[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
   RUNNING OUT OF TIME: TELECOMMUNICATIONS TRANSITION DELAYS WASTING 
                      MILLIONS OF FEDERAL DOLLARS

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 20, 2010

                               __________

                           Serial No. 111-100

                               __________

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


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 20, 2010.....................................     1
Statement of:
    Kempf, Steven J., Acting Commissioner, Federal Acquisition 
      Service, U.S. General Services Administration; and Sanjeev 
      Bhagowalia, Chief Information Officer, Office of the 
      Secretary, U.S. Department of the Interior.................    11
        Bhagowalia, Sanjeev......................................    29
        Kempf, Steven J..........................................    11
    Zeleniak, Susan, group president, Verizon Federal, Inc.; Bill 
      White, vice president of Federal programs, Sprint Nextel 
      Corp.; Diana L. Gowen, senior vice president and general 
      manager, Qwest Government Services, Inc.; Edward C. Morche, 
      senior vice president, Federal Markets, Level 3 
      Communications; and Don Herring, senior vice president, 
      AT&T Government Solutions..................................    54
        Gowen, Diana L...........................................    70
        Herring, Don.............................................    91
        Morche, Edward C.........................................    83
        White, Bill..............................................    61
        Zeleniak, Susan..........................................    54
Letters, statements, etc., submitted for the record by:
    Bhagowalia, Sanjeev, Chief Information Officer, Office of the 
      Secretary, U.S. Department of the Interior, prepared 
      statement of...............................................    32
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............    48
    Gowen, Diana L., senior vice president and general manager, 
      Qwest Government Services, Inc., prepared statement of.....    72
    Herring, Don, senior vice president, AT&T Government 
      Solutions, prepared statement of...........................    93
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California:
        Followup question and response...........................    46
        Prepared statement of....................................     9
    Kempf, Steven J., Acting Commissioner, Federal Acquisition 
      Service, U.S. General Services Administration, prepared 
      statement of...............................................    14
    Morche, Edward C., senior vice president, Federal Markets, 
      Level 3 Communications, prepared statement of..............    85
    Towns, Hon. Edolphus, a Representative in Congress from the 
      State of New York, prepared statement of...................     3
    White, Bill, vice president of Federal programs, Sprint 
      Nextel Corp., prepared statement of........................    63
    Zeleniak, Susan, group president, Verizon Federal, Inc., 
      prepared statement of......................................    56


   RUNNING OUT OF TIME: TELECOMMUNICATIONS TRANSITION DELAYS WASTING 
                      MILLIONS OF FEDERAL DOLLARS

                              ----------                              


                         THURSDAY, MAY 20, 2010

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:03 a.m. in room 
2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Cummings, Kucinich, Watson, 
Connolly, Cuellar, Issa, and Luetkemeyer.
    Staff present: John Arlington, chief counsel--
investigations; Lisa Cody, investigator; Adam Hodge, deputy 
press secretary; Carla Hultberg, chief clerk; Marc Johnson and 
Ophelia Rivas, assistant clerks; Amy Miller, special assistant; 
Steven Rangel, senior counsel; Christopher Sanders, 
professional staff member, Leneal Scott, IT specialist; Ron 
Stroman, staff director; Lawrence Brady, minority staff 
director; John Cuaderes, minority deputy staff director; Rob 
Borden, minority general counsel; Adam Fromm, minority chief 
clerk and Member liaison; Stephen Castor, minority senior 
counsel; and Ashley Callen, minority counsel.
    Chairman Towns. Good morning. Thank you for being here 
today.
    This hearing is, of course, on Running Out of Time. The 
purpose of today's hearing is to examine the Federal 
Government's delay in implementing Networx, a Government-wide 
program for procurement of telecommunications service for 
Federal agencies at substantial cost savings. The theory behind 
Networx is a good one. The Federal Government ought to be able 
to use the enormous bargaining power to obtain telecom services 
at a very substantial cost savings. That was the reason the 
General Services Administration negotiated the Networx 
contracts on behalf of Federal agencies.
    By all accounts, GSA negotiated a pretty good deal, but the 
best deal in the world won't do us any good if the Federal 
agencies don't implement it by transferring their telecom 
systems to Networx contracts. This is not a small matter. GSA 
reports that for every month the transition is delayed, the 
Government is losing approximately $22.4 million in unrealized 
savings. By that estimate, when factoring in previous losses, 
we may lose between $300 million to a half billion dollars in 
unrealized cost savings by next year.
    More importantly, when I say we, in this case we are 
talking about the taxpayers. This is simply unacceptable.
    This is not the first time we have looked at this issue. 
The committee held two hearings, one in 2004 largely focused on 
planning and strategy aspects of the program, and another 
hearing in 2005 to address GSA revised strategy for Networx. In 
2005 we were concerned about the sluggish roll-out of Networx. 
Five years later concern is an understatement. If there is a 
red flag that has yet to be thrown, I want you to know that I 
am throwing it today.
    The transition to Networx hasn't really gone on forever; it 
just feels like it. We are now in the ridiculous position of 
being 3 years into a 10-year contract that we have not even 
implemented. What good are the cost savings if we don't take 
advantage of them? It just doesn't make sense.
    Today I want to get a better understanding of just what is 
delaying the transition to Networx and what will be done about 
it. I also want to look close at the issue of small business, 
women, and minority subcontracting. The Networx program sets 
very specific goals for small business and minority 
participation. The five major networks contractors, AT&T, Level 
3, Qwest, Sprint, and Verizon, were required to submit small 
business and minority contracting plans. After reviewing the 
plans, I am concerned that the quality of the subcontracting 
plans varies significantly, and I want to make sure GSA has the 
information necessary to hold the contractors accountable for 
their subcontracting plans.
    All of these parties should know that I take this issue 
very seriously, and I want to make sure that contractors 
maximize their efforts to meet their goals. I want to know that 
specifically it is being done to improve small business and 
minority participation in the program.
    Testifying today are the two key Federal stakeholders 
involved in the Networx transition, and, of course, GSA, which 
is responsible for overseeing the Networx program, and the 
Inter-Agency Management Council, which is involved in 
implementation. We also have the five Networx contractors.
    Unfortunately, we don't have anyone from the Office of 
Management and Budget. OMB's absence is unfortunate, because I 
think OMB's leadership will be a key factor in expediting the 
transition to Networx. I am genuinely disappointed that they 
chose not to participate today.
    Nonetheless, I look forward to a thorough examination of 
the Networx transition and I want to thank our witnesses for 
appearing today, and I look forward to hearing their testimony.
    [The prepared statement of Hon. Edolphus Towns follows:]

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    Chairman Towns. Now I yield 5 minutes to the ranking member 
of the committee, the gentleman from California, Congressman 
Issa.
    Mr. Issa. Thank you, Mr. Chairman. And thank you for 
holding yet another hearing on the loss of savings of Federal 
tax dollars as a result of the slow roll-out of Networx.
    Mr. Chairman, like you, in 2007 I thought we were putting 
this behind us. Agencies faced with a choice of saving money or 
having better technology available to them, or both, 
undoubtedly would quickly implement these changes, but that has 
not been true. It is very clear that, in addition to losing $18 
million in savings each month in Federal agencies, that, in 
fact, the older technology versus newer technology 
opportunities are being squandered.
    Mr. Chairman, as you said earlier, we have most but not all 
of the key players here today. The President of the United 
States is the Chief Executive Officer of this large 
corporation. We are ultimately the stockholders, 
representatives on the board, and the Office of Management and 
Budget effectively is the chief operating officer, or some 
might say a combination chief financial and chief operating 
officer for the Government. It is essential that there be 
someone responsible for Networx failure to be implemented, so I 
regret that we do not have all the stakeholders here today for 
that purpose.
    Mr. Chairman, the taxpayers expect Government to be 
different than the private sector, but they don't expect 
Government to ignore the taxpayers' dollars as though they are 
not accountable to anyone. Not implementing new technology, not 
taking cost savings, even after they are negotiated using the 
leverage of our large purchasing power, is unconscionable. 
Although I expect to have some reasons for the delay explained 
to me today, they clearly will not be acceptable to this 
committee and they will not be acceptable to any watchdog for 
the Federal taxpayers.
    This should be the last time we have to have a hearing 
showing us that, given a choice of doing nothing or doing 
something that will save the taxpayers money, agencies are 
continuing to do nothing.
    It is also very clear that the last administration deserves 
both credit for the negotiation of a good contract and blame 
for the period of 2000 to their departure in 2009 for not 
having more done. So I would like to join with the chairman to 
explain that this is not a failure of the Obama administration. 
I don't even think it is a failure of the Bush administration. 
But it is yet another example where bureaucrats, unseen and 
seldom known by name, do not care about the taxpayers' money 
enough to save it.
    Mr. Chairman, I would ask that all members of the committee 
have 5 legislative days in which to place their opening 
statements in the record and revise and extend.
    [The prepared statement of Hon. Darrell E. Issa follows:]

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    Chairman Towns. Thank you very much for your statement.
    Let me indicate that we have to stop at 11 a.m. sharp, of 
course, because we have a joint session and we have to shut 
down, and we will not want to hold you until after the joint 
session and then come back, so we hope to try to finish before 
so that everybody can sort of move on with their day.
    Mr. Issa. Mr. Chairman, I would suspect that if we asked 
leadership, if either of the witnesses would like to attend the 
joint session we could arrange for that during their testimony 
today. If they would indicate that they could remain, we would 
see if we couldn't get tickets based on their schedule.
    Chairman Towns. But they would have to return 15 minutes 
after the session is over.
    Mr. Issa. No, no. I am only saying that for the 2-hours we 
are going to take, Mr. Chairman, we perhaps could allow them to 
be there for the joint session. No, no intent to ask them to 
remain beyond that.
    Chairman Towns. Thank you.
    Let me just ask, first of all, we swear all of our 
witnesses in, of course, so we would like to ask you to stand 
and to raise your right hands.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that the witnesses 
indicated that they answered in the affirmative.
    We will now turn to our first witness, of course, Mr. 
Stephen Kempf, who is Acting Commissioner of GSA, Federal 
Acquisition Services. And our next witness, of course, is Mr. 
Bhagowalia, Inter-Agency Management Council.
    Let the record reflect, of course, that they all answered 
affirmatively.
    I ask each witness now to summarize his testimony in 5 
minutes. The yellow light, as you know, means that you should 
wind up within a minute, and the red light means stop. The 
yellow light gives you an idea that the red is getting ready to 
come. That will allow us an opportunity to ask questions. Red 
means stop everywhere in the United States.
    Thank you very much. Mr. Kempf, you may start.

  STATEMENTS OF STEVEN J. KEMPF, ACTING COMMISSIONER, FEDERAL 
ACQUISITION SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; AND 
 SANJEEV BHAGOWALIA, CHIEF INFORMATION OFFICER, OFFICE OF THE 
           SECRETARY, U.S. DEPARTMENT OF THE INTERIOR

                  STATEMENT OF STEVEN J. KEMPF

    Mr. Kempf. Good morning, Chairman Towns, Ranking Member 
Issa, and members of the committee. My name is Steven Kempf. I 
am the Acting Commissioner of the Federal Acquisition Service 
within the General Services Administration.
    I would like to thank you for the opportunity to provide 
the status of the ongoing transition of the Federal Government 
from the FTS 2001 contracts to the Networx program's suite of 
services contracts.
    Networx is the third in a series of successful GSA 
contracts and the largest telecommunications program in Federal 
history. These contracts are an outstanding example of 
strategic sourcing concepts. Networx leverages the Federal 
Government's buying power to obtain the best value 
telecommunications services for all Government agencies. It is 
comprised of two acquisitions, Networx Universal and Networx 
Enterprise.
    Networx significantly exceeds its two predecessor contracts 
in technical breadth, pricing sophistication, operational 
management, best business practices, and breadth of 
contractors. It offers five contractors for agencies to choose 
from on two separate acquisitions.
    Transitioning from FTS 2001 to Networx is a complex and 
resource-intensive process, and agencies face numerous 
challenges, as reflected by the pace of transition. GSA 
measures the pace of transition by looking at services 
disconnected from FTS 2001. By May 2008, 1 year into the 
transition, the Government had transitioned less than 1 percent 
of the FTS 2001 services. One year later, we saw 16 percent of 
the transition completed. And as of today, 53 percent of FTS 
2001 services have been disconnected.
    GSA believes there are a number of reasons why the 
transition is progressing more slowly than expected.
    First, as I have mentioned, the Networx contracts are 
complex. They contain a broad range of services and priced 
items, which require technical knowledge of network services. 
This complexity has made it difficult for agencies to 
understand the contract and to rapidly move forward with the 
transition.
    Second, agencies have issued many more statements of work 
for agency-specific requirements than was envisioned by GSA or 
the Networx contractors. This has created an enormous amount of 
additional work for the agencies, GSA, and the Networx 
contractors, and has resulted in significant increase in the 
time for agencies to make fair opportunity decisions.
    Additionally, in some cases sufficient inventory 
information was not available for the agencies to make fair 
opportunity decisions or to order services. Obtaining detailed 
inventory data is a labor- and time-intensive challenge that 
delayed some agencies in moving forward with the transition.
    Further, some agencies would benefit from additional 
managers with expert technical skills and background in network 
services. At other agencies, the transition would benefit from 
added technical depth and contracting resources. This reflects 
the Government-wide shortage of acquisition professionals, of 
which this committee is well aware.
    Contracting officers assigned to support the Networx 
transition require familiarity with Networx services' 
termination, Networx services' terms and conditions, and the 
roles and responsibilities under the contract. These 
contracting officers were also subject to protest provisions 
that were added by section 843 of the Defense Authorization Act 
in 2008. These provisions and the protests that ensued also 
added time to the Networx competitive process.
    Last, another area of challenge has been the contractor 
ordering systems. Some agencies have experienced difficulties 
entering orders into the contractors' online ordering systems. 
As a result, some agencies have had to rely on contractors to 
transcribe the ordering data into their systems, which can 
introduce yet another source of error and delay.
    In response to these challenges, GSA developed and 
implemented a wide range of measures to help agencies 
accelerate their transition from FTS 2001 to Networx. The full 
extent of this assistance is included in my written testimony. 
I would like to highlight the fact that during the past year 
GSA has offered to provide any assistance to any agency which 
requires in completing the transition activities. In addition, 
GSA is providing direct assistance to all small agencies in an 
effort to virtually conduct the transition for the agency. We 
continue to be dedicated to doing anything possible to help 
agencies complete this effort.
    Current indications of progress and reports to GSA 
demonstrate that agencies are now highly engaged and are doing 
everything possible to meet transition schedule deadlines. 
Through the help of this committee, OMB, and the involvement of 
senior agency executives, transition is well underway and will 
be completed.
    The Government will benefit enormously from lower prices 
and the ability to procure better technical services.
    Based on GAS's assessment of the progress of transition to 
date, GSA believes that most agencies will complete the 
transition by June 2011. Some large data networks that are 
still awaiting fair opportunity decisions may not be fully 
transitioned for 2 years or more. GSA will continue to do 
everything possible to maintain the current transition momentum 
and to assist agencies in transitioning as much service as 
quickly as possible to Networx contracts in an effort to 
realize maximum value from the Networx program.
    Thank you for the opportunity to testify before the 
committee. I am happy to answer any questions you may have 
regarding the Networx program.
    [The prepared statement of Mr. Kempf follows:]

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    Chairman Towns. Thank you very much, Mr. Kempf.
    Mr. Bhagowalia.

                STATEMENT OF SANJEEV BHAGOWALIA

    Mr. Bhagowalia. Good morning, Chairman Towns, Ranking 
Member Issa, and members of the committee. I appreciate the 
opportunity to appear before you to discuss the Networx 
transition. My name is Sanjeev Bhagowalia, and I am also known 
as Sonny. I am the Chief Information Officer for the U.S. 
Department of the Interior.
    I play two roles regarding the Networx program. First, as 
the DOI CIO I am responsible for leading the DOI's transition 
to Networx. Second, as of September 2009 I am the Chair of the 
Inter-Agency Management Council Executive Steering Committee, 
and I serve in an advisory capacity to GSA in the development, 
coordination, and oversight of the telecommunications program 
of the Government, including Networx. It is important to note 
that I am not the Chair of the IMC. The GSA Assistant 
Commissioner for Integrated Technology Services, Federal 
Acquisition Service, is the Chair of the IMC, as noted in the 
charter. If the Chair is not present at the IMC meeting, I 
support the meeting as the senior ranking Executive Steering 
Committee Chair.
    I have chosen to highlight three reasons why there are some 
continued delays in Networx in my capacity as the Executive 
Steering Committee Chair. Networx is the largest 
telecommunications program in the history of the Federal 
Government. It is more varied and flexible than the FTS 2001 
contract, with more than 7,000 requirements and 28 million line 
items, an increase of almost sixfold over FTS 2001.
    Second, given the scope of the program and the many 
competing priorities that agencies are faced with, it is likely 
that many agencies were, and simply are, overwhelmed by the 
task at hand, which had slowed initial progress. But, thanks to 
the recent efforts of the IMC, the Executive Steering 
Committee, the GSA, OMB, and agency CIOs, Federal agencies are 
now highly engaged in the transition process, and progress is 
accelerating. We have achieved the 53 percent mark in the last 
7 months.
    Ironically, this acceleration is now impacting the ability 
of vendors to respond to the large volume of agency 
procurements. I have reviewed the GSA process and believe that 
GSA's overall procurement process and steps were clear and well 
laid out in the common process areas, although the tailoring 
part was too accommodating, adding complexity. In my analysis, 
I agree with GSA's assessment that there are three problem 
areas experienced by agencies to conduct their transition: 
insufficient inventory data, complexity of the Networx 
offerings, and challenges in the fair opportunity process.
    As the Executive Steering Committee Chair, I have taken 
five steps to improve the effectiveness and efficiency of the 
program. I placed Networx on the agenda of the Federal CIO 
Council, and it has remained as a standing monthly agenda item 
on the CIO Council's agenda, with visibility and metrics. I 
focused considerable attention on ensuring that agencies' 
issues and voices regarding the Networx transition were brought 
to the attention of the IMC, the GSA management, and the 
Federal CIO.
    I believe in the maxim ``what gets measured gets done.'' I 
champion the concept of more-detailed transparency in metrics, 
and now most of these metrics are available on the GSA Internet 
site.
    I have helped establish the Networx data to provide senior 
Government executives, Networx transition managers, and key 
industry Networx service providers with an overview of the 
Networx contract and an urgency to completing this transition.
    I have partnered with GSA and OMB in a relentless followup 
with each agency currently below the benchmark on a regular 
basis to verify process, assist with issue resolutions, and 
bring senior executive commitment to the CIO level to verify 
that resource allocation exists to get the job done.
    I would like to highlight three steps vendors and other 
stakeholders can take to expedite the transition of Networx.
    The single most important step is adopt a like-for-like 
transition approach. That focuses the transition on existing 
services through the Networx contract.
    Second, agencies should have a solid handle on verifying 
the inventory of the FTS 2001 services, because an up-to-date 
inventory is critical to allow for like-to-like transition 
approach, and agencies should have dedicated resources, 
including a full-time contracting officer, to get the job done.
    Vendors also need to adhere to a allocated time for 
proposal development. When vendors ask for extensions, this 
introduces delays into the aggressive transition schedules. In 
some cases this is due to inadequate statement of work 
specificity from the Government; in other cases it is also lack 
of preparation or inadequate specificity from vendor responses.
    The Federal Government should capitalize on three things 
that have worked well. The biggest reason that the pace of the 
transition is accelerating is the new commitment of the senior 
leadership at GSA, OMB, and the agencies and the use of metrics 
in a trust but verify framework to verify that, indeed, we are 
making progress. This has been proven in the last 7 months, 
with an achievement of almost 37 percent improvement in the 
metrics.
    An important tool that also supports transition inventory 
activities is the Networx inventory application tool developed 
by GSA. This tool is excellent. This tool allows GSA and 
agencies to audit inventory records throughout the duration of 
the contract, and agencies should use this tool to ensure the 
Networx inventory is complete and accurate.
    Finally, the efforts of the IMC Transition Working Group 
has been invaluable. They help provide a wide variety of 
support for the overall programs and agencies' defining 
requirements, helping transition guides, and creating 
guidelines for bureau transitions.
    In conclusion, I am committed to supporting this initiative 
and will continue to collaborate with GSA, all agencies 
involved in the transition across Government. I welcome your 
support and attention to the program and I believe it is 
providing the needed focus and attention to all agencies to 
start expediting and energizing their commitment to getting the 
job done.
    As I have described before, it is in the best interest of 
the Government to continue our momentum and finish the task at 
hand. We have just passed the 53 percent mark, thanks to our 
recent focus. Now all the stakeholders need to remain committed 
and focused, which will save money for the taxpayers, as 
indicated by GSA and yourself, and utilize the other features 
and benefits of the 50 other services available on this 
program.
    This concludes my testimony. I am happy to answer any 
questions that you may have.
    [The prepared statement of Mr. Bhagowalia follows:]

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    Chairman Towns. Thank you for your testimony, both of you.
    Commissioner Kempf, is this program voluntary or mandatory?
    Mr. Kempf. This program is voluntary, but I think almost 
every agency is participating in it. I think for most of the 
services, it really is the contract of choice, and every agency 
is participating in it.
    Chairman Towns. The reason I ask, I wondered if that was a 
reason as to why it was moving so slowly.
    Mr. Kempf. No. I think most of the agencies have worked 
with GSA for years on their telecommunications. I think there 
was one agency early on that wasn't going to be part of it but 
has come into the fold. All of agencies are buying their 
services through this contract, or will be buying a good deal 
of their services through this contract.
    Chairman Towns. Let me ask you, if agencies are not 100 
percent transitioned by the final deadline, I think June 2011, 
what will really happen? In other words, are we going to allow 
Government phones to go dead, or will GSA be forced into 
expensive sole-source contracts? What will happen?
    Mr. Kempf. First we will look at what is left to 
transition. We are at the expectation that there will be little 
left to transition or there will be a known amount of work left 
to transition that we are watching move through the pipeline. 
At that point, or actually we will probably have to start the 
negotiations quite a bit before June 2011, we will have to 
anticipate what will be still left over at 2011 and then do a 
sole source contract, a bridge contract, to allow the rest of 
that work to transition, because we can't afford to have the 
lines drop dead in June 2011.
    Chairman Towns. Mr. Bhagowalia, I am tempted to call you 
Sonny.
    Mr. Bhagowalia. Sonny is fine, sir.
    Chairman Towns. Given that the program has had extensive 
schedule delays and there have been millions of dollars in 
unrealized cost savings, why has the program not been flagged 
by OMB for an official comprehensive review?
    Mr. Bhagowalia. Well, sir, I got involved in September 
2009, and OMB, the new Federal CIO, got involved immediately 
right after when we informed them as to what was going on. They 
have been involved ever since, with basically monthly reviews 
of the Federal CIO Council. We have also had a followup with 
all of the agencies that are below the benchmark, with regular 
followup through GSA and OMB. And OMB also has been 
participating in the IMC Executive Steering Committee and the 
IMC, itself, to followup and see what metrics are indicating 
who is behind and why is it behind and so on and so forth.
    So all I can talk about is since my involvement, working 
within partnership with GSA and OMB and the other agencies, OMB 
is focused and helping and has been of great help to us coming 
forth.
    Chairman Towns. Can you explain why the transition seems 
not to be a priority for the agencies?
    Mr. Bhagowalia. Well, sir, this is a very interesting 
question. I have a day job. I am a CIO of the Department. I was 
just watching basically a struggle going on in terms of 
potentially a train wreck, as you mentioned, in terms of 
savings. But I think all of us want to do the right thing here, 
and we have been working very hard to kind of make sure that we 
can fix this and make sure we are going to get there. So the 
agencies have some challenges. Sometimes it is not on the 
priority list. They have many competing priorities, in my view, 
that I have looked at. I think somewhere that prioritization 
requires senior executive commitment and leadership, and I 
believe your committee's focus also has helped in making sure 
that people are taking this very seriously, and they have.
    Second, I believe that there has been a lot of challenges 
within the agencies, themselves, in terms of a lot of turnover 
and attrition going on in some of the procurements and other 
things, which are not normally in the CIO's office. With that, 
there have been some challenges in terms of what has gone 
forward.
    Third, this is a very complex program. As I have mentioned 
before, it is six times larger and more complex than FTS 2001, 
and it is the largest telecommunications program in our 
history.
    I just find that in some instances, because of the 
aforementioned reasons, that the lack of commitment or 
leadership and oversight in some areas, perhaps we have slipped 
behind. But I am happy to report that since November 2009 we 
have gone from 16 percent to 53 percent, which is more than the 
last 2\1/2\ years before that, so I believe we are on the right 
track, thanks to the oversight provided here and our 
involvement, ourselves, of our own volition, that is improving 
this process.
    Chairman Towns. Let me raise this with both of you. What is 
the key thing that we can do right now today and tomorrow to 
speed this transition? What can we do? I want to get both of 
you, Commissioner Kempf also.
    Mr. Kempf. I would say that the only thing, I think GSA is 
doing everything it can identify that was useful to moving 
forward. I think your continued attention to the matter, we 
have been up talking to both this committee staff and continue 
to speak with them, provide information on progress, status, 
and continued attention to the matter will keep senior agency 
officials focused on the goal.
    Mr. Bhagowalia. I would just add that we need to focus on, 
first, the matter at hand. There are 50 services available in 
Networx and we should certainly look at that, but we should 
first focus on a like-for-like transition. That is No. 1, and I 
think we should do that, because you focus on one thing and get 
the job done.
    Second is we need to make sure that we have the chief 
acquisition officers involved more, because on most of the side 
that we have the Federal CIO Council, the chief information 
officers have, as one of the 12 core competencies, acquisition, 
but the real acquisition warrant and responsibility lies with 
the chief acquisition officers. So perhaps they could also 
help, and we have reached out to them through GSA and OMB, and 
working with them I think the focus in trying to lift the 
matter from not only the CIO perspective but also the CAO 
perspective will certainly help.
    Third, as Steve has mentioned, your continued oversight of 
this, along with what OMB is doing, is really helping us, and 
our regular followup is really producing results, because 
people are looking at this and saying, Let's get it done. We 
are making progress. Now we have hit the 53 percent mark, we 
can probably get this done, so let's go ahead and do it.
    I think that is the kind of momentum and leadership that we 
need.
    Chairman Towns. Thank you.
    I now yield to the ranking member.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Kempf, I would hope that I don't ever imply that I am 
disappointed in GSA. I give some credence to the fact that you 
are a service organization, a little bit like the buffet at the 
restaurant. If you put all the right things out and people do 
not bother to take their vegetables, it is not your fault when 
their diet is imbalanced. But at the same time, do you have 
regrets that this contract was not envisioned initially to be 
one in which you spoon Federal the agencies, provided the 
dollars in a complete service, so that what you indicated in 
your opening statement you are now doing in some cases wouldn't 
have been done at the front end several years ago, where you 
could have provided the implementation service? That is the 
first half. And I think I know the answer to that.
    And the second half is the whole idea that you are having 
challenges when people are going through the process of 
essentially awarding a contract that you have already awarded. 
That is a little different than when I used to order pens in 
the Army from GSA. I didn't have to worry about anything except 
buying the service, because it had been pre-done.
    It appears as though the contract complexity is partially 
based on the fact that you haven't pre-cleared the absolute 
right of an agency to buy from this buffet that you are 
offering them without a series of protests and delays.
    Can you answer those two for me, please?
    Mr. Kempf. Sure. Let me start with the first part about 
what we might have done differently at the beginning. I think 
we did a good job of trying to identify lessons learned from 
the last transition, and I think GAO did a report, I think it 
was in about 2008, looking at all of the processes we had put 
in place to support the agencies moving forward into the 
transition. The Networx services team within GSA did an 
enormous amount of----
    Mr. Issa. Mr. Kempf, because the time is limited and other 
Members are now coming in and out, I just want it to be fairly 
short. If you don't think that you needed to do it, that is 
fine. If you do think you needed to do it, it is more just 
almost a yes or no on the first question, please.
    Mr. Kempf. I think we have done everything we could and 
accelerated our support and services, including direct support, 
as we saw agencies struggling more and more, first part.
    Mr. Issa. And the more difficult one, the next time we go 
around, do we need to create an environment in which basically 
agencies can make decisions without essentially having one 
contractor slow roll the process of moving if they don't win?
    Mr. Kempf. Well, I think we tried to do that with the 
prices that we had developed, which would provide a much more 
transitioned and smoother process to moving forward. The other 
thing that we did that I think will help next time is in this 
contract is the seeds of the corpus of what the agencies will 
be buying next time, so essentially they will be able to 
develop their requirements, or they will have a list of what 
they already have to transition. I think that was a problem, 
identifying just what you needed to transition. They didn't 
have their inventory well at hand when they started.
    Mr. Issa. OK. And before I go to Mr. Bhagowalia, or Sonny 
as we are choosing to call you, the administration has a lot of 
things they could do, and certainly OMB's absence here speaks 
very loudly, but this committee also has an ability. Currently 
these contracts are being bridged at the higher cost. I am 
assuming that these administration agencies would not like this 
committee, always in need of money to offset some of our other 
programs, to simply say you shall only negotiate at the lower 
amount per the contract, even if it is a bridge, and take that 
money, something that we could do that would give us some 
portion of $18 million a month for offsets that the chairman 
and I need for our programs.
    So, knowing that we could do it, knowing that it would be 
irresistible, and knowing that your agencies would then lose 
those revenues, does that help the agencies, if they are clear 
that we could, would, and should do that, to move quickly 
toward getting these bridge loans at the lower amount and 
taking those moneys and using them for other uses within the 
agencies? Is that a helpful tool?
    Sonny, of course, has already responded in the non-verbal 
manner, but if you would, please.
    Mr. Kempf. Well, I think that would give the agencies a lot 
of impetus to move forward, but it would also create a lot of 
havoc in some of the agencies, as they would have to determine 
what things to turn off, whether that be their Internet 
service, their telecommunication service.
    Mr. Issa. No, no. If they are simply unable to convert over 
today but they are bridging and that contract is currently at 
the higher cost, even though the company they are bridging with 
has a contract with us at a lower cost for the same services, 
to me if somebody says there is a better price and I will give 
it to you if you give me an annual contract, and we say, Yeah, 
but it will take a while to do it, if they don't give me that 
better price today that they are giving the guy down the road 
during that bridging period, then I am going to make my 
decision faster, much faster.
    So I am assuming that agencies who said I can only, and we 
can make it statutory, I can only write bridge contracts at the 
lower rate that you have already agreed with GSA to, that if 
they are held to do it, either by saying that Congress will act 
or that Congress has acted, that they would get those lower 
prices.
    Sonny, I guess I will go to you, since you actually are 
where the rubber meets the road on this.
    Mr. Bhagowalia. I think it would help. There are certainly 
obviously some extenuating circumstances, as Steve has 
mentioned, but I think it would help. I think sometimes you 
have to push a little bit to make sure everyone understands 
that we are serious. And I would like to note that OMB did 
issue a memorandum, MO8-26, stating that all agencies are 
required to transition from FTS 2001 to Networx, and that new 
services must transition to Networx unless a business case 
justifies otherwise.
    So I think there was something that was provided, and there 
is obviously a lot of tailoring and flexibility that is also 
available in the contract, and I think GSA has done a great job 
trying to have a standard approach but also a tailoring 
approach, but if there are too many options it adds complexity, 
and complexity equals cost. So in my view, a little bit of 
commitment, follow-through, and making sure that there is some 
push would certainly help.
    Mr. Issa. Mr. Chairman, if I could ask just two questions 
for the record.
    Chairman Towns. Sure.
    Mr. Issa. First of all, if you would respond for the record 
as to those savings that those contracts, those bridge 
contracts in place, would achieve if they had been at the rate 
negotiated by GSA for the services that they would receive if 
they were to make a final determination. We would like to know 
just how much the chairman and I could bank on for other uses 
if the agencies can't move.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T3039.032
    
    Mr. Issa. And then, second of all, Sonny, because it is off 
topic a little bit, I would appreciate your comments back on 
the Department of Interior's ability to determine, at the 
Mineral Management Service, the correct revenues we are 
supposed to receive from our off-shore oil and other resources. 
In previous hearings this committee has been told that we only 
know that we get the check, we get the wire transfer, and then 
we have to wait for the actual oil company to tell us how much 
it is for and what site. I would appreciate an update on that 
from your perspective of whether that agency deep down in 
Department of Interior has improved, for the record.
    Mr. Bhagowalia. I will check the status for you on the 
second item that you had mentioned. Obviously, I am not in that 
particular department, in that section of the Department, but I 
will get that information for you.
    Chairman Towns. We will hold the record open for it.
    Mr. Bhagowalia. Yes, sir.
    And on the first part, I think the question was in terms of 
helping out and going forward I think it would certainly be 
helpful, in terms of what you are saying, in providing a little 
bit more focus in the area that you have suggested here.
    Chairman Towns. I now recognize the gentleman from 
Virginia, a very active member of this committee, Congressman 
Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    I would ask that my opening statement be entered into the 
record, if there is no objection.
    Chairman Towns. No objections.
    Mr. Connolly. Thank you, Mr. Chairman.
    [The prepared statement of Hon. Gerald E. Connolly 
follows:]

[GRAPHIC] [TIFF OMITTED] T3039.033

[GRAPHIC] [TIFF OMITTED] T3039.034

    Mr. Connolly. I also want to welcome Don Herring from AT&T, 
who will appear on our next panel. I had the opportunity to 
visit AT&T in Oakton in my District about a month or so ago, 
and very much appreciate the work he and his colleagues at that 
facility are doing, often on behalf of the U.S. Government.
    Mr. Bhagowalia, we have had substantial delays in the 
transition to Networx, and in some cases the delays have been, 
from my point of view, extraordinary, where the talent, the 
capability inside the telecommunications talent is very 
limited. In one case there was one Federal agency where we had 
two people and they died, and when they died the capability 
died with them. It brought everything to a standstill at a 
large Federal agency.
    Help me understand how we can be so hollowed out in terms 
of capability on something as important as telecommunications, 
and especially when we knew that we needed to implementation 
Networx.
    Mr. Bhagowalia. Well, sir, I can only talk about the fact, 
when after I took on the new role as the Executive Steering 
Committee Chair as of September 2009. My observations are that 
there has been some attrition and turn-over in some of the 
procurement corps that exists in a lot of agencies, and along 
with that goes some talent and some movement and continuity 
issues that happen on the contract.
    I would also say to you that obviously there is some 
incredible talent in the agencies, but it is uneven in some 
areas, so clearly some departments perhaps are behind, but in 
some other areas they are fantastic. I can safely say that in 
my department the acquisition corps, but more importantly also 
the technical corps folks, are very, very qualified. Similarly, 
I found that GSA has been the same thing.
    But, taken in totality, I find that, again from my 
experiences, that in the Government there is a lot of 
responsibility that has gone over to the acquisition corps, and 
when there is attrition or movement or turnover or they leave 
for other jobs, a lot of institutional knowledge goes and tacit 
knowledge goes with them, and that is perhaps some of the 
issues that you were talking about. That does exist. 
Unfortunately, that is something that we are trying to improve 
with the new human resources processes and training that will 
improve that process.
    Mr. Connolly. Well, I just have to tell you I have worked 
for some large companies in the private sector. There is 
transition in the private sector. People go and take other 
jobs, people get promoted, people move to other departments, 
but the hollowing out of an entire capability, especially one 
as sensitive as telecommunication, I never saw it in the 
private sector.
    Mr. Bhagowalia. If I could answer that I, myself, was in 
industry for 14\1/2\ years in the Boeing Co., I chose to come 
to Government for service, and I can safely tell you that there 
are many, many folks who are coming from industry to serve, and 
we are getting a new infusion of talent, as well, but there is 
also good balance in terms of the training that exists within 
our own corps.
    My biggest concern is attrition and the institutional 
knowledge that people have, and that continuity remains, as you 
said, a big concern.
    Mr. Connolly. Let me just say on that I think that this 
isn't only about making Networx work, finally, but, frankly, it 
raises a broader question about the technical skill set and 
competence we have within Federal agencies. I think we have to 
address that, because there are lots of other things that this 
committee has looked at, like cybersecurity.
    As you look at what I call the demographic imperative, the 
Baby Boom generation that is working its way through the 
Federal work force, they are going to be retiring, and along 
with those retirements goes huge skill sets. So this is the 
canary in the mine shaft, it seems to me, and we have to use 
this to not just look at this specific task, but, frankly, the 
whole question of do we have the resident expertise we need 
moving forward in the Federal Government, and if not, how do we 
build it in so that we are not so vulnerable to transitioning 
by individuals or, God forbid, somebody passing on and with 
them goes the capability. That is just not acceptable in 
serving the American public.
    Commissioner Kempf, speaking of capability, GSA has had to 
resort to helping agencies write their statement of work. How 
is it that Federal agencies don't have the professionals 
capable of writing their own statements of work for Networx?
    Mr. Kempf. Thank you for that question. I think one of the 
things that we have seen, I think you hit on it very early 
here, was that each of the agencies has their own struggles 
with personnel, and in some agencies, particularly the small 
agencies, there just aren't enough people with the expertise to 
do the requirements.
    In that instance we have stepped in for particularly those 
smaller agencies and actually done the work for them with 
respect to the requirements, and even supported them very 
aggressively with their contracting. I think this committee is 
well aware of the contracting issues across the entire Federal 
Government, and the depletion of that contracting corps and the 
competing demands for their time and service to get things 
done.
    Mr. Connolly. Yes. Mr. Chairman, I see my time is up, but 
if I may just observe, again I think this is a broader issue 
than just being able to write statements of work, although that 
is troubling enough, but it raises the question of whether we 
have the technical expertise within the Federal agencies to 
manage large, complex contracts, systems integration contracts, 
telecommunications contracts, cybersecurity, Mr. Chairman, as 
you pointed out, and I just think we have to get to that, 
because otherwise we are going to find our ability to even 
manage the contracts we outsource will be degraded over time.
    Thank you.
    Chairman Towns. I thank the gentleman from Virginia for his 
comment.
    I now yield 5 minutes to the gentleman from Missouri, Mr. 
Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. I am a little 
under the weather this morning so I am going to pass and I will 
yield back.
    Mr. Issa. If the gentleman would yield for a second.
    Mr. Luetkemeyer. I will yield my time to the ranking 
member. Thank you.
    Mr. Issa. Thank you.
    Just briefly, Sonny, because you came from the private 
sector and the gentleman from Virginia had sort of alluded to 
that, isn't the greatest, in your opinion, I am hoping it is, 
isn't the greatest problem that there is, as far as people 
retiring and things not being able to be done going forward, 
the tendency to have legacy software and hardware; that the 
faster the pace of modernization, the less often you end up 
with somebody being critical because they are part of legacy?
    Mr. Bhagowalia. Yes. Absolutely. I mean, Moore's law is 18 
months technology changes full-scale, and sometimes it takes us 
that long to go through the acquisition process, so it is 
already obsolete by the time you are going through technology 
change. I think the balance between faster acquisition and more 
smaller, agile processes is the answer.
    Mr. Issa. OK. So I guess for both sides of the aisle here, 
the most important thing for us to do is to give you the 
impetus to move faster so that less often will you have 
somebody who is mission critical but on life support.
    Thank you. I yield back.
    Chairman Towns. Thank you very much. The gentleman yields 
back.
    Mr. Connolly. Mr. Chairman, would my colleague yield?
    Mr. Issa. He controls the time.
    Mr. Connolly. I wanted to ask the distinguished ranking 
member a question, if I could do that.
    Chairman Towns. The gentleman from Missouri controls the 
time.
    Mr. Connolly. Would the gentleman yield?
    Mr. Luetkemeyer. Sure.
    Mr. Connolly. I appreciate it. Thank you.
    Mr. Issa's point is very well taken, but one of the 
practices that is going on right now is in the desire to catch 
up, Federal agencies are raiding small- and medium-sized 
companies, as well as large companies, for their expertise. 
That is having a devastating impact on small- and medium-sized 
Federal contractors. We don't solve this problem of addressing 
the hollowed-out capability we have by hollowing out theirs. 
That can have a real problem impact on their ability, frankly, 
to compete with Federal business and provide the expertise that 
they have that we need.
    So in solving the problem I think we have to move forward 
and be very sensitive to how we are dealing with the private 
sector.
    Thank you for yielding.
    Chairman Towns. Thank you. Does the gentleman yield back?
    Mr. Luetkemeyer. Yes, I will yield back. Thank you, Mr. 
Chairman.
    Chairman Towns. Commissioner Kempf, has GSA calculated the 
total amount of unrealized cost savings to the American 
taxpayers? Did you look at it?
    Mr. Kempf. I don't believe we have done that yet, but I 
believe Congressman Issa has asked us to at least give you part 
of that response back.
    Chairman Towns. Good.
    Mr. Bhagowalia, I know you worked with the Federal Chief 
Information Officers on the transition. How can we leverage the 
participation from the Chief Financial Officers' community and 
Chief Acquisition Officers? How can we leverage that?
    Mr. Bhagowalia. Sir, I think in the OMB there is a 
tremendous partnership that has happened between the Federal 
CIO, the Federal CFO, the Federal CAO, Mr. Gordon, and the 
Federal CFO, Mr. Werfel, and Federal CIO, Mr. Kundra, and the 
Federal CTO to work together on these common problems. I think 
from that standpoint we need to bring it to their attention, 
and we have.
    We are also following up with the CAO, even though that is 
not within my domain, but making that suggestion, and we have 
provided that suggestion to your staff, as well, that if the 
three parties were to get together from that side, and then 
likewise we have a concomitant sort of process at the CIO 
Council, the CFO Council, and the CAO Council, and a regular 
exchange of metrics on a regular basis of one set of metrics 
that can be viewed by all three.
    And then also the CFO Council and the CAO Council, just 
like the Federal CIO Council is following up with every agency, 
they could do likewise with the other part of the CFO and CAOs 
that exist within the departments and agencies. We can solve 
this issue by triangulating and making sure there is enough 
oversight and participation, because basically everyone now 
knows that they have to get this done, and I think that is what 
is driving the momentum.
    And thanks for the oversight, as well. I believe that is 
the only way we will get this job done. I have recommended that 
the CAO and CFOs should be involved in this process.
    Chairman Towns. Thank you very much.
    Mr. Ranking Member, do you have any other additional 
questions?
    Mr. Issa. Not at this time.
    Chairman Towns. Let me first thank both of you for your 
testimony. Of course, we look forward to continuing to work 
with you to try and move this process forward.
    Of course, if any Members have any additional questions, 
you can submit them.
    Thank you very, very much Mr. Bhagowalia, better known as 
Sonny, and Commissioner Kempf. Thank you so much for your 
testimony this morning. Thank you.
    Mr. Bhagowalia. Thank you.
    Mr. Kempf. Thank you.
    Chairman Towns. We will now move to our second panel: Ms. 
Susan Zeleniak, group president of Verizon Federal; Mr. Don 
Herring, senior vice president at AT&T Government Solutions; 
Diana Gowen, senior vice President and general manager of Qwest 
Government Services; Edward C. Morche; and Bill White, vice 
president of Federal programs at the Sprint Nextel Corp.
    As with the first panel, it is the committee's policy that 
all witnesses are sworn in, so if you would please stand and 
raise your right hands as I administer the oath.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that all the 
witnesses answered in the affirmative.
    Let me begin with you, Ms. Zeleniak.

STATEMENTS OF SUSAN ZELENIAK, GROUP PRESIDENT, VERIZON FEDERAL, 
 INC.; BILL WHITE, VICE PRESIDENT OF FEDERAL PROGRAMS, SPRINT 
NEXTEL CORP.; DIANA L. GOWEN, SENIOR VICE PRESIDENT AND GENERAL 
  MANAGER, QWEST GOVERNMENT SERVICES, INC.; EDWARD C. MORCHE, 
SENIOR VICE PRESIDENT, FEDERAL MARKETS, LEVEL 3 COMMUNICATIONS; 
    AND DON HERRING, SENIOR VICE PRESIDENT, AT&T GOVERNMENT 
                           SOLUTIONS

                  STATEMENT OF SUSAN ZELENIAK

    Ms. Zeleniak. With a last name like Zeleniak, I am not used 
to being first, so thank you.
    Chairman Towns. With a last name like Towns, I can really 
relate to that.
    Ms. Zeleniak. Mr. Chairman and members of the committee, 
thank you for the chance to speak with you today about the 
status of the Networx transition. My name is Susan Zeleniak, 
and I am the group president of Verizon Federal.
    The benefits and cost savings of Networx can still be 
achieved. Verizon will continue to work closely with our 
customers to make the promise of Networx a reality.
    First a word about Verizon. In addition to being an 
industry leading wireless provider and our FiOS services, 
Verizon serves 98 percent of the Fortune 500 and virtually 
every Federal agency. We have the largest global network of any 
U.S. carrier, serving 2,700 cities and 159 countries around the 
world. And we are a recognized leader in cybersecurity.
    Let me begin by recognizing GSA for their vision in 
conceiving the Networx program. Networx will bring the 
Government the best technologies at the lowest prices. Many 
cutting-edge solutions, like cloud computing and 
virtualization, can be delivered today through the Networx 
contract. GSA got it right.
    Several factors have contributed to the prolonged 
transition, as agencies have taken more time than expected to 
determine their requirements, evaluate their fair opportunity 
proposals, and make their awards.
    The situation is understandable, given the complexities of 
many of the agency IT programs. We would prefer to be further 
along in the transition process but recognize that some 
agencies are taking additional time to make certain that their 
transition is done right.
    So far the biggest lesson that we have learned is that the 
most successful agencies have dedicated a level of resources 
required to a smooth and timely transition. Take, for example, 
the Department of Homeland Security. DHS has one of the largest 
and most complex networks, and yet it is almost done with 
transition. Why? Because early in the process DHS committed the 
resources to getting the job done.
    Allow me to describe three steps Verizon has taken to speed 
up transition. We invested millions of dollars in a back office 
transition program that automates the transition of our 
existing customers to Networx so that they more quickly realize 
the savings. We established a network users forum to meet with 
our customers to discuss any issues that are impacting their 
transition. And earlier this year we hosted our own seminar 
focused on moving agencies from transition to transformation. A 
standing room only crowd at that event told me that agencies 
are as anxious as we are to move beyond transition.
    Clearly, the transition process has proven to be far more 
complex than anticipated. Thankfully, both GSA and the IMC have 
taken steps to expedite the transition. GSA's transition 
credits and funding for contractors have helped move the 
process forward. I urge agencies to take advantage of this 
assistance.
    In addition, the IMC should continue to provide leadership 
in identifying and solving transition problems.
    I am confident that the promise of Networx will become a 
reality. When it does, the benefits will extend well beyond 
Federal agency users. It will have a meaningful impact on how 
American citizens interact with their Government, and it will 
help drive solutions to social problems that are important to 
all of us.
    In March the FCC issued its national broadband plan. That 
plan showed how agencies can use broadband services to both 
improve their performance and generate social benefits. Networx 
will enable a smarter use of broadband and improve the delivery 
of Government services. Your constituents will enjoy a faster 
resolution to matters they have with Federal agencies.
    Let me just give you two examples of this.
    As your constituents conduct business with Federal agencies 
online, it will create one more reason for American citizens to 
adopt broadband. Greater broadband adoption is terribly 
important for education, job training, and health care, just to 
name a few.
    Also, each online solution means one less car on the road. 
That means less traffic congestion, reduced energy consumption, 
and less pollution.
    In conclusion, despite transition delays, Networx will 
provide Federal agencies with advanced technologies at the 
lowest prices. It is important for all agencies to allocate 
greater resources to the effort and to take advantage of 
incentives that GSA and the IMC are offering to help with 
transition.
    Once the transition is complete, Networx will improve 
Government efficiency and performance, deliver cost savings to 
taxpayers, enable new online services for our citizens, and 
help drive broadband solutions for social problems.
    Thank you for the opportunity to speak.
    [The prepared statement of Ms. Zeleniak follows:]

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    Chairman Towns. All right. Thank you so much for your 
testimony.
    Mr. White.

                    STATEMENT OF BILL WHITE

    Mr. White. Good morning, Chairman Towns, Ranking Member 
Issa, and members of the committee. My name is Bill White, vice 
president of Federal programs for Sprint Nextel Corp.
    Sprint appears before the committee today in the unique 
position as being the only provider to have served FTS 2000, 
FTS 2001, and the Networx contract for the past 20 years. 
Sprint has worked very well with GSA over these years to 
provide billions of dollars in highly reliable 
telecommunications services and solutions to Federal agencies.
    Sprint has many lessons learned from the last large Federal 
telecommunication transition, FTS 2000 to 2001, that we bring 
to the current challenge.
    I am here today to present Sprint's views on the ways to 
expedite the transition in order to save the Government time 
and money and bring about greater competition in the 
acquisition of telecommunications services.
    A March 4, 2009, Government contracting memorandum plainly 
states, ``the Federal Government should perform its functions 
efficiently and effectively, while ensuring that its actions 
result in the best value for taxpayers.'' While I have much 
respect for the hard work that has been done by the GSA to 
date, I have serious reservations about the efficiency and 
effectiveness of having two overlapping Networx contract 
vehicles.
    I submit that best value is achieved by maximizing 
competition. Simply put, the Networx enterprise contract offers 
lower prices and more competition than the universal contract. 
Accordingly, and for the reasons further stated, Sprint 
recommends that the Government either combine the Networx 
contract vehicles into one contract or at least direct agencies 
to Networx enterprise.
    The two Networx contracts, universal and enterprise, 
overlap considerably, creating unnecessary complexities 
resulting in delays and lost savings. Some examples are, first, 
the complexity of the Networx contract has created millions of 
unique price points resulting in confusion and delays. Second, 
duplicative services offered on both contracts are priced 
differently, also causing confusion and delays. Third, 
terminology changes between the old contract and the new grind 
the gears of transition to a halt.
    It is in the Government's best interest to open competition 
to all five Networx contractors to achieve best value, save 
money, and complete the transition by the mid-2011 deadline.
    It is well accepted that greater competition leads to 
better value for consumers, industry, and Government. All five 
Government contractors represented today hold Networx 
enterprise contracts; however, there are only three Networx 
universal vendors. As such, solicitations issued under Networx 
universal by definition are subject to less competition. 
Collapsing the contracts, or at least directing agencies to the 
lower-cost Networx enterprise will facilitate a faster 
transition.
    Additionally, over 95 percent of the current FTS 2001 
inventory of services installed at agencies is available on 
enterprise.
    All parties would benefit if GSA combines the Networx 
contracts or directs agencies to the lower-priced network 
enterprise vehicle. By collapsing the contracts, agencies would 
have a clearer and faster path to traditional services and 
transformative capabilities like unified communications, mobile 
integration, and 4G. GSA would have a more streamlined 
administrative effort, lower cost to manage contract 
modifications, reporting, and the contract oversight process. 
The universal vendors would also have reduced labor and 
administrative efforts required to support the duplicative 
contracts. These resources can be reinvested in expediting 
transition.
    Finally, I think it is important to emphasize that the 
longer it takes to merge or direct traffic to one contract, the 
more difficult it could be to transition services at the end of 
Networx.
    Sprint also has invested millions of dollars in Networx and 
is better prepared for the transition based on lessons learned 
from our prior FTS 2001 transition experience.
    To highlight some of the progress to date, Sprint has moved 
over 423,000 voice lines from FTS to Networx, and an average of 
1\1/2\ days per project and over 400 Internet protocol services 
at an average of 21 days per project. No contractor is better 
prepared or more experienced than Sprint for this transition 
task.
    Simplifying the contract platform would go a long way to 
reducing transition complexity and ultimately accelerate 
transition.
    I thank you for your time and am happy to answer any 
questions you may have.
    [The prepared statement of Mr. White follows:]

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    Chairman Towns. Thank you very much, Mr. White, for your 
testimony.
    Ms. Gowen.

                    STATEMENT OF DIANA GOWEN

    Ms. Gowen. Chairman Towns, Ranking Member Issa, members of 
the committee, good morning. My name is Diana Gowen. I am the 
senior VP and general manager of Qwest Government Services. We 
are an awardee of both Networx universal and enterprise.
    I will begin by addressing some of the root causes of the 
network transition delays. Networx was designed to be more 
innovative, cost-effective, and transformative than prior 
contracts. Industry and the agencies welcomed this change. 
Unfortunately, the new contracts were so vastly different from 
the two predecessor contracts that agencies had to learn new 
complex pricing and service structures.
    With the loss of key contracting and technology staff, 
heightened focus on OMB compliance issues, and a 42-month 
extension of FTS 2001, Networx transition fell to the bottom of 
the pile. Incumbentitis and comfort with the status quo set in. 
Agencies heaved a huge sigh of relief, let their inventories 
grow stale, and had no incentive to plan or to move forward.
    All of these issues could have been overcome if OMB and GSA 
had helped agencies simplify the procurement process. They did 
not, and, unfortunately, we are here after more than 3 years 
with, by my calculation, almost $1 billion in lost savings, and 
continued lost savings accruing, as I heard this morning, 
$22\1/2\ million per month. A lot of technical and contracting 
help could have been provided for the cost of doing nothing 
during that time.
    Exacerbating all of these issues were two unfortunate 
choices GSA made. In 2006, before Networx was awarded, was the 
decision to extend the FTS 2001 contracts for 42 months. The 
legacy contracts marched full-speed ahead, with no fixed date 
for stopping new orders. Unbelievably, FTS 2001 continues to 
have more new orders than Networx.
    Second, GSA measured transition progress by a flawed 
metric, counting things disconnected rather than dollars moved 
from the old contract to the new. This creates an illusion of 
progress.
    Under Networx, the procurement process has been too 
complex, with too few knowledgeable procurement and technical 
resources. Agencies have not made fair opportunity decisions 
quickly. So we should focus on steps that would create 
momentum: increase agency/industry dialog, compare pricing, or 
issue requests only for pricing, and if proposals are necessary 
at this stage, make them oral. Transition like-for-like, 
transform later. For those agencies that have proposals in 
hand, the evaluation criteria should be rigorously followed and 
decisions made. For transition, agencies should build a project 
time line and stick to it. Hold folks accountable.
    I am encouraged by GSA Administrator Martha Johnson's focus 
on transparency, innovation, operational excellence, and 
customer intimacy. In the long run, this vision will push GSA 
to make better customer support decisions. In the short term, 
we need GSA's continued collaboration with all of the 
stakeholders.
    Qwest has made every effort to assist in the transition, 
investing tens of millions of dollars in tools, in people, 
meaning jobs, for proposals, for contracting, for program 
management, for training staff and educating agencies. Despite 
these efforts, the delays continue.
    The cost of Networx bids and the delays in transition are 
leading to a death spiral of costs chasing declining revenues 
and profitability. There is real economic harm.
    These problems have been largely ignored by several 
oversight agencies since the award of Networx. OMB, the GAO, 
the CIO Council, GSA should not feel good about where we are to 
day. Oversight such as that provided by your hearing today is 
vital.
    We recommend Congress and OMB encourage GSA to extend the 
Networx contracts 5 years until 2022 and to freeze the rate 
structure at today's rates until at least 80 percent of the 
dollars on FTS 2001 have been moved to the Networx contract. It 
is time to make some basic changes to the program to ensure 
that Government gets the best deal, industry is treated fairly, 
and agencies get the chance to transform to modern technology 
at world class pricing.
    Thank you for the opportunity to present our views on this 
important program, and I look forward to your questions.
    [The prepared statement of Ms. Gowen follows:]

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    Chairman Towns. Thank you very much for your testimony.
    Mr. Morche.

                   STATEMENT OF EDWARD MORCHE

    Mr. Morche. Good morning, Chairman Towns, Ranking Member 
Issa, and members of the committee. As a Networx carrier, Level 
3 Communications would like to thank you for the opportunity to 
testify about the delays in implementation of the Networx 
contract.
    My name is Edward Morche, and I am the senior vice 
president of Level 3's Federal Markets Group.
    Broadly speaking, there are five major work elements 
involved within the transition process. Agencies must: one, 
obtain the current inventory of their services; two, choose 
between the Networx enterprise or universal contract; three, 
convert their legacy inventory to Networx-based CLINs; four, 
conduct fair opportunity; and, five, evaluate the carrier 
responses.
    Each one of these steps affects an agency's resources and 
has the potential to introduce delays to the process. It is the 
opinion of Level 3 Communications that these principles could 
be minimized through a combination of the following principles: 
A, reduce agency workload where possible by out-sourcing 
actions to the carriers; B, parse out the services to be 
transitioned into narrower scopes; and, C, eliminate as many 
decision points as possible.
    For many agencies, obtaining an inventory of current 
services is a time-consuming and difficult task. It is further 
exacerbated by the fact that services are continually evolving 
as the needs of agencies change. As a result, it is very 
challenging to assemble an inventory that is 100 percent 
complete and accurate.
    Rather than seeking to establish a comprehensive inventory 
prior to transitioning services, agencies could focus on 
gathering information that is easily available and then use 
that sub-set of information to perform fair opportunity. This 
incremental approach to transition will also build necessary 
skills at every step in the process through repetition and 
experience.
    For the first time ever, agencies are now required to 
choose between two contract vehicles, either a Networx 
enterprise or Networx universal. In an effort to eliminate as 
many decision points as possible, agencies could be instructed 
to use both contracts simultaneously or, alternatively, they 
could be instructed to use the more competitive Networx 
enterprise contract as the default contract vehicle.
    For all intents and purposes, there are no differences 
between the two contracts except that Networx enterprise has 
more vendors and, for most services, lower prices. In fact, the 
Networx enterprise contract supports 96 percent of the total 
number of services offered, while Networx universal has only 92 
percent of the services.
    Furthermore, an analysis of pricing on the public Networx 
unit pricer shows that agencies can realize substantial savings 
on the most popular services by using the more competitive 
Networx enterprise contract. I have included specific examples 
in my written testimony.
    Making Networx enterprise the default contract could save 
the Government an incremental $1 billion over the 10-year life 
of the contract. Despite these facts, the vast majority of fair 
opportunity awards have been made under the Networx universal 
contract.
    Converting legacy information to the Networx CLIN structure 
could easily be outsourced to the carriers. All five of the 
Networx carriers have personnel with expertise in taking basic 
network configuration information and putting that into the 
framework that is required to provide it ``under Networx.''
    In regards to the fair opportunity process, agencies could 
eliminate the decision on whether or not to use the unit pricer 
by issuing requests for proposal to all five of the Networx 
carriers and let the carriers do the work of putting together 
the best price solutions to meet the Government's needs.
    Delays in the evaluation phase of transition can be reduced 
by making the award process simpler and establishing lowest 
price as the single and only decision criterion. All five 
Networx carriers have been vetted by GSA and offer the same set 
of well-defined services with common service level agreements. 
As a result, agencies could use a single decision criterion to 
make their selection.
    In closing, Level 3 Communications believes that each step 
in the transition process could be accelerated in the following 
ways: one, parsing out the legacy service inventories into 
smaller pieces; two, making Networx enterprise the default 
contract or issuing all requirements on both contracts 
simultaneously; three, using the expertise that exists within 
the carriers to translate legacy service information into 
Networx CLINs; four, issuing all requirements as requests for 
proposal; and, five, establishing lowest price as the sole 
decision criterion for transition.
    Level 3 Communications would like to thank the committee 
for the opportunity to testify, and we look forward to 
answering any questions.
    [The prepared statement of Mr. Morche follows:]

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    Chairman Towns. Thank you very much, Mr. Morche, for your 
testimony.
    Mr. Herring.

                    STATEMENT OF DON HERRING

    Mr. Herring. Good morning. Thank you, Mr. Chairman, Ranking 
Member Issa, and members of the committee, for the opportunity 
to share AT&T's observations about Networx transition.
    I am Don Herring, and as the leader of AT&T's Federal 
Government business I am actually energized by the potential of 
Networx to transform the way the Government operates and 
interacts with its citizens.
    AT&T, as you may know, is a premier supplier of global 
network and information services. We bring a highly reliable, 
resilient, and secure network infrastructure to support the 
advanced needs of our worldwide customer base. The AT&T 
business unit that I am fortunate enough to lead, AT&T 
Government Solutions, relies on talented staff members who 
focus on the IT needs of the Federal Government. This team of 
AT&T professionals is committed to the success of Networx.
    Transitions the size and scope of Networx are demanding, 
but we have a vast base of both commercial and government 
experience to accomplish these efforts in a timely fashion. 
AT&T is already transforming several agencies' networks to 
secure and cost-effective technologies. At one agency, for 
example, we are deploying a virtual private network to over 250 
remote locations, and together we are exploring the addition of 
wireless sensors and satellite enhanced mobility services.
    At another agency, we were selected to transform its entire 
communications network of over 1,000 agency sites to deliver 
technologies ranging from traditional voice to secure data 
networks to mobility services.
    And at another agency we are providing cloud-based 
information distribution services to improve their constituent 
communications.
    The scope and scale of Networx allows us to deliver the 
full range of AT&T's innovative technology and services to the 
Federal Government.
    Networx transitions have an extraordinary number of moving 
parts that require rigorous coordination. This is true 
regardless of the network's size or scope, and it is not a 
small task for agency procurement and CIO teams. In many cases 
the challenges faced by the transition teams have been 
compounded by external factors that demand attention and divert 
agencies' resources away from Networx.
    Cybersecurity, improved transparency, and social media 
policies to support a more-connected and mobile employee base 
are extremely important, as they enable us to deliver today's 
and tomorrow's technology to the Government. However, these 
efforts do impact the time, resources, and expertise that can 
be directed to the Networx effort.
    Agency staffing complications also impact Networx 
transition. Because transition efforts of this magnitude are a 
once-in-a-decade occurrence, many agencies lack the staffing 
resources necessary to manage the technical and logistical 
details associated with an agency-wide transition.
    There are, however, steps that can be taken to quicken the 
pace of Networx transition. To reduce risks associated with the 
anticipated surge in orders as the deadline approaches, 
agencies, GSA, and Networx service providers should coordinate 
to develop and adhere to specific, disclosed, and harmonized 
time tables for releases of requests for proposals and 
subsequent awards.
    Second, supplementary resources should be provided to 
agency teams that are struggling to make and implement informed 
choices as they move to Networx. To that end, the Government 
should consider dedicating resources to support transition, 
whose responsibilities include: one, establishing a centralized 
pool of experts to deploy within agencies to manage and 
complete transition; two, working directly with individual 
agencies to craft detailed transition strategies with 
contingent milestones; and, three, creating a repository of 
agency strategies and schedules to share with other agencies 
and industry.
    Finally, we recommend the Government consider providing 
incentives to agencies to create comprehensive transition plans 
and adhere to them. Specifically, we suggest the Government 
review the timing and the structure of the transition 
reimbursement credit program to support thoughtful agency 
transition planning and execution. This recommendation should 
in no way be interpreted as an effort to slow transition, but 
rather to reflect our strong believe that an improved planning 
process should ultimately speed transition.
    In summary, there is a great deal to be gained from 
Networx. Significant financial efficiencies, enhanced 
technology services, Government operations transformation, and 
AT&T is committed to the success of Networx.
    Thank you, Mr. Chairman, for holding this important 
hearing. I am happy to take any questions.
    [The prepared statement of Mr. Herring follows:]

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    Chairman Towns. Thank you, Mr. Herring, for your testimony.
    Let me just, before I move from you, when you mention 
supplemental and incentives, what do you actually mean by that?
    Mr. Herring. So today agencies are eligible for a 
transition reimbursement credit from GSA if they submit all of 
their orders. In fact, there is a deadline now by August 31st 
of this year. That is an important step in a milestone; 
however, it is not the only step.
    We believe at AT&T that the way you achieve ultimate goals 
and implement large projects is to break it down into smaller 
projects, milestones that are held closely, that folks are 
accountable for, and that you would then incent agencies to 
meet those many milestones along the way.
    So giving orders to the Networx carriers is a very 
important step. It is not the only step. And I would suggest 
the Government looks at that so that we can chunk this, if you 
will, into smaller bites but still get toward the ultimate 
transition goal of having everything transitioned by June of 
next year.
    Chairman Towns. Right. I asked this of the first panel, but 
let me ask you, too. What is the single greatest thing that we 
could do today, right now, to speed up this transition? I just 
want to go right down the line. Why don't I start with you, Ms. 
Zeleniak?
    Ms. Zeleniak. Thank you. I think it is pretty much come 
across. Agencies need to dedicate the resources to getting the 
job done, so I think that the single biggest thing would be to 
call on those agencies who have to go through transition and 
have them identify who will be leading their transition and 
what is the team that they are going to put in place to make it 
happen.
    Chairman Towns. Mr. White.
    Mr. White. What I would suggest is that, for the agencies 
that have not made their decisions, to put together their 
statements of work, get that process going, because that is the 
front end of the process. Until they make their evaluation on 
who they want to do business with going forward, nothing else 
occurs, so I would encourage the agencies to get their paper 
out to the five carriers and allow us to move forward.
    Chairman Towns. Ms. Gowen.
    Ms. Gowen. Well, I think I said this in my testimony. I 
will repeat it. I believe that, first, the agencies do need to 
make their decision on who their vendor is. They can do that by 
opening a dialog, by looking at pricing tables, by having 
pricing bids. If they feel they really have to have a statement 
of work, have oral responses. That will quicken the process, 
and then make a decision.
    There are many agencies who have responses from us in-
house. They have had them in house for months and months. So if 
they would rigorously follow their evaluation criteria and make 
a decision, that is a great step forward.
    Last, those who have made decisions, if they will put a 
project plan together, put the resources against it, and stick 
to it, then we could all be successful.
    Chairman Towns. All right. Mr. Morche.
    Mr. Morche. Thank you. Ideally, the agencies outsource as 
much of the work as possible to the carriers. We have heard 
quit a bit today about how the agencies are under-resourced 
with the right kinds of individuals. High-level activities such 
as converting the existing CLIN structure for their inventories 
to the new Networx CLIN structure----
    Mr. Connolly. Excuse me, Mr. Chairman. We cannot hear the 
witness.
    Mr. Morche. Sorry. Having the carriers do the conversion 
work from the FTS 2001 contract structure to Networx is 
something that we are all capable of doing. Encouraging the 
agencies to not try to complete a 100 percent inventory of the 
current services but to complete inventories based on regions, 
based on sub-agencies, based on types of service, and move 
those out in smaller, more manageable statements of work.
    Also, to eliminate the confusion about which contract to 
use. We believe firmly that more competition is better, but 
lower pricing is better and that is recognized by Networx 
enterprise.
    Chairman Towns. All right. Thank you.
    Mr. Herring.
    Mr. Herring. Yes. Thank you, Mr. Chairman. We believe going 
forward the biggest single thing that could happen is ensuring 
predictability. That is, when does an agency plan to transition 
their service from FTS 2001 to Networx. And to get 
predictability you have to ensure that a full and complete plan 
is done. Milestones, that is across agency, GSA, and the folks 
at this table, as well. Predictability will allow all of us to 
identify where the problems are. A milestone plan will allow us 
to identify where the future problems will be. I think that 
will ensure speedy transition, more speedy transition on to 
Networx.
    Chairman Towns. All right. Thank you very much.
    I now yield 5 minutes to the ranking member, Congressman 
Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    I want to thank you all for being here. I find myself in an 
odd situation. I recognize that I have the five premier 
suppliers of telecommunication services in the country, but I 
have a contract that doesn't seem to match.
    Let me just try to go through a couple of questions. We had 
the GSA here a moment ago. I said nothing ill of them, but 
perhaps you will.
    For Sprint and Level 3, is there any reason that you 
couldn't provide, if you were allowed to under the ``universal 
contract,'' the same services the universal contract has? More 
or less a yes or no. Could you, in fact, bid and meet, under 
the universal contract, all of its requirements?
    Mr. Morche. We could.
    Mr. Issa. Mr. White.
    Mr. White. We bid universal and we lost that contract some 
years ago. Currently we hold the Networx enterprise contract 
and we can provide all the capabilities that are listed on the 
enterprise contract, which meets the large majority of the 
requirements of the agencies.
    Mr. Issa. So if I understand correctly, if the GSA simply 
said you can say I want a universal contract but I want the 
enterprise prices and terms that you two offer on your 
enterprise contract, you could do that? You could meet the same 
prices? I noticed that the other three vendors, they offer the 
same price on both contracts. Would you do the same, I guess is 
the real short question?
    Mr. White. Sprint would, and I think part of the confusion 
for the agencies today is that there is duplicity of services. 
There are also examples where prices for services are not the 
same, and that has created the structure where there are 
literally millions of pricing items, which causes a lot of 
confusion and delays.
    Mr. Issa. Sure. And, of course, I am, like most Members of 
Congress, given Cliffs Notes of specific examples, so the 
examples I have in front of me are dedicated, non-dedicated, 
high-speed broadband lines going from 10 MIP through AT&T. 
After T3 I never bought anything faster than that, so the rest 
of them are just kind of interesting to me.
    But, Mr. Morche, on behalf of L3, you are, in the case, in 
my notes, at least, both dedicated and non-dedicated T-1 lines 
or 1-MIP lines. You are dramatically lower on the Networx 
enterprise than your competition. You simply are the least 
expensive. Are those prices good if you were on universal?
    Mr. Morche. Absolutely. There is no reason for us to have 
higher pricing.
    Mr. Issa. OK. So one of the questions for this committee to 
send back to GSA in our followup would be why wouldn't you be 
allowed to comply with those contracts based on the bid. In 
other words, say if somebody wants universal, it is all five of 
you, just as if somebody wants enterprise it is all five of 
you. From the two of you, that is OK, right?
    Mr. Morche. Absolutely.
    Mr. White. Absolutely.
    Mr. Issa. Well, I have three others here at the table. Is 
there any reason that the customer that you are now sitting in 
front of, we are a consumer, too, wouldn't be better off, I'm 
not sure if your companies would be, if GSA simply said you can 
choose to have this ``universal,'' but you can still get these 
other two and their existing prices, no re-bid. Is there any 
reason that, from my standpoint, that isn't fair for me to try 
to do? Ms. Gowen.
    Ms. Gowen. There was initially a fundamental difference 
between Networx universal and enterprise, and Networx universal 
was supposed to be the continuity of operations contract, had 
every single thing the predecessor contract had in it.
    Mr. Issa. Yes.
    Ms. Gowen. Enterprise did not. And I don't believe that has 
changed. So once you got initial transition done, then you 
could open up the whole idea of merging the contracts.
    Mr. Issa. OK.
    Ms. Gowen. But you would have to get to the point where you 
had the continuity accommodated.
    Mr. Issa. OK. Then let me go through this. I guess a couple 
of you have bridge, Verizon and Sprint.
    Ms. Zeleniak. Yes, that is correct.
    Mr. Issa. So people are negotiating bridge contracts right 
now?
    Ms. Zeleniak. Well, not right now. We are on the bridge 
contract right now.
    Mr. Issa. You are on the bridge contract.
    Ms. Zeleniak. We are moving to continuity of service.
    Mr. Issa. But they are paying a higher price for it?
    Ms. Zeleniak. They are paying a higher price for some 
services than Networx.
    Mr. Issa. Why? Why should I pay a higher price for the same 
service if you have said you can deliver them with a profit at 
the lower price?
    Ms. Zeleniak. Sure. When we were competing for Networx and 
we build a lot of our back office systems and processes we put 
a lot of automation into the process, created tools that are 
specific for Networx that don't work for FTS 2001. So part of 
the way of reducing prices was to introduce automation into the 
process, and so that is one of the reasons clearly why the 
rates are different.
    And in terms of the two different contracts, under Networx 
universal we had to comply with the requirements for 39 
mandatory services. On enterprise I think it was something like 
13. So there is a difference on what you were required to do in 
universal.
    The other thing is the prices can change on the contracts 
all the time, so prices I think, since the contracts have been 
awarded, have been lowered repeatedly on both contracts. So if 
an agency really wants to look at all five, they already have 
enterprise to do it.
    Mr. Issa. I guess I go back to the same question. My time 
is expiring. Why is it universal really is necessary today? I 
understand this idea that you bridge once and then you are able 
to bridge better, but now we are talking about taking until 
2011. The contract is half over by the time somebody takes the 
baby step in some cases. Am I missing something, or is that 
correct?
    Mr. Herring. If I may, sir?
    Mr. Issa. Yes, sir.
    Mr. Herring. I will give you our opinion on this, as well. 
I don't believe that the cause of the delay thus far for 
Networx is caused by having two contracts. I don't think it is 
a major decision for an agency to decide between A or B, in 
this case universal or enterprise. Instead, we should really 
focus the agencies on making that initial decision, not a 
difficult one on which one to choose. It is in plain black and 
white on what people can buy and services, what the prices are, 
and instead concentrate on what are the milestones to get you 
transitioned to whatever agency and whatever carrier you 
choose.
    Trying to address whether we should have one or two 
contracts, which is now a 7-year-old issue, takes time away and 
energy and distraction from really the task at hand for all of 
us, which is to transition to Networx.
    Mr. Issa. OK. Well, I am going to ask all of you to give me 
one answer for the record. Be as lengthy and complete as you 
can. From our standpoint sitting up here, Networx is less 
expensive, and it is where we are going to. Please answer for 
the record as completely as possible why this committee should 
not look toward moving all of Government to a less-expensive, 
more-competitive solution through interim legislation.
    In other words, we are looking and saying you guys are 
getting these roll-outs fairly slow. We do not have to wait. We 
do not have to maintain Networx to its ending date. We can, in 
fact, look at new legislation for new opportunities that pushes 
agencies toward better, cheaper, faster.
    So please give me your answers from each of your companies' 
perspectives why this committee should not begin the process of 
moving us toward a unified Networx solution type re-bid that 
would envision that if it is going to take until 2011 to get 
everybody ``up to this baby step,'' that we shouldn't look at 
2011 as an implementation of the next step.
    Thank you, Mr. Chairman.
    Chairman Towns. Let me remind the gentleman that this 
hearing has to be over at 11 a.m.
    Mr. Issa. I am done.
    Chairman Towns. OK. Thank you.
    Mr. Issa. I only wanted those answers for the record. It 
would take way too long to do it any other way. Thank you.
    Chairman Towns. I now yield to the gentleman from Virginia.
    Mr. Connolly. Thank you, Mr. Chairman.
    Ms. Gowen, in your written testimony you talk about the 
problems with the slow transition to Networx and you said it 
could have been overcome if GSA had simplified the procurement 
process and helped individual agencies. I wonder if you could 
elaborate on that? Is the procurement process the villain of 
the piece here, or is it a big part of the problem?
    Ms. Gowen. There are many villains here. My statement there 
was simply GSA is doing that now. They are helping agencies and 
bringing resources to bear to help them get their decisions 
made, their transitions made. Early on in the process that did 
not happen. As far as procurement simplified, once again, in 
our mind it was a matter of resources, technical and 
contracting, and if OMB and GSA had helped agencies figure out 
if I save money here I can afford to hire some contractors to 
help me get there, and to develop that business case and move 
forward. And early on that did not happen.
    Mr. Connolly. But I take it from your testimony that, 
nonetheless, there are some streamlining ideas you have about 
the procurement process in general, keying in on this 
experience that you might have us consider.
    Ms. Gowen. For future issues, well, that is a fascinating 
question.
    Mr. Connolly. I guess what I am getting at is clearly this 
has been a problematic situation. What are the lessons learned 
moving forward? We need to fix this, but there are lessons to 
be learned moving forward, and I was intrigued by your comment 
on the procurement process being at least one big piece of 
that.
    Ms. Gowen. Well, that is this whole fair opportunity 
process, and it has been very complex for agencies. I think 
many of us sat here and said initially if agencies had done a 
like-for-like transition and made decisions on like-for-like, 
we would have been much further along. Instead, and many of us 
encouraged this, because we have a contract that allows for it, 
we encouraged agencies to look at transformation and adopting 
new technologies, but that is a complex process, and most of 
them initially stopped their dialog with industry and said, you 
know, I have a procurement process going on. I can't talk to 
you.
    I think if agencies had kept a dialog up with industry, we 
could have helped them simplify what these statements of work 
could have looked like. We could have helped quicken the 
process.
    So I think that is a big lesson that we all could learn is 
somehow or another to get the contracting shops throughout the 
Government to understand that having dialog with industry is 
not a bad thing, it is a helpful thing and should happen up 
front.
    Mr. Connolly. I certainly concur.
    Mr. Herring, did you want to comment?
    Mr. Herring. Yes, thank you, Mr. Connolly. I appreciate 
your comments earlier today.
    I agree with the comments that more open dialog within the 
parameters of the Federal acquisition regulations, of course, 
would be helpful. Oftentimes this goes back to my point of 
making sure there are milestones and a project plan, if you 
will, and that includes in the procurement process. When will 
an RFP, request for proposal, be issued? When do you expect to 
make an award? That just parlays into the transition effort, as 
well.
    But if I could expand my answer, as well, onto a slightly 
different topic but an issue that seems to be a common theme 
here, which is let's go ahead and do like-for-like transition, 
I do believe that will speed the transition up. However, I 
think we should not be short-sighted in what this contract 
called Networx can do.
    We talk about price. Very important component. We talk 
about speed. Very important. Getting to the June date of next 
year, as well. But I think something that should have equal 
importance, as well, is making sure Government agencies can 
take advantage of the advanced technologies that are on the 
Networx contract. To go like-for-like is essentially saying buy 
the same service you bought 10 years ago.
    We all know how much technology has advanced in the past 10 
years and is advancing each and every day and each and every 
month. So looking at ways to both speed the transition, lower 
costs for governments and therefore helping our citizens, but 
also keeping in mind technology advancement, which is what this 
contract is designed to do. In fact, it is very flexible on 
what new technologies you can add to it.
    I think we should make sure we look at the entire picture.
    Thank you.
    Mr. Connolly. Thank you. I see my time is up. If I had more 
time, I would go on from the procurement process to ask you 
about the personnel challenge, because you heard the testimony 
in the previous panel. I mean, to me it is stunning----
    Chairman Towns. I will yield the gentleman an additional 2 
minutes before he takes it.
    Mr. Connolly. I thank the chairman.
    All right. Let me ask, because you heard the testimony 
about agencies even needing help on statement of work from GSA, 
and simply did not have the capability in-house, and even in 
some large agencies, frankly to move forward, and if somebody 
passed on or transitioned out the capability went with them.
    From your point of view as carriers, how much of an 
impediment is that, too, in moving forward successfully?
    Mr. Herring. I will start and thank you.
    I do believe it is an impediment at the moment. I believe 
there are resource drains, not necessarily in quantity, 
although that is an issue inside of agencies, but sometimes in 
the skill set, as well. And it supports the point that I made 
just previously, which is if we are short-sighted enough to 
only look at the speed and go like-for-like, we will be more 
reliant upon people who have had those skill sets for the last 
10 years and maybe even beyond and not allow new technology 
automation to help with some of that, or if people can change 
their skills then and focus on the agency's mission.
    Thank you.
    Mr. Morche. I think the fact that we are here 3 years later 
talking about transition is somewhat appalling. We started this 
whole conversation years ago about how can we transform 
Government to be on par with private industry. I would compare 
our commercial side of our business to the Government side of 
our business and say there is a 3- to 5-year gap in technology. 
Looking at the lack of resources inside the agencies, the 
ability to re-engineer and re-architect what is there has put a 
great deal of pressure on the agencies, where we have now 
fallen back to a point where we will accept a transition of 
like-for-like.
    At this point, getting the transition done is a step toward 
transformation. I think we have come to a realization that 
transformation in one fell swoop is just overwhelming at this 
point for the agencies.
    That being said, transitioning like-for-like, we should 
still take advantage of every opportunity we have for 
Government to have access to the lowest prices and greatest 
networks that our country avails.
    Ms. Gowen. I have to harken back to the dialog with 
industry. I think industry can help the agencies work through 
this process. I think probably every one of my peers feels that 
way, as well. You have to do it before you are into a very 
formal procurement process, but I think if they do that well 
ahead we can all sit down and help them with transformation. I 
agree with that. We are all saying like-for-like now because we 
are so late in this process. If we were 3 years ago and we 
could have agencies in full dialog with all of us, you know, I 
think it would be a different world, but we can't. We have to 
move forward from today.
    Mr. White. Obviously, human capital is a growing issue. As 
technology changes, it is going to become even more 
exacerbated.
    I think one of the things that we should be focused on is 
how can we simplify the administrative side of the equation so 
that the people that are in the jobs today can do a more 
effective and efficient job by simplifying the contract 
environment so they don't have to wade through millions of 
different contract line items in order to figure out which 
direction they should go in.
    So from my perspective it is all very simple in that the 
more focus and the easier we can make it for the agencies by 
collapsing the contracts, the faster the whole process will 
move forward.
    Thank you.
    Ms. Zeleniak. And from our perspective, we do see that the 
lack of acquisition officers is a big issue, and there just 
aren't as many as there used to be. And on the other side of 
the aisle the Federal contracting process has become more 
complex, so when you put those two together you definitely are 
going to run into some roadblocks.
    So simplifying the actual statements of work, breaking up 
the procurements into smaller pieces might be a good way to go 
for Government.
    Chairman Towns. Thank you very much.
    I now yield to the gentlewoman from California.
    Ms. Watson. Thank you, Mr. Chairman, for this hearing.
    I think you are addressing several of the concerns that I 
have, but I want to state them, and you can then write to the 
committee as a whole your responses, because I think I am 
hearing the answers but let me just place it out there.
    As you know, we have a joint session and we need to get 
down there.
    There are worries that as the final years of transition 
approaches there will be a surge in orders by agencies 
straining to meet the deadline, and this surge could put a 
significant strain on vendor resources and ultimately 
jeopardize the success of the transition.
    Here are the questions: What are all of you doing to ensure 
that you will not be overwhelmed during the final months of the 
transition if there is a surge in orders? I think I have heard 
some of the responses, but this will help you frame your 
response to the committee.
    What should the agencies, GSA, and OMB be doing to 
coordinate the timing of orders and to reduce the risk of this 
occurring?
    What do you think are the key check points agencies should 
have in any plan, and how would their implementation be 
measured?
    And don't you think it is a little late in the process for 
agencies to just now be forming a detailed transition strategy?
    All of you have been referencing those questions. I would 
like to have them in writing, Mr. Chair, rather than take the 
time for them to respond as they have been doing.
    Chairman Towns. Without objection, so ordered.
    Ms. Watson. If they could get the gist of what we are 
asking. I would appreciate it.
    Thank you so much, all the witnesses, for being here.
    Chairman Towns. Let me just ask one quick question before 
we conclude.
    Can you provide a real-world example of how the transition 
delay has affected your business? Just right down the line. 
Start with you, Mr. Morche.
    Mr. Morche. I am happy to go first.
    Chairman Towns. Sure.
    Mr. Morche. We have talked about this amongst each other 
and publicly. The challenge that a publicly traded company has 
is we have to manage our operating budget, which is head count. 
We manage that based on, as Don said, milestones and 
expectations of when business demand is going to come our way. 
When we expect a tsunami of orders and they don't come, and 
then we expect another tsunami of orders and they don't come, 
and we expect another tsunami of orders and they don't come, it 
is very, very difficult for us to ensure that we have the right 
people in place at the company at the right time and to be 
prepared for the day when they do finally come. It is extremely 
taxing in terms of our budgets and our planning. And on top of 
that, it is the capital budget for where we need to augment all 
of our networks relative to new technology.
    Mr. White. I would add that this is all about a business 
case, so there is the promise of lower prices on Networx. We 
are delivering that to agencies that have transitioned today. 
But the promise of lower prices was built on some basic 
assumptions in the business case, so that really is the risk as 
it exists today, that we are not seeing the return that we had 
projected. We have invested at Sprint millions of dollars in 
building online portals to be easier to do business with to 
support new technology and services, so that is the feedback I 
would provide, Mr. Chairman.
    Ms. Gowen. And I would echo both of my colleagues on both 
sides. We have, as I said, hired people ready to get orders and 
respond to statements of work. We have had three different 
occasions when we expected tsunamis of statements of work, 
hired up, ready to go, and had a little swell and that was it 
and agencies relaxed again.
    I expect exactly the same thing with orders. So it is 
building up a cadre and then stopping.
    And the other piece is exactly what Bill said. We have 
invested millions and millions, tens, hundreds of millions in 
systems that have not been used to date, and there is little 
return.
    Ms. Zeleniak. I would totally echo my colleagues, as well, 
and just add that what is expected to be done between now and 
June 2011 just might be impossible. I think it needs to be 
recognized that no matter what actions are taken, the volume of 
activity yet to be done is staggering. I think we have all 
agreed among ourselves that our ability to actually accomplish 
all that by June 2011, given the current status, is going to be 
quite difficult, and so that is one of the challenges for our 
business.
    Mr. Herring. Thank you, Mr. Chairman.
    We have the same financial pressures as everyone else at 
the table. We invested millions of dollars, as well, up front, 
and that is a real concern.
    Maybe a bit of a softer concern but one that is real to us 
and real to the way we think about how we are trying to help 
the Federal Government and its citizens is thus far, because 
many decisions have not been made to transition to Networx, we 
haven't been able to offer the best that AT&T can offer to 
agencies so far. We are trying to help agencies transform the 
way they achieve their mission, the way they help citizens, not 
just transition from one contract to another. So I worry that 
this time pressure that we are now under doesn't allow all of 
us, including AT&T, to put our best foot forward to help serve 
the citizens.
    Chairman Towns. I yield to the ranking member.
    Mr. Issa. Thank you, Mr. Chairman.
    Often one round leads to an even better set of questions in 
the second round, and these will probably be ones that again I 
am going to ask you to primarily submit for the record.
    Before I came to Congress I ran an electronics company and 
I stay in touch. I am still on the board of the company, so I 
get to see their price-downs, who is supplying services, and so 
on. I also get to see the very short period of contracts with 
no protest that we have. We bring all of you in, we bid it, we 
make our decision based on a package of price and services and 
delivery, and we make our decision and that is the end of it 
and the purchasing agent has to tell four out of the five we 
are really sorry but, you know, next time.
    It appears as though part of the reform that this committee 
should be looking at with GSA is what I talked about earlier in 
the statement, which is that when I go to a buffet I can make a 
very quick decision. I may not take the vegetables they 
planned, but I can make a quick decision. This contract or 
series of contracts has enjoyed protest after GSA has done the 
primary bidding in the process. It has enjoyed a tendency for 
you to, if you will, all of you, to be part of the slow-down, 
not just part of the frustration that it is going slow.
    So I am going to ask each of you, if we go back to GSA and 
we say we want to have this whole process changed, would each 
of you support a process in which the selection by the agencies 
would be very much more like a buffet? They would be able to 
make the decision among you as vendors with a price structure 
in place and effectively not have to go through the level of 
bidding that they are going through, because all day today we 
have been hearing that in a sense we don't have the capability 
to know what we want, we don't have the ability to write it, 
and then, of course, after we make a decision one of you that 
doesn't get it protests the process that somehow the work 
wasn't properly defined.
    If anyone disagrees, please speak up now and we will save 
time if there is minimum disagreement. Yes, sir?
    Mr. Herring. Yes. I disagree that going back to not 
allowing protests to happen----
    Mr. Issa. I am not saying not allowing protests; I am 
saying that GSA would streamline the process so that more of 
the decisions would be made in the GSA process so that an 
agency could choose. For example, assuming that an agency said 
we believe we fit GSA table No. 2, for example, and as to this 
particular potpourri of services, and we fit this as to voice 
services, and of course they have their own internal transition 
costs because you are not supplying all of the hardware. If, in 
fact, GSA pre-screened this to where as long as, if you will, a 
safe haven in the bidding process, as long as an agency said, 
yes, we reasonably believe we fit under GSA X, we then can make 
that decision without a protest, just the same as somebody 
walks up and says, yeah, I think this will work for me, period.
    It appears as though, and all of you have been involved in 
the protest, the protest capability is generated by an absence 
of certainty by an agency that if they choose something that 
was pre-selected they have a safe haven. It is just 
implemented.
    Do you still disagree with that?
    Mr. Herring. I do agree that streamlining would be very 
helpful and, frankly, oversight from GSA I think is also what 
we are talking about here would be helpful. We do not support, 
though, getting rid of the protest capability in general.
    If I could just expand for 1 second, I recognize the time 
is----
    Mr. Issa. We are assuming that you would protest at the GSA 
if they felt that their schedule or block things agency could 
pick from were inappropriate, but go ahead.
    Mr. Herring. That capability we would welcome. AT&T has 
protested four awards thus far. In three of the cases, the 
Government has decided to take remedy and has agreed with our 
position to go change, either re-bid the process, etc. I think 
it falls back to what we talked about before, which is the 
skill set and the personnel inside of an agency is sometimes 
lacking in understanding the procurement process in general, 
understanding the details of it, so oversight and help from GSA 
would be recommended.
    Mr. Issa. Ms. Gowen, you appear to have your finger at the 
ready. We are frustrated because we would like to see agencies 
making accurate decisions, but we would also like to see as 
much of it pre-determined so that those decisions would be 
within the capability of the agency. But go ahead, please.
    Ms. Gowen. Well, first of all, your whole analogy of the 
buffet, you know, I think the contract is a buffet. One of the 
issues from my perspective is that agencies have unduly 
complicated choosing from the buffet.
    As vis-a-vis protests, the big problem is when you do a 
complex RFP statement of work and you set out an evaluation 
criteria and then you don't follow it, you get into trouble. I 
don't care whether it is Networx or full and open somewhere 
else, agencies have to do that.
    Mr. Issa. We will just use a re-fueling tanker as a 
hypothetical example.
    Ms. Gowen. Right.
    Mr. Issa. Thank you.
    I guess quickly, so the chairman can----
    Mr. Morche. If I could make one point just for the record, 
Level 3, we have never made a protest, so I think we are the 
only one of the five.
    I would highlight I think one of the problems we all see is 
the statements of work that are coming out are so large, if 
somebody was to lose it and they feel it was for the wrong 
reason, this once in a lifetime opportunity goes by the 
wayside. It puts an enormous amount of pressure on carriers to 
want to protest that. If the statements of work RFPs were much 
smaller, more reasonable for us to digest, I think the pressure 
on a carrier to want to protest a loss of that size is 
diminished significantly. As long as all five of us have access 
to the same thing, I think everybody benefits.
    Mr. Issa. And I think I see heads both in first row and 
second row shaking.
    Finally, you get the closing word.
    Ms. Zeleniak. Thank you.
    I think that one of the things the agencies are doing is 
putting together very complex statements of work to make sure 
they don't have to do another fair opportunity later. Really. I 
think that they are trying to get everything into one to say, 
OK, now I can buy this and all the follow-on services I will 
ever need.
    I think, once again, if we simplified, you know, let's buy 
this much now and do another fair opportunity once you get past 
transition, we might be able to get this thing moving a little 
faster.
    Mr. Issa. Thank you, Mr. Chairman.
    Chairman Towns. Let me thank all of you for your testimony 
and to say to you that we really appreciate it. Our concern on 
this side is that if there is an opportunity to save money and 
to cut down on cost, that is our interest, that is our concern. 
Of course, we would like to see it move as quickly as possible. 
This is why we have these hearings, to sort of see in terms of 
what we might be able to do and also to get information coming 
from you as to how we might be able to facilitate it.
    I want to thank all of you for your testimony, and this 
hearing is adjourned.
    [Whereupon, at 10:59 a.m., the committee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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