Metropolitan Area Acquisition (MAA) Implementation Issues	 
(27-JUL-01, GAO-01-958R).					 
								 
The General Services Administration (GSA) initiated its 	 
Metropolitan Area Acquisition (MAA) program in 1997 to achieve	 
immediate, substantial, and sustained price reductions for local 
voice and selected data communications services in selected	 
metropolitan areas. As of June 2001, GSA has awarded 37 MAA	 
contracts for 20 metropolitan areas. The transition from existing
GSA contracts to the MAA contracts is still underway. This	 
correspondence responds to congressional questions concerning	 
GAO's June 13, 2001, testimony on MAA implementation issues.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-958R					        
    ACCNO:   A01472						        
  TITLE:     Metropolitan Area Acquisition (MAA) Implementation Issues
     DATE:   07/27/2001 
  SUBJECT:   Federal procurement				 
	     Fees						 
	     Telecommunication					 
	     Telecommunication industry 			 
	     GSA Metropolitan Area Acquisition			 
	     Program						 
								 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-01-958R
     
GAO- 01- 958R Metropolitan Telecommunications Acquisition United States
General Accounting Office

Washington, DC 20548

July 27, 2001 The Honorable Tom Davis Chairman Subcommittee on Technology
and Procurement Policy Committee on Government Reform House of
Representatives

Subject: Metropolitan Area Acquisition (MAA) Implementation Issues

Dear Mr. Chairman: As you know, the General Services Administration (GSA)
initiated its Metropolitan Area Acquisition (MAA) program in 1997 to achieve
immediate, substantial, and sustained price reductions for local voice and
selected data communications services in selected metropolitan areas. As of
June 2001, GSA had awarded 37 MAA contracts for 20 metropolitan areas. The
transition from existing GSA contracts to the MAA contracts is still under
way.

In your letter of June 27, 2001, you asked that we respond to several
follow- up questions pertaining to your Subcommittee?s June 13, 2001,
oversight hearing regarding the MAA contracts. My responses to your
questions follow below.

1: In your testimony, you note that GSA envisioned that these MAA contracts
would complement its existing contracts, as well as provide a solution for
local service contracts that were expiring. Are there any indications that
these local contracts are conflicting with each other rather than
complementing each other?

There is an indication or appearance of conflict between the MAA contracts
and GSA?s existing contracts for local telecommunications services. 1 This
conflict stems from terms in existing contracts regarding termination of
service; according to some MAA contractors, these terms put them at a
competitive disadvantage by reducing the incentive for agencies to move to
the MAA contracts. For example, contractual agreements in effect in New
York, New Jersey, and Pennsylvania establish a

1 In addition to the MAA contracts, FTS offers a variety of programs through
which agencies can acquire local telecommunications service. For example,
the Aggregated System Procurement program consolidates local requirements
into an overall system procurement based on the Bell Operating Company
boundaries. The Individual System Procurement program serves locations where
the aggregated program does not. In addition, regional FTS offices have
obtained rate stabilization agreements that allow agencies to acquire local
tariffed telecommunications services at short- term discounts.

GAO- 01- 958R Metropolitan Telecommunications Acquisition 2 minimum number
of lines that the government agrees to buy. This minimum

requirement continues throughout the term of the contract even if agencies
transition to the MAA contacts, unless the MAA contractor is an incumbent
carrier. Effectively, the result is a termination ?penalty,? because the
government must either pay prevailing higher tariff rates for the remaining
lines, or continue to pay for the minimum number of lines whether it uses
them all or not. Another instance of such a disincentive is the Aggregated
System Procurement (ASP) contract for Western Zone I, which includes the
Dallas- Fort Worth MAA market; this contract includes a specific one- time
disconnect charge of $25.90 per line.

We do not know, however, whether this indication or appearance of conflict
is actually responsible for delaying MAA implementation in these regions. We
plan to address this issue in our continuing work.

In commenting on a draft of this report, the GSA Federal Technology
Service?s Assistant Commissioner for Regional Services stated that the terms
of the existing local service contracts reflect the fact that they were
negotiated before telecommunications reform. As a result, these terms are
less favorable than they would have been if negotiated in today?s more
competitive telecommunications environment. While acknowledging that the
timing, terms, and conditions of these existing local contracts do create
MAA implementation issues, GSA contends that these concerns will be
mitigated as those existing contracts expire.

2: You also stated that GSA charges customer agencies two types of fees.
What are these two types and what are they for?

GSA?s Federal Technology Service (FTS), which has responsibility for the MAA
program, is a self- sustaining organization. As such, it assesses customer
agencies two types of management fees to recover the costs of contract
management and administration activities: a contract management fee and a
full- service fee. The contract management fee is to cover general program,
acquisition, and contract management activities and is applied as a
percentage of service cost. The full- service fee covers service ordering,
implementation planning and coordination, and billing. The full- service fee
is an additional percentage applied to the total of service costs plus the
contract management fee.

Those customer agencies that choose the direct- order/ direct- billing
option available to them under the MAA contracts would pay only the GSA
contract management fee. They would not be assessed the full- service fee,
because they would shoulder responsibility for billing and ordering
themselves, rather than obtaining those support services from GSA.

3: The management fees that GSA charges range in total from about 28 to over
80 percent. Based on your work to date, what is your view on these rates?

Our view is that GSA should be disclosing the rates it is charging customer
agencies for its management services. As I stated in my testimony, the MAA
contracts

GAO- 01- 958R Metropolitan Telecommunications Acquisition 3 presently
require contractors to embed the GSA fees in the service pricing that they

disclose to agencies during marketing activities, as well as on the invoices
submitted for payment of services. As a result, agencies do not have
complete information to help them determine whether using GSA?s services is
their most economical option. For example, an agency in St. Louis could
lower its local MAA service costs by almost 18 percent if it assumed
additional service ordering, billing, and administration responsibilities
and their associated cost. However, lacking full information on these fees,
agencies cannot readily determine whether it is more economical for them to
procure their own local services, to procure services through GSA but
perform management support activities themselves, or to procure services
through GSA and pay GSA for support.

During the course of our continuing work on MAA contract implementation, we
will more thoroughly evaluate the management fees that GSA is collecting on
these contracts, as well as the support that GSA provides in exchange.

4: Based on your work to date, do you have any advice on how MAA contract
implementation could be improved?

Yes, based on our work to date, there is one immediate step that GSA could
take to improve MAA contract implementation in New York. As discussed in my
testimony, our work on the New York MAA indicated that AT& T and GSA had
different perspectives on such issues as vendor marketing and the time
frames for completing transition requirements. Given the complexity and
newness of this particular implementation effort, some of these differences
are understandable. However, this situation also warrants an increased
quantity and quality of communication between these two parties. In
commenting on a draft of this report, the Assistant Commissioner for
Regional Services stated that GSA has scheduled vice presidentlevel meetings
with the MAA contractors in order to improve communication and resolve
related issues.

Our review of the MAA program is continuing. We may offer additional
suggestions to improve MAA program implementation in our final report.

5: Both Qwest and WinStar suggest that GSA provide better information to
agencies and vendors on transition. In your view, is there a benefit to
publishing a monthly report card or other transition report in order to push
both FTS regional offices and federal agencies to transition?

In our view, the reporting of MAA implementation progress to agencies and to
contractors by GSA would be a useful management tool. According to the
Project Management Institute, performance reporting is a valuable element of
project management; these reports should cover such matters as status or
percentage completion in relation to schedules, what is completed versus
what is in progress,

GAO- 01- 958R Metropolitan Telecommunications Acquisition 4 and the
forecasting of future status and progress. 2 The recommendations made to you

during the hearing by both Qwest and WinStar reiterate this point. For its
FTS2001 transition, GSA did post this type of information on its Web site,
contained in transition bulletins and status reports. While GSA also posts
MAA program information, the MAA Web pages do not contain information on
transition or implementation progress. Although several factors are
influencing the actual pace of MAA implementation, as a general management
practice we would view regular MAA status reporting to all program
stakeholders as a positive step by GSA. According to the FTS Assistant
Commissioner for Regional Services, GSA is now looking at how to make MAA
implementation status information publicly available.

- - - - In addition to the questions set forth in your letter of June 27,
2001, I was also asked by Congressman Horn during the hearing to determine
whether GAO obtains its local telecommunications equipment and services from
GSA, and whether we or GSA provides the related computer security. We do not
currently obtain local telecommunications services from GSA (with the
exception of our office in Boston, Massachusetts). Starting October 1, GAO
offices in the Washington, D. C., area will obtain local telecommunications
services and equipment from GSA, using its Washington Interagency
Telecommunications Services 2001 (WITS2001) contract.

With regard to computer security, we have a computer security unit- the
Information Systems Security Unit within the Information Systems and
Technology Services organization- that is responsible for information
security across the agency. For local telecommunications procured under the
WITS2001 contract, GSA does not perform computer security functions for
customer agencies such as GAO; however, GSA requires the contractor
providing those services and equipment to meet certain security
requirements.

- - - - In providing the agency?s official oral comments on a draft of this
letter, the GSA FTS Assistant Commissioner for Regional Services generally
concurred with the information presented. We have incorporated GSA?s
comments where appropriate.

- - - - During the course of our work to address the questions posed in your
June 27 letter, we reviewed the documentation we prepared in support of our
earlier testimony before the Subcommittee. We also met with the GSA FTS
Assistant Commissioner for Regional Services and other MAA program
management staff. We conducted this work in July 2001 in Washington, D. C.,
and Fairfax, Virginia, in accordance with generally accepted government
auditing standards.

2 Established in 1969, the Project Management Institute (PMI ï¿½ ) is a not-
for- profit project management professional association, with nearly 80,000
members worldwide. The PMI has published the project management standard, A
Guide to the Project Management Body of Knowledge (PMBOK ï¿½ Guide).

GAO- 01- 958R Metropolitan Telecommunications Acquisition 5 - - - - We

are sending copies of this correspondence to the Ranking Minority Member,
Subcommittee on Technology and Procurement Policy, and interested
congressional committees. We are also sending copies to the Administrator of
General Services and to the Director, Office of Management and Budget.
Copies will be made available to others upon request. The correspondence
will also be available on GAO?s Web site at

http:// www. gao. gov.

If you have any questions regarding this correspondence, please contact me
or Kevin Conway, Assistant Director, at (202) 512- 6240 or by e- mail at
koontzl@ gao. gov or

conwayk@ gao. gov, respectively. Sincerely yours,

Linda D. Koontz Director, Information Management Issues

(310328)
*** End of document. ***