Telecommunications: GSA Has Made Progress in Planning		 
Governmentwide Program but Challenges Remain (15-SEP-04,	 
GAO-04-1085T).							 
                                                                 
The General Services Administration (GSA) has begun planning for 
a governmentwide telecommunications program known as Networx. GSA
issued a request for information in October 2003 that proposed	 
two acquisitions: Networx Universal, which was to provide a full 
range of national and international network services across the  
United States, and Networx Select, which was to provide agencies 
with leading-edge services with less extensive geographic	 
coverage. Contracts under the Select acquisition were to be	 
awarded 9 months after the Universal In February, we testified on
GSA's initial plans and identified four key challenges GSA faced 
in ensuring a successful outcome for the program: structure and  
scheduling, transition planning, service inventories, and	 
performance measures. At the committee's request, GAO assessed	 
GSA's progress in addressing the challenges identified as well as
GSA's efforts to address longstanding issues related to billing. 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-1085T					        
    ACCNO:   A12486						        
  TITLE:     Telecommunications: GSA Has Made Progress in Planning    
Governmentwide Program but Challenges Remain			 
     DATE:   09/15/2004 
  SUBJECT:   Billing procedures 				 
	     Information technology				 
	     Performance measures				 
	     Satellites 					 
	     Service contracts					 
	     Telecommunication					 
	     Telecommunication industry 			 

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GAO-04-1085T

United States Government Accountability Office

GAO	Testimony Before the Committee on Government Reform, House of
Representatives

For Release on Delivery

Expected at time 10 a.m. EDT TELECOMMUNICATIONS

September 15, 2004

 GSA Has Made Progress in Planning Governmentwide Program but Challenges Remain

Statement of Linda D. Koontz,
Director, Information Management Issues

GAO-04-1085T

[IMG]

September 15, 2004

TELECOMMUNICATIONS

GSA Has Made Progress in Planning Governmentwide Program but Challenges Remain

                                 What GAO Found

GSA has addressed several of the significant challenges facing the Networx
program. Work is either planned or underway on other challenges, but
additional efforts will be necessary to fully address them. Specifically:

o  	GSA has addressed concerns about the structure and scheduling of the
two acquisitions, now known as Universal and Enterprise. Instead of a
9-month lag between acquisitions that might complicate agency
decision-making, GSA now plans to issue the requests for proposal (RFP)
for the contracts simultaneously (See figure below). In addition, the
Universal contracts will now require that offerors provide services only
where federal agencies are located, rather than in the entire country, to
allow more potential industry participants to compete-a concern raised in
prior comments.

o  	GSA has solicited for contractor support to assist with the
development of plans to transition to the Networx contracts. However, GSA
has not yet developed procedures to ensure that lessons from past
transitions are applied, or established a transition strategy.

o  	GSA worked with agencies to develop a service-level inventory as input
into the requirements for the new contracts. In addition, it plans to work
with agencies to build a more detailed inventory of currently-used
telecommunications services for use during transition.

o  	GSA plans to implement performance measures that evaluate progress
against the program's goals. However, some of the measures are still under
development, and it does not have a strategy for using the measures to
monitor ongoing program performance.

o  	GSA has reduced the number of billing elements it will track and has
begun a study designed to identify potential improvements in the billing
process, but it lacks a strategy for addressing agency concerns about the
usability of billing data.

Until GSA develops and applies strategies for addressing the outstanding
challenges facing Networx, it risks not being able to deliver all of the
operations and cost improvements outlined in the program's goals.

                 GSA's original and revised key contract dates

                             Original          Original Select        Current 
                             Universal                               schedule 
                             contract schedule contract        (both          
                                               schedule1       contracts)     
                   Draft RFP       Spring 2004     Winter 2005  November 2004 
                     release                                   
                   Final RFP         Fall 2004     Summer 2005     April 2005 
                     release                                   
              Contract award       Winter 2005       Fall 2006     April 2006 

1In its RFI, GSA previously used the name Select to describe the contract
now known as Enterprise.

Source: GSA

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Mr. Chairman and Members of the Committee:

I am pleased to participate in the Committee's hearing on the General
Services Administration's (GSA) next generation governmentwide
telecommunications acquisition program, known as Networx. As you know,
GSA's planning for this program is taking place within an environment of
tremendous change-in the telecommunications industry, in underlying
services and technology, and potentially in the regulatory environment. In
this context, the Networx initiative can be viewed as a significant
opportunity for federal agencies-GSA's customers-to flexibly acquire and
apply innovative telecommunications services offered by industry to
improve their operations.

As you know, GSA issued a request for information (RFI) in October 2003
describing the strategy of the proposed Networx program. At that time, GSA
proposed two acquisitions. Networx Universal was to provide a full range
of national and international network services; offerors were to provide
ubiquitous service across the United States. Networx Select was to provide
agencies with leading edge services and solutions with less extensive
geographic and service coverage than required by Universal. Contracts
under the Select acquisition were to be awarded 9 months after the
Universal contracts. Last February, we testified on GSA's initial planning
efforts and identified four challenges GSA faced in ensuring a successful
outcome for the program. These challenges related to the structure and
timing of the proposed contracts, and the need for transition plans, an
inventory of current services, and effective measures of performance.1

In April, you requested that we assess GSA's progress in addressing the
challenges that we identified, as well as GSA's efforts to address
long-standing issues related to billing. My testimony today presents our
results to date on these topics.

1 GAO, Telecommunications: GSA Faces Challenges in Planning for New
Governmentwide Program, GAO-04-486T, (Washington, D.C.: February 26,
2004).

  Results in Brief

In brief, GSA has taken steps to address several of the significant
challenges facing the Networx program. Work is either planned or underway
on other challenges, but additional efforts will be necessary to fully
address these challenges. Specifically:

0M	GSA has addressed concerns about the time period between contracts by
planning to award all contracts simultaneously. In addition, the Universal
contracts will now require that offerors provide services where federal
agencies are currently located, rather than across the entire country, to
potentially allow more industry participants to compete.

0M	GSA has solicited quotations for contractor support to assist with the
development of plans to transition to the Networx contracts. However, GSA
has not yet developed procedures to ensure that lessons from past
transitions are applied, nor has it established a transition timeline.

0M	GSA worked with agencies to develop a service-level inventory as input
into the requirements for the new contracts. In addition, GSA plans to
work with agencies to build a more detailed inventory of currently-used
telecommunications services for use during transition.

0M	GSA plans to implement performance measures that evaluate progress
against the program's goals. However, some of the measures are still under
development, and it does not have a strategy for using the measures to
monitor ongoing program performance.

0M	GSA has reduced the number of billing elements it will track, and has
begun a study designed to identify potential improvements in the billing
process and associated administrative costs. However, it lacks a strategy
for addressing agency concerns about the usability of billing data.

To prevent unresolved challenges from hampering GSA's efforts to provide
agencies with the services they need, we recommend that it finalize and
implement processes for managing transition efforts, measuring program
performance, and resolving agency concerns over the usability of billing
data.

My remarks today are based on audit work conducted at GSA headquarters,
where we reviewed program planning documents and public presentations,
interviewed program officials, and attended a public industry forum on
August 11, 2004. We also reviewed analyses conducted by GSA and its
contractors as well as our previous work on the Federal Telecommunications
System 2001 (FTS2001) and related contracts. We conducted our work between
May and September 2004 in accordance with generally accepted government
auditing standards.

Background

GSA's Federal Technology Service is responsible for ensuring that federal
agencies have access to the telecommunications services and solutions
needed to meet mission requirements. Currently, GSA uses a series of
contracts intended to meet agency needs for various services.
Specifically, it awarded two large, governmentwide contracts for
long-distance services-one to Sprint in December 1998 and one to MCI
WorldCom in January 1999. Under the terms of these contracts, known
together as FTS2001, each firm was guaranteed minimum revenues of $750
million over the life of the contracts, which run for four base years and
have four 1-year extension options. If all contract options are exercised,
those contracts will expire in December 2006 and January 2007,
respectively. According to GSA, federal agencies spent approximately $614
million on FTS2001 services during fiscal year 2003.

Related governmentwide telecommunications services are provided through
other additional GSA contracts: the Federal Wireless Telecommunications
Service contract and the FTS Satellite Service contracts. The wireless
contract was awarded in 1996 to provide wireless telecommunications
products and services to all federal agencies, authorized federal
contractors, and other users. It is scheduled to expire in November of
this year. Satellite services are provided through a series of contracts
for a variety of commercial off-the-shelf satellite communications
products and services,

including mobile, fixed, and broadcast services. These contracts will
expire in 2007.

We have periodically reviewed the development and implementation of the
FTS2001 program and assessed its progress. In March 2001 we reported to
you on the delays encountered during the government's efforts to
transition from the previous FTS2000 to the FTS2001 contracts, the reasons
for those delays, and the effects of the delays on meeting FTS2001 program
goals of maximizing competition for services and ensuring best service and
price.2 We recommended that GSA take numerous actions to facilitate those
transition efforts. In April 2001 testimony before you, we reiterated
those recommendations and noted that the process of planning and managing
future telecommunications service acquisition would benefit from an
accurate and robust inventory of existing telecommunications services.3
Ultimately, GSA acted on our recommendations and the transitions were
successfully completed.

GSA is now planning its Networx acquisition to replace the contracts that
are expiring. GSA has worked with representatives of federal agencies, the
telecommunications industry, and other interested parties to lay the
groundwork for the new program. Agencies work directly with GSA and
through the Interagency Management Council (IMC), a group of senior
federal information resource officials who advise GSA on issues related to
telecommunications contracts. GSA and the IMC proposed eight goals for the
Networx program, including an emphasis on ongoing support and
performance-based contracts. The table lists each of the program goals.

2GAO, FTS2001: Transition Challenges Jeopardize Program Goals, GAO-01-289
(Washington, D.C.: March 30, 2001).

3GAO, FTS2001: Contract Transition Delays and Their Impact on Program
Goals, GAO01-544T (Washington, D.C.: April 26, 2001).

Program Goals Proposed for Networx

Service Continuity: Contracts should include all services currently
available under FTS2001 to facilitate a smooth transition.

Competitive prices: Prices should be better than those available elsewhere
in the telecommunications marketplace.

High quality services: Contracts should ensure a high quality of service
throughout the life of the contracts.

Full service vendors: Vendors should be capable of providing a broad array
of services to avoid duplication of administrative and contracting costs.

Alternate sources: Agencies should be able to choose from a greater number
of vendors and have access to emerging technologies.

Operations Support: GSA should provide fully integrated ordering, billing,
and inventory management.

Transition assistance and support: Contracts should include provisions for
transition support.

Performance-based contracts: Contracts should be performance based and
include service level agreements where possible.

Source: GSA.

In October 2003, GSA released a RFI describing its initial strategy for
the Networx program. In the RFI, GSA proposed two acquisitions-Networx
Universal and Networx Select. The Universal acquisition was expected to
satisfy requirements for a full range of national and international
network services. According to GSA, this acquisition was intended to
ensure the continuity of services and prices found under expiring
contracts that provide broad-ranging service with global geographic
coverage. Universal offerors were to provide a full range of voice and
data network services, managed networking services and solutions, and
network access, wireless, and satellite communications services. In
addition, offerors were to provide these services at all locations across
the United States. Consequently, this acquisition was expected to result
in multiple contract awards to relatively few offerors because few were
expected to be able to satisfy the geographic coverage and comprehensive
service requirements.

By contrast, GSA planned to award multiple contracts for a more
geographically limited set of services under the Select acquisition. These
contracts were to provide agencies with leading edge services and
solutions with less extensive geographic and service coverage than that
required by Universal. Awards under the Universal and

Select acquisitions were to be staggered; the Select contracts were to be
awarded 9 months after the Universal contracts.

In February 2004, we testified on GSA's initial planning efforts in
support of FTS Networx.4 After reviewing the RFI and the comments
submitted in response, we identified four major challenges that GSA was
likely to face as it proceeded:

0M	structuring and scheduling the Networx contracts to ensure that federal
agencies have available to them the competitively priced
telecommunications services they need to support their mission objectives;

0M	initiating the implementation planning actions needed to ensure a
smooth transition from current contracts to Networx;

0M	ensuring that adequate inventory information is available to planners
to provide an informed understanding of governmentwide requirements; and

0M	establishing measures of success to aid acquisition decision making and
enable effective program management.

We noted that addressing these challenges would take solid leadership from
GSA and stakeholder commitment. Without such actions, we concluded, the
potential of Networx may not be realized.

We have also previously reported on billing difficulties in GSA's
telecommunications programs. For example, during the transition to
FTS2001, we found that several agencies were billed at improper rates.
Several agencies delayed their transition to the new contract because
resources planned for the transition were redirected to deal with the
billing errors.5 We recommended numerous actions to improve the transition
process, which GSA successfully implemented.

4 GAO-04-486T.

5 GAO, FTS2001: Transition Challenges Jeopardize Program Goals,
GAO-01-289, (Washington, D.C.: March 30, 2001).

  Structure and Timing of Contracts Have Been Revised in Response

to Comments As we testified in February, the responses to the RFI
identified a series of concerns about GSA's proposed acquisition strategy.
Some respondents commented that only the traditional long-distance
companies would be able to meet the requirements of the larger contract.
Others were concerned that the 9-month lag between contracts would
complicate decision making by asking agencies to decide on a vendor for
the more comprehensive contract before being able to review the options
available under the more limited contracts.

GSA recently revised its contracting strategy in response to these
concerns. GSA still intends to meet the proposed program goals through two
sets of contracts. The first, known as Networx Universal, requires
offerors to provide 39 services everywhere a federal office is locate, as
well as anywhere else the company offers those services commercially.
Required services include toll-free telecommunications, Internet services,
and cellular services. Ten other services, including satellite
communications and paging services, can be offered but are not required.
The second, now known as Networx Enterprise, requires offerors to provide
nine mandatory services in nearly 300 locations nationwide specified by
GSA; another 42 services can be offered at the option of the company. The
services required under the Enterprise contracts focus on Internet-based
offerings and related security and management services. GSA intends to
structure the contracts so that the Universal offering meets the program
goals of service continuity and full service vendors, while the Enterprise
contracts meet the goal of providing alternative sources. Both sets of
contracts are intended to meet the other five goals, and each is planned
to run for 4 years with three 2-year options.

The main difference between its current strategy and the plan outlined in
the RFI is that the geographic coverage requirements for the Universal
contracts are less stringent. Instead of having to offer services in the
entire country, service providers need only offer service where federal
offices are located (as well as where the

provider offers the service commercially) to qualify to compete for the
contracts. This change resulted in a 76 percent reduction in the locations
carriers must serve to be eligible to compete for the contracts. In turn,
this increased the percentage of the anticipated service area that
carriers could reach with their own networks. According to program
officials, they discussed the changes with industry representatives, who
are satisfied with the changes. In addition, industry representatives did
not raise any questions about the new structure at the August industry
forum.

GSA has also addressed the concern over the time between contracts, by
changing the proposed 9-month lag between the two types of contracts. GSA
currently plans to issue the requests for proposal (RFP) for both the
Universal and the Enterprise contracts simultaneously. This table lists
the key dates from the old and new contract schedules.

                 GSA's original and revised key contract dates

Original Universal Original Select Current schedule contract schedule
contract schedule1 (both contracts)

Draft RFP release Spring 2004 Winter 2005 November 2004

Final RFP release Fall 2004 Summer 2005 April 2005

Contract award Winter 2005 Fall 2006 April 2006

1In its RFI, GSA previously used the name Select to describe the contract
now known as Enterprise.

Source: GSA

  Transition Planning is Just Beginning

As we reported to you in March 2001, the current FTS2001 contracts got off
to a rocky start as significant delays in transitioning to the new
contracts hindered timely achievement of program goals.6 Factors
contributing to delays in that transition included a lack of data needed
to accurately measure and effectively manage the transitions, inadequate
resources, and other process and procedural issues. In testimony before
you in April 2001 we stated that the value

6 GAO-01-289.

of that critical program to customer agencies would be improved through
the application of identified lessons learned. Those in industry who
commented on the Networx RFI also noted the need for strong and
comprehensive program management to ensure a successful transition,
including issues such as the availability of accurate inventories and
well-defined contractor and government responsibilities.

The IMC has established various subgroups to assist it in carrying out its
responsibilities. One of these subgroups-the Transition Working
Group-looked at transition issues from past transitions, and in April 2003
identified 22 lessons learned. Some of the lessons identified include the
need for accurate inventory information and the need to be flexible in
transition planning. The group also drafted a document intended to clearly
define the responsibilities of GSA and the agencies for transition-related
costs, with the goal of eliminating some of the confusion experienced in
the past transition.

However, GSA has not yet developed procedures to ensure that lessons from
past transitions are applied, nor has it established a timeline of actions
needed during the transition process. GSA released a request for
quotations on August 16 to solicit contract help with developing a
transition plan, including procedures intended to prevent the types of
errors that happened in the previous transition. GSA expects to award a
contract to the selected contractor by October. According to program
officials, GSA will be able to make more progress on this issue when the
contractor begins. They also agree that a transition timeline is an
important management tool, and that they will begin developing such a
timeline soon. GSA believes that with almost 2 years until agencies are
scheduled to choose carriers under the new contracts, there is still time
to plan for an effective transition. However, until GSA completes these
planned actions, it risks repeating the transition problems experienced in
the past. To prevent such an occurrence, and to ensure that transition
plans are developed with adequate time to be implemented, we are
recommending that GSA develop a transition timeline and procedures to
prevent the reoccurrence of identified difficulties from previous
transitions.

  GSA Has Developed an Inventory of Current Services, and Has

Begun Planning for a More Detailed Inventory We testified in February that
it is important that GSA and its customer agencies have a clear
understanding of agency service requirements in order to make properly
informed acquisition planning decisions. According to our ongoing research
on best practices in telecommunications acquisition and management, clear
understanding comes at least in part from having an accurate baseline
inventory of existing services and assets. More specifically, an inventory
allows planners to make informed judgments based on an accurate analysis
of current requirements and capabilities, emerging needs that must be
considered, and the current cost of services. In addition, the FTS2001
transition lessons learned document identified the lack of a good starting
inventory as the cause of problems in a number of areas and a contributor
to the slow start on the FTS2001 transition. Specifically, the IMC's
Transition Working Group identified accurate inventories as a requirement
for conducting an efficient transition.

GSA is addressing the need for inventory information in two ways. First,
GSA developed an inventory of the services currently used by its customers
by reviewing the existing contracts, modifications to them, and billing
information. Agencies then verified this information to ensure the listed
services meet their current and anticipated future needs. According to GSA
officials, this inventory was used in acquisition planning, for example,
to justify its decision on which services to include in the proposed
Networx contracts and which to make mandatory. Second, GSA is planning to
work with its customer agencies to develop more detailed inventories for
transition purposes. For example, the transition inventory would not only
identify which services are used, but it would also identify where those
services are used and how much. According to program officials, GSA plans
to provide agencies with initial information based on billing and ordering
data in November. Agencies will then verify the GSA data using their own
data sources. Because service changes are expected to continue to occur,
GSA expects this process to continue until January 2006. Program officials
also told

us that once it is in place, the inventory process could be used as an
ongoing management tool.

  GSA Is Developing Performance Measures, but not a Strategy for

Applying Them Our research into recommended program and project
measurement practices highlights the importance of establishing clear
measures of success to aid acquisition decision making as well as to
provide the foundation for accountable program management. As we testified
earlier in the year, such internal measures define what must be done for a
project to be acceptable to the stakeholders and users affected by it;
these internal measures enable measurement of progress and effectiveness
in meeting objectives. Further, in keeping with the principles of the
Government Performance and Results Act (GPRA), programs can be more
effectively measured if their goals and objectives are outcome-oriented
(i.e., focused on results or impact) rather than output-oriented (i.e.,
focused on activities and processes).

According to agency officials, GSA plans to measure its performance
against each of the program's goals. For some of these goals, GSA has
already determined how it will measure progress. For example, GSA will
measure progress towards the goal of competitive prices using the same
process it currently uses-a direct comparison of contract rates to market
rates. For other goals, GSA officials stated that performance will be
evident from the contract selections. For example, the outcome of the goal
of using full-service providers will be known when the providers are
selected. However, for some goals, GSA has not yet determined how it will
measure progress. For the goals of high quality service and operations
support, GSA officials stated that specific metrics are

still in development as part of their efforts to develop service level
agreements for vendors.7

While the approach described by program officials seems reasonable, GSA
has not determined when it will finalize the measures still under
development. In addition, GSA has not developed a strategy outlining how
it will use key measures to monitor ongoing program performance. Until GSA
develops a firm strategy, it lacks assurance that the required program
measures will be in place at the appropriate time. As a result, its
measures may have limited effect as a program management tool. We
therefore recommend that GSA finalize its efforts to identify measures to
evaluate progress towards program goals and develop a strategy for using
those measures for ongoing program management.

  Number of Billing Elements Has Been Reduced, but Other Billing

Issues Are Unresolved Clear, accurate, and complete billing records are an
important internal control: they record the detail of each
telecommunications transaction for later verification and management
oversight. However, bills and billing systems have been a problem in the
current generation of FTS programs and thus continue to be a concern for
their proposed replacement. In addition to the previous experiences
discussed earlier, both the telecommunications carriers and GSA's customer
agencies have more recently raised concerns about billing. Carriers asked
GSA to address inconsistent and sometimes conflicting billing requirements
in different regions. Some also questioned whether the number of billing
elements-the data fields tracked in the billing system-was excessive.
Agencies commented that the way in which they currently receive billing
information hampers their efforts to reconcile invoices and produces
inaccurate and incomplete bills. A few agencies

7 These are agreements between suppliers and customers to provide business
services under specific terms.

commented that billing difficulties have cost them hundreds of thousands
of dollars.

In response to industry's concern about the number of billing elements,
GSA reduced the number of elements required under the Networx contracts.
In its RFI, GSA proposed the use of 513 billing elements. Working in
collaboration with the IMC and the Industry Advisory Council, GSA reduced
the number of billing data elements to 196 (a reduction of 62 percent),
with 54 elements being government specific. In response to the concerns
about the accuracy of billing information, GSA plans to introduce service
level agreements with the carriers to hold the carriers accountable for
the accuracy of the billing data they provide.

GSA has also begun examining potential alternatives to the way it
currently consolidates carrier billing data and provides it to some
agencies. The study is considering several options, including the option
of contracting out bill consolidation, and the potential costs and
benefits of the options. According to program officials, one of the goals
of the study is to identify potential savings in administrative costs.

However, GSA has not undertaken any similar efforts to identify the causes
of agency difficulties in billing and address them. GSA officials
attributed part of the uncertainty over future billing procedures to a
lack of consensus among industry on how to improve the process. Regardless
of the plans of industry, if GSA does not develop a billing process that
better meets the needs of its customers, the agencies are likely to
continue to experience difficulties in managing their telecommunications
costs. To better address this challenge, we are recommending that GSA
develop and implement a strategy for addressing the billing data issues
raised by its customer agencies.

  Summary

Mr. Chairman, the Networx program represents a significant opportunity for
GSA and the federal government to both expand the menu of
telecommunications services available to

agencies and continue to provide quality and value in the services that
agencies select. The size and scope of the planned contracts present a
formidable management challenge, and GSA is to be commended for working
with its customers and industry to collaboratively address concerns about
the structure and timing of the contracts and the need for a current
service inventory for use in identifying contract requirements. GSA has
begun efforts to address other challenges, such as the need for transition
plans, the use of performance measures, and an effective billing system,
but it lacks strategies for ensuring that each of these issues is
adequately addressed. As the planned release of RFPs approaches, GSA will
have less time to finalize those decisions still outstanding and implement
the resulting actions. To demonstrate the appropriate level of planning
and commitment necessary to ensure that agencies have access to necessary
telecommunications services, we are recommending that GSA take additional
steps to resolve these issues in a timely manner.

Mr. Chairman, this concludes my statement. I would be pleased to answer
any questions that you or other members of the Committee may have at this
time.

  Contacts and Acknowledgements

Should you have any questions about this testimony, please contact me by
e-mail at [email protected] or James Sweetman at [email protected]. We can
also be reached at (202) 512-6240 and (202) 512-3347, respectively. Other
major contributors to this testimony were Jamey Collins, Samuel Garman,
and Nancy Glover.

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