[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
       OVERSIGHT OF THE POST-FTS2000 TELECOMMUNICATIONS CONTRACT
=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      INFORMATION, AND TECHNOLOGY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM
                             AND OVERSIGHT
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION
                               __________

                             APRIL 30, 1997
                               __________

                           Serial No. 105-46
                               __________

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





                       U. S. GOVERNMENT PRINTING OFFICE
44-262                          WASHINGTON : 1997
___________________________________________________________________________
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              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois          TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland       ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
STEVEN SCHIFF, New Mexico            EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida         GARY A. CONDIT, California
JOHN M. McHUGH, New York             CAROLYN B. MALONEY, New York
STEPHEN HORN, California             THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida                ELEANOR HOLMES NORTON, Washington, 
THOMAS M. DAVIS, Virginia                DC
DAVID M. McINTOSH, Indiana           CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
JOE SCARBOROUGH, Florida             DENNIS J. KUCINICH, Ohio
JOHN B. SHADEGG, Arizona             ROD R. BLAGOJEVICH, Illinois
STEVEN C. LaTOURETTE, Ohio           DANNY K. DAVIS, Illinois
MARSHALL ``MARK'' SANFORD, South     JOHN F. TIERNEY, Massachusetts
    Carolina                         JIM TURNER, Texas
JOHN E. SUNUNU, New Hampshire        THOMAS H. ALLEN, Maine
PETE SESSIONS, Texas                 HAROLD E. FORD, Jr., Tennessee
MICHAEL PAPPAS, New Jersey                       ------
VINCE SNOWBARGER, Kansas             BERNARD SANDERS, Vermont 
BOB BARR, Georgia                        (Independent)
ROB PORTMAN, Ohio
                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                       Judith McCoy, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

   Subcommittee on Government Management, Information, and Technology

                   STEPHEN HORN, California, Chairman
PETE SESSIONS, Texas                 CAROLYN B. MALONEY, New York
THOMAS DAVIS, Virginia               PAUL E. KANJORSKI, Pennsylvania
JOE SCARBOROUGH, Florida             MAJOR R. OWENS, New York
MARSHALL ``MARK'' SANFORD, South     ROD R. BLAGOJEVICH, Illinois
    Carolina                         DANNY K. DAVIS, Illinois
JOHN E. SUNUNU, New Hampshire
ROB PORTMAN, Ohio

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          J. Russell George, Staff Director and Chief Counsel
                Mark Brasher, Professional Staff Member
                 John Hynes, Professional Staff Member
                          Andrea Miller, Clerk
           David McMillen, Minority Professional Staff Member
          Mark Stephenson, Minority Professional Staff Member












                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 30, 1997...................................     1
Statement of:
    Barram, David J., Administrator; and Robert Woods, 
      Commissioner, Federal Telecommunications Services, General 
      Services Administration....................................     6
Letters, statements, etc., submitted for the record by:
    Burton, Hon. Dan, a Representative in Congress from the State 
      of Indiana, letters referred to............................    20
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York, prepared statement of...............    12
    Stevens, Hon. Ted, a U.S. Senator from the State of Alaska, 
      prepared statement of......................................     3
    Woods, Robert, Commission, Federal Telecommunications 
      Services, General Services Administration:
        Information concerning awards............................     9
        Information concerning language..........................    32
        Letter from the Industry Advisory Council................    17












       OVERSIGHT OF THE POST-FTS2000 TELECOMMUNICATIONS CONTRACT

                              ----------                              


                       WEDNESDAY, APRIL 30, 1997

                  House of Representatives,
Subcommittee on Government Management, Information, 
                                    and Technology,
              Committee on Government Reform and Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Stephen Horn 
(chairman of the subcommittee) presiding.
    Present: Representatives Horn, Sessions, Davis of Virginia, 
Maloney, and Davis of Illinois.
    Ex officio present: Representative Burton.
    Staff present: J. Russell George, staff director; Mark 
Brasher and John Hynes, professional staff members; Andrea 
Miller, clerk; and David McMillen and Mark Stephenson, minority 
professional staff members.
    Mr. Horn. A quorum being present, the Subcommittee on 
Government Management, Information, and Technology will come to 
order. I apologize for the delay, but we are having a meeting 
of the Conference at this time, and a lot of us had to be tied 
up there.
    The drafting and negotiating stage of the Post-FTS2000 
telecommunications process is finally coming to a close, or so 
we hope. Today, we will hear from the two people who have been 
intimately involved throughout the long process, who can tell 
us whether or not that is the case.
    In the past, I have noted that a high level of attention to 
this matter is clearly warranted. This is a multibillion dollar 
procurement. The General Services Administration must do what 
is in the best interests of the taxpayers. GSA observed in its 
December 1996 report to Congress that the future environment is 
uncertain. Maybe we can learn today whether this uncertainty 
still exists.
    Now that we are on the verge of the new contract, we look 
forward to hearing from the key agency on how it maximizes 
competition and leaves the Government the flexibility it needs 
in order to take advantage of the quickly changing 
telecommunications environment. We are going to hear from David 
Barram, the acting Administrator of the General Services 
Administration. After a successful career in Silicon Valley, 
Mr. Barram has joined the Department of Commerce as Deputy 
Secretary, Chief Operating Officer. He has been acting 
Administrator at the General Services Administration since 
March 4, 1996.
    Mr. Barram is accompanied by Robert Woods, who is 
Commissioner of the Federal Telecommunications Service of the 
General Services Administration. Mr. Woods knows this issue 
backward and forward. He has appeared before this committee a 
number of times, and we salute his diligent efforts on the 
Post-FTS2000.
    A word of thanks is also due to Chairman Burton, who will 
probably be along shortly when the Conference adjourns. He has 
devoted careful attention to this issue over the past several 
months.
    We welcome our distinguished witnesses. As you know, under 
the traditions of this committee, we would ask all witnesses to 
be sworn in. So if you will raise your right hands?
    [Witnesses sworn.]
    Mr. Horn. Thank you. We are inserting in the record at this 
point a statement of Senator Ted Stevens, who cannot make it.
    Without objection, that is inserted in the record.
    [The prepared statement of Hon. Ted Stevens follows:]
    [GRAPHIC] [TIFF OMITTED] T4262.001
    
    [GRAPHIC] [TIFF OMITTED] T4262.002
    
    [GRAPHIC] [TIFF OMITTED] T4262.003
    
    Mr. Horn. Is there an opening statement from Mr. Davis of 
Illinois?
    Mr. Davis of Illinois. No, thank you.
    Mr. Horn. I thank the gentleman.
    We will proceed then, however you would like, Mr. 
Administrator.

STATEMENTS OF DAVID J. BARRAM, ADMINISTRATOR; AND ROBERT WOODS, 
  COMMISSIONER, FEDERAL TELECOMMUNICATIONS SERVICES, GENERAL 
                    SERVICES ADMINISTRATION

    Mr. Barram. Thank you Mr. Chairman, and good morning. If I 
could make an opening statement, I would appreciate it.
    On March 12, you initiated a process that had as its 
purpose achieving a consensus strategy that would allow the 
Post-FTS2000 program to proceed. You asked us, under your 
leadership, to meet with industry to forge this consensus. 
Moreover, you requested this be accomplished within a 30-day 
period so as to minimize the effects of potential delay to the 
program.
    Thank you for that, by the way.
    Mr. Chairman, I am here to report to you on the outcome of 
this process. At the outset, please permit me to offer a 
perspective on what is ahead for us all.
    Nothing I know will better describe the new world order 
than how we use and how we cope with telecommunications. 
Everything we do in our regular work, and probably our lives, 
will be affected by the changes ahead. We have been very 
successful with FTS2000. It has given us excellent services and 
great prices.
    The next step would not be possible without the platform we 
built with FTS2000. But I believe the next step, which is 
FTS2001 and the MAA, will be exciting, unpredictable, 
satisfying and challenging. Because we all want a Government 
that works better and costs less, this is the right step to 
take. We will save money, provide productivity-enhancing 
services and give Government employees the tools to do their 
jobs as this country turns or as we cross the bridge to the 
21st century.
    You know that famous bridge; it is a big deal to us and to 
the industry. Companies will merge, make alliances, get in and 
out of markets, innovate and generally keep all of us on our 
toes. If history is our guide, we will all benefit as these 
changes occur.
    Mr. Chairman, I believe the consensus-building process of 
the last month has worked and that we have achieved success. 
Under the leadership of this committee, representatives from a 
broad range of industry, the Interagency Management Council, 
various congressional committees and the General Services 
Administration attended the consensus development session. 
Collectively, we reviewed and considered the concerns and 
comments of industry and the FTS users. There was considerable 
discussion on the detailed provisions of strategy, and my staff 
provided clarification on these provisions as needed.
    Based on the comments and suggestions offered at the 
consensus development session, we formulated enhancements to 
the February 1997 refined Post-FTS2000 program strategy. These 
enhancements were incorporated as specific changes to the FTS 
program statement of principles and were presented in writing 
to the industry and Government representatives on April 4, 
1997. A followup discussion among all parties was held on April 
7, to explain the changes and seek additional comments.
    Copies of the statement of principles and the supplement 
developed following the consensus development session have been 
provided to the committee. I am satisfied, Mr. Chairman, that 
the program principles, as supplemented by the consensus 
development process initiated at your direction, continue to 
allow the future FTS2001 and metropolitan area acquisition 
contractors to move toward offering true end services. As of 
this moment, these final provisions are being incorporated 
within the contractual language of the solicitation documents 
and we are prepared to proceed with release of those documents 
on schedule this Friday, May 2.
    Mr. Chairman, the concerns and comments of all interested 
industry and user parties have been heard. An important 
illustration of this give-and-take process occurred when 
industry suggested that we incorporate a prequalification 
process within the MAA program to increase the speed and 
enhance the competitiveness with which MAA contracts may be 
awarded. That was an excellent suggestion, Mr. Chairman, and we 
have heard industry and incorporated this process.
    With this suggestion and others, I believe we now have a 
strategy that is in the best interests of the American 
taxpayer, the Federal Government users, and the industry 
providers. In consultation with the attending congressional 
staff, we believe it is time to release the final FTS2001 
solicitation and a draft MAA solicitation on May 2. Release of 
the FTS2001 RFP should ensure that the FTS2001 contracts are 
awarded and transition planning is under way prior to 
expiration of the current FTS2000 contracts. As we move 
forward, we will continue to receive and consider industry 
comments and questions as a normal part of the Federal 
acquisition process.
    There are times in life when we need to get on with it. 
This is one of those times. We have been listening and we will 
keep on listening. We have insisted on broad, deep and fair 
competition, and we will keep on insisting.
    Mr. Chairman, we have constantly aimed to achieve 
innovation, and we will keep on aiming for that innovation. 
Again, let me thank you and the committee for your leadership 
during the March hearings and the April meetings. Bob Woods and 
I will be happy to answer any questions you may have.
    Mr. Horn. We thank you for that statement.
    Mr. Woods, do you have anything else to add to that?
    Mr. Woods. No, Mr. Chairman, I don't.
    Mr. Horn. Let me just go through a few questions. We are 
going to take 10 minutes to a side; I don't think this is going 
to last too long.
    Just for the record, does the current strategy you have 
described represent the acquisition structure which will best 
promote Federal interests and get the best deal?
    Mr. Woods. Mr. Chairman, I believe that it will. We have 
worked hard with the industry and with our customers, and we 
believe that the refinements will add. So we are quite 
confident that the enhancements made serve the interests that 
were broad, and that we worked those in a way that I think will 
serve this Government well.
    I think the Administrator said it well when he said we have 
got a good base and the current program has been successful. 
But if we don't change in this environment, the next generation 
won't be. So we have had to change from a base of success, and 
sometimes that is awfully hard to do.
    When you fail, change is fairly easy. We have been 
successful, and this change has come in consultation with a lot 
of interested parties. So we have a lot of confidence in what 
has been done.
    Mr. Horn. Have any segments of the industry expressed 
reservations regarding the current strategy, and what are their 
concerns? Would you like to respond to them?
    Mr. Woods. I think as we go along in this, it is not so 
much whether they express reservations as it is a matter of 
dimension. They agree with most of it, but there are some parts 
of it they don't agree with. You are always going to get some 
of that. If I am representing my organization effectively, 
whether I am in industry or in Government, I am always going to 
want the part that is good for me.
    My job and the Administrator's job is to represent the 
Government's interests well. As we have gone through this, I 
don't think anybody got the whole loaf, but I think they all 
got something out of it; and I think we will always have some 
reservations, and there are always going to be some fine points 
that have to be worked out. That is going to happen.
    Mr. Barram. Let me add just one comment. The Federal 
Telecommunications Act and our proposals here are both designed 
to respond to an incredibly different environment, where long 
distance providers can offer local service and local can offer 
long distance, and there are all kinds of new technologies.
    So this is a time of incredible change. It would be 
illogical not to have everyone wondering just how they are 
going to play in that new environment.
    What we have tried to do is concoct a program with all 
kinds of consultation that gives everybody a chance to compete, 
which is what we found really works, and that is no surprise, 
and that we end up with the best service for our customers, the 
Federal Government agencies.
    Mr. Horn. When do you expect to make the awards for the 
FTS2001 contract?
    Mr. Woods. Right now, we are looking at early next year, 
next calendar year. We have not announced a formal time on 
that, although our web page does show dates for those, and we 
could get you, for the record, those exact dates.
    Mr. Horn. Without objection, it will be inserted at this 
point.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T4262.004
    
    Mr. Horn. When do you anticipate migrating the traffic from 
the incumbents to the FTS2001 winners?
    Mr. Woods. After the award of the new 2001. At that stage, 
you have really got to sit down and take stock. You have to 
have a sense of what you have got and who the current providers 
are and who the new providers are going to be.
    At that stage, we anticipate it is going to take anywhere 
from 3 to 4 months to put together a transition plan; that is 
ambitious. We have staff working to do everything they can do 
without knowing who the players are. And then, from that point 
on, from that 3- or 4-month planning period, it will take, we 
think, about 12 months to do the actual transition.
    Mr. Horn. Can you predict how long distance rates will go 
under the proposed FTS2001 contract?
    Mr. Woods. How far they will go in terms of reduction?
    Mr. Horn. I am sorry, predict how low long distance rates 
will go under the proposed FTS2001 contract?
    Mr. Barram. Don't look at me. Zero.
    Mr. Woods. I hope very low. I think the economics of this 
business are that you have very high capital investment and you 
have very low operational unit costs. So as you buy volume, 
your rates would go down substantially.
    We have not predicted at this point, Mr. Chairman, what 
might happen, but my personal belief is that the industry is 
sitting on top of tremendous capacity that is unsold, and I 
think as we begin to sell the rest of the capacity, that some 
areas, like switch voice, will begin to decline significantly. 
When we say 5 cents a minute and 2 cents a minute on-Net, I 
still believe those rates are going to come down.
    Federal agencies--and I spent 20-some years, 25 years, in 
Federal agencies as a customer of this type of service; I still 
believe that the agencies are looking for declines in those 
kinds of prices, and they are either going to get them from us 
or from other sources. So I believe the expectation of 
customers is for continuing declining prices.
    Mr. Horn. Just as the last general question, perhaps a 
softball question, how did you arrive at the changes 
encompassed in the current strategy?
    Mr. Woods. Well, as we went through it--and I think both of 
us have something to say on that--but as we went through the 
development of the strategy some 3 or 4 years ago, we have 
genuinely tried to bring the customer into this process as 
deeply as we can, and it is in fact part of how I got to be in 
this job; I sort of got lured into being one of those customers 
who participated heavily. And the customers 3 or 4 years ago 
said, your main requirement in the next generation is 
flexibility. They were concerned at that time about the great 
changes that were coming.
    So we got here by trying to read where the industry is 
going; and, quite frankly, the changes have been significant, 
as you know, over the last 18 months. As we have listened to 
different groups and moved ahead with interpretations of the 
Telecommunications Reform Act and others, we made those changes 
based on the best interpretations we could find from the people 
that actually were there and actually worked it.
    So it happened by nature, its very nature of consultation 
with Congress, with the industry, and with customers.
    Mr. Horn. When you look at the contract, is there a thought 
on what is the total limit of time of that contract? Or do you 
think smaller time periods will permit more flexibility in 
taking advantage of technology? How do you deal with that 
problem?
    Mr. Woods. My personal belief is that--and this sounds like 
a very Washington answer--you have got to do both. There are 
some services in which you need long-term stability.
    Switch voice is going to be here in some form forever. Will 
it be here in the form exactly as we have today? Probably not. 
So for some things, that kind of service, especially advanced 
800 routing where you call in to the Social Security office at 
5 o'clock in the afternoon and it starts switching you to 
different offices that are still open in order to save money 
and still provide the service, those are very complicated 
arrangements. You can't take agencies in and out of those 
contracts at the drop of a hat.
    There are other services, we believe, that should be much 
more dynamic and much more responsive. So we really have to mix 
that.
    We can't take one silver bullet and hope for the best. We 
have got to go after the contract length that matches the 
product. As the Administrator said, we found competition works 
and we are going to continue to bring that to bear; as we move 
ahead, we will bring new players in.
    Mr. Barram. Let me add one thought. I think one of the 
powerful and exciting opportunities we have ahead of us is 
trying to keep some stability while we are dramatically 
changing the way people use telecommunications. I have a hard 
time imagining after the turn of the century that most of us 
will not be carrying our telephone with us most of the places 
we go and have numbers that are identified with us.
    This is different than we operate today. So we will have a 
lot of different kinds of switching.
    The providers who get contracts are going to have to play 
in that arena, because that is what is going to be happening. 
So they are both going to want some stability and have to be 
making dramatic changes within what they are doing.
    We are going to have a real challenge managing this, and we 
are going to have to be very focused on the services rather 
than facilities on our own side, so that we don't end up with 
what we call ``stranded investment.'' We want the providers to 
be telling us what the next great thing is, and there will be 
enough competition that I think we will keep getting the next 
great thing.
    Mr. Horn. That is very helpful.
    I now yield 10 minutes to the ranking minority member, the 
gentlewoman from New York, Mrs. Maloney.
    Mrs. Maloney. First, I would like to ask that my opening 
statement be put in the record, as read.
    Mr. Horn. Without objection, it will be put with the rest 
of the opening statements.
    [The prepared statement of Hon. Carolyn B. Maloney 
follows:]
[GRAPHIC] [TIFF OMITTED] T4262.005

    Mrs. Maloney. I would like to really congratulate GSA for 
winning one of Vice President Gore's Hammer Awards for lowering 
the price for long distance phone calls from 27 cents a minute 
to 5.5 cents per minute today. It is an extraordinary 
achievement and what is really the largest procurement contract 
ever undertaken by Government, a staggering 10-year, $25 
billion contract.
    But in that process, you succeeded in lowering the cost to 
the American taxpayer, and I congratulate you.
    I would like to really ask some questions about the outcome 
of the task force that Chairman Burton put in place to reach a 
compromise on the final stages; and particularly I would like 
to talk about the prequalified bidders list and the use of a 
prequalified process for the metropolitan area acquisition 
program, which is intended to increase speed at which contracts 
can be awarded and to ensure that the telecommunications 
services will be subject to fair competition.
    First of all, how are you going to devise this prequalified 
list and how will this prequalified bidders list increase speed 
and increase competition?
    Mr. Woods. The idea behind the prequalified list came out 
of the task force work sessions that we held up here, that 
Chairman Burton's staff hosted. The suggestion actually came 
from the industry side over their concern that if every one of 
these procurements--and there are going to be about 20 or so, 
or maybe more--that it was going to take too long a period of 
time; that every time we did one of these, they would look 90 
percent like the last one, but you would be going through the 
whole process from the start.
    The idea here is not to exclude anyone or that you get some 
exclusive list. It is simply to try to do some front-end work 
that lets you say that company X, that is qualified technically 
from a managerial standpoint in the first city certainly hasn't 
lost that qualification when you get to the third city.
    So the idea was that we would develop this list, it would 
allow the Government to move fairly rapidly in getting through 
what is 90 percent of the routine work that it takes to do the 
evaluation.
    Mrs. Maloney. Do all the industry groups support the pre-
qualified bidders list concept? Are they on board on that?
    Mr. Woods. I think they are. We have heard no objection to 
that yet. Its function does not exclude anyone.
    Let's say we have eight people, eight companies on the 
list, and a qualified company comes along and wants to bid. 
They can either get prequalified ahead of time or they can bid 
at the time of the solicitation.
    Mrs. Maloney. So it is not anticompetitive. People can come 
into the process.
    Do you have to have certain qualifications to get on the 
prequalified list? Do you set a standard that people must reach 
before they can get on the list? That cuts down Government's 
work, too, by not having to look at contractors' bids that 
cannot handle the job.
    Mr. Woods. That is correct. The only caveat I would see 
there is that we would not take it forever. In other words, if 
you get prequalified and 4 years later you have had doubtful 
performance, the Government has left itself the option that we 
may go back to a specific company and say, we would like to see 
you requalified because we have had some problems.
    But other than that, it really does make our work a lot 
easier.
    Mrs. Maloney. Do you have sort of a list of qualifications 
to make this fertile to the prequalifying?
    Mr. Woods. Yes. Essentially what we do is take the 
qualification and take everything but the specifics for the 
particular city, and they have to pass the technical marks for 
everything within that basic solicitation.
    What is happening is, they are almost doing what they do on 
a bid on a regular proposal, but they do it as though they are 
bidding to a specific city. In fact, when we bid the first one 
in New York, it is very possible that companies that come in, 
they will in effect be prequalified during that actual bidding. 
So we would keep them prequalified.
    Mrs. Maloney. This sounds like a good solution of 
Government and private industry working together to come up 
with a solution that will solve many of the six questions we 
went over at the last hearing.
    As you know, I am interested in having GSA conduct a pilot 
project which would test the feasibility of allowing State and 
local governments to purchase telecommunications through the 
FTS2000 program or any successor to it. You have been so 
tremendously successful for Government on the Federal level, I 
was thinking probably some of our localities would likewise 
like to benefit from your work in this area.
    First of all, is this something that GSA has the legal 
authority to test, without legislation?
    Mr. Woods. Without trying to get out of my bounds and get 
into the legal arena of trying to be an attorney, the basic 
rules to date are that, under our current programs, we do not 
have specific authority to sell to States, and without the 
specific authority, we are precluded from doing it.
    In the next generation, 2001 and MAA, we have said in the 
solicitation we will sell to State, local and other Government 
entities as the law permits. So we have left our door open from 
a contracting standpoint to do this.
    I would have to tell you that not a month goes by that I 
don't get a letter, a call, an inquiry from a State or local 
government about the use of FTS2000.
    Mrs. Maloney. I have some draft legislation that would 
allow some pilot programs across the country for localities. I 
would like to know if you could look at it and get back to me.
    And also could you get back to the subcommittee with sort 
of general pricing data so that we can begin to gauge the 
possible benefits to State and local governments?
    Mr. Woods. We would be happy to do so, and we have, in 
fact, run some traffic from States that compare the current 
prices with our prices. So we have actually done that on a 
request basis from several States already.
    Mrs. Maloney. Great.
    Mr. Woods. We would be happy to present that to you.
    Mrs. Maloney. I would love to look at that.
    Mr. Barram. Could I add one comment? The whole idea of 
selling not just telecommunications, but a lot of stuff we are 
involved with, to States, is an important issue that I think we 
need to resolve in the next year. As you know, we are in 
suspension on an overall procurement opportunity for States to 
buy off our schedules; and so I think we need--I think it is 
inevitable, and we need to get moving on that.
    Mrs. Maloney. Prior to the latest round of meetings, the 
regional Bell Operating Co.'s expressed some concern that the 
long distance companies would be able to offer local services 
as unevaluated options after winning a FTS2001 contract. At 
those latest meetings, Mr. Woods emphasized the fact that this 
was not accurate and that any options would be evaluated as 
contract modifications.
    How will these contract modifications be evaluated by GSA, 
what is the normal process, what is the existence of 
prequalified bidders, enhanced competition, in this process?
    Mr. Woods. There were in fact two issues at stake when we 
talked about this. One was, you are the winner of a contract, 
and immediately that region can be opened to competition from 
other companies. In other words, if I won, what have I won?
    During the negotiations and the work sessions with 
industry, we have decided to go into a forbearance period for a 
year in which the winner of a contract has time to get on board 
and sell and have a minimum revenue guarantee.
    The idea that we would just add service without evaluating 
it, our answer on that before dealt with just what you said, 
that we would not do it without evaluating it. In effect, if we 
already have providers in an area, which is what we are talking 
about, and we are talking about other providers being offered 
the opportunity to do that, first of all, you would have to 
start out with the idea if you don't offer better terms than we 
currently buy at, the Government would not have any interest in 
pursuing it.
    So we look at what we pay, we look around the industry and 
we do a price analysis. So we do evaluate it and we evaluate 
quite carefully.
    If we had service offered in, say, the Washington, DC, 
area, and we paid $13 a line and somebody comes in and tries to 
sell it for $16, we just will not buy. We will look at this 
strictly as a business.
    So we will evaluate. They are not unevaluated options.
    Mrs. Maloney. Some people complain to my office or argue 
that the February 1997 strategy violated the Competition and 
Contracting Act. What is your reading of that law's 
requirements in light of the latest revisions?
    Mr. Woods. I believe we are on solid ground. Our counsel 
has been involved in this probably more than they wished, but 
we have been into this in great depth, and we believe we are on 
solid ground with the Competition and Contracting Act and we 
are prepared to move forward.
    So we have gone over this issue, we have listened to the 
specific arguments from different companies. We have sat and 
listened to the line-by-line argument, not the sort of general 
idea, but we have gone into that. Our counsel is confident that 
we have done what it takes to move ahead.
    Mrs. Maloney. And when you have the final draft RFPs, will 
you make them available to this subcommittee?
    Mr. Woods. Yes, we will, and we will make them available 
both electronically on our web site and make them available in 
paper, if needed.
    Mrs. Maloney. Since the last meeting and the conclusion and 
the strategy that was put in place then, have you received a 
lot of statements, pro and con, on that; and, again, could the 
committee look at those statements?
    Mr. Woods. We are happy to share any of those. We, in fact, 
received late yesterday from the Industry Advisory Council, 
which represents some 200 of those companies, a letter in 
general about the process; and in fact they thought it was open 
and worked, and they in fact were lauding our efforts on this.
    We have listened. We will continue to listen. We have taken 
comments without the sort of supposedly open and closed comment 
periods that you see in some procurements. We have taken them 
whenever we have gotten them, and we have gotten a lot.
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    Mrs. Maloney. Well, congratulations. My time is up.
    Congratulations on your Hammer Award. You are up for 
another one. Having 5 cents a minute is quite an achievement. I 
congratulate you over this long process. I think GSA has done 
an excellent job.
    Mr. Woods. Thank you.
    Mr. Barram. Thank you.
    Mr. Horn. I now yield 10 minutes to our distinguished 
chairman, who has come from another subcommittee. We would 
welcome his thoughts on this.
    Mr. Burton. Thank you, Mr. Chairman.
    Let me state at the outset that I strongly endorse the 
GSA's plan to release the FTS2001 RFP and the MAA draft RFP on 
May 2, 1997. I believe Congress, the GSA, and the vendors have 
done an outstanding job, and I want to commend all of you, 
because there was some controversy over this in crafting these 
proposals that allow this process to move forward.
    At our last hearing, I asked all the interested parties to 
sit down and attempt to narrow their differences, to negotiate 
in good faith and come up with an agreement that would result 
in the RFPs being released.
    When I initially became involved in this issue, I stressed 
four principal goals that this procurement must meet in order 
to move forward.
    First and foremost, it must be the best possible deal for 
the American taxpayer.
    Second, it must take advantage of emerging market forces in 
the telecommunications industry.
    Third, it must allow as many vendors as possible to compete 
for it while ensuring a level playing field.
    Fourth, it must take advantage of the leverage provided by 
the Federal Government's purchasing power.
    Through working together, I believe we have met these 
conditions, providing the American taxpayer with the most 
technically efficient and cost-effective telecommunications 
system, and I am pleased to see that this process is going to 
move forward. This procurement promotes competition and 
innovation in order to secure lower prices and higher quality 
services for the Federal Government and the taxpayer.
    I sincerely want to commend my good friend and colleague, 
Mr. Horn, for his outstanding work. He has shown tremendous 
leadership on this subject. I also want to thank our colleague, 
the senior Senator from Alaska, my good friend Ted Stevens and 
his staff, my committee staff, and of course Commissioner Bob 
Woods of GSA and his staff, all of whom displayed 
professionalism and tremendous patience throughout this entire 
process.
    I thank Mr. Barram and Mr. Woods for appearing before us 
today, and, I have one quick question for Mr. Barram. Has the 
criteria I laid out been met?
    Mr. Barram. Yes.
    Let me also thank you, Mr. Chairman, for your leadership in 
getting us to build this consensus strategy in and the work of 
your staff. It has been a really very profitable activity. I 
think we are--I am convinced, I am satisfied we are operating 
from the principles you laid down.
    This is the best deal for the American taxpayers, and it 
will be very competitive. We have got a structure in place that 
will let us do that--we have talked a little bit about that 
today and have been very successful in the FTS2000 program that 
gives us a platform to build on for this one.
    Second, because this is a services-based contract, it meets 
your principles of innovation and using technology well. 
Because we are focused on services, as I mentioned earlier, we 
will not end up with what we call a ``stranded investment'' in 
the Federal Government, so that as things change, as services 
change, we will be able to get them from the service providers.
    As I said in my opening statement, there is nothing as 
powerful to describe the new world order as telecommunications, 
with all the innovation and changes that are taking place. So 
we are going to have a lot of competitors in this business, and 
that is one of your principles as well.
    It has worked for us in the past, and we are going to have 
some significant factor times the number of competitors we had 
in the past.
    Finally, the strategy has always been predicated on 
leveraging the Government's purchasing power. That is why we 
have been able to get great prices and great services. The 
combination of two is great value, which is what we are heading 
for.
    So, I think this consensus process has really done a great 
job of strengthening our ability to make a more powerful 
proposal for a contract. We are going to have, I think, very 
great success in the marketplace for our Federal Government 
customers.
    So I think it passes your principles, the strategy, with 
flying colors, and we thank you very much for your leadership.
    Mr. Burton. I thank you. Mr. Woods had to put up with an 
awful lot. Once again, thank you for all your help.
    Mr. Chairman, thank you very much.
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    Mr. Horn. We thank you again for your leadership in getting 
this consensus-building put together. I think everybody is 
happy with the result, and ultimately that result is what will 
satisfy the American taxpayers that pay all the bills around 
here.
    I now yield 10 minutes to the gentleman from Illinois, Mr. 
Davis.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
    I, too, would want first of all to commend and congratulate 
GSA on what I would consider to be an outstanding job, not only 
in terms of what we appear to be seeing at the bottom line, but 
also in terms of the process itself. I think that those 
involved in the industry would have to be pleased with the 
process, even if it turns out that they are not absolutely 
excited about all of the outcome in terms of where they are.
    I think it is one of the most fascinating approaches to 
arriving at a conclusion that I have seen, and I hope that it 
is one that we will continue to use, not only in Government, 
but also I think it can be used in the private sector as well.
    I also would want to commend and congratulate Chairman 
Burton for his outstanding leadership on this issue in terms of 
helping to bring it to where it is at, and certainly to you as 
well, Mr. Chairman.
    The question that I have as we look at where we are is 
whether or not we are certain or we are comfortable that 
adequate safeguards have been built in that will allow small 
businesses, women-owned businesses, minority businesses to 
actually have a real shot at a piece of the action.
    So that is the question: Are we comfortable with those 
kinds of safeguards built into the process?
    Mr. Woods. I believe we are. We have, in fact--I think you 
have been briefed or brought into this before, that we have a 
number of procurements that fit under this mantra of Post-
FTS2000, and it includes everything from professional services, 
to cable and wiring, to international services, and so forth.
    We have made not only conscious efforts to make sure that 
there are small business contracting plans in any bid that 
comes in. We have on several of these services made sure that 
there were small business awards and that we encouraged small 
business to participate.
    We believe, as we did in FTS2000 where we exceeded the 
goals we set by a large margin with AT&T and Sprint, that this 
is not something that you get satisfied with and that you sit 
on. You have got to keep at it, you have got to stay diligent 
and moving ahead.
    So we not only believe the safeguards are there in terms of 
the contracting, but we believe the attitude is there in terms 
of staff and the program and we are going to continue to go 
down that path. So we have in fact lately talked about some of 
the other procurements coming. And although 2001 is an enormous 
procurement and, as Chairman Horn said, one of the biggest in 
the Federal Government, we have got some others coming that are 
also likewise very complicated and very large in their size; 
and we intend to make sure that small business is part of that.
    So we work very closely with our Associate Administrator 
Dietra Ford in that area, and we have held public forums for 
small business and others, and continue to do that. So we are 
committed to it.
    I don't think just language in a contract is enough. I 
think you have to go beyond that, and we are.
    Mr. Davis of Illinois. I certainly appreciate that 
position, because I too don't believe it is something that we 
can leave to chance. It is not something that will ever be 
accomplished, unless we are diligent and unless we actually 
pursue it and stay on top of it.
    I also note that the FTS2001 contractors will be able to 
offer and price local services by interconnects; that is, the 
three-digit local exchange, and not across the entire MAA. By 
structuring and setting up the options this way, does that open 
GSA up to the charge of allowing for cherry-picking or maybe 
during the basketball season, crimp-shooting?
    Mr. Woods. My Administrator is a great basketball fan, so I 
am afraid he may want this one.
    I would say on that, that is one way to look at it. But 
this is a question that is often referred to as the ``universal 
service'' or ``ubiquity'' issue; if you provide one spot you 
have to provide everywhere. Our sense is, that is a barrier to 
entry for other competitors.
    We in fact are protecting the initial awardees that have 
competed for that area by having a 1-year cooling-off period 
where no one else can move in on that territory. It is our 
belief that we have to allow competition, and by allowing us to 
go in at that three-digit level that you referred to, we 
believe that that functionally meets our customer requirements. 
The new entrant must compete and attract away the customer. The 
customer is already an incumbent somewhere else.
    So we believe it is a good balance, and we believe 
requiring ubiquity-type service throughout an area really 
constitutes a barrier to entry and decreases competition.
    So we believe it is a reasonable balance. We are protecting 
the initial awardee for some period of time, for a year, and we 
are giving them a minimum revenue guarantee. And we believe 
that is enough. We believe if you guarantee it forever and you 
don't allow anyone else to compete, that is not good for our 
customer and not good for the prices we pay. So we have 
consciously thought about that issue and we believe it is best 
to do it at the three-digit level.
    Mr. Davis of Illinois. Thank you. I notice that GSA has 
maintained that the February 1997 strategy was required due to 
the Telecommunications Act of last year, and I assume that the 
revisions we are talking about and the changes we are talking 
about today are also consistent with that law. I guess the 
question is, could you elaborate on that in terms of the 
consistency of where we were, as well as where we are?
    Mr. Woods. Well, as you will recall, the Telecommunications 
Reform Act was passed about this time last year, in fact 
February 1996. And as with any new law that comes out, and it 
was one that replaced one that was decades old, it has taken 
some time to decide what specific parts of that law mean. A lot 
of what we went through in the February timeframe was looking 
at interpretations of that, that had never been challenged and 
never been dealt with.
    So when we got some questions from the other Chamber, it 
was along the lines of what was intended in the act, and we sat 
down, listened to that, went through it; and from our 
perspective legally, we could have gone either way. I mean, we 
were not in violation of any law no matter which way we went.
    The question was, what is in the spirit of the law, what is 
in the best interests of the Government; and those things, they 
are sometimes deep subjects with not easy answers. As we went 
through it, it was our sense that the industry is going to 
allow this, offerings from one sector into the other sector and 
so forth, the contractor was going to be around for a while or 
set of contracts. We wanted to be flexible enough to do the 
same thing that the private sector was going to do. That was 
the issue.
    After a lot of deliberation, we agreed with that point of 
view that we ought to be flexible and let each segment of the 
industry offer other services, and then we at that point 
restructured to meet that.
    So we not only believe it is in compliance with the letter 
of the act, we believe it is in compliance now with the spirit 
of the act. So that is really what we were doing, was fine-
tuning at that point.
    Mr. Davis of Illinois. Again, I think you have demonstrated 
a high level of flexibility and the ability to work with the 
industry, the ability to bring the industry together. Overall, 
it is an outstanding piece of work, and I certainly commend and 
congratulate you, and also would reiterate, Mr. Chairman, the 
commendation to you for the outstanding role that I think you 
have played in the process.
    That concludes my questions. I thank you very much.
    Mr. Horn. I now yield 10 minutes to the gentleman from 
Texas, Mr. Sessions.
    Mr. Sessions. Mr. Chairman, thank you.
    Mr. Barram, Mr. Woods, I would like to pile on with the 
nice words that have been put on you today, not only by 
Chairman Burton, but also by other members of this 
subcommittee, including our subcommittee chairman, Mr. Horn.
    Mr. Barram. Please do.
    Mr. Sessions. Please take from the tone of my message that 
you should be patted on the back. This has been a difficult 
process and you have made good progress, and as an outsider 
looking in, let me say you responded to my letter very nicely. 
Thank you, Mr. Woods.
    I would like to, if I could, just direct my comments in two 
specific areas. When I first walked in, I heard the word 
``forbearance,'' this 1-year period of time we are talking 
about where a person, the winning contractor of the FTS2001 
contract, at the end of a 1-year period would be allowed to get 
in.
    Can you define for me--and I know I have got this 
agreement, this statement of principles in front of me which is 
wonderful, as Mr. Davis suggested. Can you tell me, when does 
this year start and what the process is?
    I know when someone signs a contract, it may take a period 
of time before they are on line, before revenue starts. When 
does the gun go off?
    Mr. Woods. Typically, from a contractual standpoint and a 
legal standpoint, we have started at contract signing, which 
means the day you sign the contract, the time at that point 
would be ticking. But contractually you have a lot of 
flexibility.
    A lot has to do with what you agree to ahead of time.
    At this point, we have not nailed that down totally, and 
from my perspective, I think we would rather get you back the 
best answer we can. I am just telling you typically what we do, 
but we have not drafted that language.
    That language is not set yet, so contractually the 
Government has not entered into a contract. So until we do 
that, it is kind of what you say it is, and what you agree to.
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    Mr. Sessions. I guess my comment would be that I would 
encourage you to get closer to understanding what that means, 
because in some instances, there may be a statement of 
principles that is easier to read than some of these.
    You may have a different circumstance in a different area 
based upon a switch performance or ordering. Someone may order 
some set of services, the switch, outside an operating entity's 
ability; something may come into play. I would encourage you to 
look at defining that, and probably--maybe the preference would 
be after you have begun billing, when the first bill goes out, 
because there may be some line of demarcation.
    I would encourage that to be within either a statement of 
principles or more clearly, closely defined.
    Second, I think my words--and I heard your response to this 
cream thinking or cherry picking, is it possible that you would 
have one--I will wait until this buzzer finishes.
    Is it possible that you would have one of your customers 
within an area paying one set of prices and another FDS or 
Federal Government entity paying a separate set of prices? And 
do you think that this would mean that this would be in the 
best interest of the taxpayer or not? Or how do you view that 
circumstance that potentially could occur?
    Mr. Woods. First of all, in answer to your question, 
Congressman Sessions, it is absolutely possible and happens 
today. We have, within rock throwing distance of this Capitol, 
agencies who pay different rates. And that happens.
    What we try to appeal to from a GSA standpoint is good 
business sense that you're getting what you pay for and more. 
And that is, in fact, what I believe our competitive advantage 
is, that we offer the best deal in town.
    When someone here in this city pays greater than $13.73 a 
line for dial tone service on the desk a month, I'm looking to 
hound them, because I believe they're not getting the best 
deal, because that's what I sell it for.
    So we have that. We have, in fact, created within our 
reinventing effort this competitive atmosphere. We are 
encouraging agencies to go after the best deal. They have gone 
at it, I think, with great energy. But I--there's no guarantee 
that you won't get different rates. And sometimes they believe 
they're getting greater value with greater rates--with higher 
rates if other services are there.
    And with all your years in this business, you know how 
selling that ends up. You've got to convince that customer that 
you get greater value.
    Mr. Barram. Let me interject one thought. As you know, 
these are nonmandatory services.
    Mr. Sessions. I am sure.
    Mr. Barram. They will not be. So that has a big effect.
    And the rest of our business at GSA, we have a lot of 
nonmandatory activities, which is very powerful for us to be 
better and very good for our customer. So that will help too; 
that will probably ensure that there may be, that there will be 
different rates at different places. But if we think about 
value, price, and service, if we think about value, price may 
not be the determinant.
    Mr. Sessions. Good. I am completely satisfied that both of 
you and the people who work for you, as well as those people in 
the process, feel like it has been fair, it has been open.
    One thing that I am concerned about and the reason why I 
talked about in the first place about this forbearance period, 
just know what the deal is that was cut.
    Mr. Woods. Yes.
    Mr. Sessions. There is nothing worse than walking out to 
signing a deal and then walking out later saying, ``I wonder 
what we really meant in a certain circumstance.'' So I 
encourage you to be open in this period, also to take 
everybody's comments about cutting the tightest deal that you 
can, not only on behalf of yourself and those people who are 
competitors, but the taxpayers of the country.
    Mr. Chairman, thank you so much for your time.
    Mr. Horn. Quite welcome. I now yield 10 minutes to the 
gentleman from Virginia, Mr. Davis.
    Mr. Davis of Virginia. Thank you very much. And this is a 
much different hearing than some of the ones we have had 
before. And, again, thank you very much for the work. I know it 
has been difficult.
    Let me ask a couple questions. Tell me how Bell Atlantic 
comes out under this, under the MAA, and how the District of 
Columbia and their ability to use this? In the past, they have 
declined to sign up. What are their options now? And what 
savings can they accrue?
    Mr. Woods. Well, the District has, unlike Mrs. Maloney's 
question about State usage, the District of Columbia actually 
can use our services today. And so they have, in effect, 
special privilege in that regard.
    We have over time, as you know, put some effort into trying 
to get the District on board with what we're doing because we 
believe there not only are savings but, Congressman Davis, 
there are functional differences. We have at least the legend--
and I have not personally observed it--the legend is we still 
have rotary phones in many of the schools.
    Mr. Davis of Virginia. That is accurate.
    Mr. Woods. Well, we believe we can take them beyond rotary 
phones very quickly. But we also believe that distance 
learning, how speed telecommunications capabilities and other 
things that we're planning for the next generation for agencies 
and the Department of Defense, and so forth in this exact 
geographic area should be made available to them. And we need 
them on the planning team to do that. So we're offering that up 
to them. And we're working that fairly hard.
    In the Bell Atlantic set of questions, as a regional Bell, 
they will obviously be competitors for a number of our 
metropolitan area acquisitions. And we hope as time goes on and 
they deregulate, they will be competitors for other services 
we've got. But they are a very large provider.
    And the merger with NYNEX will cover a trail of territory. 
And I believe over time will--they're in the position to be in 
60 percent of our long distance market; about 60 percent of our 
service is in that geographic territory.
    Mr. Davis. Super. Well, thank you very much. I thank both 
of you very much.
    Mr. Woods. Thank you.
    Mr. Horn. I thank the gentleman very much. I have one last 
question. Mention was made of large purchases in the future and 
we might apply the same technique.
    Could you give us an idea of what areas those are?
    Mr. Woods. I believe that when you look at 2001, as 
significant as it is, we have some coming attractions that I 
think are going to be significant in the Federal arena. Right 
now, one that we are moving forward with is something called 
seat management. And I know that that term will probably invite 
some ridicule. But its idea is to provide desktop computing 
services on a service basis. And it, in effect, says you're not 
going to lease it. You're not going to buy it. You are, in 
effect, going to buy the service.
    The Gartner Group today projects at about $12,000--it costs 
about $12,000 a seat. And the reason you use seats is most 
organizations have more seats than they've got people. And so 
you're paying for the computer that sits there.
    And our belief is we can buy those seats on a service basis 
for a lot less than $12,000 a seat. Our rough and very crude 
estimates at the moment are that that's a roughly $10 billion 
Federal market. If we bring those prices down 10 percent, I 
don't have to do the math, I think you'd see that's a very 
significant area. So we believe that is an area we need to move 
ahead on.
    The second area I believe is very significant is the 
Washington area communications ability. Washington, DC, 
represents one-third of my local telephone service business. 
And if we don't do this well, we don't do anything else well. 
And so as we provide high-speed capability for the next 
generation, I believe we ought to be linking up with the 
District. We ought to be linking up with our partners in 
defense and we ought to be making that a model for what the 
rest of the Government looks like.
    So we're ambitious to do that well. And I have deep 
appreciation for what we've been through with 2001 to get it to 
the market as well as the MAA's, but there's more coming. It's 
going to be significant for this Government. And it's going to 
take leadership on all our parts to make it work.
    Mr. Horn. Well, would Commissioner or----
    Mr. Barram. No, I'd just--I agree with Bob. There's a lot 
of things that are going to happen in the next couple of years 
that are huge changes in the way we all function and work and 
these are two of them.
    As soon as we get this RFP out, we take a deep breath and 
work on the next big complicated issue.
    Mr. Horn. Well, I want to thank you in particular, Mr. 
Administrator, and Bob Woods as Commissioner, also. And I hear 
some of his fine staff is in the first row right behind him. 
And I know these things would not have happened in building a 
consensus if it wasn't for Commissioner Woods and his staff 
taking the time to sit around the table with congressional 
staff, as the various people that have a real stake in this 
come in. And you are representing the stake of the taxpayers. 
And so I want to thank you two first and your staff.
    And then I would like to thank the congressional staff that 
participated in these meetings on both sides of the aisle. 
Starting with Bill O'Neil, the director of procurement for the 
full committee reporting to Mr. Burton. And Earl Comstock is 
here who is the legislative director for Senator Stevens, who 
also participated. And then nothing happens on this 
subcommittee without the leadership of J. Russell George, the 
staff director and counsel right here. And the gentleman on my 
left and your right, Mark Brasher, is our specialist in this 
area, who is seated next to me. And then Patricia Delgado 
represented the ranking Democrat on the full committee, Mr. 
Waxman. Mark Stephenson, professional staff member for the 
subcommittee, minority, headed by Mrs. Maloney.
    And then in preparation of this hearing, we also thank John 
Hynes, who is the professional staff member in communications. 
And Andrea Miller, our clerk. And we thank the reporters who 
have to try and untangle what we are saying: Vicky Stallsworth 
and Bob Cochran.
    Also thank you to Janet Javar who is working with the clerk 
on the minority side. So thank you all. And with that, this 
hearing is adjourned.
    [Whereupon, at 11:12 a.m., the subcommittee was adjourned.]

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