Telecommunications: GSA Faces Challenges in Planning for New Governmentwide Program
Published: 2004-02-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Genera1 Services Administration (GSA) has initiated planning for its next-generation telecommunications acquisition program, known as Networx, which will replace the current Federal Telecommunications System (FTS) 2001 for longdistance and international services. It will also replace contracts for wireless and satellite communications products and services. Planning for this acquisition is occurring within an environment of tremendous change--in the industry, in underlying services and technology, and potentially in the regulatory environment. In this context, Networx can offer a significant opportunity for the federal government to flexibly acquire telecommunications services at competitive rates and apply innovative solutions to improving agency operations. At the request of the Chairman of the House Committee on Government Reform, GAO is providing an overview of acquisition planning steps completed to date, along with its assessment of challenges facing GSA and federal agencies as this acquisition proceeds.
section_title: What GAO Found
paragraphs: Over the past year, GSA has acted to ensure that all interested parties-- including industry and agency users--have had a chance to comment on the development of the successor to FTS2001 and associated contracts. In its planning for the Networx acquisition, GSA cited five goals for the program: (1) continuity of telecommunications services, (2) best value, (3) strong competition, (4) a broad range of services and providers in a changing marketplace, and (5) expanded opportunities for small businesses. To achieve this, GSA plans two acquisitions: Networx Universal--broadranging services with global coverage, and Networx Select--leading-edge services but more geographically limited. To take full advantage of the opportunities offered in these new contracts, GSA will need to address four key challenges: (1) ensuring that an adequate inventory of information about existing telecommunications services and assets is available, to give planners an informed understanding of governmentwide requirements; (2) establishing specific measures of success to aid acquisition decision making and effective program management; (3) structuring and scheduling the contracts to ensure timely delivery of competitively priced telecommunications services that meet agency mission needs; and (4) ensuring a smooth transition from the current contracts by initiating appropriate implementation planning actions. Both leadership from GSA and commitment from stakeholders in resolving these issues will be essential to establishing efficient, cost-effective, and secure telecommunications services. If this can be achieved, the Networx contracts will be optimally positioned to leverage the power and creativity of today's telecommunications marketplace to carry the federal government forward well into the 21st century.

section_title: Letter
paragraphs: I am pleased to participate in the Committee’s hearing on the General  Services Administration’s (GSA) next generation governmentwide  telecommunications acquisition program, known as Networx. As you  know, GSA’s planning for this program is taking place within an  environment of tremendous change—in the telecommunications industry,  in underlying services and technology, and potentially in the regulatory  environment. In this context, the Networx initiative can be viewed as a  significant opportunity for the federal government to flexibly acquire and  apply innovative telecommunications services offered by industry to  improve agency operations. As requested, today I will discuss the  background for this current initiative and provide an overview of the  acquisition planning activities completed to date. I will also describe four  challenges that GSA and executive branch agencies will need to address in  the next few months as planning for this major acquisition proceeds.
In brief, over the past year, representatives of GSA, federal agencies, the  Interagency Management Council (IMC), the telecommunications industry,  and other interested parties have engaged in planning and dialogue over  the replacement for the current Federal Telecommunications System  (FTS) 2001 and associated contracts.  This replacement acquisition  program is known as FTS Networx. GSA and the IMC have taken steps to  ensure that all interested parties have had an opportunity to comment on  at least a portion of their plans for this major initiative and to help refine  their acquisition strategy. Nevertheless, significant challenges remain for  GSA and the IMC to address in the coming months to help ensure a  successful outcome for a more clearly and fully defined Networx program  with respect to    ensuring that adequate inventory information is available to planners to  provide an informed understanding of governmentwide requirements;   establishing measures of success to aid acquisition decision making and  enable effective program management;   structuring and scheduling the Networx contracts to ensure that federal  agencies have available to them the competitively priced  telecommunications services they need to support their mission  objectives; and initiating the implementation planning actions needed to ensure a smooth  transition from current contracts to Networx.
My remarks today are based on our previous reviews of GSA’s federal  telecommunications programs, including implementation of the current  FTS2001 contracts, as well as research to date into sound  telecommunications planning and management practices that you recently  requested. In addition, we reviewed comments submitted by industry and  federal agencies to a request for information issued by GSA last October to  provide information to potential industry offerors regarding its Networx  program plan, and to solicit comments from industry regarding its  acquisition strategy. We also attended the Industry Advisory Council’s  February 17, 2004, forum held to obtain additional industry views on the  Networx program and strategy. We conducted our work in January and  February 2004, in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: According to GSA, its Federal Technology Service, in conjunction with the  IMC, is responsible for ensuring that federal agencies have access to the  telecommunications services and solutions needed to meet mission  requirements. Its current program to provide long- distance  telecommunications services—FTS2001—has two goals: to ensure the best  service and price for the government, and to maximize competition for  services.
In implementing this program strategy, GSA awarded two contracts for  long-distance services—one to Sprint in December 1998 and one to MCI  WorldCom in January 1999. Under the terms of these contracts, each firm  was guaranteed minimum revenues of $750 million over the life of the  contracts, which run for four base years and have four 1-year-extension  options. If all contract options are exercised, those contracts will expire in  December 2006 and January 2007, respectively. According to GSA, federal  agencies spent approximately $614 million on FTS2001 services during  fiscal year 2003 alone.
Related governmentwide telecommunications services are provided by  other GSA contracts: the Federal Wireless Telecommunications Service  contract and the FTS Satellite Service contracts. The wireless contract  was awarded in 1996 to provide wireless telecommunications products  and services to all federal agencies, authorized federal contractors, and  other users. The satellite services contracts are a series of contracts for a  variety of commercial off-the-shelf satellite communications products and  services, including mobile, fixed, and broadcast services. According to GSA,  these contracts will expire in late 2004 and in 2007, respectively.
We have periodically reviewed the development and implementation of the  FTS2001 program and assessed its progress. In March 2001 we reported to  you on the delays encountered during the government’s efforts to  transition from the previous FTS 2000 to the FTS2001 contracts, the  reasons for those delays, and the effects of the delays on meeting FTS2001  program goals of maximizing competition for services and ensuring best  service and price. We recommended that GSA take numerous actions to  facilitate those transition efforts. In April 2001 in testimony before you, we  reiterated those recommendations and noted that the process of planning  and managing future telecommunications service acquisition would  benefit from an accurate and robust inventory of existing  telecommunications services. Ultimately, GSA acted on our  recommendations and the transitions were successfully completed.
section_title: GSA’s Networx Program Development Actions Are Continuing
paragraphs: GSA is now planning its FTS Networx acquisition program, including the  awarding of new governmentwide contracts for a broad range of long  distance and international voice and data communications services,  wireless services, and satellite telecommunications services. These  contracts are intended to replace the existing FTS2001, Federal Wireless  Telecommunications Service, and FTS Satellite Service contracts. GSA  and the IMC has identified five goals for the Networx acquisition program:    Meet agency needs for a comprehensive acquisition that provides  continuity of current telecommunications services and solutions.
Obtain best value (lowest prices while maintaining quality of service  levels) for all services and solutions.
Encourage strong competition for the initial contract award(s), and ensure  continuous competition throughout the life of the program.
Respond to the changing marketplace by providing agency access to a  broad range of services and service providers.
Provide expanded opportunities for small businesses.
To achieve those goals, the program calls for two acquisitions—Networx  Universal and Networx Select. The Networx Universal contracts are  expected to satisfy requirements for a full range of national and  international network services. According to GSA, Networx Universal  seeks to ensure the continuity of services and prices found under expiring  contracts that provide broad-ranging service with global geographic  coverage. GSA expects all Networx Universal offerors to provide a full  range of voice and data network services, managed networking services  and solutions, and network access, wireless, and satellite communications  services. This acquisition is expected to result in multiple contract awards  to relatively few offerors because few are expected to be able to satisfy  the geographic coverage and comprehensive service requirements. GSA  also intends to apply competitive incentives to obtain best value for its  customer agencies, although those incentives are not yet defined. Further,  GSA expects to establish minimum revenue guarantees for these  contracts.
In contrast, GSA plans to award multiple contracts for a more  geographically limited set of services under Network Select. GSA generally  describes these Select contracts as providing agencies with leading edge  services and solutions with less extensive geographic and service coverage  than that required by Networx Universal; specific Networx Select service  requirements have not yet, however, been defined. Details of pricing  structures and Select service delivery mechanisms are planned to be  provided in the Networx Select request for proposals, which GSA intends  to release in the summer of 2005.
GSA anticipates awarding both the Networx Universal and the Networx  Select contracts well before the expiration of the FTS2001 contracts.
section_title: Challenges Remain Before Finalizing the Networx Acquisition Program Strategy
paragraphs: Notwithstanding the acquisition planning activities completed by GSA and  the IMC to date, these entities face significant challenges in finalizing their  program strategy to ensure that Networx is appropriately defined,  structured, and managed to deliver those telecommunications services and  solutions that will enable federal agencies to most efficiently and  effectively meet their mission needs. Specifically, these challenges include:    Ensuring that adequate inventory information is available to planners  to provide an informed understanding of governmentwide requirements.
Establishing measures of success to aid acquisition decision-making  and enable effective program management.
Structuring and scheduling the Networx contracts to ensure that federal  agencies have available to them the competitively priced  telecommunications services they need to support their mission  objectives.
Initiating the implementation planning actions needed to ensure a  smooth transition from current contracts to Networx.
subsections: section_title: Ensuring Adequate Inventory Information
paragraphs: It is important that GSA and its customer agencies have a clear  understanding of agency service requirements in order to make properly  informed acquisition planning decisions. According to our ongoing  research on best practices in telecommunications acquisition and  management, clear understanding comes at least in part from having an  accurate baseline inventory of existing services and assets. More  specifically, an inventory allows planners to make informed judgments  based on an accurate analysis of current requirements and capabilities,  emerging needs that must be considered, and the current cost of services.  Although leading organizations acknowledge that establishing and  maintaining such an inventory may be difficult, they view this baseline as  an essential first step to high-quality telecommunications requirements  analysis, and subsequent sourcing decisions associated with meeting those  requirements.
Despite this importance, it is not clear whether GSA and federal agencies  have yet established the comprehensive, accurate inventories needed to  support Networx planning. Mr. Chairman, you followed up on this issue in  your December 17, 2003, letter to GSA asking to what extent such detailed  inventories were currently being maintained and kept accurate and up-to- date for use both in acquisition planning and future contract transitions. In  his response, the Administrator of General Services identified sources of  information provided by GSA and the FTS2001 vendors—for example,  monthly billing information—that would be helpful to agencies in  developing inventories of existing services. In addition, the Administrator  noted that GSA is examining methods of incorporating better billing and  inventory data into the Networx program where practical. However, the  Administrator did not provide specific information on the extent to which  these inventories exist, or whether agencies are periodically validating  that information to ensure that it is accurate and complete. Further, the  Administrator acknowledged that the accuracy and completeness of  telecommunications service inventories varies among agencies. As a  result, without a clear understanding by GSA and its customer agencies of  the FTS2001 services used today and the applications they support, it is  unclear how properly informed Networx acquisition planning decisions  can be made.
section_title: Establishing Measures of Success
paragraphs: Our research into recommended program and project measurement  practices, which we affirmed in discussions with private-sector  telecommunications managers, highlights the importance of establishing  clear measures of success to aid acquisition decision making as well as to  provide the foundation for accountable program management. Such  measures define what must be done for a project to be acceptable to the  stakeholders and users affected by it, and in so doing enables  measurement of progress and effectiveness in meeting objectives.
Although GSA has established program goals, it has not yet defined a  comprehensive set of corresponding performance measures for the  Networx acquisition program. According to GSA’s Assistant Commissioner  for Service Delivery/Development, one of the criteria for measuring  Networx success will be identical to that used for FTS2001—that is,  savings as measured by contract service costs compared with best  commercial pricing. Further, according to this official, this was the sole  measure reported to the Office of Management and Budget for FTS2001.  While low pricing is an important criterion reflected in program goals,  GSA has not yet defined measures about how well its final acquisition plan  will deliver the value (service plus price) that agencies need to improve  their operations and meet their mission needs. For example, GSA’s  Networx environmental assessment indicates that agencies want this  program to support network planning and optimization, include simple  and understandable fees, provide management of contracts and  contractors on the agencies’ behalf, and include other elements of value.  GSA’s Assistant Commissioner for Service Delivery/Development  recognizes the importance of having such measures, and told us that GSA  would be establishing such measures coincident with its actions to finalize  the Networx Universal RFP in the coming months.  It will be important  that GSA follow through on this commitment to establish that appropriate  set of measures to evaluate the intended business value of the Networx  program and enable the effective management of this significant program  over time.
section_title: Structuring and Scheduling Contracts to Deliver Needed Services
paragraphs: Once agency requirements are adequately understood and measures of  success defined, structuring and scheduling the Networx contracts to  successfully encourage industry competition to obtain low prices and  high-quality, innovative services becomes the next challenge. The varying  views of industry representatives commenting on the request for  information raised fundamental questions about the soundness of the  proposed acquisition approach for accomplishing this. For example, large,  interexchange carriers, like those that hold the current FTS2001 contracts,  generally agreed with the broad scope of the Universal contracts. They  further suggested that services offered under Networx Select and  Universal should be mutually exclusive, and that all carriers should be  allowed to compete for both.
In contrast, other carriers criticized the approach. These carriers asserted  that some major telecommunications providers might be precluded from  bidding on the Networx Universal contracts because of the broad service  and ubiquitous geographic coverage requirements described in the request  for information. For example, one vendor stated that it was quite possible  that only traditional long distance carriers could effectively bid for  Universal, thus denying many players in the industry a realistic chance to  compete for major portions of the federal long distance business. One  carrier noted that, based on the procurement timetable, the timing of the  award for the Select contracts would minimize the opportunity to compete  for long-distance telecommunications services. Because of the 9-month lag  between the Universal and Select acquisitions indicated in the proposed  acquisition schedule, agencies could be asked to make decisions regarding  their use of awarded Universal service contracts before information is  available regarding Select leading edge services and solutions that may be  more suitable for their needs.
Defining an acquisition strategy that appropriately balances the need to  ensure the continuation of existing telecommunications services in all  current government locations with encouraging strong competition to  obtain best value is a daunting challenge. However, proceeding from a  clear understanding of requirements and measures of success—as I  previously discussed—should aid in meeting this challenge by providing  guideposts for a decision that strikes an appropriate balance on contract  scope, program structure, and acquisition schedules that can deliver to  agencies competitively priced solutions that meet their mission needs.  Further, continuing to solicit and effectively implement feedback from  stakeholders should help GSA achieve this goal.
section_title: Initiating Implementation Planning to Ensure Smooth Transition
paragraphs: As we reported to you in March 2001, the current FTS2001 contracts got  off to a rocky start as significant delays in transitioning to the new  contracts hindered timely achievement of program goals. Factors  contributing to those delays included a lack of data needed to accurately  measure and effectively manage the transitions, inadequate resources, and  other process and procedural issues. Ultimately, GSA did take action on all  of our recommendations and the transition to the FTS2001 contracts was  finally completed. In subsequent testimony before you in April 2001 we  noted the importance of incorporating the lessons learned from this  transition into future procurements. Specifically, we stated that “the  process of planning and managing future telecommunications service  acquisitions—both by GSA and by the agencies themselves—will benefit  from an accurate and robust inventory of current telecommunications  services. Further, the value of this critical program to customer agencies  will be improved through the application of lessons learned in  streamlining and prioritizing the contract modification process, in  effectively and expeditiously resolving billing problems, and in holding  contractors accountable for meeting agency requirements in a timely  manner.” Those in industry who commented on the Networx request for  information also noted the need for strong and comprehensive program  management to ensure successful transition, including not only the  availability of accurate inventories but also defined contractor and  government responsibilities.
While GSA recognizes the importance of transition planning, it has not yet  fully addressed these issues. GSA has emphasized that its development of  the Networx program included an analysis of lessons learned from  existing programs and previous acquisitions. Further, in his February 11  letter in response to your inquiry about agency inventories, the  Administrator outlined the proactive steps GSA plans to take, including  actions to establish a working group and to improve the availability of  accurate inventory information to support the transition. According to the  GSA’s Associate Commissioner Service Delivery/Development, these  actions will also include developing processes and procedures, identifying  funding needs, and training agency personnel in order to support a smooth  contract transition.  As acquisition plans are finalized in the coming  months, it will be important that GSA follow through on these initial steps  to ensure that the transition to the new contracts proceeds efficiently and  seamlessly, and that a repeat of the FTS2001 transition difficulties is  avoided.
In summary, Mr. Chairman, Networx represents a critical opportunity to  leverage the strength and creativity of the telecommunications  marketplace to make the vision of delivering to agencies the  telecommunications business solutions they need to perform their  missions better and more cost-effectively a reality, and in so doing to carry  the federal government forward well into the 21st century. To accomplish  this, however, GSA will need to overcome significant challenges and  demonstrate solid leadership. Likewise critical will be stakeholder  commitment. Actions taken and decisions reached in the coming months  to more fully define the Networx program and finalize an appropriate  acquisition strategy will significantly influence the telecommunications  choices federal agencies will have for the next several years.  Unless GSA  follows through to resolve the challenges outlined today, the potential of  Networx may well not be realized.
Mr. Chairman, this concludes my statement. I would be pleased to answer  any questions that you or other members of the Committee may have at  this time.
section_title: Contact and Acknowledgments
paragraphs: Should you have any questions about this testimony, please contact me by  e-mail at koontzl@gao.gov or Kevin Conway, Assistant Director, at  conwayk@gao.gov. We can also be reached at (202) 512-6240 and (202)  512-6340, respectively. Another major contributor to this testimony was  Michael P. Fruitman.
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