[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
ENTREPRENEURIAL GOVERNMENT RUN AMOK? A REVIEW OF FSS/FTS ORGANIZATIONAL 
                       AND MANAGEMENT CHALLENGES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 2, 2003

                               __________

                           Serial No. 108-80

                               __________

       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

                                 ______

                      U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2004
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 2, 2003..................................     1
Statement of:
    Perry, Stephen, Administrator, General Services 
      Administration, accompanied by Sandy Bates, Commissioner of 
      the Federal Technology Service, and Donna Bennett, 
      Commissioner of the Federal Supply Service.................    10
    Woods, William T., Director, Acquisition and Sourcing 
      Management, U.S. General Accounting Office; Larry Allen, 
      executive vice president, Coalition for Government 
      Procurement; and Donald E. Scott, senior vice president, 
      EDS, Inc. on behalf of Information Technology Association 
      of America.................................................    46
Letters, statements, etc., submitted for the record by:
    Allen, Larry, executive vice president, Coalition for 
      Government Procurement, prepared statement of..............    63
    Clay, Hon. Wm. Lacy, a Representative in Congress from the 
      State of Missouri, prepared statement of...................     8
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     4
    Perry, Stephen, Administrator, General Services 
      Administration, prepared statement of......................    16
    Scott, Donald E., senior vice president, EDS, Inc. on behalf 
      of Information Technology Association of America, prepared 
      statement of...............................................    74
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California, prepared statement of.................    80
    Woods, William T., Director, Acquisition and Sourcing 
      Management, U.S. General Accounting Office, prepared 
      statement of...............................................    49


ENTREPRENEURIAL GOVERNMENT RUN AMOK? A REVIEW OF FSS/FTS ORGANIZATIONAL 
                       AND MANAGEMENT CHALLENGES

                              ----------                              


                       THURSDAY, OCTOBER 2, 2003

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 11:13 a.m., in 
room 2154, Rayburn House Office Building, Hon. Tom Davis of 
Virginia (chairman of the committee) presiding.
    Present: Representatives Tom Davis of Virginia, Souder, 
Ose, Lewis of Kentucky, Murphy, Maloney, Cummings, Mr. Davis of 
Illinois, Tierney, Clay, Watson, and Norton.
    Staff present: Peter Sirh, staff director; Melissa Wojciak, 
deputy staff director; Ellen Brown, legislative director and 
senior policy counsel; John Hunter, counsel; Teddy Kidd, 
professional staff member; Jennifer Safavian, chief counsel for 
oversight and investigations; Robert Borden, counsel/
parliamentarian; John Brosnan, GAO detailee; Teresa Austin, 
chief clerk; Brien Beattie, deputy clerk; Karen Lightfoot, 
minority communications director/senior policy advisor; 
Michelle Ash, minority counsel; Mark Stephenson and Tania 
Shand, minority professional staff members; Earley Green, 
minority chief clerk; Jean Gosa, minority assistant clerk; and 
Cecelia Morton, minority office manager.
    Chairman Tom Davis. The committee will come to order. Good 
morning, I want to welcome everybody to today's oversight 
hearing on the General Services Administration's ongoing 
efforts to restructure the organization of the Federal Supply 
Service and the Federal Technology Service, and the impact of 
recent GSA Inspector General investigations of FTS contract 
management. We will also touch upon GSA's plans for a new 
Governmentwide telecommunications program.
    The hearing today will build on the information on 
structural and management challenges faced by the two services 
developed in a hearing held last Congress by my Subcommittee on 
Technology and Procurement Policy, and supplemented by the 
General Accounting Office in work performed for the 
subcommittee. Also key are recent revelations of mismanagement 
in FTS contracting surfaced by the GSA IG in a study of FSS/FTS 
organizational issues performed by Accenture last year for the 
General Services Administration.
    Through various revolving funds, GSA buys products and 
services from the private sector. It resells them to Federal 
agencies. FSS and FTS, which do a combined $30 billion in 
business each year, both fit within this model but take 
different approaches to filling agency customers' needs. The 
Federal Supply Service, through its Schedules program, provides 
Government agencies with the opportunity to quickly purchase 
needed products and services including, of course, IT. Customer 
agencies deal directly with vendors under their FSS contracts. 
Used properly, the Schedules have proved to be an invaluable 
tool for Federal contracting officers.
    FTS, operating through GSA's Special Information Technology 
Fund, offers Federal agencies a range of IT and 
telecommunication services through varied contract vehicles it 
has traditionally managed and the Schedules. FTS views itself 
as a ``value added'' reseller of telecommunications and IT. FTS 
offers consulting and extensive contract management solutions 
to assist Federal agencies in complex acquisitions that require 
indepth technical knowledge. FTS seems to have been the primary 
source of GSA's recent management challenges.
    The overlapping and redundant nature of the current 
structure has raised questions related to the relationship 
between these services. As a result of last year's hearing, GAO 
work and the Accenture report, the Technology and Procurement 
Policy Subcommittee found that overlaps existed between FSS and 
FTS in a number of areas, including information technology 
sales and marketing and IT contracting offerings. Administrator 
Perry, to his credit, has embarked upon a realignment effort in 
an attempt to coordinate the range of services provided to 
agencies. As a part of this effort, GSA has recently announced 
the result of a review of its IT contract vehicles. As I 
understand it, a number of those contracts will not be 
continued and those that remain will, for the most part, be 
managed by the Federal Supply Service.
    Notwithstanding these efforts, there have been disturbing 
revelations of what may well be a pattern of contract 
mismanagement throughout the FTS. The GSA IG reported 
inappropriate contracting practices and misuse of the 
information technology funds by FTS officials at GSA's 
Bremerton, WA, office. I also understand that the IG will soon 
release another report documenting further contracting 
irregularities by FTS officials in other GSA regions. I believe 
that the problems are extensive and could involve acquisitions 
valued up to $100 million. The committee is closely following 
this unfolding story. We have to be ready to remedy the 
situation if allegations of wide-spread abuse and mismanagement 
at FTS prove to be true. Consequently, the committee intends to 
explore alternatives, including legislative solutions, to the 
current FSS/FTS structure that would lead to better management 
oversight of contracting activities.
    I am keenly interested in hearing GSA's plan to remedy 
these growing difficulties and in exploring the relationship of 
these instances of mismanagement to the underlying structural 
issues. Finally, in addition to all this, GSA will soon issue a 
Request for Information seeking input for a next generation 
Governmentwide telecommunications program. This program is 
slated to be run by FTS. While we have yet to see the details 
of the GSA's telecom proposal, as the specifics unfold, the 
committee plans to address issues concerning the appropriate 
location for this program and whether there is a need for it at 
all.
    In closing, I want to emphasize that the committee will 
continue to follow these events. I will not hesitate to propose 
whatever solutions are needed to resolve GSA's structural and 
management challenges, but I look forward to the 
recommendations and working with Commissioner Perry in doing 
this. We have to be able to assure the American taxpayers that 
GSA provides best value as a supplier of IT products and 
services to the Federal Government. If this requires that we 
mandate permanent reorganization, we will do what we need to 
do.
    But let us start today by hearing what the witnesses have 
to say. I want to welcome all the witnesses to today's hearing. 
I look forward to their testimony. Is there anyone else that 
wishes to make an opening statement this morning?
    [The prepared statement of Chairman Tom Davis follows:]
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    Mr. Clay. Mr. Chairman.
    Chairman Tom Davis. Yes, Mr. Clay?
    Mr. Clay. Yes, Mr. Chairman, the GSA is the parent 
organization of the Federal Supply System and the Federal 
Technology Service. Both systems have functioned remarkably 
well since their creation. The FSS alone has operated since 
1949 and, combined, they do more than $30 billion in business 
each year. This is a real testimony to the hard work of the 
employees and managers at offices and warehouses around the 
country. The procurement solutions they provide to Government 
through their contractors have been invaluable. However, 
lately, something has gone awry with these two systems, and 
that is what brings us here today, to examine the issues of 
waste, fraud and abuse.
    Recently, I was reading a report issued by the GSA 
Inspector General's Office. I was astonished to learn that they 
found FTS funds were co-mingled. There has been abuse and 
misuse of the Small Business Administration 8(a) Contractor 
Program; improper coding procedures; duplication and overall 
inefficiency between FTS and FSS. These situations are 
unfortunate and are reflective of a troubled agency. 
Mismanagement on this scale is simply not acceptable. Finally, 
it is imperative that our constituents have confidence in the 
Government's ability to be fair and open in its procurement 
process.
    I look forward to hearing from today's witnesses, and I ask 
unanimous consent to submit my statement into the record. Thank 
you, Mr. Chairman.
    [The prepared statement of Hon. Wm. Lacy Clay follows:]
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    Chairman Tom Davis. Thank you very much. Are there any 
other opening statements?
    [No response.]
    Chairman Tom Davis. Well, Members can have 5 legislative 
days to submit opening statements for the record. There is no 
vote, yet; we anticipate it momentarily, but let us move ahead 
with the hearing.
    Our first witness is Steve Perry, the Administrator of the 
General Services Administration. Mr. Perry, you are accompanied 
by Sandy Bates, who is the Commissioner of the Federal 
Technology Service. Welcome, Sandy; you have been here before; 
and Donna Bennett, the Commissioner of the Federal Supply 
Service, so welcome.
    It is the policy of this committee that all witnesses be 
sworn before they testify. Would you rise with me and raise 
your right hands.
    [Witnesses sworn.]
    Chairman Tom Davis. Please be seated. Your entire statement 
is in the record, Mr. Perry. If you can, try to take 5 minutes. 
You know how the buttons work. But whatever you need, on this 
important issue, we want to give you time to amplify; thank you 
and welcome.

  STATEMENT OF STEPHEN PERRY, ADMINISTRATOR, GENERAL SERVICES 
ADMINISTRATION, ACCOMPANIED BY SANDY BATES, COMMISSIONER OF THE 
FEDERAL TECHNOLOGY SERVICE, AND DONNA BENNETT, COMMISSIONER OF 
                   THE FEDERAL SUPPLY SERVICE

    Mr. Perry. Good morning Mr. Chairman and members of the 
committee. Thank you for the opportunity to testify today on 
behalf of the GSA with respect to our overall operations. At 
previous meetings of this committee, you have provided us with 
the opportunity to talk about the procedures we have 
established to improve the performance of GSA in terms of 
providing best value services, not only to our GSA customer 
agencies but, indeed, to the American taxpayers. This applies, 
obviously, to all parts of our agency: the Public Building 
Service, the Federal Supply Service, the Federal Technology 
Service, our Office of Governmentwide Policy and all other 
areas of GSA. Since the last time that the committee conducted 
an oversight hearing, GSA has undertaken many of the steps 
necessary to improve our operations; and as you point out, we 
have confronted new challenges since we last met, and I am 
pleased to have this opportunity to review them with you.
    As requested in your invitation letter, I will be 
discussing three general areas. First, the changes we have made 
to improve the overall operations of our Federal Technology 
Service and Federal Supply Service by realigning and 
consolidating some functions within those two services. Second, 
I want to talk about the incidences that we have uncovered 
regarding cases where we have failed to follow proper 
contracting procedures, as required by the Federal Technology 
Services Information Technology Fund. And then third, to talk a 
little bit about the process that we are using to develop an 
acquisition strategy for the replacement of the expiring FTS 
2001 telecommunications contract.
    The first subject then is the initiative to improve the 
performance of our Federal Technology Service and our Federal 
Supply Service by realigning, combining and consolidating some 
of those functions. This initiative began, in part, because of 
GSA's agency-wide performance improvement program. But also, 
Mr. Chairman, this initiative began, in part, because you and 
members of this committee suggested at a previous hearing that 
we needed to review concerns expressed that GSA's process for 
enabling agencies to acquire information technology products 
and services seemed to have some areas of non-value adding 
duplication between our two services, in terms of what was 
available from Federal Technology and Federal Supply.
    We have, in fact, established an FTS/FSS review study 
committee as a result of those discussions. That committee was 
to review whether the organizational structure and the 
functions of the Federal Supply and the Federal Technology 
Service could be enhanced to ensure that best value services 
were being provided to agencies and to the American taxpayers. 
It was determined that overlaps and non-value adding, 
duplicative functions did, in fact, exist between FTS and FSS 
and that this appeared to be creating inefficiencies and 
confusion among our customer agencies and industry partners. 
FSS and FTS have jointly developed and implemented a 
performance improvement plan to fix that situation.
    First, in December 2002, the Commissioners of FSS and FTS 
and I announced that we would combine and realign certain 
functions in FSS and FTS, and that GSA's Office of Performance 
Improvement would provide oversight to the performance 
improvement process in order to assure that the changes would 
be implemented prudently but expeditiously. Of the most 
significant changes that were among our proposals, one was to 
consolidate the development and administration of all 
contracting vehicles into FSS. Second, to establish a Contract 
Vehicle Review Board to review and rationalize current 
contracts and to look at any future contracts. Third, to 
consolidate all marketing activities of FSS and FTS into FSS. 
And fourth, to respond to customer agency unmet requirements 
for the acquisition of certain professional services by having 
FTS begin to provide assisted acquisition service in that area. 
I am pleased to announce, Mr. Chairman and report to the 
members of the committee, that each of those changes have been 
implemented and are now fully operational. I have information 
and will be discussing during the question and answer session a 
lot of the specific details pertaining to that.
    In the interest of time, and because I think it is a very 
important subject, I want to move to the next general topic 
that your invitation letter asked us to address. That next 
general topic is the cases that we have uncovered at GSA where 
we have failed to follow proper contracting procedures, as 
required by the Federal Technology Services Information 
Technology Fund. I will start with a bit of background.
    The Federal Technology Service's IT Solutions Business Line 
acquires IT products and services for other Federal agencies. 
Unlike the Federal Supply Services's approach of providing 
contracting vehicles for agency contracting officers to use, 
the Federal Technology Service's IT Solution Business Line has 
contracting officers who actually do the contracting on behalf 
of the customer agencies. The IT Solutions Business Line has 
Client Support Centers in each GSA region. FTS central office 
management provides policy guidance and general oversight to 
all CSCs or all Client Service Centers. For day-to-day 
operations, however, the Client Service Centers in the regions 
report directly to the GSA regional management, with dotted 
line reporting relationships to the FTS central management.
    With this organizational structure, obviously, achieving 
the desired results requires the FTS central office management 
and our GSA regional management to cooperate in a partnership, 
or matrix-type, of management operation. FTS enters into formal 
reimbursable agreements with its clients to provide IT products 
and services. FTS uses the Information Technology Fund, and IT 
and telecommunications costs are, in effect, run through that 
fund. We pay the vendors and then we bill the agencies for 
reimbursement. Part of the internal control system to ensure 
the proper use of the IT fund is that the management team 
request the GSA Inspector General to include in his annual 
audit regular reviews and audits of the CSC, Client Support 
Center, funds. FTS central office management requested the GSA 
Inspector General to include in its annual audit plan the audit 
of all FTS Client Support Centers; the IG agreed to do so.
    Before the audits began for this audit cycle, the Regional 
Administrator in Region 10 in the State of Washington 
discovered contracting irregularities, which caused him to 
request the GSA Inspector General to begin the audit of that 
CSC in that region as the first audit to start this annual 
cycle. The IG's findings from that review resulted in the 
issuance of an alert in March 2003 that identified the 
contracting irregularities in Region 10's IT Solution Office in 
Bremerton, WA. The contracting improprieties were in two 
categories. First, the improper use of the Information 
Technology Fund to acquire non-IT products and services. And 
second, the improper use of the 8(a) contracting vehicles for 
small business, including splitting procurements and the misuse 
of the subcontracting.
    Region 10 and its FTS central office officials have worked 
together to undertake corrective actions and resolve the 
problems and prevent their reoccurrence. Thus far, Region 10 
and the central office have done the following things. First of 
all, each of the associates of the Bremerton office have been 
reassigned. All of the associates who were in that office are 
now under the direct supervision of managers in the Auburn, WA 
regional office headquarters facility. In May 2003, that re-
assignment was accomplished. In addition, we have implemented 
new and refresher training courses for contracting and 
appropriate people to make sure that they are up-to-date with 
respect to the procedures and the requirements of the law and 
regulations. Further, we have restructured the Region 10 
organization into teams in which network services, IT solutions 
and acquisition associates work together to assure a higher 
quality of work in their application and implementation of task 
order procedures. Fourth, we have assigned a Chief of 
Acquisitions responsible for oversight of acquisitions and for 
developing internal control procedures and/or statements of 
objectives for FTS work to be performed in Region 10. The 
management team there, assisted by the IG, is gathering 
detailed information regarding the actions of individual 
associates. Using that information, Mr. Chairman and members of 
the committee, management will reach determinations regarding 
appropriate disciplinary and personnel actions that will 
follow.
    I can tell you that on behalf of all of the associates at 
GSA, these items that were uncovered were very, very disturbing 
to us. It is not consistent with the way in which most of the 
people at GSA operate, and certainly not consistent with the 
direction we have received from the President or the direction 
that the GSA management team has, in general, given to our 
associates. Region 10, which is headquartered in the State of 
Washington, I have talked about that audit. But in addition to 
that audit, the GSA IG is currently conducting audits of the 
Client Support Centers with the largest volume of transactions. 
That includes our Region 4 based in Atlanta, Region 6 in Kansas 
City and Region 9 in California. Subsequently, each other 
region will have an audit of its client support center.
    FTS has also begun to implement a series of actions and 
initiatives designed to improve acquisitions quality and 
integrity across the service. First, we have reiterated the 
policies and procedures that are already in place. On September 
23rd of this year, the FTS Commissioner issued a memorandum 
that reiterated the applicable regulations and policies issued 
and/or pertaining to FTS over the past few years. This 
memorandum strongly admonishes all FTS activities to 
scrupulously adhere to the letter and spirit of all pertinent 
guidance, including the Federal Acquisitions Regulation and the 
December 6, 2001 memorandum to all IT solutions associates 
directly, which talked about how to grow the business 
responsibly.
    Second, as part of the FTS 2004 annual financial audit, the 
GSA Chief Financial Officer will ensure that financial auditors 
review the FTS control environment and risk assessment, and 
that proper control activities are in place. In addition, to 
ensure a sound system of internal controls, program performance 
will be routinely analyzed, assessed, and evaluated by 
management. Taken together, this is intended to provide 
reasonable assurance of a fully effective and efficient 
internal control program within FTS.
    Third, FTS has implemented an additional legal review 
requirement to ensure sound legal regulatory and contractual 
principles. GSA's Office of General Counsel will review all FTS 
new contract awards over $5 million. All FTS actions that will 
result in the awards of blanket purchase agreements against the 
FSS Multiple Awards Schedules, regardless of dollar value, will 
also be reviewed. And all FTS actions that will result in the 
issuance of a task delivery order that contains leasing 
provisions, regardless of dollar value, will be reviewed. All 
FTS actions that will result in the issuance of task delivery 
orders under existing vehicles--GWACs, MVI, FSS Multiple Award 
Schedule--in excess of $5 million will be reviewed. All of 
those reviews will be done by our General Counsel's Office.
    In addition to the matters set forth above, GSA associates 
are encouraged to seek legal advice from assigned counsel on 
any matter they deem appropriate. We have always had an open 
door policy and have encouraged associates to be forthright if 
they suspect that there are any actions that are inappropriate 
going on in their respective areas. Associates are also 
encouraged to keep legal counsel involved in the progress of 
major acquisition matters, and to seek advice on such issues as 
to whether a procurement is appropriate for an SBA 8(a) 
procurement, and whether a procurement constitutes information 
technology or non-information technology. FTS is developing a 
series of detailed acquisition improvement plans for each 
regional and national CSC. Each improvement plan will specify 
required actions, methods, and results in such areas as the 
oversight of pre-award and post-award activities and the 
conduct of acquisition activities by associates with 
appropriate levels of experience and expertise.
    Last, FTS IT Solutions is strengthening its long-term 
strategic goals, the statement of its annual performance goals 
and its performance measures to ensure the linkage of FTS 
measures to GSA vision, values, and goals; and to make sure 
that the goals and measures are not in any shape or form 
contributing to the driving of any kind of inappropriate 
contracting behavior. In addition, the intent is to ensure a 
balanced approach between linking performance with customer 
satisfaction, associate satisfaction and the quality of 
business results. In the next 2 months, the FTS Commissioner 
will solicit an independent review of contract and management 
operations to evaluate compliance with procurement laws and 
regulations and internal GSA policies and procedures.
    Mr. Chairman, let me assure you that we take this audit 
report finding very seriously. While I said at the outset that 
we actually were conducting a performance improvement process 
which was looking for those kinds irregularities, we did not 
expect to find them, or at least we hoped that we would not 
find them, and actually we have. This failure to follow proper 
contracting procedures is totally inconsistent, as I said, with 
the President's direction and with GSA values and goals.
    Now, Mr. Chairman, I will talk briefly then about the next 
general subject, which is the telecommunications services 
replacement of the expiring contract. As you know, FTS is 
responsible for ensuring that Federal agencies have access to 
affordable telecommunications services and solutions which meet 
agency mission requirements. FTS works very closely with this 
committee, with the agencies and with the entire community of 
stakeholders to leverage the Federal community's buying power.
    Throughout the tumultuous period that has characterized the 
telecommunications deregulation, and despite the difficult 
industry environment that we face today, our acquisition 
strategies have served us well in FTS 2001. We contend that has 
successfully provided the state-of-the-art services that 
agencies need at very low prices; and we have also been able to 
provide competitive access to new technologies. Also, FTS 2001 
achieved the objective established by this committee of 
ensuring the best practice, service and price for the 
Government, while maximizing competition in acquiring those 
services. Although FTS 2001 contracts are not mandatory, 
agencies have remained with FTS because we have managed the 
program to their satisfaction and have made continuous 
improvements during the life of the contracts. Mr. Chairman, as 
FTS 2001 and its related acquisition programs begin to approach 
expiration, we have begun our process of developing an 
acquisition strategy for the replacement contract.
    Building on the experience that we gained in competing FTS 
2001, we have established four primary goals for the new 
contract. First, we must assure continuity of current 
telecommunication services and solutions for our customers. FTS 
2001 provides telecommunications services to tens of thousands 
of locations, and Government users depend upon FTS 2001 for 
uninterrupted service to perform their missions. Second, we 
must provide best value for all services and solutions by 
attracting the most innovative and highest quality services 
from industry at the best possible prices. Third, we must 
respond to the changing marketplace by providing access to a 
broader range of services and providers than on the previous 
FTS telecommunications contract. Finally, we seek to offer 
expanded opportunities for small businesses. We believe it 
would be possible for FTS to provide these opportunities to 
compete as both primes and as subcontractors.
    Again, I want to thank you for the opportunity to comment 
on these very important subjects. Now Sandy Bates, Donna 
Bennett and I would look forward to any questions that you or 
members of the committee may have.
    [The prepared statement of Mr. Perry follows:]
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    Chairman Tom Davis. Thank you very much.
    GSA's Inspector General obviously found that, in the 
Bremerton regional office, certain employees were rewarded for 
increasing revenues for that office from, as I understand it, 
$53 million in 1998 to $522 million in 2002, which was a huge 
increase. Also, the Inspector General referenced 2 percent fees 
being paid to clients. I guess my questions are, did any FTS 
employees in the Bremerton office receive incentives for sales? 
I will do one at a time, but I have a series of questions about 
that.
    Mr. Perry. We have an incentive program that rewards 
associates for good performance and for accomplishments. It is 
correct that in FTS IT Solutions, one of the factors that is 
taken into account is the volume of sales; customer 
satisfaction is another; coming up with innovative solutions is 
another. But among the aspects taken into account is also 
compliance with the procedures. So while it would be the case 
that if someone did something to generate additional sales and 
there could potentially be a financial benefit resulting from 
it, that same person would be in jeopardy of losing the entire 
incentive if they were determined to have violated the 
procedures in doing so.
    Then, last, I will add to that question that, as we have 
looked at the gross numbers with respect to bonuses issued in 
the years of 2000, 2001, and 2002, we see that actually as 
sales were growing at the pace that you mentioned, the FTS 
bonuses for FTS as a whole, and for specifically Region 10, 
which includes Bremerton, those bonus amounts were going down 
in each of those successive years. The total bonus amount went 
down and the average bonus amount went down. Although we have 
not completed the review, we think it is in part because of the 
fact that we have taken a deliberate effort to not have sales 
be the overarching issue with respect to bonus awards. It is 
more to be derived based upon the achievement of specific 
identified goals in each business unit's business plan.
    Chairman Tom Davis. So it is not like a sales commission. 
It is just one of several factors that are weighted in your 
views?
    Mr. Perry. That is right. It is not like sales commission.
    Chairman Tom Davis. What is the bonus incentive structure 
for FTS employees? Can you describe to me how you would 
describe how an FTS employee would get bonuses at the end of 
the year?
    Mr. Perry. Sandy, would you take that question, please?
    Chairman Tom Davis. Sandy, obviously there are a number of 
factors. Could you try to give us a feel for it?
    Ms. Bates. There are a number of factors. First, though, it 
is not a formula. It is not something that you can fit in ``x'' 
percent for this or ``x'' percent for that.
    Chairman Tom Davis. So it is subjective, to some extent.
    Ms. Bates. It is subjective.
    Chairman Tom Davis. You understand what I am trying to do?
    Ms. Bates. Sure.
    Chairman Tom Davis. I have to ask this. One of the 
allegations here is that somehow, because they could get 
bonuses if they could shift these sales there and that was an 
incentive for them to cheat.
    Ms. Bates. You know, as Mr. Perry said, that certainly is 
one area. As we get further into this and into our review, we 
may find instances where too much emphasis was placed on 
getting new customers and retaining old customers at the 
expense of other priorities.
    Chairman Tom Davis. Right.
    Ms. Bates. But it is subjective, although I think FTS has 
put out policies that try and make the whole award environment 
consistent with guidelines across the service, so that we are 
all working within the same framework. But as you know, anytime 
there is subjectivity involved, there is room for variance.
    Chairman Tom Davis. But the bonus incentive program for FTS 
employees includes incentives for sales and customer 
satisfaction. I think Mr. Perry talked about those. What are 
the other factors?
    Ms. Bates. Coming up with the innovative solutions, 
following the rules and regulations, working as a team, being 
on the FTS team. I would also like to point out that while we 
are using the term ``bonus'' and ``incentive plan'', that is 
not the same as industry uses those words. These are rewards 
based on performance. I think sometimes it is not an incentive 
plan like the industry would have that would say, ``the more 
you sell or sell a certain product.'' It would be incentive 
directly for that.
    Chairman Tom Davis. Having come out of industry, I can tell 
you that the sales are No. 1. Customer satisfaction and obeying 
the rules, generally, are secondary. [Laughter.]
    Ms. Bates. Well, that is something that I believe FTS 
faces. Mr. Perry referenced in his testimony a policy statement 
and a general guiding principle that we have of growing the 
business responsibly. We recognize first and foremost that we 
are a Government agency and we have to perform as such. 
However, we also want to employ the best business practices of 
industry, and that can be a delicate balance. But this is 
something we are striving for.
    Chairman Tom Davis. But you understand why we are asking 
this, and why we have to ask it, and why you have to ask it.
    Ms. Bates. Absolutely.
    Chairman Tom Davis. Because in point of fact, these things 
can get out of kilter when you send this out.
    Ms. Bates. Yes, sir.
    Chairman Tom Davis. We will be interested to get the 
results when they come in. What you are telling me is 
interesting; the fact that the bonus structure in that region 
did not writhe as a result of this, or at least it does not 
appear to have.
    Let me ask a couple more questions. Is there any idea what 
action will be taken against the individuals who knowingly 
violated the program? And would it matter if they had benefited 
from it on a bonus structure, versus if they did not benefit, 
or is it too early to make that decision until we have gotten 
all the facts?
    Ms. Bates. It is really too early to make that decision. We 
have teams in place consisting of representatives from the 
region, obviously, our chief people in the Office of General 
Counsel, looking at the specifics around each case. Then we 
will take that and marry it against the standard personnel 
procedures dealing with this. So it is too early to tell. It 
could run the gamut.
    Chairman Tom Davis. Part of the problem is, we try to 
encourage our managers to be innovative and to try new things 
and so on. If they step outside and then they get slapped down, 
it encourages people to stay within the box and not be 
innovative, and that is a tough balance. But I think in this 
case, just from the facts that we have been able to see so far, 
they were clearly outside the bounds.
    Ms. Bates. I agree with you. The cases that the Inspector 
General cited in Bremerton, and some that may come up in other 
regions, were far outside the box and were extreme examples; 
not of a hairline question of judgment, but that it went 
outside. But we, as you pointed out, certainly do not want to 
return to a time in our life where innovation is discouraged 
and acceptable risk is discouraged. What we need to do is to 
have a responsible approach to our business.
    Chairman Tom Davis. In fact, just if you asked my 
philosophy on it, I am always willing to put up with a few 
people making mistakes out there and maybe stepping over the 
line, in a willingness to be innovative and try to do the kind 
of things we ask Government to do. That is kind of the price 
you pay by encouraging that, and we all need to understand that 
things happen. But I think in this case, let us wait until the 
report is finally in, as there may be other things involved.
    I just have a couple more questions. Do you think that the 
current structure of the FTS regional offices are too 
independent to provide the kind of oversight by GSA that 
appears to be necessary in the wake of the IG findings? And do 
you think GSA should implement more direct headquarters 
oversight and management, rather than continuing to rely on the 
FTS to reform the system, or is it too early?
    Mr. Perry. I do not think that our current organizational 
structure is wrong. I think that what we need to continue to 
work on perfecting is this balance between having a central 
organization that can look for opportunities to leverage our 
synergies across the organization and, in some instances, meet 
our customer needs on a global basis from a central office 
perspective. But as you know, a great deal of our customer 
needs have to be met regionally or at the local level. A great 
example of that would be, the facilities that they work in are 
obviously at the local level. We would sub-optimize if we were 
to somehow consolidate the process of providing their local 
services too much.
    What we have struggled to do, and I think we are making 
great progress on, as a matter of fact, is to move from an old 
model, which was ``siloed,'' in terms of central office versus 
regional office, to make that a cooperating, collaborating 
team. There are two things that need to happen in order that 
can be done. One is that we need to be on the same page with 
respect to what our goals are. When there is no disagreement as 
to what it is we are supposed to be achieving for our customer 
agencies and for the American taxpayer, then the disconnects 
between the central office and the regional office begin to 
disappear. Then second, we also need to have a strong teamwork 
approach to our work, so that central office people and 
regional office people are, in fact, working collaboratively 
toward those same goals; we are achieving that. I think, and 
this is told to me by veterans of GSA who have been around for 
many years, that the collaborative working relationship between 
the management of our regions and the management of our central 
office operations are as close as they have ever been, or at 
least as close as they have ever seen it. I think that is very, 
very encouraging, and I think we ought to continue to pursue 
that, as opposed to making an organizational change which would 
have at its end a reduction in our ability to serve the 
customer.
    Chairman Tom Davis. Thank you, my time is up; questions?
    Ms. Norton. Thank you, Mr. Chairman. I thank you, Mr Perry, 
for your work and especially your work with us here in the 
District of Columbia.
    I have some questions. I can understand that as IT has 
become more pervasive, there would be confusion between FSS and 
FTS, and there would be a need for realignment, some merging, 
and that you are, of course, in the process of doing that. I 
would be particularly concerned that apparently some contracts 
were providing the same services through the same contractors, 
and there were under-used contracts, which I understand now are 
being allowed to expire or to merge. Of course, I am interested 
in that, because I am interested in how this confusion may have 
had an effect on who gets contracts and who understands how you 
become a supplier or a provider. I was pleased to hear you say 
that you understood that part of what needs to be done is to 
expand the pool of providers and suppliers, and especially 
among small businesses.
    I have a question about the GSA Schedule. I am a fan of the 
Schedule. I had pressed the District of Columbia, which had the 
most complicated procurement procedures known to the universe, 
to adopt a similar system. Indeed, for awhile there, the 
District was using for some of its services your own Schedule. 
I have, however, received a fair number of complaints about the 
difficulty of learning how to get on the Schedule. I wonder if 
you could summarize in a few minutes how, if one is a small 
business and one has never been on the Schedule before, could 
you summarize how a small business goes about getting on the 
GSA Schedule, including issues like size, experience and 
procedures? If you cannot summarize it, you can imagine the 
position I am put in, when they come and say, ``how in the hell 
do you get on this thing?''
    Mr. Perry. Well, I will summarize it, and I will talk a 
little bit about some of the things we are trying to do. The 
objective of the paperwork that we have small businesses fill 
out, in the event that they are attempting to get on GSA's 
Schedule, I think is a worthwhile objective. But we have gone 
too far in terms of how complicated it is, and we have some 
steps in place to minimize that. Of course, the objective is to 
make sure that we know enough about the business' track record 
in the particular commodity area that they are interested in 
selling to the Government. So we ask them to explain, ``what is 
your business; who are some of your customers; what kind of 
services have you provided; who are some of the people in your 
organization; what is their background; what are their 
credentials; how can they indicate what abilities they have in 
this arena.'' There are questions also about financials, 
including their tax returns and their business financials, so 
that we can see to what extent they appear to be a financially 
viable organization. So the questions are of that nature, so 
that when we say to another Federal agency, ``this organization 
has a GSA Schedule contract,'' we are, in effect, saying that 
we have reviewed their financial wherewithal and their 
wherewithal to accomplish the business line that they are in, 
successfully enough that they can meet your needs, oftentimes 
on a national basis.
    Given that requirement, the question then becomes, ``are we 
asking questions that go beyond that, or is there a way to 
streamline and make more simple the whole process?'' Donna and 
her team have answered that question, and the answer to that 
question is yes. We are putting this in place, and actually it 
is October 1, so it should have happened by now. We had planned 
for October 1 to begin the implementation; that is, the 
businesses should begin to see the implementation of this 
effort to streamline the process and actually go to an online 
process. I would hasten to add, the reason I add the point 
about online is, a lot of the small businesses become 
discouraged with this application process, not just because it 
is a 100 page application, but more so because, after they 
submit the application, the time that is spent in going back 
and forth and making corrections is what uses up most of the 
time that gets involved in the process. By moving to an online 
approach, we believe those questions can be asked back and 
forth between GSA and the small business much more quickly.
    Another thing that we are doing in all regions is that, in 
most regions, they have a weekly meeting which is open to any 
small business to attend. The subject matter of that weekly 
meeting is how to get on the GSA Schedule. We take each of the 
small businesses or their representatives through the tutorial. 
We also have that tutorial online. So if you go to GSA.gov, one 
of the questions on the main screen is, ``how to do business 
with the Government.'' Then they can click on that and be led 
through this process of how to get on the Schedule.
    So I agree with you, and every time I have attended a small 
business workshop, the No. 1 question that people ask is, why 
does it take so long? I emphasize, that is partly because of 
the application, which we are streamlining; but that is only a 
part of it. The biggest part, I think, is the time that is 
spent when they send something in, and then we send up a 
request for additional information or clarification, and then 
they send that back. That timeframe back and forth takes so 
much time. Some of that is going to be addressed with the 
online system. If I may, I would like to ask Donna to elaborate 
on that answer, if she will.
    Ms. Bennett. That was pretty thorough. There are a couple 
of things that I would add to that. One is that we made a 
couple of process improvements before we even got to the 
electronic solutions to this problem. One of them involves the 
initial screening of offers as they come in, so that a business 
that submits an offer does not wait for weeks to find out 
whether or not they provided the right information. Our goal 
for ourselves is to actually go back within 3 days of receiving 
that and say either, ``your package looks pretty good and it is 
now in the queue,'' or to let them know up front if we think 
there may be defects or deficiencies in it so that they have a 
chance to correct that.
    I think that the only other point that I would add to what 
the Administrator cited, unless you would like more detail, is 
that, of course, all of the Schedule solicitations are posted 
on FedBizOps.Org on a continuous basis, so the information is 
constantly out there. We do find that the training classes that 
we offer on a periodic basis, and particularly in the IT 
Center, are extremely helpful to the small businesses that 
attend them. The final thing that we are doing is putting more 
resources into the IT Center to speed up the processes. So we 
have reallocated some of our existing resources, and I have 
authorized the hiring of more, so that we can do things more 
quickly.
    Ms. Norton. The timeliness of this hearing, on October 2nd, 
pleases me to no end. I understand that Chairman Davis has been 
doing procurement fairs around the country on this very issue. 
He has offered, as I understand it, to do one with me here in 
the District of Columbia. I would very much appreciate the 
opportunity to do that.
    Mr. Perry. Well, we would be honored to do that. I know 
that GSA puts on a great show, and we would be happy to work 
with you on that.
    Ms. Norton. I would very much appreciate that. Mr. 
Chairman, could I ask one question?
    Chairman Tom Davis. Sure.
    Ms. Norton. This is about another issue that has plagued 
small businesses. The Congressional Black Caucus was 
particularly concerned about it, and we have a tri-caucus 
meeting of the Black Caucus, the Hispanic Caucus and the Asian 
Caucus. All the small businesses, frankly, in the United States 
have raised this question, and I really do not know what the 
answer is. It has to do with bundling. Years ago, of course, 
bundling became the fashion. Now you can imagine that if you 
bundle contracts together, a small business may be read out of 
the process altogether. I would like to know the status of 
bundling; how small businesses can continue to do business with 
the Government if there is pervasive bundling of contracts 
which, in effect, make the contract a very large contract, 
which sets it up for not a small business, but a medium size or 
larger business. I am asking what the effect is of bundling on 
the ability of small businesses to compete for Federal 
Government business.
    Mr. Perry. Well, your point is certainly correct; that the 
general result that could occur from a bundling of items that 
were previously purchased separately and are now being added 
together could be to make it more difficult for small 
businesses to compete on that level.
    Ms. Norton. Just let me say, Mr. Perry, so you do not 
misunderstand me, I am a great devotee of efficient Government. 
I believe those of us who believe in Government have the 
preeminent responsibility to make it proficient. Some of my 
friends on the other side of the aisle, not including the 
chairman, do not believe in Government at all. [Laughter.]
    So to see it become inefficient does not really much 
matter.
    Chairman Tom Davis. Will the gentlelady yield?
    Ms. Norton. Always to the chairman.
    Chairman Tom Davis. The bundling issue is a difficult issue 
because when the ground rules change, your marketing strategies 
need to change. One thing we have found is that Government is a 
poor integrator of services. When the Government would pick 
different small businesses together and give them to an 
integrator, it generally did not work as well when Government 
tried to put it together. So they pick a large integrator, who 
then picks their small business partners. One of the problems 
that this committee has uncovered is that, many times, the 
percentages that are envisioned in the original contract, 
whether it was 8(a) or small business, are not well enforced. 
Of course, the pieces that go with that generally are not as 
advantageous to small business as you had before.
    We are, as we speak, working on language in the Defense 
Authorization Bill to try to correct some of that. We are 
interested in working with you on that. But one thing I am 
concerned about is that Government is not a good integrator; 
and that is why we bundle things together, to allow the prime 
to basically pick its partners and its teammates on these 
issues, because it seems to work more efficiently. But in the 
process, we do not want to sacrifice. It may mean for some of 
these smaller companies that they have to market the larger 
companies, instead of the Government directly; that is my 
understanding. I would be interested in what the Commissioner 
has to say.
    Mr. Perry. Well, I can cite a couple of examples where we 
have tried to achieve the best of both worlds, because we are 
after the efficiency, and at the same time, we are after the 
benefits that derive to our economy by encouraging the growth 
and development of small businesses. An example would be our 
Connections contract. We have done this when FPS was a part of 
GSA, and a number of our security guard contracts. We have done 
it, or we are doing it, or are contemplating doing it in our 
real estate brokerage contracts. That is where we, first of 
all, incorporate into the specifications that the large 
integrator company that is going to be the prime on the project 
will commit at the time of submitting the proposal, to 
achieving a percentage of small business involvement. The 
statutory requirement that Congress mandates is 23 percent, so 
often we start with that number. But our actual achievement, in 
terms of small business purchases at GSA, is over 40 percent. 
It was 42 percent last year. It probably will be 44 percent of 
our total spending this year. So we put the 23 in, but where we 
believe we can go higher, we attempt to go higher.
    Then, Mr. Chairman, we have been addressing the point that 
you make; that is that the prime contractor will agree that the 
monitoring of actually achieving what was specified in the bid 
proposal will be something that GSA will do. That makes it 
real, as opposed to being able to submit a bid and then never 
live up to it. Our intent is that they will submit a bid, and 
if they are the winning proposer, then they will submit 
information indicating that they do, in fact, have ``x'' 
percent of small businesses involved. As I say, we have some 
contracts in place where those specifications are in there.
    Chairman Tom Davis. There obviously is still an issue, if 
you look at it from the perspective of the small business or 
the 8(a) business; that is, many times, without the Government 
involved, the percentage or the piece that you are likely to 
get from the large contractor is not as advantageous a piece or 
as lucrative a piece as you might have been able to negotiate 
with the Government. But that is another issue.
    Ms. Norton. Well, of course, if there is real 
accountability from the GSA through to the contractor and to 
the sub, and this is not just window dressing, it could work.
    Chairman Tom Davis. Right, well, I think we may need to 
work on some legislative language to ensure that. I would add 
this; that although this has not been a priority of mine in 
terms of the procurement, I recognize that it is a priority to 
a large number of Members, and I think this is going to have to 
be addressed. We recognize Ms. Norton, that you, Mr. Danny 
Davis and many other Members have raised this as their top 
legislative procurement priority. I think if we can address 
this issue we can probably do away with other mischief in the 
procurement process that is being aimed at directly. So this is 
something we look forward to working with you on. It is an 
important issue to a lot of contractors in this region, 
particularly in your jurisdiction, and we will be discussing it 
more, so thank you very much.
    Mr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman.
    Could someone explain to me what Millennia, Millennia Lite, 
and Answer are?
    Ms. Bates. Good morning, they are governmentwide contracts 
for IT services. They are Multiple Award Contracts where you 
have multiple companies that were successful offerors in each 
of those contracts.
    Mr. Murphy. Just in plain English, what are they? What do 
they do? I do not need all the ``gibber-jabber.''
    Chairman Tom Davis. Well, you are asking her to put 
Government contracts language in plain English?
    Mr. Murphy. Yes. [Laughter.]
    Or do we have to hire a new agency to do that?
    Ms. Bates. I could do it, I believe. They are contracts 
that provide IT services and equipment.
    Mr. Murphy. Now let me make reference here to some of my 
background in psychology. It caught my attention about a 
company called Titan Corp. and a $229 million contract to 
provide some mental health services, EAP services. Of course, 
Titan has nothing to do with that, from what I understand. They 
provide communications and combat systems to the military. In 
recognition of that, they then sub to Ceridian Corp., which is 
well known for its leadership in the payroll processing 
industry, which has no experience also in dealing with these 
kinds of things. Then it says something about a solicitation 
issued to Millennia Lite vendors as part of this, too. I am 
wondering, since this is through FTS, how a company that has 
nothing to do with providing mental health services and does 
information technology work is involved in a contract like 
that?
    Mr. Perry. Let me start that question and see if anybody 
has more detail than I. That contract, as I understand it, 
includes putting an Employee Assistance Program in place for 
members of the military that will be an online system; so that 
any eligible party or family member who has an issue would be 
able to go to this online system and, while I do not know 
exactly how it works, use that online system to be able to find 
someone in the Employee Assistance Program who could provide 
assistance. So some portion of that contract was to develop the 
online, computer-based system, and that is where the 
information technology part comes in.
    When we have contracts of that type, many contracts have 
some component of putting in place an information technology 
system and some component of something else; maybe professional 
engineering services or whatever. What we have to do is, to 
look at the specifics of the contract and only use the IT Fund 
as a means of making the procurement if it is predominantly IT. 
So that would be the question that would have to be raised as 
to whether this is predominantly putting in an online system.
    Mr. Murphy. So this does not necessarily include EAP 
services for employees. It is just the computer system network 
so that they can connect with someone?
    Ms. Bates. Yes, sir, that is the overwhelmingly predominant 
requirement for that.
    Mr. Murphy. And having worked with military families, I 
certainly understand the incredible value of having people 
being able to contact someone. But I also know that on bases, 
there are computers, there are people there. If you just take 
the number of military personnel and divide it by $229 million, 
that is a heck of a lot of money per person to cover this; and 
it is by a company that does not do EAP work. They had to sub 
out to another company, who also does not do EAP work, who I am 
assuming got somebody else to do it. If this is all a computer 
system where people can log on and talk to someone who is an 
EAP person, it just does not seem to make a lot of sense to me. 
I am wondering if this is along the same lines as doing IT work 
to build buildings, which is part of the whole scandal that 
kicked this off anyway.
    Mr. Perry. Well, what we could do, and we would be happy to 
do, since we do not have that level of detail, is maybe get 
back to you specifically on that.
    Mr. Murphy. That would be great.
    Mr. Perry. I could tell you though what our intent would 
be, or what would be a proper contract. The only thing that 
would be a proper contract would be if this was predominantly 
an information technology system and not predominantly medical 
services. But I would be happy to provide a specific answer to 
you on the Titan question.
    Mr. Murphy. I appreciate that, because just looking at it 
from what little information I have, this looks like a $400 
hammer to me.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you very much.
    Let me ask a couple more questions of this panel. It looks 
like, by the way, that the 11:15 vote is going to be a little 
later. They voiced the rule and we are going to have a final 
vote, it says, around noon or 12:30. They have moved it now.
    What role have contractors, operating under small business 
programs, played in reported abuses?
    Mr. Perry. Well, part of what was reported in the IG's 
alert was that there were cases where 8(a) contracts were 
split. In other words, there is a $3 million limit below which, 
if there is a compelling need, a contracting officer can make 
the decision to, in effect, do what would be called a sole 
source to an 8(a) small business under that limitation. 
However, if the customer requirement is $5 million, and if that 
gets broken into two separate contracts of $2.5 million apiece, 
then that is inappropriate. You should not split the contracts 
up in order to make them fit below the threshold. Now one could 
argue that if the customer agency, the military or whoever it 
was--given all that we have gone through with the aftermath of 
September 11 and the war on terror and so forth--you could 
contrive an argument that says this was an urgent item or 
somebody believed it was an urgent item, and so for the speed, 
they broke it into two pieces. But that, just prima facie, 
should not happen.
    The other cases that we are beginning to hear about, and do 
not have many details on, are what I called subcontracting 
abuse. That is where you would use the 8(a) process and process 
a contract with a small business, and then have that small 
business hire a more competent subcontractor to really do the 
work, in which case that would be a ``pass-through.'' That, 
obviously, is also inappropriate. So those are the two examples 
that we have heard of the IG is investigating.
    Chairman Tom Davis. Do you have any idea how long these 
abuses have been going on?
    Mr. Perry. The time period for this audit is 2000 to 2002. 
There have been previous audits in previous years that did not 
reveal these same things, or we do not know whether they did 
not find them or did not look for them, or that they did not 
exist. So at least in the 8(a) area, I am not aware of any 
information that we have that shows, in the previous year--
2000--that those kinds of abuses were found. But the IG may 
explore that, and we may know more about that soon.
    Chairman Tom Davis. I have a million other questions that I 
would like to ask but we had a good conversation yesterday. I 
do not need to put everything on the record in terms of how the 
agency is going.
    I want to just say again how comfortable I feel with you at 
the helm over there. I think you are doing a great job. Not 
everything goes perfectly with an agency of your size. I think 
you are acting quickly to remedy problems as they are 
identified; and as you note, in this case, they were pre-
existing, to some extent, before you even got there. I think 
that is important to note.
    But I have to ask a couple of questions. Do you think that 
a future telecommunications program could be based on the use 
of various Schedule contracts that agencies could use to 
acquire telecommunications services? Also, from either Ms. 
Bennett or Ms. Bates, if you have any thoughts on that, as 
well. I know we are getting ready to look at the next wave, and 
I just wondered if any thought is given to that.
    Mr. Perry. Well, I will start, and then I will ask both 
Sandy and Donna to comment on it, if they care to. But your 
point is one that we have explicitly incorporated, or will 
explicitly incorporate, into the Request for Information 
document that will be circulated, because we have asked 
ourselves that question--whether it would serve customer 
agencies' needs. In some instances, they obviously will need 
the assisted acquisition service that FTS provides. There may 
be some instances where they believe that they do not, and we 
would want to look into providing them with other contracting 
opportunities. Today, we believe that sometimes what they do 
is, to use contracting vehicles which exist outside of GSA 
because they can do that, if they elect to, as opposed to using 
FTS. We think that the Multiple Award Schedules are the most 
efficient contracting vehicles that could be put in place. So 
if some agency was going to use an option other than the 
assisted service of FTS, our view is that the likely next most 
efficient way to go would be the GSA Multiple Award Schedule. 
Sandy or Donna.
    Ms. Bates. First off, I think Mr. Perry covered, in his 
opening statement, the four things that we are looking for that 
will serve as the checklist. We need to have continuity for our 
current customers. People are very much reliant--and agencies' 
missions are reliant--on this basic infrastructure. We also 
need to have something in place that provides best value.
    The third is, we also need to take a look at, and make sure 
that we address, the changing market. No one knows better than 
you and the people in this room that the telecommunications 
landscape is far from settled and continues to change every 
day. We cannot even predict, not necessarily technology, but 
the business landscape. The fourth is, we need to expand the 
opportunity for small business. Given that, and where we are 
today in releasing a Request for Information very shortly, to 
really signal the beginning of the formal dialog with this 
committee, members of other committees, the industry, our 
customers, and other stakeholders, to truly determine which is 
the best strategy. I think we have to examine all of that 
against our criteria and let the chips fall where they may. A 
Schedule contract approach should be considered seriously; the 
multiple award, IDIQ, the whole range. But I think some things 
remain clear: that we have a strong track record of leveraging 
the Government's buying power and also setting the bar for 
industry. Our customers, I am pleased to report, are still with 
us, in terms of saying, ``GSA, we want you to do this for us 
and put in place something we can use,'' and to give it, as 
Steve Perry referenced not too long ago in talking about small 
business, the GSA seal of approval of really getting the best 
terms and conditions, price and best value and allowing 
flexibility. So it is all of those attributes, and it is a long 
list, but it is something we must do and we will do.
    Chairman Tom Davis. Great, thank you very much.
    Ms. Bennett, you do not need to say anything on this, if 
you do not want to.
    Ms. Bennett. I would simply add, we look forward to being 
part of the process.
    Chairman Tom Davis. Well, thank you; I could spend the 
whole day asking questions. But we have had some good 
conversations and we will continue to do that, and we have 
another panel to hear from.
    I want to thank all of you for being here. I appreciate 
your input on this. We will obviously continue to stay in touch 
with you on this. I will just declare a 2-minute recess as you 
exit, and we will move our next panel up to the microphones. 
Thank you very much, Commissioner Perry.
    [Recess.]
    Chairman Tom Davis. All right, if we could get the 
witnesses up to the table. Just stand behind your name, because 
I have to swear you in.
    We have William Woods, the Director of Acquisition and 
Sourcing Management at the U.S. General Accounting Office; 
Larry Allen, executive vice president for the Coalition for 
Government Procurement; and Don Scott, the senior vice 
president of Electronic Data Systems, testifying on behalf of 
the ITAA. Thank you very much for being here. It is the policy 
of the committee that we swear witnesses in.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you, we try to keep it to 5 
minutes. We gave Commissioner Perry a few more minutes. He was 
under the gun on some issues and he wanted to lay it out. We 
have lights in front of you. It will be green for 4 minutes, 
yellow for 1, and then when it is red, if you could move to 
summary. Mr. Woods, we will start with you and move straight on 
down. Again, thank you for being with us.

   STATEMENTS OF WILLIAM T. WOODS, DIRECTOR, ACQUISITION AND 
  SOURCING MANAGEMENT, U.S. GENERAL ACCOUNTING OFFICE; LARRY 
   ALLEN, EXECUTIVE VICE PRESIDENT, COALITION FOR GOVERNMENT 
 PROCUREMENT; AND DONALD E. SCOTT, SENIOR VICE PRESIDENT, EDS, 
INC. ON BEHALF OF INFORMATION TECHNOLOGY ASSOCIATION OF AMERICA

    Mr. Woods. Thank you, Chairman Davis, it is a pleasure to 
be here this afternoon. I appreciate your inviting GAO to 
testify at this hearing on the restructuring of GSA's Federal 
Technology Service, the Federal Schedule and the Federal Supply 
Service. I assume that my entire statement will be part of the 
record.
    Chairman Tom Davis. It is. Your entire statements are in 
the record.
    Mr. Woods. I would just like to touch on three basic points 
in the time we have available this morning. First, I want to 
provide some observations on the restructuring that GSA has 
gone through. Second, I want to talk about the incentives that 
are in place at the two organizations that we are discussing 
here this afternoon. Third, I want to touch on some further 
opportunities that we think are available to both of these 
organizations to help their customer agencies.
    Starting first with our observations on the restructuring, 
we testified in April 2002 before the Technology Subcommittee 
that you chaired at the time. We and others put on the table a 
number of issues regarding the two GSA organizations that we 
are talking about here; primarily the potential for duplication 
and overlap among a number of the services and functions that 
they provide.
    Following that hearing, as a result of this and other 
committees' urging and GSA initiatives, they undertook a 
management study to see how they could realign themselves and 
reorganize to eliminate some of this duplication and overlap. 
At the request of this committee, we have been, for many 
months, monitoring the implementation of that reorganization 
plan, and I want to provide just our bottom line, in terms of 
work.
    We think that the initiatives that Administrator Perry 
outlined here this morning are steps in the right direction, 
very positive developments. There were definitely some areas of 
duplication and overlap, and the steps that have been taken 
should, over time at least, go a long way toward eliminating 
that duplication and overlap.
    We do have some concerns, however, about the third leg of 
the plan; that is, the expansion of the activities of the 
Federal Technology Service into other areas that are unrelated 
to information technology. The first panel covered at some 
length the issues that had been uncovered by the GSA Inspector 
General. We have seen the alert report. We have not, of course, 
seen the draft report, which we understand is still in 
development. But having said that, the findings that the IG 
uncovered with regard to the Bremerton office are quite 
disturbing. We are pleased to see that GSA is equally disturbed 
by those findings, and are pleased to see that they have taken 
a number of steps to fix that. But having said that, we would 
have some reservations about the plan to move the Federal 
Technology Service into other areas, given the disturbing 
findings that the IG has found and those that are perhaps yet 
to come.
    Second, in terms of incentives, Mr. Chairman, you were 
pursuing a line of questions with Administrator Perry that I 
think was right on the mark, in terms of trying to address the 
incentives that are at play at GSA. In preparation for this 
hearing, I reviewed the annual performance plan for GSA, and I 
think they are right on the mark in terms of understanding 
their role and mission. Their central mission, of course, as it 
has been for many years, is to provide customer agencies with 
the goods and services they need to carry out their missions. 
That is fundamental, and it is encouraging to see that they 
understand that and have taken many positive steps over the 
years to fill that mission. When we look, however, at the 
performance plans of the Federal Technology Service and the 
Federal Supply Service, we see that, at least in some respects, 
their performance plans are geared toward increasing revenues.
    I think it is absolutely the correct line of thinking to 
question to what extent some of the underlying difficulties 
that have surfaced are the result of these agencies trying to 
push sales volume and not focusing on what we think their core 
mission ought to be, which is helping customer agencies 
maximize the efficiency of their operation and be able to carry 
out their missions. Just an example of the incentive that was 
at work, we issued a report in 2002 that took a look at the fee 
structure that was in place at FSS and FTS, and we found that 
at least with respect to the FSS, their fees were greatly in 
excess of their costs. The schema that is supposed to be at 
play here is that they are entitled to and, in fact, they are 
required to recover their costs in terms of their fee 
structure. But the objective is not to derive a profit, if you 
will, through the use of these fees. Our report identified a 
greatly excessive amount; I think somewhere in the neighborhood 
of $150 million over their costs. We are pleased to see that 
they have since taken action to reduce the fee that they charge 
customer agencies to bring that more in line with actual costs.
    The third item that I wanted to touch on, which is 
elaborated upon in our statement, is the opportunity that we 
see for both of these organizations to help their customer 
agencies maximize efficiencies. We think that both of them are 
in a position to be able to provide meaningful data and 
meaningful analysis to their customer agencies to help them 
identify where they are spending their money, with whom they 
are spending their money and on what, and to be able to take 
that data and that analysis and do what we have termed ``spend 
analysis'' to be able to maximize efficiencies and leverage 
buying power. We have a recommendation in our statement to that 
effect, and we would hope that would be favorably received by 
GSA.
    With that, let me stop there. I would be pleased to take 
your questions.
    [The prepared statement of Mr. Woods follows:]
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    Chairman Tom Davis. Thank you very much.
    Mr. Allen, thanks for being with us.
    Mr. Allen. Good morning, Mr. Chairman; I am Larry Allen, 
executive vice-president of the Coalition. It is a pleasure to 
be here before the committee today and testify on the progress 
that GSA has made on integrating the operations of FSS and FTS. 
As we previously testified before the Subcommittee on 
Technology and Procurement Policy in the 107th Congress, we 
believe that the operations of these two services can and 
should be better integrated to provide state-of-the-art 
service. We have been honored to work with representatives from 
both services, as well as officials in the Administrator's 
office, since that initial hearing, on a number of projects 
designed to do just that.
    The Coalition believes that GSA has taken good initial 
steps to integrate the operations of FSS and FTS. These steps 
include the implementation of several recommendations put forth 
in the Accenture report conducted in 2001. As a result, the two 
services have begun to work closer together to bring about the 
``Team GSA'' result we earlier envisioned. Our testimony today 
will highlight several of these changes and make 
recommendations on future steps.
    One of the key recommendations the Coalition made in its 
earlier testimony was the need to eliminate duplicative 
contracts that resulted in higher overhead burdens for 
contractors and customer confusion. A Contract Review Board was 
established by GSA to review current GWAC contracts and the MAS 
IT Schedule. The Board reviewed each of these programs and 
concluded that there were, in fact, too many contracts 
providing the same services. A number of recommendations were 
made to allow under-used contracts to expire and merge existing 
contracts. Significantly, the Coalition understands that each 
of the Review Board's recommendations were unanimous. We are 
extremely pleased to see that the recommendations of the Review 
Board were released last week and that GSA will implement its 
recommendations. We understand that this committee has been 
fully briefed on the specific actions to be taken, and we will 
not repeat them here. It is important to note, however, that 
the Coalition and its members support the Board's recommended 
course of action. We also support the continued operation of 
the Contract Review Board. We believe that this Board can be an 
effective check against future unneeded contract duplication, 
and will serve to ensure that customer needs are met by the 
most appropriate contracting mechanism. Coalition member 
companies believe that the streamlining process, however, 
should not stop with the initial round of recommendations. 
While it is important to provide the agency, its contractors 
and customers time to adjust to the initial recommendations, we 
believe that additional action may be possible to further 
combine GWACs into unified offerings. The Contract Review Board 
should be charged with identifying these opportunities.
    Another recommendation that GSA has implemented is the 
consolidation of all contract vehicles in FSS. The Coalition 
believes that this is a good initial step. In our previous 
testimony, we stated that the proliferation of FTS contracts 
and the growth of FSS Schedules led many Government customers 
to ask, ``will the real GSA please stand up.'' We recommended 
that FSS take ownership of all contracts, and they have done 
this. Bringing these contracts into FSS, however, is just one 
step of what must be a multi-phased process in order to have 
the desired effect. In the meantime, FTS has also moved to 
enhance the acquisition management services it provides Federal 
customers. Perhaps the most significant step in this process is 
the creation of the FTS Services Management Office that now 
provides acquisition management assistance to agencies buying 
professional services. The Coalition's initial interactions 
with this office have been very positive. We feel that it is a 
good step. The FTS officials in charge of the function have 
briefed our members thoroughly on their capabilities, have 
sought to participate in upcoming conferences and have been 
very responsive to our general questions. We also want to point 
out that the two services are even beginning to market 
themselves together. Recent GSA advertisements cite both FSS 
contracts and the assisted acquisition services offered by FTS. 
We believe that these ads are an important symbol of the ``Team 
GSA'' concept we have called for, and look forward to this 
continued collaboration.
    While the Coalition is pleased that GSA has made several 
changes to enhance its overall value, we believe that steps 
still remain that must be taken. As we mentioned earlier, the 
transition of GWAC contracts to FSS was a positive step. In 
order to make the transition as effective as possible, however, 
the FSS central office must be able to manage those contracts 
within the overall context of creating the most effective 
contracting offering possible. We believe that the dual 
reporting structure inside GSA is sometimes incompatible with 
the overall goal of ensuring accountability and minimal program 
duplication. We want to emphasize that these concerns are about 
the inherent structure itself, not the people who fill the 
positions. The Commissioners of each service and all Regional 
Administrators whom we have met each carry out their duties 
well. Each manager, however, can carry out their duties, while 
the agency, as a whole, may still not function at maximum 
efficiency. The current dual management structure of GSA is 
such that the regional offices report to regional management 
and central offices report to central management. It is 
currently at the GSA Administrator's office where the two 
structures come together.
    We recommend that GSA create an additional office to ease 
the burden on the Administrator. To do this, we again call for 
the creation of an Associate Administrator for Operation, who 
will be responsible for integrating the regional and central 
operations of each service. The Associate Administrator can 
also be a catalyst for identifying remaining duplication within 
the Agency formulating plans for eliminating, where it makes 
sense, this duplication and taking the ``Team GSA'' concept to 
its next logical step. We believe that even a very fine GSA 
Administrator, such as Mr. Perry, cannot possibly be everywhere 
at once. He and other Administrators are responsible for a wide 
variety of agency functions, and additional support in the 
agency, we feel, is required in order to integrate its central 
and regional operations. In addition to what we believe are 
important operational enhancements, the creation of an 
Associate Administrator for Operation may also be a necessity 
brought about by personnel realities. We have already seen the 
retirement of several senior leaders in GSA in just the past 3 
years, and more are likely on the way.
    Eliminating disparate agency organizational structures and 
better integrating overall agency operations may not, 
therefore, be merely a recommended management change. It may 
become an operational imperative in order for GSA to continue 
to meet the many challenges it is given. In conclusion, the 
Coalition believes that GSA has begun making significant 
improvements to the operations of FSS and FTS. We are pleased 
to have been part of this process, and look forward to 
continuing our working relationship with the agency and with 
this committee.
    [The prepared statement of Mr. Allen follows:]
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    Chairman Tom Davis. Thank you very much.
    Mr. Scott.
    Mr. Scott. Mr. Chairman, I am Don Scott, senior vice-
president of government solutions at EDS. I thank you for 
inviting me here today to testify on behalf of ITAA. As you may 
know, the majority of ITAA's 400 member firms provide computer 
software and information technology services to the Federal 
Government, and it is with great pleasure that I represent 
them.
    For nearly three decades, ITAA has been very active in 
legislation and regulations pertaining to Government 
procurement. Through ITAA's Procurement Policy Committee, and 
especially its Federal Supply Service Subcommittee, we have 
worked closely with officials at GSA, its Federal Supply 
Service and Federal Technology Service. ITAA monitors both the 
FSS and FTS programs and meets frequently with its senior 
officials. The GSA Schedules and other Governmentwide 
Acquisition Contracts are vitally important to ITAA since their 
member firms provide billions of dollars annually of software 
and computer services to Government customers.
    In ITAA's view, GSA's Federal Supply Service Schedules and 
other GWACs supported and reformed by FASA, the Clinger-Cohen 
Act, the E-Government Act, and hopefully SARA, have permitted 
efficiencies in Government contracting that were unheard of 
only a few years ago. The GSA Networx service offerings have 
resulted in the most cost-effective telecommunications services 
to be found anyplace; they set the bar. Further management 
initiatives such as the ones being discussed here today will 
likely result in even more effective Government services.
    ITAA was very supportive of Administrator Perry's 
initiative to study the possible overlap and duplication of 
services between FSS and FTS. We shared the views of this 
committee and its chairman that GSA's focus should be on 
efficiency and effectiveness, and that redundancies between the 
two groups should be eliminated. The GWACs support a variety of 
service offerings and products. While ITAA believes that 
Government customers should have a variety of acquisition 
vehicles to choose from, we are also concerned that a 
proliferation of GWACs could lead to duplication and overlaps. 
This also resulted in increased costs to us in industry. We are 
expected to bid on various GWACs, since we did not know which 
contract vehicle agencies would decide to use.
    While ITAA did not have a position on the relocating of the 
GWACs to FSS, we did suggest that the expertise on the GWACs 
also be transferred to FSS. We were pleased when this was 
agreed to. In preparation for the testimony today, ITAA polled 
its member companies for their views on how the restructuring 
between FSS and FTS was proceeding. Here are some of our 
observations and concerns.
    On the Federal Supply Service side, we believe that to 
date, the restructuring at FSS has proceeded smoothly, but it 
has taken longer than expected. ITAA has had long term concerns 
about sufficient resources at FSS for its massive work load. 
This relates, of course, to the issue that Congresswoman Norton 
raised a while ago. We are still disappointed in the delay 
achieving some of the reforms under consideration, including 
electronic modification of contracts.
    Another long-time concern is the lack of sufficient skilled 
contracting officers to handle the negotiation backlog. With 
the addition of the cooperative purchasing option for State and 
local governments, which ITAA supported, we believe this 
workload will continue to grow. We understand that additional 
resources are being provided, but additional contracting 
efficiency could also help to alleviate the problem.
    ITAA has also expressed concern that some State governments 
are now requiring vendors to apply for a GSA Schedule contract, 
even if they never intend to sell to the Federal Government. 
This is currently the situation in California, and we expect to 
see this in other States, as well. Due to the climate in the 
commercial IT business, many firms that had not sold to the 
Federal Government previously have now decided to apply for 
Schedule contracts. We continue to hear about the excessive 
delays in getting their paperwork processed and approved, and 
hope that needed resources and training can soon be provided.
    On the FTS side, the ITAA is pleased that FTS' procurement 
support services have now been extended to other non-IT 
contract vehicles. ITAA is not commenting on the 
telecommunications responsibility of FTS, since we do not have 
specific positions there. However, we believe we should say 
that the convergence of IT in telecommunications should cause 
FTS to seriously consider consolidating its IT business with 
its network services business. This would also be supportive to 
agencies' desires to use total solutions-based contracts. The 
ITAA and its members look forward to commenting on the RFI that 
was mentioned earlier for the next generation of 
telecommunications offerings. This action would also further 
the direction toward enterprise solutions in which IT solutions 
are aligned with primary business objectives.
    ITAA also recommends more attention to reforming its 
procurement services, since they are overdue for modernization. 
As a retired GSA employee, I would be glad to answer specific 
questions during the question period. On the GSA Contract 
Review Board, one of the areas of the most intense interest 
within ITAA has been the creation and activities of this board. 
Many ITAA members have invested and been awarded the GWACs that 
were being reviewed by the Board. Again, while ITAA was very 
supportive of the goal to avoid duplication of the contracts, 
we are also concerned that those contracts where companies had 
invested significant resources be continued through advertised 
term. ITAA was provided a summary of the recent board decisions 
on Monday. Since this is just before the close of the 
Government fiscal year, we were not able to get sufficient 
responses from our affected members, but believe they are 
generally in line with industry expectations.
    ITAA members range from the smallest one person firm to the 
largest system integrators numbering hundreds of thousands of 
employees. We suggest that future GWACs consider the 
capabilities also of mid-range companies. We know that you, Mr. 
Chairman, and others have been studying the needs of these mid-
sized firms and recognize their importance to healthy 
competition in the Federal sector.
    In conclusion, Mr. Chairman, we are fortunate to live in a 
very interesting time. The American public and taxpayers have 
increased expectations for Government performance. As both the 
Nation and agencies of the Federal Government adapt to this new 
focus, it is particularly important that the Federal Government 
have fast, efficient access to IT solutions that best meet 
agency requirements. ITAA believes that the GSA has made 
serious strides in reforming its FTS and FSS to improve and 
enhance their service to agencies. We commend Administrator 
Perry for his initiatives, since internal restructuring is 
never easy. GSA's governmentwide scope gives it a unique 
opportunity to provide significant support to the agendas of 
Congress and the administration to eliminate duplication, 
promote inter-operability and enhance efficiency and 
effectiveness for the taxpayers. IT acquisition and management 
are critical to those efforts. ITAA thanks you for this 
opportunity to comment, and I would be glad to respond to your 
questions.
    [The prepared statement of Mr. Scott follows:]
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    Chairman Tom Davis. Thank you. I am going to try to finish 
the questions, and go over to vote and not hold you. I could 
hold you afterwards and we could spend the afternoon, but I 
will try to let you go and just ask a couple of questions. Your 
entire statements are in the record; we appreciate it. Mr. 
Scott, if after you survey your members you want to add 
something further, get it to the committee and we will get it 
in the record.
    Mr. Scott. Yes, sir.
    Chairman Tom Davis. I was intrigued by a comment that you 
made about studying the needs of the mid-sized firms. Because 
my observation has been that, particularly on these GWACs, the 
mid-size firms are where you get a lot of innovation, and then 
they rise to a certain level and get acquired or die. It is a 
very difficult area, and yet some of the best innovations in 
the IT area take place at some of these mid-sized companies. 
Your company is a giant. You have bought up some of these 
companies. You are a great company. But also, just to keep the 
process fresh, to keep new innovations going, we want to keep 
those firms alive, and not feel that when they get to a certain 
level that they have to sell out and cash in. We would like to 
keep them going. I do not know the answer to that. I am not 
sure if you know the answer to that. But it is something that, 
as you say, when we put these Schedules and the GWACs and other 
vehicles together, we should be mindful of. Do you agree with 
that?
    Mr. Scott. I absolutely agree.
    Chairman Tom Davis. That is your ITAA hat that is talking, 
obviously.
    Mr. Scott. Yes, sir; and they get kind of lost, so we have 
mentor protege programs and many programs to help these small 
businesses. When they graduate from that and move up, then we 
do not have anybody particularly focusing on their needs. So I 
think that is a very good point. We will love to work with you 
all as we go forward as to how we can nurture that.
    Chairman Tom Davis. Yes, right now, you are either a small 
business or you are EDS.
    Mr. Scott. Yes.
    Chairman Tom Davis. There is nothing in between. That is 
the way the code treats it and the regulations. I am not sure 
it should change, but I think we want to just be mindful of 
that as we move up. So I appreciate that comment. I know that 
you have a lot of balls to balance, representing a large 
organization doing that.
    Mr. Allen, let me ask you a quick question. I understand 
that GSA will soon issue a request for information seeking 
input for the next generation of Governmentwide telecom 
programs. That is of interest to a lot of your members. Do you 
think there ought to be another Governmentwide telecom program 
along the FTS 2002 model to be run by FTS, or do you have any 
thoughts about a different concept maybe that does not rely on 
a centrally managed Multiple Award Contract?
    Mr. Allen. I appreciate that question, Mr. Chairman. In 
fact, sitting in the hearing room, we were very pleased to hear 
the comments of Administrator Perry and Commissioner Bates 
along the lines that they are seriously considering Multiple 
Award Schedule contracts as a solution set for next generation 
telecom. That is a concept that the Coalition and its members 
would strongly support. We believe that the time is ripe for 
allowing FSS Schedules to have telecom services on them. 
Currently, there are products available on the Schedules, but 
not so much the services that make the products work. We feel 
that adding those services to the Schedules would be good, and 
that is why I think we would be generally supportive of the 
comments Mr. Perry made earlier, along the lines of giving 
agencies the option of the assisted procurement services 
available from FTS in the telecom environment; or allowing the 
agencies to buy from Schedules themselves, if they have that 
capability.
    Chairman Tom Davis. Thank you; and Mr. Woods, let me just 
ask you a question. Do you think the current structure, based 
on two services with separate Commissioners, lends itself to 
efficient contract management oversight?
    Mr. Woods. Well, I think certainly when you take a look at 
their regional structure, I think the point that has been made 
earlier about people reporting through two separate chains 
definitely causes one to question that structure.
    Chairman Tom Davis. Again, I think Commissioner Perry is 
trying to address this, and we are going to have ongoing 
discussions on that issue.
    You have a smorgasbord of things that I would love to talk 
to you about; but we have a vote going on, and this one I 
cannot miss. I do not want to hold you and keep you so I am 
going to adjourn the meeting. Thank you very much for being 
here. As I said, your entire statements are in the record. If 
you have any subsequent thoughts that you want to react to, 
please get them in the record. We will stay in touch with you 
and get you back here again.
    Thank you all very much.
    The hearing is adjourned.
    [Whereupon, at 12:48 p.m., the committee was adjourned.]
    [The prepared statement of Hon. Henry A. Waxman follows:]

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