Telecommunications: GSA Faces Challenges in Planning for New	 
Governmentwide Program (26-FEB-04, GAO-04-486T).		 
                                                                 
The Genera1 Services Administration (GSA) has initiated planning 
for its next-generation telecommunications acquisition program,  
known as Networx, which will replace the current Federal	 
Telecommunications System (FTS) 2001 for longdistance and	 
international services. It will also replace contracts for	 
wireless and satellite communications products and services.	 
Planning for this acquisition is occurring within an environment 
of tremendous change--in the industry, in underlying services and
technology, and potentially in the regulatory environment. In	 
this context, Networx can offer a significant opportunity for the
federal government to flexibly acquire telecommunications	 
services at competitive rates and apply innovative solutions to  
improving agency operations. At the request of the Chairman of	 
the House Committee on Government Reform, GAO is providing an	 
overview of acquisition planning steps completed to date, along  
with its assessment of challenges facing GSA and federal agencies
as this acquisition proceeds.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-486T					        
    ACCNO:   A09364						        
  TITLE:     Telecommunications: GSA Faces Challenges in Planning for 
New Governmentwide Program					 
     DATE:   02/26/2004 
  SUBJECT:   Telecommunication					 
	     Procurement planning				 
	     Strategic planning 				 
	     Systems conversions				 
	     FTS Networx					 
	     Federal Telecommunications System 2001		 

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GAO-04-486T

United States General Accounting Office

GAO Testimony

Before the Committee on Government Reform, House of Representatives

For Release on Delivery
Expected at 10:00 a.m. EST
Thursday,
February 26, 2004

TELECOMMUNICATIONS

        GSA Faces Challenges in Planning for New Governmentwide Program

Statement of Linda D. Koontz
Director, Information Management Issues

GAO-04-486T

Highlights of GAO-04-486T, testimony before the Committee on Government
Reform, House of Representatives

The Genera1 Services Administration (GSA) has initiated planning for its
next-generation telecommunications acquisition program, known as Networx,
which will replace the current Federal Telecommunications System (FTS)
2001 for longdistance and international services. It will also replace
contracts for wireless and satellite communications products and services.

February 26, 2004

TELECOMMUNICATIONS

GSA Faces Challenges in Planning for New Governmentwide Program

Over the past year, GSA has acted to ensure that all interested parties-
including industry and agency users-have had a chance to comment on the
development of the successor to FTS2001 and associated contracts. In its
planning for the Networx acquisition, GSA cited five goals for the
program: (1) continuity of telecommunications services, (2) best value,
(3) strong competition, (4) a broad range of services and providers in a
changing marketplace, and (5) expanded opportunities for small businesses.
To achieve this, GSA plans two acquisitions: Networx
Universal-broadranging services with global coverage, and Networx
Select-leading-edge services but more geographically limited. The table
below displays GSA's proposed schedule for the two contracts.

GSA's proposed schedule for Networx Universal and Networx Select
acquisitions as ofPla

occurring within an environment of       Milestone Networx Universal      
tremendous change-in the                 Networx Select                   
industry, in underlying services and     Draft RFPa released Spring 2004  
                                            Winter 2005                      
technology, and potentially in the       Draft RFP responses due Summer   
                                                   2004 Spring 2005          
                                            Final RFP released Fall 2004     
regulatory environment. In this          Summer 2005                      

nning for this acquisition is February 2, 2004

context, Networx can offer a Final RFP responses due Winter 2004 Fall 2005

significant opportunity for the federal government to flexibly acquire
telecommunications services at competitive rates and apply innovative
solutions to improving agency operations.

At the request of the committee Chairman, GAO is providing an overview of
acquisition planning steps completed to date, along with its assessment of
challenges facing GSA and federal agencies as this acquisition proceeds.

www.gao.gov/cgi-bin/getrpt?GAO-04-486T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Linda D. Koontz at (202)
512-6240 or [email protected].

Source selection complete Fall 2005 Summer 2006

Contract award(s) Winter 2005 Fall 2006 aRequest for proposals

Source: GSA

To take full advantage of the opportunities offered in these new
contracts, GSA will need to address four key challenges:

o  	Ensuring that an adequate inventory of information about existing
telecommunications services and assets is available, to give planners an
informed understanding of governmentwide requirements.

o  	Establishing specific measures of success to aid acquisition decision
making and effective program management.

o  	Structuring and scheduling the contracts to ensure timely delivery of
competitively priced telecommunications services that meet agency mission
needs.

o  	Ensuring a smooth transition from the current contracts by initiating
appropriate implementation planning actions.

Both leadership from GSA and commitment from stakeholders in resolving
these issues will be essential to establishing efficient, cost-effective,
and secure telecommunications services. If this can be achieved, the
Networx contracts will be optimally positioned to leverage the power and
creativity of today's telecommunications marketplace to carry the federal
government forward well into the 21st century.

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 the federal government to flexibly acquire and apply
innovative telecommunications services offered by industry to improve
agency operations. As requested, today I will discuss the background for
this current initiative and provide an overview of the acquisition
planning activities completed to date. I will also describe four
challenges that GSA and executive branch agencies will need to address in
the next few months as planning for this major acquisition proceeds.

In brief, over the past year, representatives of GSA, federal agencies,
the Interagency Management Council (IMC), the telecommunications industry,
and other interested parties have engaged in planning and dialogue over
the replacement for the current Federal Telecommunications System (FTS)
2001 and associated contracts. This replacement acquisition program is
known as FTS Networx.1 GSA and the IMC have taken steps to ensure that all
interested parties have had an opportunity to comment on at least a
portion of their plans for this major initiative and to help refine their
acquisition strategy. Nevertheless, significant challenges remain for GSA
and the IMC to address in the coming months to help ensure a successful
outcome for a more clearly and fully defined Networx program with respect
to

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

o  	establishing measures of success to aid acquisition decision making
and enable effective program management;

o  	structuring and scheduling the Networx contracts to ensure that
federal agencies have available to them the competitively priced

1The IMC consists of senior government information resources management
officials from agencies using FTS 2000. The council provides guidance to
GSA officials in administering telecommunications contracts.

telecommunications services they need to support their mission objectives;
and

o  	initiating the implementation planning actions needed to ensure a
smooth transition from current contracts to Networx.

My remarks today are based on our previous reviews of GSA's federal
telecommunications programs, including implementation of the current
FTS2001 contracts, as well as research to date into sound
telecommunications planning and management practices that you recently
requested. In addition, we reviewed comments submitted by industry and
federal agencies to a request for information issued by GSA last October
to provide information to potential industry offerors regarding its
Networx program plan, and to solicit comments from industry regarding its
acquisition strategy. We also attended the Industry Advisory Council's
February 17, 2004, forum held to obtain additional industry views on the
Networx program and strategy.2 We conducted our work in January and
February 2004, in accordance with generally accepted government auditing
standards.

Background 	According to GSA, its Federal Technology Service, in
conjunction with the IMC, is responsible for ensuring that federal
agencies have access to the telecommunications services and solutions
needed to meet mission requirements. Its current program to provide long-
distance telecommunications services-FTS2001-has two goals: to ensure the
best service and price for the government, and to maximize competition for
services.

In implementing this program strategy, GSA awarded two 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, 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

2The Industry Advisory Council is a broadly based organization of
information technology professionals representing more than 400 companies
nationwide that provide products and services to the government. Member
firms include telecommunications companies, hardware and software
providers, systems integrators, and professional services companies.

agencies spent approximately $614 million on FTS2001 services during
fiscal year 2003 alone.

Related governmentwide telecommunications services are provided by other
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. The
satellite services contracts are a series of contracts for a variety of
commercial off-the-shelf satellite communications products and services,
including mobile, fixed, and broadcast services. According to GSA, these
contracts will expire in late 2004 and in 2007, respectively.

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 FTS 2000 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.3 We recommended that GSA take numerous actions to
facilitate those transition efforts. In April 2001 in 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.4 Ultimately, GSA acted on our recommendations
and the transitions were successfully completed.

GSA is now planning its FTS Networx acquisition program, including the
awarding of new governmentwide contracts for a broad range of long
distance and international voice and data communications services,
wireless services, and satellite telecommunications services. These
contracts are intended to replace the existing FTS2001, Federal Wireless
Telecommunications Service, and FTS Satellite Service contracts. GSA and
the IMC has identified five goals for the Networx acquisition program:

3U.S. General Accounting Office, FTS2001: Transition Challenges Jeopardize
Program Goals, GAO-01-289 (Washington, D.C.: March 30, 2001).

4U.S. General Accounting Office, FTS2001: Contract Transition Delays and
Their Impact on Program Goals, GAO-01-544T (Washington, D.C.: April 26,
2001).

  GSA's Networx Program Development Actions Are Continuing

o  	Meet agency needs for a comprehensive acquisition that provides
continuity of current telecommunications services and solutions.

o  	Obtain best value (lowest prices while maintaining quality of service
levels) for all services and solutions.

o  	Encourage strong competition for the initial contract award(s), and
ensure continuous competition throughout the life of the program.

o  	Respond to the changing marketplace by providing agency access to a
broad range of services and service providers.

o  Provide expanded opportunities for small businesses.

To achieve those goals, the program calls for two acquisitions-Networx
Universal and Networx Select. The Networx Universal contracts are expected
to satisfy requirements for a full range of national and international
network services. According to GSA, Networx Universal seeks to ensure the
continuity of services and prices found under expiring contracts that
provide broad-ranging service with global geographic coverage. GSA expects
all Networx Universal offerors to provide a full range of voice and data
network services, managed networking services and solutions, and network
access, wireless, and satellite communications services. This acquisition
is expected to result in multiple contract awards to relatively few
offerors because few are expected to be able to satisfy the geographic
coverage and comprehensive service requirements. GSA also intends to apply
competitive incentives to obtain best value for its customer agencies,
although those incentives are not yet defined. Further, GSA expects to
establish minimum revenue guarantees for these contracts.

In contrast, GSA plans to award multiple contracts for a more
geographically limited set of services under Network Select. GSA generally
describes these Select contracts as providing agencies with leading edge
services and solutions with less extensive geographic and service coverage
than that required by Networx Universal; specific Networx Select service
requirements have not yet, however, been defined. Details of pricing
structures and Select service delivery mechanisms are planned to be
provided in the Networx Select request for proposals, which GSA intends to
release in the summer of 2005.

GSA anticipates awarding both the Networx Universal and the Networx Select
contracts well before the expiration of the FTS2001 contracts.

Networx Select will be awarded approximately 9 months after Networx
Universal. Table 1 displays GSA's schedule for these two acquisitions:

Table 1: GSA's proposed schedule for Networx Universal and Networx Select
acquisitions as of February 2, 2004

                                 Milestone Networx Universal   Networx Select 
                       Draft RFPa released        Spring 2004   Winter 2005   
                   Draft RFP responses due        Summer 2004   Spring 2005   
                        Final RFP released          Fall 2004     Summer 2005 
                   Final RFP responses due        Winter 2004    Fall 2005    
                 Source selection complete          Fall 2005     Summer 2006 
                         Contract award(s)        Winter 2005    Fall 2006    

  Challenges Remain Before Finalizing the Networx Acquisition Program Strategy

Source: GSA

aRequest for proposals

Notwithstanding the acquisition planning activities completed by GSA and
the IMC to date, these entities face significant challenges in finalizing
their program strategy to ensure that Networx is appropriately defined,
structured, and managed to deliver those telecommunications services and
solutions that will enable federal agencies to most efficiently and
effectively meet their mission needs. Specifically, these challenges
include:

o  	Ensuring that adequate inventory information is available to planners
to provide an informed understanding of governmentwide requirements.

o  	Establishing measures of success to aid acquisition decision-making
and enable effective program management.

o  	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.

o  	Initiating the implementation planning actions needed to ensure a
smooth transition from current contracts to Networx.

Ensuring Adequate 	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

Inventory Information

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.
Although leading organizations acknowledge that establishing and
maintaining such an inventory may be difficult, they view this baseline as
an essential first step to high-quality telecommunications requirements
analysis, and subsequent sourcing decisions associated with meeting those
requirements.

Despite this importance, it is not clear whether GSA and federal agencies
have yet established the comprehensive, accurate inventories needed to
support Networx planning. Mr. Chairman, you followed up on this issue in
your December 17, 2003, letter to GSA asking to what extent such detailed
inventories were currently being maintained and kept accurate and
up-todate for use both in acquisition planning and future contract
transitions. In his response, the Administrator of General Services
identified sources of information provided by GSA and the FTS2001
vendors-for example, monthly billing information-that would be helpful to
agencies in developing inventories of existing services. In addition, the
Administrator noted that GSA is examining methods of incorporating better
billing and inventory data into the Networx program where practical.
However, the Administrator did not provide specific information on the
extent to which these inventories exist, or whether agencies are
periodically validating that information to ensure that it is accurate and
complete. Further, the Administrator acknowledged that the accuracy and
completeness of telecommunications service inventories varies among
agencies. As a result, without a clear understanding by GSA and its
customer agencies of the FTS2001 services used today and the applications
they support, it is unclear how properly informed Networx acquisition
planning decisions can be made.

Establishing Measures of Success

Our research into recommended program and project measurement practices,
which we affirmed in discussions with private-sector telecommunications
managers, 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. Such measures define what
must be done for a project to be acceptable to the stakeholders and users
affected by it, and in so doing enables measurement of progress and
effectiveness in meeting objectives.

Although GSA has established program goals, it has not yet defined a
comprehensive set of corresponding performance measures for the Networx
acquisition program. According to GSA's Assistant Commissioner for Service
Delivery/Development, one of the criteria for measuring Networx success
will be identical to that used for FTS2001-that is, savings as measured by
contract service costs compared with best commercial pricing. Further,
according to this official, this was the sole measure reported to the
Office of Management and Budget for FTS2001. While low pricing is an
important criterion reflected in program goals, GSA has not yet defined
measures about how well its final acquisition plan will deliver the value
(service plus price) that agencies need to improve their operations and
meet their mission needs. For example, GSA's Networx environmental
assessment indicates that agencies want this program to support network
planning and optimization, include simple and understandable fees, provide
management of contracts and contractors on the agencies' behalf, and
include other elements of value. GSA's Assistant Commissioner for Service
Delivery/Development recognizes the importance of having such measures,
and told us that GSA would be establishing such measures coincident with
its actions to finalize the Networx Universal RFP in the coming months. It
will be important that GSA follow through on this commitment to establish
that appropriate set of measures to evaluate the intended business value
of the Networx program and enable the effective management of this
significant program over time.

Structuring and Scheduling Contracts to Deliver Needed Services

Once agency requirements are adequately understood and measures of success
defined, structuring and scheduling the Networx contracts to successfully
encourage industry competition to obtain low prices and high-quality,
innovative services becomes the next challenge. The varying views of
industry representatives commenting on the request for information raised
fundamental questions about the soundness of the proposed acquisition
approach for accomplishing this. For example, large, interexchange
carriers, like those that hold the current FTS2001 contracts, generally
agreed with the broad scope of the Universal contracts. They further
suggested that services offered under Networx Select and Universal should
be mutually exclusive, and that all carriers should be allowed to compete
for both.

In contrast, other carriers criticized the approach. These carriers
asserted that some major telecommunications providers might be precluded
from bidding on the Networx Universal contracts because of the broad
service and ubiquitous geographic coverage requirements described in the
request

for information. For example, one vendor stated that it was quite possible
that only traditional long distance carriers could effectively bid for
Universal, thus denying many players in the industry a realistic chance to
compete for major portions of the federal long distance business. One
carrier noted that, based on the procurement timetable, the timing of the
award for the Select contracts would minimize the opportunity to compete
for long-distance telecommunications services. Because of the 9-month lag
between the Universal and Select acquisitions indicated in the proposed
acquisition schedule, agencies could be asked to make decisions regarding
their use of awarded Universal service contracts before information is
available regarding Select leading edge services and solutions that may be
more suitable for their needs.5

Defining an acquisition strategy that appropriately balances the need to
ensure the continuation of existing telecommunications services in all
current government locations with encouraging strong competition to obtain
best value is a daunting challenge. However, proceeding from a clear
understanding of requirements and measures of success-as I previously
discussed-should aid in meeting this challenge by providing guideposts for
a decision that strikes an appropriate balance on contract scope, program
structure, and acquisition schedules that can deliver to agencies
competitively priced solutions that meet their mission needs. Further,
continuing to solicit and effectively implement feedback from stakeholders
should help GSA achieve this goal.

Initiating Implementation Planning to Ensure Smooth Transition

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 those delays included a lack of data needed to accurately
measure and effectively manage the transitions, inadequate resources, and
other process and procedural issues. Ultimately, GSA did take action on
all of our recommendations and the transition to the FTS2001 contracts was
finally completed. In subsequent testimony before you in April 2001 we
noted the importance of incorporating the lessons learned from this
transition into future procurements. Specifically, we stated that "the

5GSA plans to award the Networx Universal contracts at about the same time
that it releases a draft request for proposals to solicit public review
and comment on the Select services segment of this acquisition program.

6GAO-01-289.

process of planning and managing future telecommunications service
acquisitions-both by GSA and by the agencies themselves-will benefit from
an accurate and robust inventory of current telecommunications services.
Further, the value of this critical program to customer agencies will be
improved through the application of lessons learned in streamlining and
prioritizing the contract modification process, in effectively and
expeditiously resolving billing problems, and in holding contractors
accountable for meeting agency requirements in a timely manner."7 Those in
industry who commented on the Networx request for information also noted
the need for strong and comprehensive program management to ensure
successful transition, including not only the availability of accurate
inventories but also defined contractor and government responsibilities.

While GSA recognizes the importance of transition planning, it has not yet
fully addressed these issues. GSA has emphasized that its development of
the Networx program included an analysis of lessons learned from existing
programs and previous acquisitions. Further, in his February 11 letter in
response to your inquiry about agency inventories, the Administrator
outlined the proactive steps GSA plans to take, including actions to
establish a working group and to improve the availability of accurate
inventory information to support the transition. According to the GSA's
Associate Commissioner Service Delivery/Development, these actions will
also include developing processes and procedures, identifying funding
needs, and training agency personnel in order to support a smooth contract
transition. As acquisition plans are finalized in the coming months, it
will be important that GSA follow through on these initial steps to ensure
that the transition to the new contracts proceeds efficiently and
seamlessly, and that a repeat of the FTS2001 transition difficulties is
avoided.

In summary, Mr. Chairman, Networx represents a critical opportunity to
leverage the strength and creativity of the telecommunications marketplace
to make the vision of delivering to agencies the telecommunications
business solutions they need to perform their missions better and more
cost-effectively a reality, and in so doing to carry the federal
government forward well into the 21st century. To accomplish this,
however, GSA will need to overcome significant challenges and

7GAO-01-544T.

demonstrate solid leadership. Likewise critical will be stakeholder
commitment. Actions taken and decisions reached in the coming months to
more fully define the Networx program and finalize an appropriate
acquisition strategy will significantly influence the telecommunications
choices federal agencies will have for the next several years. Unless GSA
follows through to resolve the challenges outlined today, the potential of
Networx may well not be realized.

  Contact and Acknowledgments

(310376)

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.

Should you have any questions about this testimony, please contact me by
e-mail at [email protected] or Kevin Conway, Assistant Director, at
[email protected]. We can also be reached at (202) 512-6240 and (202)
512-6340, respectively. Another major contributor to this testimony was
Michael P. Fruitman.

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