[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]





MAKING NETWORX WORK: COUNTDOWN TO THE RFP FOR THE FEDERAL GOVERNMENT'S 
                       TELECOMMUNICATIONS PROGRAM

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

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 3, 2005

                               __________

                            Serial No. 109-5

                               __________

       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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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  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
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida           C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada                BRIAN HIGGINS, New York
KENNY MARCHANT, Texas                ELEANOR HOLMES NORTON, District of 
LYNN A. WESTMORELAND, Georgia            Columbia
PATRICK T. McHENRY, North Carolina               ------
CHARLES W. DENT, Pennsylvania        BERNARD SANDERS, Vermont 
VIRGINIA FOXX, North Carolina            (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 March 3, 2005....................................     1
Statement of:
    Hogge, Jerry, senior vice president, Level 3 Communications, 
      LLC; Robert Collet, vice president, engineering, AT&T 
      Government Solutions; Shelley Murphy, vice president, 
      Federal Markets, Verizon; Jerry Edgerton, senior vice 
      president, government markets, MCI; Jeff Storey, CEO, 
      Wiltel Communications; and Anthony D'Agata, vice president 
      and general manager, Sprint GSD............................    68
        Collet, Robert...........................................    78
        D'Agata, Anthony.........................................   123
        Edgerton, Jerry..........................................    96
        Hogge, Jerry.............................................    68
        Murphy, Shelley..........................................    86
        Storey, Jeff.............................................   109
    Perry, Stephen, Administrator, U.S. General Services 
      Administration, accompanied by John Johnson, Assistant 
      Commissioner for Service Development and Delivery, Federal 
      Technology Service, and Barbara Shelton, Acting Commission, 
      Federal Technology Service; and Linda Koontz, Director, 
      Information Management Issues, U.S. Government 
      Accountability Office, accompanied by James Swedman, Senior 
      Analyst, U.S. Government Accountability Office.............    11
        Koontz, Linda............................................    32
        Perry, Stephen...........................................    11
    Scott, Donald, senior vice president, EDS, U.S. Government 
      Solutions; David Bittenbender, vice president, Network 
      Services, Computer Sciences Corp., Federal Sector; James 
      Courter, CEO & vice president, IDT Corp.; Michael Cook, 
      senior vice president & general manager, Hughes Network 
      Systems; Diana Gowen, president, Broadwing Government 
      Solutions, Broadwing Communications, LLC; and Greg Baroni, 
      president, Global Public Sector, Unisys Corp...............   139
        Baroni, Greg.............................................   176
        Bittenbender, David A....................................   151
        Cook, Michael L..........................................   160
        Courter, James...........................................   155
        Gowen, Diana.............................................   168
        Scott, Donald............................................   139
Letters, statements, etc., submitted for the record by:
    Baroni, Greg, president, Global Public Sector, Unisys Corp., 
      prepared statement of......................................   179
    Bittenbender, David, vice president, Network Services, 
      Computer Sciences Corp., Federal Sector, prepared statement 
      of.........................................................   153
    Burton, Hon. Dan, a Representative in Congress from the State 
      of Indiana, prepared statement of..........................   194
    Collet, Robert, vice president, engineering, AT&T Government 
      Solutions, prepared statement of...........................    80
    Cook, Michael, senior vice president & general manager, 
      Hughes Network Systems, prepared statement of..............   162
    Courter, James, CEO & vice president, IDT Corp., prepared 
      statement of...............................................   157
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   202
    D'Agata, Anthony, vice president and general manager, Sprint 
      GSD, prepared statement of.................................   125
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     5
    Edgerton, Jerry, senior vice president, government markets, 
      MCI, prepared statement of.................................   100
    Gowen, Diana, president, Broadwing Government Solutions, 
      Broadwing Communications, LLC, prepared statement of.......   170
    Hogge, Jerry, senior vice president, Level 3 Communications, 
      LLC, prepared statement of.................................    72
    Koontz, Linda, Director, Information Management Issues, U.S. 
      Government Accountability Office, prepared statement of....    34
    Murphy, Shelley, vice president, Federal Markets, Verizon, 
      prepared statement of......................................    88
    Perry, Stephen, Administrator, U.S. General Services 
      Administration, prepared statement of......................    14
    Porter, Hon. Jon C., a Representative in Congress from the 
      State of Nevada, prepared statement of.....................   201
    Scott, Donald, senior vice president, EDS, U.S. Government 
      Solutions, prepared statement of...........................   142
    Storey, Jeff, CEO, Wiltel Communications, prepared statement 
      of.........................................................   111

 
MAKING NETWORX WORK: COUNTDOWN TO THE RFP FOR THE FEDERAL GOVERNMENT'S 
                       TELECOMMUNICATIONS PROGRAM

                              ----------                              


                        THURSDAY, MARCH 3, 2005

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2154, Rayburn House Office Building, Hon. Tom Davis 
(chairman of the committee) presiding.
    Present: Representatives Tom Davis, Burton, Gutknecht, 
Cannon, Marchant, Dent, Waxman, Maloney, Cummings, Clay, 
Watson, Lynch and Norton.
    Staff present: David Marin, deputy staff director/
communications director; Ellen Brown, legislative director and 
senior policy counsel; Rob White, press secretary; Drew 
Crockett, deputy director of communications; Edward Kidd, 
professional staff member; John Brosnan, GAO detailee; Teresa 
Austin, chief clerk; Sarah D'Orsie, deputy clerk; Corinne 
Zaccagnini, chief information officer; Leneal Scott, computer 
systems manager; Kristin Amerling, minority deputy chief 
counsel; Karen Lightfoot, minority communications director/
senior policy advisor; Nancy Scola and Mark Stephenson, 
minority professional staff member; Earley Green, minority 
chief clerk; Jean Gosa, minority assistant clerk; and Cecelia 
Morton, minority office manager.
    Chairman Tom Davis. The committee will come to order.
    Good morning, and welcome to the Government Reform 
Committee's hearing and ongoing oversight of the General 
Services Administration's Networx procurement, one that carries 
with it the potential to be both the largest telecommunications 
procurement ever, as well as the one that creates the Federal 
Government's first digital, government-wide interoperable 
communications network.
    This hearing is our third in the committee's continuing 
efforts to gather information from industry and other 
stakeholders to find out whether Networx program, as it has 
evolved from that contained in its request for information 
issued last October 2003, and the draft request for proposals 
issued last November will become the government's acquisition 
infrastructure for information exchange in today's dynamic 
telecommunications environment.
    First, I would like to briefly set out my expectations for 
this program and the role I envision for Congress.
    Networx must be the driver that facilitates the deployment 
of communications and information technologies effectively 
across government. I firmly believe that the communications 
infrastructure is the most critical component of the 
government's Enterprise architecture, and it is the purpose of 
this hearing today to hear how Networx will fit the 
government's requirement for an enterprise-wide communications 
environment.
    Networx must be the agent to enable us to better intersect 
technologies with sound management practices and effective 
governance principles. To ensure Networx success we need to 
provide the leadership and resources for those things the 
government should and must do as an Enterprise, such as the 
building of a centrally managed telecommunications 
infrastructure. Networx must be the backbone of that 
infrastructure. Congress must be an engaged and aggressive 
partner with the executive branch and industry in ensuring the 
success of this program. To ensure this success we must think 
about establishing a governance structure that removes the 
heavy hand of mandatory use, but puts discipline in the 
objective of a centrally managed communications environment.
    Now, where are we in this oversight of Networx? Since the 
committee's last hearing and the release of the draft RFP, GSA 
has spent months listening to industry, customer agencies and 
congressional and other stakeholders; as a result, the strategy 
has continued to evolve.
    During this time my staff and I have monitored the 
progression of Networx, conferring with all of the stakeholders 
and GSA, and consulting with experts, including the Government 
Accountability Office. The committee intends to continue to 
monitor Networx closely as it progresses from a strategy to an 
acquisition, and on to an operating program.
    As it stands now, Networx will be a two-part program, with 
both portions to be awarded concurrently. The full-service 
portion is called the Universal and will provide the full range 
of domestic and international network services. GSA has reduced 
somewhat the much-criticized billing and other management 
requirements as the strategy has progressed. The smaller, more 
focused service portion is called Enterprise. It is designed to 
allow participation by providers who offer specialized services 
with less extensive geographic coverage than required by 
Universal. Enterprise does, however, mandate that its 
participants comply with the same billing and management 
requirements as Universal.
    Both Universal and Enterprise provide for multiple award 
contracts with relatively low minimum revenue guarantees. The 
current plan is for a total minimum revenue guarantee of $525 
million to be shared by all Universal awardees, and a recently 
increased MRG of $50 million of all Enterprise awardees. The 
contracts are to span 4 years, with three 2-year options. The 
planned schedule provides final solicitation to be issued on 
April 1, 2005, and for award by April 2006.
    So far GSA has made substantial changes to the program as 
the comment process has advanced. I am not sure, however, that 
the evolution has been sufficient to ensure that Networx will 
become the best choice for customer agencies as they design 
telecom plans to meet their diverse management challenges.
    It is not at all clear that Networx, as currently 
configured, particularly Enterprise, will encourage the 
broadest participation from industry, include a broad spectrum 
of technologies and services, and allow for the introduction of 
evolving technologies. I have consistently heard from the 
industry that Enterprise, with its single, rather low minimum 
revenue guarantee and onerous management and billing 
requirements is a barrier rather than a gateway for the 
nontraditional innovative segments of the market.
    GSA has moved to improve Enterprise. It has increased the 
original, rather meager $25 million minimum revenue guarantee 
to be divided among all awardees to $50 million, and it plans 
to provide for flexibility within Enterprise by allowing 
awardees to expand the number of optional services offered 
during the life of the program. Nevertheless, these changes may 
not be sufficient to rescue the program. I am not sure that 
merely providing what is, in effect, Universal with more modest 
mandatory requirements and narrower geographic coverage will 
get the job done.
    Some argue that Enterprise needs to be fundamentally 
different from Universal to succeed. They contend that 
innovation is stifled by complex management and billing 
requirements, by specifying requirements instead of setting 
forth a statement of objectives, by dividing the minimum 
revenue guarantee among an unknown number of participants.
    Finally, while I believe that GSA should be the 
government's agent to manage the government's communications 
environment, GSA must get its house in order so that it is up 
to the task. Because of the revelations of contract management 
challenges at GSA, particularly at the Federal Technology 
Service, I, along with GSA's top leadership, am reviewing 
options to resolve the agency's structural and management 
challenges. I intend to further explore issues relating to 
GSA's management structure in an upcoming hearing on March 16.
    We must be able to assure the American taxpayers that GSA 
will provide the kind of leadership and management capability a 
program like Networx demands. We must ensure that GSA exercises 
financial self-discipline. GSA must not cripple Networx with 
exorbitant management fees.
    Once the program is ongoing, GSA must consider 
administrative and overhead charges regularly, and adjust them 
downward as volume targets are achieved. GSA must handle the 
selection properly, the transition must be as smooth as 
possible, and the right program performance measures must be 
developed and consistently applied. I am prepared to take 
whatever action is needed to ensure that GSA is up to the job.
    We hope to receive enlightenment this morning on these 
challenges, as well as others, such as transition, access to 
the most current technology, and the impact on the program of 
the ever-converging and merging telecommunications marketplace. 
We will examine whether GSA has the capacity to advance from 
the current planning stage to the execution of what will be a 
complex and challenging acquisition.
    The key to success here is for GSA to take advantage of the 
wealth of information that has been made available to it 
throughout the comment-and-discussion process and through these 
hearings. It is crucial for GSA to design and implement this 
program properly. It is more important for GSA to do this right 
than it is to do it on schedule; timeliness is important, doing 
it right is imperative.
    We have a solid line-up of witnesses today, experts from 
industry and government. They have a range of views and a 
breadth of experience. I look forward to their input, and I 
look forward to working with the government and industry to 
ensure that Networx achieves its potential.
    [The prepared statement of Chairman Tom Davis follows:]

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    Chairman Tom Davis. I now recognize the distinguished 
ranking member, Mr. Waxman, for an opening statement.
    Mr. Waxman. Thank you, Mr. Chairman.
    I am pleased to join you today to assess the 
administration's continuing plans on how to purchase 
telecommunications services for the Federal Government when its 
current telecommunications contract expires. I look forward to 
working with you, the administration and the private sector to 
ensure that the Federal Government continues to receive the 
best price and highest quality service telecommunications 
needs.
    The telecommunications industry and marketplace have seen 
dramatic change over the last decade. A startling array of new 
services and technology has become available, everything from 
the widespread use of the Internet and cell phone technology to 
today's emerging satellite security and voice-over Internet 
protocols.
    Along with this rapid technological advance have come 
changes to the industry as well from the rise of the so-called 
Baby Bells to the large-scale pending mergers we read about in 
the newspapers. These changes will no doubt continue and may 
even speed up. The challenges of structuring an acquisition 
that will ensure best value in the complex and evolving 
environment are immense, but I believe GSA is meeting this 
challenge.
    The Federal Telecommunications Service at GSA that has 
administered the current Federal telecommunications program, 
FTS2001, and its predecessor, FTS2000, were not totally without 
problems. These programs have largely been a success. The 
Federal Government pays between 1\1/2\ and 2 cents per minute 
for long-distance service, well below the best commercial rate. 
Over its lifetime the program has saved the American taxpayer 
close to $2 billion.
    GSA issued a draft request for proposals last fall that 
outlines an acquisition strategy for the new program. This was 
one step in an ongoing process of consultation between 
industry, government clients and GSA that will culminate next 
month with the release of the final request for proposals.
    GSA has made revisions to its acquisition strategy that 
take into account many of the concerns of industry and the 
government users, and points at the strategy as retaining two 
critical elements, leveraging Federal buying power and 
encouraging continuous competition over the life of the 
contract.
    I thank you, Mr. Chairman. I look forward to hearing from 
our witnesses today.
    Chairman Tom Davis. Thank you.
    Any other opening statements?
    Mrs. Maloney.
    Mrs. Maloney. First of all, I thank the chairman and 
ranking member for holding this hearing.
    And just very briefly, more than any other, procurement FTS 
network has the potential to greatly impact the way that 
Federal Government agencies conduct their missions and interact 
with U.S. citizens.
    Being from New York, Manhattan and Queens, I understand 
firsthand the need for more vigorous continuity of operations, 
disaster recovery and security capabilities. As many of you 
know, after September 11 the phone system failed for many days 
in New York City, and the ability to communicate with 
firefighters and fire officers, many believe, could have saved 
their lives and more civilian lives. So this is critically 
important not only for the utility of government and 
communications, but in this time of homeland security threats, 
it is absolutely vital to improve on the system.
    I look forward to hearing from GSA and industry on how the 
procurement will ensure a network program that is responsive to 
agency mission and security needs, will deliver on the promise 
of better service for my constituents, and leverage the buying 
power of the Federal Government.
    I would add that oftentimes localities will follow the new 
innovations that we bring to the Federal Government; so I 
believe it's critically important to the communication systems 
to New York City and other areas that may face problems.
    Let me close by saying that we've been preparing for 
Networx for several years now, and I am concerned that we are 
beginning to eat into valuable transition time. I know there 
have been a number of mergers, but we need to get this going. 
And we need to give agencies ample time for transition if they 
are to effectively take advantage of all the new technologies 
and benefits and innovations that may be out there to help us 
to better communicate.
    This is an important hearing, and I thank the leadership 
for putting this together.
    Chairman Tom Davis. Thank you very much.
    Ms. Norton.
    Ms. Norton. I thank you, Mr. Chairman, for calling this 
hearing, an important hearing, as we move toward Networx. I 
have an interest not only in my Federal, but also because the 
District of Columbia has used the system with considerable 
savings.
    Federal Government is in the catbird seed here, and I think 
that's really the most important thing for us to remember here. 
The savings to the Federal Government and to the District of 
Columbia as a result of how the system works and has been 
managed is what I look to. It is the bottom line by which I 
judge the system.
    At the same time, I think GSA deserves credit, given the 
complexity of the technology and of the industry it faces, 
truly mind-blowing. One wonders after a while, as new 
opportunities to use technology comes about, whether we really 
need all of this in every agency all the time, but as it comes 
out, we've got to be prepared to take advantage of it. This 
hearing will be important in assessing whether we are able to 
do so efficiently, and with a cost saving that the Federal 
Government is entitled to.
    Thank you very much, Mr. Chairman.
    Chairman Tom Davis. Thank you very much.
    It's the policy of the committee that all witnesses be 
sworn before their testimony, and we will do that in a minute, 
but I want to recognize today our outstanding panel.
    We first have the Honorable Stephen Perry, the 
Administrator of the U.S. General Services Administration, 
accompanied by Mr. John Johnson, the Assistant Commissioner for 
Service Development and Delivery, Federal Technology Service; 
and Barbara Shelton, the Acting Commissioner of Federal 
Technology Service.
    We also have Ms. Linda Koontz, who is the Director of 
Information Management Issues, U.S. Government Accountability 
Office; and Mr. James Swedman is accompanying her as the Senior 
Analyst, Government Accountability Office.
    Now it's our policy that all witnesses be sworn again, so 
would you rise with me and raise your right hands.
    [Witnesses sworn.]
    Chairman Tom Davis. Commissioner Perry, we will start with 
you, and then go to Ms. Koontz.
    Thanks for being with us, Stephen, and thanks for your 
leadership on this.

   STATEMENTS OF STEPHEN PERRY, ADMINISTRATOR, U.S. GENERAL 
SERVICES ADMINISTRATION, ACCOMPANIED BY JOHN JOHNSON, ASSISTANT 
  COMMISSIONER FOR SERVICE DEVELOPMENT AND DELIVERY, FEDERAL 
  TECHNOLOGY SERVICE, AND BARBARA SHELTON, ACTING COMMISSION, 
    FEDERAL TECHNOLOGY SERVICE; AND LINDA KOONTZ, DIRECTOR, 
 INFORMATION MANAGEMENT ISSUES, U.S. GOVERNMENT ACCOUNTABILITY 
  OFFICE, ACCOMPANIED BY JAMES SWEDMAN, SENIOR ANALYST, U.S. 
                GOVERNMENT ACCOUNTABILITY OFFICE

                   STATEMENT OF STEPHEN PERRY

    Mr. Perry. Thank you, Mr. Chairman, Mr. Waxman, members of 
the committee. Thanks for this opportunity for GSA to present 
information about the acquisition of telecommunications 
services for the Federal Government agencies.
    GSA Acting Commissioner Barbara Shelton is here, as well as 
John Johnson, who is GSA's Assistant Commissioner for Networx 
Services. And we will respond to your questions, both as they 
relate to the acquisition strategy that we are developing, and 
as it relates to our work to finalize the request for proposals 
that both the government and the industry will have to work 
with in order to provide the quantity and quality of 
telecommunications services needed by the government at the 
best value for taxpayers.
    I have submitted a copy of my written statement for the 
record, so I will be brief in my opening remarks, but I do want 
to take a moment to thank you, Mr. Chairman, and members of 
this committee, for holding these hearings, and for your 
continuing recognition that telecommunications services are 
indeed critical to the success of day-to-day operations of 
every Federal agency. And consequently, the telecommunications 
acquisition process and this Request for Proposal must be 
developed and executed very well, with careful consideration to 
many factors involved, with active involvement of Federal 
agencies, with active involvement of industry contractors, with 
the oversight of this committee, and the input of other 
interested stakeholders.
    Additionally, GSA must continue to apply every ounce of our 
market knowledge, our acquisition expertise, and our judgment 
to develop an acquisition process which will yield the quality 
services agencies require at best value.
    Let me take a moment to mention just four of the highlights 
that are in my written testimony.
    First, the government has a strong track record for 
acquisitions of telecommunications services, which has been 
established by GSA with direction and support from this 
committee, and with the collaboration of many Federal agencies 
and industry contractors. While the new Networx acquisition 
builds on the success of its predecessor program, FTS2001, it 
is by no means merely an extension of those contracts; rather, 
Networx is designed to provide agencies with more than three 
times the service offerings that are in FTS2001, and this 
includes new technology, and particularly new technology for 
security.
    Also, the Networx acquisition is designed to attract new 
entrants, to meet the revolving requirements of Federal 
agencies with the solutions and emerging technologies of 
industry, and to move the government's telecommunications 
system to the next generation network environment.
    Second, Federal agencies have worked together to define and 
document their key requirements and program goals that this 
acquisition must achieve, and these include service continuity. 
There is a zero tolerance for loss of service by agencies 
during the transition from FTS2001 to Networx.
    Second, highly competitive prices, quality service; the 
contracts will include performance measures that will be 
constantly monitored to make sure that we are receiving 
continuous quality service.
    The contracts will provide for access to full-service 
providers, as well as access to all alternative sources for 
leading-edge technology and services. It provides for operating 
support and the need to improve our processes for ordering, for 
billing, for inventory management and for accountability. And 
then there are provisions for transition support, including use 
of the lessons learned from the last transition, including the 
need for accurate inventories of services; and then 
performance-based contracts with enforceable service-level 
agreements.
    A third highlight from my written testimony is that since 
the request for information was issued in October 2003, 
industry review and input has been obtained at conferences, 
hearings and other forums, and based on that industry input we 
have revised the original plans and improved the Networx 
acquisition process on several occasions. We issued the draft 
RFP October 29th, and since that date we've continued to 
solicit industry feedback, and this has resulted in substantial 
additional revisions and improvements.
    Last, as you know, the Networx acquisition consists of two 
conjoined and simultaneous acquisitions. Networx Universal 
meets the needs of agencies needing access to full-service 
providers who provide a broad range of services, including 37 
mandatory services, and a wide geographic area of coverage. 
Networx Enterprise, on the other hand, meets the requirements 
of Federal agencies needing access to alternative sources for 
leading-edge services, including nine mandatory Internet 
protocol and wireless-based service areas. And this will apply 
in cases where a broad range of service or wide geographic 
coverage is not a primary requirement.
    We think this two-pronged approach will, in fact, attract 
robust competition from the traditional service providers, from 
the emergent new service providers, and from systems 
integrators. The competitive participation of all of these 
providers is critical to help the government move its 
telecommunications system to the next-generation network 
environment.
    Mr. Chairman, members of the committee, I will conclude my 
remarks here so that we can discuss these and other matters, 
including the schedule for issuing the RFP, awarding the 
contracts, and transitioning to the new Networx 
telecommunications system.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Mr. Perry follows:]

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    Chairman Tom Davis. Ms. Koontz, thanks for being with us.

                   STATEMENT OF LINDA KOONTZ

    Ms. Koontz. Thank you, Mr. Chairman, and members of the 
committee.
    I am pleased to participate in today's hearing on GSA's 
Networx program.
    As you know, GSA's planning for this program is taking 
place within an environment of tremendous change in the 
telecommunications industry, in underlying services in 
technology, and potentially in the regulatory environment. In 
this context Networx initiative can be viewed as a significant 
opportunity for Federal agencies to acquire and apply 
innovative telecommunications services to support mission 
needs.
    Since we last testified, GSA has made progress in 
addressing the management challenges we identified and our 
recommendations. GSA has articulated a strategy for addressing 
billing concerns and plans to complete transition planning and 
training for agencies on the identification of service 
inventories by February 2006. It has also drafted performance 
measures for each of its program goals.
    In the course of our work, we identify three issues that 
are critically important to the short-term progress of the 
Networx program. If these issues not are resolved, they could 
affect the ultimate success of the program.
    First, contract size. As you know, Mr. Chairman, vendors 
commenting on the draft RFP express concerns about what they 
perceived as the relative small size of the Enterprise minimums 
compared to the cost of developing proposals and fulfilling the 
administrative requirements of the contracts. GSA subsequently 
raised the Enterprise minimums to 50 million, and is examining 
the administrative requirements to make sure that they are all 
needed.
    While raising the minimum may help address industry 
concerns, uncertainties remain. These include the Enterprise 
administrative requirements, the number of awardees, and how 
business will be allocated between Universal and Enterprise. As 
a result, whether GSA's actions today are sufficient to 
encourage robust competition for the Enterprise contracts 
remains an open question.
    Second, GSA has not yet finalized the criteria against 
which proposals will be evaluated and has not shared this 
information with prospective offerors. GSA does plan, however, 
to provide this information in the final RFP.
    Third, GSA has not yet determined the location-specific 
traffic volumes required by agencies due to delays in 
developing our related system. This information may not be 
available until mid to late May.
    These uncertainties represent risk to potential offerors 
which may inturn affect the quality of their proposals, 
particularly their ability to offer the best price to the 
government. In addition, delays in establishing evaluation 
criteria and traffic volumes could affect GSA's ability to 
award the contract by April 2006.
    Given the relatively short timeframes before proposals will 
be due, leadership from GSA and commitment from stakeholders 
will be critical to resolving these issues and ensuring that 
the Networx program realizes its potential.
    That concludes my statement. I will be happy to answer 
questions.
    Chairman Tom Davis. Well, thank you very much.
    [The prepared statement of Ms. Koontz follows:]

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    Chairman Tom Davis. Anybody else want to add anything? You 
have your--I think we're ready to move with the questions.
    Let me start, Commissioner Perry, with you.
    In your statement you indicated that GSA anticipates two 
awards on Universal and maybe five on Enterprise; is that 
correct?
    Mr. Perry. Yes. That is an estimate.
    Chairman Tom Davis. It could be three; it could go back and 
forth?
    Mr. Perry. Yes, it is in that range. But we believe the 
service that the government would require, has required, and 
will continue to require in the future could be met easily by 
the two.
    Chairman Tom Davis. But it could be three, it could be 
four, could be five, it could be six, correct?
    Mr. Perry. Yes.
    Chairman Tom Davis. Those are just your estimates.
    Did you derive these numbers based on your assessment of 
the likely competitive market, or is this just what you would 
like to see?
    Mr. Perry. No. It's based on the government need and our 
sense of the competitive marketplace.
    Chairman Tom Davis. You indicated that GSA will raise the 
minimum--the MRGs on Enterprise to $50 million for all offerors 
and will guarantee $10 million to each offeror in the event 
there are five Enterprise awards. What does that mean? Does 
that mean that you wouldn't go to six awards and divide it, or 
is that, again, a flexible number?
    Mr. Perry. Well, the minimum guarantee amount of $50 
million would be divided equally among however many awardees 
there are; so in your example of five, then it would be $10 
million each. The larger number of awardees, that minimum 
guarantee would decrease proportionately.
    I think on the subject, if I may add----
    Chairman Tom Davis. Sure.
    Mr. Perry. The things that competitors--and Enterprise, for 
example, or for that matter Universal--will look at in making 
their determinations to compete first of all will be their view 
or their perception of how well their product or service 
matches up with the government need. That is going to be 
preeminent. The second thing would be for them to take an 
assessment of their ability to provide those products and 
services to the government in a superior package as compared to 
their competitors. If they assess that is the case, then they 
go to the third question, which is to see that there is an 
opportunity for them to have a profitable return on their 
investment by investing. That is the time in which the minimum 
revenue guarantees come into place.
    Ideally their profit, their return on their investment will 
come from the sale of their products and services, not from the 
minimum revenue guarantees. The minimum revenue guarantees are 
there to ensure that there will be robust competition. Our 
assessment is that will be the case at the level that they have 
now established.
    Chairman Tom Davis. Thank you.
    Ms. Koontz, you have been reviewing the program for us for 
over a year now. Based on that experience, how would you rate 
GSA's overall performance in developing their Networx strategy?
    Ms. Koontz. I think that GSA has followed a very good 
course of events in developing their strategy. They spent a lot 
of time, I think, with industry, they spent time with us in 
terms of developing a strategy. I also think that they have 
listened to the stakeholders as they have moved forward.
    Chairman Tom Davis. Do you think that they have been 
responsive, then, to suggestions from industry and from you?
    Ms. Koontz. I think they have been; and I think that 
they're not done yet. So I don't know what their final proposal 
is going to be, but I sense that they are attentive to what 
industry is telling them.
    Chairman Tom Davis. Do you think that GSA currently has 
adequate resources to manage the program and the anticipated 
transition; and if not, what else would you think would be 
required?
    Ms. Koontz. I don't think that we've taken a detailed look 
enough at the resources at this point for me to give you a good 
answer on that, Mr. Chairman.
    Chairman Tom Davis. OK. Compared to the last transition, do 
you think--is GSA better prepared for the transition to 
Networx? Do you think that GSA will have the transition 
management plan completed in time for the award?
    Ms. Koontz. GSA seems to have a greater recognition this 
time, given what happened last time, of what it is going to 
take to transition. They also have a plan this time, they have 
a schedule for completing it. If they adhere to what they say 
they're going to do, and if they stay on time, they should be 
in a much better position to manage the next transition than 
the one that we saw a number of years ago.
    Chairman Tom Davis. Well, you noted the number of issues 
that have been raised concerning the draft RFP regarding such 
matters as the size of the minimum revenue guarantees, the lack 
of evaluation criteria, the traffic volume data. Do you think 
they can resolve these matters and still issue an RFP by April 
1st?
    Ms. Koontz. Obviously not all the issues will be resolved 
by April 1st because GSA has already told us that the traffic 
volumes for specific locations won't be available until mid to 
late May; however, it seems to us that there is probably enough 
information for them to release the draft RFP on April 1st. I 
think they need to remain sensitive, though, given the short 
time that they have for prospective offerors to do their 
proposals, to perhaps looking at having to lengthen that time 
if it becomes necessary.
    Chairman Tom Davis. Do you think it would be appropriate 
for GSA to issue a second draft RFP to allow comment on such 
matters as the evaluation criteria?
    Ms. Koontz. I don't think that is necessary. I think that 
they have heard the comments that they need to have at this 
point.
    Chairman Tom Davis. All right. Thank you.
    Mrs. Maloney.
    Mrs. Maloney. First of all, I saw in one of your letters, 
the letter to the GSA and your performance accountability 
report, that the contracts literally save the government money 
in the last term. So I would like to understand the timeframe a 
little better. You're going to come out with the RFP on April 
1st, and then how long do the contestants have to respond to 
it?
    Mr. Perry. The request for proposals would be issued on 
April 1st, and at that point, as has been pointed out, there 
would be some information that GSA would not yet have 
available, and we would make that information available in no 
later than the end of May, and then the respondents would take 
that information and complete that and then submit their 
proposals by July 5th.
    Mrs. Maloney. By July 5th.
    Mr. Perry. Yes.
    Mrs. Maloney. And then how long will the government review 
these proposals and make a decision?
    Mr. Perry. My plan would be to make the review and actually 
issue the awards in April 2006.
    Mrs. Maloney. In April 2006.
    And I understand you are allowing for competition, new 
ideas, new innovations in order to move us more into the 21st 
century. And if there is a transition period, what is the 
length of the transition period allowed for agencies? Say 
Homeland Security wants to get into a new system that is more 
secure, how much time would they have to get into a system that 
may be more secure? And who pays for the transition cost; does 
the government pay for it, or does the contractor pay for it?
    Mr. Perry. Well, in terms of the time that would be 
allocated for transition, we're allocating 18 months.
    Mrs. Maloney. Eighteen months?
    Mr. Perry. And that would be a period of time that enables 
us to complete the transition without having to extend the 
existing contracts, which is our plan. As a contingency, we do 
have the ability to extend the existing contracts should that 
become necessary, but we don't expect that to be the case.
    So the last transition that we've talked about took almost 
3 years; it took over 2\1/2\ years. We are saying this one will 
be done much more quickly not only because GSA has worked with 
industry and with customers, agencies to develop a better 
transition plan, but because agencies themselves are better 
prepared for the transition. So we believe that it all can be 
accomplished within the 18 months that's in this schedule as we 
projected it, but we have contingencies to deal with----
    Mrs. Maloney. And who would pay for the transition?
    Mr. Perry. The cost is paid for, in effect, by the 
government because we have a fund that GSA accumulates as a 
result of the fees that we charge to agencies for 
telecommunications acquisition services, and those funds would 
be used to pay for transition costs.
    Mrs. Maloney. Let me ask you something. You said it took 3 
years for the first transition to take place, and now you're 
only allowing 18 months. That's a huge discrepancy.
    Mr. Perry. It is, it is. But the previous transition had a 
number of things happening, including a major strike of a 
provider during that period of time. It was not--we didn't have 
the benefit of the lessons that we've learned now. So by virtue 
of the fact that we started probably at 2 years ago to begin 
preparing for this new transition, we have worked to streamline 
it, make it such that it can be done more quickly. Still 18 
months is more like it.
    Mrs. Maloney. I want to say that our country has changed 
dramatically since the last time we reviewed these contracts, 
and I would say that the priorities have changed dramatically. 
I mean, there's more of an emphasis on security and 
communications during times of possibly a tragedy, and just 
moving into the 21st century, so I question the length of your 
contracts.
    I'm glad that we're coming back and looking at new 
technologies and new security items in these contracts. I 
understand you're proposing a 4-year base period, with 32-year 
options, and what is the rationale for that particular contract 
length, given the speed of change in the telecommunications 
industry? It's hard to keep up with all the mergers and what 
they mean and how it's going to change the telecommunications 
industry, and what you're proposing is a potential 10-year 
contract. And is that wise, given the speed with which 
telecommunications changes, the speed of new startups and new 
ideas and new protocols, or whatever, in the industry? Do we 
want to tie ourselves into a 10-year contract given the massive 
speed and change of this particular industry, and given the 
fact that as we, as a Nation, evolve, our priorities may change 
in how we want to communicate in the future, given the world 
situation and security and so forth?
    Mr. Perry. Let me kind of just briefly, first on the first 
part of what you were discussing, namely the transition issue 
and the tradeoff that we have to make between how quickly we 
launch the award, because, as you pointed out, the more that 
gets delayed, the less time we have for a transition, which is 
the reason why we do need to proceed.
    On your second point--and I'll ask John to followup on this 
a bit--even though the contracts have a duration, there is 
nothing that prevents the continuous refreshment of technology 
during the course of that first 4 years and subsequently. So 
technology is not frozen in place; in fact, quite the contrary, 
the project is designed--or contracts are designed to allow for 
the continuous refreshment of technology as these technologies 
emerge and mature.
    Mrs. Maloney. But what if the technology comes from a 
competitor company? I mean, obviously the company that gets the 
contract can build on their technology. Say a new company comes 
out with a new technology and patents it, you understand what 
I'm saying, and we're tied into a 10-year contract?
    Mr. Perry. Well, that would be the case. It probably 
wouldn't prevent the government from having access to that 
company and that technology, provided that it wasn't available 
under the Networx contract.
    John, do you want to comment on that?
    Mr. Johnson. Let me just add to that. First of all, we've 
anticipated the types of security requirements that we believe 
are necessary to carry us forward into the future. Now that 
being said, we can't anticipate the future completely, so we do 
have a very robust modification process to make sure that we 
can introduce new technologies and services over time to remain 
current, such as we have with FTS2001.
    With regard to the new technologies that are security 
technologies, for example, that could be introduced, it's 
likely that because we will have a robust portfolio of service 
providers, those service providers would be motivated to form 
teaming arrangements or other arrangements to provide the 
requisite services required under the contract to meet customer 
demand. So I can't imagine that would be a large problem. If it 
were a large problem, however, we would take action to correct 
it by perhaps considering an additional contract for security 
services.
    Mrs. Maloney. My time is up.
    Mr. Burton [presiding]. The gentlelady's time has expired.
    Ms. Koontz, you indicated that the criteria was going to be 
ready when?
    Ms. Koontz. The evaluation criteria will be released with 
the final RFP.
    Mr. Burton. And when will that be?
    Ms. Koontz. April 1st.
    Mr. Burton. When will the committee get a chance to take a 
look at that.
    Ms. Koontz. I think that's a question for GSA.
    Mr. Burton. Well, I think because of the interests of the 
committee, all the members, Democrat and Republican alike, we 
would like to see that as quickly as possible so if there is a 
problem that we visualize, we would like to respond to it.
    Mr. Johnson. We are nearing the completion of the 
evaluation criteria, and as was indicated, it would--it's 
planned to go out coincident with the release of the final 
RFPs, but certainly it could be available for the committee to 
review prior to that time.
    Mr. Burton. Yes. It would be great if we could have it a 
little ahead of time; it would be, you know--the chairman, I'm 
sure, and everybody on the committee would like to have that.
    I understand that the telecommunications industry has 
expressed concern regarding the price management mechanism in 
the contract. And some members of the industry feel that the 
mechanism, as they understand it, allows the government to 
reduce prices unilaterally. Is that accurate?
    Mr. Perry. I would not characterize it that way. It's part 
of the effort that the government makes as a major purchaser, 
not only in telecommunications, but in a variety of other 
areas, to attempt to obtain the best pricing that a particular 
company offers to any of its customers, if we're their biggest 
customer. What the price mechanism enables us to do is to 
compare the prices that GSA or the government is being charged 
with the prices that same company is charging to its commercial 
customers, and in the event that those prices to commercial 
customers were as much as 5 percent below the government price, 
then we would expect that the government would be offered the 
better price. But it's not beyond that. In fact, that's a 
concept that's used in our multiple award schedules and a 
variety of other government purchasing vehicles; the 
expectation is that if we are a large purchaser, as comparable 
to their many large commercial buyers, then we try and 
negotiate that we get a price that's at least the same as their 
commercial customers.
    Mr. Johnson. I might add, if I may, that there has been a 
criticism about the inclusion of the price management mechanism 
based on previous history. And the fact remains that we haven't 
had to use the price management mechanism because our prices 
have been very attractive. But the uncertainty of the future 
market just causes us to believe that the price management 
mechanism for the future is much more important because we 
don't really know where the industry is headed, and we think 
that it is at least a good tool for us to keep prices at bay 
and competitive.
    And I might also indicate that it's generally not our 
practice--or it isn't our practice to unilaterally adjust 
prices without negotiation with our service providers. We do 
create a dialog to make sure that our perceptions of prices are 
accurate, and that the price adjustments that we would want to 
make are necessary to maintain attractive pricing.
    Mr. Burton. Well, I understand that we want to get the very 
best price for the taxpayer, we want to save the taxpayers 
money, and we want to make sure that the service is quality, 
while keeping the price low; but once those contracts are 
negotiated, you know, a company may have a small margin of 
profit regardless of what they're charging corporate America. 
And so I think it's very important that you don't put some 
company--and I know that hasn't happened in the past, but don't 
put some company into an economic trick bag that might drive 
them out of business because you're arbitrarily and 
unilaterally lowering those prices. I mean, the contract should 
be negotiated in good faith so that the companies don't have to 
worry too much about that.
    I understand that the draft RFP doesn't contain a section 
M, which is the customary section that spells out the 
evaluation criteria that will be used to choose the contract 
awardees. Is this accurate; and if so, why was this omitted 
from the RFP?
    Mr. Johnson. The evaluation criteria, the RFP has not been 
released yet. We released a draft RFP that did not include the 
evaluation criteria. One of the reasons for that is because 
when we released the draft RFP, we knew that as a result of 
industry comment, that the RFP would change significantly, and 
it has. As a matter of fact, many of the issues that we're 
discussing today have been resolved. We received roughly 2,500 
comments from industry as a result of the draft RFP, of which 
we've accepted about 40 percent in terms of changes that have 
been made to the RFPs.
    So we knew that we would be making substantial changes, of 
which we have. So the criteria that we would develop obviously 
would be necessary with regard to the new or the revised RFP, 
so we thought that would create a lot of confusion.
    The second part is that we just have not completed the 
evaluation criteria to be released in time for the draft.
    Mr. Burton. Maybe we will see that in advance.
    Mr. Johnson. Yes.
    Mr. Burton. Who is next up?
    Ms. Norton. I think I'm next, Mr. Chairman.
    Mr. Burton. Well, then, we will recognize the gentlelady 
from the great city of Washington, DC.
    Ms. Norton. Mr. Perry, I have a question. I look at pages 4 
and 5 of your testimony where you outline the Networx program 
goals, the last of the goals is performance-based contracts. As 
you know, government has been traditionally far better at 
awarding contracts than in monitoring contracts; it's very 
difficult to monitor contracts.
    We're dealing with a mammoth contract here. We were very 
concerned last session in discovering just how difficult it is 
and just how easy it is for the contractor to, frankly, get 
away with not meeting the expectations of the government, 
largely because of the difficulty the government has in 
monitoring what the contractor does. Now, that is difficult in 
the ordinary ABC contract. I really have a question about this 
contract, particularly in light of the GAO report.
    We saw, for example, in Iraq huge difficulties; you can see 
that there would be larger difficulties there than here, but 
the size and complexity here, it seems to me, are of some 
concern when it comes to what the GSA says about performance 
measures. It says that you have developed draft performance 
measures, but it goes on to recommend--the GAO goes on to 
recommend that the GSA finalize your efforts to identify--and 
here I'm using the GSA's language--identify measures to 
evaluate progress toward program goals and develop strategy for 
using those measures for ongoing program management.
    That is a huge challenge, and I would like you to speak 
about how far you are along in identifying measures to evaluate 
progress. Are they written down? How are you going about doing 
it for a contract this large and complex?
    Mr. Perry. Yes. Thank you for that question, and I will 
start and ask John to maybe fill in a bit.
    You are correct that in any performance-based contract, it 
may be difficult to measure. First of all, the first difficulty 
is to establish what the metric should be, what are the 
indicators as to what are good services being provided? We've 
worked together collaboratively with all of the other Federal 
agencies to understand what's important to them in terms of 
what these goals should be, and then obviously we worked with 
the industry to understand their perspective on how they should 
be held accountable and what they should be held accountable to 
achieve.
    Measures are beginning to be developed. We have measures--
maybe these are sort of mundane or routine, but in the 
transition period we have measures on various transition steps 
that have to occur, and we would be measuring whether or not 
those various steps are taking place within the time standard 
allowed, and have very high expectations. In many cases the 
measure says that 98 percent of the modifications will be made 
within the standard time allowed. And then in some measures--in 
my own view, the measures should say 100 percent, but a couple 
of them are at this point at 98 percent. But those measures, in 
this case we are able to track some of them because they are 
things like what is the time interval for accomplishing this 
modification; and if they are not able to accomplish them in 
that time interval, then the record will show that measure was 
not achieved, and it will have consequences.
    John, you may want to add to your thought there.
    Mr. Johnson. I appreciate the recognition of the complexity 
of measuring a program of this magnitude. As Mr. Perry 
indicated, some of our program measures, such as transition 
success or the ability to have alternate service providers and 
so forth, have been clearly stated, and the GAO testimony 
referred to that in terms of our maturing the measures in terms 
of how we class success at some point in time.
    But also we have internal operational measures that we use 
to evaluate the effectiveness of our operation in terms of 
monitoring SLA compliance and other such things; in other 
words, making sure that we're getting what we asked for and 
paying for what we've asked for appropriately.
    Ms. Norton. Do you get feedback from the agencies that use 
the service?
    Mr. Johnson. Yes, ma'am. And we also receive feedback from 
the agencies in terms of the quality of service that they 
receive, and the overall operational characteristics of the 
program itself.
    So we have these measures, and as a result of these 
measures, we make adjustments to the program for continuous 
improvement.
    But I might state that moving from the traditional contract 
environment to a service-level agreement environment does 
require a certain amount of restructuring, if you will, of 
infrastructure in terms of how you manage contracts; and we are 
working on that right now in terms of our operational systems.
    Ms. Norton. This is a big challenge, and I think this is 
where the--this is how the contract should ultimately be 
measured.
    Mr. Johnson. Right.
    Ms. Norton. I thank you very much, Mr. Chairman.
    Mr. Burton. I thank the gentlelady.
    Mr. Cannon.
    Mr. Cannon. Thank you, Mr. Chairman.
    Mr. Perry, as you know, agencies are not required to use 
FTS2001 for their telecommunication needs, despite the fact 
that GSA offers better pricing than other contract vehicles. I 
would put some bites in that becoming a commodity; basic 
economics suggest that we don't want to factualize the 
government's buying power if we're seeking the lowest possible 
prices.
    One suggestion I heard is that the administration use a 
buy-smart approach where agencies would be required to use 
Networx unless they provided justification as to why going it 
alone would provide a better value for taxpayers. What are your 
thoughts on that idea?
    Mr. Perry. Well, first of all, I certainly agree that 
government agencies should work together, and we should 
leverage the purchasing power of the government. And I also 
agree that in this area the item being purchased is 
sufficiently similar that there shouldn't be wide deviations 
from agency to agency.
    Now, as to my feeling about that, I think that we are 
making really good progress in terms of getting more and more 
agencies to recognize just the point that you're making, that 
this is the only appropriate and smart way to go. I think some 
of the reason why we might not have achieved that to the extent 
that we would have liked to up to this point, first of all it 
starts, I believe, with a general notion that agencies have 
historically had that we are independent, we operate 
independently, we don't do things across agency boundaries. But 
that is changing; that's changing rather dramatically partly 
because in an environment of constrained resources, and in an 
environment where agencies recognize that we do have to 
collaborate in the future much more than we have in the past, 
now that is changing. I think the nature of technology is 
enabling that change, not only in the telecommunications arena, 
but in financial management systems, in human resource 
management systems, in all the e-government initiatives that 
the administration has taken on. Agency boundaries have been 
crossed in order for agencies to collaborate and get a better 
deal. And so all of that serves coming together and making this 
an idea whose time has arrived.
    And I also would say--I'll compliment our GSA team in not 
only engaging with the industry, but engaging very much with 
agencies, including some agencies that did not participate in 
FTS2001, to help them be a part of crafting this Networx 
acquisition, and as a result I think we'll have much more buy-
in from other agencies than we may have had in the past.
    Now, without going all the way to a mandatory requirement, 
there is a very significant emphasis by OMB on agencies to, in 
fact, present a justification if they plan to deviate from a 
government-wide acquisition initiative, and I would expect that 
would be adhered to on Networx.
    Mr. Cannon. So you don't feel that you need us to create a 
requirement; OMB, you think, is sufficient for that purpose?
    Mr. Perry. I think it starts, again, with the agencies 
themselves. I think a lot of this is agency initiation, but I 
think OMB is a backstop to that; and hopefully the combination 
of GSA, the agencies and OMB would make our compliance happen 
even without congressional action.
    Mr. Cannon. I'm really excited, I think, as you know, about 
Internet protocol and what we can do with that to work with you 
there.
    What do you see happening with IP and Networx and the 
services being made available that way; and what do you expect 
happening to cost over time because of new IP services?
    Mr. Perry. I will also ask John, as the expert, to talk 
about that. But the little bit I know will tell me that we are 
moving from a telecommunications system where you try to get 
the line cost down as low as you possibly could, and you switch 
services, a means of delivering; whereas today, with IP 
protocols and with other packet delivery systems, you can have 
a very ubiquitous telecommunications system that operates 
actually for, I would say, fractions of the cost of what used 
to be the case. We've seen the costs come down dramatically 
during the period of time of FTS2001, and the expectation is 
that some of that will continue as new technology comes on.
    Mr. Cannon. John, as you begin to approach that question, I 
was talking to a guy in the industry the other day who was very 
sure that the cost would be a thirtieth, at least, and after 
some discussion sort of concluded that you actually end up with 
maybe a hundredth the cost for IP. What do you see that coming 
out as?
    Mr. Johnson. With industry behind me, I'm afraid to answer 
that question, but certainly I think there are many 
opportunities to save on the cost per megabit, if you will, of 
delivery, whether it be voice, video, data, as a result of 
converging our traditional applications toward an IP-based 
environment.
    And as we all know today, for example, as was mentioned in 
the chairman's opening comments, voice, for example, is between 
2\1/2\ and 2 cents per minute, and as that voice migrates over 
to IP, it could be that it is far less than that. I don't know 
what the actual cost per minute would be if that were the 
measure.
    The idea is that by moving all of our applications to an 
NPLS IP environment, it will allow us a great opportunity to 
save on each service that's migrated that path, as well as on 
infrastructure costs that's traditionally developed and 
maintained in terms of managing each service separately.
    So I think that there is great promise in savings for both 
government and industry in the cost per delivery.
    Mr. Perry. Congressman, if I may add to that question just 
a second.
    A lot of the emphasis that we were just talking about is as 
it would relate to industry bringing forth technology at 
reduced cost. Some of the opportunity for savings is also on 
the customer side; that is, that as agencies are smarter in the 
use of this technology and telecommunications area, the same 
thing will happen.
    You've already mentioned the issue of agencies 
collaborating and participating fully. That will help. But the 
other is that agencies will move from handling each of their 
bureaus independently, going to agencywide or enterprise-wide 
acquisitions for both their voice data and video, and that will 
also bring savings to the government.
    Mr. Cannon. And perhaps save us some travel; that would be 
good.
    Thank you very much. I see my time has expired, Mr. 
Chairman. I yield back.
    Chairman Tom Davis. The Chair will recognize Mr. Clay.
    Mr. Clay. Thank you very much, Mr. Chairman.
    Let me hear from anyone on the panel. What are the unique 
benefits of a centrally managed telecommunications acquisition 
program that could not be obtained in other models; in other 
words, is there a firm that can do it all? Could somebody 
attempt to answer that?
    Mr. Perry. I'll start with that. But the way we would 
interpret the phrase ``centrally managed telecommunications 
system'' is centrally within the government; that is, that as 
opposed to each of the agencies independently acquiring their 
own telecommunications system and operating it and maintaining 
it separately, we are following a model, and have for some 
time, that tries to centralize that, at least to the extent 
that GSA and a collaboration of the agencies form this 
centralized operation. It's not that one company would be asked 
to do it, but that the government would act in unison in 
acquiring its telecommunications services.
    Mr. Clay. And you think that is more efficient?
    Mr. Perry. Yes, I certainly do. I think that's a model that 
has been successful in a variety of organizations that are 
complex and far flung; that if you have a particular activity 
that's occurring in 20 or 30 places, if you can consolidate 
that expertise and at the same time continue to be sensitive to 
the needs of those 20 or 30 end locations, if you can do both 
sides of that equation, then, yes, it can be very effective. If 
you centralize and lose sight of the needs of those independent 
units, then you have a big problem; but if you do both, you 
can.
    Mr. Clay. I see. Thank you.
    Can anyone give us your best estimate of the number of 
companies that will be able to compete for Networx? Does anyone 
want to take a stab at it?
    Mr. Johnson. I am fairly confident that there are a large 
number of companies that can compete for Networx. I would have 
to answer that question by the responses that we received to 
the draft RFP, which we received responses from 40 companies 
with regard to their interest and making comments. So I would 
say that there is the potential for very robust competition.
    Mr. Clay. Can you name several of them today and then just 
give me the names, which ones are they? I mean, which ones just 
pop up in your head?
    Mr. Johnson. I could name many of them. They range from 
large carriers to systems integrators, as well as some of the 
traditional smaller carriers; but it's across the board, quite 
frankly, in terms of who those companies are and who responded.
    Mr. Clay. You don't want to say specific names? That's 
fine.
    Mr. Johnson. I'd prefer not to.
    Mr. Clay. Let me say that GSA has indicated that relatively 
small minimum revenue guarantees will be provided to winning 
contractors, $525 million for Universal and $50 million for 
Enterprise. These MRGs will be split equally among all 
awardees. Would you please explain the rationale for these 
decisions on minimum revenue guarantees to the committee?
    Mr. Perry. Yes, if I may, Congressman, I will try to put it 
in context. What we are trying to achieve in this is robust 
competition, and to make it attractive to not only the 
traditional carriers who have provided telecommunications 
services to the Government, but also to the emerging companies 
that may have leading-edge technology to participate in this 
arena.
    And to my mind, there are two or three things that a 
company would think about before they would decide to 
participate in this competition. One is that they would see a 
match between the Government's needs and requirements and their 
own products and services. And as John says, there are at least 
40 companies who potentially see a match there.
    A second issue they would look at before they get to MRGs 
would be whether or not they would be, in their judgment, able 
to compete in offering a value proposition to the government 
that would be superior to that of some of their competitors. If 
they get past that hurdle, then they would say, is there a way 
in which I can do this and do it profitably and derive a return 
on my investment. That is where the MRG may come in. And I 
think they would want their profit on their investment to be 
derived from the sale of their products and services, not 
necessarily from a guaranteed minimum revenue amount.
    However, we believe that the minimum revenue guarantee 
needed to be added in order to sweeten the whole proposal, if 
you will, so that some companies who have a high hurdle in 
terms of the cost of putting together a bid proposal, and there 
is--and they would confront a great deal of uncertainty as to 
whether or not they would be able to generate enough revenue to 
make this all worthwhile, the minimum revenue guarantee is 
intended to bring those people into the competition.
    We think having established that the way we did is 
reasonable. We took the projected total revenue and then we 
divided that, 95 percent to the Universal group and initially 5 
percent to the Enterprise group, and subsequently increased the 
Enterprise group to $50 million. But hopefully in that context 
one would say, OK, if all of those other things are in place, 
if companies believe they can compete, they have a product, 
they have a value proposition, and there is some assurance that 
they will be--have at least some amount of minimum revenue, we 
believe that will generate the robust competition that we need.
    Mr. Clay. OK. I thank the panel for their response.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you very much.
    Mr. Marchant, any questions?
    Mr. Marchant. No.
    Chairman Tom Davis. Mr. Lynch, any questions?
    Mr. Lynch. Thank you, Mr. Chairman.
    The ability of customers to utilize new technologies and to 
have that flexibility in cost-saving technology as well 
depends, I think, in part on the ease of transition to actually 
adopt some of those technologies and, if necessary, to change 
carriers.
    The last time that we were here on this matter, I know Ms. 
Koontz had identified some transition challenges that we 
still--at that point I believe your statement was that GSA had 
not developed procedures or a time line or contractor support 
to allow people to actually transition to the advantage of the 
customer and use some of these new technologies and change 
carriers.
    I am wondering, have we made any progress on that? And do 
we see any other obstacles that need to be addressed with 
respect to that transition occurring?
    Ms. Koontz. Since we we last testified on this subject, I 
think GSA has made some progress; first, in mapping a schedule 
out and mapping a strategy for preparing for the transition. I 
also think that one of the things that was a very fundamental 
problem in the prior transition was the lack of service 
inventories or adequate service inventories so that agencies 
had identified exactly what services needed to be transitioned 
to the new carriers.
    I think GSA, based on the experience that they had last 
time, have a recognition that this is important. They spent a 
lot more time in developing service inventories, and again they 
have a strategy and a deadline for getting those completed in 
time for the transition.
    Mr. Lynch. OK. Just going back just to the lessons learned 
from previous transition efforts, what have we learned? What 
were the major obstacles or major challenges in transition 
before, and how have we overcome these obstacles going forward?
    Ms. Koontz. Again, I thought one of the issues was the lack 
of adequate inventories, but I can--do you have anything to add 
about the challenges?
    Mr. Swedman. There are a few more. A lot of it has to deal 
with the agencies, just recognizing the scope of the challenge, 
recognizing that it is hard. And there has been a lot of talk 
within the Interagency Management Council. GSA has been putting 
in some contractor support to help them with their portion of 
the transition management. There are a few things, and GSA is 
working on a plan on that. They expect that to be finished by 
February 2006, which would put it in place a few months before 
the transition has to actually begin.
    Mr. Lynch. OK. Thank you.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you.
    Mr. Burton.
    Mr. Burton. Mr. Chairman, thank you.
    I just have one quick question. You said in these contracts 
you were putting in minimum revenue projections to help entice 
bidders to bid; is that correct?
    Mr. Perry. That is correct.
    Mr. Burton. Now, can the government reduce that minimum 
revenue projection unilaterally?
    Mr. Perry. No.
    Mr. Burton. They cannot? That is a floor?
    Mr. Perry. It would be in the proposal, the document. 
Whatever we determine it to be, once that is final, then we 
would not change it.
    Mr. Burton. OK. Thank you very much.
    Chairman Tom Davis. Let me just followup on that. If you 
intend to keep the minimum revenue guarantees pretty much where 
they are, and to maintain substantially the same level of 
management and operations requirements, is it realistic to 
expect to obtain robust competition, particularly in the 
Enterprise, from a market that almost universally maintains 
that the expense of competing is prohibitive?
    Mr. Perry. Thank you very much for that question. The first 
point is that some of the continued changes that we are making 
in the area of management and operation requirements are not 
even yet known to the industry, because we haven't had an 
opportunity to communicate that to them. In other words, we are 
continuing to look at the objections that they have raised in 
these areas, and we are continuing to bring that number down so 
that we have fewer and fewer government-specific requirements 
in that area.
    My hope is that when they see the changes that we have made 
or the changes that we will continue to make that will make 
this less onerous, and at the same time meet the needs of the 
Government, that they will find that we have met or certainly 
moved a great distance toward meeting their expectation in that 
area.
    I think that is going to be good news. That obviously then 
takes some of the pressure off of the minimum revenue 
guarantees, because if we take some of the onerous things that 
are driving up their costs, then that should help. So I would 
hope, while we would look at all aspects, everything is still 
on the table, we would look at all of those things, I would 
hope that they are going to see a much better balance than was 
in the RFP that they have in front of them now.
    Chairman Tom Davis. Also, just one other issue, it is a 
concern to me the fees that GSA charges its customer agencies. 
Do you have any plans to review the process GSA uses to 
calculate the management fees charged to the agencies under 
Networx?
    Mr. Perry. Yes. We do review them annually now, but the 
review that we have in the future, I think, will be much more 
substantial, because certainly, as you know, Mr. Chairman, we 
are doing some things--first of all, let me back up and say 
that the fees that we charge are intended to cover our out-of-
pocket or our total expense of providing acquisition services, 
nothing more than that. In fact, we have no incentive to charge 
anything greater than that. It is not the way we operate. It 
should be a break-even operation.
    We are doing things that we believe will help to 
continuously improve the efficiency of our agency, which would 
help continuously reduce our own costs, which will have some 
impact on the fee. In fact, in the schedules area, over the 
last couple of years we have reduced those fees already once, 
and we will reduce them again in 2006.
    The review that will happen as a result of the efficiency 
changes that we make in GSA as a whole will also be reflected 
in the next time that we take a look at what that charge should 
be. We expect it will continue to be contained.
    Chairman Tom Davis. OK. Also knowing that there is a 
tendency in agencies to avoid transition difficulties by just 
keeping their incumbent vendors, how do you feel about the 
Enterprise acquisition being successful, and why are the 
mandatory Enterprise services also mandatory on Universal? Does 
that reduce the chance that the agencies would use the 
Enterprise? That is my concern.
    Mr. Johnson. The services on both contracts are very 
similar, as you indicate, but the mandatory offering on--or the 
services on Enterprise, in terms of how--the number of them 
that are mandatory are fewer than in Universal. The reason for 
that was that we wanted to open up competition and give some of 
those service providers that do not have the full breadth and 
scope of ability to meet our broad demands the ability to enter 
the marketplace.
    It is hopeful, however, that based on the services that we 
have cited as mandatory, the advance technology such as IT and 
wireless services, VPN-type services and what have you, that 
the agencies will be motivated to move toward that technology 
to improve their infrastructures and their operations.
    So I think that it allows industry, one, to enter with 
relative ease as compared to Universal, and also it hopefully 
will motivate agencies to look seriously at the Enterprise 
providers because of the emerging technologies that they offer.
    Mr. Perry. Let me just add to that. If you look at it from 
the point of view of--let's say of a potential Enterprise 
contractor, if the only thing we had available was Universal, 
with 37 mandatory requirements, there would be some companies 
who would have a particular sweet spot among those 37, but they 
wouldn't be able to take on all of them.
    So we go to Enterprise and say, OK, you don't have to take 
on all 37; you only have to take on 9. Now, yes, they are nine 
that are also on the Universal, but from the Enterprise 
contractor that gives them the opportunity of saying, OK, well, 
I do not have to worry about those other 26 and/or 28, and I 
don't have to worry about wide geographic application, I can 
bid in my sweet spot area.
    Chairman Tom Davis. Who knows where technology will be 4 or 
5 years down the road? The real question is that the more 
vendors you have, the more opportunity you are going to have to 
take care of that down the road.
    So those are, I think, all of the questions that I have for 
this panel. Anyone else want to ask a question? If not, I will 
dismiss this panel. I appreciate very much your continuing to 
work with us. I know you are going to be listening to all of 
the testimony today so that we can factor that into the final 
RFP.
    Linda, thanks for being with us. We appreciate all of the 
work that you're doing. And, Mr. Swedman, thank you.
    We will take a 2-minute break and get our next panel up.
    [Recess.]
    Chairman Tom Davis. We are ready to move to our second 
panel. We have Mr. Jerry Hogge, senior vice president, Level 3 
Communications; Mr. Robert Collet, who is the vice president of 
AT&T Ms. Shelley Murphy, vice president, Federal Markets, 
Verizon; Mr. Jerry Edgerton, senior vice president, Government 
Markets, MCI; Mr. Jeff Storey of WilTel Communications; and Mr. 
Anthony D'Agata, who is the vice president and the general 
manager from Sprint.
    It is our policy that we swear everyone in.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you very much.
    Your entire statement is in the record. Not only do we read 
it, but we are making sure that GSA reads it as we go through 
this. If you could try to hold it to 5 minutes, we can try to 
move through this quickly and then get into questions.
    Jerry, we will start with you, and we will move straight on 
down the line. We appreciate your patience in being with us 
today.

   STATEMENTS OF JERRY HOGGE, SENIOR VICE PRESIDENT, LEVEL 3 
      COMMUNICATIONS, LLC; ROBERT COLLET, VICE PRESIDENT, 
 ENGINEERING, AT&T GOVERNMENT SOLUTIONS; SHELLEY MURPHY, VICE 
  PRESIDENT, FEDERAL MARKETS, VERIZON; JERRY EDGERTON, SENIOR 
  VICE PRESIDENT, GOVERNMENT MARKETS, MCI; JEFF STOREY, CEO, 
WILTEL COMMUNICATIONS; AND ANTHONY D'AGATA, VICE PRESIDENT AND 
                  GENERAL MANAGER, SPRINT GSD

                    STATEMENT OF JERRY HOGGE

    Mr. Hogge. Thank you. Good morning, Chairman Davis and 
members of the committee, and thank you for inviting me here 
today to speak about the Networx program. My name is Jerry 
Hogge, and I am senior vice president and general manager of 
Level 3 Communications, Government Markets.
    In prior testimony, Level 3 praised the GSA for revising 
its Networx strategy for incorporating the best elements of 
past programs' successes while building in flexibility and 
choice for the future. We believe that GSA has taken positive 
steps in many areas of this procurement, and that Networx, 
through the competitive benefits of both Universal and 
Enterprise, holds great promise for realizing the Government's 
stated goals of encouraging competition, creating new sources 
of supply, and achieving the best value for the taxpayer's 
dollar.
    In its current form, however, the draft RFP requires two 
fundamental revisions. First, the minimum revenue guarantee for 
Enterprise awardees should be increased to ensure vigorous and 
broad-based participation by existing and new entrants.
    Second, the final RFP should clearly describe the mechanism 
that will be used to ensure full and fair competition between 
and among Enterprise and Universal contract awardees, 
especially the fair opportunity process that will be used to 
transition from FTS2001 to Networx.
    In our judgment, unless those issues are properly resolved, 
Networx is not likely to achieve the best value for the Federal 
Government, and is not likely to attract aggressive competition 
from new bidders.
    In order for Networx to achieve its stated goals, they must 
be structured to encourage competitive bids from a wide range 
of potential bidders. Incumbent and nonincumbent bidders are 
most likely to compete vigorously for a Networx contract if an 
award carries with it a reasonable expectation of business 
commensurate with the market opportunity and appropriate to the 
unique costs and investments associated with complying with the 
contract requirements.
    Based on our understanding of the draft RFP, Networx will 
require bidders to make a substantial amount of program-
specific investment, as well as incur sufficient upfront bid 
and proposal costs. As such, Networx will attract bidders, 
particularly new entrants, only if success in receiving a 
contract award carries with it a corresponding assurance of 
business through the contract.
    The threshold measure of this business expectation is the 
contract's minimum revenue guarantee. Accordingly, Level 3 
recommends a minimum revenue guarantee of at least $25 million 
for each Enterprise award, to be satisfied over the base 
contract period. An MRG of this size is appropriate to the size 
of the market for Enterprise services, does not present undue 
budgetary risk to the government, and is necessary given the 
unique investments and costs required.
    Even more important than the government's minimum 
expression of business commitment is the successful bidder's 
expectation to be given a fair opportunity to compete and win 
business throughout the life of the program. GSA's acquisition 
strategy acknowledges this important aspect to the program in 
the deliberate and substantial overlap that has been created 
between the Universal and Enterprise RFPs.
    Level 3 fully supports this concept, but believes that the 
expected competitive benefits of the program will be realized 
only if Universal and Enterprise are formally linked. The need 
for a formal direct linkage is essential, particularly for 
purposes of transition-related fair opportunity bidding. Agency 
decisions made during the FTS2001-to-Networx transition period 
will significantly impact the ultimate value of each Networx 
contract.
    In our judgment, a direct linkage can be achieved either by 
reforming the procurement at the outset, by designing a single 
contract vehicle with multiple vendor categories, or by keeping 
the separate contracts for Universal and Enterprise, but 
linking the two sets of contracts through a cross-over approach 
similar to that used to connect the FTS2001 and MAA contracts. 
As we noted in our formal comments on the draft RFP, ample 
precedent exists for both approaches.
    Finally, the RFP must define a clear process for ensuring 
that the competition among and between Universal and Enterprise 
contracts is robust and fair. The fair opportunity process 
should not only set forth clear guidelines to require agencies 
to solicit fair opportunity proposals from all Universal and 
Enterprise winners capable of meeting the stated requirements, 
but it should also set forth objective guidelines for how bids 
will be evaluated and how the results will be tracked and 
communicated. Such a process will allow both Universal and 
Enterprise winners to compete on a level playing field for 
agency business post award. An equitable approach would make it 
unnecessary, indeed would not permit a single company to 
receive prime contract awards for both Universal and 
Enterprise.
    Properly resolving these key issues, as well as the many 
detailed issues raised by the comments GSA received in response 
to its draft RFP, is at the heart of the Networx program's 
future success. We are less than a month away from the schedule 
release of the final RFP, and the two fundamental elements I 
described remain either partially or wholly unresolved. Other 
essential information, such as the evaluation criteria, the 
instructions for proposal preparation, a detailed site 
inventory, and GSA's response to over 2,500 detailed comments, 
has not been released.
    As a prospective nonincumbent bidder, it is certainly our 
preference for this procurement to move forward without delay. 
However, given the profound nature of the issues I have 
discussed, I believe it is even more important to take 
reasonable time for these issues to be properly resolved before 
a final RFP is issued. The strategic importance of the Networx 
program in terms of its estimated $10 billion value, its broad-
based agency use, and 10-year duration require elevating 
substance over strict adherence to a predetermined time line. 
Accordingly, I recommend that GSA clarify its final position on 
these issues in the form of a second draft RFP. Doing so will 
minimize the number and complexity of amendments that would 
otherwise be required, and ensure that all potential bidders 
are presented with a comprehensive and clear statement of GSA's 
requirements.
    In summary, GSA has listened to industry, to the Federal 
agencies, and has made many improvements to the initial 
procurement strategy. However, a few strategic issues remain to 
be resolved. Left unchanged, these issues are likely to 
significantly limit the success of Networx, particularly 
Networx Enterprise, and potentially deter both existing and new 
bidders from pursuing these contracts.
    Level 3 is hopeful that the leadership of GSA and this 
committee will recognize the importance of these issues, and 
that they will be favorably resolved before Networx moves 
forward. Level 3 looks forward to continuing to work with GSA 
and Chairman Davis and the
Government Reform Committee to ensure that Networx is a 
success.
    Thank you, Chairman Davis and the committee, for your time 
and consideration, and I am happy to answer any questions.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Mr. Hogge follows:]

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    Chairman Tom Davis. Mr. Collet, thank you for being with 
us.

                   STATEMENT OF ROBERT COLLET

    Mr. Collet. Well, good morning, Mr. Chairman and members of 
the Committee on Government Reform. My name is Bob Collet, and 
I am leading AT&T's FTS Networx proposal team. AT&T has been 
asked by the committee to provide our views on the Networx 
procurement.
    The strategy and vision contained in the draft RFP are 
consistent with our view of both the government's needs and the 
industry's evolution. The message I am here to deliver is that 
GSA got it right, and it is time to move forward with the 
procurement; let's not delay.
    Today I want to highlight three reasons why the acquisition 
strategy is the right one. First, it increases competition. 
Second, it brings to the Federal agencies new and much-needed 
capabilities. And, third, it is the right procurement for the 
times. Let me briefly address each of these points.
    First, the procurement's three-part structure, Universal, 
Enterprise and schedules, maximizes competition and choice for 
the Federal customers, assuring the Federal Government the 
opportunity to leverage the combined buying power of the 
agencies.
    We believe the number of Universal offerors will be greater 
than experienced in FTS2001. By cultivating cross-over 
contractors, GSA has expanded the pool of viable Universal 
competitors; consequently the Government can expect vigorous 
competition for Universal awards.
    GSA and the Interagency Management Council's Networx 
acquisition strategy further maximizes competition by means of 
the procurement's Enterprise component. Enterprise opens up a 
whole new set of opportunities for competition by giving 
companies without geographical service scope a way to meet 
evolving government needs and enhance competition. In addition, 
we expect spirited competition from system integrators because 
of declining costs in telecommunications and information 
technology that have reduced the barriers to Enterprise market 
entry.
    Finally, for those providers that cannot be responsive to 
Enterprise requirements, GSA's intent to establish a 
telecommunications multiple awards schedule results in yet 
another contract vehicle to enable agencies to obtain 
telecommunications services. Therefore, with the Universal, 
Enterprise and schedule vehicles, Federal agencies will have a 
wide variety of acquisition options.
    The second reason that the procurement is ready is that it 
brings significant new capabilities to the agencies. These 
agencies' capabilities include enhanced security solutions, 
technologies to meet agency needs, and to advance information-
sharing among the agencies. These enhancements will enable 
mission performance gains to ensure that agencies have the 
security and survivability tools they need to guard against 
cyberattacks and to facilitate continuity of government during 
emergencies.
    The third reason is that the procurement is right for the 
times because it anticipates and accommodates industry 
evolution. Since the inception of the Networx strategy several 
years ago, GSA and the agencies anticipated that industry 
structure could and indeed would change and evolve. The 
multivehicle, multiple award structure of Networx reflects this 
thinking and positions Federal agencies to reap the benefits of 
industry consolidation and rationalization.
    So while GSA and the Interagency Management Council should 
be commended for developing a responsive and forward-looking 
acquisition strategy, we do recommend a few adjustments in the 
procurement. We believe, however, that these adjustments can be 
made without delaying the release of the RFP. These suggested 
adjustments are detailed in my written testimony.
    Notwithstanding these modest suggestions, we believe the 
procurement is on target and ready to be released. GSA should 
move forward now to issue the RFP. A delay would result in loss 
of cost savings likely to flow from competition of Networx 
awards. In fact, the delay would necessitate an extension of 
the incumbent contracts, and recent experiences indicate that 
incumbents will seek major, major price increases as the 
agencies will have no practical alternatives.
    The benefits of the procurement are clear: improved agency 
access to integrated security solutions, improved mission 
performance, improved e-gov capabilities and efficiencies, and 
improved cost savings. For all of these reasons the procurement 
is sound.
    In addition to the benefits the government will reap by 
moving forward in an expeditious manner, I want to underscore 
the investment that we have made to prepare for this 
procurement. Industry has invested significant financial 
resources in human capital to get to this point, and we 
continue to make these investments in anticipation of the April 
RFP release. Simply put, the acquisition strategy is sound, and 
GSA and industry are well prepared to get on with the 
competition.
    So, thank you, Mr. Chairman, for the opportunity to 
participate in today's hearing. I welcome any questions that 
you or other members of the committee may have.
    Chairman Tom Davis. Thank you.
    [The prepared statement of Mr. Collet follows:]

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    Chairman Tom Davis. Ms. Murphy, thanks for being with us.

                  STATEMENT OF SHELLEY MURPHY

    Ms. Murphy. Mr. Chairman and members of the committee, my 
name is Shelley Murphy, and I the president of Verizon Federal 
Markets. Verizon continues to be pleased with the open 
communication by Congress and the GSA during the Networx 
procurement process.
    Although we appreciate that the GSA has listened to the 
concerns expressed by industry, the draft RFP show that issues 
still remain. A major concern is the tens of millions of 
dollars that each awardee will have to spend on billing and 
back-office systems. Verizon's position is that to maximize 
competition and reduce prices, the GSA must either bring those 
requirements into line with industry practices or go forward 
with a separate procurement for a GSA-provided billing system.
    The issue surrounding the requirements for back-office 
systems are especially concerning from a wireless perspective. 
The GSA is on record stating that the Universal and Enterprise 
programs are designed to provide multiple options for both 
technologies and vendors to the government. Based on the draft 
RFPs, the procurement's current structure does not serve the 
stated GSA purpose.
    By GSA's design, more companies can bid on the Enterprise 
RFP than on the Universal RFP, but because of this design, the 
major mission-critical networks will most likely be competed 
for under the Universal contract. Once an agency decides to use 
the Universal contract, vendors holding only the Enterprise 
contract are precluded from bidding on those agency's 
requirements, even if the Enterprise vendors can meet those 
requirements. With no direct way to compete for Universal 
business, the Enterprise contract does not provide the 
government with sufficient options and makes the contract less 
attractive to potential bidders.
    This issue could be corrected by allowing direct 
competition by Universal and Enterprise awardees for an 
agency's requirements, or by the ability to graduate from the 
Enterprise to the Universal contract. Enterprise awardees would 
have an incentive to expand their services to match those of 
the Universal contract offerings. Either approach would benefit 
the government by providing a large expanding pool of companies 
that could compete for Universal business over the term of the 
Networx contracts. These approaches are similar to the current 
successful GSA practice under FTS2001.
    The current structure of the draft RFPs requires vendors to 
bid to a predefined set of feature service level agreements and 
prices. This commoditizing of services will result in fewer 
options for the agencies and potentially increased prices. As a 
result, agencies may decide not to use Networx and instead 
issue their own separate procurements.
    With more commercial-like offerings, agency choices will 
increase, and prices will remain low. Individual agencies can 
then determine which combination of features, service level 
agreements and prices meets their individual requirements, 
thereby providing more flexibility and lower costs using the 
Networx contracts.
    Another issue that may limit competition and increase cost 
to the government is that the mandatory performance 
requirements of the Networx draft RFPs are generally more 
restrictive than in the commercial marketplace. These 
restrictive requirements are pervasive through the draft RFPs, 
especially in the required standards, the service level 
agreements, and the pricing format. The structure of the 
Networx draft RFP is directly opposite the Federal Government's 
goals of reducing expense and gaining flexibility by adhering 
to commercial practices.
    Emerging services create an additional issue when the GSA 
tries to predefine combinations of features and service level 
agreements and then requires 10-year pricing. Features for 
these emerging services are still evolving, and, more 
importantly, the pricing structures are not fully developed. 
Verizon is concerned that the GSA may move the procurement 
forward too quickly in order to meet an artificial deadline.
    Approximately 2,500 comments were submitted by the industry 
on the draft RFPs. Due to the importance of Networx over the 
next decade, after incorporating any changes, the GSA should 
issue another set of draft RFPs. This will help ensure that the 
GSA sets forth an RFP which will maximize competition and 
minimize cost of service to the government.
    To summarize Verizon's main points, in order to get 
sufficient competition and reduce expenses that would be passed 
on to the government, the billing and operating system 
requirements should either mirror industry practices, or the 
billing system should be made separately by GSA.
    To maintain competition and flexibility for the largest 
systems, Verizon believes that the relationship between the 
Universal and Enterprise contract should be tighter with a way 
for Enterprise awardees to either directly compete with or 
graduate to the Universal program.
    Letting the commercial marketplace establish feature and 
service level agreement requirements at market-driven prices 
will provide the government with significantly more price-
competitive options. Such an approach will also encourage 
agencies to maximize the use of the Networx contracts rather 
than establish their own procurement vehicles.
    And, finally, the GSA needs to issue another set of draft 
RFPs. This will result in clearer, higher-quality final RFPs, 
and will expedite the overall procurement process.
    I thank the committee for the opportunity to discuss the 
Networx procurement and would be pleased to answer any 
questions.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Ms. Murphy follows:]

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    Chairman Tom Davis. Jerry, welcome back.

                  STATEMENT OF JERRY EDGERTON

    Mr. Edgerton. Thank you, Mr. Chairman.
    Mr. Chairman and members of the committee, good morning. My 
name is Jerry Edgerton, and I am the senior vice president of 
MCI's Government Markets Division. Thank you for the 
opportunity to provide you MCI's perspective on Networx.
    MCI applauds the committee for its continuing leadership in 
overseeing this important Federal program. In the 6 months 
since I last testified before this committee on this matter, 
MCI has continued to aggressively prepare for the Networx 
procurement. For example, we have analyzed the draft RFP and 
submitted detailed comments and suggestions for improvement to 
the GSA.
    We have assembled a top-flight Networx team so that we can 
expertly provide all of the 53 products and services desired by 
agencies by partnering with highly regarded small and large 
businesses, emphasizing the use of minority businesses, and we 
have invested in developing the complex service order billing 
and operating systems that are required under this procurement.
    MCI strongly believes that the Networx structure being 
proposed by GSA will continue to provide the competitive 
environment, flexibility, innovation, technology refreshment 
and, more importantly, value that the agencies need to perform 
their mission-critical operations.
    MCI is currently one of the largest telecommunications 
providers to the U.S. Government, both as an FTC vendor and as 
a provider of numerous other Federal contracts. MCI supports 
more than 75 Federal agencies and has designed and implemented 
some of the most complex government networks in the world.
    Our guiding principle is to make sure that Government users 
get the full benefits of competition on which MCI thrives: 
world-class service, quality, the best available technology, 
and innovative problem-solving all at a competitive price. And 
MCI has delivered, providing quality innovation and over $1 
billion of savings over the life of the FTS2001 contract.
    MCI has thoroughly evaluated the Networx draft RFP. The 
Networx strategy demonstrates a careful, detailed examination 
of the comments and issues that have been raised by interested 
parties in order to minimize cost, maximum efficiency and 
technological advancement. Because it properly focuses on the 
needs and expectations of the agency customers, we encourage 
GSA to maintain the base structure of the Networx strategy, 
specifically compete two separate network contracts, Universal 
and Enterprise; demand continuity of services on the Universal 
contract; streamline the requirements for the management and 
operations support requirements; and mandate a fixed set of 
service capabilities for both Universal and Enterprise 
contracts.
    There are three major areas of unresolved issues that can 
adversely impact the effectiveness and the viability of the 
Networx program, and the ability of government to attain the 
best possible prices. GSA has not clearly set forth the number 
of awardees either under the Universal or the Enterprise 
procurements. GSA has not offered many details on the proposal 
to add telecommunications services to the Federal supply 
program. And GSA must resolve the lack of clarity on how 
agencies will use the two contracts if the contracts provide 
duplicative services.
    On these outstanding issues, we make the following 
recommendations. GSA should set clear limits on the number of 
Networx contracts awarded. Networks like FTS2001 can provide 
agency users with the lowest possible prices by aggregating the 
massive volumes of service demand for much of the Federal 
Government onto a single contract vehicle.
    GSA should maximize competition by encouraging as many bids 
as possible from potential service providers. At the same time, 
GSA must limit the number of awardees in order to make each 
contract award financially viable for the successful 
contractor. Unless they are meaningful limits, the industry 
will not be able to give GSA its best prices. In order to lock 
in rock-bottom prices for the contract's 10-year term, 
providers must be confident in their ability to win a certain 
level of revenue. The greater the number of awardees, the less 
each business will be able to capture, and the more the 
government purchasing power is diluted.
    While MCI supports the GSA decision to award large minimum 
revenue guarantees, the absence of high guarantees necessitates 
a limited number of awardees in order to assure that each 
awardee has a significant portion of traffic.
    GSA must strike a balance between giving agencies as wide a 
choice of providers and coaxing the lowest possible prices from 
industry and set a meaningful limit on the number of awards.
    GSA should also place limits on the number and types of 
services that will be included in the Federal Supply Schedule. 
GSA has discussed a major change in policy by including 
telecommunications services on the multiple award program. MCI 
supports the inclusion of commoditylike services on the FSS, 
but it is important that clear limits be placed on the numbers 
and types of services that are included in the FSS.
    For example, simple inbound 800 toll-free services have 
become well established as commodities and could be included in 
the FSS. However, more complex, enhanced services like those 
using intelligent routing should not be treated as a commodity. 
Instead they should be placed into the Networx umbrella to 
ensure service quality, enable comparisons among vendors, and 
allow GSA oversight of vendor performance.
    Furthermore, in the absence of clear, precise definitions, 
the FSS program will create uncertainty for Networx bidders by 
creating an unpredictable and uncontrollable back-door path for 
entry into the Federal telecommunications space. Again, in 
order to make the business case of the lowest possible prices, 
bidders must have a level of certainty as to the number and 
types of services, and thereby the potential revenue under the 
contract.
    GSA should also ensure that agencies can obtain services 
from Networx awardees. The current Federal Acquisition 
Regulations prohibit an agency from using two different 
contract vehicles to procure the same services. Under the 
program currently outlined by GSA, an agency will have to 
select between the Universal and Enterprise contracts during 
the fair consideration portion of the procurement process. This 
will effectively prevent the awardees of the nonselected 
contract from competing for that agency's business, thereby 
reducing the competitive options for the agencies. GSA should 
ensure that an agency has the ability to obtain services from 
all of the Universal and Enterprise networks.
    Some of you have expressed concerns that Networx does not 
encourage the creative integration of complex services into an 
Enterprise solution. I believe this is inaccurate and contrary 
to practice of the government agency. Agencies are now using 
FTS2001 to procure and implement telecommunications solutions 
that integrate a full range of services, capabilities and 
performance measures. For example, the Department of Justice, 
with the assistance of GSA, used the FTS2001 contract to 
compete, award and begin the implementation of the JutNet 
Program, a complex network design requiring a full range of 
traditional integrator services and capabilities.
    MCI has used FTS2001 to deliver a series of integrated 
solutions for the Department of Interior that include a new 
private IP Wide Area Network, a dedicated Network and Security 
Operations Center, and 20 security engineering and program 
management employees.
    Networx, with its greatly expanded number of potential 
services will allow agencies and providers to meet any need for 
integrated and complex solutions.
    Although this issue is somewhat beyond the scope of the 
hearing, I would be remiss if I did not address the industry 
consolidation issue and its effect on Networx and the Federal 
Government. As you know, 2 weeks ago Verizon and MCI announced 
an agreement to merge, which followed similar announcements by 
Sprint and Nextel and SBC and AT&T. And Qwest has resubmitted a 
competing offer for MCI.
    The Networx procurement is presently structured to take 
full advantage of the competitive forces that exist in the 
marketplace today, and that will exist in the marketplace 
following the contract award. MCI plans to build on the Networx 
procurement and will do so as a completely independent entity.
    MCI has teamed with Bell companies on other procurements, 
and any teaming arrangement on the Networx procurement will be 
at an arm's-length transaction. In fact, the timing of the MCI-
Verizon merger and perhaps other mergers as well as relate to 
the Networx procurement is such that the contracts for the 
Networx procurement are likely to be awarded long before these 
transactions are consummated. Accordingly, GSA need not delay 
the procurement process as a result of the recent merger 
announcements.
    Networx is structured in a manner that accommodates and 
takes full advantage of the changes in technology in the 
marketplace. Like FTS2001, it is designed to be a dynamic 
program that allows for the inclusion of new offerings as well 
as new offerors. Government customers will see the benefits of 
future advancements, both anticipated and unanticipated.
    Furthermore, consolidation--
    Chairman Tom Davis. Jerry, can you sum this up? You are 4 
minutes over.
    Mr. Edgerton. OK.
    In conclusion, I wanted to show the committee that MCI is 
fully committed to participating in the Networx program. MCI 
has maintained steadfast communications with our government 
customers, and we have delivered superior network performance 
and customer service and will continue to do so.
    I will be glad to answer any questions.
    [The prepared statement of Mr. Edgerton follows:]

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    Chairman Tom Davis. I just want to remind everybody, your 
entire statement is the record. So we are ready to go ahead. 
Jeff, thanks for being here.

                    STATEMENT OF JEFF STOREY

    Mr. Storey. Good morning. My name is Jeff Storey. I am the 
president and CEO of WilTel Communications. Thank you for 
inviting me to speak this morning. We appreciate the 
committee's dedication to ensuring the Networx program 
encourages the widest possible participation. By broadening the 
program's scope to include specialized network providers like 
WilTel, both government and taxpayers will reap the benefit of 
an intensely competitive market. We look forward to working 
with the committee and GSA to provide government greater 
choice, innovative services and competitive prices.
    WilTel is headquartered in Tulsa, OK, and specializes in 
wide-area networking for carriers, enterprises, media and 
entertainment companies, and the government. We provide a full 
suite of data, voice, IT, video, management and professional 
services across our 30,000-mile next-generation fiberoptic 
network.
    Drawing on 20 years of experience in engineering 
specialized solutions to solve our customers' complex 
networking needs, WilTel is an ideal telecommunications 
supplier for the Federal Government. Nationwide telecom 
carriers, broadcast television networks, Fortune 100 
businesses, and Internet giants, companies whose entire 
business is their network trust WilTel.
    Although not a household name, WilTel provides 
telecommunications carriers with the capability they need to 
serve over 40 million voice and data customers and video 
transport for major events like the SuperBowl and the Academy 
Awards. Just last month, WilTel outdistanced many of the 
government's incumbent suppliers to provide DISA critical high-
capacity services between mainland military bases and bases in 
Hawaii and Japan, the program known as TOT-P.
    Networx represents a tremendous opportunity for the Federal 
Government to access the most reliable, innovative and cost-
efficient network solutions available. To realize this 
potential, however, the current process must change. Instead of 
simply extending the practices followed in prior FTS 
procurements, Networx must foster the introduction of new 
technology and promote new methods of procurement by engaging 
new industry partners with specialized expertise.
    Although improvements have been made, the Networx program 
still creates barriers that preclude nonincumbent suppliers 
from successfully competing for government contracts, even when 
they offer the best solution. These deficiencies lie in three 
key areas. First of all, we need a level playing field that 
fosters competitive bidding so that specialized providers like 
WilTel can participate.
    Because of the small minimum revenue guarantee for new 
Enterprise vendors, the detailed mandatory technical service 
features discourage involvement of new providers. These 
requirements favor the incumbents and Universal providers with 
much higher revenue guarantees.
    Second, the regimen and pricing table and structures 
currently embodied in the Networx program strongly favor 
incumbent solutions. To encourage competitive pricing the 
government should use the same method employed by commercial 
enterprises across the country, define the communications 
problem, allow firms to bid solutions, and evaluate them based 
on the total cost of ownership.
    Also, replacing the burdensome price management mechanism 
with a streamlined commercial-based price renegotiation 
arrangement allows providers to craft innovative pricing that 
will lower the government's cost to purchase Networx services.
    Finally, the government can benefit greatly by adopting 
commercial service standards instead of nonstandard government 
procurement mandates which impose unnecessary costs and force 
providers to fundamentally alter their services. These 
increased costs preclude government agencies from obtaining 
cost-effective, secure and reliable services commonly available 
to large enterprises.
    By adopting the recommendations detailed in my written 
testimony, the Networx program can be much more attractive to 
new providers, enhancing competition and ensuring that the 
government will realize better prices and more innovative 
services. By addressing these important issues, the government 
will achieve its objective of upgrading its communications 
solutions in a timely manner and at the most competitive 
prices.
    WilTel wants to compete, and we are well positioned to meet 
the needs of the government if given a fair opportunity to win. 
Thank you.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Mr. Storey follows:]

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    Chairman Tom Davis. Mr. D'Agata, thank you. Last but not 
least.

                  STATEMENT OF ANTHONY D'AGATA

    Mr. D'Agata. Thank you, Mr. Chairman. Good morning, members 
of the committee. My name is Tony D'Agata. I am the vice 
president and general manager of Sprint's Government Systems 
Division. I would like to express my appreciation for the 
opportunity to share with you Sprint's views on Networx, the 
follow-on program to FTS2001.
    Sprint appears before the committee today in a unique 
position as the only provider to have served both FTS2000 and 
FTS2001 customers over the last 16 years. Today we probably 
serve 314 agencies, provide service to well over a million 
government employees, and deliver over 500,000 circuits to 
Federal agencies.
    Although we support the Networx program structure, today I 
must report that the draft takes the program further down the 
road of a government-unique path and makes it even more 
difficult, if not impossible, for the contract to achieve a 
positive financial position.
    Sprint wants to continue to serve our customers well into 
the future. However, at this time I cannot recommend that our 
share owners assume the risk inherent in the current Networx 
draft.
    Our concerns are as follows: The draft management reporting 
and billing requirements exceed commercial requirements. The 
FTS2001 requires the delivery of 14 monthly reports to GSA and 
user agencies; however, the Networx requires up to 240 reports 
for each agency. This would result in the Government mandating 
that Sprint provide up to 75,000 reports per month.
    The draft also increases the notice reporting that must be 
provided to the government. Notice reporting informs the 
government of the status of new service installations. Whereas 
FTS2001 requires three separate notifications be provided to 
the government for each service installation, the Networx 
requires the contractor to provide five separate notifications 
to the government for each service installation.
    In addition, the draft qualitatively increases the 
reporting obligations. It mandates that the contractor produce 
reports on the performance elements of services not required by 
anyone else in the marketplace.
    The draft RFP substantially increases the billing 
requirements beyond FTS2001 and current industry commercial 
requirements. This will require substantial systems development 
in the tens of millions of dollars before an award.
    The draft service performance requirements exceed 
commercial requirements. The draft contains 240 requirements 
for services specified; 87 percent exceed the performance 
requirements of the equivalent commercial service. Over half of 
all of the requirements are either unachievable or not 
measurable given the current state of technology.
    The draft contains onerous business terms and conditions. 
The credit provisions of the draft do not conform to commercial 
practice. The failure to provide just one of the five 
installation notices mentioned earlier will result in 
forfeiture of the entire recurring charges for the month for 
that site. This is true even if the site was installed on time, 
and the government enjoyed all of the beneficial use of the 
service.
    The credit provisions for failure to comply with the 
service performance requirements are no less punitive. A 
network outage will result in forfeiture of one-quarter of the 
entire recurring monthly charges for the affected agency.
    Finally, the draft contains a price management mechanism 
that gives the government the unilateral right to set prices 
for all services.
    The draft simply asks too much. It requires tens of 
millions of dollars of capital investment to deliver 
noncommercial products, and provides special billing and 
management reporting required by no one else in the 
marketplace. In addition, the government has the discretion to 
assess punitive credits and unilaterally set Networx prices.
    Mr. Chairman, we sincerely hope that the Networx draft is 
modified in a manner that will enable Sprint to continue its 
partnership with the GSA, the agencies, and this committee on 
this vital government program.
    I would be happy to answer any questions that you might 
have.
    [The prepared statement of Mr. D'Agata follows:]

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    Mr. Burton [presiding]. Is there anything about this thing 
you like?
    Mr. D'Agata. Well, we do like the fact that we are able to 
serve a lot of government agencies today. And we are, you know, 
hopeful that we can continue to provide services to them in the 
future.
    Mr. Burton. You said that--how many reports per month?
    Mr. D'Agata. 75,000.
    Mr. Burton. I had 7,500. I thought that was high; 75,000. I 
hope GSA is listening; 75,000 reports a month. My gosh, the 
paper alone would negate making a profit.
    Mr. D'Agata. Mr. Chairman, 240 to each billing entity.
    Mr. Burton. Do all of you agree with that? Is that what you 
figure, 75,000 reports a month or a large amount?
    Mr. D'Agata. It depends, Congressman, on the volume of 
business that you have today.
    Mr. Burton. Well, everybody is going to be bidding and so 
we don't know who is going to get what.
    Mr. D'Agata. Potentially, if they have as much as Sprint, 
they would have to provide as many reports.
    Mr. Burton. Does everybody agree with that?
    Mr. Collet. I know the number is a very large one, but I 
think most of that would be delivered electronically from 
automated systems. So it is true that investment is necessary 
in the operational support systems, but we have not concluded 
that it was overly excessive. We are making investments in the 
systems right now, in anticipation of having to pass an 
operational capabilities demonstration 2 months after award.
    Mr. Burton. So AT&T does not think the reporting mechanism 
is excessive?
    Mr. Collet. Oh, it is, it is excessive, and there will be 
some costs associated with it, and that cost will be recovered 
in the prices.
    Mr. Burton. So the costs will be borne by the taxpayers, 
ultimately.
    Mr. Collet. Ultimately, yes.
    Mr. Burton. And it is not necessary. Do any of you agree 
that it is not necessary to have that many reports?
    Mr. Collet. Agreed. There are too many reports. We have 
been in some dialog with GSA, and the response we received is 
that this is going to change. Everybody is trying to be 
reasonable and meet agency requirements.
    Mr. Burton. Is anybody still here from the GSA? I hope you 
are making notes, because it seems like, to me, that is 
excessive. You may need more than one sheet of paper.
    You said something, Mr. D'Agata, about reports that others 
don't have to report. I guess you are talking about commercial 
entities?
    Mr. D'Agata. Yes, sir.
    Mr. Burton. I wish GSA was up here. I would like to ask 
them why they are requiring reports that the private sector 
does not report, and if you are making notes back there, I 
would like to have personally, as former chairman and one who 
has been interested in this for a long time, I would like to 
know why they are asking to report and issue reports that are 
not required in the private sector, because we are trying to 
make government more business-friendly instead of more 
bureaucratic.
    You said that the cost is high before an award. What kind 
of cost are you talking about in the bid process?
    Mr. D'Agata. I am talking about investing millions of 
dollars, sir, on operation support systems that one really has 
to develop now, before award, so you really have to spend the 
money in advance of an award to be able to demonstrate at award 
or right after award that you have the capabilities.
    Mr. Burton. Mr. Storey, you have a smaller company than 
AT&T, Sprint and MCI. How does a smaller company afford the 
costs that are incurred before they make the bid?
    Mr. Storey. Well, it is very difficult, and that is why, in 
my comments, I said that the onerous provisions that are on 
small companies make it difficult for us to win business, 
especially with relatively small minimum revenue commitments.
    So we will have to make these decisions on a speculative 
basis. We will have to decide that this is something that is 
worthy of the investment of our dollars and with a hope of a 
return.
    Mr. Burton. It is like shooting craps in Vegas, only higher 
stakes.
    Mr. Storey. Yes, it is.
    Mr. Burton. You are talking about millions of dollars to 
prepare for the bid, and you have all of these reports, and 
then you don't get it, so you are out of luck.
    Mr. Storey. Right.
    Mr. Burton. We use stronger language than that back in 
Indiana, but I will not go into that right now.
    It seems like, to me, that GSA ought to try to make this as 
user-friendly as possible while trying to make sure that they 
are trying to get the best price for the taxpayer. And to 
literally force smaller companies that might be able to provide 
very, very good services to the government and agencies are 
priced out of the market because they can't come up with the 
money to make the initial bid. So I would like for GSA, if you 
would make a note of this, to respond to that as well. I mean, 
why is it that the cost of proposing a bid is going to be so 
high that some companies that could provide good services will 
not be able to be involved in the bid process?
    Let's see. Mr. Storey, you had some other questions here or 
comments. The minimum revenue guarantee for the network 
enterprise is too small. Can you go into that in a little more 
detail?
    Mr. Storey. Well, it is related to the same issue. We have 
huge investments to win this business, to make a proposal.
    Mr. Burton. How do you think they should come up with a 
minimum revenue guarantee, or should they even have one?
    Mr. Storey. You know, I think that they should have one, 
because it gives us encouragement to bid and to prepare 
proposals knowing that we will have something. I think that 
they should look at the percentage of the traffic that they 
have that will go to nonuniversal providers, and I think they 
should increase that level of percentage.
    Mr. Burton. Could you give the committee some kind of a 
formula that we can look at and see what would be good in 
coming up with a minimum revenue bid? I don't know if you can 
do that or not, but if you are talking about raising the 
minimum revenue bid or guarantee, rather, minimum revenue 
guarantee, we have to have something as laymen up here to take 
a look at so we can say to GSA, you know, maybe they are right. 
Do you see what I am talking about?
    Mr. Storey. Yes. I don't have a formula for you today, but 
I would suggest that more of the business be committed to 
Enterprise as opposed to Universal, and that will increase the 
pool of Enterprise businesses that are out there.
    Mr. Burton. One of you, I can't remember which one it was, 
said that you ought to be able to bid on both Universal and 
Enterprise. Can you explain to me why? I would like to know why 
you can't.
    Ms. Murphy. Mr. Burton, I think the issue is during the 
period of fair consideration, an agency has to decide whether 
they are going to recompete their business under Universal or 
Enterprise, and once they have chosen one, then only awardees 
under that particular contract are in a position to compete for 
the business.
    Mr. Burton. I see.
    Ms. Murphy. So even if there are subsequent requirements 
that an awardee, for instance, on Enterprise might be able to 
meet, if the agency has selected Universal as their contract 
vehicle, then that Enterprise awardee is prohibited from 
competing. So our position is that lessens overall competition 
for the government.
    Mr. Burton. I see. And you think that is good?
    Ms. Murphy. No, I think that is bad.
    Mr. Burton. I thought that was what you were going to say.
    So I would like to say to GSA, can you explain to me why 
that is the case, and if you could, let us know. I mean, 
remember that I am a neophyte in this, even though I have been 
working on this for about 7 or 8 years as chairman and now on 
the committee, but I would like to know why, since they brought 
this up, industry has brought that up, why that is a problem?
    Let's see what else we have here. You guys came up with so 
many problems here.
    I think, Mr. Storey, you said there is a bias, or you 
indicated that there was a bias toward larger companies who 
have more resources so that they can be more competitive and 
biased toward companies that might already have part of the 
market share with government already. Can you go into that in a 
little more detail?
    Mr. Storey. Sure. The bias is incumbent in the technical 
requirements that are in the proposal. When you specify that 
every company has to be able to do every product in a certain 
way with the operational support system requirements along with 
it, it creates a set of products that not every company has. We 
do not provide every product. WilTel does not provide every 
product out there that the government might want to use. We 
provide some products extremely well, and it may be the best 
solution for the government for those products, but when you 
tack on a whole series of other products, other requirements, 
it just makes it too onerous to compete.
    Mr. Burton. Well, once again, if GSA could give the 
committee or me in particular, if you want to, the reasons why 
smaller companies that don't provide all of these services 
can't be competitive, I would like to see that. There might be 
a reason for that. You might say that the overall pricing 
structure is going to be lower if one company can provide all 
of the services; I don't know what the answer is, but I would 
like to have an answer to that if we could get that as well.
    I see my time has expired. Mr. Marchant, do you have any 
questions at the moment?
    Mr. Marchant. I would like to address the issue of the 
amount of money that it takes to prepare the bid. I think the 
gentleman from Sprint was--you are saying basically that, in 
order to even approach the bid, you have to in essence make 
sure that you can have the support systems, if you do get the 
bid in place, virtually before you get the bid.
    Mr. D'Agata. Yes. There are two forms of expenses, 
Congressman. One is the actual labor costs that you have 
internally to prepare the bid itself that, I think, all of us 
are, you know, more than willing to spend to prepare the bid. 
The other is the operation support systems requirements. One 
needs to be able to demonstrate soon after award that you have 
the capabilities that were specified in the contract. To do 
that requires a lot of time and software changes and 
development activities that, to make the deadline or the 
schedule that is laid out by the government, you really have to 
spend that money in advance of an award to be able to meet 
those requirements when you are asked to demo.
    Mr. Marchant. Well, do you foresee a situation where a 
company would come in and scrape up enough money to put 
together the bid, get the business and then really not have the 
capital or the internal capital in the company to put those 
systems in place and virtually have to drop out, back out or 
prove that they couldn't meet that standard after they had 
already won the bid?
    Mr. D'Agata. I would hope that they would, you know, 
solicit from their leadership that they have the money before 
they submit the bid, because you become committed to the extent 
of your proposal, and so you better have that authority before 
you submit your bid.
    Mr. Marchant. And then the other question I had goes back 
to Ms. Murphy's comment about the billing system and your 
suggestion that maybe the billing function could be taken over 
by GSA.
    Ms. Murphy. GSA has recently released a sole-source request 
for billing systems and there has been a lot of conversation 
here about minimum revenue guarantees versus the operation 
support systems and billing systems requirements. So there is a 
couple of different ways to solve that. Yes, you can raise the 
minimum revenue guarantee; you can also alleviate the billing 
requirements and the operation support system requirements such 
that minimum revenue guarantees are not such an issue.
    So if the GSA were willing to look at handling going in a 
different way, then that would be a solution that we would very 
much be in favor of.
    Mr. Marchant. Is that a solution that you specifically 
would be in favor of, or is there some consensus on that among 
the other panel members?
    Mr. Collet. I don't see how a system like that would be 
practical, because billing is intimate to how a network is 
constructed and operates. If GSA had to operate as a Universal 
biller, then they would have to get really close to all of the 
internal systems of all of the operating carriers, and I think 
it would be an absolute disaster, a nightmare for them to do.
    Mr. Marchant. They would have to have a lot of proprietary 
information about your company and your systems to even get to 
that point, wouldn't they?
    Mr. Collet. Agreed. Agreed. I mean it is difficult enough 
to meet government requirements with commercial systems, even 
within a vertically integrated company. It would be extremely 
difficult, and I have spent most of my life as an engineer, so 
maybe I am a little more terrified of it than others would be, 
but it would be very, very difficult and, operationally, I 
think very impractical.
    Mr. Marchant. If I could just raise one more question, Mr. 
Chairman.
    The whole issue in this bid process, RFP process, do you 
feel like that the process begins to intrude on your 
proprietary information to the point where you would not bid on 
this because there is too much information that has to be 
divulged about your systems before you can even win the bid?
    OK. Thank you.
    Chairman Tom Davis [presiding]. Thank you very much. I am 
trying to think of where to start.
    We have heard varying positions on the network's draft RFP 
from all of you. Your concerns with the draft RFP, I will just 
go down and ask each of you, do you think they can be resolved 
before releasing the final FRP on April 1?
    Mr. Hogge. Well, our recommendation is that if there is a 
document that is ready, that it be released as a second draft. 
I mean, there were 2,500 or so detailed comments, some 
fundamental issues that have been raised in this forum that if 
the document is ready to be released, one more go-around 
through a second draft I think would overall abbreviate or make 
sure that the overall procurement process occurs in accordance 
with an endpoint that is useful to GSA and to industry.
    Chairman Tom Davis. Thank you.
    Mr. Collet. We believe it should be released on time. Over 
the last several months, GSA has evaluated approximately 2,500 
comments, as disclosed earlier, and has expressed an 
inclination that I think up to 40 percent of those comments 
were being accepted. I think most of those would be in the 
operational support system area. So we are hopeful that these 
comments will reflect well in the operational support system 
requirements, and if they do not, then the cost of those 
additional requirements simply get reflected in the price of 
the service that is presented to the government.
    Ms. Murphy. Mr. Chairman, we favor an additional draft RFP, 
and we think it could actually lead to a more concise final RFP 
process. In any major procurement, you always end up with a lot 
of questions once the final RFP comes out, and there are 
usually amendments that lead to delays. We feel that with one 
more round of draft RFP, many of those issues could be put to 
rest before the final RFP, and we could stay on schedule even 
with an additional round.
    Mr. Edgerton. We are committed to the process. If April 1 
is the date, we are going to meet it. However, I think, as a 
result of the hearings and other comments, that there will 
probably be some delays, which will actually reflect a more 
improved RFP.
    Mr. Storey. In general, I think that we would like to see 
the RFP come out on time. However, we would like to see it 
right, so if we can delay a little bit and get a much better 
competitive environment where all competitors can compete and 
bid on business, that would be a better outcome for us.
    Chairman Tom Davis. You don't care if it comes out on April 
1, as long as it is right.
    Mr. Storey. Exactly.
    Mr. D'Agata. We think it is absolutely possible for GSA to 
incorporate our comments into the final RFP and deliver it on 
schedule. I think one of the difficulties that industry has 
right now is that we provided to the GSA numerous comments. We 
don't know how many of those have been incorporated into the 
final version, so we are--you know, right now, we don't know 
what will be acceptable.
    Chairman Tom Davis. We heard today that location-specific 
traffic volumes won't be made available until mid to late May. 
How does that impact your ability to develop your proposals? I 
will start with you, Mr. D'Agata, and move on down the line.
    Mr. D'Agata. Mr. Chairman, it is less of a factor for us in 
that we enjoy an incumbent status, so we pretty much know the 
volumes at each agency.
    Chairman Tom Davis. So mid-June is fine with you.
    Mr. Storey. The more information we have, the better able 
we are to make a competitive bid that makes sense. Being a non-
ubiquitous provider like some of the others, the geographic 
information is important to us. So the sooner that is 
available, the better off we will be in making sure that not 
only will we make competitive offers, but once we win an award, 
we will be able to really satisfy that demand.
    Mr. Edgerton. I just need to know Tony's volumes.
    Chairman Tom Davis. Do you want to ask him right now?
    Ms. Murphy. As a relatively new crossover entrant and 
really playing a new entrant role on the network's procurement, 
that traffic information is really critical to us to finalize 
our strategy.
    Chairman Tom Davis. Does this give you enough time?
    Ms. Murphy. It makes it more difficult. If you have an RFP 
that comes out in April and your traffic information isn't 
available until mid-May at the earliest, that means you--we 
really aren't in a position to finalize business decisions 
about even whether we can or can't bid until we really get our 
hands on that data.
    Chairman Tom Davis. OK.
    Mr. Collet. We have been doing our homework, so we have a 
pretty good idea of what the traffic is from our competitors 
but, in general, there is a lot of work that is necessary to 
complete the technical volume, the management volume, the 
business volume responses. So if we can get that earlier rather 
than later, that will certainly help in the development of the 
proposal. If we obtain volume information let's say mid-May, we 
would certainly have to confirm or review it vis-a-vis what we 
already know, and then we are looking at perhaps a month and a 
half to produce a final pricing proposal. It will be tight, but 
I think it will be manageable.
    Chairman Tom Davis. OK.
    Mr. Burton. Mr. Chairman.
    Chairman Tom Davis. Let me yield to Mr. Burton.
    Mr. Burton. I just wanted to followup on that. It seems to 
me, and any of you can answer this question, that the amount of 
traffic is important if you are going to be able to bid on 
this. And for one company, even though they are great people, 
to have that information gives them the real inside track.
    So, Mr. Chairman, it seems like to me that GSA or whoever 
it might be ought to make the information available to all of 
the bidders so that they can be--so that there is fairness in 
the bid process. If one of them has it and the others don't, 
they know what the problems are, they know what the costs 
involved are, and they have a real leg up in the bid process. 
So it just seems like, to me, that the ones who are going to be 
legitimate bidders ought to have access to the same 
information. That should not be something that is held secret.
    Chairman Tom Davis. OK. Thank you. Mr. Hogge.
    Mr. Hogge. Yes. As another potential nonincumbent bidder, 
knowing the traffic and where it originates and terminates is 
absolutely fundamental to developing our business case which is 
fundamental to committing the corporation and the capital 
required to do this. If memory serves, last time around, it 
took many weeks, if not many months, to get the traffic models 
to work right. So getting that information, having an accurate 
forecast of what the requirements are and where they come from 
is absolutely essential. So it is impossible to sit here today 
not knowing any of that to tell you whether or not we have 
enough time to meet the deadline if it comes out in mid to late 
May.
    Chairman Tom Davis. Mr. Hogge, you stated that for Networx 
to be successful, there should be clear guidelines that would 
require that agency customers consider proposals from both 
Universal and Enterprise awardees. Would such a ``crossover'' 
process allow Enterprise awardees who can enter Networx with a 
much smaller commitment of resources than Universal 
participants cherry pick the most desirable requirements to the 
detriment of the Universal awardees?
    Mr. Hogge. Well, what we are advocating is a full and open 
task order process. As I said in my prepared remarks, there is 
a deliberate overlap in the service content from Universal to 
Enterprise. The Enterprise is a smaller set designed to entice 
smaller or next generation competitors into the mix. Post-
award, when vendors go through their vendor process through 
fair opportunity, that is the point at which competition 
really--the rubber hits the road; it is the point at which it 
is not just a transition of like for like, potentially like for 
a new product converging or converting a circuit switch service 
to an IP-based service, an MPLS service. That is the point at 
which technology infusion, innovation, and new competition from 
new entrants comes into play. We are simply advocating that we 
get a shot to participate in that process post-award.
    Chairman Tom Davis. Mr. Burton.
    Mr. Burton. If I might make a formal request--and I don't 
know to whom I direct this, Mr. Chairman, but you are the boss, 
so maybe you can help us out with this--I would urge that the 
information that will create a level playing field regarding 
the traffic involved, that be given to all of the legitimate 
bidders, and if GSA is the one that has that information, I 
would make a formal request that they do that. And if they 
can't, I would like for them to contact me as former chairman 
and as a member of the committee and let me know why they can't 
do that. If there is a reason you can't, I would like to know 
the reason why.
    Chairman Tom Davis. I will ask the staff to followup on 
that. That is appropriate.
    Do you want to add anything else?
    Mr. Hogge. No.
    Chairman Tom Davis. Mr. Collet, let me ask you, in your 
statement, you recommend that GSA award only the number of 
contracts that it can manage well, which I think is 
appropriate. They have asked two Universal, maybe five on the 
Enterprise. Do you think that is reasonable?
    Mr. Collet. I think it is very reasonable at this point.
    Chairman Tom Davis. Would AT&T consider submitting offers 
on both Universal and Enterprise?
    Mr. Collet. Absolutely.
    Chairman Tom Davis. OK.
    Mr. Collet. I think it is a prudent option on our part.
    Chairman Tom Davis. Ms. Murphy, you suggest that GSA needs 
to make some major alterations to the service order, billing 
and reporting system requirements before you could reasonably 
compete on this. Is that correct?
    Ms. Murphy. Yes.
    Chairman Tom Davis. And that these requirements should more 
closely mirror commercial practices. Any particular 
requirements that you want to focus in on that you find 
problematic?
    Ms. Murphy. Well, we really focused on the billing 
requirements as one area of particular concern. Certainly, we 
addressed detailed comments to GSA in these areas when we 
submitted our response to the draft RFP. So, you know, I think 
the problem that Mr. Storey mentioned earlier, we have 
certainly been open with our comments. We are just not quite 
sure how much of our comments, how many of our comments will be 
accepted and what the magnitude of the changes will be.
    Chairman Tom Davis. You also suggested that Networx should 
allow Enterprise contractors to be able to graduate into 
Universal.
    Ms. Murphy. It is a process that seems to have worked well, 
if you look at the FTS 2001 crossover. The contract has been in 
place for a number of years now. The number of services 
provided under the contract have expanded. I think it has more 
than doubled, and it has managed to keep competition robust and 
prices very competitive over that time.
    Chairman Tom Davis. OK. Mr. Edgerton, do you think--I 
gather from your comments that you think GSA should set a clear 
limit on the number of contracts to be awarded under Universal 
and Enterprise. You heard Commissioner Perry earlier talk about 
maybe two Universal, five Enterprise. Do you have a number in 
mind, or do you just think they----
    Mr. Edgerton. That is the first time we have heard a 
definitive number.
    Chairman Tom Davis. Do you think that is a reasonable 
number from your perspective?
    Mr. Edgerton. Yes.
    Chairman Tom Davis. You note that, as Networx is currently 
configured, Universal awardees can't participate in Enterprise 
requirements and vice versa. You state that GSA should ensure 
that a customer agency has the ability to obtain services from 
all of the Universal and Enterprise awardees. Do you have any 
suggestions on how to accomplish this?
    Mr. Edgerton. I think there is a prohibition that needs to 
be looked at as to how the process takes place.
    Chairman Tom Davis. OK. Mr. Storey, how can the GSA justify 
reducing the Universal MRGs in favor of Enterprise when the 
Universal program, with its far more extensive list of 
mandatory requirements and geographic coverage, will likely 
generate more revenue? That is your question, isn't it?
    Mr. Storey. Yes. And I think that the Enterprise sector is 
the place where innovation is going to come into the 
government. If you look at the Universal, that is going to be 
the incumbents and the large companies, and if there is going 
to be innovation and new technology introduced to the 
government, it will come through the Enterprise part of this 
contract.
    Chairman Tom Davis. You mentioned that GSA's small business 
subcontracting goal of 39 percent would be unduly burdensome 
for a smaller company like yours. What would be a reasonable 
goal for small business subcontracting?
    Mr. Storey. The 20, 25 percent range.
    Chairman Tom Davis. All right. Thank you. And Mr. D'Agata, 
in your statement, you indicated that Sprint may not 
participate in Networx as presently configured since the 
program requires too much capital investment for noncommercial 
products and special billing and management reporting. In your 
new company, that concerns us, in that an incumbent such as 
Sprint would not submit an offer.
    Have you shared these concerns with GSA prior to today.
    Mr. D'Agata. Yes I have, sir.
    Chairman Tom Davis. And what was their response?
    Mr. D'Agata. That they would look into those issues in the 
final RFP.
    Chairman Tom Davis. And is this both Universal and 
Enterprise?
    Mr. D'Agata. Yes, it is, although we are primarily focused 
on Universal, but it would apply to Enterprise as well.
    The other thing, sir, that is of concern are the service 
level provisions where a number of them just are not 
achievable. They defy the laws of physics and are not 
achievable.
    Chairman Tom Davis. OK. I think those are the questions I 
wanted to ask. Do you have any more, Dan?
    Mr. Burton. No, Mr. Chairman.
    Chairman Tom Davis. Does anybody want to add anything 
before we go on to the next panel? This has been very helpful 
to us. I hope it has been helpful to GSA as well, and I 
appreciate everybody's taking the time to come here. As I added 
before, your entire statements will be in the record and made 
part of the record, and we will continue to work with you. And 
we would like to have you all in here at the end. Thank you.
    We will take a 2-minute recess as we move to the next 
panel.
    [Recess.]
    Chairman Tom Davis. The hearing will come to order.
    This is our final panel. We have Mr. Donald Scott, the 
senior vice president of EDS for government solutions; Mr. 
David Bittenbender, vice president, Network Services, for 
Computer Sciences Corp., Federal Sector; Mr. James Courter, a 
former member of this body and CEO and vice president of IDT 
Corp.; Mr. Michael Cook, senior vice president and general 
manager of Hughes Network Systems; Ms. Diana Gowen, president, 
Broadwing Government Solutions, Broadwing Communications, LLC; 
and Mr. Greg Baroni, president of the Global Public Sector, 
Unisys Corp.
    It is our policy we swear you in. If you would rise with me 
and raise your right hands.
    [Witnesses sworn.]
    Chairman Tom Davis. Again, your entire testimony is in the 
record and questions are based on that and that will all get 
put into the permanent record. So if we can just take 5 
minutes, I am going to try to beat our votes on the House floor 
so we can dismiss you and not have to keep you. Thank you for 
your patience, and thank you so much for being here.

 STATEMENTS OF DONALD SCOTT, SENIOR VICE PRESIDENT, EDS, U.S. 
   GOVERNMENT SOLUTIONS; DAVID BITTENBENDER, VICE PRESIDENT, 
  NETWORK SERVICES, COMPUTER SCIENCES CORP., FEDERAL SECTOR; 
 JAMES COURTER, CEO & VICE PRESIDENT, IDT CORP.; MICHAEL COOK, 
    SENIOR VICE PRESIDENT & GENERAL MANAGER, HUGHES NETWORK 
     SYSTEMS; DIANA GOWEN, PRESIDENT, BROADWING GOVERNMENT 
  SOLUTIONS, BROADWING COMMUNICATIONS, LLC; AND GREG BARONI, 
         PRESIDENT, GLOBAL PUBLIC SECTOR, UNISYS CORP.

                   STATEMENT OF DONALD SCOTT

    Mr. Scott. Thank you, Mr. Chairman. I have a good bit to 
say, but I will try to be as brief as possible. I am offering 
EDS's recommendations in the interest of making Networx more 
effective now and in the future. I have submitted a more 
complete copy of course for the record.
    First, I want to commend the committee for the continued 
high level of interest that you have in this program. We know 
you have a broad scope of responsibilities, but you have seen 
fit to give Networx a good bit of attention, and we appreciate 
it. And we also commend Administrator Perry and the FTS program 
for their diligence in getting to the optimum contract.
    Chairman Tom Davis. I take it everybody commends the GSA 
for this. I mean, we all have to bid on this, so I am just 
going to assume everybody does that.
    Mr. Scott. However, the two contracts are not where we 
think they should be at this point in time. For example, in the 
focus on wireless communications, we find that they have kind 
of stuck to primarily voice services rather than look forward 
to broadband wireless, PDAs, etc., that is now becoming widely 
available.
    Also, on the security requirements, we felt like they were 
offered in a very narrow manner in the draft and that they 
should, in addition to having preventive methods like 
firewalls, they ought to have also more aggressive efforts to 
prevent them happening and detecting intrusion and that sort of 
thing.
    However, adding these new features such as I just mentioned 
to Networx will not be enough to make it effective for the 
future. The program also must support the new next generation 
era, and the Networx that we have today are not built for that 
purpose. Technology change has taken us from legacy telecom, 
which existed to provide transport and connectivity, to the 
world of next generations, which exist to provide effective 
information handling and sharing. This is a world in which 
Networx procurement will function in the next decade.
    These new Networx are distance-insensitive, wired and 
wireless, packet driven, IP-based with converged services, and 
are solutions-oriented. The key concepts driving next 
generations within this information-sharing business model are 
end-to-end solutions, convergence, collaboration and ease of 
information sharing.
    We are becoming customer and information focused in an 
information society. We demand that information be easily 
obtained and shared, and we expect effective information 
convergence, storing and processing, messaging and 
collaboration. The challenge GSA faces is how to offer the 
services needed in this future, facing procurement, but also 
how to offer the legacy services that are still required by 
many of the government agencies.
    EDS recommends a strategy which should have little impact 
on the timely release of the final RFPs. GSA should structure 
Enterprise to enable the procurement of information solutions. 
Legacy services along with other services traditionally offered 
by carriers would be offered on Universal.
    EDS recommends that Enterprise become a performance-based 
contract using solutions-focused models which can be premised-
based or network-based. Task order requirements would be 
provided in the form of statements of objectives. This can 
provide GSA's customers the benefit of a full complement of 
innovative solutions found in the commercial next generation 
marketplace. The components, transport, last-mile access, 
wireless and security, for example, would be incorporated in 
these solutions. The agencies will obtain total solutions 
needed to satisfy their objectives and their mission 
requirements rather than obtain the individual components of 
the solution. Taken together, these recommendations define a 
program that will enable Networx to offer next-generation at 
the same time it provides components for the legacy generation. 
EDS's approach would lead to more satisfied government 
agencies, greater contract volume, and become the foundation of 
the administration's goal of a common government IT 
architecture.
    To summarize, Enterprise and Universal should provide two 
tracts: the Universal to take care of the legacy stuff, and the 
Enterprise to take care of the forward-looking.
    So, Mr. Chairman, EDS looks forward to participating in 
this competition as soon as possible. However, we recommend 
that GSA concentrate on getting it right. EDS believes that 
restructuring the network procurements according to our 
recommendations will increase competition by enabling more 
carriers, integrators and small businesses to compete.
    Mr. Chairman, thank you for the opportunity, and I look 
forward to your questions.
    [The prepared statement of Mr. Scott follows:]

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    Chairman Tom Davis. Thank you very much. Mr. Bittenbender.

               STATEMENT OF DAVID A. BITTENBENDER

    Mr. Bittenbender. Mr. Chairman, members of the committee, 
we appreciate the opportunity to appear here today. I am here 
on behalf of Computer Sciences Corp. where I work as vice 
president of Federal Network Services, but I am also here as 
former chairman of the FTS 2001 Interagency Management Council 
and as a former government telecommunications executive. I 
personally feel very strongly about the effective use of 
communications and information technologies in contributing to 
a more responsible and responsive government.
    Mr. Chairman, you set the vision for such a government at a 
breakfast we attended just a few months ago. There, you spoke 
of the need for a communications infrastructure, one that meets 
new and demanding national security and economic 
competitiveness demands imposed on an effective, 21st century 
government. Yours is a strong and important vision and message, 
and I applaud you for it.
    For a myriad of reasons, your vision will not be easy to 
achieve. Important and substantial initiatives rarely are. GSA, 
though, is to be commended for its attempt to structure so 
major a procurement in such turbulent times internal to its own 
organization and across government as well.
    Networx can and should be the flagship initiative for 
government to dramatically improve its ability to share 
information. It has that potential. To achieve that potential, 
the procurement should move from its current position as 
essentially an enhanced schedule of stove-pipe commodity 
services, to a horizontally defined standards-based initiative 
that can evolve with a rapidly and dramatically changing 
communications industry.
    Leaders in the communications industry today may not be the 
leaders of tomorrow. Twenty-five years ago, when the GSA first 
considered replacing the original FTS contract, there was only 
one service provider. At the time of the FTS 2000 procurement 
in 1988, there were three providers. Today, there are dozens, 
many offering services that did not exist in 1988. And the 
original service provider of 25 years ago will likely not exist 
when Networx is awarded. This trend continues apace, and the 
government must develop procurement structures that adapt to 
this environment.
    We do not believe that the Networx procurement in its 
present form encourages the objective of a government-wide, or 
even system-wide integration of communication services. This is 
not so much the fault of GSA as it is the reality that GSA 
faces in its customer market. Like it or not, stove-pipe 
culture in government and the telecommunications industry is 
strong. Yet, this culture must be addressed in terms of 
communications infrastructure if we as a government are to 
truly be able to share information across boundaries and 
jurisdictions.
    We believe Networx suffers from some of the same weaknesses 
as its predecessors. Although the procurement mandates a 
standards-based service solution and specifies 
interoperability, many aspects of service provisioning, 
operation and management make seamless interoperability among 
the Networx service vendors impracticable and, actually, not 
readily supported even by the vendors themselves.
    In addition, the requirements of the Enterprise component, 
which is essentially a subset of the Universal requirements, 
present significant barriers to innovation and to the entrance 
of small and other businesses who could offer niche service 
with significant potential value to the government.
    The Universal component, which is largely commodity 
services, can and probably should move forward, given the 
impending expiration of the existing contracts.
    However, we believe that government would be better served 
through restructuring the Enterprise component as a statement 
of objectives rather than a statement of requirements. It is 
the Enterprise procurement we believe that offers the greatest 
potential to the government for innovation, contract 
flexibility, and sound infrastructure management over the 
duration of Networx.
    CSC supports a delay in the issuance of the Networx RFP or 
certainly the Enterprise component, so as to allow its careful 
and adequate consideration by the GSA, Congress, this committee 
in particular, and by the broader government and industry. 
Networx is moving forward with a rapidly evolving realization 
at senior levels of the executive branch and Congress, a 
realization fueled by this committee, that our infrastructure 
today is not adequate. A brief time-out might be in order.
    Mr. Chairman, once again, I thank you for the opportunity. 
I look forward to any questions you may have and working with 
you in any manner that is appropriate.
    [The prepared statement of Mr. Bittenbender follows:]

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    Chairman Tom Davis. Thank you much. Mr. Courter.
    Mr. Burton. Mr. Chairman, I would like to welcome our 
friend, Jim Courter. He was a former colleague of ours and he 
has not aged a bit since he left.
    Chairman Tom Davis. He hasn't, has he? That is because he 
is not here. He is in the private sector.
    Whatever your secret, Jim, you look great, and good to have 
you here.

                   STATEMENT OF JAMES COURTER

    Mr. Courter. Mr. Chairman, it is good to be here on a 
different venue.
    Obviously, I was on the Committee on Armed Services and did 
not often testify. I will not read my statement. Obviously, it 
is there for the record. There are a few things that I would 
like to point out that I think are very important in the next 2 
or 3 minutes.
    First of all, although our company has been successful, and 
both of you know something about our company; we started about 
10 years ago. We are a very small company. Six and a half years 
ago when I went there, revenue was $52 million; now it is $2.2 
billion. There was less than 100 people 6 years ago, we have 
4,500 now in 18 countries around the world, and we have a very 
strong balance sheet.
    We are a diversified company. It is a good thing we are. 
Otherwise, I would not be here today. If we just stayed in 
telecommunications, traditional, plain old telephone, not going 
into voice, VOIP, without a transaction that we had with our 
good friends at AT&T a few years ago in selling a controlling 
interest of net-to-phone, which was one of the premier voice-
over IP telephone companies in the United States, we would have 
gone bankrupt with so many others, because of the MAA contract. 
And so I am speaking to you from--I am the poster child. You 
know, it wasn't individuals' fault. Everybody at GSA was well-
intentioned, but it was a catastrophe for our company.
    One, we bought Windstar out of bankruptcy 3 years ago and 3 
months ago. I remember very specifically. We were overjoyed by 
our success in buying it out of bankruptcy. We thought it would 
be the perfect fit for our network. We are basically an 
international telecommunications provider. We route telephone 
traffic, voice traffic for all of the major PTTs, including the 
ones in the United States, and all of the RBOCs around the 
world. What we did not have was that last mile of connectivity 
that would make us a real national and global player.
    So we bought Windstar out of bankruptcy for $52\1/2\ 
million, and the good part of it was that day, after that, we 
realized we were in a heck of a situation because the 
expectation of the amount of revenue and the expectation of the 
amount of traffic that we were going to route for the Federal 
Government under the NAA contract was woefully less than 
anybody anticipated, thus making it inevitable that we would 
burn significant sums of money each and every month. To this 
very day, and it is almost 3\1/2\ years later, IDT is losing in 
the government sector with the GSA contracts $2\1/2\ million a 
month.
    We had 4-year contracts with four 1-year options to renew. 
We went to GSA and said, we can't renew this; we can't continue 
to burn hundreds and hundreds of millions of dollars, because 
we are not getting the revenue, we are not getting the traffic 
under this program. GSA some time ago told us they, in fact, 
were going to extend and exercise their option year after year 
after year for 4 more years, so we could sit here and burn an 
additional $2\1/2\ million a month for 4 additional years.
    Now, I have sat down with Mr. Perry. He understands that we 
have a terrible situation. He understands the fact that IDT and 
other companies like it were terribly misled by the Federal 
Government as to the quantity of business we would get, and he 
assures us that we will work something out with the Federal 
Government.
    So my basic message is, there has been a lot of testimony, 
a lot of comments about the amount of business and the amount 
of traffic. No. 1, bidders have to know the amount of traffic 
that they are going to get. It cannot be a secret, because you 
don't want to turn innovative communications companies, like 
IDT and some at this table and some on the prior panel, and put 
them in a situation where they are forced to go bankrupt again.
    It happened because of the fact that--I will give you one 
example. In Atlanta, in the city of Atlanta where we still are, 
the maximum GSA estimated was $520 million of business for IDT; 
now, of course, Windstar. The estimated value, and that is the 
one that contractors look at, was $170 million of revenue in 
Atlanta for Windstar, old Windstar. Our gross revenue is $1\1/
2\ million. Now, how can you make money under those types of 
circumstances?
    So my point here is, you have an opportunity to get it 
right this time, and indeed, I hope that you do.
    There is another comment I would like to make, and that is, 
there has been great talk about Universal and Enterprise, and 
we look at Enterprise. of course, we will be very cautious this 
time and very circumspect, and we will be looking very 
carefully as to what the real traffic numbers are going to be; 
we will not be deluded a second time. It seems to me, under 
Enterprise, it is more the equivalent, as far as I am 
concerned, if the government is going to get the best product 
at the best price, it is not the decathlon. You do not need a 
company to be expert in nine different areas. I understand 
there are nine categories, nine requirements when it comes to 
Enterprise. If you want to win the 100-yard dash, you don't put 
a shot putter in the Olympics. You got someone who is the very 
best at that particular event. So I would suggest that GSA 
review the nine requirements when it comes to the Enterprise 
program.
    So one is lessons learned, and the other is, you have a 
chance to do it right this time. If you need additional input 
from myself, I am obviously at your disposal. Thank you very 
much.
    [The prepared statement of Mr. Courter follows:]

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    Chairman Tom Davis. Jim, thank you very much. Mr. Cook.

                  STATEMENT OF MICHAEL L. COOK

    Mr. Cook. Mr. Chairman, thank you very much.
    My name is Michael Cook, and I am senior vice president of 
Hughes Network Systems and general manager of the Government 
Markets Group for Hughes. So, Mr. Chairman and members of the 
committee, I appreciate and value the opportunity to appear 
here today and talk on behalf of Hughes Network Systems about 
broadband satellite services.
    You have made it clear, Mr. Chairman, in recent months how 
important it is to improve communication amongst government 
agencies and departments, and you have been equally clear in 
setting your belief that Networx must be the gold standard on 
which government communication requirements are based.
    My purpose here today is to urge that satellite broadband 
technologies and that satellite services be equally treated 
with the other prominent broadband technologies; that is DSL 
and cable. The inclusion of satellite services is where the 
Networx procurement needs to be modified and improved, and this 
is the purpose of my testimony today.
    Broadband is today's powerhouse communications technology. 
It is driving the economy and will continue to do so for the 
foreseeable future. Networx recognizes this. In both the 
Universal and the Enterprise Networx component procurements, 
bidders are required to provide DSL and cable services. 
However, in both procurement processes, satellite broadband 
stands as an optional offering. This does not make sense for 
the government as a customer, either today or over the 
projected duration of Networx. Nor does it reflect the reality 
of today's and tomorrow's communications environment. 
Regardless of claims, hopes or even spin, terrestrial broadband 
technology such as DSL is simply not available to every 
consumer, business or government location throughout the United 
States.
    Satellite broadband is not a niche technology nor an 
emerging one. It is here. It is real. It is reliable. It is 
everywhere. It is in wide-use in commercial, consumer and 
government markets, and its use will grow significantly over 
the coming years. Over 20 million consumers appreciate 
satellite-delivered TV, and these numbers are growing rapidly 
as people are embracing new high-definition technologies. 
Already today more than a quarter of a million Americans rely 
on satellite broadband communications at home, and these 
customers primarily reside in rural and suburban areas where 
DSL and cable are not available.
    A further 200,000 business locations rely on satellite 
broadband for mission-critical communications. Hughes alone 
transports over 6\1/2\ million credit card transactions each 
day across its satellite Networx. If you are a business or a 
government agency, large or small, satellite gives you the 
communications capabilities that the 21st century, commerce, 
and egovernment demand: high speed, high quality service and 
availability everywhere.
    Critical large-scale business operations depend on 
satellite communications. Chances are that you as individuals 
benefit from satellite communications every time you fill your 
car with gas. Over 90 percent of all gas stations in all 50 
States of virtually every major oil company employs satellite 
communications at the pump for the electronic transaction 
purposes and in the back office for stock control and 
monitoring. The retail industry, the hospitality industry, the 
automotive industry, the financial services industry, the 
broadcast industry all rely on satellite broadband. Why should 
government be any different? Well, it isn't. Government 
departments and agencies, including, among many others, 
Agriculture, Interior, Homeland Security, the Department of 
Defense, the National Weather Service, and the Postal Service, 
are all using satellite technologies and services for day-to-
day Enterprise applications.
    Also remember that, as a back-up network, satellite 
communications is essential in a world where heightened 
national and homeland security risks are ever present, as well 
as natural disasters. As an example, in Hendry County in 
Florida last year, hard hit by four hurricanes, the county 
director of operations coordinated all county activities for 4 
days from his home using HNS's DIRECWAY broadband satellite 
communications services. The landbased communications network 
was completely incapacitated by the weather for those 4 days.
    Satellite broadband is also the most portable of technology 
choices, and we have supported many emergency situations, such 
as the search for parts of the space shuttle Columbia with 
small, portable, fly away units.
    My point with these examples is this: Satellite 
communications is a viable technology. It is widely deployed. 
It is deployed in consumer, commercial and government sectors, 
improves communication for primary communications, for backup 
and continuity of operations function as well as for audio and 
video applications and others.
    If Networx requires broadband technology, it should require 
all technologies now in wide commercial and government 
deployment. Satellite broadband offerings should stand side by 
side with DSL and cable in this procurement, and satellite 
broadband is not, nor should it be, optional.
    Now, I know that Networx or rather the GSA procures 
satellite through other contract vehicles, but our point is 
this is the most important telecommunications procurement for 
government as we go forward, and it is essential that satellite 
broadband is there alongside all of the other technologies.
    Mr. Chairman, thank you very much.
    [The prepared statement of Mr. Cook follows:]

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    Chairman Tom Davis. Thank you very much.
    Ms. Gowen, you may be our last speaker.
    And, Mr. Baroni, we may need to go vote.
    If it is agreeable, we will recess for an hour, because we 
have a series of votes and everybody can get some lunch, and we 
can wind it up, and we can do questions.
    Can everybody do that on their schedule?
    You will be our final speaker, and then, Mr. Baroni, you 
will have an hour to prepare your testimony.

                    STATEMENT OF DIANA GOWEN

    Ms. Gowen. Good afternoon, Chairman Davis, and members of 
the committee. Thank you for the opportunity to be here. I am 
Diana Gowen, president of Broadwing Government Solutions, 
Broadwing Communications.
    Broadwing, while small relative to legacy carriers here 
today, is a robust, wholly owned, all-optical, nationwide 
network. Because of our advanced technology and size, we are 
nimble and innovative in ways some of the legacy carriers 
cannot be. So we applaud GSA for showing clear vision in 
creating an Enterprise version of Networx to improve the 
government's access to new technologies. While a new entrant in 
the Federal space, it provides advanced networking solutions to 
very sophisticated customers such as General Electric, AT&T 
Wireless and Bank of America. They entrust their mission-
critical Networks to us.
    However, in spite of the trust those large commercial 
customers place in us, we approach Networx with some 
trepidation. The risks are large, and the market uncertain but, 
more critically, we see an uneven playing field. The GSA has 
been working for 2-plus years on this acquisition and has very 
consistently sought council from all quarters, and there are 
marked changes that have resulted. Yet, some fundamental issues 
remain: The competitive playing field is not level. Universal, 
while it is the continuity of service contract, is unduly 
favored in many ways. The MRGs, fair consideration, the ability 
to modify the contract early on, fair opportunity or 
consideration across two separate and unequal contracts is our 
greatest concern.
    The major objective for Universal is continuity of service, 
and a major objective for Enterprise is new and innovative 
technological solutions. Because of the agency's well-founded 
concerns with continuity of service, the dominant contract 
vehicle in all probability will be Universal, and agencies 
could miss opportunities to avail themselves of creative 
technological solutions when upgrading their networks.
    Consider the case of a new innovative network service, 
QPLS, offered only by Enterprise providers, and one of the 
Universal providers, in this case the agency's incumbent 
carrier. The agency could either provide the incumbent a sole-
source award or abandon its incumbent and issue a task order 
under Enterprise. A sole-source award certainly would not 
promote the benefits of competition. But, at the same time, the 
incumbent, if able to provide, should be able to compete with 
the Enterprise bidders.
    Networx should be changed from two separate and unequal 
contracts to one, either conceptually or in reality, by 
adopting some of the following approaches: Structure the 
contract along the lines of the Millennia Light and 
Connections, or GSA could administratively direct an agency to 
consider all network awardees, regardless of whether they are 
Universal or Enterprise. The current FTS 2001 and MAA contracts 
offer a good example. JUTNET, AT&T, and Qwest, MCI and Sprint 
all competed. AT&T and Qwest were MAA awardees, and Sprint and 
MCI were FTS 2001 awardees. Networx could adopt a version of 
this strategy to broaden the competitive playing field during 
the fair opportunity competitions, or GSA could approach the 
Office of Federal Procurement Policy and request a modification 
or exception to the Federal acquisition regulations.
    We have all recommended that the government accept 
commercial capabilities and eliminate many of the noncommercial 
requirements, yet many agencies remain firm in their 
noncommercial desires, so that GSA should pay for the unique, 
government-only development through special cleanse or 
increased revenue guarantees. If GSA chooses the MRG path, then 
the MRGs are too low for Enterprise. The operational support 
requirements are exactly the same for both Enterprise and 
Universal, and there is room to expand the MRGs, since the 
combination of the proposed MRGs today is less than 1 year's 
revenue under the current FTS 2001 contract and well below the 
government's estimates of how much will be spent under this 
program.
    Our last concern is forbearance from modifications to the 
Enterprise contracts for the first 24 months. These are the 
innovation contracts, yet Universal awardees will be allowed to 
modify their contracts.
    The contract modification process under FTS was 
successfully streamlined; the number of mods negotiated doubled 
on an annual basis, so I think GSA knows how to modify 
contracts. Tech change is not going to slow down for 2 years, 
and therefore, both Universal and Enterprise should be able to 
modify their contracts as necessary.
    So Broadwing is eager to work with you, Mr. Chairman, and 
the members of the committee and with the GSA to help bring 
about a fair and balanced competitive environment for Networx. 
Thank you.
    [The prepared statement of Ms. Gowen follows:]

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    Chairman Tom Davis. Thank you very much.
    We are going to recess now. It is 1 p.m., we will come back 
here at 2 p.m., give everybody a chance to eat lunch except for 
you, Mr. Baroni. I know you will be preparing your testimony. 
Thanks.
    [Recess.]
    Chairman Tom Davis. Well, Mr. Baroni, have you had enough 
time to prepare your remarks?
    Mr. Baroni. I think so.
    Chairman Tom Davis. Well, we're ready--at least I'm ready.

                    STATEMENT OF GREG BARONI

    Mr. Baroni. Well, Mr. Chairman, many thanks for the 
opportunity to appear before you today to share Unisys' views 
on GSA's proposed government-wide telecommunications program, 
Networx.
    My written testimony, which you've already included in the 
formal record, highlights Unisys' best practices in the 
telecommunications and networks services, the challenges facing 
the current legacy procurement vehicles, such as FTS2001, our 
analysis of the Networx draft RFP and recommendations to 
improve Networx services.
    Unisys is uniquely qualified to be a key partner in this 
acquisition, and I believe, given the fact that we are a major 
global solutions provider to 9 of the top 10 telecommunications 
organizations--and I say that recognizing that it's rapidly 
dwindling--we are, in our view, very expertise in this area.
    In addition, we've been a global leader in delivering 
highly complex managed services and network services, both to 
the private and the private sector, under performance-based 
contracting arrangements, the most notable of which is the 
Transportation Security Agency, where we established an 
innovative approach to link our performance directly to mission 
outcomes.
    Let me briefly outline the challenges associated with the 
current network or the legacy network contracts and the need 
for transformation.
    Current procurement vehicles typically provide legacy voice 
and data services that traditionally have been offered by the 
commodity vendors who supply hard-wired physical networks and 
are not well-suited to deliver converged communications.
    Unisys believes that the GSA Networx contracts should be a 
key enabler of this transformation that balances world-class 
services with innovation in a cost-effective manner. Networx 
must address these challenges faced today with the FTS2001 
contract, such as access to a limited number of direct 
commodity telecom providers unable to exploit full convergence, 
the inability to access value-added services, and, of course, 
the billing issues and the lack of flexibility in reducing 
pricing over time.
    As you requested, and I'm sure you've surmised by now, we 
have a few comments on the draft Networx RFP. First, for the 
Universal contract, as proposed, a robust network footprint in 
competitive pricing will be the minimum required for a winning 
proposal. Because systems integrators and outsources typically 
do not own the underlying assets, and because margins are 
typically razor thin on these kinds of awards, we believe it's 
unlikely that modern transformational service providers are in 
a position to make a competitive bid relative to traditional--
to large traditional telecommunications service providers.
    Second, for the Enterprise contract, significant 
impediments still exist because of the complex billing and 
back-office system requirements for Networx. Billing and back-
office systems requirements appear to be similar for both 
Universal and the Enterprise procurements. In both cases 
vendors are being asked to conduct an operational capability 
demonstration of their operation support systems that will 
require very robust and government-specific requirements, 
thereby adding significant upfront investment for an 
opportunity that in the case of the Enterprise solicitation 
appears to have limited initial opportunity for significant 
revenue.
    Third, the minimum revenue guarantee which, admittedly, was 
increased from $25 to $50 million still offers little 
motivation to move customers from the Universal to the 
Enterprise contract. Given bid proposal and investment 
requirements, the business case for a systems integration to 
prime the contract is, at best, very challenging.
    Fourth, an effective transition to the Networx contracts 
will be vital. As pointed out by GAO, the transition elements 
will need to be specifically taken into account to include the 
transition from the FTS contract to the new Networx contract, 
from circuit centric solutions to IP and value-added solutions, 
and from circuit billing and support systems to a more managed 
services billing and support system.
    Finally, it appears GSA is looking for more next-generation 
and modern solutions. It seems, though, that the Enterprise 
contract favors legacy firms--i.e., the carriers--that can 
provide robust and cost-efficient network connectivity 
solutions because the majority of the core services are, in 
fact, connectivity centric rather than complex value-add 
services.
    In summary, Mr. Chairman, Unisys is very supportive of the 
government's approach and strategy for telecommunication and 
network services. We acknowledge the significant progress GSA 
has made, and emphasize the following recommendations.
    The Networx contract should be designed with a 
transformational approach, balancing the value of added 
services to the clients with optimal price points, as opposed 
to being merely a commodity-priced vehicle favoring the 
carriers.
    Second, increase the minimum revenue guarantees for the 
Enterprise contract to significantly higher than $50 million so 
that the incentives to use the contract are in place. Further, 
specific minimum revenue guarantee goals in the first 2 years 
of the contract will greatly increase the incentive for 
innovation and cost-effective long-term solutions.
    Third, reduce the burden on contractors by simplifying the 
overall billing requirements, limiting the requirements during 
the operational capability demonstration to required core 
services, and only those services that the vendor plans to 
implement in the initial 2 years of the procurement.
    And finally, the government should consider options such as 
performance-based managed services contracting and critical 
security services by not limiting the Networx contracts to 
vendors with legacy and commodity telecommunications services. 
Also, we recommend that greater weight be given to the 
evaluation process to critical value-added services such as 
security.
    Thank you for the opportunity and inviting us to share 
observations and recommendations. I look forward to any 
questions you might have.
    [The prepared statement of Mr. Baroni follows:]

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    Chairman Tom Davis. Well, thanks for bearing with us.
    Let me start the questioning.
    Mr. Scott, you state that Networx should be reconfigured so 
that Universal and Enterprise provide different tracks. Under 
your plan, as I understand it, Universal would maintain its 
current form, but Enterprise would be transferred to a next-
generation network, information-sharing, solutions-based model, 
which I think that's an interesting concept. How long do you 
think it would take GSA to transform the Enterprise strategy 
into a viable next-generation network acquisition vehicle?
    Mr. Scott. Are you saying to change the contract 
requirements?
    Chairman Tom Davis. Right.
    Mr. Scott. I would think they should be able to do that in 
3 or 4 months, at the max.
    Chairman Tom Davis. OK. Could they do that while the 
Universal acquisition goes forward?
    Mr. Scott. Well, I think that could happen, and perhaps 
even Universal could go forward as scheduled; but I have some 
concern about getting Universal in place and then the other one 
drags on, I have some great concern about that.
    Chairman Tom Davis. I do, too.
    How do you think that the next-generation network could be 
different from what FTS provides today?
    Mr. Scott. As I said in the testimony, it's focused more on 
solutions, which you've heard from some of the other speakers 
here today. And it will supply solutions, total solutions, and 
not just a telecommunications component. The telecommunications 
component would be a part of it, along with the other elements 
of the total solution; the total solution being to provide some 
sort of capability from user to user, a total capability which 
provides information sharing among them.
    Chairman Tom Davis. OK.
    Now Mr. Bittenbender, do you think your company is likely 
to participate in Networx if Enterprise were not restructured 
as you suggest?
    Mr. Bittenbender. Do I think we would? We would not be able 
to be prime in the contract. We would, you know, we would have 
to presume that we would take a subcontractor role with one of 
the components.
    Chairman Tom Davis. What are the special technologies that 
you all would bring to a procurement like this?
    Mr. Bittenbender. Well, on top of bringing innovation, we 
bring the ability to manage large numbers of disparate services 
and bring them together into a coherent service delivery 
mechanism.
    Chairman Tom Davis. So it's more of an integration role?
    Mr. Bittenbender. Yes.
    Chairman Tom Davis. OK.
    Mr. Courter, based on your firm's unfortunate experience 
under the GSA's MAA program, you expressed concern about 
whether GSA has realistically estimated the agency requirements 
in Networx, so that was an eye opener, I think, to some of our 
members.
    Do you think that the $50 million MRG in Enterprise is 
realistic?
    Mr. Courter. I think it's too small. You're talking terms, 
it's my reading of what I have read is $50 million, it could 
be, as the testimony was set up----
    Chairman Tom Davis. Cut up five ways. Five contractors.
    Mr. Courter. Over 5 years? It's minimal, I mean, it's not--
and if you add the cost of preparation and that which you need 
as far as back office to support this, it's probably not 
something anybody could make money on. And my greatest fear 
right now is that I know there's going to be crossovers, so the 
large enterprises, you know, the large incumbent carriers who 
are going to probably take the whole thing and nothing will 
have changed.
    Chairman Tom Davis. Mr. Cook, you make a good case for the 
treatment of satellite broadband equal to DSL and cable in the 
Networx procurement. I know it's hard to forecast, but do you 
see satellite broadband 3 years from now in consumer, 
commercial, and government markets?
    Mr. Cook. Very definitely, yes. We in the industry are 
spending a lot of efforts, a lot of R&D money, continuing to 
develop the technology. We're continuing to see the performance 
of the services increase in terms of speed and capabilities. 
The costs are coming down. We're making more efficient use of 
the spectrum that we're using.
    And certainly in about 2 years' time we will have a brand-
new type of satellite to use as well. We're building something 
called Spaceway, which, again, in terms of spectrum efficiency, 
is about 10 times more efficient than the sort of satellites 
we're using today; and that in itself will help us to drive 
down costs and so on. So we definitely see that the market for 
satellite broadband is going to be significantly bigger in 2 or 
3 years' time than it is today.
    Chairman Tom Davis. If you look at the draft RFP as it is 
today, would you consider participating as a prime under 
Enterprise the way it is today, or would there have to be 
provisions probably----
    Mr. Cook. I think the answer is we would like to, but it's 
very difficult today for us to participate as a prime for many 
of the reasons we've heard, all the way through from billing 
systems through to coverage of the services and so on.
    Chairman Tom Davis. Now, Ms. Gowen, let me just ask you for 
your company. You talked about a number of changes that GSA 
could make in Networx, Enterprise, raising the minimum returns, 
allowing Enterprise and Universal awardees to compete for 
agency customer requirements, permitting firms to offer only on 
Universal and Enterprise, but not both. Which is most important 
for your firm to keep you in the bidding?
    Ms. Gowen. The most important thing for us is to get a 
level playing field post-award; and to me that means that the 
fair consideration process has to be different than the way 
it's outlined in the draft. An Enterprise awardee who is 
qualified for the offer, as well as the Universal, should both 
be able to compete, just as I cited in the example of JutNet 
with the MAA providers, as well as the FTS providers. And our 
position is if the GSA can figure out administratively how to 
adjudicate fair consideration across both contracts, then we 
are a happy bidder of Enterprise.
    I would add that it would be nice to see higher MRGs if 
we're going to have all these noncommercial requirements remain 
in the contract.
    Chairman Tom Davis. Right. I think a couple of previous 
panels ago that Commissioner Perry talked about knocking those 
requirements down, and that obviously--I don't know what the 
correct mix is, but that would make it a little more palatable, 
I gather?
    Ms. Gowen. Well, right now in just billing alone there are 
194 requirements; 54 of them are noncommercial requirements, 
just to give you an example. So if we get rid of the 54, then I 
think we could all be happy.
    Chairman Tom Davis. Now Mr. Baroni, both of the Networx 
RFPs include managed network services among the list of 
mandatory services. Could you provide the same types of managed 
services you offer to private customers using these provisions?
    Mr. Baroni. At this point, no; because again, the 
requirements, as was just pointed out by Diana, that even if 
you looked at things as simple as the billing system, the 
complexity added to that almost becomes prohibitively expensive 
to get in that game.
    You know, the thing that I'm concerned about is that when 
you look at the way the RFP is currently drafted, it is 
requirement-centric, not outcome-centric. And when you think 
about managed services, you're really oriented much more toward 
a performance-based contracting model; and that's really not 
embedded in this current RFP.
    Chairman Tom Davis. I asked this of the previous panel--we 
heard today that location-specific traffic volumes won't be 
made available until mid-to-late May; how does this impact your 
ability to develop your proposals?
    Mr. Baroni. Can you repeat that again?
    Chairman Tom Davis. Sure. We heard the location-specific 
traffic volumes are not going to be available until mid-to-late 
May; how does this impact your ability to develop your 
proposals?
    Mr. Baroni. Rather significantly, because you really need 
to--in order to properly price any solution, you really have to 
understand scope. And so that becomes a necessary ingredient.
    Chairman Tom Davis. OK. I assume everybody is on the same 
wavelength----
    Ms. Gowen. I have a slightly different position there.
    You know, Enterprise is principally a data-centered 
requirement set, it's Universal that has the voice requirements 
in them. And it is absolutely required, in order to do a voice 
bid, that you have all the traffic data, the to's and the 
froms. In a data-centric environment I think they probably have 
the right data for us today. If they don't, then we all really 
need the data before you can price your proposal and develop 
your solutions.
    Chairman Tom Davis. OK. Mr. Cook.
    Mr. Cook. Again, I think I would agree. The only, again, 
addition maybe I would make to it is this is a long-term 
contract, and traffic patterns change and data changes. So to 
some extent the proposals that we all make are going to have to 
take into account those changing patterns over time. What we 
need to do is have a real good understanding of where we start 
from.
    Chairman Tom Davis. Mr. Courter.
    Mr. Courter. Yes, I 100 percent agree, you need that data 
in order to price your bid properly.
    Chairman Tom Davis. Or you end up with the Atlanta 
situation.
    Mr. Courter. Exactly.
    Mr. Bittenbender. As an integrator it's critical to us, 
because we don't deliver telecommunications services, we choose 
the appropriate company that delivers them and then put all 
those appropriate companies together. Not knowing what the 
geographic footprint is does not give us the ability to choose 
what we believe to be the best supplier.
    Chairman Tom Davis. So basically the government is not 
going to get their best offers----
    Mr. Bittenbender. The longer they wait, I believe that's 
true.
    Chairman Tom Davis. OK. Mr. Scott.
    Mr. Scott. Mr. Chairman, as he says, going beyond just the 
capability of bidding, it is seriously impacting the teaming 
process because people can't decide whether they want to bid or 
whether they want to prime or whether they want to sell. That 
is, along with the evaluation stuff, affecting that decision 
process.
    Chairman Tom Davis. Anyone else want to add anything? 
Basically my questions as we walk through this thing.
    Mr. Baroni. I guess I would say under the current 
construct, I can't imagine any integrator prime in this bid. 
And maybe, Don, you may say otherwise, or Dave----
    Chairman Tom Davis. That's what I read from hearing the way 
it's currently structured. And we want to have integrators, 
obviously, looking at this thing. OK.
    Mr. Courter. Congressman, Mr. Chairman, if I could just add 
one further thing. I think it was Congresswoman Maloney was 
talking about on September 11th, communication redundancy. And 
as you know, and I have spoken to you about it, Congress did 
pass legislation to start the process of requiring redundant 
connections, physically diverse redundant connections for 
safety reasons in certain Federal buildings. And I would hope 
that the specifications would give GSA the ability in certain 
circumstances that require a redundant connection for safety 
purposes.
    Chairman Tom Davis. That's a good point. And I will make 
sure that we emphasize that with GSA.
    OK. Anything else?
    I want to thank you all for being patient and sitting 
through this. And the meeting is adjourned.
    [Whereupon, at 2:42 p.m., the committee was adjourned.]
    [The prepared statements of Hon. Dan Burton, Hon. Jon C. 
Porter, Hon. Elijah E. Cummings and additional information 
submitted for the hearing record follows:]

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