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





  MAKING NETWORX WORK: AN EXAMINATION OF GSA'S CONTINUING EFFORTS TO 
       CREATE A MODERN, FLEXIBLE AND AFFORDABLE GOVERNMENT WIDE 
                       TELECOMMUNICATIONS PROGRAM

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

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 15, 2004

                               __________

                           Serial No. 108-223

                               __________

       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

                                 ______

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96-747                      WASHINGTON : 2004
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
TODD RUSSELL PLATTS, Pennsylvania    JOHN F. TIERNEY, Massachusetts
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
EDWARD L. SCHROCK, Virginia          STEPHEN F. LYNCH, Massachusetts
JOHN J. DUNCAN, Jr., Tennessee       CHRIS VAN HOLLEN, Maryland
NATHAN DEAL, Georgia                 LINDA T. SANCHEZ, California
CANDICE S. MILLER, Michigan          C.A. ``DUTCH'' RUPPERSBERGER, 
TIM MURPHY, Pennsylvania                 Maryland
MICHAEL R. TURNER, Ohio              ELEANOR HOLMES NORTON, District of 
JOHN R. CARTER, Texas                    Columbia
MARSHA BLACKBURN, Tennessee          JIM COOPER, Tennessee
PATRICK J. TIBERI, Ohio              BETTY McCOLLUM, Minnesota
KATHERINE HARRIS, Florida                        ------
------ ------                        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 September 15, 2004...............................     1
Statement of:
    Bates, Sandra, Commissioner, Federal Technology Service, U.S. 
      General Services Administration; and Linda Koontz, 
      Director, Information Management Issues, U.S. Government 
      Accountability Office......................................     6
    Scott, Donald, senior vice president, EDS U.S. Government 
      Solutions; Jerry Hogge, senior vice president, Level 3 
      Communications LLC; Robert Collet, vice president, 
      engineering, AT&T Government Solutions; Shelley Murphy, 
      president, Federal markets, Verizon; and Jerry A. Edgerton, 
      senior vice president, Government markets, MCI.............    42
Letters, statements, etc., submitted for the record by:
    Bates, Sandra, Commissioner, Federal Technology Service, U.S. 
      General Services Administration, prepared statement of.....     8
    Collet, Robert, vice president, engineering, AT&T Government 
      Solutions, prepared statement of...........................    69
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   105
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     4
    Edgerton, Jerry A., senior vice president, Government 
      markets, MCI, prepared statement of........................    83
    Hogge, Jerry, senior vice president, Level 3 Communications 
      LLC, prepared statement of.................................    61
    Kanjorski, Hon. Paul E., a Representative in Congress from 
      the State of Pennsylvania, prepared statement of...........   104
    Koontz, Linda, Director, Information Management Issues, U.S. 
      Government Accountability Office, prepared statement of....    19
    Murphy, Shelley, president, Federal markets, Verizon, 
      prepared statement of......................................    76
    Scott, Donald, senior vice president, EDS U.S. Government 
      Solutions, prepared statement of...........................    45
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California, prepared statement of.................   102

 
  MAKING NETWORX WORK: AN EXAMINATION OF GSA'S CONTINUING EFFORTS TO 
       CREATE A MODERN, FLEXIBLE AND AFFORDABLE GOVERNMENT WIDE 
                       TELECOMMUNICATIONS PROGRAM

                              ----------                              


                     WEDNESDAY, SEPTEMBER 15, 2004

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:15 a.m., in 
room 2154, Rayburn House Office Building, Hon. Tom Davis 
(chairman of the committee) presiding.
    Present: Representatives Tom Davis of Virginia, McHugh, 
Mica, Ose, Lewis, Platts, Waxman, Maloney, Cummings, Kucinich, 
Clay, Watson, Ruppersberger, and Norton.
    Staff present: Melissa Wojciak, staff director; David 
Marin, deputy staff director/communications director; Ellen 
Brown, legislative director and senior policy counsel; John 
Hunter, counsel; Robert Borden, counsel/parliamentarian; Robert 
White, press secretary; Drew Crockett, deputy director of 
communications; Edward Kidd, professional staff member; John 
Brosnan, GAO detailee; Teresa Austin, chief clerk; Sarah 
Dorsie, deputy clerk; Corinne Zaccagnini, chief information 
officer; Phil Barnett, minority staff director; Michelle Ash, 
minority senior legislative counsel; Mark Stephenson, minority 
professional staff member; Earley Green, minority chief clerk; 
and Jean Gosa, minority assistant clerk.
    Chairman Tom Davis. The hearing will come to order. I ask 
that my total remarks be put in the record. As all of you know, 
Congress is in the mad dash to adjournment. But I thought it 
very important before the close of this Congress to hold this 
hearing and make a few points to GSA, to the industry, and 
especially to the agencies.
    We have a couple objectives this morning. The first is to 
receive a progress report from GSA on the Networx procurement, 
and underscore to GSA and all of the parties interested in this 
procurement just how important I think Networx is to the 
Government.
    More than ever, and for reasons all of us know, the U.S. 
Government must be able to move information seamlessly, 
securely, efficiently, in the most cost-effective manner 
possible. This is best accomplished through a centrally managed 
communications environment.
    GSA is in the best position, both historically and in terms 
of its jurisdiction, to manage this environment. Networx must 
be this environment. In my mind, Networx must include a 
spectrum of services to allow agencies flexibility in meeting 
diverse requirements.
    This should include the ability to introduce new 
technologies, in this rapidly changing technology sector. And 
this should have a minimum contract value to assure the best 
industry participation. But, a minimum contract value can only 
be set by GSA if agencies and departmental participation is 
assured.
    As the chairman of the committee, I want to ensure every 
agency participation in Networx, because it is important to the 
operation of our government, and because it is the historic and 
jurisdictional responsibility of this committee to do so.
    Agency participation is best assured when agencies feel 
ownership of the contract. I think Don Scott is here today, 
representing EDS. He understands this point, because the 
Interagency Management Council he put in place for the original 
FTS 2000 set the stage for what I hope GSA considers for 
Networx. I want to see a Networx government that relies on both 
the Federal CIO Council and OMB's Office of Electronic 
Government for its management.
    The second message I want to deliver is the importance of 
ending the popcorn creation of networks across the government 
that too often are not interoperable, are agency or mission 
specific, and are expensive. Departments with 
telecommunications procurements underway today first must view 
Networx as the ultimate solution, and second, should consider 
strongly the existing FTS 2001 environment as the bridge until 
Networx is awarded.
    I express this view to the Treasury Department in 
correspondence and directly by phone with regard to the current 
telecommunications procurement.
    On this point, I am very disappointed that the Treasury 
Department elected to decline my request to participate in the 
hearing today. I am also disappointed that Treasury has yet to 
respond my letter asking that their current telecommunications 
procurement by reconsidered and ported to FTS 2001 pending 
award of Networx. I am disappointed that my request that the 
Treasury CIO meet with my staff has yet to be met.
    OMB's Office of Electronic Government shares my views about 
Networx and about Treasury's procurement in particular. This 
office, which was created by legislation I authored and this 
committee steered, understands the importance of an enterprise 
environment for communications and other components of what is 
termed enterprise architecture. This was the vision behind the 
creation.
    Treasury has chosen to disregard OMB's guidance, declined 
GSA's proposal that could very quickly produce substantial 
savings, and contribute to the communications environment many 
of us envision, and apparently disregard this committee's 
express concerns as well.
    Treasury's record of IT management doesn't justify such 
disregard. In fact, tax system modernization itself would 
suggest that the Department very seriously consider the advice 
it is receiving. This program started seven Presidents ago with 
Richard Nixon, has consumed billions and billions of taxpayer 
dollars, and it is still unfinished.
    I focus on Treasury, but my message is to all of the 
agencies, a vision which I know is shared by the majority of 
our committee colleagues, is for agency CIOs to report their 
requirements to departmental CIOs, and departmental CIOs to 
work with GSA to ensure their inclusion in a more unified 
centrally managed communications environment.
    So let's be clear. The committee intends to look carefully 
and critically at any communication procurement going forward 
to determine, first, whether it can be met through Networx, and 
second, whether FTS 2001 can satisfy its requirements as a 
bridge contract until award.
    Now, our Government finds itself today in one of the most 
critical periods in our Nation's history. Its ability to 
effectively move information is directly related to our 
national security. Further, its ability to move information 
also is directly related to the committee's jurisdiction. As 
chairman, I take that responsibility seriously, that is why we 
are here today.
    I look forward to the testimony.
    [The prepared statement of Chairman Tom Davis follows:]

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    Chairman Tom Davis. Any other opening statements? Any other 
Members wish to make opening statements? If not, as you know, 
it is our policy that we swear in witnesses. If you would rise 
with me and raise your right hands. We have two distinguished 
panelists to open.
    We have Sandra Bates, a Commissioner of the Federal 
Technology Service, the U.S. General Services Administration, 
and we have Linda Koontz, the Director of Information 
Management Issues, U.S. Government Accountability Office.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you very much. Please be seated.
    Sandra, you are no stranger to this committee. We will 
start with you. Then we will go to Ms. Koontz, and then we will 
move to questions. Thanks for being here.

 STATEMENTS OF SANDRA BATES, COMMISSIONER, FEDERAL TECHNOLOGY 
   SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; AND LINDA 
     KOONTZ, DIRECTOR, INFORMATION MANAGEMENT ISSUES, U.S. 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Bates. Mr. Chairman, members of the committee, thank 
you for the opportunity to speak to you today. Our Networx 
procurement is at an important stage. We consider Networx to be 
far more than just another in a series of Federal 
telecommunications contracts.
    Networx is an initiative whose success can profoundly 
affect the government's ability to move information at a 
reasonable cost to the tax-paying public. Its success depends 
on many factors. Networx will result in a series of contracts 
that are designed to meet the existing and emerging needs of 
our customers as addressed through our goals.
    The goals are: Service, continuity, highly competitive 
prices, high quality service full service vendors, alternative 
sources, operations and transition support, and performance 
based contracts.
    Networx will provide a seamless, interoperable and secure 
operating environment for the Federal Government. The 
innovations and creativity of the industry will be challenged 
by Networx. We have revised our Networx strategy based on the 
guidance from this committee, our customers, and the industry.
    Since our last discussion, we have had an ongoing dialog 
with industry and others to mature our strategy. As a result of 
this dialog, we observed four primary concerns that I will 
briefly address.
    One, should we relax our nationwide service requirement 
formerly referred to as ``ubiquity'' and allow for a less 
stringent requirement that will not compromise our goals? The 
answer to this question is yes.
    We have reduced our nationwide wire center pricing 
requirement by 70 percent. We believe this change will result 
in greater competition while sustaining service continuity for 
our customers.
    Two, could our goals and objectives be accomplished with 
one acquisition or must we have two? Our original approach 
suggested dual acquisitions awarded 9 months apart. After 
careful consideration, we determined that dual acquisitions are 
still required, but they will be awarded simultaneously.
    Three, are the ordering and billing elements described in 
the RFI too complex and extensive, resulting in the potential 
for limited competition? We determined that they are too 
complex and extensive. We have reduced them by 62 percent.
    Finally, what should the role of the multiple award 
schedules be in Networx? We believe that the schedules play a 
valuable role in helping agencies craft solutions. The ongoing 
expansion of schedule holders will complement the Networx 
program and continue to provide our customers with choice.
    The revised strategy has been accomplished without 
compromising our program goals. We are excited about the 
environment we will create with our two acquisitions, Networx 
Universal and Networx Enterprise.
    Networx Universal will serve as our full service continuity 
acquisition. The entry criteria has been greatly reduced, 
making it possible for more companies to compete.
    Enterprise is designed to attract IP or wireless-based 
offerors who do not provide the broad range of services offered 
by Universal. They have a significant market presence today and 
a strong future. Combined, both acquisitions will help us 
accomplish our goals, foster competition, and provide us with 
the agility we need to meet the uncertainties of the future.
    We believe both small business and large business 
cooperation will help Networx achieve success. All prime 
contractors on Networx will be required to meet tough small 
business goals. Additionally, small business multiple award 
schedule holders may offer agency services that can complement, 
and to some degree, compete with the Networx program awardees.
    To achieve our goals, we are committed to a schedule that 
is aggressive. We have much work to do. We are up to the task. 
The Networx Universal and Enterprise draft RFPs will be 
released on November 1, 2004. The final RFPs will be released 
in April 2005, with contract award in April 2006.
    Mr. Chairman, we have listened carefully to your 
committee's guidance and to the feedback we received from our 
customers and industry. We have revised our strategy and have 
made significant and meaningful changes to our approach.
    I thank you for the opportunity to testify before your 
committee today. And I am ready to answer any questions. Thank 
you very much.
    Chairman Tom Davis. Thank you, Ms. Bates.
    [The prepared statement of Ms. Bates follows:]

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    Chairman Tom Davis. Ms. Koontz.
    Ms. Koontz. Mr. Chairman and members of the committee, I am 
pleased to participate in the committee's 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 and underlying services and 
technology, and potentially in the regulatory environment.
    In this context, the Networx initiative can be viewed as a 
significant opportunity for agencies and GSA's customers to 
flexibly acquire and apply innovative telecommunications 
services offered by industry to improve their operations.
    As you know, GSA issued a request for information in 
October 2003 describing the strategy of the proposed Networx 
program. At that time, GSA proposed two acquisitions. Networx 
Universal was to provide a full range of national and 
international network services. Offerors were to provide 
ubiquitous service across the United States.
    Networx Select was to provide agencies with leading edge 
services and solutions with less extensive geographic and 
service coverage than required by Universal. Contracts under 
the Select acquisition were to be awarded 9 months after the 
Universal contracts.
    Last February, we testified on GSA's initial planning 
efforts and identified four challenges GSA faced in ensuring a 
successful outcome for the program. These challenges related to 
the structure and timing of the proposed contracts, and the 
need for transition plans and inventory of current services and 
effective measures of performance.
    In April, you requested that we assess GSA's progress in 
addressing challenges that we identified, as well as GSA's 
efforts to address longstanding issues related to billing.
    My testimony today presents our results to date on these 
topics. In brief, GSA has taken steps to address several of the 
significant challenges facing the Networx program. Work is 
either planned or underway on other challenges, but additional 
efforts will be necessary to fully address these. Specifically, 
first, GSA has addressed concerns about the structure and 
scheduling of the two acquisitions now known as Universal and 
Enterprise. Instead of the 9-month time lag between 
acquisitions that might complicate agency decisionmaking, GSA 
now plans to issue the request for proposal for the contract 
simultaneously.
    In addition, the Universal contracts will now require that 
offerors provide services where Federal agencies are currently 
located, rather than across the entire country, to potentially 
allow more industry participants to compete.
    Second, GSA has solicited quotes for contractor support to 
assist with the development of plans to transition customers 
who change carriers. However, GSA has not yet developed 
procedures to ensure that lessons learned from past transitions 
are applied or established a transition timeline.
    Third, GSA worked with agencies to develop a service level 
inventory as input into their requirements for the new 
contracts. In addition, GSA plans to work with agencies to 
build a more detailed inventory of currently used 
telecommunication services for use during transition.
    Fourth, GSA plans to implement performance measures that 
evaluate progress against the program's goals. However, some of 
the measures are still under development, and it does not yet 
have a strategy for using the measures to monitor ongoing 
program performance.
    And last, GSA has reduced the number of billing elements 
that it will track, and has begun a study designed to identify 
potential improvements in the billing process and associated 
administrative costs. However, it lacks a strategy for 
addressing agency concerns about the usability of billing data.
    To prevent unresolved challenges from hampering GSA's 
efforts to provide agencies with the services they need, we 
recommend that it finalize and implement processes for managing 
transition efforts, measuring program performance, and 
resolving agency concerns over the usability of billing data.
    GSA agrees that more needs to be done in these areas, and 
with continued focus on these challenges, the agency can ensure 
that the goals of the Networx program are ultimately realized.
    That concludes my statement. I would be happy to answer 
questions.
    [The prepared statement of Ms. Koontz follows:]

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    Chairman Tom Davis. Thank you very much. Let me start, Ms. 
Bates, with you. The Networx strategy envision a centrally 
managed Government-wide telecommunications program run through 
GSA.
    But, as I understand it, some government agencies, such as 
Treasury, who I mentioned in my opening remarks has announced 
plans to conduct their own large telecom acquisitions on their 
own. What is your strategy for attracting these agencies to 
participate in Networx?
    What do you offer that they can't provide for themselves?
    Ms. Bates. As an example, we have worked, currently are 
working with, two agencies, Department of Justice, and 
Department of Agriculture, in their strategy to utilize the 
existing FTS 2001 contracts to begin moving their Networx 
infrastructure to the next level, so that when Networx is 
awarded, they can continue that journey, or will be in a 
position to transition, whichever is necessary.
    And that seems to be working for those two agencies very 
well, both from a price perspective and technical innovation, 
and was done in a competitive task order environment.
    Our strategy overall is to keep the current contracts as 
competitive, technologically and price wise, with the best 
industry has to offer. When we have the Networx group of 
contractors and new services, people then can continue 
upgrading their networks or moving to their enterprise 
architecture.
    We are also planning for transition so that transition will 
not be the huge effort and disruption that it has been in the 
past. We think we have provided a clear pathway for agencies to 
move into the future.
    Chairman Tom Davis. But, if different agencies start 
picking their own, and setting up their own networks and so on, 
that will defeat the whole thing, won't it?
    Ms. Bates. Yes, it will. It makes each agency doing 
duplicative effort because they are conducting their own 
procurements, they are not leveraging the government's buying 
power.
    Chairman Tom Davis. You lose economies of scale, obviously.
    Ms. Bates. Absolutely. And they are placing a burden on the 
industry as well, who has to spend a lot of money to respond to 
these requests. Of course, that, in the end, gets passed on to 
the taxpayer.
    Chairman Tom Davis. OK. So more expensive. Probably not----
    Ms. Bates. Right. And we have no standardization, we have 
such a mixed bag of offerings, we don't know what the security 
requirements are in each of these contracts. We don't know what 
the interoperability is. There is just a whole host of problems 
by doing this in a fragmented way.
    Chairman Tom Davis. When GSA revised the timetable for the 
Networx contract, it pushed back the award date for the 
comprehensive Universal contract from the winter of 2005 to 
April 2006.
    If contracts are awarded as planned, how will GSA be able 
to ensure a complete transition to new service providers before 
the FTS 2001 contracts expire in December 2006 and January 
2007?
    When will the transition timeline be established to help 
manage the process?
    Ms. Bates. The planned--as you stated, the planned award in 
April 2006 is predicated on the fact that we will have done, 
with our customer agencies, a significant amount of transition 
planning prior to that.
    In fact, that has already begun. The IMC has working groups 
established to begin with inventories, requirements 
development, and timelines within their agencies to begin 
transitioning right away.
    Also, not all of the FTS 2001 contracts expire with the 
Sprint and MCI. We have crossover contracts with--such as 
Qwest, AT&T and Verizon that expire at different times later in 
the time period. So transition will have to be carefully 
orchestrated, and we are confident that we can do that.
    Chairman Tom Davis. Ms. Koontz, you have been reviewing the 
program for the last year or so. Based on that experience, how 
you would you rate GSA's overall performance so far in 
developing the Networx strategy?
    Ms. Koontz. I think that based on the challenges that we 
identified in February, I think that GSA has made good progress 
toward addressing those challenges, which we thought were all 
critical to ensuring the programs success.
    Our major concern at this point is that GSA needs to remain 
focused on these issues to ensure that all of the things that 
they promised to do will be done in an appropriate time.
    Chairman Tom Davis. Do you think that GSA currently has 
adequate resources to manage the Networx program in the 
anticipated transition?
    Ms. Koontz. I do not know. We have not evaluated their 
resources. That is an excellent question.
    Chairman Tom Davis. Will their proposed performance 
measures help ensure that the program fulfills its ultimate 
goal in providing agencies with the services they need at 
competitive prices?
    Ms. Koontz. Performance measures are absolutely critical to 
make sure that GSA, over the life of something as long as what 
could be a 10-year contract, can know, you know, with the force 
of data, that they are indeed meeting the goals of the program.
    So it is absolutely critical that they have performance 
measures, good performance measures, for all of the program 
goals. I would also suggest that GSA would probably benefit 
from actually reexamining and maybe refining some of the goals 
to make sure that they really represent a picture of and 
planned program performance and that they are results oriented.
    Chairman Tom Davis. You said in your statement that GSA 
needs to finalize and implement processes for managing its 
transition efforts.
    Compared to the last transition, is GSA better prepared for 
the transition to Networx?
    Ms. Koontz. I would have to say that GSA is better 
prepared, to the extent that based on the report that we did 
for you in the transition last time, and a rather exhaustive 
study that they have done on their own of transition lessons 
learned, I think they have a wealth of knowledge of the 
problems and barriers that they have to address.
    What is left to do, though, is to translate those lessons 
learned into actual processes and procedures that will mitigate 
the same problems recurring.
    Chairman Tom Davis. OK. Ms. Watson, any questions? I will 
have more.
    Ms. Watson. Sure. I would like to possibly have you give 
some specifics on the extent to which GSA and its customer 
agencies have developed accurate and complete inventories for 
the current services and requirements.
    Ms. Bates. I will first address what--the customer 
agencies. We have something called the Interagency Management 
Council, which consists of the senior telecommunications 
network officials from the 16 large agencies and the small 
agencies council.
    Each one of those agencies, plus others, in response to the 
chairman's letter last December, have begun working on an 
inventory. Many of them have a very good inventory based on the 
last transition, the inventory they developed for Y2K, an 
increased ongoing emphasis on inventory.
    What they continue to work on is the inventory needed for 
transition. It has a requirement for significantly more detail 
than an inventory just to have. And I will cite an example. In 
order for a service to transition from one service provider to 
another, you have to have specifics such as room number, local 
government contact, floor, that kind of thing where you 
wouldn't need it if you just wanted a regular inventory.
    The agencies are well aware of this, and they are working 
hard. It is my estimation that we are further along at this 
point in working on that inventory than we were for the last 
transition. GSA, FTS, is working with the current service 
providers, to make sure that their inventories are up to speed, 
as well as the inventories we maintain from an overall 
perspective.
    I do believe we need to continue to be focused on 
inventories since it is an everchanging data base.
    Ms. Watson. Can you just describe what our objectives and 
goals are? Where would we like to go with our inventory?
    Ms. Bates. Ideally what we would like to have is for each 
agency and component to have a very accurate inventory of all 
of the telecommunications services they have, exactly where it 
is located, as well as the program applications and systems 
that are running over that network. This becomes critical when 
you begin planning a change, you need to identify the programs 
that are using that facility so that you have no program 
interruption.
    So it is a big job. I think the government agencies are up 
to it. But, it is something that you should never declare 
finished. It is ongoing.
    Ms. Watson. My concerns go to how do we coordinate 
communications across the board in times of emergencies or 
tremendous threats? And I know as you transition, and all of 
the agencies that you support, that I hope is kept in mind. And 
I am just trying to find out, are we on the path to being sure 
that the telecommunications and other systems are up to par, 
working?
    I heard mention of what are the best practices, best 
equipment and are we getting there?
    Ms. Bates. I think you have made a very good point. And by 
GSA FTS having a centrally managed program, we are in a much 
better position to work with the service providers to make sure 
that in times of emergency or disaster, we can help coordinate 
the recovery efforts, we have central inventories, and we know 
where we are going.
    If we do not have a centralized focus in times of natural 
disaster or other emergencies, it is very difficult for the 
government to coordinate the next steps. So I think we are on 
the path. We are working very closely with the Department of 
Homeland Security. They will be using the Networx network. And 
I think we are on the right path.
    Ms. Watson. That is a very effective nexus to my next 
inquiry. I was visited yesterday by representatives of the fire 
department in New York and some family members. And they are 
very concerned about their communication--those radios and the 
bands that they were using.
    And apparently the equipment failed on September 11. And 
when the Commission was holding the hearings, they felt that 
they were not able to really get into the substance of why so 
many firefighters were killed on that day, and why so many of 
them didn't get the order to evacuate. And they talked about a 
piece of equipment that came from Motorola.
    And so I don't know how you get into the local first 
responders and what they do and municipalities. I don't know 
how we make that connection. But, on a National Federal level, 
we ought to be looking at the equipment and how companies get 
those contracts, and testing that equipment, does it work 
properly at the time when it is needed? And I am trying to get 
there.
    And I don't know if it is GSA that could look into it. But, 
certainly as we deal say with the Capitol under tremendous risk 
on 9/11, you know, did we have a communications network, are we 
getting the equipment in the agencies? Are we using the best 
that we can get? Are we looking at competition so we can be 
sure we are getting the best product at the best cost?
    And I am interested in what you are doing along these 
lines.
    Ms. Bates. That particular requirement for the first 
responder and interoperability of radio systems at the local 
level is not covered--is not one of the main focuses of the 
Networx acquisition. However, I can tell you that the 
Department of Homeland Security, the Federal Emergency 
Management Agency and other components, we are working with 
them, and the focus on the first responder and the 
interoperability of State, local, municipality and Federal 
systems is one of great concern to everyone. And it is a very 
complex problem.
    Ms. Watson. Well, that is what I am trying to emphasize 
here in terms of homeland security and national security, and 
they affect the local areas. And there should be a network 
across this country that is connected, and we can have 
assurances that right down to the local level, the first 
responders are part of that network, that Federal network, and 
so this is something you probably can't get into any detail 
now, because we are all trying to find our way as to what is 
the best to do.
    I was forced to raise that issue because I just had this 
conversation. We are very, very concerned about what happened 
on September 11 and what lessons were learned.
    Ms. Bates. Well, I support you. And I can assure you that 
the scope of the Networx contracts will be such that should we 
receive the appropriate approvals to provide service to State 
and local Governments, we will be in a position to do that and 
to further that.
    Ms. Watson. Right. You talk about possibly 10-year 
contracts. And I would hate to think that GSA and the agencies 
you serve would get into contracts of long extensions that--and 
their equipment doesn't really stand up. So we can go into this 
discussion in private. But I just wanted to raise these 
concerns that I have.
    And thank you very much, Mr. Chairman.
    Chairman Tom Davis. Thank you very much. Ms. Bates, let me 
just ask you, how did GSA decide which services to make 
mandatory in the Universal contract?
    Ms. Bates. We looked at the services that were being 
provided today under FTS 2001. We looked at the services that 
were going to be needed over the future of the next 10 years of 
the contract, and decided that those were the ones to be made 
mandatory. We did not do this in a vacuum. We worked with our 
customer agencies as well as the industry to make sure that our 
mandatory requirements were all inclusive, but, not so lengthy 
that they limited competition.
    Chairman Tom Davis. The revised strategy mentions an 
increased role for the Federal Supply Schedules.
    Ms. Bates. Yes.
    Chairman Tom Davis. Could you elaborate on how this works?
    Ms. Bates. Today there are many companies that are on the 
Federal supply schedule that provide extensive amounts of 
telecommunications equipment. There are some telecommunications 
services on the schedules today. And certainly there are 
integration services available on the schedules and GWACs 
today.
    As companies choose to widen of their schedule presence, 
they do that as they see fit. And we see that growing more and 
more. So I see the schedules as a complement to Networx and I 
think it is a good thing. It allows companies that are new 
companies to the marketplace to bring their services to the 
government through the schedules. And we are working closely 
with FSS in doing this. So I think that we have a very 
compatible program.
    Chairman Tom Davis. So innovation, new technologies, new 
things that happen maybe outside of the parameters of the 
original awardees are able to enter into the marketplace in 
this way?
    Ms. Bates. Sure. And the companies, as you know with the 
schedules, the companies can select the time that they wish and 
the services that they wish to offer, and the terms and 
conditions as a part of the schedule, as opposed to doing it at 
the Government's timeframe. So that does allow a company when 
it is ready to seek a schedule contract.
    Chairman Tom Davis. It is hard to foresee these things. But 
how likely is it that the option years in the Networx contracts 
would be exercised when you consider that the changes that are 
taking place in the telecommunications industry, how is it 
advantageous to enter into contracts that can last for as long 
as 10 years?
    Ms. Bates. Well, it is hard, particularly at this time and 
with this industry, to predict too far into the future. But we 
feel that our strategy really supports the government in a 
position for a longer period of contract.
    With the two acquisitions, we will have multiple awards, 
within Universal and Enterprise. Universal will have, I think, 
a very good cadre of full service contractors. And the 
Enterprise will address those same contractors should they 
decide to bid, as well as some emerging companies.
    So hopefully, we will have a stable of contractors that 
will see us through. However, if it doesn't make any sense to 
exercise options, we won't.
    Chairman Tom Davis. Well, how many awardees do you envision 
for the Universal segment?
    Ms. Bates. The contracts will be multiple award. The number 
of awards will be determined by the quality of the proposals 
that are submitted.
    Chairman Tom Davis. OK. How will new technologies be added 
to the contracts? Will GSA add all new technologies whether 
they are mandatory or nonmandatory to both contracts?
    Ms. Bates. We will buildupon some of the things we have 
done in the past. First, both of the contracts will be scoped 
so that technology upgrade and technology refreshment will be 
included in the scope.
    In addition, industry will be able to propose a contract 
modification to add new technology to whichever contract they 
hold. Then should our customers have new requirements, the 
customer can ask that new technology be added to the contracts. 
So we have it covered three ways. Through scope, through 
industry initiating modifications, or through customer-
initiated modifications. Of course we can do it any time we 
want.
    Chairman Tom Davis. Do you envision a process whereby an 
Enterprise vendor could become a Universal provider as their 
capabilities expand over the period?
    Ms. Bates. As it is currently structured, we do not 
envision that.
    The Enterprise requires, I think--with being IP based or 
wireless, is really the wave of the future. And I think that if 
somebody is in the enterprise category, it will serve their 
company well.
    I really don't see an advantage to having a crossover after 
the initial competition. That said, if the initial competition, 
a company can bid both Universal and Enterprise, and can be 
selected for both if it is appropriate.
    Chairman Tom Davis. Ms. Koontz, let me ask you. Go back to 
the first question I asked Ms. Bates.
    Agencies such as Treasury, which I mentioned in my opening 
remarks, they plan to conduct their own large telecom 
acquisitions instead of participating in the GSA program. Do 
you think such acquisitions have the potential to undermine 
Networx?
    Ms. Koontz. I think they do have the potential if this is 
done too far. I guess that our position on anything that is 
outside of Networx or FTS 2001, those contracts are not 
mandatory.
    However, every investment, including telecommunications 
investments, have to be justified. And they have to be 
justified in light of looking at other alternatives. And only 
in that case where it was justified in other alternatives 
should those other contracts be awarded.
    Chairman Tom Davis. Over the years, prices have fallen 
under FTS 2000 and FTS 2001. Do you think we have reached the 
bottom, or do you expect prices to fall over the length of 
Networx programs, or is it just hard to say?
    Ms. Koontz. I think it is hard to say.
    Chairman Tom Davis. Do you think that GSA has been 
addressing need for inventories. Do you think their actions 
have been adequate in that area?
    Ms. Koontz. I think that GSA has made some very good first 
steps toward establishing the inventories that we think are 
really critical, particularly for transition. They did create 
inventories that they used for the requirements planning 
process.
    And now they plan to go forward and develop the more 
detailed kind of inventories that will support transition. So, 
again, I think they are making progress. This is something they 
need to stay focussed on throughout.
    Chairman Tom Davis. Finally, in your statement, you 
recommend that GSA finalize and implement processes for 
managing transition efforts, measuring program performance, 
resolving agency concerns over the usability of billing data.
    Do you think GSA can comply with these recommendations and 
still meet the projected timetable for Networx?
    Ms. Koontz. I believe they can. I believe it is going to be 
very challenging. But I think there is sufficient time for them 
to resolve these issues and have them completed at the 
appropriate time.
    Chairman Tom Davis. Thank you. That is all of the questions 
that I have for this panel. Ms. Watson, do you have any 
additional questions?
    Anything else anybody wants to add? Well, thank you very 
much for being with us. We will take a 2-minute recess as we 
move to our next panel. Thank you.
    [Recess.]
    Chairman Tom Davis. All right. Our second panel here. Thank 
you very much, gentlemen. We have Don Scott, senior vice 
president of EDS U.S. Government Solutions; Jerry Hogge the 
senior vice president Level 3 Communications; Mr. Robert 
Collet, vice president, engineering, AT&T Government Solutions; 
Shelley Murphy, president, Federal markets for Verizon; and 
Jerry Edgerton the senior vice president, government markets, 
MCI.
    It's policy that we swear you before you testify. If you'd 
rise with me and raise your right hands.
    [Witnesses sworn.]
    Chairman Tom Davis. Mr. Scott, we will start with you and 
we will move straight on down the line. We are debating a bill 
on the floor. That's why we have had some animated discussions 
here that affects this committee in a number of areas. I am not 
going to be able to get over. I think if I can--on a couple of 
amendments. But we want to move as quickly as we can.
    Your entire statements are in the record.
    Mr. Scott, we will start with you and we will move straight 
down and then move to questions. Thank you.

  STATEMENTS OF DONALD SCOTT, SENIOR VICE PRESIDENT, EDS U.S. 
GOVERNMENT SOLUTIONS; JERRY HOGGE, SENIOR VICE PRESIDENT, LEVEL 
     3 COMMUNICATIONS LLC; ROBERT COLLET, VICE PRESIDENT, 
    ENGINEERING, AT&T GOVERNMENT SOLUTIONS; SHELLEY MURPHY, 
  PRESIDENT, FEDERAL MARKETS, VERIZON; AND JERRY A. EDGERTON, 
         SENIOR VICE PRESIDENT, GOVERNMENT MARKETS, MCI

    Mr. Scott. Thank you. Mr Chairman and members of the 
committee, I'm Don Scott.
    Chairman Tom Davis. If you'd turn on your mic.
    Mr. Scott. I'm vice president of U.S. Government Solutions, 
EDS Corp. Thank you for inviting me today to testify on behalf 
of EDS regarding the GSA strategy for the Networx program. We 
believe our comments will help GSA's Networx be most effective 
in today's telecommunications environment. I'm presenting an 
abbreviated version. The rest is for the record. We have 
included a recommendation to expand the scope of the Networx 
program to include applications and other user services. This 
is outlined in a white paper EDS provided recently to GSA and 
is an included as a part of the testimony.
    Also in the record are examples of this integrated 
strategy's successful implementation. Please note that also in 
our testimony submittal we have referred to some recently 
published papers on network convergence.
    And, finally, we have offered some suggestions for 
transitions to those expanded services.
    We do not propose that GSA eliminate any of the services 
proposed under Networx; rather, it is our belief that Networx 
should offer an even broader, richer set of services and 
solutions. My comments that follow concentrate on the services 
that should be offered and explain why.
    GSA's governmentwide responsibility offers a unique 
opportunity to support the agenda of the Congress and of the 
administration. GSA is in a position to leverage the buying 
power of the entire Federal Government and has a charter to 
lead the technology initiatives. Networx should be aligned with 
the Office of Management and Budget's efforts to move to common 
governmentwide architectures.
    Mr. Chairman, we commend you and your committee for your 
high level of interest in this program and we commend GSA and 
the leadership that Administrator Perry, Commissioner Bates, 
and Assistant Commissioner Johnson have shown. In particular, 
GSA's continuous outreach to stakeholders will help ensure that 
services are acquired at the best value to the taxpayer and 
that vigorous competition occurs.
    Considerable investment will be required by both government 
and industry, so we support the long-term contracts for 
projects having such large size and scope. However, because the 
Networx contract may be effective for the period 2007 through 
2017, GSA should give serious consideration to the services 
expected to be commonly available during that period and the 
companies' ability to provide those services. GSA should not 
leave it to the customer agencies to individually acquire 
services that are available in the marketplace and are 
appropriate for consolidated governmentwide buying consistent 
with the government's common enterprise architecture goals.
    The telecommunications industry will be much different by 
2007 and beyond. There is compelling evidence that the IT and 
telecommunication industries are converging and that 
traditional telecommunications will likely be acquired using 
commodity schedules or through integration into total IT 
service packages and solutions. In the complete text of this 
testimony, there are references to a number of industrial, 
governmental, and academic and medical organizations who have 
implemented or are in the process of implementing converged 
solutions. Most will be fully implemented by 2007. Also 
included are references to two convergent studies that were 
completed this year. These studies, published in ``The 
Economist,'' each surveyed approximately 100 senior executives 
on the subject of convergence. The first study found that two 
thirds of the organizations surveyed would shift their 
applications to unified networks within the next 5 years, and 
that one quarter sees this integration as crucial to fulfilling 
their business strategy. The second study and report conclude 
that 75 percent of companies will achieve widespread migration 
to converged networks within 3 years.
    The integrated services we are proposing include such items 
as information storage; security; messaging; collaboration 
tools; various business applications; situation awareness 
capabilities; knowledge management tools; hosting capabilities; 
and other services. Associated enabling devices such as desktop 
computers, laptop computers, and telephones should be included. 
BlackBerries, pagers, and other remote devices, together with 
seamless network connectivity, should be included so that a 
complete secure capability is provided wherever the user 
happens to be. The industry is transitioning toward integrated 
networks that will provide all media over a data network using 
IP. We expect maturity by 2007, which will render the risk far 
less than if government agencies acquire services 
independently. Along with these technology developments, we 
believe that traditional telecommunications organizations in 
the user community will be fully integrated into the IT 
organizations.
    The transformation of the communication marketplace defines 
the following progressions of events.
    Transport will become a commodity, and minimal strategic 
value will be placed on the transport providers. Transport will 
be converged into IP-based services and applications.
    IP solutions will become the strategic product, which will 
be built on the transport infrastructure through the desktop, 
personal data systems, and other devices. In essence, the 
current logical demarcations will be moved further into the 
infrastructure.
    Government agencies will be enabled to move toward true 
performance-based relationships in which the success of the 
mission is directly related to the underlying technology that 
provides the solution.
    End-to-end services fit this new mold best. This approach 
deals with the infrastructure as it directly interfaces with 
the user and also facilitates consistent thought leadership 
across the infrastructure. These success factors are critical 
in IP-driven transformations. By anticipating these market 
shifts, the Federal Government can provide for the breadth and 
flexibility that will be required to integrate secure, 
effective offerings over the life of the contract.
    Therefore, while the transport components will continue to 
be a foundation for the application services being carried, we 
predict that these will be dwarfed in importance by the 
applications. We believe that with these enhancements, the 
Networx program can provide effective best-value solutions, 
deliver cost savings to the taxpayer, enhance security and 
increase user productivity, and contribute to the 
organizational transformation. The Networx program should be an 
integral part of the government's enterprise architecture. In 
attracting customer agencies to participate, GSA should offer a 
wide array of integrated services, thereby discouraging 
agencies from acquiring them individually.
    Mr. Chairman, thank you for the opportunity to comment, and 
I will be pleased to answer any questions.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Mr. Scott follows:]

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    Chairman Tom Davis. Mr. Hogge.
    Mr. Hogge. Good morning, Chairman Davis, members of the 
committee, and thank you for inviting me here today to speak to 
you about the Networx program. My name is Jerry Hogge and I'm 
senior vice president and general manager of Level 3 
Communications, government markets.
    On February 26 of this year, Level 3 and other industry 
participants testified before this committee to offer 
suggestions about how GSA might best procure telecommunications 
services through the Networx program. The efforts of this 
committee and GSA's Federal Technology Service appear to have 
made significant improvements to the original procurement 
approach as announced in the Networx request for information 
released last fall. As outlined in GSA's August 11th briefing, 
the revised approach embraces many of the procompetitive 
recommendations offered by industry. However, since the full 
details of the revised strategy won't be available until the 
draft RFP is released, certain central elements of the 
procurement remain as open questions. Level 3 believes that 
GSA's revisions, together with a few key additional elements, 
can combine to maximize competition, attract Federal agency 
participation, and ensure best value for our Federal Government 
and taxpayers. Level 3 is encouraged by the revised strategy 
and looks forward to reviewing the full detail of how the 
proposed changes will be implemented as well as how the 
remaining elements of the procurement will be characterized in 
the draft RFP.
    In our earlier testimony, Level 3 made four recommendations 
which we believe must be addressed to ensure competition and 
end-user value in the Networx program. Those recommendations 
were that Networx should allow bidders to bid to their 
strengths; that Networx should specify the services required 
and avoid specifying particular technologies; that Networx 
should avoid being locked into one or two providers; and that 
Networx should allow for the adoption of best practices for 
operational support.
    We believe that GSA has taken very positive steps to 
address these issues through its revised strategy. 
Specifically, we believe that GSA's proposed changes improve 
the Networx procurement in four key dimensions.
    First, Networx service ubiquity requirements appear to have 
been substantially relaxed. Level 3 considers this revision 
procompetitive because it allows communications providers to 
bid to their strengths, while permitting them to expand their 
coverage as their networks and services expand.
    Second, Networx service requirements are now to be 
specified in functional terms with key performance criteria 
rather than in terms of specific technologies. Level 3 
considers this proposed revision fundamental to ensuring that 
Networx will be flexible enough to facilitate the availability 
of leading-edge technology as well as address the possibility 
of legacy service obsolescence.
    Third, Networx-Universal and Networx-Enterprise contracts 
are to be simultaneously awarded. Level 3 considers this 
proposed revision essential to leveling the competitive playing 
field, encouraging competition, and reducing the possibility 
for Networx to be dominated by one or two providers.
    Four, the number of required billing elements is expected 
to be reduced by 62 percent. In our view, it appears that these 
simplifications will be procompetitive, as reduced operational 
requirements should reduce the cost of entry for new 
competitors and may add flexibility to the program as new 
services are introduced.
    In addition to these four areas, GSA's strategy document 
addressed potential changes covering a wide range of program 
elements. Level 3 is encouraged by the proposed changes and 
will offer a complete assessment when greater detail is 
released in the draft request for proposal.
    I'd like to suggest that a number of critical issues should 
be addressed to ensure that Networx delivers the greatest value 
and efficiency to the government. Most important are two 
related terms that address, one, the government's business 
commitment to successful bidders; and two, the means through 
which the government will ensure full competition at the time 
of contracting and then post award.
    These two concepts are at the heart of the Networx 
program's ability to attract agency participation, to motivate 
vigorous industry competition, and ensure best value for end-
user agencies. Just as agency decisionmakers will weigh the 
cost and benefits of making a change between possible service 
providers, so too will prospective bidders consider the costs, 
risks, and potential benefits associated with pursuing and 
winning a Networx contract. Specifying a minimum business 
commitment for each successful bidder is a simple tool to 
facilitate this assessment and directly leverage the 
government's aggregate buying power. Minimum business 
commitments, expressed through minimum revenue guarantees, 
serve as basic consideration for the competitive process.
    Finally, in order for Networx to be a successful program 
for the government and industry, there must be an effective 
competition throughout the life of the program. There are many 
processes available to the government to ensure competition, 
and many methods have been used successfully by GSA and other 
agencies in the past. Indeed, the committee has touched on this 
issue by raising a question about GSA's ability to execute the 
Networx program as currently proposed. Based on GSA's high-
level strategy and its extensive and successful record of 
achievement through previous programs, Level 3 is confident 
that GSA will be able to successfully design and implement the 
Networx program in such a way that it will stimulate agency 
participation and deliver agency value, while driving 
competition that will be fair to all bidders and result in 
meaningful business opportunity for successful industry 
participants.
    In summary, GSA's revised strategy suggests that Networx 
will be flexible enough to encourage new competitive providers, 
new technologies, new services and changing market forces; that 
Networx's legacy operational and system requirements will be 
simplified, and that service coverage requirements will be 
optimized to the agency needs.
    Level 3 looks forward to continuing to work with GSA and 
Chairman Davis and this committee to ensure that Networx 
continues along a successful path as the procurement process 
moves forward.
    Thank you, and I'm happy to answer any questions that you 
have.
    Mr. Mica [presiding]. Thank you. And we will hold questions 
till we have heard from the rest of the panelists.
    [The prepared statement of Mr. Hogge follows:]

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    Mr. Mica. I recognize now Mr. Robert Collet, vice president 
of Engineering, AT&T Government Solutions. Welcome, and you're 
recognized, sir.
    Mr. Collet. Thank you. Good morning, Mr. Mica and members 
of the Committee on Government Reform. My name is Bob Collet. 
I'm the vice president of Engineering and Chief Technology 
Officer for AT&T'S Government Solutions Division. I'm also 
leading the AT&T's FTS Networx proposal team. My remarks today 
respond to the committee's questions regarding FTS Networx 
benefits and GSA's ability to manage the program. We believe 
the procurement is on track, that the changes made since the 
RFI was issued last October are positive, and that the benefits 
that Networx can bring to the government should not be delayed. 
The procurement should stay on schedule and move forward as 
expeditiously as possible.
    The first question in the committee's letter of invitation 
was whether the revised acquisition strategy as proposed by GSA 
would be effective in today's telecommunications environment. 
The answer to that question is yes. Through the Universal suite 
of products GSA will deliver four key things: a vehicle that 
enables continuity of service; products that anticipate future 
agency requirements; and choices and continuous competition. 
For those agencies that do not require the comprehensive suite 
of services under Universal, there will be a data network and 
wireless Enterprise tracks. And when GSA expands the multiple 
award schedule with additional telecommunication options, there 
will be an easy-to-use vehicle for obtaining off-the-shelf 
products.
    The committee's second question focused on GSA's ability to 
execute the proposed strategy. We believe that GSA is capable 
of executing both Universal and Enterprise strategies if they 
are provided adequate resources. Managing a handful of 
Universal contracts and a larger number of Enterprise contracts 
would tax the management capabilities of any agency. The 
complexity would be further compounded if all Universal and 
Enterprise contracts provided up to 53 types of network 
services. Therefore, we recommend that GSA award only the 
number of contracts that it guarantees that it can manage well 
in terms of vendor, contract administration, and agency 
customer service.
    The last question posed by the committee addressed the 
program's attractiveness to the agency in terms of best value. 
If the gist of the question is whether the Networx procurement 
is designed to give the agency the right products at the best 
industry practices, the answer is yes. The Federal Government, 
as a large-scale buyer, has tremendous purchasing power. We 
believe that agencies would be satisfied with GSA's acquisition 
strategy because it will yield competitive sources for a broad 
range of telecommunications hosting and application services. 
AT&T has consistently stressed the importance of strong 
security and continuity of operations capabilities. The current 
procurement addresses these requirements and will bring robust 
value to the agencies. While GSA is maintaining and expanding 
its portfolio of networking and hosting security services, 
agencies can obtain a rating of ``green'' on their Federal 
Information Security Management Act scorecard. Agencies can 
also obtain ``green'' on the continuity of operations 
scorecard, as contractors will be required to provide robust 
national security, emergency preparedness, and disaster 
recovery services.
    Finally, with regard to billing, even though GSA recently 
reduced the number of billing elements by 62 percent, the 
remaining elements should provide the agencies with the billing 
detail they need to effectively run their businesses. With the 
changes that have been made to date, GSA has the right vision 
for the Networx procurement. We believe the FTS Networx 
strategy is responsive to the needs of the agencies. The 
government should expect AT&T to submit competitive bids for 
both the Universal and Enterprise options of the Networx 
procurement. We look forward to bringing the government the 
benefits of our extensive investments in the network, security, 
continuity of operation services, and in applications services, 
and back-office systems to give agencies a quantum leap in 
productivity and to make America stronger and more secure.
    Thank you, Mr. Chairman, for the invitation to appear 
before the committee. I appreciate having the opportunity to 
share AT&T's views on this important matter and welcome any 
questions that you may have or wish to ask. Thank you.
    Mr. Mica. Thank you. We will withhold questions until we 
have heard from all the panelists, as I said.
    [The prepared statement of Mr. Collet follows:]

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    Mr. Mica. Shelley Murphy is president of Federal markets 
for Verizon. Welcome, and you're recognized.
    Ms. Murphy. Thank you, Mr. Chairman and members of the 
committee. My name is Shelley Murphy and I'm the president of 
Verizon Federal markets. I want to thank you for giving me 
another opportunity to testify on the GSA Networx procurement.
    In February of this year, I testified on concerns regarding 
the Networx procurement as laid out by the GSA. Verizon thanks 
the GSA for listening and addressing a number of our concerns. 
However, we believe a few key modifications are still necessary 
to allow sufficient competition on both the Enterprise and 
Universal contracts and to ensure that the contracts remain 
viable through the expected 10-year term.
    Although the GSA reduced the number of wire centers for 
Universal bidders to approximately 5,400, the GSA requires 
vendors to provide a wide range of services including high-
speed data services to all of these locations. From the 
information provided by the GSA, only about 5 percent, or 300 
of these 5,400 Universal locations use these high-speed 
services today. Many of the sites may never need these 
services, so requiring them at all of the 5,400 wire centers on 
the Universal contract is excessive. It also presents a high 
barrier for companies attempting to bid on the Universal 
contract, effectively limiting competition to the traditional 
long distance carriers and increasing prices for the services 
that the government agency will require.
    The GSA also needs to reevaluate its wireless strategy. The 
GSA provides the option for a wireless provider to bid on a 
modified Enterprise specification with only certain mandatory 
wireless requirements. However, the requirement of this 
modified procurement to provision service in 100 percent of the 
Nation's metropolitan statistical areas and 90 percent of the 
rural statistical areas would not allow Verizon Wireless, the 
Nation's largest carrier, to participate in the wireless-only 
Enterprise procurement.
    Verizon is also concerned about the long-term viability of 
Networx. With the volatility of the telecommunications market, 
over time it is possible that consolidation will reduce the 
number of Networx awardees, thereby reducing the competition 
for services.
    The GSA's current approach omits a plan for adding new 
technologies as they become available, and mandates the use of 
soon-to-be-obsolete services throughout the 10-year term of the 
contract. It is very expensive to build or retain 
infrastructure to support outdated technologies, and this will 
drive up prices. Such an approach will also limit competition 
to those with legacy networks in place, the traditional long 
distance carriers.
    Verizon requests that the GSA consider several key changes 
to the network acquisition strategy. These changes will 
maximize competition, reduce risk, and achieve best value, 
while ensuring rapid introduction of new technologies and 
services.
    The GSA defined approximately 300 locations that today 
require high-speed data services. For the Universal contract, 
the GSA should make high-speed data services mandatory for the 
300 locations currently requiring these services, the remaining 
100 largest metropolitan statistical areas and locations where 
the bidders have the services commercially available. The 
remaining locations should be nonmandatory. These changes, in 
conjunction with the future deployment of new technologies by 
the industry, should satisfy the government's current and 
future needs for continuity of service, as well as increase the 
number of potential bidders for the Universal contract.
    The GSA also needs to change the wireless coverage 
requirements to 95 percent of the top 100 most-populated 
markets to allow major wireless providers to bid on the 
optional wireless-only Enterprise contract. GSA should focus on 
the wireless carriers' ability to provision quality network 
coverage and advanced voice and data services within these 
markets.
    As envisioned under the two-contract approach, there is no 
ability to compete agency requirements between the Universal 
and Enterprise contracts. One solution to maintaining 
sufficient competition on the Networx contract is to allow 
Enterprise contractors to graduate to the Universal contract as 
their capabilities evolve.
    The GSA must define the processes and criteria by which old 
technologies and outdated standards are eliminated. The Networx 
contract must include a separate new technology insertion 
mechanism that allows for rapid contract modifications to add 
new technologies as they are made available. This process must 
be flexible enough to allow the marketplace to define the 
standards during the life cycle of the technology so that 
providers will not be required to provide outdated network 
services to the government. In addition, pricing needs to 
evolve as the technologies evolve.
    In summary, the GSA has made significant progress evolving 
the Networx strategy, but the evolution is not finished. These 
recommendations will increase competition on both contracts, 
ensure highly competitive prices for required services, and 
protect the government's networks from obsolescence throughout 
the life of the contract.
    I thank the committee for the opportunity to discuss the 
Networx procurement and would be pleased to answer any 
questions at the appropriate time.
    Mr. Mica. Thank you.
    [The prepared statement of Ms. Murphy follows:]

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    Mr. Mica. And we will hear from our final witness who is 
Jerry Edgerton, and he is senior vice president of Government 
markets at MCI. Welcome, sir, and you're recognized.
    Mr. Edgerton. Mr. Chairman and members of the committee, 
good morning. My name is Jerry Edgerton. I'm the senior vice 
president of MCI'S Government markets division. I want to thank 
Mr. Chairman and the committee for your support of the FTS 2001 
program and I appreciate the opportunity to provide you with 
MCI's comments regarding the government strategy for Networx.
    The existing Federal telecommunications program, FTS 2001, 
has been very successful in meeting the changing and expanding 
telecommunications needs of the Federal Government's agencies. 
The world, as well as the mission of many government agencies, 
has changed since that contract was awarded in 1999. And the 
Federal Telecommunications Service, FTS, has delivered on its 
promise to support increasingly complex communications needs. 
The FTS has been quick to respond to agency requirements by 
adding new services to support security, citizens' access to 
services, and continuity of operations.
    Furthermore, GSA has delivered on its promise to provide 
value for government users. According to the GSA Fiscal Year 
2003 Annual Performance and Accountability Report, FTS 2001 
prices are 53 percent lower than comparable services purchased 
by large commercial clients.
    MCI strongly believes that the Networx structure being 
proposed by GSA will continue to provide the flexibility, 
innovation, technology refreshment and value that agencies need 
to perform their mission-critical operations.
    MCI attended the GSA's Networx Industry Day in August, and 
GSA provided a clear and detailed profile of its Networx 
strategy. MCI believes that GSA has been inclusive and diligent 
in soliciting input from all of the stakeholders in the Networx 
project. The strategy briefing has resolved most of our 
outstanding questions about the general direction of the 
program, with a few exceptions that I will note later.
    MCI supports the FTS plan to provide agencies with choices 
by competing two separate contracts, Universal and Enterprise. 
Offering two separate contracts recognizes the fact that one 
size does not fit all Federal networks. The Universal contract 
allows agencies to procure the full range of telecommunication 
and network services by choosing from a set of capable teams. 
The Enterprise contract gives agencies the option of addressing 
additional telecom and network needs by choosing from more 
specialized providers.
    The FTS also addressed industry's concerns about the timing 
issue of these two procurements and now plans to conduct those 
simultaneously. The Enterprise procurement also offers small 
and disadvantaged businesses an opportunity to compete for 
government business. They can continue to partner with the 
Universal service providers and bid Enterprise procurements as 
an additional entry to the Federal Government space.
    MCI supports the requirement for continuity of service on 
the Universal contract. Many agencies desire to procure 
services from a single contractor who will provide all required 
network services to agency locations worldwide. Most agencies 
don't have the specialized technical staff, budget, time or 
systems and processing required to procure services from 
multiple vendors. The continuity requirement in the Networx 
proposal will save most agencies time and money and allow them 
to focus their resources on their mission-critical activities.
    FTS has streamlined the Networx Management and Operations 
Support [MOPS], requirement. FTS listened to industry and has 
crafted an appropriate compromise between agency requirements 
and industry capabilities. This will allow agencies with 
extensive detailed billing and operational requirements to 
receive the level of support that is needed without raising the 
cost of doing business for all users. FTS is taking the right 
approach by mandating a fixed set of service capabilities on 
both Universal and Enterprise contracts. Agencies would be ill 
served by having to put together workable network solutions 
using a jigsaw puzzle of mismatched parts from different 
vendors. FTS correctly concluded that program flexibility that 
provides convenience for some service providers would not be 
beneficial for the government. Most agencies would face higher 
prices to fill the gaps in service.
    MCI does have concerns about two unresolved issues that 
could negatively impact the ability of government to obtain the 
best possible pricing and services under Networx. First, FTS 
has not clearly set forth the number of awardees under either 
the Universal or the Enterprise procurements.
    Networx, like FTS 2001, can provide agency users with the 
lowest possible prices by aggregating the massive volume-of-
service demands for much of the Federal Government into a 
single contract vehicle. FTS should maximize the competition by 
encouraging as many bids as possible from potential service 
providers, but must limit the number of awardees.
    In order for the government to lock in rock-bottom prices 
for the contract's 10-year term, providers must be confident of 
their ability to win certain levels of revenue. The greater the 
number of awardees, the less the business that each awardee 
will be able to capture and the more the government's 
purchasing power is diluted. FTS must leverage the government's 
volume to produce the lowest possible prices from industry.
    Second, FTS has not offered many details on its proposal to 
add telecom services to the Federal Supply Schedule program. 
MCI supports the inclusion of commodity-like services on the 
Federal Supply Schedule. The absence of clear, precise 
definitions by the FSS will create uncertainty for Networx 
bidders by creating an unpredictable and uncontrollable 
backdoor, post-award path for entry into the Federal 
telecommunications market space.
    In order to make the business case for the lowest possible 
prices, Networx bidders must have a level of certainty as to 
the number and type of services and thereby the potential 
revenue under the contract. I might add that this is a concern 
from any other government contract that attempts to offer 
services to other government agencies other than through GSA.
    In conclusion, I want to assure this committee and the 
government that MCI is fully committed to ensure the continued 
success of FTS 2001 and the future success of Networx. GSA 
plans for the Networx procurement are on the right track. It 
will require companies like MCI to compete like never before, 
and will force our rivals to do the same. But that's really the 
whole point of the exercise and the only way to guarantee that 
Federal agencies and the taxpayers will get the best deal 
possible. Thank you.
    [The prepared statement of Mr. Edgerton follows:]

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    Chairman Tom Davis [presiding]. Well, thank all of you for 
your testimony. I'm sorry I wasn't here for everything. We're 
trying to get a couple of things straight over on the floor, 
but I have read everybody's testimony.
    Let me ask each of you--and I don't want you to be bashful; 
GSA won't hold anything against you, I'm sure, when they start 
evaluating the prospective bids--but how would you rate GSA's 
overall performance on a scale of 1 through 10? And, Don, I'll 
start with you. I don't want to put anybody on the spot, but I 
just want to----
    Mr. Scott. Seven.
    Mr. Hogge. Eight.
    Mr. Collet. Eight and a half.
    Ms. Murphy. Eight.
    Mr. Edgerton. Eight point five.
    Chairman Tom Davis. I don't think anybody hurt themselves 
there.
    A recurrent theme, we have some different testimony, is 
does the proposed structure provide enough flexibility for 
companies to offer new services as they become available? 
That's a critical question for us, because things change so 
quickly in this. I'll start and just go down the line.
    Mr. Scott. I think it provides the flexibility to provide 
infrastructure certainly, telecommunications infrastructure. 
But it does not provide the capability to move to where I think 
the government--the whole industry is going to be in this 
timeframe, and that is the convergence of telecommunications 
and IT so that it all ends up as a solution. And so I don't 
think--I don't think it will get GSA to that point. And what I 
fear is, if they don't, we are going to have more situations 
such that we have in this agriculture and such that we have had 
at Homeland Security and other places.
    Mr. Hogge. From Level 3's perspective, we are one of the 
companies that is going to be providing those infrastructure or 
telecommunications services, some broad-brush strokes were 
given in the strategy document. But we were encouraged by the 
specification of requirements and functional terms with key 
performance criteria rather than by specific technologies. And 
we see that as a key element of flexibility needed in the 
future.
    Mr. Collet. I believe there is plenty of flexibility in the 
acquisition strategy. If you break it down into components such 
as telecommunications, definitely. For wireless there is, 
especially from a mobile virtual service operator perspective.
    And I do disagree with Mr. Scott's proposition about 
information technology. The acquisition, from our perspective, 
includes a substantial amount of flexibility in the IT space, 
because hosting and application services are a part of the 
acquisition, and therefore we should be able to integrate those 
in very nicely with the network and actually provide it in an 
optimal way.
    A model would be to look at how the Defense Information 
Systems Agency is structuring its network-centric Enterprise 
services and the global information grid. You don't want to 
take it too far. You don't want to do too much at one time. By 
starting first with the establishment of Web services, things 
on the desktop can certainly come later, and they certainly 
become simpler rather than more complex.
    Ms. Murphy. We are really pleased also by functional 
definitions of the services that GSA provided in the strategy 
documents that they released. And we believe there is adequate 
flexibility. We won't know until we really see the process 
further defined.
    Ms. Bates mentioned that it will be through, you know, 
contract modifications with three pads in, you know, that's--
that sounds very good. But once we get to the draft RFP and see 
the further definition, we'll be able to answer that more 
clearly.
    The other piece that's critical is the flexibility and 
pricing of those new services. Pricing algorithms that have 
been used for traditional services aren't going to work for the 
services of the future, because the underlying infrastructure 
is different and the pricing structures need to differ to go 
along with that.
    Mr. Edgerton. Mr. Chairman, if the success on the change-
out of the services and the requirements by the agencies in the 
FTS 2001 is any indication, what we implemented in 1999 and 
2000 is totally different than what the customers are asking 
for today. And the current vehicle has been adaptable for that, 
and we believe that the current processes that have been in 
place will allow those kinds of innovations to be presented and 
accommodated in this next procurement.
    Chairman Tom Davis. My time is almost up for my first 
round. But Ms. Murphy let me ask you. You suggested GSA needs 
to make some changes in its strategy, particularly reducing 
locations specified for high-data services and reducing 
wireless, a couple of its requirements. Would these changes be 
necessary for firms other than, you know, the usual long 
distance carriers? I mean, how would you----
    Ms. Murphy. We believe that these changes will increase the 
number of companies that are in a position to respond to the 
Universal portion of the procurement.
    Chairman Tom Davis. Correct. But I'm trying to look at the 
bells. I mean, you've removed more in the long distance 
business, the backbone, but this is still a very high bar for 
you is what you're telling us.
    Ms. Murphy. This is still a very high bar, especially when 
you consider that at this point, 5.5 of those 54 locations 
require those types of services today. We know the requirement 
for those services will grow over time. But we also believe 
that there will be alternate technologies available, wireless 
technologies, for instance, that aren't envisioned today that 
may provide more cost-effective ways to serve those customers 
at those higher bandwidth requirements in the future.
    Chairman Tom Davis. And you also suggest that Networx 
should allow Enterprise contractors to graduate to be Universal 
as their capabilities evolve. And I asked this question of the 
panel prior to that: Do you think that feature would 
significantly increase competition both on the front end and as 
the contract goes on?
    Ms. Murphy. I don't know that it will increase competition 
for the Universal portion on the front end. But what it will do 
is help mitigate the risk for the industry issues that we are 
currently having. If you have consolidation within the 
industry, if that consolidation includes one of the traditional 
long distance providers that we could envision being awarded 
under Universal, what you want is to make sure that you 
continue to have sufficient competition on the Universal 
contract to make sure that the government is continuing to get 
best value and rapid introduction of new services.
    Chairman Tom Davis. Thank you. Ms. Watson.
    Ms. Watson. Universal communications is my interest, and 
you heard me raise some questions in the first panel. And 
anyone on this panel who would like to speak to it, are we 
looking at ways when we service our various agencies of setting 
up a Universal system that works, is tested, tried and true, 
across this country as it relates to security?
    Ms. Murphy. Ms. Watson, I think any number of the agencies 
are looking at putting that type of network infrastructure in 
place that will provide the high availability and security 
that's required. As we go forward in a post-September 11th 
world, I think part of the discussion we have had here today 
revolves around encouraging agencies to use the Networx 
procurement potentially as the vehicle to do that. My opinion 
is that the way the procurement is structured, with some minor 
changes, would allow the agencies to do exactly that.
    Ms. Watson. Do that monitor in terms of procurement, the 
efficacy of the products that are served--the products that are 
sold? And do they work? How do we evaluate the equipment? Is it 
a good contract, you know, and are they using state-of-the-art, 
and are we giving the best value for our money? How does your 
agency or the GSA do that?
    Mr. Collet. OK. Perhaps I could answer that question. The 
products that the government is asking for is under a broad 
scope. And many of the products--let me rephrase that. All of 
the products that they are asking for have standards. So things 
that need interoperability, they will certainly be able to have 
that. Now, there are some risk areas in the future with regards 
to convergence. Much work is being done in places like the 
Internet Engineering Task Force to establish the standards in 
which Networx can carry multiple kinds of communications.
    Ms. Watson. Let me just ask this. Who evaluates whether or 
not these contractors meet the standards at the end of their 
contract or during their contract? Who monitors to see that 
they meet these standards that are being formulated.
    Mr. Edgerton. I think the customers do that by virtue of 
their satisfaction with the services. GSA conducts an active 
program with the Interagency Management Council to make sure 
that the services being provided are up to the industry 
standards but are also forward looking. So each agency lays on 
the GSA its unique requirements, and then they are fulfilled 
through the GSA execution of that.
    Ms. Watson. Is there anywhere where the information that 
comes from the customers is housed so we can look back to see 
that we have made the best contractual decision, and that the 
equipment, indeed, or whatever the services are, indeed are of 
some value and a cost savings to the taxpayers? Is there any 
way that the information can be deposited in a central place? 
Does that exist?
    Mr. Edgerton. I think we would have to yield to GSA as to 
what their requirements are on that. But we certainly make 
available performance in terms of installation, performance in 
terms of mean time to repair, overall network performance 
statistics, and so forth.
    Ms. Watson. Well you know, you hear story after story about 
how we contract for government services and equipment, and we 
are paying too much for what we are getting. And you know, we 
keep doing this, and I'm just wondering that this information 
could be deposited in a central place where we can see and kind 
of monitor, a committee like this, kind of monitor whether or 
not we are making the best decisions on procurement.
    Mr. Edgerton. I would submit that the competitive process 
that the GSA has put into place certainly on FTS 2001 has 
provided the opportunity for my esteemed colleagues to make 
aware to all customers, as well as GSA, the current price 
points and the current values in the marketplace, so there is 
always pressure to do better both from a pricing and 
performance perspective.
    Ms. Watson. Well, I know about competitive processes, but 
it seems like the people in several cases who do get the 
contracts are way over what they should be, and I don't know 
how that process works.
    Mr. Edgerton. Well, let me make one other observation. 
Under FTS 2001, there was a price management mechanism put into 
place to assure that the prices were always good, or as good or 
better than commercial. And as a result of the processes that 
GSA put in place, they have never had to exercise that option 
because our prices have always been better than commercial 
prices.
    Mr. Scott. Let me support that, Ms. Watson. Over the last 
more than 10 years, GSA has led the industry in driving the 
prices down for this service. The initiative that was taken in 
that has driven these prices down. They are the best in the 
industry. And I am not one of the contractors.
    Ms. Watson. Well, let me ask this. Does the GSA deal with 
noncompetitive or nonbiddable processes?
    Mr. Scott. Not on this contract.
    Mr. Edgerton. You have to ask GSA that.
    Ms. Watson. OK. Because, you know, we are hearing about a 
particular contract was given, it wasn't bidded on, you know, 
and I'm just wondering what the connection is with GSA. Anybody 
from GSA want to respond? OK. I'm not going to put you on the 
spot.
    Chairman Tom Davis. I think some of this may be anecdotal. 
And so you need to run it down on this. These folks deal with 
it every day. There's always somebody who doesn't get 
something. We tend to operate a lot by anecdote here. I think 
she's trying to get to that.
    Ms. Watson. Yes. So I will just stop there. Thank you, Mr. 
Chairman.
    Chairman Tom Davis. Ms. Watson, thank you very much.
    I've got a few more questions, if you can just indulge me. 
From an industry perspective, how do we ensure participation of 
small and disadvantaged businesses in the Networx program?
    Mr. Scott. Well, a lot of the small business--a lot of it 
comes out of the applications software development. They do 
very well, and they probably lead the industries into 
development of innovative new software. And so if Networx is 
pushed toward more applications, you'd get more participation 
in the program by small businesses.
    Mr. Hogge. As part of delivering the services that are 
mandatory under either the Universal or the Enterprise 
contracts--and there are lots of bits and pieces that have 
traditionally fallen to small disadvantaged businesses 
historically either as specified percentages or as goals and 
objectives in that regard work quite well. In my experience, 
and previous programs.
    Chairman Davis. But I mean just let me ask you all, if 
you're going to do that--and I'm not advocating you do or don't 
do, because my philosophy is that on procurements we ought to 
let the value for the taxpayer be the driving force, not making 
sure it's spread around that everybody gets a little piece of 
it. I mean I think when you start doing those other things in 
the procurement system, it just raises your cost, so it just 
creates inefficiencies. But if you're going to do that, I mean, 
we're realistic here. I think there'll be a component of that 
in most of this. Are you better off letting your primes pick it 
and decide and be the integrators, or are you better off 
letting the government--I mean, how would you--anybody have any 
thoughts on that?
    Mr. Collet. Well, I think the prime contractor should 
select its teaming partners. There's a lot of technology that 
needs to be brought to bear on this deal. And small businesses 
can be a very important part of that. I think there's a natural 
synergy between the large companies and the small ones. Given 
the scope and requirements of FTS networks today, even just 
under FTS crossover and our day-to-day business at AT&T, we use 
a large number of small contractors. And it's for a selfish 
reason: They bring innovation and flexibility to the team that 
we might not have otherwise.
    Ms. Murphy. I would agree. I think the primes should select 
their subs. And if you look at the way GSA has defined the 
mandatory services under Universal and the optional services 
under Enterprise, there are some areas that are a natural fit 
for small business partners.
    Chairman Tom Davis. The revised strategy mentions an 
increased role for the Federal Supply Schedules, which I think 
makes a lot of sense. But how would you suggest GSA implement 
the used schedules within the program? Anybody have any 
thoughts on that.
    Mr. Collet. Well I think there are two elements in the 
supply schedule that would need to be modified. First is, I 
think contractors can change their prices every year, so that 
might be an issue that needs to be addressed here. And there 
are also some difficulties associated with how you stitch 
together end-to-end solutions. So maybe the multiple awards 
schedule, rules of engagements, need to be changed a little bit 
to address telecommunications.
    Chairman Tom Davis. OK.
    Mr. Collet. But it should be doable.
    Chairman Tom Davis. Anybody else want to add anything?
    Ms. Murphy. The way we've thought about it from a schedules 
perspective is that can be a very efficient way for agencies to 
acquire what we often refer to as stems and ends of their 
networks. You know, the broad----
    Chairman Tom Davis. We call them bells and whistles, 
whatever.
    Ms. Murphy. Yeah and the broad-brush Enterprise core of an 
agency's network backbone is probably going to be procured 
through Universal. It is going to have to be designed. It's got 
very stringent specifications. But as that network changes or 
needs to be added to over time, schedules become a very 
efficient way to do those add-ons.
    Chairman Tom Davis. It can be an entry point for people who 
couldn't get in otherwise--new companies, startup small 
companies.
    Ms. Murphy. Absolutely.
    Mr. Scott. That's very compatible with a solution base, 
because the commodity services that are available on the 
schedule could then be assembled into a solution by some 
solution provider.
    Chairman Tom Davis. Mr. Scott, let me ask, does the change 
in strategy make the Networx acquisition more attractive to 
integrators?
    Mr. Scott. It is more attractive, but it's my estimation at 
this point in time that we cannot compete effectively on it as 
currently structured.
    Chairman Tom Davis. OK.
    Mr. Scott. There are not enough solutions yet and not 
enough applications, not enough of the stuff that we do.
    Chairman Tom Davis. And if other agencies start setting up 
their own systems, would this be even less attractive?
    Mr. Scott. We'll go try to win them.
    Chairman Tom Davis. OK. But that would be one at a time 
and--OK.
    Mr. Scott. Yes. And that's what I was suggesting we ought 
to stop doing here.
    Chairman Tom Davis. Mr. Hogge, you note that Networx, to be 
successful, should be effective through the life of the 
program, the competition should be effective through the life 
of the program, which I agree with.
    Any other specific suggestions you want to make just in 
terms of how we can accomplish this?
    Mr. Hogge. Well, I think you heard from a couple of the 
panelists, including me, as we look at this opportunity and try 
to understand what sort of business opportunity it represents 
for us, and that's a part of the catalyst for the competitive 
process. So having some level of certainty, understanding what 
the business commitment will be, is a key element from our 
perspective as a nonincumbent contender here.
    The argument was made by a couple of the other panelists 
who sit in different positions in the current program, and I 
think that the two things, business commitment and 
understanding how the competitive process will work, both at 
the initial contracting period and over the life of the 
program, are keys to competitiveness.
    Chairman Tom Davis. OK. You suggest that GSA has yet to 
address fully the issue of specifying a minimum business 
commitment, or what you call the MRG. The new strategy does say 
that MRGs will be smaller than under FTS 2001, which I would 
agree with, just looking back historically. Are you saying you 
disagree with the concept of the smaller MRGs, or do you have 
any suggestions for a minimum MRG level for the Universal and 
the Enterprise?
    Mr. Hogge. Well, smaller is a relative term. So we are 
trying to understand. There is a threshold on both sides that 
makes sense; that, No. 1, leverages the government's buying 
power and is roughly equivalent to what happens on the 
commercial side with minimum commitments and minimum contract 
commitments that occur.
    Chairman Tom Davis. Before you gear up, you want to make 
sure you're going to be able to----
    Mr. Hogge. Exactly.
    Chairman Tom Davis. OK. I think it's fair.
    Mr. Collet, you indicated that the changes made since the 
issuance of the RFI are positive. What changes do you think 
were the most helpful?
    Mr. Collet. I'm sorry. What changes----
    Chairman Tom Davis. You indicated that changes, that the 
changes made, such the issuance of the request for information, 
were positive. What particular changes were most helpful?
    Mr. Collet. OK. I would say the changes that were helpful 
were in the area of billing. Originally the government had a 
requirement for roughly 500 elements, and that's been reduced 
by 62 percent, so we are very much capable of meeting those 
requirements and doing so very cost effectively. That was the 
most key area.
    Chairman Tom Davis. OK. And let me just ask Mr. Edgerton, 
what's your position on the contract term for Networx, 
including base and option years? Do you have a thought on that, 
the way it's being structured?
    Mr. Edgerton. We're satisfied with the way it is. The 5-
year base and the option year make you do the right thing as 
you go through the process of the contract.
    Chairman Tom Davis. And I asked this of the GAO testifier 
in the previous panel, and you've had an extensive experience 
in this. Under the prior program, do you think that we reached 
the bottom in terms of prices, and what's your expectation for 
changes in unit prices for service to be acquired in Networx 
over the length of that contract? Have any idea or you think 
it's still just too dynamic?
    Mr. Edgerton. We've squeezed our lemon pretty tight.
    Chairman Tom Davis. That's well scripted.
    Mr. Edgerton. That's better than the sour apples. This 
whole business now is all about what can you do and how can you 
more efficiently. We have a transition going in the industry to 
IP platforms that require investment. We're doing that against 
an uncertain revenue base, uncertain regulatory environment, 
and certainly the issues relative to consolidation in the 
industry. So our focus has been to move with the IP platform to 
focus on Enterprise solutions and continue to drive the prices 
out. We still have the access cost piece, which is our 
significant cost. But we have done and continue to do what's 
necessary.
    I would certainly hope that the prices are at the lowest 
level. GSA would probably have a different view of that. But I 
think as we make the additional investments in the network and 
we increase our reach in the access area and use alternative 
methods of access, then there is the possibility of additional 
savings to the government.
    Chairman Tom Davis. Thank you. Is there anything else 
anybody wants to add on top of what anybody else has said, or 
any questions that we've gotten here before we close the 
hearing?
    Mr. Collet. I'd just like to add one point about the issue 
of convergence. You know, when we are looking forward, we're 
probably going to see a great deal of technological churn 
during the next few years and the benefits to the government 
should be absolutely fantastic in terms of moving business 
logic functions and capabilities off stovepipe IT systems onto 
the Web. But doing that is going to be challenging.
    There's a lot that needs to be done at the network-centric 
Enterprises services layer, and then at the transport layer 
beneath that. We're probably looking at a 5 to 10-year story, 
rather than just having everything ready by 2007.
    And one of the things we--well, there's lots that we like 
about the acquisition strategy, but a key aspect of that is if 
it bundles enough IT and network components so that we'll have 
a fighting chance of making it all work and providing the 
government the best service that they can possibly set. So 
keeping it together is important. But keeping the scope where 
it is is very important. And I think industry could deliver 
those tools and processes that will help the agencies go to the 
next level.
    Chairman Tom Davis. Good. Well let me just say we 
appreciate everybody's interest. Did you want to add anything?
    Mr. Scott. I had one more comment. If GSA sees fit to move 
forward pretty much on the course they're on, I would encourage 
them to leave great flexibility over the life of this contract 
for the entry of new services and new providers. We're going to 
see a time of very very great change, and GSA needs to be 
positioned to accommodate that or the agencies will leave them.
    Chairman Tom Davis. OK. Well thank you very much. I think 
this has been helpful to us. I think it has probably been 
helpful to GSA as we continue to formulate it, and obviously 
this committee will continue to stay on top of this procurement 
as it moves forward.
    Thank you very much and the hearing is adjourned.
    [Whereupon, at 11:55 a.m., the committee was adjourned.]
    [The prepared statements of Hon. Henry A. Waxman, Hon. Paul 
E. Kanjorski, and Hon. Elijah E. Cummings follow:]

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