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





  WILL ``NETWORX'' WORK? A REVIEW OF WHETHER A CENTRALIZED GOVERNMENT 
            TELECOM PLAN JIBES WITH AN EVER-EVOLVING MARKET

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

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 26, 2004

                               __________

                           Serial No. 108-149

                               __________

       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
94-004                      WASHINGTON : DC
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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
NATHAN DEAL, Georgia                 C.A. ``DUTCH'' RUPPERSBERGER, 
CANDICE S. MILLER, Michigan              Maryland
TIM MURPHY, Pennsylvania             ELEANOR HOLMES NORTON, District of 
MICHAEL R. TURNER, Ohio                  Columbia
JOHN R. CARTER, Texas                JIM COOPER, Tennessee
MARSHA BLACKBURN, Tennessee          ------ ------
------ ------                                    ------
------ ------                        BERNARD SANDERS, Vermont 
                                         (Independent)

                    Melissa Wojciak, Staff Director
       David Marin, Deputy Staff Director/Communications Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 26, 2004................................     1
Statement of:
    D'Agata, Anthony, vice president and general manager, 
      Government Systems Division, Sprint Corp.; Quinten Johnson, 
      regional vice president, SBC Federal Solutions; Kevin 
      O'Hara, president and chief operating officer, Level 3 
      Communications, LLC; Jerry W. Hogge, senior vice president, 
      Winstar Government Solutions, LLC; David J. Page, vice 
      president, Federal Government sales, BellSouth Corp.; Louis 
      M. Addeo, president, AT&T Government Solutions; Shelley 
      Murphy, president, Verizon Federal Inc.; and Jerry A. 
      Edgerton, senior vice president, Government Markets, MCI...    98
    Perry, Stephen A., Administrator, U.S. General Services 
      Administration; Sandra N. Bates, Commissioner, Federal 
      Technology Service, U.S. General Services Administration; 
      Linda D. Koontz, Director, Information Management Issues, 
      U.S. General Accounting Office; Drew Ladner, Chief 
      Information Officer, U.S. Department of the Treasury; and 
      Melvin J. Bryson, Assistant Director, Administrative Office 
      of the U.S. Courts.........................................    10
Letters, statements, etc., submitted for the record by:
    Addeo, Louis M., president, AT&T Government Solutions, 
      prepared statement of......................................   155
    Bates, Sandra N., Commissioner, Federal Technology Service, 
      U.S. General Services Administration, prepared statement of    27
    Bryson, Melvin J., Assistant Director, Administrative Office 
      of the U.S. Courts, prepared statement of..................    76
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............     7
    D'Agata, Anthony, vice president and general manager, 
      Government Systems Division, Sprint Corp., prepared 
      statement of...............................................   100
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     3
    Edgerton, Jerry A.,senior vice president, Government Markets, 
      MCI, prepared statement of.................................   174
    Hogge, Jerry W., senior vice president, Winstar Government 
      Solutions, LLC, prepared statement of......................   133
    Johnson, Quinten, regional vice president, SBC Federal 
      Solutions, prepared statement of...........................   108
    Koontz, Linda D., Director, Information Management Issues, 
      U.S. General Accounting Office, prepared statement of......    51
    Ladner, Drew, Chief Information Officer, U.S. Department of 
      the Treasury, prepared statement of........................    66
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York, prepared statement of...............    94
    Murphy, Shelley,president, Verizon Federal Inc., prepared 
      statement of...............................................   163
    O'Hara, Kevin, president and chief operating officer, Level 3 
      Communications, LLC, prepared statement of.................   112
    Page, David J., vice president, Federal Government sales, 
      BellSouth Corp., prepared statement of.....................   147
    Perry, Stephen A., Administrator, U.S. General Services 
      Administration, prepared statement of......................    13

 
  WILL ``NETWORX'' WORK? A REVIEW OF WHETHER A CENTRALIZED GOVERNMENT 
            TELECOM PLAN JIBES WITH AN EVER-EVOLVING MARKET

                              ----------                              


                      THURSDAY, FEBRUARY 26, 2004

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 11:20 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, Burton, 
Ose, Cannon, Waxman, Maloney, Cummings, Tierney, Van Hollen, 
and Norton.
    Staff present: Melissa Wojciak, staff director; David 
Marin, deputy staff director/director of communications; Ellen 
Brown, legislative director and senior policy counsel; Edward 
Kidd, professional staff member; John Brosnan, GAO detailee; 
Teresa Austin, chief clerk; Brien Beattie, deputy clerk; Phil 
Barnett, minority staff director/chief counsel; Kristin 
Amerling, minority deputy chief counsel; Michelle Ash, minority 
senior legislative counsel; Mark Stephenson, minority 
professional staff member; Earley Green, minority chief clerk; 
Jean Gosa, minority assistant clerk; and Cecelia Morton, 
minority office manager.
    Chairman Tom Davis. The meeting will come to order. Good 
morning, thank you everybody for your patience. We had to get 
through some of those bills.
    I want to welcome everybody to today's oversight hearing on 
the GSA's proposed government-wide voice and data 
telecommunications program Networx. Through this hearing, we 
hope to gather information from industry and other 
stakeholders, including GSA, to determine whether GSA's 
proposed acquisition strategy contained in its request for 
information issued in October will be effective in today's 
ever-evolving telecommunications environment.
    GSA's Federal Technology Service [FTS], in coordination 
with the Interagency Management Council, is responsible for 
ensuring that Federal agencies have access to affordable 
telecommunications and networking services and solutions that 
meet agency mission requirements. FTS has traditionally met 
this responsibility through large, government-wide contracts, 
such as the current FTS 2001 contracts for long distance and 
international telecommunications services, and the Federal 
wireless telecommunications contract.
    Networx would be GSA's fourth generation government-wide 
telecommunications program. We are interested in learning 
whether GSA's overall acquisition strategy is likely to provide 
robust competition from the entire spectrum of the marketplace. 
Further, we need to example narrower but still-significant 
issues related to the proposed acquisition, such as transition 
strategies, appropriate contract performance period, billing 
requirements, and the use of minimum revenue guarantees.
    The key to success here is to make GSA take advantage of 
the wealth of information that's been made available to it in 
response to the RFI and through this hearing. This knowledge, 
not merely the designs of the past, should guide the 
structuring of a flexible telecommunications program, based on 
current and future markets and evolving government needs.
    [The prepared statement of Chairman Tom Davis follows:]

    [GRAPHIC] [TIFF OMITTED] T4004.001
    
    Chairman Tom Davis. I would now recognize the distinguished 
ranking member, Mr. Waxman.
    Mr. Waxman. Thank you, Mr. Chairman. I am pleased to join 
you today to review the administration's preliminary 
observations on how to purchase telecommunications services 
when the current FTS 2001 contracts expire. As everyone knows, 
this committee has historically played a role in the 
development of the acquisition strategy for the Federal 
Government's telecommunications needs. I look forward to 
working with you, Mr. Chairman, the administration and the 
private sector to ensure that the Federal Government continues 
to receive the best price and highest quality service to meet 
those needs.
    The Federal Technology Service at GSA has administered the 
current Federal telecommunications program, FTS 2001, and its 
predecessor, FTS 2000. While not totally without problems, the 
program has been a success. The Federal Government pays between 
1.5 and 2 cents per minute for long distance service, well 
below the best commercial rate. Over its lifetime, the program 
has saved the American taxpayer close to $2 billion by 
leveraging Federal buying power and encouraging continuous 
competition. Any future acquisition should retain these 
critical features. Could you imagine what the Federal 
Government could do in the area of pharmaceuticals if we used 
the collective buying leverage of the Federal Government for 
Medicare recipients to get the best price, so that we could get 
the best price, best quality and protect the consumers from 
high prices, as well as the Treasury and the taxpayers?
    GSA issued a request for information last October that 
provides the outlines of an acquisition strategy for the new 
program, and has received comments from a wide cross section of 
the industry. Now is the time to examine questions about 
whether the proposed strategy will address the fiscal, 
technological and socioeconomic priorities of the Federal 
Government. Will the strategy generate enough continuous 
competition to assure the best price in quality? How will the 
new technologies be integrated into the program? Will small and 
minority businesses have sufficient opportunities under the 
proposed strategy? And what is the best way to ensure a smooth 
transition from the existing to the new contracts? These are 
just a few of the questions that I would like to see addressed 
today.
    Mr. Chairman, I thank you and I look forward to hearing 
from our witnesses. I want to tell the witnesses that we all 
have a lot of things going on, and I have a conflict. But if 
I'm not here, I certainly will be monitoring the testimony, my 
staff is here, and we'll be working with all of you to pursue 
the best policy. And I would hope that we can keep the record 
open, so that if there are further questions we want to submit 
for answers in writing, we'd like to ask that for the record.
    Chairman Tom Davis. Thank you.
    Any other Members wish to make opening statements? The 
gentleman from Indiana, Mr. Burton.
    Mr. Burton. Mr. Chairman, I want to commend you for holding 
this hearing this morning. Although the current government 
telecommunications contract will not expire until 2006, we need 
to begin today discussing and debating how we want the contract 
to be structured. Communications and information sharing is in 
many ways the life blood of our government.
    If we cannot successfully communicate with our constituents 
or between various Federal agencies or even each other, the 
business of government will come to a screeching halt. 
Particularly in the post-September 11 world, it's extremely 
important that we do this thing right.
    Today's hearing gives us an opportunity to listen to the 
thoughts of the GSA, the telecommunications industry and the 
other stakeholders about the positives and potential negatives 
of GSA's proposed contract strategy as outlined by them in 
their October 2003 request for information. The best solution 
to this important government procurement issue is going to take 
compromise by all the major stakeholders, and everybody is 
probably not going to be completely happy with the final 
product. I know that from past history.
    Mr. Chairman, after overseeing the process the last time 
this contract was up for consideration, I learned a few 
valuable lessons. At the end of the day, I hope we will be able 
to work together to develop a policy that ensures robust and 
fair competition, contains enough flexibility to provide new 
technology and innovative solutions to government's ever-
evolving information technology needs, such as in the areas of 
network, Internet and cybersecurity, emergency preparedness and 
response, disaster recovery and continuity of services in a 
crisis. Above all, that it's affordable, efficient, well 
managed and a good value for the American taxpayers.
    So in closing, Mr. Chairman, I want to thank you once again 
for getting the ball rolling by convening this hearing today. I 
sincerely hope we can work together in an open, fair and 
bipartisan way to continue moving this process forward 
constructively. I probably won't be able to listen to all the 
witnesses because we're getting a briefing on a trip we're 
taking over to Iraq. But I certainly will follow this very 
closely, Mr. Chairman.
    Chairman Tom Davis. Thank you, and we look forward to your 
guidance on this. You have some experience in this, having gone 
through it before, and I appreciate your interest. Any other 
Members wish to make opening statements?
    Ms. Norton. Mr. Chairman, I would like to make a statement.
    Chairman Tom Davis. The gentlelady from the District of 
Columbia.
    Ms. Norton. Mr. Chairman, I'm going to the floor, but I'm 
going to try to remain here to hear these witnesses. I'm 
impressed that we are here dealing with perhaps the most 
competitive and technologically driven industry in the country, 
that literally changes by the minute. We therefore, it seems to 
me, are in the catbird seat, given the fact that we are surely 
the largest customer that any of these players could desire.
    So I will be interested to know whether the acquisition 
strategy that is proposed will provide the government the 
opportunity to take advantage of competition from many sources. 
I want to see them all go at one another with, to a fare-thee-
well. Because we are the ones who will benefit if they have to 
kill each other in order to get this contract. [Laughter.]
    The technology changes every moment, the reason the 
technology changes is precisely because this industry wants to 
stay competitive. It stays so competitive that it's often 
difficult to keep up with what technology one ought to have. We 
don't need to have, I suppose, minute by minute state-of-the-
art technology, but we certainly ought to encourage the 
government to keep up with the changing technology. And we need 
to say to these guys, ``We're here, let's see what you've 
got,'' for the best company with the lowest bid, go at it, and 
the more you go at it, the better off we'll be.
    Thank you very much, Mr. Chairman.
    Chairman Tom Davis. Thank you very much.
    The gentleman from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Chairman, I thank you for holding this hearing to 
collect information from stakeholders in the General Services 
Administration's proposed government-wide voice and data 
communications program, Networx.
    It's my hope that this hearing will serve as an opportunity 
for us to explore whether GSA's proposed acquisition strategy 
will serve as the best solution in our current technologically 
advanced society. The current telecommunications program, FTS 
2001, will expire in 2006. It is important that we are able to 
implement a new program in a timely, effective and cost-
efficient manner.
    In the RFI request issued by the FTS in October 2003, the 
stated goals of Networx were to assure continuity of services, 
achieve best value by leveraging the government's buying power 
to obtain the lowest possible prices, while maintaining 
quality, provide access to a broader range of service than 
currently available, and provide expanded opportunities for 
small businesses. It is at this hearing where we can determine 
whether or not the FTS-proposed Networx does in fact accomplish 
these goals, or whether it must be adapted to further meet the 
concerns of all stakeholders involved. I have four main 
concerns that I hope the witnesses will address today.
    First, Networx must have the ability to not only offer but 
keep up with new technological advances. In light of September 
11 and our continuous need to effectively address issues 
related to our Nation's security, we must be sure that any new 
telecommunications program we implement is capable of 
supporting new technologies as they are developed.
    Second, the bidding process for Networx must remain a 
competitive process that does not exclude either new or smaller 
entities from entering the government-sponsored program. This 
bidding process must also allow for companies with specialized 
telecommunications technology to compete in our ever-evolving 
technology economy.
    Third, Networx must remain cost-effective in its new form. 
If the program does not continue to save the government money, 
especially in our current budget crunch, then it will miss its 
most important aim.
    And last, Networx must allow for an affordable and 
efficient transition from the current FTS 2001 
telecommunications program. We must be guaranteed that by 2006 
there will be a smooth and non-problematic transition into the 
new program.
    With that said, Mr. Chairman, I look forward to hearing 
from today's witnesses, and once again, Mr. Chairman, I thank 
you.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

[GRAPHIC] [TIFF OMITTED] T4004.002

[GRAPHIC] [TIFF OMITTED] T4004.003

[GRAPHIC] [TIFF OMITTED] T4004.004

    Chairman Tom Davis. Thank you very much.
    We have a great first panel, we have a great second panel. 
Let me say in the second panel, we held a lot of them in the 
back room. And this is where we could have sold tickets. We had 
SBC, Sprint, Verizon, MCI, AT&T, Winstar, BellSouth and Level 3 
all in the same room, and by all accounts, it was fairly 
harmonious. So it's a historic first. [Laughter.]
    On the first panel we have Steve Perry, the Administrator 
of the U.S. General Services Administration; Sandra Bates, no 
stranger to this committee, the Commissioner from the Federal 
Technology Service, U.S. General Services Administration; Linda 
Koontz, the Director of Information Management Issues from the 
U.S. General Accounting Office; Drew Ladner, our Chief 
Information Officer at the U.S. Department of the Treasury; and 
Mel Bryson, the Director of Information Technology, 
Administrative Office of the U.S. Courts.
    It's the policy of this committee that we swear witnesses 
in before their testimony. If you'll rise with me and raise 
your right hands.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you very much.
    Commissioner Perry, we'll start with you and then we'll 
move straight on down the line. Your total statement is in the 
record. Not everybody is here to hear it, so you don't need to 
go over the time, because that's in the record, and most of the 
Members will get it off the record. Then we'll have our 
questions, a lot of them are cued to what your testimony is. So 
if you can take about 5 minutes, keep your testimony to 5 
minutes. We have a light in front of you. When the orange goes 
on, that means you have 1 minute left, 4 minutes are up.
    Steve, thanks for being with us, and thanks for doing a 
great job over there.

  STATEMENTS OF STEPHEN A. PERRY, ADMINISTRATOR, U.S. GENERAL 
SERVICES ADMINISTRATION; SANDRA N. BATES, COMMISSIONER, FEDERAL 
TECHNOLOGY SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; LINDA 
   D. KOONTZ, DIRECTOR, INFORMATION MANAGEMENT ISSUES, U.S. 
   GENERAL ACCOUNTING OFFICE; DREW LADNER, CHIEF INFORMATION 
OFFICER, U.S. DEPARTMENT OF THE TREASURY; AND MELVIN J. BRYSON, 
  ASSISTANT DIRECTOR, ADMINISTRATIVE OFFICE OF THE U.S. COURTS

    Mr. Perry. Thanks, Mr. Chairman. I appreciate the 
opportunity to testify to the committee on this very important 
subject.
    As has been pointed out, we all know that having an 
effective and efficient telecommunications program in the 
Federal Government is very important. It's not only important 
because we spend billions of dollars to obtain these services, 
but it's important because this is critical to the 
communication interactions, and the data transfer of 
information that we have to do to support the day to day 
operation of the government.
    So we're happy to be here today to talk about our plan for 
transitioning from FTS 2001 to the new program that we call 
Networx. The Networx contract, as has been pointed out, will be 
the fourth generation of telecommunication contract in the 
government that started in the mid-1960's. Each successive 
contract that has been put in place has been an improvement 
over the prior contract. We expect that will continue to be the 
case with the new Networx contract that's being put in place.
    FTS 2001 certainly has been a success, as Mr. Waxman 
pointed out. We've derived savings in the government of nearly 
$2 billion from that program. In short, GSA telecommunications 
programs of the past have in fact been successful, and as we 
move forward, we believe we can build upon the lessons learned 
and the solid foundation that is now in place to make the new 
program even more successful as we move to the future.
    Last October you invited us to talk to this committee about 
our plans for beginning the transition process and developing a 
new Networx program as well as an acquisition strategy. Since 
that time, Sandy Bates and her team have benefited from 
numerous meetings with the committee staff and we continue to 
seek your counsel and support. Additionally, as was pointed 
out, we've had very valuable discussions with customer 
agencies, and we've had very valuable discussions with the 
telecommunications industry and other interested parties.
    The level of interest is perhaps unprecedented. The quality 
of comments and the exchange of information and ideas that 
we've received to date have been very, very helpful. Through 
this dialog, we are receiving many excellent ideas that we will 
continue to consider and, where appropriate, incorporate into 
the development of the Networx telecommunications program, as 
well as the formulation of our acquisition strategy.
    So Mr. Chairman and members of the committee, one of the 
things I want to emphasize in my remarks is that we will assure 
you that we understand the importance of the proposed 
government-wide telecommunications program and we are committed 
to achieving implementation of the new program in a very 
successful way. Before I turn the presentation over to Sandy to 
talk about this in some more detail, I'd like to just highlight 
a few of the customer requirements that we've learned from our 
discussions with customers and industry partners and that GSA 
has committed to achieve in this acquisition.
    The first is service continuity. That is, we will ensure 
that all services currently provided under FTS 2001 are 
transitioned to the new Networx contract without interruption.
    Second is transition assistance. The Networx contract will 
include requirements for contractors to assist agencies in 
achieving a timely, efficient transition from the current 
contract to the new contract.
    Then of course, best value. Networx contracts will offer 
telecommunications services to Federal agencies at highly 
competitive prices that are at or below current levels. 
Additionally, agencies can use the Networx contract to meet 
their telecommunications needs without incurring the costs of 
developing their separate acquisitions.
    And flexibility, the Networx program will give customer 
agencies maximum flexibility to adapt to changes in the 
competitive economic and technology environment of the 
telecommunications industry.
    Alternative sources. Networx will provide choices to agency 
customers in selecting from among multiple contractors for 
services that they require. That will provide for the robust 
competition that you spoke of.
    In the area of operations support, Networx contracts will 
integrate ordering, billing and inventory management to the 
extent necessary to meet agency requirements. The Networx 
contracts additionally will be performance based.
    And last but certainly not least, GSA is placing a strong 
emphasis on the utilization of small businesses by our Networx 
service providers.
    So I want to assure the committee that we understand how 
important this is and we're working on it that way. We do hope 
that the result of our work will be that even those agencies 
that have not taken advantage of the benefits of GSA's 
telecommunications programs in the past will realize that they 
have the opportunity to do so, to obtain the telecommunications 
services that they need, to achieve their agency's missions and 
at the same time, save money for their agencies and of course 
for the American taxpayer.
    Mr. Chairman, we thank you for holding this hearing. I look 
forward to continuing to work with you and the other members of 
the committee to make this new Networx contract a reality. 
Thank you.
    [The prepared statement of Mr. Perry follows:]

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    [GRAPHIC] [TIFF OMITTED] T4004.016
    
    Chairman Tom Davis. Thank you very much.
    Ms. Bates, thanks for being with us.
    Ms. Bates. Good morning, Chairman Davis and members of the 
committee. Thank you for inviting me to appear before you this 
morning. I have submitted a detailed written statement, so I 
will now address the particular issues you raised in your 
letter.
    Effectiveness of the strategy. I readily agree that the 
proposed October strategy can be improved. We are committed to 
improving it, industry has suggested items for improving it. 
For example, some respondents question having separate, 
staggered universal and select acquisitions. Some believe that 
universal could overshadow select and result in significantly 
fewer opportunities for select awardees. This is a fair 
concern.
    Our challenge is to understand the tradeoff and strike an 
appropriate balance between the desire to be all-inclusive and 
the need to foster meaningful and effective competition. And 
there are other areas where industry feedback has been 
extremely valuable. In each case, we are evaluating the effects 
of the suggested alternatives and working to develop a more 
refined and a more effective approach.
    Transition. Since May 2003, the IMC-led transition working 
group has been planning for the Networx transition. Both FTS 
and our customers are committed to a well-planned, well-
executed and effective transition at the lowest possible cost.
    Contract performance periods. We have received a variety of 
comments. The suggestions range from 5 years to 15 years. The 
final contract duration should attract meaningful competition, 
justify the resource investment and minimize contract-required 
transitions.
    Billing. We've clearly heard that the billing data elements 
contained in the RFI may be overly burdensome to industry. 
However, we need to understand how we can strike the 
appropriate balance between agencies' needs for information and 
industry's ability to deliver it with their established 
commercial offerings.
    Services and technologies needed by the government. We 
believe that Networx should support the continuity of our 
customers' existing network communications infrastructure. 
Networx must also look beyond 2006 to the future by providing 
new capabilities that will be enabled by the networks of 
tomorrow.
    We understand that today not all agencies have selected FTS 
for contracts for all of their telecommunications needs. Some 
may believe they can obtain better prices through their own 
negotiations. For others, the prospect of transitioning complex 
infrastructure from one contract to another may drive their 
decision. Then there are those who may be concerned that using 
an FTS program will mean loss of control over selection of 
technical solutions, management of their infrastructure or 
provider relationships.
    Let me assure you, Networx will continue to build on FTS' 
proven success in negotiating the best deals in the industry. 
We are committed to making a transition smooth and efficient 
for all customers. Networx will assure flexibility, 
individually tailored solutions and continuous technology 
refreshment. For FTS success also depends on fostering 
productive relationships between customers and providers.
    Centrally managed program acquisitions. I certainly believe 
that we have demonstrated the value of such an approach in the 
government networking arena. One example of tangible value that 
comes from central management, price negotiation. I think we 
can all agree that telecommunications pricing is not 
straightforward. For agencies to develop individual 
capabilities for pricing analysis and negotiation would be 
duplicative and inefficient at the least.
    FTS has routinely achieved price levels well under the 
market, sometimes as low as half the market rates. Agencies 
negotiating individual contracts cannot be assured of such 
aggressive pricing. Because we do our homework on behalf of all 
agencies, we can leverage the government's buying power to 
achieve the greatest benefit. Nevertheless, we are open to all 
ideas, including those that might mean significant change. We 
are not afraid of finding the right answer or of finding a 
better answer. In fact, we want to do so and I think our job is 
to do so.
    We are committed to crafting a strategy that ultimately 
reflects best value results and innovation to support the 
missions of government. Mr. Chairman, we are pleased to have 
delivered an initial strategy that is already serving its 
purpose as the basis for productive interaction. I expect to 
come away from this hearing with more good ideas. I will be 
happy to address your questions that you may have.
    [The prepared statement of Ms. Bates follows:]

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    Chairman Tom Davis. Thank you very much.
    Ms. Koontz.
    Ms. Koontz. Mr. Chairman, members of the committee, I am 
pleased to participate in this hearing on the General Services 
Administration's next generation telecommunications acquisition 
program, known as Networx. As you know, GSA's planning for this 
program is taking place within an environment of tremendous 
change in the telecommunications industry, in underlying 
services and technology, and potentially in the regulatory 
environment.
    In this context, the Networx initiative can be viewed as a 
significant opportunity for the Federal Government to flexibly 
acquire and apply innovative telecommunications services 
offered by industry to improve agency missions. However, GSA 
will have to overcome significant challenges if the full 
potential of the Networx program is to be realized.
    The first of these challenges is ensuring that an adequate 
inventory of information about existing telecommunications 
services is available to give planners an informed 
understanding of government-wide requirements. The ongoing 
research we are doing for you, Mr. Chairman, on private sector 
best practices in telecommunications acquisition and 
management, have indicated that leading organizations view a 
baseline inventory as an essential first step to 
telecommunications requirements analysis and subsequent 
sourcing decisions. Quite simply, before you can chart a course 
for the future, you have to know where you are.
    Second, establishing specific measures of success to aid 
acquisition decisionmaking and effective program management. 
Again, our work on private sector best practices highlights the 
need to establish outcome-oriented program goals on which to 
base acquisition planning decisions, and corresponding measures 
to assess over time whether the goals are being met by the 
program.
    Third, structuring and scheduling the contracts to ensure 
timely delivery of competitively priced telecommunications 
services that meet agency mission needs. The varying views of 
industry representatives commenting on the request for 
information raised fundamental questions about the soundness of 
the proposed acquisition approach. For example, some raised 
concerns about the broad service and geographic requirements of 
the universal contracts and the effect that could have on 
competition. Further, others raised questions about the timing 
of the awards. It appears that agencies could be asked to make 
decisions regarding their use of universal service contracts 
before information is available regarding select leading edge 
services and solutions that might be more suitable for their 
needs. The process of sorting out these varying views is a 
difficult one. However, proceeding with a better understanding 
of requirements, goals and measures should help GSA in its 
efforts to structure the contracts. Further, it will be 
important for GSA to continue to solicit and implement 
stakeholder feedback.
    Last, ensuring a smooth transition from the current 
contracts by initiating appropriate implementation planning 
actions. Three years ago, we testified before you on the 
transition difficulties experienced with the FTS 2001 program. 
To avoid a repeat of these problems, GSA will need to establish 
strong program management and ensure that agencies have 
detailed inventories needed for transition.
    In our recent conversations with GSA, they agreed with 
these challenges and shared with us their plans to develop 
baseline inventories and measures of success, prepare for the 
transition and continue to work toward a final acquisition 
strategy. While these statements are very encouraging, 
leadership from GSA and commitment from stakeholders in 
resolving these issues will be essential in establishing 
efficient, cost effective and secure telecommunications 
services.
    Actions taken and decisions reached in the coming months to 
more fully define the Networx program will significantly 
influence the telecommunications choices Federal agencies will 
have for the next several years. Unless GSA follows through to 
resolve the challenges outlined today, the potential of Networx 
may well not be realized.
    That concludes my statement, and I'd be happy to answer any 
questions at the appropriate time.
    [The prepared statement of Ms. Koontz follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Ladner, welcome.
    Mr. Ladner. Good to be here again, Mr. Chairman.
    Mr. Chairman and members of the committee, I thank you for 
the opportunity to appear today to discuss GSA's government-
wide telecommunications program, Networx. The continued 
leadership of the chairman and the members of the committee is 
vital if we are to steward taxpayer dollars wisely not only at 
the Treasury Department, but across the Federal Government.
    I serve as the Chief Information Officer of the Treasury 
Department. As CIO, I provide oversight, management, budgetary 
approval, and policy direction for all of the information 
technology programs within the Treasury Department and across 
its bureaus. I have operational responsibility for shared 
services across all of our Treasury bureaus, including for the 
Treasury communications system, one of the largest secure 
networks in the civilian government.
    Let me start by suggesting a list of principles that the 
Treasury Department seeks to have inform its acquisition of 
telecommunications services. Reflected throughout my submitted 
testimony, they include but are not limited to: identifying and 
adopting innovation, listening to the market laws of supply and 
demand, relying on marketplace innovation wherever possible, 
avoiding the creation or promotion of proprietary standards, 
simplifying business structures, processes and systems, 
embracing data, IP and managed services, compensating based on 
performance and results, affording maximum flexibility while 
keeping costs low, supporting the execution of Treasury's 
shared service philosophy, and expecting technological 
obsolescence and therefore not owning assets.
    The Treasury Department is committed to acquiring from the 
private sector the latest in telecommunications innovations, 
whether in product, process, or otherwise. Because the private 
sector has the incentive to invest in research and development, 
the expectation is that the private sector consistently will 
provide the most attractive offerings in terms of cost and 
performance.
    Today's question is, how does Networx fare in all of this? 
Early signs are that Networx will constitute a significant 
improvement over FTS 2001. It appears that Networx will be much 
more market-driven, in contrast to its more technology-driven 
predecessor, FTS 2001. As a general rule, at the Treasury 
Department we believe that the government should rely on 
performance-based results-oriented specifications, rather than 
trying to dictate solutions through how to design technology 
specifications.
    Moreover, this underscores an essential philosophical 
approach to acquiring Networx services, whether the customer is 
in the public sector or private sector, government agencies 
should strive to ensure that the customer is provided with the 
best, most cost-effective services available.
    This raises a larger point. As CIO, I need to be able to 
manage the supply chain, both downstream from our shared 
service platform into Treasury bureaus, as well as upstream 
into Treasury's suppliers. Treasury currently depends 
exclusively on no one carrier, and manages risks by being 
carrier neutral. Avoiding sole sourcing and preserving 
flexibility enables us to use multiple companies across a large 
telecommunications contract. Doing so is critical for several 
reasons.
    First, it is financially advantageous and ensures that 
competitive forces provide incentive for contractors to price 
at market levels. Second, in the event of inevitable 
technological change or obsolescence, a customer can make 
necessary adjustments quickly and cost effectively. Third, if 
under-performance provides operational rationale to switch 
vendors, a government agency is in the better position to do 
so.
    In summary, the key to a successful Networx contract will 
be to consolidate purchasing power in a flexible, performance-
based contract that nimbly accommodates innovation when 
superior price-for-performance can be achieved. Remaining 
innovative in our telecommunications programs is essential to 
national security. Among other reasons, the application of new 
products and processes leads to even more advances, thanks to 
the vibrant entrepreneurial spirit of our country and in the 
small to medium-size businesses that drive 80 percent of our 
economy.
    Again, I am grateful to you, Mr. Chairman, and the 
committee, for demonstrating leadership in exploring the best 
ways to acquire telecommunications services, and for the 
opportunity to discuss this further today. I'd be happy to 
respond to any form of questions.
    [The prepared statement of Mr. Ladner follows:]

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    Chairman Tom Davis. Thank you, Drew.
    Mr. Bryson.
    Mr. Bryson. Thank you, Chairman Davis, members of the 
committee. We also appreciate the invitation to appear before 
you today.
    My position is equivalent to the chief information officer 
with the courts system. Our office provides and manages 
national voice and data services for more than 750 courthouses 
and offices throughout the country, including the 50 States, 
Puerto Rico, the U.S. Virgin Islands, Guam, and the Mariana 
Islands. Those communications services are critical for our own 
internal communication, as well as for those who are now 
getting into the government aspect of the court system, which 
is our electronic case filing, and those who look for 
information on what the courts are doing through our public 
access systems.
    The Federal Technology Service contract series has been an 
essential tool in providing the U.S. courts with a 
comprehensive set of integrated, cost effective and highly 
reliable voice and data services for more than a decade. We at 
the Administrative Office are committed to working with the 
General Services Administration and others, including this 
committee, to develop a successful follow-on solution for our 
wide ranging and ever growing needs for telecommunications 
services.
    The judiciary's experience with the FTS contract series has 
shown us that such a contract vehicle offers clear advantages 
in terms of prices as well as significant reductions in 
overhead for contract management. The FTS contracts also 
greatly facilitate our engineering tasks by reducing the need 
to coordinate infrastructure changes with but one vendor team 
that knows our needs.
    The Federal Judiciary was the first major FTS customer to 
complete the transition from FTS 2000 to the follow-on FTS 2001 
contract. That orderly transition was facilitated by our own 
internal, accurate inventory of the courts' national voice and 
data services. Our independent inventory streamlined the 
complex process of preparing, submitting, tracking, and 
verifying tens of thousands of separate orders for lines, 
individual phone calling cards, and other specialized 
telecommunications services as we made this complicated 
transition.
    Our transition experience demonstrates the importance of 
accurate and integrated management systems. Unfortunately, 
consolidation of telecommunications vendors over the past few 
years has not been accompanied by a smooth integration of their 
separate legacy systems for processing orders, managing 
circuits and changes, and ensuring billing systems are 
automatically updated and accurate. In numerous cases, our 
ability to quickly and efficiently change, add or delete 
services was hampered by these inefficient vendor tracking 
systems, or by overly complex and poorly integrated vendor 
ordering and billing systems.
    We are working closely with GSA on the transition to make 
sure that we address all of those issues. If the transition 
involves the need to move to multiple new contracts and forces 
us to make the change to new vendors, the effort will be much 
more complex and difficult. Ultimately, this will take longer 
and involve much higher indirect costs to each agency.
    As I say, we're making a significant investment in working 
with GSA to make sure that this follow-on contract meets all of 
our needs. The things that we think we need from the new 
contract include these: continuous high quality service; 
integrated end-to-end processes to order, install, inventory 
and bill services; flexibility to provide both local and long 
distance voice and data services; and finally, flexibility in 
choosing central or local billing and management options.
    The Judiciary prefers a single Networx contract that covers 
the full range of telecommunications solutions. This approach 
avoids the additional costs associated with the need to 
research, compete, award, and manage multiple contracts for the 
myriad parts of our nationwide network infrastructure.
    We also strongly prefer a long term non-mandatory solution 
to assure the best possible pricing for all services. In short, 
we need to ensure that an efficient and effective vehicle for 
continued service to the courts is available to replace the 
expiring FTS 2001 contract.
    Again, we thank you for the invitation to appear today, and 
as with the others, we'd be happy to answer any questions that 
you might have.
    [The prepared statement of Mr. Bryson follows:]

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    Chairman Tom Davis. Thank you very much.
    I have a bunch of questions. Let me start, Ms. Bates, I'm 
going to start with you. I think you noted that the current 
program in its 6th year, referring to the first page of your 
testimony, exemplifies best value and you talk about how the 
FTS 2001 and cross-over contracts have been modified 229 times 
for the benefit of all agencies, and have grown from an 
acquisition offering 24 core services and so on.
    I guess my point is, it's great to modify it and all that, 
but when you go back to the original bit and who you select, 
and then you put all these modifications in, isn't it possible, 
and these are evolving needs, that maybe somebody who lost the 
original bid might have been better over time in these areas? 
And aren't we better off with a flexible schedule-type 
contract, where you can bring in people who might not have been 
the best value on the original bid, but in time have developed 
new capabilities and allow them to come into the process, as 
opposed to amending existing bids with existing contractors? Do 
you understand what I'm saying? That wasn't in my script.
    Ms. Bates. I understand. We'll just talk through it.
    First off, I think it is a positive that the contracts have 
been modified. They are not being modified to correct flaws or 
insufficiencies at all. But rather, improved processes and 
recognize that, and then add the new technologies.
    If you'll recall, too, in our strategy of FTS 2001, we 
allowed for crossover from, with the anticipation of companies 
in the local markets emerging and really promoting public 
policy in 1996 of telecom reform. I'm happy to report that 
companies have crossed over in that, so that as an example, the 
unsuccessful offeror in FTS 2001 did cross over into FTS 2001, 
as well as Verizon recently crossed over into FTS 2001.
    So I think with that strategy, we have allowed for 
continuous competition of the players that are providing all 
those services, plus with the initial competition and all those 
mods, we have continued robust and aggressive price management, 
where the companies, if you'll recall, bid the full 8-year 
pricing, declining prices, the best in the world, and continue 
to do that.
    So I think that the strategy that we adopted and were 
trying to take those good pieces of the strategy and 
incorporate those into a Networx-type environment. So I think 
we have the optimum solution today.
    Chairman Tom Davis. I guess because technology changes so 
rapidly in this area, and new companies come on with 
capabilities that weren't envisioned at the beginning of the 
contract and everything else, it seems, and what the process 
is, I'm not set on. But you just want to make sure that we are 
flexible throughout, and that we are constantly shopping for 
the best value, the best technology.
    Ms. Bates. Right.
    Chairman Tom Davis. The best technologies, the lowest 
costs. And also to encourage agencies to come in. About half 
the agencies use this right now. I'm not saying it's a cure-
all, but if you have enough flexibility and you use your buying 
power and everything else you have, we ought to be getting 
higher participation.
    Ms. Bates. I agree with you. I think most of our customers, 
we provide service today to every agency. It's just not their 
total service. Of course, our goal is to have a program that is 
robust enough that it will be so attractive that people will 
want to use this more.
    I think it's also important to note that today on Schedule 
70, there are many services, telecommunications services 
offered, there are line items, there's over 200. It's about 70 
companies. So I think that when we talk about whether we have a 
fully negotiated contract versus a schedule contract, it's not 
either-or. And that's what we got when we asked the industry.
    So I think we're in agreement.
    Chairman Tom Davis. It's a question of how you best get 
there.
    Let me just ask another question. I'm off the script. But 
cooperative purchasing, something in the government act we 
allow for the group 70 schedule, as you noted. Any thought of 
using, I haven't talked to the companies about this, either, so 
if they come up out of their chair, allowing State and local 
governments to use this?
    Ms. Bates. Well, as you know, FTS was instrumental in 
cooperative working with you early on, with cooperative 
purchasing.
    Chairman Tom Davis. Absolutely. You were way ahead of us on 
that. I'll ask everybody to comment on this question, too. But 
go ahead.
    Ms. Bates. I think that the concept is there. There's 
nothing in our current thinking that would prohibit it. I think 
in the area of telecommunications networking that it's so 
complex, with the margin so thin on pricing, kind of figuring 
out and keeping dual sets of, I think it would be a good idea. 
I was going down the line of----
    Chairman Tom Davis. We're going to hear from industry on 
that, too.
    Ms. Bates. But the cooperative purchasing, in terms of 
letting State and local governments in, we are all for.
    Chairman Tom Davis. Steve, any thoughts on that?
    Mr. Perry. I would just add that, as you know, a lot of 
people, either at the State and local level or Federal level or 
in the industry had concerns as to whether or not enabling 
State and local governments and others to purchase on the 
Federal Government schedule would have bad ramifications. I 
think though that what we're seeing, now that we've stepped 
into that with IT, that those fears are not being realized. 
Small businesses are participating, Main Street companies who 
were providing for their States before and weren't on GSA 
schedules, many of them have become GSA schedule holders.
    So both the States are benefiting and the industry 
companies are benefiting. So I think the continued success that 
we're seeing on IT Schedule 70 may inform us as to how well we 
could apply the same thing to telecommunications.
    Chairman Tom Davis. Right. The thing I like about 
cooperative purchasing, and my time is up, but the fact that 
you're cutting out a lot of the middle stuff that raises your 
ratio, the bid protests are gone, all the lawyers are out of 
it, and that's a good thing. And the fact that a lot of the 
marketing and strategies that went into pumping stuff up that 
was so expensive for people coming up with responses to RFPs 
and proposals, it's really consolidated. That's a good thing. 
It saves money for both the government and for our contractors 
on that.
    I'll ask the second panel how they'd react to that. Go 
ahead.
    Ms. Bates. We have left it in scope, in today's contract, 
and we will have it in scope tomorrow, with the hope that they 
would be approved. So we have everything in place, ready to go 
once we get the nod.
    Chairman Tom Davis. Well, I think a lot of it will depend 
on industry response to this. We're not eager in bringing, if 
industry's not interested in doing this, of bringing it in. And 
I want to get their response as well. But the reality is that 
the marketing mechanisms they have to use to try to get into 
State and local governments are expensive. It is a Wild West in 
terms of its predictability and so on. I'll be interested in 
hearing their reactions, I'll kind of give them a heads-up that 
the question is coming.
    Ms. Norton.
    Ms. Norton. Thank you, Mr. Chairman.
    This idea in this program is of special interest since the 
District of Columbia has profited from being on the GSA 
program. I appreciate strongly the efficiencies that must take 
place in hammering such a huge contract as this. It can't be 
handled in the way the ordinary government contract is. I agree 
with what the chairman has said about some of those 
efficiencies.
    I also think that competition and product innovation in 
this industry is unique. I indicated that in my opening 
comments, so that I'm trying not to do a cookie cutter approach 
to how I look at this contract, that is to say, not that you 
are. But that we are looking at what I regard as a virtually 
unique industry in our country and in the world. And here we 
are, a unique party, the Federal Government, able to maximize 
competition the way no other contracting party could.
    So I've got to ask, I want to ask some questions about our 
role vis-a-vis where the industry is. Now, there's a huge flux 
in this industry, precisely because it is so innovative. If 
there were only three bidders to the universal contract, what 
would happen if something happened to one of those vendors?
    Ms. Bates. There could be more. But if there were only 
three that could, that were successful in terms of meeting the 
government's requirements and best value and low cost, and 
something happened to one, I think certainly that would be a 
shame, and would reduce our options and flexibility. But we 
would still have two companies in place in universal that could 
continue to compete. We would also then have, if we were to 
pursue exactly the strategy laid out in the RFI, which is under 
modification, we would also have multiple companies in network 
select that could satisfy some or all of the requirements and 
fill the void.
    So I think we're trying to position ourselves, knowing that 
this is an industry that by all accounts has not settled out 
yet, and we're expecting to see further mergers, acquisitions 
and new entrants. We want to be as open to that, yet steel 
ourselves against having something happen that would affect us 
drastically.
    Ms. Norton. I don't know why we wouldn't want to minimize 
risk and maximize competition. I don't know why we should take 
any risks here, particularly given the multiple companies in 
the field, and particularly given the fact that we may be 
talking about one industry, but there are so many different 
categories of what they do, wireless, long distance, Internet--
we could go on for some time.
    Why not open the door to more competition, given--I mean, 
what do we have to lose by opening the door to more 
competition, particularly given the fact that many of these 
companies are much better in providing certain kinds of 
services, I don't know, Internet versus long distance or 
whatever, than others. Why not say, ``Y'all come''? And why 
wouldn't the result be lower cost to the government, and better 
product innovation as well?
    Ms. Bates. I can only address it. Certainly those comments, 
your thoughts, were also some of the thoughts submitted in 
response to the RFI, that centered around why don't we just 
have one competition and do it by categories or levels. And 
this is under consideration. We are looking at that hard, and 
going at that, because many of the industry respondents did 
recommend that a further refining, and like I said in my 
statement, one contract versus two, and perhaps different ways 
to grouping, to play to the specialization of certain segments.
    Ms. Norton. I would really like to see, all of us out here 
in this IT world know good and well that we have the right and 
we look for who does what best and at a lower cost in these 
related but highly different categories of service. I must say, 
I put a great value on the efficiencies you brought to this 
contract. I don't want to lose any of that.
    But for the life of me, I can't see why allowing these guys 
to go at one another with these very different kinds of 
service, opening the door to some who may not have been in it 
all before, that really bothers me. As we look to companies 
that, and this happens in government work so often, that 
somebody who has a leg up continues to get the contract.
    Well, you know, that might work in some kinds of 
industries. But in this industry, where the competition has 
been such that somebody can and does run ahead of somebody else 
because of a product innovation, so who was good yesterday has 
been surpassed tomorrow, why shouldn't we say, ``OK, let's look 
at these individual services, let's open the competition, 
because we are the biggest player in the universe, we're going 
to drive you so hard, we're going to drive down our costs even 
more than we've gotten.''
    I must tell you, I think there's lots more, lots more to be 
wrung out of this than you've been able to do. I'm looking for 
ways to do it. Therefore, I must say I'm very pleased to hear 
you say that you are open to looking at the various categories, 
wireless, Internet and the rest. And that would mean, of 
course, that there would be newer companies, companies that may 
have specialties in one way or another.
    Let me ask you about the notion of where the company has to 
be geographically. There are large bidders and smaller bidders 
that don't provide, for example, long distance service 
everywhere. Is this a primary factor in choosing such a vendor?
    Ms. Bates. The strategy as stated in the RFI required 
continuity of service, which would mean service to every place 
that it is being provided to our government customers today for 
Networx Universal. In Networx Select, that requirement was 
relaxed and respondents would bid wherever they provided the 
service.
    In response to the comments that we received from the RFI, 
we are deeply probing that requirement on two fronts. One, we 
are probing with our customers to determine the impact, if that 
wasn't as specified, and to learn more about that. With regard 
to the industry, we are probing to see, when we say continuity, 
what are they hearing. If we were not to have the requirement 
for continuity, I'm not saying we'd relax it, but if we 
weren't, who would be left behind?
    There is an implication that the person that would be left 
behind would be Joe in the treetop. Well, I don't know if it's 
just a few people or if it's major sections of our country that 
serve the population and the government agencies. So I think 
that the time we're spending now to really further understand 
that requirement and probe deeply to get at the facts will help 
us arrive at whatever the right solution is as we move forward.
    Ms. Norton. That could not be more important. One size does 
not fit all, and if there are efficiencies in non-universal 
service that don't hurt anybody, and you're looking closely at 
that, that's the way to go at it. Let us find out what the 
underlying facts are.
    The assumption that everybody needs everything, when you 
consider where the government is located, is the point I'm 
raising. I'm very pleased if you're looking closely to see 
whether or not that's necessary.
    Ms. Bates. Thank you.
    Chairman Tom Davis. Thank you very much, Ms. Norton.
    Mr. Perry. Mr. Chairman, if I could just add to that 
answer, please.
    Chairman Tom Davis. Sure.
    Mr. Perry. I would echo Sandy's comments and yours, 
Congresswoman Norton, that robust competition is really a 
hallmark of this. We are not trying to do anything else, other 
than to drive toward robust competition. That's part of what 
has driven the low cost of what we've done so far, and it also, 
as you point out, is what drives technological innovation, all 
these companies working against each other to move things 
forward. And we've benefited from that.
    We would propose to continue to do that in the new 
contract, while at the same time making sure that we do all the 
things necessary to provide for reliable service. That's the 
other part of that equation. It can't be fragmented to the 
point that we could have a disruption. So we take your point, 
and I just wanted to emphasize the fact that robust competition 
is indeed what we would hope to achieve.
    Chairman Tom Davis. Thank you very much.
    The gentleman from Utah, Mr. Cannon.
    Mr. Cannon. Thank you, Mr. Chairman.
    Just following on this line of questioning, can you for the 
whole panel, particularly for the GSA members here, can you 
give me a sense of what you think the right number of awardees 
under Networx would be? On the one hand, as has been said by 
Representative Eleanor Holmes Norton, you have an issue with 
redundancy, and also network security. Yet if you have too many 
people, the price suffers.
    Have we given any thought to what the number of awardees 
ought to be?
    Ms. Bates. It's very difficult to say, particularly with 
this industry, as things change. The Networx Universal, as 
described in the RFI, which was kind of the straw man for 
comment, had requirements such as continuity, which we were 
discussing a moment ago. I would think that there are many 
companies that can provide that universal service, perhaps they 
wouldn't be able to provide it necessarily predominantly by 
themselves. But through partnering arrangements----
    Mr. Cannon. Let me just ask, have you focused on, we have 
some major companies, and a lot of minor companies that can 
provide services. Have you looked at, it would seem to me you'd 
want more than one, that means two or more. But maybe you don't 
want as many as five or six. Has there been some focus on what 
you're looking at for just the number of major contractors?
    Ms. Bates. We have not decided yet on a number. We've not 
gotten that far. If you'll recall, in our strategy for 2001, 
when we completed it and went out with the RFP, we said there 
would be a maximum of two awardees, and obviously a minimum of 
one but a maximum of two. We've not reached that point yet. And 
we've not even reached a point yet where we would put a limit, 
because we're not talking about, as your point, 200 companies.
    Mr. Cannon. But you will hopefully consider that and come 
up with some sort of a list?
    Ms. Bates. Yes, sir.
    Mr. Cannon. Thank you very much. Do you have a sense of how 
we will be introducing the government Voice Over Internet 
Protocol in this procurement or in other contexts? What are you 
thinking about that now?
    Ms. Bates. Well, clearly, we are like everyone else 
realizing that Voice Over IP is the technology for the future, 
and that all of the network services, as we move on into the 
2010, 2012 timeframe, will be IP-based, including Voice Over 
IP. So it plays heavily in our technical specifications and our 
concept of operations, reflected throughout our work to date.
    The challenge ahead of us is that, when we award the 
contracts, we need to be able to do two things: satisfy the 
existing requirements and provide a lighted pathway as people 
move toward the new technology. It is not going to be 1 day 
everybody moves. Some people, the early adopters, are moving 
now. Others may not be.
    The industry is in the same way. They don't just start and 
drop everything. So it's a continuum. But I can assure you that 
Networx, both universal and select, in whatever strategy we end 
up with, will cover that in spades.
    Mr. Cannon. Thank you.
    Mr. Perry, in particular I'm interested in telework and how 
we're dealing with that. If we talk about DSL, how that fits in 
and whether you're considering any telework-related items in 
the Networx solicitation. In particular, is DSL expected to be 
a component of the Networx Universal, will that be like a 
distinct service, particularly about how telework is going to 
be for people working at home or in some other place, and how 
that will be brought into consideration.
    Mr. Perry. Well, we do support teleworking now, of the type 
you described, where the person may be teleworking from their 
home with a DSL line. And we obviously have telework centers 
where people drive to and agencies or the government provides 
the facility there. But that would continue to be supported.
    It will be driven, obviously, to some large extent, by 
individual agencies, to the extent they'd want to utilize it. 
But it is available and will continue to be.
    Mr. Cannon. And DSL is going to play a part of that, as you 
look into the future?
    Mr. Perry. Yes.
    Mr. Cannon. As you're looking at all these new kinds of 
technologies that are coming in, can you talk a little bit 
about how those are going to fit in, even those that may not be 
currently available in the commercial market?
    Mr. Perry. I'm sorry?
    Mr. Cannon. How are new technologies, how are you dealing 
with the new technologies, some of which are not even available 
today, but which we can anticipate?
    Mr. Perry. Right. Again, to some extent, what we've done in 
FTS 2001, we talked about the 229 modifications that were made 
in the original contract. Many of those were made to adopt or 
adapt to new technologies that emerged subsequent to the 
contract. That will be the case here as well. Whatever those 
emerging technologies are that we don't even know about today, 
as they become available they will be incorporated into the 
contracts.
    Mr. Cannon. Thank you, Mr. Chairman. I see my time has 
expired. I yield back.
    Chairman Tom Davis. The gentlelady from New York, Mrs. 
Maloney.
    Mrs. Maloney. Thank you very much. Mr. Perry, you mentioned 
that the goal is robust competition, as was the goal for FTS 
2001. And I think one of the easiest ways to understand how to 
maximize service and a good product and cost is to really 
understand what happened in FTS 2000 and 2001. The chairman, in 
his opening remarks, mentioned that there were 229 
modifications to FTS 2001. I'd like a breakdown on how much 
that cost. You can competitively bid something, but then if 
there are so many modifications, whether it's a change in the 
contract for new expenses or new technology, if I recall, I 
believe that new technology in FTS 2000 and 2001 was supposed 
to have been competitively bid in a new way. I don't think it 
was supposed to have been a modification.
    So my question is, I'd like to know how much we spent on 
2001 contracts, and how much we added onto them with 
``modifications'' and whether those modifications were cost 
overruns, or we really didn't think we had to do that in our 
original contract, and how much of it was new technology. As I 
recall, 2001 was new technology and was to be competitively 
bid, was it not, in the last contract?
    And again, you probably don't have these numbers, but I 
think that's something that would be important for the 
committee to understand, why did we have 229 with 
modifications, and for what reason? It could turn out that the 
229 modifications cost more than the original contract. I would 
just like to look at those numbers.
    Mr. Perry. Sure. We will provide that to you.
    I will tell you though, that we talk about those 229 
modifications with some pride, because these were not cost 
overruns or cost increases, generally speaking. These 
modifications were enhancements, and many times, cost 
reductions. So we'll be happy to provide that information to 
you.
    Mrs. Maloney. Do you know how much the 229 modifications 
cost the American taxpayer?
    Mr. Perry. I don't know the answer to that question.
    Mrs. Maloney. That's what I'd be looking at.
    And also, I think that our country has changed dramatically 
since the last contract and the No. 1 concern for many of us is 
security and safety. And I want to know if this new contract 
has a category in it that looks toward a Pentagon attack or a 
September 11 attack. What are these new technologies that these 
companies may have that would make the service more secure and 
reliable in times of a tragedy or a terrorist attack? Is that 
part of the new contract?
    Mr. Perry. Yes, it will be. There is a feature referred to 
as ``embedded security features.'' And to go back to the 
modifications, some of the modifications that were made under 
FTS 2001 were for an enhanced security by means that weren't 
available previously, but became available and became more 
desirable after September 11.
    In fact, some agencies of the government, as you would 
understand, the Defense Department and some others, have not 
used the FTS 2001 contracts because of concerns on security 
matters. So we are in the Networx contract addressing those 
more and more.
    Mrs. Maloney. And since you said security was built into 
2001, and when they attacked the World Trade Center Towers, it 
was primarily government offices. There was some private 
sector, but we had the SEC there, and we had a lot of Assembly 
offices there. There were a lot of government offices there. 
How did the FTS 2000, 2001 respond to the attacks on September 
11? I know we were out of power for a while. Was that part of 
your contract? Were you down at the September 11 site with FTS 
2000 and 2001?
    Mr. Perry. Yes. And Sandy may add some details here, but 
there was a facility there at the site that was destroyed. We 
used the providers under this contract to reestablish 
operations. We didn't do it overnight, but we did it very 
quickly. The response was generally reviewed as being very 
good.
    Ms. Bates. I can only add that after the attack, service 
was restored to the areas as soon as it could be under FTS 
2001, as well as the metropolitan area, the MAAs, the local 
contracts. We had a robust program working with our brothers in 
the Public Building Service of helping agencies relocate to 
other office space, and making sure that they had service at 
that time.
    In addition, many agencies used backups in other parts of 
the country for their data services, and we had service into 
there. So I think the companies on both the 2001 and MAA served 
well in such a disaster, including the restoration of service 
to the Pentagon.
    Mrs. Maloney. My time is up. Thank you.
    [The prepared statement of Hon. Carolyn B. Maloney 
follows:]

[GRAPHIC] [TIFF OMITTED] T4004.070

    Chairman Tom Davis. Thank you very much.
    Let me just ask a couple more questions of this panel 
before we move on. I think I'll start this with Mr. Perry.
    We continue to hear expressed a concern that GSA is 
committed to the centrally managed program outlined in the RFI, 
and that it's unlikely to change the basic framework as the 
program goes forward. Will you go forward with a program that's 
designed based on the information received from industry, 
agency stakeholders and others, even if it differs 
fundamentally from that currently set forth in the RFI?
    Mr. Perry. Yes, absolutely. What we will do in the final 
analysis is do what meets the needs of our customer agencies, 
and the capabilities of the industry. At the same time, we 
believe that our history has shown us, as we've been talking 
here, about leveraging the volume of purchases that the Federal 
Government represents. The way to do that is through pooling 
those resources together, not by fragmenting them to the nth 
degree.
    So as a thought about this, we believe that our going-in 
approach ought to be, how can we work as a Federal Government 
in a collaborative way to understand what our inventories are, 
understand what our requirements are, understand what the 
industry capabilities are, and first, begin with the premise 
that we will try to fashion a solution that provides the best 
value to the government as a whole?
    Certainly there are some agencies which would have reasons 
to operate separately. And we would accommodate that, if they 
don't use the FTS contracts, they are welcome to use other GSA 
acquisition vehicles, including schedules, or they obviously 
have the choice of doing it independently. But I think logic 
would say that a starting point would be for us to collaborate 
to the greatest extent feasible.
    Chairman Tom Davis. OK. Ms. Koontz, let me ask you, you 
note in your statement that the proposed FTS Networx 
procurement represents the third in a series of major, 
centralized telecommunications procurements undertaken by GSA 
on behalf of Federal agencies. What are your thoughts on the 
viability of using a centralized telecommunications acquisition 
to meet the government's telecommunications service needs?
    Ms. Koontz. We think that the concept of a centrally 
managed program still has merit and is still viable. You don't 
have to look a whole lot further than the FTS 2001 program 
itself to see that there is a demand among agencies for a 
centrally managed program where they are willing to pay a fee 
to GSA in order to have GSA acquire and manage these services.
    I would add to that, in addition, in our research that 
we've done of private sector best practices that centralization 
has a couple of benefits. One, you get to leverage your 
requirements across your organization, or in this case, across 
multiple agencies. And in addition, you get to leverage your 
telecommunications expertise, which is often a scarce resource 
in short supply. So the centralization can also be an 
appropriate human capital strategy as well.
    Chairman Tom Davis. OK. Mr. Ladner, Treasury is no stranger 
to the pain of contract transition that we hear mentioned so 
often in this. Having gone through to some extent under FTS 
2000 and again at the inception of 2001 of the contract, based 
on your experiences, are there specific actions you can 
identify that GSA should be taking now to make future contract 
transitions less stressful to their government agencies? And 
I'll ask Mr. Bryson the same thing.
    Mr. Ladner. Mr. Bryson actually mentioned a few things in 
his testimony that address this. I think to add to that, we 
believe that it's critical for any contract to embed 
innovation. And one of the aspects which seems to change 
quickest, which we need to remain most aligned with in the 
private sector, is in the area of billing.
    So as we look to transition off our current contract of 
TCS, which expires in September 2005, what we are trying to 
look at and work with FTS most specifically on is in the area 
of billing. How can we ensure that as we find and address 
business problems at the operating level, we ensure that those 
can be managed in the transition process appropriately.
    To add to what Ms. Koontz said, we believe as well that a 
centrally managed program is very, very helpful, and there are 
a lot of benefits to that. Whether one looks at what's 
happening in the private sector or public sector, IT government 
reform is pushing more and more organizations to centralize.
    But again, being able to solve business problems and then 
take how we're solving those business problems and introduce 
those learnings and those technologies in at the central level 
is critical. And again, being able to transition what we're 
already doing in that regard from TCS to say, a Networx 
contract, would be crucial.
    Chairman Tom Davis. OK. Mr. Bryson, you might reiterate a 
couple of things you said just to get it in this part of the 
record.
    Mr. Bryson. I would, yes. Of the moneys that we spent on 
telecommunications, about half of them are spent on the 
national infrastructure, and about half of them are spent 
actually at the local level for services. We're very much in 
favor, as I said, of a national contract that allows us to get 
the kind of savings that the size of the government can 
generate for all of those services.
    So to the extent we have a contract that allows courts or 
other offices out in smaller locations, away from the major 
cities, to have better prices for cellular, local dial tone, 
those kinds of things, we think that is helpful.
    As we move to the new contract, we really would like to 
have GSA and the companies that we deal with look at their 
interface. It would be nice to have an electronic way to 
transmit orders, track them, have them implemented, and then 
get billing back in a timely way, so that the services that we 
ask for, that we contract for, we know are there, they're done 
correctly, and that we're being billed correctly for them.
    This is a huge juggernaut that we're dealing with here, we 
have multiple companies. If you're dealing with the small 
companies around the country as well who have to then bill back 
through the main providers, it is a serious concern keeping all 
that straight. All that of course goes through GSA as well, so 
you've got an interesting dilemma in how you make sure that all 
that information is correct, that what we're paying in our 
billing cycles is correct for what we're getting. We think that 
is an area that really needs to be focused on, the 
infrastructure that supports this contract needs to be looked 
at very carefully and improved to really serve us well.
    Mr. Ladner. Let me just add, while it's more of a steady 
state issue, and has a lot of ramifications for what we're 
transitioning to, and that is, the area of portfolio 
management, Clinger-Cohen holds that we steward resources well 
across the Department. So what we've been working hard at is 
figuring out what we've got, to figure out how we're doing.
    With regard to network services, that's no exception. So 
what we've been trying to do at Treasury is to understand 
better in as close to real time as possible how we're doing on 
the network side, and then help our business owners understand 
how telecommunications services are supporting, achieving 
mission critical objectives.
    So having the right kinds of interfaces to get the 
information that we need from carriers, from FTS, so we can 
figure out what's going on, is absolutely critical for our 
portfolio management initiative.
    Chairman Tom Davis. Thank you very much.
    Does anyone else on the panel want to add anything? We'll 
keep the record open for a couple of weeks if Members have 
questions they want to forward. I know Mr. Waxman, I think, 
will have a couple. And based on the review of some of the 
comments, we may have a couple followups. But I appreciate your 
patience, appreciate your being here today.
    We'll dismiss this panel, move to the second panel and take 
about a 3-minute recess. Thank you very much.
    [Recess.]
    Chairman Tom Davis. The committee will come to order.
    Just please rise with me and I'll introduce you if we could 
swear everybody in. Anthony D'Agata, the vice president and 
general manager from Government Systems Division at Sprint; 
Quinten Johnson, regional vice president, SBC Federal 
Solutions; Kevin O'Hara, president and chief operating officer, 
Level 3 Communications; Jerry Hogge, the senior VP for Winstar; 
David Page, vice president, Federal Systems, BellSouth; Louis 
Addeo, the president of AT&T Government Solutions; Shelley 
Murphy, president, Federal Marks, Verizon, and Jerry Edgerton, 
senior vice president, Government Markets, MCI.
    Please raise your right hands.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you. Thank you for your patience. 
Your total testimony is in the record. I figure if everybody 
takes the allotted time or a minimum of 40 minutes, working out 
before we get to questions. But you don't have to take it all 
if you don't want to. But if we can keep on schedule, we all 
get out of here. I'll remind you, your presence is really 
important, and as you heard from the previous panel, your 
comments are really important in shaping this thing.
    So we want to make sure--again your total testimony is in 
the record, I'll just re-emphasize that--but we want to make 
sure you get your major points across because it's important 
not just that this committee hear them, but that GSA 
understands how you underline your important points; take that 
into account.
    We drew out of a hat to see who goes first. This is such a 
distinguished body, we didn't want to rank one company over 
another in the telecom arena. You can understand--[laughter]--
so I'm going to start on the left, Mr. D'Agata, with you, and 
move on down. Thank you.

   STATEMENTS OF ANTHONY D'AGATA, VICE PRESIDENT AND GENERAL 
  MANAGER, GOVERNMENT SYSTEMS DIVISION, SPRINT CORP.; QUINTEN 
JOHNSON, REGIONAL VICE PRESIDENT, SBC FEDERAL SOLUTIONS; KEVIN 
    O'HARA, PRESIDENT AND CHIEF OPERATING OFFICER, LEVEL 3 
  COMMUNICATIONS, LLC; JERRY W. HOGGE, SENIOR VICE PRESIDENT, 
    WINSTAR GOVERNMENT SOLUTIONS, LLC; DAVID J. PAGE, VICE 
PRESIDENT, FEDERAL GOVERNMENT SALES, BELLSOUTH CORP.; LOUIS M. 
 ADDEO, PRESIDENT, AT&T GOVERNMENT SOLUTIONS; SHELLEY MURPHY, 
PRESIDENT, VERIZON FEDERAL INC.; AND JERRY A. EDGERTON, SENIOR 
            VICE PRESIDENT, GOVERNMENT MARKETS, MCI

    Mr. D'Agata. Good morning, Mr. Chairman and members of the 
committee. My name is Tony D'Agata, I'm vice president and 
general manager of Sprint's Government Systems Division.
    I would like to express my appreciation for the opportunity 
to share with you this morning Sprint's views on Networx, the 
follow-on program to FTS 2001. Simply stated, Sprint endorses 
GSA's network acquisition plan to replace the FTS 2001 program. 
We will, however, recommend changes to the Networx acquisition.
    The Networx acquisition strategy is sound. The government's 
experience over the past 15 years with multiple award, IDIQ, 
telecommunications contracts has been extraordinary. These 
vehicles have enabled the government to aggregate its buying 
power to the benefit of the smallest government agency.
    As of the third year of the FTS 2001, the government had 
saved over $400 million, compared to the best prices available 
on FTS 2000. By the end of the term of the FTS 2001, the 
government savings will approach over $1 billion. Moreover, FTS 
has provided to the government agencies unprecedented 
management tools, such as online ordering, pricing and trouble 
report handling to manage the accomplishment of their 
respective missions.
    But the carriers cannot take all the credit for delivering 
unparalleled value to the government. The General Services 
Administration, as a full partner, has played a significant 
role in the success of these vehicles. While some would say 
that it's time to change the above winning formula to one 
resembling a set of schedules, Sprint strongly disagrees. It 
must be remembered that the schedule procurement model has been 
successful for the procurement of one size fits all, commercial 
off-the-shelf commodity items. It is not suited to the delivery 
of customized telecommunications solutions envisioned by 
Networx.
    The Networx acquisition strategy should be modified, 
however. First, the Networx carriers, contractors should not be 
put in the position of assuming the economic risk of an 
unpredictable access market. The FTS 2001 required carriers to 
forward price access services for 8 years. Unfortunately, full 
competition and those projected price reductions in access have 
not materialized. This has caused significant financial harm to 
the service providers. As a result, the government must 
consider the future uncertainties in access pricing when 
forming its price expectations of the Networx offerors.
    Second, the existing Networx procurement strategy is to 
award a universal contract to provide the mandatory ubiquitous 
services and a select contract to provide niche services. The 
Networx Select contract should not be used to cannibalize the 
Universal Networx program. If the select program awardees are 
permitted to subsequently provide overlapping but 
geographically limited similar services, the select program 
provider could cherry pick or cream skim the business base of 
the universal providers. The select program should be reserved 
exclusively for small and small disadvantaged businesses to 
provide them the opportunity to offer services complementary to 
those provided by the Networx Universal providers. Finally, 
Sprint recommends that the successor contract not contain a 
substantial minimum revenue guarantee [MRG]. One major 
rationale to support a substantial MRG is to guarantee the 
contractor a specific volume of business to justify the sizable 
system development costs. However, due to the foresight of the 
architects of the FTS 2001 acquisition strategy, all of the 
long distance providers and MAA local service providers already 
must comply with those requirements. Therefore, as long as the 
Networx billing and system requirements remain the same, all 
the likely Networx offerors should already substantially comply 
with these requirements and there is no need for a significant 
MRG to cover those costs.
    Fundamentally, Sprint's message here today is that the 
Networx procurement strategy has a long and successful 
pedigree. We urge the committee to stay the course, and I'd be 
happy to answer any questions that you may have.
    [The prepared statement of Mr. D'Agata follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Johnson.
    Mr. Johnson. Thank you very much, Mr. Chairman, for the 
opportunity to discuss the Networx contract. My name is Quinten 
Johnson, I'm the regional vice president with SBC 
Communications, Federal Solutions. SBC is very pleased in 
responding to this very important government program.
    There are a couple of issues that would help SBC achieve 
the lowest possible rates for the government under this 
contract. Historically, our internal rate determination is 
based on factors such as the volume of the service and the 
opportunity, and the length of the term of the contract. In 
this regard, the longer the contract term, such as 5 year base 
with five 1-year options, would result in lower costs, as would 
the addition of minimum revenue guarantees demonstrating 
commitment on the part of the government.
    We also believe that the government should seek normal 
commercial products and services which would allow the 
companies to provide existing offerings in the government 
marketplace, as they do in the commercial marketplace, 
resulting in lower costs.
    In the cases of special requirements, we feel that the 
entity causing the cost should bear the cost. For example, if 
the government was able to use the normal billing offerings, 
then the agency or department that requires a government-unique 
bill, that is CLIN, contract line item number-based, should pay 
for the extra costs related to that type of bill. Using our 
normal billings systems would result in reduction of billing 
errors and transition problems.
    In the discussion of the structure of the Networx Universal 
contract, we feel that requiring all vendors to offer services 
everywhere that the present contract provides would provide 
potential higher cost to the government. If vendors have to 
subcontract to other companies, it would result in higher 
administrative costs, which would result in higher overall 
costs.
    We would suggest that the government allow for different 
categories of service and allow vendors to bid on the 
categories that they have the greatest expertise in providing. 
Allowing companies who have 7 or 8 categories covered out of 10 
would allow for a greater number of companies to participate in 
the contract, and result in more competition and lower rates to 
the government. This could result in one single contract, 
rather than requiring a Networx Universal and Networx Select.
    A good model for this kind of bid would be the GSA 
Connections contract, where vendors were allowed to bid on 
different categories and task orders were competed within the 
companies that were qualified in each category. This would 
allow the government to also have the ability to offer products 
and services that go from the more commodities-type to the very 
complex-type networks. Additionally, it would allow companies 
which have specific expertise to assist the government in each 
of the different categories.
    We are very pleased to see the requirement for managed 
network services, since we have a history of offering this type 
of service. We have found that many of these types of services 
do not fit into a fixed price service-based or equipment-based 
CLIN. These managed services are better served if they are 
priced on an individual case basis, which reflects the 
customized solution which meets each individual customer's 
unique situation.
    We believe that the converged services, such as Voice Over 
Internet Protocol [VOIP], and Services Blending products such 
as local calling, long distance, voice, DSL, and wireless 
services on one bill are already here. We think that Networx 
should have the ability to include other services and 
technologies that will be developed in the future to be 
included in this contract.
    Thank you for allowing SBC the opportunity to participate 
in these hearings. SBC looks forward to working with you and 
the GSA on the continued development of the Networx contract. I 
would be happy to entertain any questions.
    [The prepared statement of Mr. Johnson follows:]

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    [GRAPHIC] [TIFF OMITTED] T4004.078
    
    Chairman Tom Davis. Thank you very much.
    Mr. O'Hara.
    Mr. O'Hara. Thank you. Good afternoon, Mr. Chairman.
    I believe if we look back, I think we would all conclude 
that the FTS program has generally worked well and served the 
needs of the government. However, since the time that the FTS 
was last awarded, there has been tremendous change in our 
industry. And we believe strongly at Level 3 that the Networx 
approach, particularly the universal approach, as contemplated 
in the RFI, does not allow the government to take advantage of 
the changes in our industry, and in fact would limit the 
government's ability to derive best value.
    Level 3 was founded on the principle of deploying the 
technology that pushes the cost-of-service down. Our goal was 
not to have the lowest cost of service the day our network 
construction was complete, but rather design and construct our 
networks in a way that allowed us to take advantage of future 
changes in technology and always enjoy the lowest cost of 
service.
    We invested $14 billion toward this goal, and in those 
areas where we offer service, we have become a formidable 
competitor. In a matter of a few short years, we've become one 
of the top three Internet backbones in the world. We're one of 
the top two providers of dial-up services to the Internet, and 
we're one of the top transport service providers in both the 
United States and Europe.
    Our goal has never been to emulate the incumbents, as we 
saw the industry realigning itself around areas of sustainable 
competitive advantage. We believe that in a world changing as 
radically as ours, trying to be good at all things while 
competing against focused competitors is a difficult, if not 
impossible task.
    In this environment, where both the services and the 
industry winners and losers are far from certain, it is 
perilous to try and predict the future. Instead, users are far 
better off taking advantage of and accommodating the inevitable 
changes in their plans. While the last 5 years have been 
difficult ones for our industry, there is no reason to believe 
that the rate of change is going to slow down. Against this 
background, we believe that the government can best achieve 
best value by considering the following alternatives.
    First, allow companies to play to their strengths. 
Requiring potential bidders to support all services, including 
legacy services everywhere, will have the unintended 
consequence of higher prices. In the IP arena for instance, 
where vigorous competition has emerged over the last few years, 
we've seen prices drop approximately 80 percent just in the 
last 2 years.
    Second, define the services and the required product 
attributes that the government desires, not the underlying 
technology. Level 3 supports approximately 25 billion minutes 
per month of calling in support of our ISP customers. If 
measured separately, this volume would place us among the top 
five local phone companies in the country. Our customers 
consistently rate us as their best quality provider. However, 
we do not own or deploy a single circuit switch. Instead, we 
support the volume with a soft switch, essentially a general 
purpose computer replacement for the very expensive traditional 
switching technology. Since we first introduced our soft switch 
services 4 years ago, our customers have enjoyed approximately 
an order of magnitude decrease in price.
    Third, the government should maintain flexibility on which 
providers they do business with, not just today, but throughout 
the life of any contract they enter. Since FTS was last 
awarded, dozens of new entrants have raised hundreds of 
billions of dollars of capital. The cumulative effect on 
innovation, pricing and quality brought about by this set of 
market forces is far greater than any benefits derived from a 
long term contractual commitment. Locking into one or two 
providers today would deny the government the market benefits 
over the life of the contract.
    In summary, the telecommunications market today does not 
look like the industry that existed just a few short years ago. 
In order to best derive best value, we believe that the 
government's approach to communications procurement should take 
advantage of these market changes.
    Thank you.
    [The prepared statement of Mr. O'Hara follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Hogge.
    Mr. Hogge. Good afternoon, Chairman Davis and members of 
the committee. I appreciate the opportunity to appear today to 
discuss the GSA's Networx program. My name is Jerry Hogge, and 
I am senior vice president of Winstar Government Solutions. I'm 
here to offer Winstar's perspective as an incumbent supplier in 
GSA's MAA and FTS 2001 programs, and to offer our specific 
recommendations as to each of the six issues outlined in your 
February 17th letter to industry.
    In addition to the six important issues raised by the 
committee, I'd like to comment on what Winstar views as the 
most vital, overarching issue for the Networx program, and that 
is the ability of the program to properly address homeland 
security, continuity of operations and their relationship to 
our Nation's telecommunications networks.
    As we all know, communications are essential to the 
efficient and effective operation of any organization. This is 
particularly true with large, distributed organizations such as 
the Federal Government, where our telecommunications networks 
are at the heart of all forms of communication, whether voice, 
data or video. Through the terrible events of September 11, 
2001, we learned some very valuable lessons about the 
importance of communication and the essential role our 
telecommunications networks serve in crisis situations. 
Unfortunately and more importantly, we were also confronted 
with some of the frailties and limitations of our 
telecommunications networks.
    One aspect of homeland security and telecommunications 
networks is physical diversity into and out of key Federal 
sites. In fact, numerous independent third party experts and 
observers have concluded that all key commercial and government 
buildings need to be served by at least two separate 
facilities-based networks and enter and exit the building from 
separate points.
    As such, Winstar contends the Networx program should 
directly address this important issue. In order for Networx to 
adequately address these important issues, there should be an 
express requirement for: One, a comprehensive network inventory 
assessment; two, a program mandate that critical government 
sites be identified and that special communications 
requirements be determined, including physically diverse 
infrastructure requirements; three, a time down requirement for 
procuring diverse network connectivity at these critical sites; 
and four, an ongoing program of review.
    I will now direct the remainder of my remarks to the six 
key issues raised by the committee. Concerning a centrally 
managed program strategy, Winstar continues to see substantial 
and lasting value in its relationship with the GSA FTS, and 
believes that there are meaningful benefits for the competitive 
industry and the Federal agency users through FTS's acquisition 
expertise and program leadership. A centralized acquisition and 
program approach can facilitate the establishment of standards, 
promulgate shared, best common practices, provide an organized 
evaluation of alternatives, and lend a sensible, unified 
approach to contract management.
    For national network requirements, such as those intended 
to be within the scope of Networx Universal, a centralized 
approach also reduces transaction costs for the government and 
for industry participants, thereby making the procurement 
action more efficient for the parties involved. Both small and 
large agencies can benefit from GSA's ability to aggregate 
Federal buying power, and from their highly specialized 
expertise and telecommunications acquisition and program 
management.
    Transition strategies and cost and contract performance 
period. The transition from one major program to another is a 
daunting task. Direct costs, such as service initiation 
charges, as well as indirect costs, such as lost productivity 
and temporary interruption of operations can be substantial. 
The time, capital and human resource commitments required by 
the government as well as the vendor community weigh heavily in 
the complex calculus of an agency's decision to make a change 
and thus have a direct link to the contract's period of 
performance.
    The transition from the original FTS program to FTS 2000 
took roughly 18 months, and reportedly cost several hundred 
million dollars. Approximately 10 years later, the transition 
from FTS 2000 to FTS 2001 took roughly 2 years to complete and 
also came at a substantial cost. The magnitude of these 
transition costs and the lengthy timeframes required to 
complete the task create inertia against change.
    We know empirically that movement between programs and 
among vendors is not something agencies take lightly nor engage 
in frequently. However, in order for there to be sufficient 
business opportunity to drive competition at the time of 
contracting, transition must be a practical and sensible option 
for agencies as they evaluate the costs and benefits of making 
a change.
    In order for Networx to represent a meaningful business 
opportunity to industry and a rational choice for agency users, 
GSA must balance these competing factors by: One, creating a 
shared financial resource to defray one-time costs of 
transition; two, establishing a 10 to 15-year contract period 
of performance structured as two or three 5-year periods; and 
three, providing minimum revenue guarantees sufficient to 
motivate competition and justify specialized investment that 
may be required to comply with the requirements of the Networx 
program.
    Billing requirements. As with any business opportunity, 
industry will evaluate the revenue potential against the cost 
of acquiring and maintaining that revenue. The Federal 
Government has longstanding and unique requirements for billing 
telecommunications services. But as the cost of 
telecommunications services has declined over the past decades, 
the rationale for many of these unique requirements has 
diminished. The government and industry have jointly recognized 
this fact, and have made changes to certain billing 
requirements. Winstar expects the trend toward commercial 
standards to continue into the Networx program.
    Services and technologies required by the agency users. In 
order for the GSA and the Federal agency users to achieve 
maximum benefit through the Networx program, there must be a 
means for ensuring that both mature and leading edge 
technologies are available to agency users. By mandating 14 
major service categories, each with multiple sub-service 
components that must be provided on a ubiquitous basis, the 
Networx program will inherently limit the number of potential 
bidders to only the largest telecommunications companies. At a 
time in our history when technology advances and service 
innovation are occurring at such a rapid pace, this broad 
mandate and resulting limitation on potential prime bidders 
works against the government's interest. Winstar recommends 
that GSA consider a tiered approach to service offerings 
designed to take advantage of the strengths of as many 
companies as possible.
    In conclusion, I'd like to again congratulate GSA on its 
accomplishments through FTS 2001 and the MAA program 
initiatives. GSA has done an exceptional job at managing 
complex programs through some of the most challenging times in 
our industry and in our country.
    At this time in our Nation's history when homeland security 
is one of our greatest challenges, I submit that economic 
savings should not be the most important objective for the 
Networx program. Instead, our collective focus in this 
procurement should be on ensuring that the Networx program does 
everything possible to guarantee that telecommunications 
services are available to facilitate the efficient operation of 
government in routine and crisis situations, and achieve these 
objectives by utilizing the strengths of as many 
telecommunications companies as possible.
    [The prepared statement of Mr. Hogge follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Page.
    Mr. Page. Thank you, Mr. Chairman and members of the 
committee. My name is Dave Page, and I'm the vice president for 
BellSouth Federal Division.
    It's a privilege to appear before you today to present the 
views of BellSouth on this new important government program, 
Networx. Our response to the Networx RFI emphasized the need 
for open and fair partnering, use of best commercial practices 
in as many areas of the acquisition process as possible, and an 
innovative contracting strategy designed to concurrently drive 
prices downward and reduce contract modification overhead. We 
have four recommendations.
    First, Mr. Chairman, we believe both Networx Universal and 
Networx Select awards should be made at the same time. As the 
RFI is written today, Networx Universal will receive their 
award 9 months prior to Networx Select. Under this scenario, 
Networx Universal awardees will have established themselves as 
vendors of choice for almost a year prior to Networx Select 
awardees being able to begin. Subdividing procurements by areas 
of need would complement the select and universal categories. 
For example, instead of finding two or three companies in the 
world that might be universal by the early definitions, you 
could have 10 companies who offer long distance, VOIP, etc.
    Second, we also strongly advocate the use of standard 
commercial pricing structures in billing platforms. CLIN-based 
pricing, which is an artificial bundling of charges, is 
government-specific and does not represent best practices in 
commercial business. CLIN-based pricing requires either the 
development of a customized billing platform or manual 
conversion from commercial billing to CLIN billing, both of 
which are inconsistent with lowering costs.
    Third, we believe timely contract modifications are needed 
to provide the most advanced and up to date services to end-
user agencies. The current modification process under an MAA 
takes far too long. Specifically, we believe the modification 
process should be handled either at the regional or national 
level, but not both. Required information for modification 
requests should be simple and straightforward: brief technical 
descriptions, brief descriptions of benefits and pricing. The 
government should commit to a rapid timeframe within which the 
modification request would be processed, say 30 days.
    Finally, moving beyond the incremental to the innovative, 
addressing timely contract modifications and more flexible 
pricing strategy, the automatic inclusion of approved tariffs 
under Networx and the use of tariff pricing as not to exceed 
pricing would be a significant step forward for GSA. I 
emphasize that the pricing should be used as a ceiling; 
discounts would be handled on an individual case basis.
    Mr. Chairman, BellSouth's recommendations are 
straightforward and direct. GSA is moving forward with good 
intentions to be a true best provider to its customers. With 
the suggestions made today, BellSouth is confident GSA will 
continue to be the governments' best answer to complex, 
involved communications contracts awards.
    Mr. Chairman, BellSouth appreciates the opportunity to 
share its views, and we welcome any questions you may have.
    [The prepared statement of Mr. Page follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Addeo.
    Mr. Addeo. Good afternoon, Chairman Davis and members of 
the committee. My name is Lou Addeo, I'm the president of AT&T 
Government Solutions.
    I appreciate the opportunity to present AT&T's views 
concerning GSA's Networx acquisition strategy. AT&T commends 
the committee's interest in this important acquisition, and 
looks forward to working with both the committee and GSA to 
meet government telecommunications and network needs. AT&T has 
a proud history of providing service to the government. 
Thousands of AT&T employees provide sophisticated integration 
information solutions, professional services and network 
technology.
    Networx is a logical follow-on to GSA's successful FTS 2001 
Fed wireless and satellite programs, and GSA should be 
commended for its initiative in preparing the Networx 
acquisition. If properly structured, Networx can provide 
agencies and taxpayers three important advantages: convergence 
of services, security and ubiquitous service. We have 
recommendations for each.
    First, Networx can encourage convergence of services over 
IP, Internet Protocol, with the promise of improved technical 
capability, increased security and lower costs. Agencies will 
be attracted to providers that can offer such innovations as 
Web-based business transactions, multi-media instant message, 
broad band wireless, and grid networking.
    Second, in the post September 11th era, Networx must 
address the government's need to have unsurpassed network 
security and survivability. AT&T has made huge investments in 
its network, nearly $3 billion in 2003 alone, so it can provide 
security IT services. Events such as the September 11th 
attacks, the 2003 blackout, the seemingly daily attacks by 
computer viruses and worms, and the recent anthrax and ricin 
attacks on Capitol Hill further demonstrate the need for 
national security emergency preparedness and continuing plans. 
For this reason, AT&T recommends that robust security 
capabilities be expressly required in Networx.
    Third, the agency mission requirements demand ubiquitous 
services. Networx should guarantee the agencies that the 
successful Networx contractors will serve all their existing 
personnel and customers. AT&T supports the acquisition goals of 
service continuity to all existing and new FTS 2001 users. We 
must be able to provide service virtually anywhere. Agencies 
simply cannot afford to leave some constituencies behind. They 
must reach every corner of the United States and perhaps around 
the globe.
    These three opportunities, convergence, security and 
ubiquity, make it critical that the Networx acquisition should 
stay on its present schedule, or perhaps be accelerated, so the 
government can realize the benefits of both converged 
technologies and large scale contracting. Our analysis 
indicates that many agencies recently have bypassed FTS 2001 
and acquired services through independent acquisitions. 
Agencies may be taking these unilateral actions because the 
remaining period of FTS 2001 is short. This short time period 
introduces substantial limitations into an agency's ability to 
plan for and address telecommunications and network 
requirements. For this reason, a new contract is critical.
    We understand that GSA has the goals of continuous 
competition, ease of acquisition, use of commercial methods and 
expeditious transition. Let me discuss each of these. 
Continuous competition. Multiple contract awards will maximize 
competition, reduce costs and provide contractors enough 
business to recover costs and provide best value.
    Schedule contracts. AT&T agrees with the multi-tiered 
acquisition strategy because it provides agencies choice and 
flexibility in satisfying their network needs. To bring 
agencies even greater flexibility, GSA should provide an 
additional option for agencies of basic telecommunications-like 
schedule.
    Three, contract term and practices. Many GSA objectives can 
be met through commercial contract terms and practices. For 
example, some agencies may be satisfied to be billed using 
commercial billing systems. Commercial systems typically result 
in simplification, better prices, easier transitions, and more 
flexible business arrangements. AT&T looks forward to working 
with GSA and agencies to bring commercial best practices into 
Networx.
    Modernization and transition. GSA and user agencies must 
actively manage and accelerate transition. I urge the Federal 
Government to move expeditiously on Networx to bring an 
unparalleled level of service and innovation to U.S. citizens 
in the 21st century E-Gov. world.
    I thank the committee for the opportunity to share AT&T's 
views on Networx acquisition. AT&T is committed to serving the 
government to assure that this opportunity is fully met. I look 
forward to any questions you may have.
    [The prepared statement of Mr. Addeo follows:]

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    Chairman Tom Davis. Thank you very much.
    Ms. Murphy.
    Ms. Murphy. Mr. Chairman and members of the committee, I 
want to thank you for giving me the opportunity to testify 
today.
    The current acquisition strategy as described in the RFI 
for Networx is unlikely to provide robust competition from many 
sources, thereby restricting the government from securing cost-
effective, high quality services. Moreover, the current plan 
does not encourage industry to provide new technology or 
innovative solutions to meet the government's increasingly 
complex information technology requirements.
    We believe that the two-contract award approach of Networx 
Universal and Networx Select is flawed. The Networx Universal 
acquisition is geared to the traditional long distance 
carriers, and represents business as usual for FTS and the 
agencies. The universal procurement would have a small number 
of awardees. The large number of mandatory services that must 
be delivered within the United States and to international 
locations under the Networx Universal procurement reduces 
competition, limits new market entrants and also reduces the 
attractiveness of the Networx Select procurement to other 
competitors.
    The Networx Select procurement appears to be for all other 
vendors, both large and small. However, it is unclear how the 
select vendors will compete with the universal providers, since 
the select contract is scheduled for award 9 months after the 
award of the universal contract. The select procurement would 
not allow incumbent local exchange carriers, competitive local 
exchange companies, wireless carriers, satellite providers, 
systems integrators, or small businesses to directly compete 
with traditional long distance vendors.
    Some would say that the universal procurement approach is 
needed to provide service continuity for existing customers. We 
agree that service continuity should be provided for those 
customers who do not want to make a change at this time. 
However, all customers will eventually transition to new 
technologies, either because they have new application 
requirements or to take advantage in the improvement in price 
performance that those new technologies, like Convergence or 
Voice Over IP will provide. It is incumbent upon industry, GSA 
and government customers to work together to ensure smooth 
transitions to different providers or new service platforms. 
Verizon is confident that we can mitigate transition risks for 
those customers choosing to make a transition by active project 
management with dedicated resources.
    There is no need to artificially create two procurement 
classifications of universal and select, when the marketplace 
can determine the best solution. For example, if the Department 
of Agriculture, with numerous remote sites, has a requirement 
for services at all locations, then a vendor with greater 
infrastructure coverage will have an advantage over a vendor 
with fewer facilities. Conversely, there are other agencies 
with requirements for services primarily in major metropolitan 
areas or specific regions where more vendors, including 
Verizon, could compete equally against traditional long 
distance carriers.
    Competition in the marketplace and customer requirements 
should determine the awardees for these specific task orders. 
Verizon requests that the government consider several key 
changes to the Networx acquisition strategy to maximize 
competition, reduce risk and achieve best value, while ensuring 
rapid introduction of new technologies and offerings.
    First, eliminate the distinction between Networx Universal 
and Networx Select and create one Networx procurement with 
several service categories, allowing for multiple awardees 
within each category. Significantly reduce the number of 
mandatory and ubiquitous service offerings. Develop multiple 
categories of services, for example, voice, data, converged 
solutions, and others to allow all segments of the industry to 
participate in direct competition with the traditional long 
distance carriers. If desired, some of the standard commodity 
based service offerings could be placed on GSA schedules. Allow 
vendors to structure their offerings to the geographies where 
they provide services with the opportunity to expand them 
during the life of the contract. Reduce the number of 
government-unique management, operation, and billing 
requirements to allow vendors to use their commercial systems, 
thereby reducing costs and risk for the government. Finally, 
create a rapid contract modification process to add new 
technologies as they are made available.
    In summary, GSA should allow the marketplace to drive the 
service offerings, geographic coverage and prices for the 
Networx acquisition. The dual procurement approach will only 
dilute the power of the marketplace and cause increased costs, 
higher risks and added confusion for the government. A single 
procurement with multiple awards based on several categories of 
service configured for maximum industry participation will 
produce the most flexible and stable contract platform for the 
future and result in cost savings for the government.
    I thank the committee for the opportunity to discuss the 
Networx procurement, and would be pleased to answer any 
questions.
    [The prepared statement of Ms. Murphy follows:]

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    Chairman Tom Davis. Thank you very much.
    And Jerry, before we get to you, let me just note, that was 
a vote. We have two votes on the floor. What I intend to do is 
let you finish your testimony, try to get a question or two in, 
then I'm going to turn the meeting over to Ms. Norton. 
Unfortunately, she doesn't get to come over and vote with us. 
Now, we're trying to change that, but that's another whole 
story. [Laughter.]
    And I'm going to give her some of my questions to ask. And 
Chris, if you want to come back, we can hold them or we can 
give the questions, we can get them all in the record. That way 
we can move you on. I know from your perspective, when this is 
over, instead of holding you for what could be some time, 
consultants bill the whole time. So we are conscious of that--
[laughter]--and I want to get them out of here as quick as we 
can, so our phone bills stay low. Mr. Edgerton.
    Mr. Edgerton. Thank you, Mr. Chairman and members of the 
committee. Good afternoon. My name is Jerry Edgerton, I'm the 
senior vice president of MCI's Government Markets Division. I 
appreciate the opportunity to appear before the committee 
today. Thanks to you, Mr. Chairman, and the committee, for your 
support of the FTS program.
    I'm here today to share MCI's perspective on GSA's upcoming 
Networx procurement. MCI is the largest telecommunications 
provider to the U.S. Government. My company supports more than 
75 Federal agencies, and some of the most complex and demanding 
networks in the world.
    MCI has had the privilege of working under a number of 
contract vehicles to provide the best possible service on 
behalf of the government to the American taxpayer. Our guiding 
principle has been and will always be to make sure that the 
Federal agencies get the full benefits of competition, 
including the best available technology, world class service, 
innovative problem solving, and most importantly, low prices.
    I would like to also thank the GSA, particularly the FTS 
organization, for their leadership during a tumultuous time in 
the industry. Their leadership has resulted in the FTS 2001 
program that has delivered very strong results across all 
government agencies. According to a recent GSA IG report to 
Congress, and as has been previously mentioned here today, FTS 
has saved the government more than $574 million in fiscal year 
2003 alone, and almost $2 billion for the life of the program. 
The same report finds that the pricing for FTS 2001 services 
are 53 percent lower than the same services provided to 
commercial clients. Agencies and taxpayers have been well 
served by FTS 2001.
    MCI has worked closely with GSA and government agencies to 
deliver innovative solutions in many areas, including call 
centers, security solutions, and importantly, disaster 
recovery. These services were added to the FTS contract as 
customer need and technology evolved since the original award 
in 1998.
    MCI continues to bring competition and innovation to the 
FTS program. Even through the difficult challenges of the past 
2 years, we have remained laser focused on quality and customer 
service. MCI has overcome the challenges and is here today a 
new company. We have a new board of directors and a new senior 
management team. We have an unsurpassed commitment to the 
highest business ethics, and will be the model for corporate 
governance.
    The new MCI has been working tirelessly to restore public 
trust and successfully emerge from Chapter 11. With the 
exception of completing our financial filings, MCI has 
satisfied all significant tasks required for its emergence, 
including obtaining all Federal and State regulatory approvals. 
Emergence is expected within the next couple of months.
    In addition, after a careful review by GSA, MCI was found 
to be a responsible government contractor. An independent third 
party conducted a customer satisfaction survey in August 2003 
to gauge how well MCI is serving our government customers on 
the FTS 2001 program. MCI received universally high marks for 
communication and overall performance. I'm proud to say that 
our customers cited MCI's people as its greatest strength. This 
is important to us, because it reaffirmed that our account 
teams and customer service specialists were continuing to focus 
on our customers, despite the challenges facing the company 
during this period.
    MCI is convinced, based on our experience, that the Networx 
program will continue to build on the success of the FTS 2001, 
and can maximize its primary goals of continuity, innovative 
solutions and flexible and competitive pricing. In our response 
to the Networx RFI, we recommended a three-tiered approach. The 
first category would be commodity-like services with commercial 
support. The second would add more complex services and 
government-specific management and operations support, similar 
to FTS 2001. The third would be task orders for customized 
complex requirements. This three-tiered approach will maximize 
cost savings by leveraging the buying power of the entire 
government, maintaining the flexibility to obtain customers 
services and benefit from ongoing innovations and technology.
    Mr. Chairman, there are a couple of additional issues that 
I would like to bring to the committee's attention that will 
affect the ultimate success of the Networx program. First, a 
binding consideration for many agencies is the continuity of 
service. Agencies with remote small locations should not be 
left behind, nor should the constituents that they serve. The 
Networx contract must require the winning vendors to provide 
service everywhere that service is provided to today. Vendors 
may need to form partnerships to achieve this goal. It is a 
critical necessity for agencies that offer services directly to 
the public, such as the Social Security Administration or the 
Indian Health Services or the Department of Agriculture, as 
well as agencies responsible for national security and defense.
    Second, to reduce the overall costs to agencies and 
ultimately the taxpayers, GSA should limit the expansion of the 
FTS 2001 billing, reporting and monitoring requirements. 
Current FTS 2001 requirements provide significant benefits to 
all agencies. However, if an agency has unique requirements, a 
task order approach eliminates the possibility of a significant 
cost increase borne by all agencies for a solution that 
benefits only a few.
    In conclusion, let me answer directly the question posed by 
the committee: Does a centralized government telecom plan jive 
with an evolving market? The answer is definitely yes. The FTS 
2001 program saved government agencies both large and small 
hundreds of millions of dollars, while at the same time 
allowing them to address the unique requirements of their 
missions. The Networx contract will continue to build on the 
success of FTS 2001 by providing similar cost savings, assuring 
that agencies have the flexibility to meet all of their 
communications needs, and providing an efficient vehicle for 
Federal users to obtain innovative solutions in an evolving 
marketplace.
    I thank you for the opportunity to appear. I'm available 
for any questions.
    [The prepared statement of Mr. Edgerton follows:]

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    Chairman Tom Davis. Thank you.
    Let me just very quickly throw out two questions that I've 
got, then Ms. Norton has some others, and I'll turn the gavel 
over to her, and we'll go over and vote. I'll come back if 
she's not through, but we may well be through.
    No. 1, is expanding the scope of the contract to allow 
State and local governments to participate off the schedule, 
how does that affect you? Your rates are so low in this case 
that you can't afford to do this to others. I'd like to just 
get a reaction to that, to the State and local governments 
being able to use this and buy anything whether it's GWAC 
schedules, whatever.
    And second, some have suggested that it's imperative that 
all government locations be served by a single, ubiquitous 
contract, others argue that innovative solutions to some 
communications needs would be encouraged by not mandating 
service to all current locations, and perhaps the standard 
ubiquitous service model may not be appropriate. What's your 
response to that? The ubiquitous model or scenarios that are 
tough to serve, they're areas where you don't make any money. 
I've gotten different reactions to that as I hear the 
testimony.
    So those are my general questions. I'm turning the gavel 
over to Ms. Norton, and she has the authority to adjourn this 
if she wants. I told her not to get too comfortable in the 
chairman's chair. [Laughter.]
    But we are working together on this, and I thank you very 
much.
    Ms. Norton [assuming Chair]. I'm not going to sit in the 
Chair's seat, because I would surely be tempted not to give it 
up if he comes back. [Laughter.]
    But I am going to allow any of you who wish to begin to 
answer the questions first that the Chair has just posed.
    Mr. D'Agata. Ms. Norton, I would support State governments 
having the opportunity to procure off of Networx. They, I know, 
would be delighted to have that opportunity. It would save 
procurement costs on their part, and it would benefit industry 
from having to compete on a State-by-State basis for the needs 
of the States.
    Ms. Norton. On that question, on that one issue, is there 
anyone else who wants to respond?
    Mr. Addeo. Yes, Congresswoman Norton. I support it in a 
general sense, having supported State and local governments for 
a few years. They do have some special approaches to doing 
business.
    Now, I think in general, they could take advantage of a 
contract of this type. But some State and local governments 
also pass down their price performance to non-State and local 
governments. So it would almost look as if they were passing 
down the pricing to commercial business. In that particular 
case, I would see that is a blending of the protection 
generally afforded Federal Government, State and local 
government in terms of pricing, that would be an issue. Other 
than that, I don't think it would be an issue.
    Ms. Norton. What kind? Are those commercial entities, or 
non-profits?
    Mr. Addeo. Yes, they're commercial. Some could be non-
profits, some could be commercial and some could be construed 
as both.
    Ms. Norton. Any other responses on that?
    Mr. Edgerton. I'd like to respond to that. We provide 
services to several States. What we find generally in conflict 
is that their procurement regulations are State specific, and 
they would probably have to make some exceptions in order to 
deal with, and buy off of, the FTS contract. It would not be a 
universal, just the privilege to buy off the FTS contract, but 
not necessarily allow the States to do that.
    Ms. Norton. No, it wouldn't, so those who wanted to might 
and those who didn't----
    Mr. Edgerton. If their procurement rules allow that. We're 
seeing all kinds of different procurement rules.
    Ms. Norton. And some might be quite willing to change their 
procurement rules if in fact there were cost savings here, as I 
assume there would be. I'm certain for the District of Columbia 
there would be.
    Are there other responses to the Chair's first question? 
Then we'll go on to his second question. Yes, Ms. Murphy.
    Ms. Murphy. With respect to the first question, Verizon 
would also support cooperative purchasing, assuming that it 
could be limited to governmental entities. We see that as 
allowing all of the public sector to take advantage of the 
broader purchasing power of the Federal Government.
    Ms. Norton. How about Mr. Davis' second issue? Does anyone 
want to comment on that one?
    Ms. Murphy. Ms. Norton, with respect to ubiquitous service 
or not, Verizon's position is that if you had a procurement 
approach that provided specific task orders, the agencies could 
decide whether they needed service to be provided ubiquitously 
or not. When we look at traditional voice long distance 
services, for example, those have traditionally been offered on 
a ubiquitous basis. We certainly wouldn't want to disadvantage 
those agencies that want to continue that way.
    But as you look at the emergence of new technologies, very 
often those are not available on a ubiquitous basis, they may 
come out first in larger metropolitan areas and then be offered 
more broadly over time. We would especially want newer 
technologies to be available to the government on a non-
ubiquitous basis, so that the agencies could perhaps have the 
opportunity to pilot new technologies, which would allow them 
to ease their transition costs and risks.
    Ms. Norton. My understanding from the question that I asked 
the prior panel is that they are willing to look into that. I'm 
not sure. It does seem to me if you're talking about a country 
as big and diverse as this, we've got to look at those options. 
I was pleased to see that was seriously being considered.
    Mr. Edgerton.
    Mr. Edgerton. Yes, Madam Chairwoman. Do you like that 
title?
    Ms. Norton. I'll accept that. [Laughter.]
    Mr. Edgerton. Our experience in dealing with the customers 
and the agencies is that, when they roll out a program, they 
roll it out ubiquitously. They may do it on a timing basis, but 
the people in New Mexico or the people at Social Security 
Administration, I think our toughest site was at the bottom of 
the Grand Canyon. They want the same level of service. They 
want the same response time as the people in Baltimore get.
    So it's a demand brought about by technology. I was 
thinking about what's changed since we entered into this 
contract. Most of us had modems. What's a modem? And we dialed 
up at 56 kilobytes, and now most of us have cable TV access or 
DSL from Verizon. And in turn, just the expectations have 
changed. And that's taking place in the agencies and by the 
customers. So the ability to provide ubiquitous services is a 
demand. We are in a position and have attempted to fulfill that 
demand.
    Ms. Norton. Mr. Addeo.
    Mr. Addeo. I'm not as sweet talking as Jerry, but--
[laughter.]
    Ms. Norton. Just try a little bit of it. [Laughter.]
    Mr. Addeo. I'll work on it.
    Mr. Edgerton. And you never will be.
    Mr. Addeo. No, I won't. I won't.
    I think ubiquitous service in the dimension that we just 
talked about is one that we all support. The network and the 
carrier community and the partners here at the table are not 
just using and looking at ubiquity from the perspective of 
providing basic service alone in themselves, but of providing 
services through partners. And networks are evolving 
technologically, and so are we evolving through partnerships, 
and we know how to do not only the basic network work, but we 
also know how to do network integration work, which is a 
natural evolution of where we're going in terms of 
telecommunications.
    Ms. Norton. Mr. O'Hara.
    Mr. O'Hara. Ms. Norton, I believe that there is an absolute 
requirement for ubiquity of service. However, it's not apparent 
to me that a single provider needs to be relied upon to provide 
that service. No carrier on this panel is capable of providing 
all services themselves. They do partner, they do select 
teaming partners, etc. However, there is a cost associated with 
that partnership, depending on the sophistication of the 
company involved. Either way, those costs of the partnership 
get passed through to the government, and I would submit that 
in many instances, the government may be better off by taking 
business, and buying, for instance, from a Verizon in Verizon 
territory versus an SBC in Verizon territory that would 
probably be subcontracting to Verizon.
    So while there may be a need at the agency level for 
ubiquity of service, it's not apparent that you'd need to have 
a requirement that all providers provide all things everywhere.
    Ms. Norton. Yes, sir, is this Mr. D'Agata?
    Mr. D'Agata. Yes. Ms. Norton, I think one of the beauties 
of the FTS 2001 program is that the General Services 
Administration is able to aggregate requirements to the benefit 
of all agencies. So contractors consider that and provide 
prices that are very competitive.
    Most of the agencies that we do business with want a single 
point of contact for their services. So if it happens to be 
Customs and Border Patrol and they have services going to 
remote sites around the country, they want someone to manage 
that for them. They want someone to provide a wide area network 
for all of those locations, and they want service level 
agreements to be met at each site. One site is not necessarily 
more important than another.
    So I think the benefit to the FTS 2001 program and 
hopefully the Networx program is that it will be able to 
provide ubiquity to all of the agencies.
    Ms. Norton. This discussion is most important. First of 
all, we've broken down ubiquity to what it means. Yes, for 
Border Patrol, but what about the 50 other agencies who may 
have needs that are far more concentrated? That's why somebody 
needs to look at this. If we've got the big bucks here, we have 
to look at what in fact ubiquity means, and whether indeed what 
we have now is all things told, the best way to do it, because 
you don't make a hell of a lot of savings breaking it up into 
several companies.
    But it's clear from the testimony of the prior panel they 
don't know. But what is also clear is that they want to find 
out. And that's why I think everybody here ought to be 
satisfied with that notion. Was there anyone else who wanted to 
respond on the ubiquity question?
    Mr. Page. I would like to just kind of tag along on what 
you just said. For example, Health and Human Services might 
want a ubiquitous nationwide network, but CDC, which is located 
in Atlanta, may have some very unique requirements that don't 
fit that ubiquitous network. I think we need to have the 
flexibility to be able to look at the people that do want the 
network that's nationwide, and the ones that are just very 
local in nature, with very specific needs.
    Ms. Norton. Are there any other responses there? Let me ask 
a question that the chairman wanted to ask. And I'd like to 
hear what each of you, what the response of each of you would 
be to this question. Will your company be able to participate 
with a reasonable chance of success in Networx as it is 
currently configured in the RFI? Why don't we just start here 
and go down the line.
    Mr. D'Agata. From Sprint's standpoint, Ms. Norton, we feel 
that we will be able to compete in the Networx architecture.
    Mr. Johnson. Ms. Norton, from SBC, absolutely we could 
compete. I think there would be some of the issues that we 
outlined earlier, transition, billing, things like that, but 
absolutely we'd be in a position to compete.
    Mr. O'Hara. From a Level 3 perspective, I suspect that we 
could compete. We may choose not to compete for the universal 
portions of the program, as the government through that program 
is essentially shifting risks and costs onto Level 3 where we 
don't see adding a lot of value. To the extent that a tiered 
approach or some other select approach is adopted, then I think 
we could bring tremendous value through this process to the 
government.
    Mr. Hogge. As far as Winstar is concerned, I guess the 
answer depends upon the ultimate answer to the ubiquity 
question, how that turns out. In terms of Winstar competing for 
this as a prime bidder, if ubiquity turns out to mean 
everything everywhere, particularly with some concept of a 
postalized rate, that would be quite a challenge for Winstar, 
given our network architecture and infrastructure is focused 
and concentrated in major metropolitan markets. If ubiquity 
turns out to mean something else, then the answer to my 
question would improve in terms of Winstar competing for 
Networx as a prime bidder. Certainly, as an incumbent provider 
in the MAA program and FTS 2001, we have a substantial 
incumbency position, particularly on the local side. So we have 
demonstrated our ability to compete. It's just the scope and 
breadth of the way the RFI is written today that is giving us 
some cause for concern.
    Mr. Page. From a BellSouth perspective, we certainly could 
go after the universal part of Networx. However, we would have 
to do that through many layers of subcontractors to be able to 
hit the ubiquity that it currently calls for. At that business 
case review, we might choose not to do so. That's why we feel 
strongly that we need to have the merging of the select and the 
universal with different categories.
    Mr. Addeo. AT&T feels strongly that we could compete, given 
the current RFI. I think over 49 respondents came in and 
responded to it. And with regard, as we follow on with the 
discussion on ubiquity, I think it really brings to the fore 
one of the key questions. We will be partnering with other 
carriers, other companies and other partners, either directly 
in, and neither to the universal and/or the other and perhaps 
on the schedule side.
    Ms. Murphy. Ms. Norton, Verizon would have difficulty 
responding to the universal portion of Networx on our own, 
without extensive partnerships that would add cost to the 
government. We have not yet determined whether we would be 
interested in participating in the select portion, because that 
has not been as well defined so far. Assuming that GSA, because 
of its openness to some of the ideas discussed today, combines 
the procurements into one with some multiple categories where 
there is the ability to provide services on a more flexible 
basis, then Verizon would be well positioned to compete on the 
Networx contract.
    Mr. Edgerton. I find it fascinating that we, in fulfillment 
of the current set of services of FTS 2001, use all the people 
at this table to fulfill those services. We have contracts and 
basically use these competitors to provide the services in 
fulfillment of FTS 2001. So we are in a position to compete and 
look forward to it.
    Ms. Norton. All right, now, I want to get a little 
competition going on the panel. [Laughter.]
    As you might have gleaned from my earlier comments, I'm 
interested in the lowest price for the government, of course 
with the requisite quality of service. But I belong to the 
``show-me school'' when it comes to lowering prices. There's a 
kind of instinctive notion that if you have several categories 
of service and multiple awards in each category that you would 
lower prices. But that's instinctive. I'm not sure it's true.
    Would any of you be prepared to tell me why the price for 
the government would be lower than it is now in your view, if 
in fact we have that kind of competition among categories of 
service and with multiple awards to a number of companies? Why 
would the price be lower than it is now?
    Mr. Addeo. At the risk of starting the war, Madam 
Chairwoman, although I don't think there would be--I do think 
that a couple of comments first of all, I don't think, if this 
was a like-for-like contract, that you'd see a significant 
amount of price reductions. Although I don't think it will be.
    I do think, however, that some of the----
    Ms. Norton. Why don't you think so? If competition is 
supposed to do that, why doesn't it do it in this case?
    Mr. Addeo. I think that the current services, if you 
compare them against previous contracts, they're managed every 
year down, automatically there's a price reduction, and there's 
some market-to-market benchmarking already that exists within 
the contract. I think you heard already that the gentleman from 
Sprint had indicated that there was some concern as to the 
pricing on access, because there was not, in his forward view, 
the pricing on access reductions that he put into his contract 
where perhaps the others didn't win.
    But I think that there's convergence coming on with the 
network, where you'll see price performance enhancements and 
things like voice and video, which cost probably more than they 
need to cost right now, over time being converged into a 
technology that will be able to help reduce costs. That has to 
be identified and borne out over the next few months, few 
years. But you'll get substantial price reductions and price 
performance changes. But not on the like-for-like services.
    Ms. Norton. Yes, Mr. O'Hara.
    Mr. O'Hara. This is a case where, not surprisingly, I 
actually do disagree with a number of the other members of the 
panel. I think if you just look at what has happened in the 
private sector over the course of the last 3 or 4 years, at the 
differences in terms of price, the rate of price performance 
improvement or price compression. In those segments of the 
business that have been highly competitive versus those other 
segments of the business that have been less competitive, at 
least on a relative basis, you see radical changes in the rate 
of price performance.
    I don't see any reason to believe that same dynamic would 
not play out within the government sector. Whether you take the 
government's buying and you break it up into two or three 
buckets, they still represent massive buckets. Even if you were 
to break it down into many dozens of buckets, it would still 
have the wherewithal and the clout to bring tremendous pricing, 
complimented by much more rigorous competition for some 
segments of the business. And in those segments where you may 
not have as rigorous a competition, I think what I'm hearing 
for the Montanas and the Border Patrols and the like, you're 
still going to have at least three people competing, which is 
as good as you're likely to get through the universal approach 
in those areas.
    So I think there's tremendous benefit to be gleaned. I 
think the evidence from the private sector would bear that out.
    Ms. Norton. You know, Mr. Addeo, I hear what you're saying, 
and with this kind of contract, perhaps it is the case, you 
understand it is counterintuitive. It's counterintuitive to 
say, particularly when we're dealing in IT, there are things 
that even my IT people, they're almost giving them away now 
compared to what we were paying for them 3 years ago. It 
doesn't happen in everything that way, but certainly in IT, you 
just can't keep up with what competition has done.
    And again, I recognize this is a unique contract. There's 
not another contract like this in the world. So I'm willing, 
and I believe that GSA is willing, to look at what Mr. O'Hara 
refers to, which is the experience in the private sector, to 
see if it obtains here. But we ought to see if it obtains here, 
recognizing the uniqueness of the area in which we are 
operating with this GSA contract.
    Let me ask another question while the chairman is getting 
himself together here. Does the bundling of services, which is 
what we have here, make it harder or easier for small and 
minority businesses to participate in this contract?
    Mr. Johnson. Ms. Norton, I think absolutely, because I 
think there's always going to be a certain niche----
    Ms. Norton. What is absolutely?
    Mr. Johnson. That it would help, having minority businesses 
involved. I think certain services, especially a lot of the new 
tech, Voice Over IP, broadband deployment, I think there's 
going to be an active role, especially in certain geographies 
where there's a role for those businesses to play.
    As was stated earlier, I don't think any one industry 
participant can be all things to all people. There's going to 
have to be those kinds of relationships.
    Ms. Norton. Mr. Page.
    Mr. Page. I honestly think this is one of those ubiquity 
questions also, because I think where you really get the most 
for your small, disadvantaged businesses, the most use for 
them, the most advantage for them is in those unique little 
small areas, niche areas, where they can be probably more 
nimble than most of the organizations represented on this panel 
today. And they are able to work with a larger company or on 
their own to go after those niche, very specific need 
businesses.
    I think it would offer them, being able to bundle a lot of 
things together would give them a unique advantage.
    Ms. Norton. Your industry provides an opportunity for the 
new crop, particularly, of women and minorities who missed out 
when the great companies of the United States were built. So we 
hope you're not building another white male industry, when in 
fact we're starting from the ground up, and there are lots of 
young people out here from the broad spectrum of American 
society who could easily participate on the ground floor and at 
the highest levels in this industry.
    Mr. Addeo.
    Mr. Addeo. I think at this table, we certainly have that 
problem. But I do think there is no doubt that the GSA is going 
to have this in mind when they do this contract. And there are 
probably all these companies here before you have what they 
call small business mentoring programs, use of 8(a)'s. And 
again, we keep talking about the network business at its basic 
level. We're going to be providing basic services. When we talk 
about applications and new changes into the network and new 
partnership space, all that space or a majority of that space 
should be taken up by partners and then serious partners with 
regard to mentoring programs and small businesses.
    Ms. Murphy. Ms. Norton, I feel honor-bound to respond, 
under the circumstances. Scary as it may be, I'm going to agree 
with Mr. Addeo that when you're providing basic services, those 
commodity-like services, the players that are currently in the 
marketplace are the players who will be providing those.
    But as you look at the new technologies and the ability 
under the Networx contract to provide solutions to meet 
agencies' needs, there's a tremendous opportunity for 
partnering with small business, women and minority-owned firms 
and 8(a). I know that's an area that we've had particular 
success, when there is a solutions component to these contracts 
that allow us to provide a broader suite of services.
    Ms. Norton. Mr. Chairman, if I could just ask one final 
question.
    Chairman Tom Davis. [resuming Chair]. Sure.
    Ms. Norton. I'm a member of the Homeland Security 
Committee. Obviously security is a primary issue in your 
business. I'm wondering about concentration, a contract that 
concentrates services. When the airlines went out, and who 
would have thought that would ever have occurred in this 
region, Mr. Davis and I were left with an airport that was 
closed for 2 weeks, amazingly more than any place else.
    But what happened was, people hopped on Amtrak and got out 
of Dodge that way, and I suppose other ways as well. But Amtrak 
had a great flow of business during that time. I'm wondering 
whether we increase or diminish security by multiplying service 
providers and what your view of that is?
    Ms. Murphy. Ms. Norton, you speak to something that's very 
important, and it comes down to how you define ubiquity or 
continuity of service as part of the new contract, and why 
there needs to be a place for telecommunications providers to 
provide services in perhaps not all the way to the bottom of 
the Grand Canyon in every single case.
    If we look at the events of September 11, in particular 
what happened in New York and at the Pentagon, one of the great 
lessons learned by our customers is that continuity of 
operations requires diversity up to and including vendor 
diversity, carrier diversity, to make sure that in the event of 
another disaster they can continue to operate.
    Ms. Norton. Mr. Edgerton.
    Mr. Edgerton. I'd like to comment that since September 
11th, there have been lots of changes in network architecture 
and technology and diverse routings and so forth, to again 
provide the assurance that you have continuity of service, at 
least on your backbone networks. The next piece is how do you 
do that last mile and make sure there's continuity of service. 
That's one of the benefits of a procurement like this, that you 
can aggregate services traditionally in GSA facilities or 
government areas, and then get even a further level of 
redundancy as part of the overall solution.
    Ms. Norton. Mr. Edgerton, on this you all have my sympathy. 
All I can tell you is that when we had that blackout in the 
Northeast, it spread all over the country because of the 
interconnection of all of these.
    Mr. Edgerton. The good news is the telecommunications 
system continued to work. [Laughter.]
    Ms. Norton. OK. Mr. Chairman, I do want to say, in turning 
back your gavel, that you indicated that I did not have a vote 
on the House floor. And I want to thank you for helping me in 
that great 200-year fight. But I do want to put everybody on 
notice that I do have a vote in this committee. [Laughter.]
    Chairman Tom Davis. And a strong voice, if you haven't 
noticed. [Laughter.]
    Ms. Norton. And Mr. Chairman, I want to compliment you 
finally because as I looked at the size of this panel and noted 
the many--this is the biggest panel I think this chairman has 
had since he took over the gavel--I think it shows that the 
chairman believes in competition, because he's brought the 
whole industry here. And I'm going to coin a new slogan for 
him, leave no company behind. [Laughter.]
    Chairman Tom Davis. Let me thank the panel for bearing with 
us. We started late this morning, and you never know. When we 
started the markup it was going to be like that, and things 
happened along the way.
    We appreciate your bearing with us. I appreciate GSA for 
being here and continuing to take notes on this. I think the 
industry input is really important. The difficulty is that what 
we think we're going to get today isn't what we'd have gotten 2 
or 3 or 4 years ago. You're one of the most rapidly 
technologically developing industries in the world. And we need 
to maintain that flexibility, where we can come in and out and 
just get the best deal for the U.S. taxpayers and the 
government every step of the way.
    Your companies are leading the world. We're proud to have 
you here today. Good luck to all of you. Thank you.
    [Whereupon, at 1:56 p.m., the committee was adjourned, to 
reconvene at the call of the Chair.]
    [Additional information submitted for the hearing record 
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