Telecommunications: GSA Needs to Improve Process for Awarding	 
Task Orders for Local Service (04-APR-03, GAO-03-369).		 
                                                                 
The Metropolitan Area Acquisition (MAA) program, managed by the  
General Services Administration (GSA), provides local		 
telecommunications services to government agencies in selected	 
metropolitan areas. Of the 25 cities in which MAA contracts were 
awarded as of January 2003, 15 were awarded to two or more	 
providers. Such multiple-award contracts are a means of promoting
competition. To ensure equity in the award of task orders under  
these contracts, the Federal Acquisition Regulation (FAR)	 
requires that the government provide contractors a fair 	 
opportunity to be considered. GAO was asked to review, among	 
other things, whether GSA's implementation of the fair		 
consideration process is consistent and the effect of any	 
inconsistency, as well as the adequacy of GSA's documentation to 
support the decisions reached.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-369 					        
    ACCNO:   A06584						        
  TITLE:     Telecommunications: GSA Needs to Improve Process for     
Awarding Task Orders for Local Service				 
     DATE:   04/04/2003 
  SUBJECT:   Contract terms					 
	     Federal procurement				 
	     Multiple award procurement 			 
	     Telecommunication					 
	     Competition					 
	     Competitive procurement				 
	     GSA Metropolitan Area Acquisition			 
	     Program						 
                                                                 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** 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-03-369

a

GAO United States General Accounting Office

Report to the Chairman, Committee on Government Reform, House of
Representatives

April 2003 TELECOMMUNICATIONS GSA Needs to Improve Process for Awarding
Task Orders for Local Service

GAO- 03- 369

GSA field offices take different approaches to awarding task orders under
multiple- award MAA contracts, leading to variations both among cities and
within cities. Although the FAR gives contracting officers broad latitude
in ensuring that this process offers contractors a fair opportunity to be
considered, GSA recognizes that consistency is important within the
nationwide MAA program. However, GSA headquarters has not developed or
implemented a uniform fair consideration process. As a result, GAO found
variations in the processes used: principally, in the time frames used in
contractor price comparisons (see table). Such inconsistencies frequently
influenced the choice of contractor. Further, because oversight was not
provided, in six cases agency preference was used as a criterion for
selecting a contractor, which is a violation of the FAR. Because GSA did
not

consistently follow a common process that ensured compliance with the FAR,
it cannot ensure the fairness of its decisions.

Further, the documentation for about one- fifth of GSA*s fair
consideration decisions was not adequate for determining how these
decisions were reached. According to the FAR, sufficient documentation of
all contractual actions must be maintained to provide (1) a basis for
decisions reached and (2) information for subsequent reviews. Out of 483
fair consideration decisions from regional GSA offices in the 11 cities
that GAO assessed, the documentation furnished for 91 (19 percent) was not
adequate. Weaknesses observed include lack of stated rationale for
decisions reached, price comparisons that did not support the choice of
contractor selected by GSA, and lack of support for technical factors used
in making the decisions. These weaknesses occurred because GSA did not
establish and implement uniform guidelines for documenting its MAA fair
consideration decisions. As a result, MAA stakeholders (GSA, agencies, and
MAA contractors) do not have assurance that the fair consideration process
was properly administered.

Variations in Time Frames Used in MAA Contractor Price Comparisons Time
frame used in price analysis

City 1 month 1 year 3 years 4 years Life cycle Insufficient data to

determine

Atlanta a * * * * * * Boston X X * X * * Cleveland * * * * X * Dallas * X
* * X * Denver X * * * X * Indianapolis * * * * X * Los Angeles * * * * *
X Minneapolis * * * * X * New York * X X * * * Philadelphia X * * X * *
St. Louis * * * * * X Source: GAO, GSA. a No price comparison was
completed in calendar year 2001. TELECOMMUNICATIONS

GSA Needs to Improve Process for Awarding Task Orders for Local Services

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 369 To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Linda Koontz at (202) 512- 6240 or koontzl@ gao. gov.
Highlights of GAO- 03- 369, a report to the

Chairman, Committee on Government Reform, House of Representatives April
2003

The Metropolitan Area Acquisition (MAA) program, managed by the General
Services Administration (GSA), provides local telecommunications

services to government agencies in selected metropolitan areas. Of the 25
cities in which

MAA contracts were awarded as of January 2003, 15 were awarded to two or
more providers. Such multiple- award contracts are a means of promoting
competition. To ensure equity in the award of task orders under these
contracts, the Federal Acquisition Regulation

(FAR) requires that the government provide contractors a fair opportunity
to be considered. GAO was asked to review, among other things, whether
GSA*s implementation of the fair consideration process is consistent and
the effect of any inconsistency, as well as the adequacy of GSA*s

documentation to support the decisions reached.

GAO is recommending that GSA follow a consistent fair consideration
process, including uniform requirements for documentation. Deviations from
this common process should be documented and communicated to

contractors so that all MAA stakeholders can understand the process. In
written comments on a draft of

this report, the Administrator of General Services agreed with our
recommendations and said that GSA was acting to implement them.

Page i GAO- 03- 369 Telecommunications Letter 1 Results in Brief 2
Background 4 GSA Has Not Established a Consistent Process or Provided

Adequate Oversight 7 Numerous Fair Consideration Decisions Were Not
Adequately Documented 14 Use of Requests for Quotations Produced Mixed
Results, but Limited Data Preclude a Thorough Evaluation 16 Conclusions 18
Recommendations for Executive Action 19 Agency Comments and Our Evaluation
20 Appendix I Termination Charges and Service Initiation

Charges 22

Appendix II Objectives, Scope, and Methodology 24

Appendix III Comments from the General Services Administration 27

Tables

Table 1: MAA Multiple- Award Cities in Which GSA Made Fair Consideration
Decisions in 2001 7 Table 2: Comparison of Time Frames Used in MAA
Contractor

Price Comparisons 9 Table 3: Comparison of 1- Year and Life- Cycle Price
Analyses for Dallas 10 Table 4: Effect of Including Reconfiguration
Charges in MAA Contractor Price Comparisons (Dallas) 12 Contents

Page ii GAO- 03- 369 Telecommunications Abbreviations

ASP Aggregated Switch Procurement FAR Federal Acquisition Regulation FTS
Federal Technology Service GSA General Services Administration MAA
Metropolitan Area Acquisition RFQ Request for Quotations SIC service
initiation charge This is a work of the U. S. Government and is not
subject to copyright protection in the

United States. It may be reproduced and distributed in its entirety
without further permission from GAO. It may contain copyrighted graphics,
images, or other materials. Permission from the copyright holder may be
necessary should you wish to reproduce copyrighted materials separately
from GAO*s product.

Page 1 GAO- 03- 369 Telecommunications April 4, 2003 The Honorable Tom
Davis Chairman

Committee on Government Reform House of Representatives Dear Mr. Chairman:
The Metropolitan Area Acquisition (MAA) program provides local
telecommunications services to federal agencies in selected metropolitan
areas. The MAA program manager, the General Services Administration (GSA),
initiated this nationwide program in 1997 to achieve immediate,
substantial, and sustained price reductions for agencies* local
telecommunications services; to expand agencies* choices of high- quality

services; and to encourage cross- agency sharing of resources. In 15 of 25
metropolitan areas in which MAA contracts had been awarded as of January
2003, GSA had awarded contracts to two or more telecommunications
providers. The intent of such multiple- award contracts is to sustain
competition and obtain the best value on task orders awarded throughout
the contract period. For these contracts, the Federal Acquisition
Regulation requires agencies to provide the multipleaward contractors a
fair opportunity to be considered for task orders; GSA refers to this
process as its fair consideration process. Fair consideration decisions
may be based on price alone, or they may be based on consideration of
price plus other factors, such as technical requirements or the
contractors* past performance. This report responds to your request that
we determine (1) whether GSA*s fair consideration process is consistent
within and among metropolitan areas, and if not, whether or not
inconsistencies affect the process results; (2) whether GSA*s
documentation properly and appropriately supports its fair consideration
decisions; and (3) whether the use of Requests for Quotations 1 in the
fair 1 Requests for Quotations are used in acquisitions to communicate
government

requirements to prospective contractors and to solicit quotations from
them regarding price and other factors. In this report, the term *Request
for Quotations* refers to a request from GSA to MAA contract vendors for
price and other information. These Requests for Quotations are authorized
by section G. 2.1, *Service Price Quotes,* of the MAA contract, as
follows: *The contractor shall provide price quotes for specific services
and features when requested by the GDR or ADR prior to submitting a
service order request. The price quote shall identify all recurring and
nonrecurring charges, the service availability date, the date when the
price quote will become nonbinding, and appropriate technical information
that describes the service.*

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 369 Telecommunications consideration processes followed by
GSA is cost- effective. In response to concerns raised at an oversight
hearing on the MAA program, you also

requested that we determine whether contract termination charges and
service initiation charges had affected GSA*s fair consideration
decisions; these results are reported in appendix I.

This report is based on work we performed at GSA*s Federal Technology
Service (FTS) headquarters and at our Washington, D. C., office, using
documentation furnished by GSA*s regional FTS offices. We reviewed all
fair consideration decisions made by GSA during calendar year 2001 as part
of the MAA contracts* service ordering process, including supporting
documentation maintained by GSA, the MAA contracts, applicable federal
acquisition guidelines, and any further GSA guidance on this process. We
conducted our work from May 2002 through February 2003, in accordance with
generally accepted government auditing standards. Appendix II contains a
detailed discussion of our objectives, scope, and methodology. Although
GSA officials have stated that the nationwide MAA program

should be consistently administered, GSA did not establish and follow a
consistent process when making its fair consideration decisions. 2 During
calendar year 2001, fair consideration processes varied both within and
across MAA cities. Variations occurred in the lengths of time over which
contractor prices are compared and in the use of additional estimated
costs for changing telecommunications lines or service features over time.
Both variations influenced which contractors received task order awards to
provide services to agencies under these contracts. Further, because GSA
has not provided adequate oversight, regional offices in six instances
incorrectly used agency preference as a basis for selecting a contractor*
violating the Federal Acquisition Regulation* and selected a higher priced
incumbent service provider.

Of the fair consideration decisions made by GSA during calendar year 2001,
19 percent were not fully supported by documentation. According to the
Federal Acquisition Regulation, all contractual actions must be

documented in a manner sufficient to provide a basis for decisions reached
in the acquisition process, and to provide information for

2 Consistent with the request letter, we use the term *fair consideration*
for the task order award process established by the Federal Acquisition
Regulation, Part 16, requiring that each vendor be accorded *a fair
opportunity to be considered for each order.* Results in Brief

Page 3 GAO- 03- 369 Telecommunications subsequent reviews of those
decisions. Weaknesses observed included lack of stated rationale for
decisions reached, price comparisons that did

not support the choice of contractor selected by GSA, and lack of support
for technical factors used in making the decisions. These weaknesses were
allowed to occur because GSA did not establish and implement uniform
guidelines for documenting its MAA fair consideration decisions. As a
result, for 91 out of 483 decisions made in 2001, MAA stakeholders (GSA,
agencies, and MAA contractors) do not have assurance that the fair
consideration process was properly administered.

GSA*s use of Requests for Quotations in the fair consideration process may
be cost- effective for some local telecommunications services, but limited
data preclude a comprehensive evaluation. By pursuing this additional
competition, GSA may receive cost proposals from contractors that could
include more favorable terms than those in the published contract, such as
lower monthly prices, or waived or reduced service initiation charges.
Examination of this process in Denver revealed that although it produced
substantial savings when one type of service was acquired, it did not
result in savings when a second type of service was obtained. GSA did not
measure the costs and benefits of this process to determine where the use
of Requests for Quotations was most suitable for acquiring local
telecommunications services or to identify improvements that could make
the process more cost- effective. In addition, we determined that the
inclusion of contract termination

charges may have changed the choice of contractors in 5 of 16 GSA fair
consideration decisions in the one MAA city in which these charges
applied, 3 and service initiation charges were a deciding factor in the
choice of contractors in 61 out of 272 decisions in seven cities (details
are given in app. I).

In light of the inconsistencies in the MAA fair consideration process, we
are recommending to the Administrator of General Services that GSA
establish and follow a uniform process for fair consideration. We are also
recommending that GSA develop and implement uniform guidelines for

3 Three of these decisions were made based on price alone, and therefore
would have been directly affected. The two other decisions were made based
on price and technical considerations; it is unclear from the
documentation, however, how the technical considerations supported those
decisions. Therefore, in those two cases, we are unable to predict whether
inclusion of termination charges resulted in a different choice of

contractor.

Page 4 GAO- 03- 369 Telecommunications documenting its fair consideration
decisions, and that it establish the measures needed to ensure the cost-
effectiveness of its process and to

provide a basis for improvement. In written comments on a draft of this
report, the Administrator of General Services agreed with our
recommendations and said that GSA was acting to implement them.

The MAA program comprises contracts offering local voice and certain data
telecommunications services to federal agencies in selected metropolitan
areas across the country. GSA began planning this program just a few
months after the passage of the Telecommunications Act of 1996, which was
intended to increase competition and reduce regulations in the
telecommunications industry, particularly for local services. Recognizing
that this competition would create an opportunity for the government to
gain an immediate price reduction in local telecommunications services,
GSA developed and launched the MAA

program to take advantage of this emerging competition. Further, it
envisioned the MAA contracts as a complement to existing local service
contracts in metropolitan areas, as well as a solution for contracts that
were expiring. As of January 2003, GSA had awarded MAA contracts in 25
cities, with a total maximum value of $5.1 billion. Each MAA contract is a
fixed- price, indefinite- delivery, indefinite- quantity

contract with a base term of 4 years (48 months) from date of award, with
four successive 1- year options. In 15 of the 25 MAA cities, GSA awarded
these contracts to two or more telecommunications providers; such
contracts are referred to as multiple- award contracts. The Federal
Acquisition Streamlining Act (FASA) of 1994 established a preference for
awarding contracts for indefinite quantities to multiple firms rather than
to a single company. This approach was intended to provide agencies a

means to procure goods and services quickly, using streamlined acquisition
procedures, while obtaining the advantage of competition.

Under multiple- award contracts, the Federal Acquisition Regulation (FAR)
requires that contractors be afforded *a fair opportunity to be
considered* in the subsequent award of task orders issued to meet specific
agency needs under these contracts. The process used to ensure this
opportunity is referred to as the fair consideration process. In
administering this process, contracting officers are given broad latitude
by the FAR. Background

Page 5 GAO- 03- 369 Telecommunications The MAA contracts give a broad
outline of the procedure to be followed by the government in conducting
its fair consideration process. 4 The government- or agency- designated
representative is to consult the latest

information about the contractors, including published contract prices,
related analyses that aid decisionmaking, information from contractors
such as price quotes or technical analyses, and other relevant
information. Using available information, the representative selects a
contractor by one of two methods: basing the decision solely on relative
prices without further consideration of other factors, or basing the
decision on a combination of price, technical, and past performance
considerations appropriate to the particular decision. After completing
this decision process, the representative then places a task order with
the selected contractor for the required telecommunications services.

GSA contracting officers making task order decisions can obtain price
information from published contracts, or they can choose to issue a
Request for Quotations (RFQ) as an additional mechanism for lowering
prices. Using an RFQ process to support fair consideration decisionmaking
can offer additional competitive benefits by allowing contractors to lower
prices beyond their contract offers and to reduce or waive service
initiation and other charges. However, while the RFQ process is being
pursued, agencies must continue to pay pre- MAA prices for
telecommunications services, rather than the lower MAA contract prices.

When making fair consideration decisions under the MAA contracts, in
addition to comparing monthly recurring charges for providing
telecommunications services, GSA may consider additional costs associated
with these services, such as the one- time termination charges that may be
associated with a pre- MAA telecommunications service

contract. GSA may also consider contractors* service initiation charges 5
for implementing service. When a contractor is also the incumbent, preMAA
telecommunications provider in a city, it does not generally include a
service initiation charge in its price quotes for existing lines and
services to be transitioned to an MAA contract, because it does not incur
new

4 The MAA service ordering process is outlined in Section G. 2 of the MAA
contracts, including the prescribed procedure to give fair consideration
to contractors for task order awards under the contract. 5 A service
initiation charge is a charge to a customer by a telecommunications
provider for the initiation of a new telecommunications service, such as
the installation of a new telephone line.

Page 6 GAO- 03- 369 Telecommunications expenses to provide these lines and
services. Where volume or types of services differ from existing services,
incumbents may include service

initiation charges in their pricing. All contractors can choose to waive
these charges.

Including these charges in fair consideration price comparisons may give
an advantage to an incumbent contractor (since the incumbent*s price would
generally not include such charges), but this advantage is permissible.
That is, acquisition case law has established that a contractor may have
unique advantages and capabilities (because of its prior

experience, for example), and the government is not required to equalize
competition or compensate for these advantages, unless there is evidence
of preferential treatment or other improper action. GSA*s FTS headquarters
in Fairfax, Virginia, and its regional offices in the

various metropolitan areas share responsibility for administering the MAA
contracts. According to testimony by the FTS Commissioner in June 2001, 6
FTS headquarters is responsible for developing solicitations, evaluating

offers, awarding contracts, and supporting implementation activities, and
the FTS regional offices are responsible for developing city- specific
requirements and for contract implementation activities, including
managing the process used to select among MAA contract awardees for
placing task orders (that is, the fair consideration process).

In calendar year 2001, fair consideration processes were conducted in 11
of the 15 MAA cities with multiple- award contracts. Table 1 lists these
11 cities, their MAA contractors, and the number of fair consideration
decisions reached in 2001.

6 Testimony of Sandra Bates, FTS Commissioner, General Services
Administration, before the Subcommittee on Technology and Procurement
Policy (June 13, 2001).

Page 7 GAO- 03- 369 Telecommunications Table 1: MAA Multiple- Award Cities
in Which GSA Made Fair Consideration Decisions in 2001

MAA multiple- award cities

Number of fair consideration

decisions Contractors

Atlanta 1 WinStar BellSouth Boston 21 AT& T

Southwestern Bell Verizon Winstar Cleveland 71 Ameritech

AT& T Dallas 20 AT& T

Southwestern Bell WinStar Denver 128 AT& T

Qwest WinStar Indianapolis 50 WinStar

AT& T Ameritech Los Angeles 44 WinStar

Pacific Bell Minneapolis 118 WinStar

Qwest New York 11 AT& T

Verizon Philadelphia 10 AT& T

WinStar St. Louis 9 WinStar

Southwestern Bell Source: GSA. GSA management has stated its desire to
ensure consistency throughout

the nationwide MAA program, but it has not established a common process
for fair consideration decisions. Because GSA headquarters has not
developed or implemented a uniform method to be followed by its regional
offices in conducting the fair consideration process, approaches vary
among cities and, in some cases, within cities. Variations occurred in the
periods of time over which contractor prices were compared and in the
inclusion of reconfiguration costs 7 in price comparisons, which

7 Reconfiguration costs are associated with the need to move, add, or
change telephone lines, services, or features after they have been
installed. GSA Has Not

Established a Consistent Process or Provided Adequate Oversight

Page 8 GAO- 03- 369 Telecommunications affected the choice of contractors.
Further, because GSA did not oversee the application of this process, in
some instances regional offices violated

the FAR by incorrectly using agency preference as a basis, in part or as a
whole, for selecting a higher priced contractor for an MAA task order.

Although the FAR gives contracting officers broad latitude in
administering the fair consideration process, GSA recognizes that the MAA
program and its contracts should be consistently managed and administered.
In her June 2001 testimony, the FTS Commissioner stated that because MAA
is a national program, communications and coordination among GSA staff
with MAA program responsibilities (FTS headquarters, its regional offices,
and MAA program management staff) were essential to ensure program
continuity and consistency. 8 Thus, GSA views consistency as an important
attribute within the nationwide MAA program.

The principal variation we identified in the fair consideration process
concerned the period of time selected by regional staff over which to
compare contractor prices. The different time periods that GSA regional
offices used for comparing contractor prices ranged from as short as 1
month to as long as the entire period remaining in the life of the
contract (GSA documentation referred to the latter as a life- cycle
analysis). In three cities* Cleveland, Indianapolis, and Minneapolis* GSA
considered contract life as the evaluation period. GSA*s Denver staff
usually used a 1- month evaluation period, 9 but it used a life- cycle
analysis to justify 17 percent of its decisions. In four other cities,
this price comparison varied from decision to decision: specifically, the
Dallas regional office alternated between use of contract life and a 1-
year period in its analyses; the New

York regional office used 1- year and 3- year periods; the Philadelphia
staff used a 1- month period and a 4- year period; and the Boston regional
office used a 1- month period in some cases, and in others considered
savings for both 1- year and 4- year periods. The reason for the specific
comparison period used was not recorded in decision documentation. Table 2
summarizes the different price comparison periods used.

8 Testimony of Sandra Bates, FTS Commissioner, General Services
Administration, before the Subcommittee on Technology and Procurement
Policy (June 13, 2001). 9 Although Denver used a 1- month price comparison
period for 83 percent of its fair consideration decisions, it also
identified life- cycle cost savings to customer agencies.

Page 9 GAO- 03- 369 Telecommunications Table 2: Comparison of Time Frames
Used in MAA Contractor Price Comparisons Time frame used in price analysis

City 1 month 1 year 3 years 4 years Life cycle Insufficient data

to determine a

Atlanta b * * * * * * Boston X X * X * * Cleveland * * * * X * Dallas * X
* * X * Denver X * * * X * Indianapolis * * * * X * Los Angeles * * * * *
X Minneapolis * * * * X * New York * X X * * * Philadelphia X * * X * *
St. Louis * * * * * X Source: GAO, GSA.

Note: GAO analysis of GSA data. a Decision documentation did not identify
the time frame used. b One fair consideration decision was reached in
Atlanta during calendar year 2001. An RFQ was issued to the contractors to
obtain a price quote for service. However, because a valid cost proposal
was received from only one contractor, a complete price comparison was not
necessary.

Although the MAA contracts state that contract price will always be a
factor in GSA*s fair consideration procedure, they do not specify the time
period over which price comparisons should be made. However, a consistent
time period is important, because analyses over different time periods may
lead to different results. For example, one- time costs such as

service initiation charges have a less direct influence on decisions that
compare prices over a longer period of time, because those additional
onetime costs may be offset by lower prices over the life of the contract.
Conversely, when prices are compared over a shorter period of time, such
additional charges form a relatively greater portion of total costs
compared; thus, their inclusion can favor the incumbent service provider
(whose price does not generally include these charges).

The effect of using different time frames in price comparisons is
illustrated in table 3. This table summarizes the decisions reached in
Dallas, where Southwestern Bell was the incumbent telecommunications
provider. If GSA had used a contract life- cycle time frame in its price
comparisons, then the decisions reached might have been different in half
of those

Page 10 GAO- 03- 369 Telecommunications cases. 10 Further, if it had
consistently made these MAA task order awards to the contractors offering
lower life- cycle prices, GSA could have realized an additional estimated
$459,000 in savings for customer agencies in

Dallas over the life of the contracts.

Table 3: Comparison of 1- Year and Life- Cycle Price Analyses for Dallas
Lowest cost contractor according to analysis (checks indicate analysis
used) Customer 1st year price analysis Life- cycle price analysis
Recipient of award

Decision would have differed if life- cycle price analysis had been used

1

Page 11 GAO- 03- 369 Telecommunications lines, services, or features) in
contractor price comparisons. Although these charges are a part of all MAA
contracts, only the Dallas regional

office included estimates of these costs in the MAA price comparisons
supporting its fair consideration decisions. Further, Dallas did not use
these charges consistently: they appeared in only half the price
comparisons completed, and they were calculated in two different ways. (In
most cases, GSA staff based estimates on the assumption that 10 percent of
the telecommunications lines ordered would move locations, add services,
or change features during the course of a year; in two cases, GSA staff
assumed that services or features associated with 25 percent of lines
ordered would change annually.) The reason for the variations in the use
of these charges and in their estimates was not recorded in decision
documentation.

Table 4 shows that in 5 of 10 decisions made in Dallas, a different
contractor might have been awarded the task orders if reconfiguration
charges had not been included in price comparisons. (Three of these five

decisions were based on price alone. Two of these decisions were based on
both price and technical considerations, and so we cannot predict the
effect of excluding reconfiguration charges.)

Page 12 GAO- 03- 369 Telecommunications Table 4: Effect of Including
Reconfiguration Charges in MAA Contractor Price Comparisons (Dallas)

Result if reconfiguration charge were not included

Customer Actual result, including reconfiguration charge Result Change in
outcome

1 Southwestern Bell AT& T Yes 2 Southwestern Bell AT& T Yes 3 Southwestern
Bell AT& T Yes 4 Southwestern Bell AT& T Unknown a 5 AT& T AT& T No

6 Winstar Winstar No 7 Southwestern Bell AT& T Unknown a 8 Southwestern
Bell b Southwestern Bell No

9 Southwestern Bell b Southwestern Bell No 10 Southwestern Bell
Southwestern Bell No Source: GAO, GSA.

Note: GAO analysis of GSA data. Southwestern Bell was the incumbent
telecommunications service provider. Comparisons are ordered
chronologically by date of first task order award issued following each
associated fair consideration decision. a Task order awarded based on
price and technical considerations.

b Analysis used reconfiguration estimate based on 25 percent of lines. In
all other cases, the basis was 10 percent of lines.

These variations exist because GSA has not established a common process
for making fair consideration decisions. GSA did provide guidance on the
fair consideration process to be followed in MAA cities following each
contract award. This guidance provided general background, including the
basis of the requirement in the Federal Acquisition Streamlining Act of
1994; the exceptions to this requirement; and the procedure to be followed
for issuing an MAA task order. However, it did not outline a common
process or identify common costs to be considered other than contract
prices. Rather, according to a GSA official, GSA permitted its regional
offices to define and follow their own fair consideration processes in
order to encourage innovation and to learn which process yields the best
results. However, GSA headquarters has taken no action that would permit
it to learn from any such experiences in order to address inconsistencies
and determine the most suitable process. As a result, variations occur in
the

application of the fair consideration process, contrary to GSA*s stated
interest in ensuring the consistency of the MAA program.

Page 13 GAO- 03- 369 Telecommunications Further, these variations led to a
lack of transparency that could hinder GSA*s ability to obtain full value
from the fair consideration process.

Specifically, although the MAA contracts outline the fair consideration
procedure in broad terms, they do not outline specific aspects of the
process that vary across MAA cities, such as costs that may be considered
by the government in addition to the price of services, or the length of
time

that may be used to compare contractor prices. Because these aspects of
the process are not disclosed, the contractors may find it difficult to
determine their most competitive offers.

GSA*s lack of oversight also hampered its ability to ensure that its fair
consideration processes always complied with appropriate federal
acquisition guidelines. Specifically, in six instances GSA violated the
FAR by incorrectly using agency preference as a basis, in part or as a
whole, for selecting a contractor for an MAA task order. According to this
regulation, designating preferred awardees is not permissible in the award
of task orders valued at more than $2,500. For orders that exceed that
threshold, all contractors in a multiple- award contract must be given a
fair

opportunity to be considered. However, we identified six cases in Boston,
Dallas, Denver, and Indianapolis where decisions explicitly cited agency
preference as a factor for choosing a contractor for task orders above the

$2,500 threshold. 11 These violations of the FAR were allowed to occur
because GSA did not provide adequate oversight to ensure that staff were
correctly applying regulations when conducting fair consideration
processes. As a result, the integrity of the fair consideration process
could not be ensured, and potential savings were lost. In all six cases
the incumbent provider was selected, which was also the higher priced
service provider; selecting the lowest priced contractor in these cases
would have yielded $76, 000 in additional estimated cost savings to those
agencies over the life of the contracts. 11 We identified two additional
cases in Boston citing agency preference as a factor;

however, because adequate documentation was not maintained, we are unable
to determine what services were ordered and therefore whether those
decisions breached the $2,500 threshold.

Page 14 GAO- 03- 369 Telecommunications About one- fifth of GSA*s fair
consideration decisions were not adequately documented. According to the
FAR, documentation of all contractual

actions must be maintained in a manner sufficient to provide a basis for
decisions reached in the acquisition process, and to provide information
for subsequent reviews of those decisions. 12 Out of 483 fair
consideration decisions from regional GSA offices in the 11 cities that we
assessed, the documentation furnished for 91 (19 percent) did not
adequately support the task order award that was made.

One or more of the following four weaknesses were present in documentation
for these 91 decisions:  An explanation of how the fair consideration
decision was made was

absent. Although contracting offices are required by the FAR to maintain
documentation sufficient to constitute a complete history of contracting
actions, this documentation was not available in 66 of the 483 decisions
assessed. Specifically, the documentation of decisions reached during
calendar year 2001 in Boston, Denver, Indianapolis, Los Angeles, New York,
and St. Louis did not include a stated rationale for the decisions
reached. As a result, in these cases it is not possible to determine
whether or not the fair consideration decisions reached by GSA were
justified. A GSA program officer stated that a decision rationale was not
prepared for 53 decisions in Los Angeles and St. Louis that were based on
price alone because of a lack of clarity pertaining to documentation
requirements for those cases. She also stated that 5 decisions in New York
were not documented because of urgency, as those decisions were made
shortly after the September 11th terrorist attacks in that city. Further,
the GSA program officer stated that a decision rationale was not prepared
for the balance of decisions because of administrative oversight.

 The price analysis did not support the decision reached. As part of fair
consideration decisionmaking, GSA usually included in each task order file
an analysis that compared the service prices offered by each contractor
over some defined period of time. In Dallas, Denver, and Indianapolis,
eight task order awards were justified by price comparisons that did not
support the decisions reached. Although price was the sole factor
considered in these cases, the lowest priced contractors, as revealed by
the price comparisons, were not awarded task orders. GSA*s

12 Contract documentation requirements are outlined in section 4. 801 of
the FAR. The FAR and Office of Federal Procurement Policy guidance require
that task order awards be documented adequately in the contract file to
provide a history of the transaction and a complete background for
informed decisions at each step in the acquisition process. Numerous Fair

Consideration Decisions Were Not Adequately Documented

Page 15 GAO- 03- 369 Telecommunications decision documentation does not
explain why these awards were made to higher priced contractors.

 Technical factors were cited but not supported. According to the
procedure defined in the MAA contracts, fair consideration decisions may
be based on price or on a combination of price, technical factors, and
past performance. How these technical factors are weighted depends on the
particular circumstances of each decision. Technical factors were cited as
the reason for fair consideration decisions, either as a whole or in part,
in four MAA cities: Boston, Dallas, Indianapolis, and New York. For three
of these cities, Boston, Dallas, and Indianapolis, we were not able to

determine how these technical factors were applied to support a total of
20 decisions. Contract documentation for these 20 decisions included a
statement that both price and technical factors were considered. However,
in one case, the specific factor considered was not identified. In the
other 19 cases, the specific technical factor was identified, but the
documentation did not specify how it supported the decision reached.

 Other documentation weaknesses were identified in Boston.

Documentation prepared to support fair consideration decisions in Boston
contained two additional weaknesses. In three cases, the decision
documentation suggests that not all MAA contractors were included in those
fair consideration evaluations, but it does not indicate why not all
contractors were considered. Further, the documentation in three other
decisions indicates that price was not considered in these cases, although
price must be considered in all fair consideration decisions.

In three regional offices, GSA has taken some action to improve its fair
consideration documentation. Specifically, in response to concerns that we
initially raised during our prior review of early MAA contract
implementation efforts, 13 GSA improved its decision documentation in
Cleveland and Indianapolis by including additional analyses and clarifying
memorandums in those contract files. In addition, Denver staff have also
taken action to correct their files.

Nevertheless, GSA has yet to take nationwide action to improve its fair
consideration documentation. Currently, weak documentation of fair
consideration decisions makes it difficult to determine the basis upon

13 The results of that review were reported earlier: U. S. General
Accounting Office,

Telecommunications: GSA Action Needed to Realize Benefits of Metropolitan
Area Acquisition Program, GAO- 02- 325 (Washington, D. C.: Apr. 4, 2002).

Page 16 GAO- 03- 369 Telecommunications which a contractor was selected
for a task order. These problems were permitted to occur because GSA did
not establish uniform guidelines to

ensure that all regional offices were documenting fair consideration
decisions in a manner consistent with the FAR. As a result, in 19 percent
of the cases we reviewed, GSA, customer agencies, MAA contractors, and the

Congress do not have assurance that the procedure followed by GSA to award
MAA task orders was properly applied. In MAA multiple- award cities, GSA
attempted to reduce the cost of

telecommunications services by asking contractors to submit price
quotations to compete for task orders. However, the process had mixed
results in the only MAA city in which we could do a partial evaluation.
(We could not do a comprehensive evaluation because of limitations in
documentation.) For acquiring some types of services, substantial savings
were realized by the use of Requests for Quotations (RFQ), but for others,

the savings were not sufficient to offset the cost of paying pre- MAA
prices during the time taken to complete the process.

GSA*s most common approach to selecting contractors for task orders was to
issue an RFQ, rather than basing decisions on published contract prices
alone: specifically, GSA followed this process in 347 out of the 394
decisions reached in the 11 MAA cities in which fair consideration
processes were conducted. 14 Of the 11 cities, GSA issued RFQs to support
fair consideration in 8. (In the 3 other cities* Boston, Los Angeles, and
St. Louis* the documentation was not sufficient to determine whether GSA

issued RFQs.) Denver was the only city, of the 11 reviewed, where GSA
staff documented their actions while reaching most fair consideration
decisions. As a result, Denver was the only city where we could make an

14 Documentation in 89 cases was not sufficient to determine whether or
not an RFQ process was used. Use of Requests for Quotations Produced

Mixed Results, but Limited Data Preclude a Thorough Evaluation

Page 17 GAO- 03- 369 Telecommunications assessment (although still partial
15 ) of the cost- effectiveness of the RFQ process. We were not able to
comprehensively evaluate the costeffectiveness

of the RFQ process across all 11 MAA cities, or to partly assess processes
in any other city, because the documentation maintained was not sufficient
for that purpose.

Despite their limitations, data available on the RFQ process in Denver
indicate substantial differences in savings realized, depending on the
types of local telecommunications services acquired; therefore, this
process may not be cost- effective for acquiring all types of local
telecommunications services. GSA used its MAA contracts in Denver to
acquire two types of services: one type is a large telephone line, known
as a trunk, which is used to interconnect a customer- owned switch, called
a private branch exchange (PBX), 16 to the contractor*s network; the
second type is a voice telephone line served by a switch that is owned and
operated by the contractor. According to our evaluation of Denver*s
records for 119 fair consideration decisions 17 that preceded award of
task orders for these two types of services, the benefit of the RFQ
process (over the life of the contracts) varied between the two.
Specifically, in five of the eight cases where GSA sought to buy PBX
trunks, the MAA contractor waived or reduced service initiation charges,
reduced its monthly recurring cost, or both (no additional benefits were
derived by this process in the three

15 In general, the complete RFQ process has four segments. In the first
segment, GSA prepares and issues the RFQ to the MAA contractors. In the
second, the contractors prepare and submit their RFQ responses. In the
third, GSA reviews and accepts the RFQ responses. Finally, GSA compares
contractor prices and awards task orders. The documentation in 40 of 121
cases in Denver was not sufficient to allow a complete assessment, because
it did not permit us to determine the time it took to complete all
discrete segments of the process, such as the time to compare contractor
prices, which would be essential to a complete assessment. Because of this
limitation, we could not comprehensively evaluate this process, nor can we
present results in precise terms. In 2 of

the 121 decisions, sufficient data were not available to permit any
analysis. The available data for the other 119 decisions do suffice,
however, to permit general observations. Additional information on our
methodology is disclosed in appendix II.

16 A private branch exchange (PBX) is a communications switching system
serving an organization and normally located on the organization*s
premises. 17 Denver made 128 fair consideration decisions, but they issued
RFQs to contractors in only 121 of those decisions. In 2 of those 121
decisions, sufficient data were not available to permit any analysis.

Page 18 GAO- 03- 369 Telecommunications other cases). For PBX services,
the net savings were substantial* an estimated $790,000. 18 In contrast,
for switched voice services, the benefits of using the RFQ

process were less substantial, and the available data suggest that they
were not sufficient to offset the savings deferred while the process was
completed. In 23 of 111 cases, additional cost or price reductions were
obtained in the form of waived or reduced service initiation charges that
did offset the value of savings deferred. However, in 88 cases, the
benefit realized did not offset the deferred savings. Thus, using the RFQ
process to acquire all switched voice services instead of taking immediate
advantage of low MAA contract prices was not cost- effective. GSA was not
able to maximize the value of the RFQ process for the benefit

of its customers, however, because it did not institute performance
measures that would allow it to gauge cost- effectiveness and determine
where the RFQ process would be most suitable for acquiring local
telecommunications services, or that would aid in identifying where its
processes could be improved. Furthermore, because adequate documentation
of fair consideration decisions was not maintained throughout this
program, GSA does not have the data it would need to evaluate its
processes throughout its MAA cities and to make improvements. As a result,
GSA is unable to direct the most suitable and cost- effective use of the
RFQ process in the administration of its MAA

contracts. Inconsistencies in GSA*s process and practices for determining
how it awards MAA task orders to its contractors are hampering its ability
to

18 To estimate net savings, we identified those fair consideration
decisions where the government benefited either through waived or reduced
service initiation charges or through further reductions in contract
pricing, and we estimated the total value of these

benefits. In all cases, we then estimated the value of monthly savings
deferred until the RFQ process was completed. We evaluated the difference
between these two figures to determine the net cost or net savings
associated with the RFQ process. In 40 of the 119 decisions evaluated,
complete data were not available regarding the final segment of this
process (3 cases pertaining to PBX service and 37 cases pertaining to
switched voice services). In those cases, we assumed that the process was
completed at the same time that GSA received the final contractor RFQ
response. Because this assumption may reflect a shorter time period than
use of an actual process completion date for these cases, the effect of
this assumption is to minimize the value of savings deferred, and as a
result, our estimates may overstate the potential net savings and may
understate any potential net loss. The value of net savings is expressed
in constant year 2001 dollars. Conclusions

Page 19 GAO- 03- 369 Telecommunications appropriately administer these
contracts; because these inconsistent processes are not transparent,
contractors may not be able to compete

most effectively. In addition, weaknesses in documenting fair
consideration decisions and inadequate oversight of the process undermine
GSA*s ability to assure customer agencies, MAA contractors, and the
Congress that the procedures it followed to award MAA task orders were
always appropriately and fairly applied. Further, because it did not
establish measures that would enable it to learn from the fair
consideration experiences in its regional offices, GSA was unable to gauge
the cost- effectiveness of RFQ processes so that it could make the most
suitable and effective use of RFQs to acquire local telecommunications
services. As a result, GSA cannot provide assurance that its MAA fair
consideration processes are sound, and that they provide the government
the maximum benefit from the MAA contracts.

We recommend that the Administrator of General Services establish a common
process for GSA to consistently follow in reaching its fair consideration
decisions under the MAA contracts, and that he direct the FTS Commissioner
to oversee the proper application of this process. This common process
should include a uniform time frame for comparing MAA contractor prices,
and it should specify the cost elements (such as reconfiguration costs) to
be considered in those comparisons. Should local conditions warrant
deviation from this common process, we recommend that GSA document these
deviations and communicate them to GSA*s MAA contractors, so that all MAA
stakeholders have a clear and

consistent understanding of the process being followed. This process
should include the management oversight necessary to ensure adherence to
the FAR prohibition against the use of agency preference in decisions on
task orders valued at more than $2,500.

We also recommend that the Administrator of General Services direct the
FTS Commissioner to establish and apply uniform guidelines for documenting
fair consideration decisions that are sufficient to ensure that GSA
appropriately reaches its decisions to award task orders. For each fair
consideration decision, this documentation should include

 the rationale for the decision;  the supporting contractor price
comparison; and  support for other factors considered in reaching the
decision, such as

technical and past performance considerations, as appropriate.
Recommendations for

Executive Action

Page 20 GAO- 03- 369 Telecommunications We further recommend that the
Administrator of General Services direct the FTS Commissioner to develop
performance measures to determine

when the RFQ process best achieves program goals. Once GSA has outcomes
for these measures, it should evaluate the results of its RFQ process to
identify potential improvements and to determine its most suitable and
cost- effective use.

In written comments on a draft of this report, the Administrator of
General Services agreed with our recommendations and indicated that GSA
was acting to implement them. Specifically, GSA has created draft guidance
on its fair consideration process under MAA procurements, and it plans to

disseminate this guidance to all its FTS regional offices by April 11,
2003. According to the Administrator, this guidance addresses all our
recommendations and will ensure consistency in the fair consideration
process and supporting documentation. GSA also provided technical comments
that we have incorporated into this report as appropriate. GSA*s written
comments are presented in appendix III.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we will not distribute it until 30 days from its
issue date. At that time, we will send copies of this report to the
Ranking Minority Member, Committee on Government Reform, and interested
congressional committees. We will also send copies to the Director of the
Office of Management and Budget and the Administrator of the General
Services Administration. Copies will be made available to others on
request. In addition, this report will be available at no charge on our
Web site, at http:// www. gao. gov. Agency Comments

and Our Evaluation

Page 21 GAO- 03- 369 Telecommunications Should you or your staff have any
questions on matters discussed in this report, please contact me at (202)
512- 6240. I can also be reached by Email

at koontzl@ gao. gov. Other key contributors to this report are Scott
Binder, Harold Brumm, Barbara Collier, Kevin E. Conway, Frank Maguire,
Mary Marshall, Charles Roney, and Michael Stiltner.

Sincerely yours, Linda D. Koontz Director, Information Management Issues

Appendix I: Termination Charges and Service Initiation Charges

Page 22 GAO- 03- 369 Telecommunications At your request, we evaluated the
effect of contract termination charges and contract service initiation
charges (SIC) 19 on the results of fair

consideration decisions for awarding task orders in cities with
multipleaward Metropolitan Area Acquisition (MAA) contracts. Under
acquisition contract law, agencies are permitted to consider termination
charges and SICs in contract award decisions.

Our analysis of termination charges showed that they had minimal impact on
fair consideration decisions. The General Services Administration (GSA)
included these charges in 16 contract price comparisons in Dallas, the
only city in which they were relevant. 20 Termination charges had a direct
effect on 5 of 16 fair consideration decisions; in other words, those 5
decisions might have resulted in an award to another contractor if Dallas
had not included the termination charges as part of its contract price
comparisons. 21 Our analysis of SICs showed that they were included as a
cost factor in

GSA*s fair consideration price comparisons in 7 of 11 MAA cities: Boston,
Cleveland, Dallas, Indianapolis, Minneapolis, New York, and Philadelphia.
In these 7 cities there were 272 fair consideration decisions that
included SICs in price comparisons, and SICs were a deciding factor in 61
of these decisions. That is, if SICs had not been part of GSA*s analyses,
the award

decision would have been issued to another contractor in 22 percent of
those decisions. SICs did not affect more decisions primarily because of
the period of time used in comparing contractor prices. In 90 percent of

fair consideration decisions where SICs were identified as a cost factor,
GSA used the contract life- cycle period as the evaluation time frame.
When SICs were amortized over the life of the contract, these charges were
usually not large enough to influence fair consideration decisions.

19 Service initiation charges are charges to a customer by a contractor
for the initiation of a new telecommunications service, such as the
acquisition of a new line or a new feature. 20 Contract termination
charges were a factor in Dallas because termination charges were

part of a Southwestern Bell Aggregated Switch Procurement (ASP) contract
that was awarded before the MAA contracts. That contract imposes a $25.90
charge to disconnect each line from the ASP service when the customer
transitions to a contractor other than Southwestern Bell. (Specifically,
the contract identifies a charge of $19.92 per line. After applying its
surcharge to that amount, GSA charges the agency a disconnect charge of

$25.90.) 21 Three of these decisions were based on price alone, and two
were based on price and technical considerations. It is unclear from the
decision documentation, however, how technical considerations supported
these decisions. Appendix I: Termination Charges and Service

Initiation Charges

Appendix I: Termination Charges and Service Initiation Charges

Page 23 GAO- 03- 369 Telecommunications For the balance of the decisions,
SICs were not included in price comparisons, the treatment of SICs could
not be determined, or cost

comparisons were not completed:  In all 44 decisions in Los Angeles and
in 9 decisions in Boston, no SICs

were included in fair consideration price comparisons.  Contract price
comparisons were not completed to support four fair

consideration decisions in Boston, one in Philadelphia, and one in
Atlanta, because only one MAA contractor was responsive to their RFQs. A
contractor price comparison was also not completed to support one fair
consideration decision in New York City, where the award was based on the
urgency of the requirement.

 In all nine decisions in St. Louis, seven decisions in Boston, five
decisions in New York City, and two decisions in Indianapolis, we could
not determine whether SICs were used in making fair consideration
decisions because the documentation was not sufficient to permit us to
make that determination.

In the remaining MAA city, Denver, SICs were not included in comparisons
of contractor prices; only monthly recurring charges were included for
comparison purposes. However, in 22 of its 128 price comparisons in
Denver, GSA did cite the value of SICs in recommending that task order
awards be made to contractors with a higher monthly recurring cost for
services, because the agency could save more money over the contract life;
we verified the accuracy of those analyses. To show the total cost of the
MAA service in those cases where the recommended contractor charged SICs,
GSA staff in Denver disclosed these charges as a separate item in the
decision results presented to customer agencies. This disclosure was an
amortization analysis indicating the time that it would take for monthly
MAA contract savings to amortize that one- time cost.

Appendix II: Objectives, Scope, and Methodology Page 24 GAO- 03- 369
Telecommunications In our review of the Metropolitan Area Acquisition
(MAA) contracts managed by the General Services Administration (GSA), our
objectives

were to determine (1) whether GSA*s fair consideration process varies
within or among cities, and if so, whether or not variations affect the
process results; (2) whether GSA*s documentation properly and
appropriately supports its fair consideration decisions; and (3) whether
the use of Requests for Quotations in the fair consideration processes
followed by GSA is cost- effective. We also determined whether contract
termination charges and service initiation charges affected GSA*s fair

consideration decisions. We reviewed all fair consideration decisions made
by GSA during calendar year 2001 as part of the MAA contracts* service
ordering process. To determine whether there were variations in the fair
consideration process, we reviewed the fair consideration procedure
outlined in the MAA contracts, applicable acquisition guidelines, and GSA
Federal Technology Service guidance and direction on the fair
consideration procedure. Using the decision documentation maintained by
the GSA regional offices, we then reviewed the steps taken by those
offices in conducting their fair consideration processes. We gathered and
assessed documentary and testimonial explanations for variations within or
among MAA regional offices in their fair consideration processes.

To determine whether GSA*s documentation properly and appropriately
supports its fair consideration decisions, we reviewed appropriate federal
contract administration guidelines including the Federal Acquisition
Regulation (sections 4.801 and 16.505) and Office of Federal Procurement
Policy guidance (May 4, 1999, Memorandum for Agency Senior Procurement
Executives regarding *Competition and Multiple Award Task and Delivery
Order Contracts*), as well as MAA contract language outlining the fair
consideration procedure. We then reviewed the documentation maintained by
GSA*s regional offices to support fair consideration decisions. This
documentation included, where available, contractor price information,
GSA*s analyses that compared contractor prices, and other memorandums
supporting and documenting the decision process. We also reviewed the task
order documentation prepared by GSA following its fair consideration
decision, in order to match the service

ordered with the decision reached. To determine whether the use of
Requests for Quotations (RFQ) in the fair consideration processes followed
by GSA is cost- effective, we reviewed regional offices* documentation to
determine whether data were available that would permit the evaluation of
time taken to complete the fair Appendix II: Objectives, Scope, and

Methodology

Appendix II: Objectives, Scope, and Methodology Page 25 GAO- 03- 369
Telecommunications consideration process. Following our review of the
documentation, we selected Denver as a multiple- award MAA city where the
documentation

available was sufficient to permit evaluation of key aspects of that
process, such as determining the approximate time taken to complete the
RFQ process and the benefits derived from that additional competition.
Specifically, we used data regarding the RFQ issue date and the date when
Denver completed its analysis to determine the time taken to complete

that process in the 79 decisions where those data were available. In the
40 other decisions where data were not available regarding the complete
process (3 cases pertaining to PBX service and 37 cases pertaining to
switched voice services), we assumed that the process was completed at the
same time that GSA received the final contractor RFQ response. 22 We also
examined documentation to determine, for each decision, any additional
benefit realized as a result of the RFQ process, such as lowered monthly
prices or waived or reduced service initiation charges. Where data were
available to determine whether the value of benefits derived from the RFQ
process justified the time required to complete that process, we compared
pre- MAA prices for services with MAA prices, in order to calculate a
baseline savings provided by the MAA contracts. We then evaluated the cost
of the RFQ process exclusively in terms of the monthly savings that were
deferred until the fair consideration process was

completed. We did not include the labor cost expended by GSA or its MAA
contractors in completing this process.

To determine the effect of contract termination charges and service
initiation charges on fair consideration decision results, we reviewed the
price comparisons that were prepared by GSA regional offices. Where

applicable, we calculated prices for services with and without these
additional charges to determine whether the decision supported was
influenced by these charges.

22 Because this assumption may reflect a shorter time period for these
cases, the effect of this assumption is to minimize the time taken to
complete the RFQ process, and therefore the value of savings deferred
during that period. As a result, our estimates may overstate the potential
net savings and may understate any potential net loss.

Appendix II: Objectives, Scope, and Methodology Page 26 GAO- 03- 369
Telecommunications We conducted our review from May 2002 through February
2003, in accordance with generally accepted government auditing standards.

Appendix III: Comments from the General Services Administration Page 27
GAO- 03- 369 Telecommunications Appendix III: Comments from the General

Services Administration

Appendix III: Comments from the General Services Administration Page 28
GAO- 03- 369 Telecommunications (310341)

The General Accounting Office, the audit, evaluation and investigative arm
of Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability of
the federal government for the American people. GAO examines the use of
public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO*s commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO*s Web site (www. gao. gov) contains abstracts
and fulltext files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as *Today*s Reports,* on its
Web site daily. The list contains links to the full- text document files.
To have GAO e- mail

this list to you every afternoon, go to www. gao. gov and select
*Subscribe to daily E- mail alert for newly released products* under the
GAO Reports heading.

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to: U. S. General Accounting Office 441 G Street NW, Room LM
Washington, D. C. 20548 To order by Phone: Voice: (202) 512- 6000

TDD: (202) 512- 2537 Fax: (202) 512- 6061

Contact: Web site: www. gao. gov/ fraudnet/ fraudnet. htm E- mail:
fraudnet@ gao. gov Automated answering system: (800) 424- 5454 or (202)
512- 7470 Jeff Nelligan, managing director, NelliganJ@ gao. gov (202) 512-
4800

U. S. General Accounting Office, 441 G Street NW, Room 7149 Washington, D.
C. 20548 GAO*s Mission Obtaining Copies of

GAO Reports and Testimony

Order by Mail or Phone To Report Fraud, Waste, and Abuse in Federal
Programs Public Affairs
*** End of document. ***