management. We

have instituted that and Ms. Binns here is responsible for the program nationwide. She has people on her staff dedicated to managing and operating this program. Within our regions, we also have

people identified for the implementation, the specifics, the day to

day implementation of that program.

Our contracting people have a similar structure in place where

we have centralized contract oversight and administration at our

headquarters level led by Mr. Al Olson, our Assistant Commissioner for Acquisition; we have contracting officers in the regions

to carry out the necessary day to day contracting activities. This

has evolved over the last 2 years. I think we are well positioned

at this time to do that.

Communications as alluded to earlier is always a challenge even

though we are in the communications business, telecommunications or communicating with one another. We have taken steps

to improve that communications so that we can freely identify

problems, make sure they are known to everyone in a timely manner, have far more communications with our industry partners and

our customers in terms of the day to day implementation as well

as making the decisions in order to proceed with the program.

In this particular area, I think we have implemented significant

change since the beginning for a very positive effect on the program.

Mr. TOM DAVIS OF VIRGINIA. In your view, how is the marketing

of the MAA contract supposed to work? What are GSA’s responsibilities and what do you view as the responsibility of the MAA

contractor? How does the fair consideration process factor into marketing to customers and the processing of customer service orders

and if an MAA contractor were to commit the time and resources

to develop a customer and were that customer to place orders with

GSA for services from that customer, could the GSA fair consideration process then preempt that customer decision?

Ms. BATES. That is a lot of questions rolled into one. Let me take

them one by one.

The marketing concept, I view marketing as customer awareness

and getting the information out about the program to make sure

the agencies can make that choice. I think that is the responsibility

of the GSA, FTS, as well as our industry partners. We need to get

out the word about this program, particularly because it is local

and decisions are made locally.

It is not just good enough to talk to the department level of an

agency. We have to get and reach the entire customer base, very

localized in nature and I think this is critical that both the industry as well as FTS does that.

We have to be mindful though of our customer wishes. Some customers do not prefer to be contacted locally, some prefer the national level, some may be at a mid level, so there is no formula.

Clearly I think it is all our responsibility to get out the word about

the program and program awareness.

85

Regarding fair consideration, this doesn’t extend just to the MAA

Program. Fair consideration is a very important and integral part

of a multiple award contract environment. It is so integral, it is the

law as Linda would remind me. It is our responsibility to conduct

fair consideration regardless of which industry partner will identify

the requirement and the agency then chooses to bring it to the contract. We conduct fair consideration and there is no guarantee or

predetermination as to which industry partner would get that business.

That is a problem that extends far beyond MAA but really goes

to the heart of multiple award programs. I think the integrity of

that process is key to the entire government acquisition process.

Mr. TOM DAVIS OF VIRGINIA. We have had delays in implementation and you are a lot smarter now than when you started this. We

all are. Given all that, do you still think you can achieve the $1.1

billion savings originally contemplated? If you are not sure, you can

get back to us.

Ms. BATES. I will get back to you.

Mr. TOM DAVIS OF VIRGINIA. I would like you to go back and take

a look. I think one of the problems we have had is we have set unrealistically high expectations and time periods at the very beginning.

Ms. BATES. I agree.

Mr. TOM DAVIS OF VIRGINIA. And a lot of unintended consequences result, particularly with telecom. We are seeing that not

only with you but you see this in the private sector. Any company

moving in has the same kind of thing. For that reason, we would

like to know where we are.

Ms. BATES. We will do that.

Mr. DEFALAISE. Mr. Chairman, if there are any other questions,

I would be happy to answer them but otherwise, could I be excused?

Mr. TOM DAVIS OF VIRGINIA. I am going to yield to Mr. Horn for

any questions. Otherwise, you can leave with our blessing and

thank you for being here.

Mr. HORN. This is a question to all of you. Looking back on GSA

over the current contract and were your needs met when new

equipment came on the line and what does that mean in terms of

the next few years? Would you get the kind of communications

equipment that you need to get? If you could give me a feeling for

did you have a problem when new equipment came on board?

Mr. DEFALAISE. In our situation, we are fortunate that our telecommunications staff, although very small, is very aggressive in

looking for ways to improve the services and to cut costs. In addition to the roughly 65 percent or more savings that we have at

Islip in New York, we got a better product. We went from analog

to digital and we also got voice mail that we did not previously

have.

To this point, we have gone to GSA because the perception has

been that they were meeting our needs, giving us a significant savings in cost potentially. As I said, we have only been able to evaluate it for one site because we don’t have the data from the others

and the quality and level of service we got as a turn key operation,

86

we just went to them and said, we want to pay less, pick it up and

hear a dial tone and we have been favorably impressed so far.

There have been delays in several locations but they have been

within expected parameters of infrastructure and regulatory concerns.

Mr. HORN. Thank you.

GAO is a customer of GSA, I take it, right, despite your fine,

across the board bluebooks, you are a patient of GSA, correct?

Ms. KOONTZ. I don’t know whether GAO is a customer of GSA

for the MAA contracts. I am sure Sandy knows but I don’t.

Ms. BATES. They are.

Mr. HORN. It is nice to know who is doing what but the issue

of new, innovative technology, does that come on board so you have

access to it or has that been a problem?

Ms. BATES. The program is structured and the resulting contracts are structured very much to focus and include tech refresh.

That is what it is all about when we talk about long term contracts

and flexibility. Definitely the framework is there. We have seen it

come on, particularly in the case of WITS in the Washington metropolitan area.

Many of the agencies as they transition not only in Washington

but in other locations have chosen to upgrade their service or reconfigure to provide greater technology. That is one of the program

benefits, to transition and also get something more and the low

prices we have been able to get through competition has allowed

that in many cases. Agencies have been able to do more with less.

I think that is very, very positive and often gets lost when we talk

about other issues.

Mr. HORN. Commander, I am curious when you are at sea and

when you are in port, does that take a different type of equipment

you need based on salt water or whatever?

Commander DAY. No, sir. This is primarily focused on our shorebased facilities. Many of them are just as critical as our under way

vessels.

Mr. HORN. Does the Coast Guard have a satellite system so they

can communicate?

Commander DAY. We are using commercial satellites as well as

some military satellite but this is not part of the offerings coming

from this program. We have taken advantage of some of the new

technology coming available under MAA. It has increased service

capability, particularly with the digital telephone offerings. That is

part of the draw for us to go there because of not only the prices

but it is refreshing technology which I would not be able to refresh

with my own service funds at that time.

Mr. HORN. Are you responsible for computer security or is GSA

responsible for that?

Commander DAY. I am responsible for computer security and the

computer system operations within my region which is New England.

Mr. HORN. Does GSA have a unit that can help you on the computer security situation or do you have your own group?

Commander DAY. I have my own group and we have not investigated or seen services available from GSA regarding that. There

are other computer related services I am aware of but we are not

87

taking advantage of those at this time, telecommunications primarily.

Mr. HORN. How about GAO, do you have your own unit on computer security or does GSA do it for you?

Ms. KOONTZ. I don’t know.

Mr. HORN. Let’s have a block in the hearing and get a letter from

GAO on that question.

Ms. KOONTZ. OK.

Mr. TOM DAVIS OF VIRGINIA. Mrs. Mink, any questions?

Mrs. MINK. The effort on the part of government to try to save

money and it appears from the testimony of a number of witnesses,

there is the potential of quite a bit of savings if we can get all the

Federal agencies into this combined cooperative telecommunications effort.

Up to date, you have been in this thing for 2 years, 1999, 2000

and this year. What would you estimate to be the total cost savings

thus far based upon the areas you have been successful in congregating into this system?

Ms. BINNS. It is very difficult to quantify with a great deal of

precision.

Mrs. MINK. How about a ballpark?

Ms. BATES. I would say we are saving right now about $1 million

a month which includes the Washington area MAA. That consists

of about 215,000 lines.

Mrs. MINK. Aside from the cost factor which must be appealing

to the agencies, is there any other benefit they would derive by

participating in the MAA?

Ms. BATES. I believe there are several other benefits they would

get. First of all, they would get the benefit of competition and we

have brought competition in the local market for the first time.

Mrs. MINK. Would you explain how you brought competition into

the local market?

Ms. BATES. The MAA Program, one of the driving factors was

furthering public policy in the area of deregulation in the local

market. These are the first acquisitions that were designed to go

out and take advantage of that deregulation and see if there was

competition in the local market and perhaps to stimulate that.

We offered the government’s requirements and put them out

there. We indeed found that there is competition out there and it

is very real. So our customers have the benefit of the competition

and also of choice which they have never had before. We have been

in a monopoly, regulated environment and they have not had the

choice. That is very, very positive. I think it is a little more than

just cost reduction. It is breaking the barrier of the cost in the local

market that we have brought.

Also, the MAA Program, as GSA regional services has always

done, has offered the customer total service. Because the decisions

are locally made many times, the people in our customer agencies

have many other duties and rely on GSA/FTS to make decisions for

them or help them make decisions. Our staff stands ready to help

them make those choices, make technical decisions, recommendations and to assist them in any way.

Another important factor is this isn’t one of those situations

where once the service is installed, FTS walks away from the cusVerDate 11-MAY-2000 10:16 Apr 11, 2002 Jkt 000000 PO 00000 Frm 00091 Fmt 6633 Sfmt 6633 C:\DOCS\77353.TXT HGOVREF1 PsN: HGOVREF1
88

tomer. We are there with the customer troubleshooting, operations,

maintenance, managing our contractor, all the way until that customer disconnects that service. It really is a life cycle service and

management.

Mrs. MINK. So when you estimate cost savings, do you include

the additional staff that may be required in order to do all the

servicing you just described?

Ms. BATES. When we calculated the cost savings of the $1 billion,

we did not include all of those elements. Basically, what we did is

looked at what our customer base was paying today and what they

would be paying in the future under this program. Being optimistic

people, we also factored in significant growth and that growth was

factored in on both sides of the equation.

Mrs. MINK. When you assess the management fees, do you include these additional costs that are experienced by GSA and FTS?

Ms. BATES. Not directly in computing the savings. I view that as

our fees and I want to tell you, we are talking about fees that

range from $2.50 a line to $6 a line. That is just to put the framework there. The value that GSA adds is that we are doing this so

our customer agencies do not have to do it. I would pose that we

are very good at what we do. We have experience, we have learned

many times through the school of hard knocks so perhaps we are

more efficient than others might be.

The truth is, with our customer agencies having gone through

down sizing and right sizing, many of them are focusing on their

core agency mission and their acquisition and technical people are

doing the same. So they rely on us to do that.

Mrs. MINK. Thank you, Mr. Chairman.

Mr. TOM DAVIS OF VIRGINIA. Mr. Turner.

Mr. TURNER. The MAA Program has been implemented in 30-

some cities and in 8 of those cities only 1 contractor was announced

by GSA. Could you tell us why there was only one contractor and

does this not take away from the idea that there is competition inherent in the program you are administering?

Ms. BATES. In many of those instances, there was competition.

It was not just one company proposed and one company being

awarded. There was competition. The results of the competition

dictated that it was appropriate to award the contract to only one

provider. The Federal acquisition regulations as they relate to multiple awards provide guidelines in terms of when it is appropriate

and relative to technical and cost proposals of each of the bidders.

In the cases where we made a single award, it was appropriate for

only one contractor.

Mr. TURNER. Do you have the option of adding the contractors

later? How does that work?

Ms. BATES. Yes, sir. If you recall, one of the principles of the program is the crossover. While we have focused in past hearings on

the discussion of crossover between long distance and local and

local to long distance, part of the crossover allows MAA providers

to crossover into other locations. I think this is a strength of the

program because where we did have a single award because of the

situation at the time, it does not preclude our customers from having choices and multiple award as we move ahead with crossover.

89

Mr. TURNER. Ms. Koontz, this kind of hearing is oftentimes a little frustrating when we have a story that says contracts that were

supposed to be implemented over 9 months have taken much

longer. We are told the problem is the regulatory environment

makes it difficult. I know in New York there was a legal problem;

you’re looking at potential management problems in GSA or whether the agencies are not aggressive enough, or whether contractors

aren’t performing but I have not yet had a sense to the apportionment of that blame. Is it primarily the contractors that are dragging their feet or is it the GSA? Who should this committee point

to and say you need to do a better job?

Ms. KOONTZ. It is probably premature for GAO to say exactly

where the blame lies in any of this. If it is anything like FTS, there

will be plenty of blame to go around probably.

We have not completed our work yet and many of the issues we

presented today, we have been unable to nail down at this point

in time. It is not possible for us to really talk about what recommendations for the future should be.

Mr. TURNER. I am sure the chairman will be diligent in keeping

a watchful eye on all those groups.

Mr. TOM DAVIS OF VIRGINIA. Ms. Davis.

Mrs. JO ANN DAVIS OF VIRGINIA. Understanding we are not far

enough along yet to determine about fees, 84 percent seems rather

high to me, as a businesswoman, for a fee. I am curious what do

the agencies get for 84 percent versus 28 percent on the low end?

Ms. BATES. First, I would like to address the percentage. I think

to characterize the fee in terms of percentage of the line charge

presents somewhat a distorted picture. If our fee is $2 and the line

charge is $40, as it was in some cases pre-MAA, that is a fairly low

percentage. If post-MAA the fee remains $2 and the line charge is

$5, that percentage is different and it presents a distorted picture.

In many cases, that is what we are dealing with where we had a

line charge that was up here and now is down here.

By the same token, I don’t mean to imply that we are not managing the fee or concerned about the makeup of that fee. That is why

I think through management of our operating expenses, our fee has

gone down 30 percent in the last 5 years and we are continuing to

look at it. FTS being a nonappropriated fee for service organization,

and nonmandatory, you can well imagine like any other good business person, I need to keep a strict eye on my operating expenses

and I am doing that actively. We can always look for suggestions

to improve.

What value do we get or how do we earn that fee? As I stated

earlier, we manage the customer through the life cycle from the beginning of the requirement all the way to the time they disconnected. We provide acquisition support, put the contracts in place,

do the follow on contract management and administration, which

in this particular market is always a challenge and requires top

notch, highly skilled individuals.

We also provide consulting services to the customer in helping

them define their requirements and to look at the solutions and

evaluate those. This requires technical people up on the latest technology.

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We also do the day-to-day operations of operating much of these

switches and services where we are looked to as the provider in the

case of many Federal buildings where we are providing service to

all the tenants within that building. We are their provider, they

look to us.

We also do the troubleshooting that is required anytime there is

a system glitch or there is a problem. The troubleshooting extends

back to the equipment to the long distance carrier or whatever.

Our customers look to us, when they have trouble they call us and

ask us to ferret it out. We do that, that is why we are there.

We also provide billing services and a consolidated bill. We take

in the bills and provide the bill to the customer and validate the

bill in conjunction with the customer. So we really are a total service provider. It takes the responsibility and much of the technical

burden off the customer by doing that. I think my colleagues here

have indicated they have taken advantage of those services.

Mrs. JO ANN DAVIS OF VIRGINIA. If two Federal agencies were

getting the same service from you, would their fee be the same?

Ms. BATES. If they were getting identical services, yes.

Mrs. JO ANN DAVIS OF VIRGINIA. The percentages are different

because they may use two different carriers, so their line charge

may be different but your fee would be the same even though the

line charge is different?

Ms. BATES. Right. The fee is not at all related to the cost. If a

line charge is $2 or $3 in a given city, the fee is the same. Within

the same city, it is the same. It can vary between locations because

our cost base is different.

You recall the fee is intended to recover all of our direct and indirect operating costs. I wanted to be accurate and not mislead you.

Mr. TOM DAVIS OF VIRGINIA. The Sprint bridge contract expired

June 6, I didn’t hear what happened to it.

Ms. BATES. It expired, we did not extend the contract. The transition is completed relative to Sprint to Sprint transition. The transition period has ended and all of the traffic now and services on

Sprint is being billed under FTS2001.

Mr. TOM DAVIS OF VIRGINIA. Thank all of you for being here

today.

I will let you step down and welcome our second panel to the witness table. We have John Doherty of AT&T; James Payne of

Qwest; Randall Lucas of Verizon; Jerry Hogge of Winstar and

David Page of BellSouth.

[Witnesses sworn.]

Mr. TOM DAVIS OF VIRGINIA. I would ask you to take about 5

minutes and summarize your comments. We have read your statement and have questions based on it.

We will start with you, Mr. Doherty, and move down the line.

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STATEMENTS OF JOHN DOHERTY, VICE PRESIDENT, AT&T

GOVERNMENT MARKETS; JAMES F.X. PAYNE, SENIOR VICE

PRESIDENT, GOVERNMENT SYSTEMS, QWEST COMMUNICATIONS; RANDALL L. LUCAS, VICE PRESIDENT, SALES, FEDERAL MARKET, VERIZON FEDERAL INC.; JERRY HOGGE,

VICE PRESIDENT, GOVERNMENT SOLUTIONS AND ENHANCED SERVICE PROVIDERS, WINSTAR; AND DAVID PAGE,

VICE PRESIDENT, FEDERAL SYSTEMS, BELLSOUTH BUSINESS SYSTEMS

Mr. DOHERTY. Thank you for holding today’s hearings to discuss

GSA’s Metropolitan Area Acquisition Program. AT&T appreciates

the subcommittee’s dedication to the stated goals of the MAA Program, end to end competition in the Federal telecommunications

market and its promise of choice, innovation and lower prices to

benefit agency users and taxpayers.

The MAA Program was designed to bring these benefits to the

local Federal telecommunications market. We believe a program

that operates more like the private sector will benefit both taxpayers and government by reducing barriers to competition and the

inefficiencies of the present program. We look forward to working

with the subcommittee, other vendors, GSA and interested stakeholders to make this happen.

I am pleased to respond to questions asked by the chairman in

his letter of invitation and his request for recommendations to improve the MAA Program.

While the program was launched as part of a tripartite agreement between Congress, industry and GSA, AT&T viewed the MAA

Program as a real opportunity for government customers to realize

benefits of end to end telecommunication competition. We still do.

AT&T is committed to bringing choice to the local telecommunications market. We have demonstrated our corporate commitment

to providing local service through a multibillion dollar investment

in local service infrastructure. Today 2 years after the first MAA

contract award, I believe all stakeholders remain committed to the

success of the MAA Program. Indeed, AT&T holds 10 of the 37

MAA contracts and has transitioned over 10,000 lines to date.

However, a number of factors have slowed or prevented achievement of the program goals. Based on experience to date, we believe

changes should be made to the program. These recommendations

are: adopt the use of telecommunication service schedules, level the

playing field for local service providers, provide financial assistance

to agencies for local services transition, reduce GSA program administrative fees, and clarify program participant roles and responsibilities.

There are several factors that have hindered the success of the

MAA Program. These are: counterproductive, noncommercial practices; lack of commitment to transition services to the MAA Program; uncooperative, incumbent local exchange carriers; and untimely and inaccurate information from the government about customer telecommunication needs.

Continuation of often higher priced legacy contracts with ILEX

and ambiguous roles and responsibilities or stakeholders in implementing the program.

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We believe applying commercial practices would streamline the

program and facilitate more rapid transition. We offer the following

recommendations to address the impediments to this program.

These recommendations, if implemented, will more closely align the

program with commercial practices and realize the goals of the program.

Our first recommendation is that GSA adopt telecommunications

service schedules to encourage even greater competitive choice and

eliminate administrative burdens. Under the schedule’s approach,

each vendor would disclose the terms, conditions and locations

where it is going to provide specific services. These schedules would

ensure fairness in implementation of the program while providing

agencies with truly competitive prices and the diversity of innovative services currently offered in the commercial marketplace.

The playing field must be level so that everyone can compete.

Many agencies do not participate in the MAA Program because of

the one-time charge required to install the facilities and equipment

necessary for transitioning service. Incumbent providers hold an inherent advantage because they have existing infrastructure and

need only reprice their current services which is a paper transition

rather than a physical transition.

End user agencies must be educated about the favorable, long

term savings available under the MAA contracts and should be

strongly encouraged to make use of these contracts. The best

means of accomplishing this would be to allow vendors to freely

market their MAA services to the agencies. If, as GSA officials appear to have indicated to GAO, GSA is moving to this position, we

believe this is a step forward.

Third, in order to assist end user agencies in their transition to

an MAA Program, GSA should provide MAA customers with financial assistance through the use of a transition fund. GSA used an

information technology fund to offset agency transition costs for the

FTS2001 long distance service contract. More MAA transitions

could be achieved by expanding the use of this transition fund to

local services in order to offset the end user’s expenses incurred

when a physical transition is required.

GSA’s program administrative fee must be reduced. These administrative fees have significantly offset vendor offers. While the

MAA Program has been successful in reducing prices from industry, only a fraction of the agencies have taken advantage of these

lower prices. The current administrative fee structure has diminished agency incentive to transition to competitive vendors. The administrative fees applicable to schedules are significantly lower and

would reduce prices paid by the end user agencies for local services

in MAA cities.

Clarify responsibilities of MAA Program stakeholders to ensure

accountability, cooperation among all and more readily achieved

MAA Program goals. To address this ambiguity of roles and responsibilities, AT&T conducted an extensive analysis of the MAA

provisioning process and documented the specific responsibilities of

vendors and the government.

With our full support, this documentation has been incorporated

into several of AT&T’s MAA contracts. Adoption of a uniform definition of roles and responsibilities would promote greater underVerDate 11-MAY-2000 10:16 Apr 11, 2002 Jkt 000000 PO 00000 Frm 00096 Fmt 6633 Sfmt 6633 C:\DOCS\77353.TXT HGOVREF1 PsN: HGOVREF1
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standing and accountability among all involved and optimize

achievement of program goals.

By adopting telecommunications service schedules, replicating

practices of the commercial marketplace, and implementing the

other changes recommended above, local exchange competition will

be accelerated providing end user agencies with a variety of alternatives to meet their telecommunication needs and save significant

taxpayer dollars.

With the renewed focus of this subcommittee on the program

issues associated with the MAA, we have an opportunity to change

course and improve the speed of the implementation of the MAA

Program.

[The prepared statement of Mr. Doherty follows:]

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Mr. TOM DAVIS OF VIRGINIA. Mr. Payne.

Mr. PAYNE. My name is Jim Payne, senior vice president for

Qwest Government Systems. I am pleased to be here to discuss the

MAA’s which constitute a significant portion of the FTS Program.

Qwest is the fourth largest long distance provider in the United

States, and we are also an international carrier and provide local

services.

This hearing is about the progress of the MAA Program and

whether the program has accomplished its primary goals, ensuring

the best services at the best prices for the government and maximizing competition for services. To that end, I will provide a brief

overview of Qwest’s perspective on three critical MAA questions.

What was the goal of the MAAs and why are we here? Chart 1

shows the goals. The goal was to establish a new paradigm reflecting the 1996 Telecom Act. It was to be the blueprint for the future.

The paradigm includes three distinct contract vehicles: FTS2001,

which we had a hearing about in April; the MAAs and the Niche

contracts.

The government would have at its disposal a single, integrated

program that forces continuous competition, innovation and low

prices.

The second question, what is the current status of the MAA Program? Many parts of it are broken, but I do believe we can fix it.

To date Qwest has won MAAs in Albuquerque, Boise, Denver, and

Minneapolis based virtually on identical RFP requirements, yet our

experiences in each city have been vastly different. With the exception of Minneapolis, in no case has a rapid transition been

achieved. Further, the guiding principles promised that long distance would be in our contracts within 1 year after the first

FTS2000 contract was awarded. It has not happened.

Our MAA experiences have been sobering. We identify the questions the committee has provided and we have some concerns. I

would invite you to look at some of the examples. In every city instead of dealing directly with Qwest, the end user agencies are

forced to deal needlessly and in many cases, exclusively through

the GSA.

In Denver, for example, a customer had selected Qwest but the

GSA redirected the order to a competitor. This certainly was not

what we had anticipated.

The GSA contract management fee that applies to MAAs ranges

from a low of 25 percent, and I heard an even greater high of 85

percent. When comparing the GSA to itself and other parts of GSA,

you can see these overhead management fees are unprecedented.

The MAAs are voice centric. New and enhanced services such as

DSL are not in the contracts that Qwest provides.

There is a lack of consistent communication between GSA here

in Washington and their regions, and it has delayed transition success. Regional and strategic MAA difficulties are not being handled

in a timely fashion. It appears to Qwest that GSA’s focus is largely

on FTS2001 problems and not on the MAAs, thus competition has

not been fully achieved.

It is clear that the FTS2001 minimum revenue guarantee dominates the GSA focus. This issue has had a cascading impact on the

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MAAs by delaying the timely addition of long distance to the MAA

contracts. This is not the deal that Qwest signed up for.

What are Qwest’s recommendations? Making these recommendations, Qwest understands the provision of service to the government is subject to the requirements of the Telecom Act and FCC

policies. We believe our recommendations are consistent with all

these requirements as well as focused on the MAA contract principles and the guiding areas.

Our recommendations are: GSA must adapt a more balanced,

overall management structure for FTS starting with the same management fee across all the FTS programs and they should not exceed 8 percent.

The GSA must stop inserting itself in many cases needlessly between the vendors and the agencies. We believe this is a waste of

tax dollars and does prevent competition.

The GSA must adopt best practices using tools and methods so

the agencies can make informed decisions and demonstrate accountability.

We believe the GSA must commit to and publish a meaningful

schedule to deliver long distance services through the MAAs as

well as the other suggestions we are making today. We recommend

that the GSA issue a schedule, and we offer one on the board here

which clearly demonstrates dates and deliverables to introduce

long distance services.

Let me emphasize, the MAA crossover process should be quite

simple. I emphasize we need clear dates and clear deliverables.

In summary, these actions and recommendations are critical to

putting FTS2000 back on track and I believe GSA does add value

to the process. However, please don’t ask me to choose between the

GSA and my end user agency.

Thank you for the opportunity for Qwest to present its views this

afternoon.

[The prepared statement of Mr. Payne follows:]

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Mr. TOM DAVIS OF VIRGINIA. Mr. Lucas.

Mr. LUCAS. My name is Randy Lucas and I am the vice president, general manager of Verizon’s Federal team. Verizon Federal

is a part of Verizon’s Enterprise Solutions Group and is specifically

organized to serve the information technology needs of our Federal

customers. Verizon Federal has numerous contracts with various

Federal agencies that provide a host of information technology and

telecommunications services.

From Verizon’s perspective, the MAA process has generally

worked well and been a success but it could be made even better

if GSA continues to communicate with industry on processes and

guidelines that dictate how the MAA program will evolve.

Verizon has been a supporter and active participant in the MAA

Program since its inception. In fact, Barbara Connor, the former

president at Bell Atlantic’s Federal Government Line of Business

testified before the Committee on Government Reform 4 years ago,

encouraging Congress to support the separation of local service and

long distance services in developing the government’s procurement

strategy. A lot has changed in this industry since that time and

real progress has been made in the implementation of the MAA

Program.

The stated goals of the MAA Program have been to sustain price

reductions for local telecommunications services in selected metropolitan areas; provide a flexible, contractual vehicle with high quality services; and to create a contractual structure that encourages

agency cooperation and aggregation of requirements. GSA is to be

commended on the pursuit of these goals and the impact the MAA

has had in fostering competition.

Verizon is in the unique position of having seen the MAA from

several different views. One of the first cities awarded was New

York City. We lost. The sole award was made to AT&T. In January

2000, we were awarded the WITS 2001 contract which GSA considers part of the MAA Program. We won a multiple award contract

in Buffalo along with AT&T. In Baltimore, where we were the incumbent vendor, we lost in a single award decision to Winstar. We

were awarded a contract in Boston, a multiple award city with contracts also going to AT&T, SBC and Winstar. Earlier this year,

Verizon was awarded the first crossover contract to go back to New

York City to compete for services there.

As you can see, we have seen multiple awards, single awards, we

have won, we have lost, we have crossed over, just like the program strategy envisioned.

Though the MAA Program, from our view, has had its successes,

we believe there are areas for improvement. We would suggest that

GSA more strictly enforce the post-award forbearance timeframes

for the awarded cities. While Verizon understands and appreciates

the need for the fair consideration process, we suggest the process

needs to be expedited so that customers can take advantage of the

new services and better prices offered in the MAA contract.

The process for technology refreshment and the ability to acquire

up to date goods and services are potential areas for improvement.

While the MAA Program offers some limited data services, customers cannot currently buy state-of-the-art telecommunications

technology such as frame relay, ATM or SONET services. Federal

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Government customers want and need these technologies to meet

the wants and needs of their customers, ultimately the taxpayer.

Industry needs to be allowed to provide these types of services

as well as voice over IP, gigabit ethernet, and DSL based solutions.

As voice, data, and video networks converge to a common platform,

the MAA contract should allow for the rapid inclusion of these new

technologies.

Verizon is still prohibited from providing long distance services

in 11 States and the District of Columbia. This is an important regulatory hurdle as we wait for the summer release of the crossover

guidelines for FTS2001. If GSA requires that all potential entrants

to that market have to be able to provide long distance services to

every State, Verizon will be locked out. If we will be able to offer

long distance services as an option on our MAA contract, we can

compete where we have been approved to provide long distance

services. This will mean more choices for our customers and a better deal for the taxpayer.

I indicated that we have competed both successfully and unsuccessfully against AT&T, SBC and Winstar for local services via the

MAA Program. In each case, we were the incumbent local exchange

carrier. The opportunities that the MAA presents would be even

more attractive if vendor partners knew they could bundle voice,

data, long distance and Internet services on the same contract platform.

Verizon values our partnership with GSA and our successes

within the MAA Program. We have found the representatives from

national GSA, as well as those from the regions, have been more

than willing to talk through issues seek feedback and discuss process improvement. The MAA is a good strategy for achieving the primary objectives. Can it be improved? Certainly, it can. It is a new

process. In my 19 years of serving this market, I have found precious few things that cannot be improved.

I thank the committee for the opportunity to discuss the MAA

Program. I would be glad to answer any questions you may have.

[The prepared statement of Mr. Lucas follows:]

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Mr. TOM DAVIS OF VIRGINIA. Mr. Hogge.

Mr. HOGGE. My name is Jerry Hogge, vice president of Winstar

Government Solutions. I appreciate the opportunity to discuss the

Metropolitan Area Acquisition Program. I am here to request your

support in accelerating the pace of its implementation.

As reported in GSA’s press statements, this $4 billion-plus program has the potential to save taxpayers millions of dollars this

year and over $1 billion going forward if it is implemented expediently.

Winstar is a broadband services company and is one of only two

competitive local exchange carriers participating in the MAA Program, and is the holder of more MAA contracts than any other vendor. Winstar is also the only vendor offering local dial tone to its

customers primarily using a 38 gigahertz wireless technology.

As a competitive local exchange carrier, Winstar views GSA’s

MAA Program as an ideal business channel offering the opportunity to provide substantial and concentrated amounts of local

voice and data services in major metropolitan areas. Winstar has

competed for 17 MAA contracts, won 12 and 2 are pending decision.

Our presence in this process has undoubtedly been a key factor

behind the vigorous competition that has taken place and a key

part of the dramatic price reductions seen in the MAA contract

prices.

As you may have read recently Winstar has voluntarily filed for

reorganization under Chapter 11 of the Bankruptcy Code. We have

received our initial funding, continue to provide services to our customers, are adding new customers daily and intend to emerge from

this process with GSA and the Federal agencies as a prominent

and strategic part of our long run business plan.

Winstar regards the MAAs as a tremendous success from a contract award perspective. However, only a minuscule part of the

promised savings has been realized because most of the business

promised in the contracts has yet to be implemented. Simply put,

Federal customers are not being transitioned to the MAAs at an acceptable pace. Processes are lengthy, basic paperwork is slow to get

done, fair consideration is inherently unfair in certain instances

and conflicts exist with in-place contracts.

As of today, well over a year into Winstar awarded contracts, we

have received orders for only 5 percent of the promised lines. Further, since most orders have been received very recently, only 1.7

percent of the lines forecast by GSA for the first year in our 12 cities have been installed. We believe these statistics are not uniquely

loaded to Winstar but instead represent programwide failures. In

fact, most of the promised MAA business remains with the incumbent RBOCs.

The drastically slow revenue flow from the MAA contracts has

had a significant impact on Winstar and will ultimately impact our

ability and willingness to participate in the program. The main impediments we have experienced in transitioning MAA business include administrative impediments such as slow receipt of notice to

proceed, fair consideration of requests and responses, and ultimately service orders.

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The average delay between the date we received a notice to proceed and our first order is almost 4 months and some cities like Indianapolis have yet to place their first order with us, resulting in

the passage of an entire year where customers cannot take advantage of Winstar’s reduced MAA prices.

The fair consideration process is somewhat a misnomer. Certain

GSA regions apply very rigid guidelines to how vendor priced proposals are to be presented and then take months to arrive at seemingly simple buying decisions. Other local GSA offices specify which

technologies can be used to satisfy a requirement such as an inground fiber deployment. This violates the contract as the specifications are to be expressed in terms of service requirements, not a

definition of a specific technology or solution.

The MAA contracts are purposely uniform in their product and

service content. All MAA providers are presumed to be equal in

terms of technical and management merit as a result of the RQS

process. Thus, post-award buying decisions should be a simple matter of comparison shopping and choosing a vendor. To date, this is

not the case.

Finally, in certain MAA cities, fair consideration decisions do not

always appear to be communicated. In several instances, we have

not yet been notified of the outcome of fair consideration proposals

we submitted in November 2000. Either we lost and haven’t been

notified as to why or GSA has taken more than 8 months to make

a simple price comparison. Neither reason is acceptable.

The fair consideration process is further confounded by apparent

conflicts with existing contracts. In Dallas, for example, Winstar’s

MAA service price must offset a termination fee that SBC charges

GSA to disconnect its service. This external cost works against all

nonincumbent MAA winners and destroys the level playing field

envisioned by the fair consideration process.

Indeed, because of the incumbent’s disconnect charge, GSA apparently and wrongly concludes that we are not a competitive

choice since it will take many months just to break even with respect to this disconnect fee.

The MAAs are 8 year contracts and we believe we provide a better life cycle value and savings that is not being properly considered.

To the best of our knowledge, less than 10 percent of the lines

forecast for our 12 cities have been transitioned. We propose a few

changes to improve these results.

Simplify the transition process; speed it up; communicate the results and track performance. Transition and fair consideration are

extremely measurable. A scorecard such as the one on the display

that begins with the baseline circuit forecast represented to industry by GSA should be immediately implemented and tracked

monthly. On the screen is a card which shows the percentage of

forecast lines that have had orders placed with an MAA provider

and the percentage of forecast lines that have been installed. This

sort of scorecard would highlight cities that are on target and compare them to those that are not, hopefully spurring action, fixing

process problems and eliminating delays.

GSA can utilize the IT fund to help defray initial one-time transition costs to a nonincumbent’s network as well as other external

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and equipment changeout costs that otherwise bias the purchase

decision in favor of incumbent providers.

GSA’s forecasts of their requirements in each city are the basis

for the bargain. Millions of dollars were not invested in winning

these MAA contracts just to share a $100,000 minimum revenue

guarantee. Instead, we relied on GSA’s detailed forecast of business

and the expectation that GSA would meet those forecasts and the

savings touted in its own press statements.

GSA received substantial price reductions based on the promised

business. We are prepared to deliver the rates promised in our proposals and it is time for GSA to live up to the lines promised in

their forecasts.

I would be happy to answer any questions you have. I appreciate

the opportunity to appear.

[The prepared statement of Mr. Hogge follows:]

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Mr. TOM DAVIS OF VIRGINIA. Mr. Page.

Mr. PAGE. My name is Dave Page. I am vice president responsible for BellSouth’s business with the Federal Government. I represent a staff dedicated to ensuring our Federal customers receive

the best technology available.

I have previously submitted my full statement to the subcommittee which I ask to be a part of the hearing record.

During my 32-year career at BellSouth and predecessors I have

held various positions in sales and customer support. I am fortunate to have had the opportunity to see telecommunications become

the most exciting industry in the world.

BellSouth is actively capitalizing on the changes in the industry

to provide our customers with leading edge services. Building on

the most sophisticated network infrastructure in the southeastern

United States, our challenge is to maintain our perennial receipt

of the industry’s highest award for customer satisfaction, while simultaneously expanding our business into the global marketplace.

GSA’s FTS Program and the MAAs are key opportunities for

BellSouth to achieve this growth. BellSouth has won 3 MAA competitions—Atlanta, Miami and New Orleans. The 1-year forbearance period for the Atlanta and Miami contracts expired April 26,

2001. We look forward to being able to offer enhanced and emerging services such as frame relay, ATM, SONET and long distance.

Unfortunately, there have only been limited opportunities to expand the contracts.

I have heard all the reason why we haven’t been able to move

forward and add new optional services. Some folks are concerned

about commitments to FTS2001 contractors but is the government

keeping its commitment to BellSouth and the millions of customers

we serve.

It is not my intention to raise issues to which I have no solution,

so I won’t sit here and grumble about the transition and how it

slowed my ability to implement services under my contracts. In

many cases, there has been a lack of creativity. I recognize this

may be caused by too few people in the field and not enough support from headquarters. It is our understanding that processing

contract modifications to add new services might take a back seat

to basic transition. I understand that priorities sometimes change

and we all have to be flexible in the process.

Nevertheless, Mr. Chairman, BellSouth has been a good corporate citizen when dealing with all the stakeholders. We find we

too have competing obligations for our people, our customers, our

agencies and our shareholders. In the end, the approach to any

problem that seems this complex is to get to the root and find a

common solution.

I was reminded that industry, government and Congress had already solved the problem. The best solution to move us forward is

to return to the guiding principles. These principles are maps that

tell us how to proceed.

We aggressively lowered prices to win these MAAs. Our intent

was to do more than just retain the business we have. It was an

opportunity to expand into markets we won’t enter and offer new

and enhanced services. In fact, one of the primary reasons

BellSouth bid on the MAAs was to be a partner with GSA moving

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from a low price bid war style of competition to a best value partnership. This is not a merge. Partners should take my interests to

heart and protect me from FTS2000 transition delays and difficulties. Partners should allow us to work together to facilitate meaningful discussions at all levels. Partners should be fulfilling their

obligations to increase opportunity for competition rather than taking an opportunity my team develops and giving it to a competitor.

Partners should live up to their commitments to all FTS program

stakeholders.

To their customers, GSA owes the economic relief of the competitions that have already been conducted. The MAA should not subsidize GSA at the customer expense. To their contractor, GSA owes

full, open, head to head competition. To the taxpayer, GSA owes

more efficient government enabled by ruthless competition in the

local and long distance services.

BellSouth appreciates this opportunity to share its views and

welcomes any questions you may have.

[The prepared statement of Mr. Page follows:]

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Mr. TOM DAVIS OF VIRGINIA. Ms. Davis.

Mrs. JO ANN DAVIS OF VIRGINIA. Mr. Hogge, you stated in one

city you waited 4 months before you got the notice to proceed and

in Minneapolis it has been a year.

Mr. HOGGE. No. I talked about an average period of time from

contract award to when we received a notice to proceed, kind of the

administrative point in time when you are responsible for delivering contract deliverables and can start working business under the

contract.

In Indianapolis, we won the contract on April 27, 2000; the notice

to proceed came on July 11, roughly 23⁄12 months later. It is getting

to that first order that has taken to this day.

Mrs. JO ANN DAVIS OF VIRGINIA. Your contracts when you bid

was based on dollars for a year ago?

Mr. HOGGE. Right. What we did in assessing each of these contracts city by city, we looked at the forecast of business, where the

buildings were, how they matched our developing network and bid

based on that forecasted business which was very specific, year by

year, by service, by product and represented that in a business

evaluation that we assessed and decided to go forward with each

bid.

Mrs. JO ANN DAVIS OF VIRGINIA. I would like to ask the same

of each of you. Did you experience the same delay and cause you

a loss in revenue?

Mr. DOHERTY. Yes. From an AT&T perspective, similar to

Winstar, a robust business case was put together looking at the actual customers, the lines, the timing of the announcement of the

award. In my testimony, we talked about untimely and inaccurate

information. There is quite a bit of frustration if you are not the

monopoly where you have all those infrastructures sunken costs in

there for years. You have to plan when you are going to put infrastructure in to all your new customers and each of those delays

delays not only implementing the capital expense but also the operational people you have in that city where you have targeted them

to implement a program and they may be sitting around for 3, 4,

5 or 6 months waiting for the first order. There as been a large degree of frustration for AT&T.

Mr. PAYNE. I have the chart in front of me showing award dates

and notice to proceed. Typically it has taken 3 months but in Boise,

it took 7 months. You are not authorized to do any work until you

have notice to proceed. In each case, we have hired staff ready to

go, to move forward, so that is cost we have absorbed is for 7

months until you are allowed to work with the end users.

Mr. LUCAS. Of the three situations I describe in the testimony,

there is still one that the wait time between the contract award

and when we first got orders that was quite lengthy but we had

to submit some interim proposals in that process as a part of the

Fair Consideration Act. From the time we submitted the second

round of proposals to the time we got the orders, it doesn’t appear

very lengthy at all.

Mr. PAGE. There is a very big difference between the two regions

I support. Region 7 in New Orleans was a very rapid process and

region 4, Atlanta and Miami it has been a longer process and

seems to be some confusion in how they are supposed to notify you,

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when they are supposed to notify you and there just seems to be

some methods and procedures they are lacking there. I don’t know

that it has been 2 months though.

Mrs. JO ANN DAVIS OF VIRGINIA. Am I to get from most of you

that the problem is the communications because it is a new program. I don’t understand why two different regions would have

such a significant difference. Do you get notification from the

Washington office or the regional offices?

Mr. PAGE. It comes from the regional office.

Mrs. JO ANN DAVIS OF VIRGINIA. Same for all of you?

Mr. PAYNE. I want to emphasize something Winstar indicated. In

Boise, it took 7 months to get the notice to proceed. We have not

yet received the first orders. That was awarded in August 2000,

last year. The point is there is a notice to proceed and then there

is subsequent process and then you get the orders. So it isn’t just

the notice to proceed issue that is the delay. It is that interim between notice to proceed that the fair consideration process, which

varies city by city, will determine when you get your first order. So

you must first get your notice to proceed and then at some point

there is a description separate from what was in the RFP, that region determines how they will define fair consideration.

Mrs. JO ANN DAVIS OF VIRGINIA. Do you think as a vendor you

understand the definition of how they determine fair consideration?

Mr. PAYNE. Since it is not in the RFP, it is absolutely at the discretion of the local city.

Mrs. JO ANN DAVIS OF VIRGINIA. It is not in the RFP?

Mr. PAYNE. There is a reference to fair consideration but the

process is not broken out, so each city takes their own definition

of it. One of the reasons Minneapolis transitioned so quickly is they

went to the notice to proceed and had a straightforward, fair consideration process. We went right into transition. As I sit here, we

are 100 percent transitioned in Minneapolis.

Mr. TOM DAVIS OF VIRGINIA. Mr. Turner.

Mr. TURNER. I find this whole process, even though I know it is

designed to be an improvement over past practices, quite confusing.

I get the impression that the vendors find it quite frustrating. It

seems you aggressively pursue trying to make a proposal and then

you are told you have been awarded the contract and then it takes

months for anything to ever happen with regard to what you

thought you got.

Mr. Doherty, I am interested about the suggestion you made

about moving to telecommunications services schedules. Explain to

me exactly what that means and how that would differ from what

we are currently doing. I also want to see if everyone on the panel

agrees that would be a very positive change?

Mr. DOHERTY. It is our position that we believe all vendors

should be able to market services to the agencies when and if they

have the capability, whether it is local, long distance or end to end

service. It is our belief these contracts with the forbearance periods

which have not been met and a number of us have relied on these

dates where they said you have a contract for a year and then you

have a crossover, these programs are too hard to manage.

It is our position if you allowed industry to look at where you

have a footprint—AT&T has capacity in 84 cities across the United

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States—we could offer the GSA a schedule of services we offer to

those agencies and they could be free to buy those services at will.

It would do two things. One, they would compare those services

without any hidden fees with whatever is available to the market.

Two, I don’t think you would experience some of these lengthy

delays mentioned here because the agencies would have all the information in front of them, I presume there would be multiple vendors who would enter services on that schedule and the process

would be much quicker, therefore turning over savings to the agencies and taxpayers in a much quicker fashion.

Mr. TURNER. Does everyone agree that would be an improvement.

Mr. PAYNE. To go back to what we are supposed to achieve, it

is best practices, best service and maximize competition. From a

business perspective, you constantly look at your methods and procedures to make certain you are doing the right thing to achieve

your goals. I believe the great frustration here is the process is not

designed to evolve with the competitive process.

In the city I described, Boise, we are landlocked into how do we

interpret fair consideration. I am looking for some uniformity. If

you spend a year of delaying, we have heard $1 million a month.

That is not a good use of anyone’s time. Go back and revisit the

process.

The overhead rate on schedules is 1 percent. Therefore the process is very expedited and off you go.

Mr. LUCAS. I don’t disagree with the schedule being another alternative. I would have some mechanical issues with local services

being provided on a schedule where every State is ruled by a different public service commission. I am not sure if we were going

to mechanically create a schedule that could provide local services

in 50 States what that price might look like once we take into consideration a balance across the country.

A schedule would certainly be an easier vehicle. We have a GSA

schedule where we sell equipment and labor services. That works

very good. From my view, that is another channel, just as MAA is

another channel to the Federal customer. It becomes a channel conflict question as well. How many channels do you need to provide

the same kind of service.

On the surface, the schedule would be a probably easier managed

option but it would have some mechanical issues we would have to

work through.

Mr. HOGGE. I would echo a good bit of Mr. Lucas’ comments.

Winstar also has a Federal supply schedule but we have a program

that can work, we have a fair consideration process that is very

loosely drafted, I think purposely so, and each GSA region has

taken their own interpretation of how they implement that language. To us it should be a businesslike process. It is intended to

be a process essentially of comparison shopping. These are nonmandatory contracts, in most cases multiple award, and you had

a prequalification process through the RQS process that took some

2 years to complete, to evaluate all bidders on the basis of their

technical and management capabilities.

After you have gotten the notice to proceed and are into a site

by site or agency by agency specification of requirements, you lay

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Winstar’s proposal next to the other providers and make a decision.

We view it as a process that is fixable but the FSS provides another means for doing it.

Mr. PAGE. I would like to echo some of what Mr. Lucas said and

say it would be a different channel. I do not think the MAA is

above being fixed. I think it would be a wonderful contractual platform for us to use. Ms. Bates said earlier that the difficulty on local

service is trying to determine exactly what people need for today

and into the future. That is not a cookie cutter kind of process

where you order from column two and one from column three. If

you really know what you need, you can do it off a schedule. I

think the MAA can be more than that.

Mr. TURNER. Ms. Bates, do you have a comment regarding my

question? What do you think about moving to a schedule?

Ms. BATES. First of all, I would like to indicate that in thinking

about this, I think this is a very complex issue. I would say regarding schedules that it is easy to say but very difficult to do and requires some in-depth study.

The problems we have been addressing today in the large part

would not go away with the schedules. There has been much discussion of fair consideration. Fair consideration is a key component

to buying off the schedule, so that does not change.

In terms of implementation problems that we have spoken about

today and the issues of plowing new ground in a deregulated market with many forces and contradictory definitions of success relative to business success, scheduled contracts do not change that.

Those forces in the local market are there and are very dynamic,

and are the byproduct of competition.

The complexities of today are the complexities of competition and

not the good old days of a single choice, one could say.

The other area addresses the fees and I do not want my remarks

to be construed in any way as defensive about a fee. We need to

be mindful of our fee and that is what you hold us accountable for.

I don’t think we need to let the fact that FTS/GSA is fee for service

obviate other issues. Many of the issues we are facing today and

have been discussing this afternoon are here on the table ahead of

us, fee or no fee. In the case of where a fee is 80 percent, it is $4,

so I am not wanting to take attention from it but I don’t think we

ought to let it take our eye off the ball of some of the real hard

issues we are facing.

Mrs. JO ANN DAVIS OF VIRGINIA [assuming Chair]. We will take

a short recess to go vote and we will be right back.

[Recess.]

Mr. TOM DAVIS OF VIRGINIA [resuming Chair]. My first questions

will be for AT&T.

We understand effective coordination with the incumbent local

providers is a critical success factor in the implementation process.

You mentioned that as one of the problem areas. What steps have

you taken to obtain that cooperation and what additional steps

does GSA need to take to ensure that coordination? What steps do

we need?

Mr. DOHERTY. Let me say I agree with Ms. Bates and the testimony as far as we are working through the issues of the program.

I understand that. I also understand depending on your comments

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that the regulatory environment in different parts of the country

and the issues are different.

However, I do believe that the accurate and timely information

shared with the winning vendors as well as those vendors who

competed for those services, particularly the ILECs and who have

contracts, the time to work out how you are going to support the

winning vendors is before those contracts are awarded.

For example, in New York the riser cable issue became a major

delay for AT&T in working with Verizon in New York to move forward to get access to buildings. That is cable inside a building that

takes you from floor to floor.

Mr. TOM DAVIS OF VIRGINIA. That is Verizon’s cable?

Mr. DOHERTY. It was GSA’s position it was their cable, Verizon

went to the PUC and it sided with Verizon and said it is Verizon’s

cable. That was a lengthy process. We also were told to use several

different tariffs, both the wholesale and retail tariff and all of that

is very time consuming.

If some of those logistics had been worked out prior to the award,

the implementation in New York would have been much quicker.

Mr. TOM DAVIS OF VIRGINIA. That is also in a State where

Verizon has been able to go across lines, so you don’t have the local

issues you would in other areas in terms of local competition?

Mr. LUCAS. Yes. That was the first State we were granted long

distance relief and one of the check marks of being able to do that

is that we have adequate local competition.

Mr. TOM DAVIS OF VIRGINIA. Which should have incentivized you

to get these guys in as fast as you could.

Mr. Lucas. We believe we have cooperated with all those that

want to get into the local service business.

Mr. TOM DAVIS OF VIRGINIA. In New York.

Mr. LUCAS. In New York.

Mr. DOHERTY. In cooperation with GSA, we are writing a document to describe the roles and responsibilities of the agencies, the

government, the vendors, vendors who may support the agencies

and that has been incorporated into our contracts. I think that has

been very helpful in streamlining who is supposed to do what and

when.

When an agency orders something, what is it they are ordering

and do they understand what they are ordering and what will be

delivered by the program. Spreading that across all the MAA contracts for the different vendors would be helpful.

Mr. TOM DAVIS OF VIRGINIA. You are on both sides of this, Qwest

is?

Mr. PAYNE. Yes, sir. We have talked about the management fee

and I realize it is only a couple dollars here and there but it does

frustrate the agencies. I want to be clear there has been specific

guidance given to me here in Washington and to my representatives in the field. I have my program manager sitting here behind

me and we were instructed not to discuss, not disclose the overhead

rate.

I think many of us at this table have gone through multimillion

dollar, billing system upgrades so that management fee can be embedded in a line cost and not broken out separately. In the FTS

2000 world, the contract ended in 1998. There was a line item so

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every month you were reminded or you could see what the management fee was. I do think that frustrates some of the selling process.

I don’t understand why we can’t deal directly with the agencies.

Some cities do allow it but three of the four will not. I heard one

of the achievements in the first panel was moving from analog to

digital. Many customers I am dealing with did that 15 years ago.

I don’t consider that progress. In Australia, it is against the law

to sell something that is an analog interface.

When you talk directly to a customer, you are going to get the

advanced technology and all the implementation advantages that

come with it. Qwest is very anxious to bring DSL—— Mr. TOM DAVIS OF VIRGINIA. What happens in the translation?

Mr. PAYNE. If you went down this line, when someone is carrying

the water for you, someone is interpreting what your selling proposition, I think it is a much better deal to say are you aware of

hosting opportunities Qwest has in this area, are you aware of the

DSL product, so the end user agency is starting to design their solutions to leap frog right into advanced technology.

Mr. TOM DAVIS OF VIRGINIA. It expands their whole universe.

Mr. PAYNE. Absolutely. That kind of dialog I witness everyday.

It has been mentioned that the agencies in many cases want to use

tools to make evaluations. My understanding is the minor tech

pricing tools are not available and haven’t been for months, so the

agencies are out there without a mechanism to make those evaluations. The agencies are caught without a tool to make the evaluation. I am not clear why that is but that is what I understand.

My most important issue is in a business environment, I learned

a long time ago nothing happens because you work hard. That is

a nice thing but you have to have a schedule and manage to the

schedule. At this hearing on April 26, we were told long distance

services will be available by the end of the summer. I proposed a

schedule. I am looking forward to September 22 providing long distance services under FTS2000 in one contract. That was the obligation I thought I heard. I am looking for a schedule of dates as we

run most of our business there.

The field is very much voice centric. We need an education process. When we go out and talk about our solutions, we are finding

the field doesn’t have basic training, neither GSA nor the agency.

We have to figure a way to bring them into the new century about

how telecommunications works. It is hard to get into advanced

technology without that.

Mr. TOM DAVIS OF VIRGINIA. You recommend that the MAA Program adopt the use of telecommunications service schedules and

also reduce the GSA program administration fees and in turn a reduced role for GSA in managing the agency’s telecommunications

acquisitions.

Under that proposed scenario, how would those agencies that

rely heavily on GSA today because they don’t have the staff to plan

and implement these services manage their requirements? How

would you envision the roles of GSA, the contractors, the customer

agencies would be redefined?

Mr. DOHERTY. I think one of the things our position supports is

the fact we can’t live in how we used to do things. If we are truly

going to open up and are committed to bringing local competition

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throughout the United States to all the agencies, we have to look

at doing things differently than we did in the past. If you currently

look at the way the schedule exists for GSA for agencies to buy

services, it is take all or nothing. There isn’t a way you can say

what I really need is technical information on this particular item

and that is what you pay, kind of a fee for service type thing.

I would encourage the GSA to look at different approaches to

support the agencies in making buying decisions. I completely support the testimony of Ms. Bates earlier about a number of technical

folks have left the agencies and a number of them do rely on GSA.

We believe there could be a different proposition on how they are

supported instead of having a fee that supports all that.

Mr. TOM DAVIS OF VIRGINIA. There was a recent Federal Computer Week story that noted the Gov Works Program at the Minerals Management Service is exploring the establishment of a telecommunications services schedule to sell to Federal agencies. Is

that a good idea? Would you support that?

Mr. DOHERTY. We would absolutely support that.

Mr. PAYNE. Let me add, I think competition always enhances

choices and better prices. I think it should certainly have an effect

on these programs.

The critical difference is the GSA schedule does not allow any

services that compete with the FTS services. There is a restriction

of competition on the schedule side. I assume Interior is not going

to take that approach. That will open an array of competition

against FTS2000.

Mr. TOM DAVIS OF VIRGINIA. That could undermine FTS2001,

their minimum guarantees and everything else?

Mr. PAYNE. It will encourage the prices to fall. The minimum

revenue guarantee is a separate set of problems and I don’t think

it is related to prices.

Mr. TOM DAVIS OF VIRGINIA. That is not the Minerals Management Service’s problem?

Mr. PAYNE. That is correct.

Mr. LUCAS. We would have the same issue. A schedule is something a little easier to manage but the mechanics of having a

schedule that would be able to provide local services in all 50

States would be mechanically a challenge because we would have

to make sure we met all the needs of the 50 individual public service commissions. It is a regulatory issue for us as far as the way

Verizon looks at it. It is a different proposition for the end user

agencies. There is a value add in the GSA’s program on the GSA

side that would be a distinction with the schedule approach.

Mr. PAGE. I don’t disagree. It is a good additional channel for

people to use but I have to emphasize what Mr. Lucas said, the

regulatory battles you would have to run to try to come up with

a 50 State price for something would be enormous.

Mr. TOM DAVIS OF VIRGINIA. Although it has only been exercised

in one instance to date, it is my understanding the MAA contracts

do have a direct order, direct billing option that would seem to promote the kind of direct customer, provider interface relationship

you find missing. Have you looked at that and does it meet your

needs?

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Mr. PAYNE. Indeed we are aware of that. The delta between the

direct bill versus full service—in Denver the full service fee is 44

percent management fee, the direct bill is 39 percent. That is still

pretty hefty overhead. We are not allowed at this stage in any of

these four cities, the agencies are not allowed to come to us directly. That has to be separately authorized so we have not had an

agency to select the direct approach. All of my agencies are at the

full service level.

Mr. TOM DAVIS OF VIRGINIA. Would it be helpful to a speedy

transition if there was an Interagency Management Council for the

MAA Program as we have for the long distance component of

FTS2001?

Mr. DOHERTY. Yes. I think anytime you can sit down and talk

with all the principals, you are likely to get faster results. We all

have our different motivations and different agendas but we also

share the same sizable number of problems. Getting everyone’s

opinion on the table and talking through it is the fastest way as

opposed to sending letters back and forth and GSA being in the position of having to filter everyone’s differences.

Mr. TOM DAVIS OF VIRGINIA. You identified the slow pace of orders as a factor in the transition delays noting to date you have

received orders for only 5 percent of the identified lines. What steps

have you taken by yourself or with GSA to try to facilitate contract

marketing and service ordering processes?

Mr. HOGGE. Like all the other MAA winners, you start out with

an initial event, kick off the city, get things going and try to work

through the regional GSA office assigned to managing that specific

MAA market to get out awareness, get customer interest and to

start motivating the service order process.

We have been actively doing that, we have been actively working

with Sandy and Margaret who have instituted periodic meetings

with each region to assess and track performance.

In our testimony we suggest shining the light of day on where

we are with respect to those forecasts. You get visibility on something and results tend to follow. We know with great detail what

the GSA felt the requirements would be by city, by product by year.

That is what we stepped up to the plate for and that is what we

would like to see tracked. Whether it comes to Winstar or not, we

know where we stand with respect to the fair consideration process

in the multiaward cities as well as the single award cities like Baltimore and Cincinnati.

Mr. TOM DAVIS OF VIRGINIA. I understand agencies didn’t budget

for one-time transition related costs such as termination fees.

Given GSA did not collect funds from the agencies in advance to

fund these one-time charges, what should we do now to address the

issue?

Mr. HOGGE. As I suggested, perhaps the IT fund could be used

to defray those one-time costs as well as taking a longer view of

things. I understand how agencies do their fiscal year budgeting

but Winstar has a built-in value proposition in the fixed 8 year

pricing we proposed to take a life cycle view of things, to adjust the

fair consideration process, to remove any kind of external factors

that otherwise bias the decision toward the incumbent. Any combination of those could be used to remedy a situation.

190

Mr. DOHERTY. It is my understanding that prior to going into the

MAA Program, GSA had somewhere around 22 to 24 percent of the

agencies used GSA for local services. I think GSA needs to take a

much longer view of what would happen to the overheads if that

was driven to the 55, 60, 65 percent capturing market share and

instead of having some of these rates we have heard, from 23 to

84 percent, to lower those and take some of those fees and let the

vendors use that as a short term service initiation charge. Increase

our fees, that money goes to the vendors, the vendors now would

take care of upfront capital costs and over a period of time, that

would go away.

If GSA looked at a model, I think those fees could be used in

some type of transition fund.

Mr. TOM DAVIS OF VIRGINIA. Mr. Page, you talked about the importance of niche contracting as a component of the overall

FTS2001 strategy. It appears that concept really isn’t being utilized

by GSA. Would you agree, and if you do, what can be done to improve that utilization?

Mr. PAGE. The only what I would call niche contract—a trilogy

of contracts, FTS, MAA and the niche contract—all should be able

to intermingle and compete with each other as we proceed—the

only one I am aware of is the DSL contract recently awarded nationwide. I would consider that a niche contract for GSA. I don’t

know of any others.

Mr. TOM DAVIS OF VIRGINIA. As far as you see, they are not utilizing it to the extent they could?

Mr. PAGE. It is underutilized I would think.

Mr. TOM DAVIS OF VIRGINIA. Have you had any difficulty marketing to customer agencies?

Mr. PAGE. I have two extremes. In New Orleans where I am the

sole provider, I have a relationship with GSA in region 7 where we

developed a marketing plan, we are actively going after customers

not presently GSA customers and doing it in a uniform manner.

We have worked with Margaret and her people to get some attractive, one-time looks at the market. That is a different world than

my region 4 marketplace. I am having a very difficult time marketing in region 4. GSA wants to be between me and the customer.

Mr. TOM DAVIS OF VIRGINIA. Ms. Davis.

Mrs. JO ANN DAVIS OF VIRGINIA. I believe Mr. Payne you stated

you were forced to work with GSA rather than going directly to the

Federal agencies.

Mr. PAYNE. I think we all said it.

Mrs. JO ANN DAVIS OF VIRGINIA. I thought I heard the first panel

that the agencies had a choice, either work directly with the vendor

or go through GSA. What is your understanding?

Mr. PAYNE. It varies from city to city. We have instructions to

work through GSA. The pricing is done through GSA. We are not

allowed to tell the end user what our bid price is, it has to have

the overhead rate. One way they can control that is if the overhead

rate is applied to the proposal responses coming out of the GSA.

We are not in the position in some cases to know that.

We should be with the agencies making their plans. At Treasury,

we sat down with them with their 5 year plan, we know where

they are going, we look at where the technology is taking us and

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them, make our plans accordingly and we are there when we need

to be there with that new technology as it evolves in whatever prescribed direction. We will probably never go through an intermediary even though we are a sub to a contract. TRW has realized

the best value is bring the two together, stand by and see what

happens. That is always the best proposition, bring them to our facilities in Sterling to see our ‘‘cybercenter,’’ or to Minneapolis to see

our managed care environment. It is a learning process. Our presentations are learning tools.

Mrs. JO ANN DAVIS OF VIRGINIA. Do you think it would have

sped up the process which has dragged out for over a year in some

cases?

Mr. PAYNE. Yes. I think some of the solutions you can skip some

of the intermediate technology and directly to the more advanced

technology when you see the cost break points. Those are the tools

we should be working, how do we proceed here.

Mrs. JO ANN DAVIS OF VIRGINIA. Do you all agree?

Mr. DOHERTY. I think the broader issue is GSA should run this

program as the public or private sector would run the program. I

think there clearly is a role for the GSA in supporting the agencies,

in helping them buy telecommunications services.

The question is should the GSA have a marketing role? Our position is that is not a role for the GSA. The GSA should get contracts

out there, get pricing in place, get policies in place and then let the

marketplace rule, let the different vendors go out and market directly to the agencies, let the agencies make informed decisions and

hold the vendor community responsible for the things they have

said and commitments they have made. I don’t think GSA needs

to be in a role to get between the end user agencies and industry

trying to provide services.

Mr. LUCAS. If I may offer a dissenting opinion. GSA is a distribution channel as far as we view the world and the MAA contract is

one mechanism. To the extent GSA can market that value added

to those agencies where they don’t have the staff to do their own

telecommunications planning and implementation, GSA provides

the value. That is something I am willing to market through.

GSA is also not mandatory, so if there appears to be some difficulty in a particular city or State where it doesn’t look like GSA

is a solution, there are other alternatives that we have to market

directly to those customers.

In the communications I have with GSA there is an understanding we can work together to where we are both successful and

where we can’t agree, there are other options.

Mr. HOGGE. I agree. There clearly is a value add. The GSA provides services to agencies that would not be equipped to respond

to a bombardment of proposals from Qwest, AT&T, Winstar and

the incumbent provider but other agencies are more sophisticated.

I think there is a solution along the spectrum depending upon particular situations. That is the difference here on the local contracts

versus the long distance contracts. Local service is inherently local,

the agencies have specific needs at a specific site.

We are open to working through GSA. It is a viable channel.

That is why we pursued the program in the first place. To the exVerDate 11-MAY-2000 10:16 Apr 11, 2002 Jkt 000000 PO 00000 Frm 00195 Fmt 6633 Sfmt 6633 C:\DOCS\77353.TXT HGOVREF1 PsN: HGOVREF1
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tent there are agencies equipped to deal with the industry coming

directly to them, there is clearly a subclass for those opportunities.

Mr. PAGE. I personally think we could do both. Where I go out

and develop a prospect and need and go through some elaborate design work, where that customer or agency has no procurement vehicle readily available to utilize, the MAA should be a platform I

can bring that customer to and we can establish that process and

because I have done the marketing, done some of the upfront work,

then GSA might be able to negotiate with that customer on fees because there is less they have had to do.

Clearly there is a need for GSA to be a marketing channel also.

I see it as being more than just a two fee process where one fee

is direct and one if GSA is involved. I think GSA is smart enough

and savvy enough to figure out a way to have a sliding scale that

allows for both. If I go out and kill it, I want to be able to eat it.

You end up not having that desire to bring that in unless you know

you can partake.

Mr. TOM DAVIS OF VIRGINIA. You mentioned the MAA contracts

are uniform in their product and service content, GSA’s implementation and administration is not. Are there specific contract administration practices that ought to be made uniform?

Mr. HOGGE. I think there are administrative processes that

should be made more simple and more straightforward. Fair consideration is the one we have chosen to focus on. Winstar began as

a company focused on providing local broadband services to small

and mid-sized businesses.

When we decided to pursue government business through the

MAA Program, you have about a 24 month period where there is

a lot of expense and zero revenue. That was the RQS process. Then

there is an additional period of time where you go through city by

city competition and there is expense and zero revenue until you

get to the point where you have a contract vehicle in place, a requirement in this market, it seems to me after that point you then

get into more of a normal sort of business blocking and tackling,

head to head competition for this business. That is where we think

our recommendations about fair consideration can turn the postaward buying process into a more businesslike transaction.

Mr. TOM DAVIS OF VIRGINIA. In your collective experience, if

agencies have to provision for additional equipment in order to

transition, do they know the options available to them such as buying from the Federal Supply Service Schedule?

Mr. PAYNE. The sales process is actually one about training technically and giving the agency the contractual alternatives. We all

know the rules and are very much aware of the vehicles and alternatives, and are aware in some instances an upgrade is required

or necessary or maybe advantageous, so when you sit down with

that agency directly, you start looking at that longer term vision,

making those plans, then start realizing their capital investments

and requirements. You can bring to the table some creative alternatives. That is part of the selling process.

None of this is charged. This is inherent in what you do when

you sell so some call it planning, some call it selling but basically

the agency is getting the benefit of a consultant who comes in and

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will provide alternatives. Part of that is looking at the alternative

contract vehicles.

My concern is the agencies are making decisions not knowing

what those alternatives are and not knowing what the costs are

and we go out to deploy it and they are surprised because we didn’t

present the solution that there is more equipment necessary or

more upgrades or riser cable.

Mr. TOM DAVIS OF VIRGINIA. Ms. Bates, do you want to say anything? We will talk to you informally when this is over. I don’t

want this to go unrebutted if you want to say anything.

Ms. BATES. I don’t intend to rebut because it is too late in the

day. I think on a positive note, I appreciate the fact we have come

here today and I have heard and you have asked questions of this

panel on ways GSA/FTS can improve. I think anytime we can all

come together and talk about ways to improve it is positive.

I would ask each of the panel members while they have spent

much time thinking of ways we can improve, and we will look at

that, they also need to think about how they can improve this process because we are in it together. If only one of us implements all

the improvements, this many-legged stool will still fall over. I think

we all need to take that to heart.

I also think we have talked about many things that have different meanings. The big thing is communications. We have all

identified that as an area of complexity that we need to do better.

I think the testimony, questions and answers really elevate that to

a new level.

We have spoken of fees, marketing, many things where apples

and oranges have been thrown into this fruit basket. It is a very

complex issue and while we always choose to take the high road

in trying to explain it, many times the devil lives in the details and

we have to get down there to make sure we are comparing apples

to apples.

I will commit to work hard with GAO over the next several

months as they complete the study you have requested to make

sure as we make recommendations and discuss very important

issues of this program and the FTS2001, we are making an apples

to apples comparison so we can all come out with a common understanding. We have a long way to go to get there.

We did talk about alternate contracting methods. While we need

to look at that, I think we need to be aware the contract vehicles

are not so much the problem but we are dealing in a deregulated

market now where competition is new to many of our customers,

ourselves and our industry and we cannot deny that we need competition along the way. That is threaded throughout in our discussion somewhat mixed of fair consideration.

I intend to push ahead. I think we have a good program in place

and everybody here has said they are committed to a rapid implementation of the current program, bringing on new customers, getting new customers over and getting that savings to the taxpayer.

I believe I can speak for everyone here, we all intend to push ahead

and do that.

I appreciate the opportunity.

Mr. TOM DAVIS OF VIRGINIA. Thank you.

Ms. Davis.

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Mrs. JO ANN DAVIS OF VIRGINIA. You are right, Ms. Bates, the

devil is in the details. It sounded like the hearing today and all the

testimony that communication is the answer to making this program work. I think it involves not only GSA here in Washington

and all your regional offices as well as each of the vendors. I think

if everyone could work on the communication, we can make a good

program out of this.

Thank you all for coming.

Mr. TOM DAVIS OF VIRGINIA. I want to take a moment to thank

everyone for attending the subcommittee’s important oversight

hearing. Thanks to all the witnesses, Congressman Turner and

other members for participating, thank my staff for organizing this

and I think it has been productive.

Ms. Bates, this is a tremendous complex procurement on the cutting edge of new technologies. I understand how difficult this is

even for the most seasoned private sector entrepreneurs who are

going under every day in some cases. You have some very solid

ones here that we will see through this contract and I think the

spirit with which you have approached this is very encouraging.

As long as we can keep talking to each other, try to learn from

it and improve it as we move on, at the end of the day our goal

is to give the taxpayers their best bang for the buck and for the

agencies to allow them to operate most efficiently.

I applaud the way you have approached this and working with

us. We obviously have a way to go but we want to be there with

you. I think the hearings help everyone to understand we are going

to oversee these things. It allows everyone to utilize what they

have to get together.

To all the vendors, we want this to work for you as well.

I am going to enter in the record the briefing memo distributed

to subcommittee members.

We will hold open the record for 2 weeks from this date for those

who may want to forward submissions for possible inclusion or if

there is some thought you want to get into the record before we

proceed. You would be most welcome to do that.

I am going to close the proceedings. Thank you.

[Whereupon, at 4:48 p.m., the subcommittee was adjourned, to

reconvene at the call of the Chair.]

[Additional information submitted for the hearing record follows:]

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