[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
ENSURING PROGRAM GOALS ARE MET: A REVIEW OF THE METROPOLITAN AREA
ACQUISITION PROGRAM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT POLICY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
JUNE 13, 2001
__________
Serial No. 107-41
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California PATSY T. MINK, Hawaii
JOHN L. MICA, Florida CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida DANNY K. DAVIS, Illinois
DOUG OSE, California JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky JIM TURNER, Texas
JO ANN DAVIS, Virginia THOMAS H. ALLEN, Maine
TODD RUSSELL PLATTS, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
DAVE WELDON, Florida WM. LACY CLAY, Missouri
CHRIS CANNON, Utah ------ ------
ADAM H. PUTNAM, Florida ------ ------
C.L. ``BUTCH'' OTTER, Idaho ------
EDWARD L. SCHROCK, Virginia BERNARD SANDERS, Vermont
JOHN J. DUNCAN, Tennessee (Independent)
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on Technology and Procurement Policy
THOMAS M. DAVIS, Virginia, Chairman
JO ANN DAVIS, Virginia JIM TURNER, Texas
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
DOUG OSE, California PATSY T. MINK, Hawaii
EDWARD L. SCHROCK, Virginia
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Melissa Wojciak, Staff Director
Amy Hearink, Professional Staff Member
James DeChene, Clerk
Mark Stephenson, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on June 13, 2001.................................... 1
Statement of:
Doherty, John, vice president, AT&T government markets; James
F.X. Payne, senior vice president, government systems,
Qwest Communications; Randall L. Lucas, vice president,
sales, Federal market, Verizon Federal Inc.; Jerry Hogge,
vice president, government solutions and enhanced service
providers, Winstar; and David Page, vice president, Federal
systems, BellSouth Business Systems........................ 91
Koontz, Linda, Associate Director, Government-wide and
Defense System Information Systems, GAO; Sandra Bates,
Commissioner, Federal Technology Service, General
Accounting Office; Louis DeFalaise, acting director,
executive office, U.S. attorney's office; and Commander
Robert Day, Commanding Officer, Coast Guard Electronic
Support.................................................... 7
Letters, statements, etc., submitted for the record by:
Bates, Sandra, Commissioner, Federal Technology Service,
General Accounting Office, prepared statement of........... 29
Davis, Hon. Thomas M., a Representative in Congress from the
State of Virginia, prepared statement of................... 4
Day, Commander Robert, Commanding Officer, Coast Guard
Electronic Support, prepared statement of.................. 75
DeFalaise, Louis, acting director, executive office, U.S.
attorney's office, prepared statement of................... 65
Doherty, John, vice president, AT&T government markets,
prepared statement of...................................... 94
Hogge, Jerry, vice president, government solutions and
enhanced service providers, Winstar, prepared statement of. 148
Koontz, Linda, Associate Director, Government-wide and
Defense System Information Systems, GAO, prepared statement
of......................................................... 9
Lucas, Randall L., vice president, sales, Federal market,
Verizon Federal Inc., prepared statement of................ 138
Page, David, vice president, Federal systems, BellSouth
Business Systems, prepared statement of.................... 167
Payne, James F.X., senior vice president, government systems,
Qwest Communications, prepared statement of................ 117
ENSURING PROGRAM GOALS ARE MET: A REVIEW OF THE METROPOLITAN AREA
ACQUISITION PROGRAM
----------
WEDNESDAY, JUNE 13, 2001
House of Representatives,
Subcommittee on Technology and Procurement Policy,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., in
room 2154, Rayburn House Office Building, Hon. Tom Davis
(chairman of the subcommittee) presiding.
Present: Representatives Tom Davis of Virginia, Turner,
Mink, Jo Ann Davis of Virginia, and Horn.
Staff present: Melissa Wojciak, staff director; Amy
Hearink, chief counsel; Victoria Proctor, professional staff
member; David Marin, communications director; James DeChene,
clerk; Mark Stephenson, minority professional staff member; and
Jean Gosa, minority assistant clerk.
Mr. Tom Davis of Virginia. Good afternoon.
I would like to welcome everyone to today's oversight
hearing on the Metropolitan Area Acquisition Program. As many
of you know, this program is the local telecommunications
component of the FTS2001 Program.
As a result of the delays and cost overruns discovered at
the committee's April 26 hearing on the FTS2001 Long Distance
Program, we decided to undertake a review of the MAA Program
and the progress of the transition in local user cities.
Unfortunately, preliminary results indicate many of the
same contract management administration issues that plagued the
2001 Program exist in the MAA Program. Today's hearing is going
to examine the problems in user cities and explore potential
solutions to bring this ambitious program back on track.
To date, the GSA has awarded 37 MAA contracts in 20 user
cities. The total value of these contracts is estimated to be
$4 billion. The program is being implemented in three phases.
Phase 1 and 2 contract awards are now complete and GSA is
preparing to begin phase 3 awards.
We are concerned that GSA is moving into phase 3 without
evaluating the progress of the program, the delivery of
services to the Federal agencies and the overall cost savings
to the Government. The MAA Program was designed to capitalize
on the goals of the 1996 Telecommunications Program. That act
was intended to foster greater competition in the
telecommunications marketplace and to accelerate the deployment
of new telecommunications technologies.
The MAA Program grew out of several meetings between
industry, GSA and Congress. It was intended to bring
competition to the local telecommunications marketplace by
providing Federal agencies in high density population cities a
choice of contractors using multiple award contract vehicles.
If this program is successful, the Federal Government will
be at the cutting edge of procurement for these types of
services. Early evidence suggests this will not be the case.
Instead of reviewing program problems and working to update
strategies, it appears that GSA has not tried to understand the
rapidly changing marketplace, nor to realize the competitive
landscape envisioned for the MAA cities.
GSA states that the MAA Program is estimated to save the
Government $1.1 billion over 8 years. This figure does not
account for transition delays or for additional charges
agencies may face and the new equipment costs for upfront
cutover fees. Transition numbers seem to indicate that actual
cost savings are likely to be markedly lower as GSA has missed
its transition deadline in all but two cities.
The MAA Program set a 9-month transition phase for each
city once notice to proceed was issued to a vendor. Nearly 2
years after phase 1 contract awards in New York, Chicago and
San Francisco, transition is only at 11 percent, 42 percent and
65 percent respectively.
While I think it is important that we don't judge the
success or failure of the MAA Program by these cities alone, we
have to assess what is occurring in each city to generate these
delays and immediately utilize this knowledge to update the MAA
Program to bring about real cost savings for taxpayers.
Moreover, phase 2 transition numbers indicate similar
problems exist. For instance, significant regulatory delays in
New York have hindered transition progress and service cutover
fees have slowed progress in Dallas. I could offer anecdotal
evidence for delays in each of the awarded cities but clearly
each city has its own soap opera but no attempt at redrafting
has been made.
Similar to the FTS2000 Program, I have no doubt that a
healthy blend of issues has contributed to ongoing programmatic
problems but I am concerned with the lack of solutions. Once
again, it is as if performance goals have no place within a
large Government program.
As we discuss next step in acquisition reform, we often
talk about moving toward horizontal acquisition to achieve
greater economies of scale and government efficiencies. GSA is
uniquely positioned to move government in that direction but
the continued failures in the FTS2001 Program suggests that
contract management administration presents serious challenges
for the Government's procurement agencies.
In particular, agency communications appears to be an
obstacle for GSA between regions, the headquarters and the
services. GSA's Office of Inspector General cited communication
difficulties as having a significant impact on the MAA Program
in its April 2001 Consulting Services Report.
I also looked at the contract management fees and the full
service fees that GSA charges user agencies in MAA cities. It
is too early to judge whether Federal agencies are being
charged too much for services but I strongly disagree with
keeping the amount of these fees hidden from user agencies.
GSA has made it clear that it is not a mandatory provider
of local or long distance telecommunications services. Agencies
are consumers in this program and they should be able to make
informed decisions with their limited budgets. Moreover,
agencies seem to have been denied important information about
upfront transition and equipment costs that further impact its
severely constrained budgets and diverted valuable resources
away from mission goals.
I am told the U.S. Coast Guard had to grapple with
disconnected search and rescue telephone lines on Staten
Island. I can only speculate but I imagine they would have
profited from a better understanding of the services that the
contract fees provided at the time.
Once again, I am concerned that taxpayers continue to pay
for failures in the program. Impediments to acquiring end to
end telecommunications services means the Government continues
to lag behind the private sector in service delivery to
citizens.
Today, the subcommittee is going to hear testimony from the
GAO, from the GSA, U.S. Coast Guard and the U.S. Department of
Justice. On our second panel, we will be hearing from John
Doherty of AT&T; James Payne of Qwest; Randall Lucas of
Verizon; Jerry Hogge of Winstar; and David Page of BellSouth.
I will now yield to Congressman Turner.
[The prepared statement of Hon. Thomas M. Davis follows:]
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Mr. Turner. Thank you, Mr. Chairman.
I appreciate the fact that you have chosen to have a
hearing on this subject. As you stated, it has been estimated
that we can save upwards of $1 billion if we fully implement
the Metropolitan Area Acquisition Program, so we are talking
about real money.
It does seem to me that a hearing on the subject is
critical because with the changing technology, clearly
government, not only within the GSA but the agencies
themselves, need to be much more aggressive in taking advantage
of the lower prices now being offered in this industry, the
ultimate beneficiary being the taxpayer.
I understand that GSA has awarded 37 contracts for services
in 20 cities with a potential value of more than $4 billion.
However, in many of these instances, the implementation time
has been much longer and slower than was provided for in the
agreement between the agency and the GSA.
Unfortunately, the promised savings cannot be realized if
the contracts are not fully implemented and the purpose of this
hearing today is to get to the bottom of the reasons for the
delays that have occurred.
I am also going to join the chairman in expressing an
interest in the issue of the disclosure of fees by the GSA. It
seems to me, as it did to the chairman, that the agency should
have the right to know what the contract management fee and
full service fee charge by GSA is so they can make an
evaluation as to whether or not they want to participate in the
GSA-sponsored contract program.
I look forward to hearing from our witnesses today and
hopefully this will be another step forward in what I think has
overall been a very positive move on the part of the Government
to try to save in the cost of local services to our Federal
agencies.
Thank you.
Mr. Tom Davis of Virginia. Thank you.
Does anyone else wish to make an opening statement? Hearing
none, I would like to call our first panel of witnesses: Linda
Koontz of the GAO; Sandra Bates of the General Services
Administration; Commander Robert Day of the U.S. Coast Guard;
and Louis DeFalaise of the Department of Justice. We appreciate
your being here.
I would like to have everyone rise because it is the policy
of this committee that all witnesses be sworn before they
testify.
[Witnesses sworn.]
Mr. Tom Davis of Virginia. To afford sufficient time for
questions, we would like you to limit your statements to not
more than 5 minutes. We have the total statements here and will
be asking questions based on the total statement which will be
entered into the record.
We also may undergo a vote before everyone has testified.
What I will try to do is maybe if one of my colleagues can go
vote as soon as the bell sounds and get back here, we can have
a brief recess and then they will reconvene the meeting but we
will keep going for about 10 minutes into it and as soon as
they get back, we will reconvene it so we can get all the
testimony and then get to questions as quickly as possible.
Linda, why don't we start with you? Thanks for being with
us.
STATEMENTS OF LINDA KOONTZ, ASSOCIATE DIRECTOR, GOVERNMENT-WIDE
AND DEFENSE SYSTEM INFORMATION SYSTEMS, GAO; SANDRA BATES,
COMMISSIONER, FEDERAL TECHNOLOGY SERVICE, GENERAL ACCOUNTING
OFFICE; LOUIS DE FALAISE, ACTING DIRECTOR, EXECUTIVE OFFICE,
U.S. ATTORNEY'S OFFICE; AND COMMANDER ROBERT DAY, COMMANDING
OFFICER, COAST GUARD ELECTRONIC SUPPORT
Ms. Koontz. Mr. Chairman and members of the subcommittee,
thank you for inviting us to participate in today's hearing on
the implementation of GSA's Metropolitan Area Acquisition
Program.
As you know, GSA initiated the MAA Program to achieve
immediate and substantial price reductions for
telecommunications in selected metropolitan areas. It further
envisioned that as part of its overall FTS strategy,
contractors under the MAA Program would eventually be allowed
to compete for FTS2001 long distance service so that agencies
could procure telecommunications end-to-end from one source.
At this subcommittee's request, we have been reviewing the
MAA Program and specifically we have focused on three issues:
the status of the MAA implementation; the fees GSA charges to
customer agencies for managing and administering these
contracts; and the steps taken by GSA to enable the MAA and the
FTS2001 contractors to crossover between these programs and
offer both long distance and local service.
My testimony this afternoon provides the interim results of
our review which is largely focused on the New York City MAA.
This work is continuing and should be completed sometime later
this year.
In brief, GSA has awarded 37 MAA contracts for 20
metropolitan areas. Although the contracts require transition
to the MAA contracts within 9 months after the contractors have
been given authorization to begin implementation, this
transition has not occurred as quickly as anticipated. For
example, MAA transitions in New York, Chicago and San Francisco
are not yet complete almost 2 years after contractors were
given notice to proceed.
GSA and the MAA contractors have faced significant
challenges in implementing this program. First, in New York the
newly deregulated telecommunications environment has produced
unexpected barriers to implementation that are taking time to
resolve. In addition, both GSA and the contractors have raised
numerous issues they believe contributed to implementation
delays. These include contractor performance issues, inadequate
customer budgets and the length of the process used by GSA to
allocate business among contractors in multiple award cities.
We have not yet begun to completely unravel these issues
but we will continue our work both on implementation barriers
and on GSA's efforts to address them.
With regard to fees, GSA charges customer agencies two
types of fees to recover the cost of contract administration
and management. These fees, in total, range from about 28 to 84
percent. According to GSA, while these percentages appear
substantial, the total cost of services including these fees is
substantially lower than the prices under other GSA local
service contracts. GSA, however, does not separately disclose
these fees but requires contractors to embed them in the
prices.
We believe agencies would benefit from having specific
information on fee amounts. It is a key input to agency
decisionmaking on whether to use MAA contracts which are not
mandatory and it makes GSA accountable to the agencies for the
amounts of fees they charge. In the coming months we will be
performing a more complete assessment of the fees to determine
what costs are included in the fees as well as the support GSA
provides to agencies.
Last, in regard to crossover, GSA has not yet allowed MAA
contractors to offer FTS2001 services. However, in December
2000, GSA permitted FTS2001 and MAA contractors to offer local
services in three of the MAA markets. In addition, GSA has
drafted a paper stating it now believes it is appropriate to
proceed with determining when to allow additional competition
for FTS2001. One of the first steps will be to share this draft
with industry representatives at the end of this month.
Mr. Chairman, that concludes my statement. Kevin Conway,
the Assistant Director responsible for our MAA study, will be
assisting me in answering any questions you might have.
[The prepared statement of Ms. Koontz follows:]
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Mr. Tom Davis of Virginia. Thank you very much.
Ms. Bates.
Ms. Bates. Mr. Chairman, thank you again for this
opportunity to appear before you today to discuss the
Metropolitan Acquisitions Program. In my remarks this
afternoon, I will briefly address the strategy, the results of
the competitions, the implementation status and our fees.
The collaborative effort that led to the development of the
FTS program strategy in the spring of 1997 occurred in the
context of the newly enacted Telecommunications Act of 1996.
That strategy gave us the framework for bringing the
Government's use of telecommunications technology forward into
this new century. The MAAs were conceived for three purposes.
First, they fulfilled the MAA program goals of maximizing
competition to provide the best services and prices to
Government users. Second, the MAAs were the first ever
competitions designed specifically for the deregulated local
markets. They provided an opportunity for public policy
leadership by FTS. We stimulated the development of competition
by offering government requirements to emerging metropolitan
markets. Third, the program crossover provisions anticipated
the introduction of additional future competition to incumbent
MAA providers.
Since 1999, we have awarded 38 contracts in 21 metropolitan
areas across the Nation with price reductions ranging from 30
to 70 percent. By the end of this year, we will have completed
28 cities. At that time, two-thirds of the Federal work force
will be within reach of an MAA with attractive prices and
state-of-the-art service offerings. Following on the heels of
the acquisitions have come the many significant challenges
associated with implementation. MAA implementation progress to
date reflects the regulatory environment under which the local
services industry operates. This environment has been
characterized by the need for labor intensive, time consuming,
site by site negotiations and problem-solving causing
implementation delays.
The local competitive environment today has developed more
slowly than expected and is far from mature. The aspects of
deregulation that have proved especially challenging for the
MAA Program include building access rights, resale of
facilities, local number portability and customer issues.
Challenges associated with contract initiation, contractor
planning and customer-related activities have required more
time than we anticipated. In August 2000, we asked the GSA
Inspector General to review the program implementation. The IG
recently issued their findings and suggestions. We agree with
their overall findings and will incorporate their suggestions
to improve our program.
Finally, let me comment on our fee structure. Local service
is a labor intensive operation, whether managed by FTS or a
large private business. Over the past 5 years, we have reduced
our fees by about 30 percent. In fact, MAA fees are lower than
pre-MAA fees in every city but one. Mr. Chairman, I believe the
strategy that we jointly crafted is as sound today as it was
when we developed it 4 years ago. The MAA acquisitions continue
to be successful in terms of new providers, services and
prices. We have brought explicit competition to the local
market through multiple award contract vehicles. We have
brought agencies real choice of providers and we have state-of-
the-art service offerings. We have taken the lead in
stimulating competition in the local arena and have gained
unparalleled and unique expertise as a result.
It is taking longer than we expected to achieve the
benefits of local services competition. We have more work to
do. We are committed to staying the course with the MAA Program
and to realizing the benefits the program has to offer.
Mr. Chairman, I look forward to your continued leadership
and support and I am happy to address any questions you have at
this time. With me today is Ms. Margaret Binns, Assistant
Commissioner for Regional Services. In that capacity, Margaret
is the GSA executive responsible for the MAA Program. She will
assist me in addressing questions you and the other Members may
have.
[The prepared statement of Ms. Bates follows:]
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Mr. Tom Davis of Virginia. Thank you. Ms. Bates is welcome.
I also want to recognize Steve Perry, the new head of the
General Services Administration who is in the audience.
Congratulations on your appointment and your confirmation. We
look forward to working with you. Your staff is doing a good
job.
Louis, you are on.
Mr. DeFalaise. Thank you.
Members of the subcommittee, I appreciate the opportunity
to be here on behalf of the Executive Office of the U.S.
Attorney's Office and for the 93 U.S. attorneys.
We are very concerned as a consumer with telephone
operations for our several hundred locations, our offices and
connected locations throughout the country, all the way to Guam
where we have to usually call at 6 p.m. because it is 8 a.m.
there.
Our concern to our personnel, the approximately 5,000
Federal prosecutors and litigators, is that they primarily be
free to do what they are being paid to do and that is
prosecuting cases and litigating on behalf of the Government.
Their only concern when they pick up the phone is that there be
a dial tone and reliable service.
From the central operation point, since we have a very
deliberate policy of keeping our headquarters personnel very
low so that we can put more people into the field, we are
concerned about being able to get a turn key operation where we
can buy the service and expertise so that our staff doesn't
have to deal with it and the price. Obviously the more
resources we can save from an operational side is more money we
can spend doing what we are intending to do, protect the public
weal.
We have had a number of offices that have completed the
transition to the MAA carriers. In our experience, we have had
a few technical difficulties in a couple of instances where
there have been delays and my staff advises me in terms of the
types of infrastructure and regulatory questions that existed,
that this is not unusual in terms of what we experienced in the
past. We are constantly updating our systems, doing it all over
the country so we seem to be in a constant process of change
and we encounter these things quite often.
The one good thing we can say about this program in the one
location where we now have sufficient data to analyze the cost
impact is that it has been highly successful. That is in the
Islip location in New York where I am informed we had been
paying $35 a month a line and now we are down to about $10 to
$12 a line. So while we are interested in the issue of what GSA
is charging us, the savings has been so great in that location
that we are very pleased by the results and the outcome. By the
fact we can take it as a turn key operation, we don't have to
have additional numbers of staff to deal with these issues
directly but all of these services are provided to us by the
GSA.
We have had some difficulties in a couple of locations, but
I have been informed by our staff we think those are manageable
ones. With the request that the longer statement be included in
the record, I would be happy to answer any questions.
[The prepared statement of Mr. DeFalaise follows:]
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Mr. Tom Davis of Virginia. Thank you.
Commander Day, thank you for being with us.
Commander Day. Mr. Chairman, distinguished members of the
subcommittee, the Coast Guard took advantage of the GSA MAA
Program when we learned of its existence through GSA, region II
in New York in July 1999. A thorough review by my staff, which
is responsible for the telecommunications services in the New
England Region, basically found the pricing was extremely
attractive compared to the services we had before. On average
we acheived a 76.5 percent savings on our analog telephone
lines.
Based on those indicated recurring savings, I initiated
action to move with our MAA Program with region II. We started
in the October 1999 timeframe and started moving forward with
the contractors in cutting over Coast Guard lines. Our
extensive command post in Staten Island, NY, has roughly 751
lines servicing that area.
We did have some problems. There were problems during the
initial transition and recurring problems over a period of 4 or
5 months we had minor outages here and there but then we did
have one major outage in April 2000 which required some
attention by both GSA personnel as well as the contractor at
the time. I had a joint meeting with these personnel, and
requested understanding of the severity of the potential impact
on Coast Guard operations. We requested rapid resolution. We
had very good communication between all three parties. I was
able to get things cleared up in terms of a pathway to make
sure we no longer had these types of issues. Within a 2-day
period, all the problems had been resolved. Since that time
period, we have experienced essentially 18 months of very good
service under the MAA Program and are experiencing savings of
$150,000 per year recurring, which is why I started this
initiative.
That is all I have. I appreciate the opportunity to speak
before the subcommittee and I would be happy to answer any
questions.
[The prepared statement of Commander Day follows:]
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Mr. Tom Davis of Virginia. Mr. DeFalaise, I understand you
have a time issue, so let me ask you a few questions.
Can you comment further on the situation in which you have
asked transition to be reversed and what are the service
problems you have had in that instance?
Mr. DeFalaise. I understand those included such issues as
dropped lines where we didn't get a dial tone or the
connections failed; there was some crossing of lines and a
number of other technical difficulties. This was in one section
of an office. This was a particular location so we stopped the
conversion for the larger part of the office and asked for a
reversal on that particular setup until the problems were
solved. It seems it is more a matter of technical difficulties
that need to be resolved.
Mr. Tom Davis of Virginia. Do you think it would be helpful
if we allowed vendors to market directly to your regional
facilities?
Mr. DeFalaise. The way the U.S. attorneys offices are set
up, because the telecommunications expertise is mostly in our
Washington office, I think the results would be pretty much as
they are today. Either we find there is something new to be
done or some cost savings at the Washington end and go out to
our offices or they get offers and come to us asking us to
evaluate them so I don't know that procedure would change that
much. It is pretty much a cooperative effort between our
technical people in our Washington office and our field
offices. For presentations, I suspect at some point the field
offices would call in and ask our Washington people to come and
help evaluate them anyway.
Mr. Tom Davis of Virginia. Do you think the lack of cost
comparison data made it difficult for you to encourage regional
offices to transition?
Mr. DeFalaise. It certainly would be much easier to
encourage the regional offices if we could tell them up front
what the cost comparisons were and what they might save in
overall operations, so yes, that would be a very attractive
feature if it could be done.
Mr. Tom Davis of Virginia. It is a new program and
obviously it is going to have its problems getting started and
getting the bugs out but I think that sheds some light.
Let me turn to GAO for a minute. Estimated cost savings in
the MAA cities is actually quite high. They set a pretty high
goal for themselves, do you agree with that?
Ms. Koontz. Yes.
Mr. Tom Davis of Virginia. You note in your testimony total
cost savings is an estimated $1.1 billion over 8 years. What
impact have significant transition delays had on the actual
cost savings to agencies or do you think they are just delayed?
Ms. Koontz. It is difficult, at this time, to project what
the impact is going to be on total MAA savings. The GSA
originally projected $1.1 billion. To the extent you have
delays it limits the amount of savings you can realize within
an 8-year period. However, the estimate GSA put together was
based on existing business they have under contract. The
potential for business may actually be much greater than that
and if the program is able to exploit this larger amount of
business, it could be that savings would be greater over the 8
year period. We haven't yet been able to quantify what the
impact has been thus far.
Mr. Tom Davis of Virginia. Clearly if it started faster,
you would get more savings?
Ms. Koontz. Yes, you can only get savings after people are
on the program.
Mr. Tom Davis of Virginia. Given some of the difficulties
that have been encountered, if you would move ahead and not be
ready for it, then you are better off waiting, so I guess the
chapter is unwritten.
The up-front cost of transitioning along with the often
unanticipated cost of provisioning of new telecommunications
equipment is cited as a barrier to transition. Do you follow
me? In your view, should GSA have better prepared agencies for
these costs? Aren't these additional costs likely to lower
overall cost savings?
Ms. Koontz. It is true that the savings estimate does not
include one-time transition related costs like service
initiation charges, any termination fees you have on other
contracts, and equipment modifications that need to be done.
For that reason, that will reduce the amount of potential
savings available over the 8 years.
Under the FTS2001 contracts, GSA was able to plan in
advance and collect money from the agencies in order to cover
these kinds of transition fees. This did not happen this time
and as we understand it, some of the agencies have cited this
as a barrier to quicker implementation because they do not have
the money budgeted to take care of these one-time transition
fees.
Mr. Tom Davis of Virginia. GSA has stated it is moving
forward to phase 3 contract awards this year. In your view, are
there steps GSA ought to be doing to improve the MAA Program
before it moves to phase 3 and what would those be?
Ms. Koontz. As you know, our work is continuing, we are not
done yet but I think we do have one observation that is based
largely on what we did in New York. This is not rocket science
by any stretch of the imagination but what we saw there was a
real need for improved communications particularly between the
MAA contractors and GSA. When you talk to each of the parties,
you get quite a different impression of what is going on and I
think that indicates there is a need for increased quantity and
quality of communications.
One thing we noted in New York was that the GSA region
there does not conduct routine scheduled meetings with the
contractors to identify, discuss, and track problems that come
up, although this is done in other regions. That might be one
thing the GSA region could do.
Mr. Tom Davis of Virginia. Thank you.
Mr. Turner.
Mr. Turner. Ms. Koontz, the GSA is providing basically
management consulting services. Would an agency have an option
to secure that kind of assistance from some other source and
perhaps be able to have another option in terms of their local
service?
Ms. Koontz. Built into the MAA Program are two types of
services that you can get from GSA, that is why there are two
different fees. One of these fees, the full service fee, is for
GSA assistance in ordering and billing. Agencies can decide if
they prefer to deal more directly with the contractor on those
issues, and they can do so more economically, they can do that
and avoid the fee. That is one possible option they can pursue.
The other option may be that because MAA is not mandatory,
agencies can use any other contract vehicle if any are
available but also they can choose to procure their own
services, buy tariff services, or to run their own procurement
if they believe the services provided under the MAA contracts
are not as economical as if they did it on their own.
Mr. Turner. I noticed today we have raised a lot of issues
regarding the GSA's implementation of this program but has your
investigation in this area allowed you to take a look at how
aggressive individual Federal agencies have been with regard to
pursuing options or dealing with the GSA? It seems to me it
could be that part of the problem we are seeing here is not
solely on the GSA shoulders but perhaps on the shoulders of
agency personnel who don't put this as a great priority in
terms of what they are doing at their particular agency.
Ms. Koontz. Because we have only focused on the New York
MAA at this point, I don't think I could generalize on that
point at this juncture.
Mr. Turner. What kind of activities do we have to really
encourage the agencies to move aggressively with regard to
taking advantage of the services provided by GSA or, in the
alternative, to pursue other alternatives on their own? What is
it that builds a fire under them to say this is something that
is going to save some money, you need to move on it, get with
it and spend some time on it, that this needs to be a priority
in your agency?
Ms. Koontz. One of the things is already present in the MAA
contracts. I think you heard the agency people testify to the
fact that the prices are quite good under those contracts. The
data we have seen, even inclusive of the fees, it is much more
favorable in many cases than any other existing vehicle.
It seems to me if that isn't sufficient to entice Federal
agencies into the MAA Program, I don't know what would be.
Mr. Turner. As a percentage, what percentage of the Federal
agencies do we know have pursued participation in the MAA
Program?
Ms. Koontz. I don't know.
Mr. Turner. Ms. Bates, do you know?
Ms. Bates. I don't know the specific percentage.
Mr. Turner. Can you give me some indication? Do we have the
vast majority of our agencies trying to participate or working
with you or do we have the vast majority of them still out
there not worried too much about utilizing the services you are
providing?
Ms. Bates. I will try and set the stage for you, sir, by
example. Within the Washington metropolitan area our WITS
Program, which is the MAA in Washington, we have significant
participation by the Federal agencies, including the Department
of Defense. I would say within Washington, which I might
mention the WITS Program, the transition is complete, we have
significant participation.
In the other areas, because of the nature of this program,
it is local service and it is managed locally in many cases
much as my colleagues here at the table have stated, so the
decisions are made locally and in small unit levels. To date,
as a rough order including the Washington area, we have 215,000
lines converted to MAA and most of that is in Washington.
I think our challenge in the future is getting out the word
by talking to the Interagency Management Council, the local
Federal executive boards, really spreading the word on this
program because as I stated in my oral testimony, by the end of
phase 3, we will have an MAA program within the grasp of the
majority of the Federal agencies and it is the responsibility
of FTS/GSA to make sure that awareness is out there so people
can take advantage of that opportunity.
Mr. Turner. Thank you.
Mrs. Jo Ann Davis of Virginia [assuming Chair]. Ms. Bates,
I have a question for you. Can you tell us about the fair
consideration process, what qualifications does GSA consider
during the process, and is this process clearly defined to the
vendors?
Ms. Bates. Fair consideration is a process used to
determine in a multiple award contract, which we have several
within the Metropolitan Area Acquisition Program to determine
which of the awardees would receive a specific set of business.
The criteria is contained in the request for proposals and in
the contract which says that fair consideration can be
conducted one of three ways. The first way is to assess, after
the requirement has been defined, take that requirement and
match it against the price tables assuming the technical
qualifications are met, and that is the case most of the time,
and look at the price tables in the MAA. I need to remind you
that we do have out year pricing so that we do have price
tables, so one can easily assess the total price of that
specific requirement. That is one way.
A second way is to take the requirement and form it into a
task order and ask each of the multiple awardees to respond
with a technical and cost proposal. The third is for any of the
companies at any time to come in and lower their prices and
enter. No. 1 and No. 2 are the methods we are using. I believe
the process is very well defined to the industry.
With regard to our customer agencies, I think this is a new
process to the telecommunications environment coming off a
monopoly environment into a deregulated environment and
multiple award contracts. This is a new process for our
customers and we have had to spend time working with them to
ensure them that we go through this process and that it is
completed.
Mrs. Jo Ann Davis of Virginia. I think I have time to ask
you one other question.
Back to the fees. I believe Ms. Koontz said the fees are on
several levels, so the agency could determine if they could
save more money and wanted to do the work themselves. I think I
understood in the testimony that you don't disclose your fees?
How would the agency know if they could afford to do it better
themselves or how much money they would save? How can they know
how to make an informed decision if you don't disclose your
fees to them?
Ms. Bates. Let me state that our fees are embedded in the
bills the customers receive. We have never made an attempt to
my knowledge to in any way not disclose those fees to customers
as we sit down and talk with them in terms of evaluating
alternatives.
Mrs. Jo Ann Davis of Virginia. Let me butt in there just a
second. If your fees are embedded in the bills, that is after
the fact, they have already made the decisions?
Ms. Bates. Right.
Mrs. Jo Ann Davis of Virginia. So are they told what the
fees are up front before they make their decision?
Ms. Bates. Yes.
Mrs. Jo Ann Davis of Virginia. I guess that is not what I
was hearing in the testimony. Maybe I should go to Commander
Day. Were the fees disclosed to you by GSA when you made your
decisions?
Commander Day. They were embedded in the bill.
Mrs. Jo Ann Davis of Virginia. By embedded in the bill, are
they spelled out.
Commander Day. This is before and we know they are there
before we enter the agreement.
Mrs. Jo Ann Davis of Virginia. Are they spelled out
dollarwise or percentagewise so you do know exactly before you
make your decisions what you are going to be paying?
Commander Day. The exact dollar amount, I have not been
shown. I do know a percentage of the recurring fee for phone
service is related to GSA overhead which we consider as the
management portion of our fee, so I don't have to manage the
billing, I don't have to manage the vendor. It is sort of
expected that is the amount they utilize for the personnel
necessary to oversee these contracts. We know they are in
there. The exact amount, I have not been shown.
Mrs. Jo Ann Davis of Virginia. Not the exact dollar amount,
but do you know the percentage?
Commander Day. Yes, ma'am.
Mrs. Jo Ann Davis of Virginia. You do know the percentage
in advance?
Commander Day. The exact percentage, I have not been privy
to either.
Mrs. Jo Ann Davis of Virginia. Mr. DeFalaise.
Mr. DeFalaise. I will double check and get back to you on
this but my general understanding is we are aware there is an
embedded fee, we do not know in advance and it would be nice to
know in advance the specific overall cost of GSA fees, but we
will nearly always eventually learn what the actual costs of
these fees are is after the fact. I will double check and if I
am wrong, I will get back to you but that is my understanding
at this time.
Mrs. Jo Ann Davis of Virginia. Ms. Bates, if they choose to
let you do the managing and go with your fee and after the fact
get the bill and find out what your fee is and decide they can
do it cheaper themselves, can they drop you and do theirs at
that point?
Ms. Bates. Yes. I would like to add that in my previous
answer to your question, while I stated yes, the fees are
known, it is not our intent to hide the fees and if we are not
being as forthright in every case with our customers as we
should, we will definitely take that as a corrective measure.
Mr. Tom Davis of Virginia [resuming Chair]. One of the
cited factors that seems to be impairing MAA implementation
progress has been contractor performance which has resulted in
untimely service delivery and service outages in some cases. In
some cases it is not even the contractor's fault, it is just
transition through other things they have to do.
What steps have we taken to try to hold the contractors
accountable for their performance and prevent the recurrence of
these problems and are there other context issues where you
have to hook up with other lines and so on, building access as
you mentioned? What role is that playing?
Ms. Bates. You are right when you state that each issue is
difficult. I think we have to keep in mind here that we really
are plowing new ground. The competition in the local market is
new, it is new to everyone. We have broken the price barriers
in the market and we are plowing new ground. It is local. Each
situation stands on its own and can be quite lengthy. I won't
attempt to go into any of that.
Our first goal has been to really get the barriers, the
problems, whatever it is cleared up so we can all get on with
the implementation. As we get into these situations, there are
very few, if any, that we can ever say this is a problem with
you that you are totally accountable for, there is no one else
involved in that. Many times, it is very entwined in a lot of
issues as you have acknowledged.
I believe our contractors are doing their best. They are a
good set of contractors and they too are plowing ground. We are
making it. As far as contractor performance issues in the true
legal and contractual area, at this time, we have not chosen to
pursue them. However, the door is always open for that.
Mr. Tom Davis of Virginia. What is the relationship between
GSA's current local service contracts and the rate
stabilization agreements and the MAA contracts for local
services? Are these being allowed to expire and those
requirements moved to your MAA contracts or are you exercising
contract options or otherwise extending those agreements?
Ms. Bates. The Rate Stabilization Program was put into
place several years ago prior to deregulation when in our
attempt to manage the program and bring lowest prices to the
government, we negotiated with the local services provider at
that time to stabilize the rates over a given period. Those are
with the traditional provider and are single award by
definition.
It was our program intent to have the MAAs in place to let
the rate stabilization programs expire and move over. We have
had to extend some of those because of the delays in the MAA
implementation. That is the program goal.
Mr. Tom Davis of Virginia. The MAA contracts are awarded
out of GSA's national headquarters office but they are
administered and implemented regionally?
Ms. Bates. Correct.
Mr. Tom Davis of Virginia. What guidelines have you
established for the regional contract administrators to ensure
some uniformity in the process or are they given great
flexibility and are their particular management or
administrative practices used by one region with greater
success that you have promoted for use elsewhere?
Ms. Bates. This is one of the areas of centralized
management with decentralized operation, a lesson we have
learned since the beginning of the MAA Program where we have
made significant changes since the beginning to where we are
now. While the service is delivered locally, we have learned it
is very critical to the program to have centralized program and
project management. We have instituted that and Ms. Binns here
is responsible for the program nationwide. She has people on
her staff dedicated to managing and operating this program.
Within our regions, we also have people identified for the
implementation, the specifics, the day to day implementation of
that program.
Our contracting people have a similar structure in place
where we have centralized contract oversight and administration
at our headquarters level led by Mr. Al Olson, our Assistant
Commissioner for Acquisition; we have contracting officers in
the regions to carry out the necessary day to day contracting
activities. This has evolved over the last 2 years. I think we
are well positioned at this time to do that.
Communications as alluded to earlier is always a challenge
even though we are in the communications business,
telecommunications or communicating with one another. We have
taken steps to improve that communications so that we can
freely identify problems, make sure they are known to everyone
in a timely manner, have far more communications with our
industry partners and our customers in terms of the day to day
implementation as well as making the decisions in order to
proceed with the program.
In this particular area, I think we have implemented
significant change since the beginning for a very positive
effect on the program.
Mr. Tom Davis of Virginia. In your view, how is the
marketing of the MAA contract supposed to work? What are GSA's
responsibilities and what do you view as the responsibility of
the MAA contractor? How does the fair consideration process
factor into marketing to customers and the processing of
customer service orders and if an MAA contractor were to commit
the time and resources to develop a customer and were that
customer to place orders with GSA for services from that
customer, could the GSA fair consideration process then preempt
that customer decision?
Ms. Bates. That is a lot of questions rolled into one. Let
me take them one by one.
The marketing concept, I view marketing as customer
awareness and getting the information out about the program to
make sure the agencies can make that choice. I think that is
the responsibility of the GSA, FTS, as well as our industry
partners. We need to get out the word about this program,
particularly because it is local and decisions are made
locally.
It is not just good enough to talk to the department level
of an agency. We have to get and reach the entire customer
base, very localized in nature and I think this is critical
that both the industry as well as FTS does that.
We have to be mindful though of our customer wishes. Some
customers do not prefer to be contacted locally, some prefer
the national level, some may be at a mid level, so there is no
formula. Clearly I think it is all our responsibility to get
out the word about the program and program awareness.
Regarding fair consideration, this doesn't extend just to
the MAA Program. Fair consideration is a very important and
integral part of a multiple award contract environment. It is
so integral, it is the law as Linda would remind me. It is our
responsibility to conduct fair consideration regardless of
which industry partner will identify the requirement and the
agency then chooses to bring it to the contract. We conduct
fair consideration and there is no guarantee or
predetermination as to which industry partner would get that
business.
That is a problem that extends far beyond MAA but really
goes to the heart of multiple award programs. I think the
integrity of that process is key to the entire government
acquisition process.
Mr. Tom Davis of Virginia. We have had delays in
implementation and you are a lot smarter now than when you
started this. We all are. Given all that, do you still think
you can achieve the $1.1 billion savings originally
contemplated? If you are not sure, you can get back to us.
Ms. Bates. I will get back to you.
Mr. Tom Davis of Virginia. I would like you to go back and
take a look. I think one of the problems we have had is we have
set unrealistically high expectations and time periods at the
very beginning.
Ms. Bates. I agree.
Mr. Tom Davis of Virginia. And a lot of unintended
consequences result, particularly with telecom. We are seeing
that not only with you but you see this in the private sector.
Any company moving in has the same kind of thing. For that
reason, we would like to know where we are.
Ms. Bates. We will do that.
Mr. DeFalaise. Mr. Chairman, if there are any other
questions, I would be happy to answer them but otherwise, could
I be excused?
Mr. Tom Davis of Virginia. I am going to yield to Mr. Horn
for any questions. Otherwise, you can leave with our blessing
and thank you for being here.
Mr. Horn. This is a question to all of you. Looking back on
GSA over the current contract and were your needs met when new
equipment came on the line and what does that mean in terms of
the next few years? Would you get the kind of communications
equipment that you need to get? If you could give me a feeling
for did you have a problem when new equipment came on board?
Mr. DeFalaise. In our situation, we are fortunate that our
telecommunications staff, although very small, is very
aggressive in looking for ways to improve the services and to
cut costs. In addition to the roughly 65 percent or more
savings that we have at Islip in New York, we got a better
product. We went from analog to digital and we also got voice
mail that we did not previously have.
To this point, we have gone to GSA because the perception
has been that they were meeting our needs, giving us a
significant savings in cost potentially. As I said, we have
only been able to evaluate it for one site because we don't
have the data from the others and the quality and level of
service we got as a turn key operation, we just went to them
and said, we want to pay less, pick it up and hear a dial tone
and we have been favorably impressed so far.
There have been delays in several locations but they have
been within expected parameters of infrastructure and
regulatory concerns.
Mr. Horn. Thank you.
GAO is a customer of GSA, I take it, right, despite your
fine, across the board bluebooks, you are a patient of GSA,
correct?
Ms. Koontz. I don't know whether GAO is a customer of GSA
for the MAA contracts. I am sure Sandy knows but I don't.
Ms. Bates. They are.
Mr. Horn. It is nice to know who is doing what but the
issue of new, innovative technology, does that come on board so
you have access to it or has that been a problem?
Ms. Bates. The program is structured and the resulting
contracts are structured very much to focus and include tech
refresh. That is what it is all about when we talk about long
term contracts and flexibility. Definitely the framework is
there. We have seen it come on, particularly in the case of
WITS in the Washington metropolitan area.
Many of the agencies as they transition not only in
Washington but in other locations have chosen to upgrade their
service or reconfigure to provide greater technology. That is
one of the program benefits, to transition and also get
something more and the low prices we have been able to get
through competition has allowed that in many cases. Agencies
have been able to do more with less. I think that is very, very
positive and often gets lost when we talk about other issues.
Mr. Horn. Commander, I am curious when you are at sea and
when you are in port, does that take a different type of
equipment you need based on salt water or whatever?
Commander Day. No, sir. This is primarily focused on our
shore-based facilities. Many of them are just as critical as
our under way vessels.
Mr. Horn. Does the Coast Guard have a satellite system so
they can communicate?
Commander Day. We are using commercial satellites as well
as some military satellite but this is not part of the
offerings coming from this program. We have taken advantage of
some of the new technology coming available under MAA. It has
increased service capability, particularly with the digital
telephone offerings. That is part of the draw for us to go
there because of not only the prices but it is refreshing
technology which I would not be able to refresh with my own
service funds at that time.
Mr. Horn. Are you responsible for computer security or is
GSA responsible for that?
Commander Day. I am responsible for computer security and
the computer system operations within my region which is New
England.
Mr. Horn. Does GSA have a unit that can help you on the
computer security situation or do you have your own group?
Commander Day. I have my own group and we have not
investigated or seen services available from GSA regarding
that. There are other computer related services I am aware of
but we are not taking advantage of those at this time,
telecommunications primarily.
Mr. Horn. How about GAO, do you have your own unit on
computer security or does GSA do it for you?
Ms. Koontz. I don't know.
Mr. Horn. Let's have a block in the hearing and get a
letter from GAO on that question.
Ms. Koontz. OK.
Mr. Tom Davis of Virginia. Mrs. Mink, any questions?
Mrs. Mink. The effort on the part of government to try to
save money and it appears from the testimony of a number of
witnesses, there is the potential of quite a bit of savings if
we can get all the Federal agencies into this combined
cooperative telecommunications effort.
Up to date, you have been in this thing for 2 years, 1999,
2000 and this year. What would you estimate to be the total
cost savings thus far based upon the areas you have been
successful in congregating into this system?
Ms. Binns. It is very difficult to quantify with a great
deal of precision.
Mrs. Mink. How about a ballpark?
Ms. Bates. I would say we are saving right now about $1
million a month which includes the Washington area MAA. That
consists of about 215,000 lines.
Mrs. Mink. Aside from the cost factor which must be
appealing to the agencies, is there any other benefit they
would derive by participating in the MAA?
Ms. Bates. I believe there are several other benefits they
would get. First of all, they would get the benefit of
competition and we have brought competition in the local market
for the first time.
Mrs. Mink. Would you explain how you brought competition
into the local market?
Ms. Bates. The MAA Program, one of the driving factors was
furthering public policy in the area of deregulation in the
local market. These are the first acquisitions that were
designed to go out and take advantage of that deregulation and
see if there was competition in the local market and perhaps to
stimulate that.
We offered the government's requirements and put them out
there. We indeed found that there is competition out there and
it is very real. So our customers have the benefit of the
competition and also of choice which they have never had
before. We have been in a monopoly, regulated environment and
they have not had the choice. That is very, very positive. I
think it is a little more than just cost reduction. It is
breaking the barrier of the cost in the local market that we
have brought.
Also, the MAA Program, as GSA regional services has always
done, has offered the customer total service. Because the
decisions are locally made many times, the people in our
customer agencies have many other duties and rely on GSA/FTS to
make decisions for them or help them make decisions. Our staff
stands ready to help them make those choices, make technical
decisions, recommendations and to assist them in any way.
Another important factor is this isn't one of those
situations where once the service is installed, FTS walks away
from the customer. We are there with the customer
troubleshooting, operations, maintenance, managing our
contractor, all the way until that customer disconnects that
service. It really is a life cycle service and management.
Mrs. Mink. So when you estimate cost savings, do you
include the additional staff that may be required in order to
do all the servicing you just described?
Ms. Bates. When we calculated the cost savings of the $1
billion, we did not include all of those elements. Basically,
what we did is looked at what our customer base was paying
today and what they would be paying in the future under this
program. Being optimistic people, we also factored in
significant growth and that growth was factored in on both
sides of the equation.
Mrs. Mink. When you assess the management fees, do you
include these additional costs that are experienced by GSA and
FTS?
Ms. Bates. Not directly in computing the savings. I view
that as our fees and I want to tell you, we are talking about
fees that range from $2.50 a line to $6 a line. That is just to
put the framework there. The value that GSA adds is that we are
doing this so our customer agencies do not have to do it. I
would pose that we are very good at what we do. We have
experience, we have learned many times through the school of
hard knocks so perhaps we are more efficient than others might
be.
The truth is, with our customer agencies having gone
through down sizing and right sizing, many of them are focusing
on their core agency mission and their acquisition and
technical people are doing the same. So they rely on us to do
that.
Mrs. Mink. Thank you, Mr. Chairman.
Mr. Tom Davis of Virginia. Mr. Turner.
Mr. Turner. The MAA Program has been implemented in 30-some
cities and in 8 of those cities only 1 contractor was announced
by GSA. Could you tell us why there was only one contractor and
does this not take away from the idea that there is competition
inherent in the program you are administering?
Ms. Bates. In many of those instances, there was
competition. It was not just one company proposed and one
company being awarded. There was competition. The results of
the competition dictated that it was appropriate to award the
contract to only one provider. The Federal acquisition
regulations as they relate to multiple awards provide
guidelines in terms of when it is appropriate and relative to
technical and cost proposals of each of the bidders. In the
cases where we made a single award, it was appropriate for only
one contractor.
Mr. Turner. Do you have the option of adding the
contractors later? How does that work?
Ms. Bates. Yes, sir. If you recall, one of the principles
of the program is the crossover. While we have focused in past
hearings on the discussion of crossover between long distance
and local and local to long distance, part of the crossover
allows MAA providers to crossover into other locations. I think
this is a strength of the program because where we did have a
single award because of the situation at the time, it does not
preclude our customers from having choices and multiple award
as we move ahead with crossover.
Mr. Turner. Ms. Koontz, this kind of hearing is oftentimes
a little frustrating when we have a story that says contracts
that were supposed to be implemented over 9 months have taken
much longer. We are told the problem is the regulatory
environment makes it difficult. I know in New York there was a
legal problem; you're looking at potential management problems
in GSA or whether the agencies are not aggressive enough, or
whether contractors aren't performing but I have not yet had a
sense to the apportionment of that blame. Is it primarily the
contractors that are dragging their feet or is it the GSA? Who
should this committee point to and say you need to do a better
job?
Ms. Koontz. It is probably premature for GAO to say exactly
where the blame lies in any of this. If it is anything like
FTS, there will be plenty of blame to go around probably.
We have not completed our work yet and many of the issues
we presented today, we have been unable to nail down at this
point in time. It is not possible for us to really talk about
what recommendations for the future should be.
Mr. Turner. I am sure the chairman will be diligent in
keeping a watchful eye on all those groups.
Mr. Tom Davis of Virginia. Ms. Davis.
Mrs. Jo Ann Davis of Virginia. Understanding we are not far
enough along yet to determine about fees, 84 percent seems
rather high to me, as a businesswoman, for a fee. I am curious
what do the agencies get for 84 percent versus 28 percent on
the low end?
Ms. Bates. First, I would like to address the percentage. I
think to characterize the fee in terms of percentage of the
line charge presents somewhat a distorted picture. If our fee
is $2 and the line charge is $40, as it was in some cases pre-
MAA, that is a fairly low percentage. If post-MAA the fee
remains $2 and the line charge is $5, that percentage is
different and it presents a distorted picture. In many cases,
that is what we are dealing with where we had a line charge
that was up here and now is down here.
By the same token, I don't mean to imply that we are not
managing the fee or concerned about the makeup of that fee.
That is why I think through management of our operating
expenses, our fee has gone down 30 percent in the last 5 years
and we are continuing to look at it. FTS being a
nonappropriated fee for service organization, and nonmandatory,
you can well imagine like any other good business person, I
need to keep a strict eye on my operating expenses and I am
doing that actively. We can always look for suggestions to
improve.
What value do we get or how do we earn that fee? As I
stated earlier, we manage the customer through the life cycle
from the beginning of the requirement all the way to the time
they disconnected. We provide acquisition support, put the
contracts in place, do the follow on contract management and
administration, which in this particular market is always a
challenge and requires top notch, highly skilled individuals.
We also provide consulting services to the customer in
helping them define their requirements and to look at the
solutions and evaluate those. This requires technical people up
on the latest technology.
We also do the day-to-day operations of operating much of
these switches and services where we are looked to as the
provider in the case of many Federal buildings where we are
providing service to all the tenants within that building. We
are their provider, they look to us.
We also do the troubleshooting that is required anytime
there is a system glitch or there is a problem. The
troubleshooting extends back to the equipment to the long
distance carrier or whatever. Our customers look to us, when
they have trouble they call us and ask us to ferret it out. We
do that, that is why we are there.
We also provide billing services and a consolidated bill.
We take in the bills and provide the bill to the customer and
validate the bill in conjunction with the customer. So we
really are a total service provider. It takes the
responsibility and much of the technical burden off the
customer by doing that. I think my colleagues here have
indicated they have taken advantage of those services.
Mrs. Jo Ann Davis of Virginia. If two Federal agencies were
getting the same service from you, would their fee be the same?
Ms. Bates. If they were getting identical services, yes.
Mrs. Jo Ann Davis of Virginia. The percentages are
different because they may use two different carriers, so their
line charge may be different but your fee would be the same
even though the line charge is different?
Ms. Bates. Right. The fee is not at all related to the
cost. If a line charge is $2 or $3 in a given city, the fee is
the same. Within the same city, it is the same. It can vary
between locations because our cost base is different.
You recall the fee is intended to recover all of our direct
and indirect operating costs. I wanted to be accurate and not
mislead you.
Mr. Tom Davis of Virginia. The Sprint bridge contract
expired June 6, I didn't hear what happened to it.
Ms. Bates. It expired, we did not extend the contract. The
transition is completed relative to Sprint to Sprint
transition. The transition period has ended and all of the
traffic now and services on Sprint is being billed under
FTS2001.
Mr. Tom Davis of Virginia. Thank all of you for being here
today.
I will let you step down and welcome our second panel to
the witness table. We have John Doherty of AT&T; James Payne of
Qwest; Randall Lucas of Verizon; Jerry Hogge of Winstar and
David Page of BellSouth.
[Witnesses sworn.]
Mr. Tom Davis of Virginia. I would ask you to take about 5
minutes and summarize your comments. We have read your
statement and have questions based on it.
We will start with you, Mr. Doherty, and move down the
line.
STATEMENTS OF JOHN DOHERTY, VICE PRESIDENT, AT&T GOVERNMENT
MARKETS; JAMES F.X. PAYNE, SENIOR VICE PRESIDENT, GOVERNMENT
SYSTEMS, QWEST COMMUNICATIONS; RANDALL L. LUCAS, VICE
PRESIDENT, SALES, FEDERAL MARKET, VERIZON FEDERAL INC.; JERRY
HOGGE, VICE PRESIDENT, GOVERNMENT SOLUTIONS AND ENHANCED
SERVICE PROVIDERS, WINSTAR; AND DAVID PAGE, VICE PRESIDENT,
FEDERAL SYSTEMS, BELLSOUTH BUSINESS SYSTEMS
Mr. Doherty. Thank you for holding today's hearings to
discuss GSA's Metropolitan Area Acquisition Program. AT&T
appreciates the subcommittee's dedication to the stated goals
of the MAA Program, end to end competition in the Federal
telecommunications market and its promise of choice, innovation
and lower prices to benefit agency users and taxpayers.
The MAA Program was designed to bring these benefits to the
local Federal telecommunications market. We believe a program
that operates more like the private sector will benefit both
taxpayers and government by reducing barriers to competition
and the inefficiencies of the present program. We look forward
to working with the subcommittee, other vendors, GSA and
interested stakeholders to make this happen.
I am pleased to respond to questions asked by the chairman
in his letter of invitation and his request for recommendations
to improve the MAA Program.
While the program was launched as part of a tripartite
agreement between Congress, industry and GSA, AT&T viewed the
MAA Program as a real opportunity for government customers to
realize benefits of end to end telecommunication competition.
We still do.
AT&T is committed to bringing choice to the local
telecommunications market. We have demonstrated our corporate
commitment to providing local service through a multibillion
dollar investment in local service infrastructure. Today 2
years after the first MAA contract award, I believe all
stakeholders remain committed to the success of the MAA
Program. Indeed, AT&T holds 10 of the 37 MAA contracts and has
transitioned over 10,000 lines to date.
However, a number of factors have slowed or prevented
achievement of the program goals. Based on experience to date,
we believe changes should be made to the program. These
recommendations are: adopt the use of telecommunication service
schedules, level the playing field for local service providers,
provide financial assistance to agencies for local services
transition, reduce GSA program administrative fees, and clarify
program participant roles and responsibilities.
There are several factors that have hindered the success of
the MAA Program. These are: counterproductive, noncommercial
practices; lack of commitment to transition services to the MAA
Program; uncooperative, incumbent local exchange carriers; and
untimely and inaccurate information from the government about
customer telecommunication needs.
Continuation of often higher priced legacy contracts with
ILEX and ambiguous roles and responsibilities or stakeholders
in implementing the program.
We believe applying commercial practices would streamline
the program and facilitate more rapid transition. We offer the
following recommendations to address the impediments to this
program. These recommendations, if implemented, will more
closely align the program with commercial practices and realize
the goals of the program.
Our first recommendation is that GSA adopt
telecommunications service schedules to encourage even greater
competitive choice and eliminate administrative burdens. Under
the schedule's approach, each vendor would disclose the terms,
conditions and locations where it is going to provide specific
services. These schedules would ensure fairness in
implementation of the program while providing agencies with
truly competitive prices and the diversity of innovative
services currently offered in the commercial marketplace.
The playing field must be level so that everyone can
compete. Many agencies do not participate in the MAA Program
because of the one-time charge required to install the
facilities and equipment necessary for transitioning service.
Incumbent providers hold an inherent advantage because they
have existing infrastructure and need only reprice their
current services which is a paper transition rather than a
physical transition.
End user agencies must be educated about the favorable,
long term savings available under the MAA contracts and should
be strongly encouraged to make use of these contracts. The best
means of accomplishing this would be to allow vendors to freely
market their MAA services to the agencies. If, as GSA officials
appear to have indicated to GAO, GSA is moving to this
position, we believe this is a step forward.
Third, in order to assist end user agencies in their
transition to an MAA Program, GSA should provide MAA customers
with financial assistance through the use of a transition fund.
GSA used an information technology fund to offset agency
transition costs for the FTS2001 long distance service
contract. More MAA transitions could be achieved by expanding
the use of this transition fund to local services in order to
offset the end user's expenses incurred when a physical
transition is required.
GSA's program administrative fee must be reduced. These
administrative fees have significantly offset vendor offers.
While the MAA Program has been successful in reducing prices
from industry, only a fraction of the agencies have taken
advantage of these lower prices. The current administrative fee
structure has diminished agency incentive to transition to
competitive vendors. The administrative fees applicable to
schedules are significantly lower and would reduce prices paid
by the end user agencies for local services in MAA cities.
Clarify responsibilities of MAA Program stakeholders to
ensure accountability, cooperation among all and more readily
achieved MAA Program goals. To address this ambiguity of roles
and responsibilities, AT&T conducted an extensive analysis of
the MAA provisioning process and documented the specific
responsibilities of vendors and the government.
With our full support, this documentation has been
incorporated into several of AT&T's MAA contracts. Adoption of
a uniform definition of roles and responsibilities would
promote greater understanding and accountability among all
involved and optimize achievement of program goals.
By adopting telecommunications service schedules,
replicating practices of the commercial marketplace, and
implementing the other changes recommended above, local
exchange competition will be accelerated providing end user
agencies with a variety of alternatives to meet their
telecommunication needs and save significant taxpayer dollars.
With the renewed focus of this subcommittee on the program
issues associated with the MAA, we have an opportunity to
change course and improve the speed of the implementation of
the MAA Program.
[The prepared statement of Mr. Doherty follows:]
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Mr. Tom Davis of Virginia. Mr. Payne.
Mr. Payne. My name is Jim Payne, senior vice president for
Qwest Government Systems. I am pleased to be here to discuss
the MAA's which constitute a significant portion of the FTS
Program.
Qwest is the fourth largest long distance provider in the
United States, and we are also an international carrier and
provide local services.
This hearing is about the progress of the MAA Program and
whether the program has accomplished its primary goals,
ensuring the best services at the best prices for the
government and maximizing competition for services. To that
end, I will provide a brief overview of Qwest's perspective on
three critical MAA questions.
What was the goal of the MAAs and why are we here? Chart 1
shows the goals. The goal was to establish a new paradigm
reflecting the 1996 Telecom Act. It was to be the blueprint for
the future. The paradigm includes three distinct contract
vehicles: FTS2001, which we had a hearing about in April; the
MAAs and the Niche contracts.
The government would have at its disposal a single,
integrated program that forces continuous competition,
innovation and low prices.
The second question, what is the current status of the MAA
Program? Many parts of it are broken, but I do believe we can
fix it. To date Qwest has won MAAs in Albuquerque, Boise,
Denver, and Minneapolis based virtually on identical RFP
requirements, yet our experiences in each city have been vastly
different. With the exception of Minneapolis, in no case has a
rapid transition been achieved. Further, the guiding principles
promised that long distance would be in our contracts within 1
year after the first FTS2000 contract was awarded. It has not
happened.
Our MAA experiences have been sobering. We identify the
questions the committee has provided and we have some concerns.
I would invite you to look at some of the examples. In every
city instead of dealing directly with Qwest, the end user
agencies are forced to deal needlessly and in many cases,
exclusively through the GSA.
In Denver, for example, a customer had selected Qwest but
the GSA redirected the order to a competitor. This certainly
was not what we had anticipated.
The GSA contract management fee that applies to MAAs ranges
from a low of 25 percent, and I heard an even greater high of
85 percent. When comparing the GSA to itself and other parts of
GSA, you can see these overhead management fees are
unprecedented.
The MAAs are voice centric. New and enhanced services such
as DSL are not in the contracts that Qwest provides.
There is a lack of consistent communication between GSA
here in Washington and their regions, and it has delayed
transition success. Regional and strategic MAA difficulties are
not being handled in a timely fashion. It appears to Qwest that
GSA's focus is largely on FTS2001 problems and not on the MAAs,
thus competition has not been fully achieved.
It is clear that the FTS2001 minimum revenue guarantee
dominates the GSA focus. This issue has had a cascading impact
on the MAAs by delaying the timely addition of long distance to
the MAA contracts. This is not the deal that Qwest signed up
for.
What are Qwest's recommendations? Making these
recommendations, Qwest understands the provision of service to
the government is subject to the requirements of the Telecom
Act and FCC policies. We believe our recommendations are
consistent with all these requirements as well as focused on
the MAA contract principles and the guiding areas.
Our recommendations are: GSA must adapt a more balanced,
overall management structure for FTS starting with the same
management fee across all the FTS programs and they should not
exceed 8 percent.
The GSA must stop inserting itself in many cases needlessly
between the vendors and the agencies. We believe this is a
waste of tax dollars and does prevent competition.
The GSA must adopt best practices using tools and methods
so the agencies can make informed decisions and demonstrate
accountability.
We believe the GSA must commit to and publish a meaningful
schedule to deliver long distance services through the MAAs as
well as the other suggestions we are making today. We recommend
that the GSA issue a schedule, and we offer one on the board
here which clearly demonstrates dates and deliverables to
introduce long distance services.
Let me emphasize, the MAA crossover process should be quite
simple. I emphasize we need clear dates and clear deliverables.
In summary, these actions and recommendations are critical
to putting FTS2000 back on track and I believe GSA does add
value to the process. However, please don't ask me to choose
between the GSA and my end user agency.
Thank you for the opportunity for Qwest to present its
views this afternoon.
[The prepared statement of Mr. Payne follows:]
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Mr. Tom Davis of Virginia. Mr. Lucas.
Mr. Lucas. My name is Randy Lucas and I am the vice
president, general manager of Verizon's Federal team. Verizon
Federal is a part of Verizon's Enterprise Solutions Group and
is specifically organized to serve the information technology
needs of our Federal customers. Verizon Federal has numerous
contracts with various Federal agencies that provide a host of
information technology and telecommunications services.
From Verizon's perspective, the MAA process has generally
worked well and been a success but it could be made even better
if GSA continues to communicate with industry on processes and
guidelines that dictate how the MAA program will evolve.
Verizon has been a supporter and active participant in the
MAA Program since its inception. In fact, Barbara Connor, the
former president at Bell Atlantic's Federal Government Line of
Business testified before the Committee on Government Reform 4
years ago, encouraging Congress to support the separation of
local service and long distance services in developing the
government's procurement strategy. A lot has changed in this
industry since that time and real progress has been made in the
implementation of the MAA Program.
The stated goals of the MAA Program have been to sustain
price reductions for local telecommunications services in
selected metropolitan areas; provide a flexible, contractual
vehicle with high quality services; and to create a contractual
structure that encourages agency cooperation and aggregation of
requirements. GSA is to be commended on the pursuit of these
goals and the impact the MAA has had in fostering competition.
Verizon is in the unique position of having seen the MAA
from several different views. One of the first cities awarded
was New York City. We lost. The sole award was made to AT&T. In
January 2000, we were awarded the WITS 2001 contract which GSA
considers part of the MAA Program. We won a multiple award
contract in Buffalo along with AT&T. In Baltimore, where we
were the incumbent vendor, we lost in a single award decision
to Winstar. We were awarded a contract in Boston, a multiple
award city with contracts also going to AT&T, SBC and Winstar.
Earlier this year, Verizon was awarded the first crossover
contract to go back to New York City to compete for services
there.
As you can see, we have seen multiple awards, single
awards, we have won, we have lost, we have crossed over, just
like the program strategy envisioned.
Though the MAA Program, from our view, has had its
successes, we believe there are areas for improvement. We would
suggest that GSA more strictly enforce the post-award
forbearance timeframes for the awarded cities. While Verizon
understands and appreciates the need for the fair consideration
process, we suggest the process needs to be expedited so that
customers can take advantage of the new services and better
prices offered in the MAA contract.
The process for technology refreshment and the ability to
acquire up to date goods and services are potential areas for
improvement.
While the MAA Program offers some limited data services,
customers cannot currently buy state-of-the-art
telecommunications technology such as frame relay, ATM or SONET
services. Federal Government customers want and need these
technologies to meet the wants and needs of their customers,
ultimately the taxpayer.
Industry needs to be allowed to provide these types of
services as well as voice over IP, gigabit ethernet, and DSL
based solutions. As voice, data, and video networks converge to
a common platform, the MAA contract should allow for the rapid
inclusion of these new technologies.
Verizon is still prohibited from providing long distance
services in 11 States and the District of Columbia. This is an
important regulatory hurdle as we wait for the summer release
of the crossover guidelines for FTS2001. If GSA requires that
all potential entrants to that market have to be able to
provide long distance services to every State, Verizon will be
locked out. If we will be able to offer long distance services
as an option on our MAA contract, we can compete where we have
been approved to provide long distance services. This will mean
more choices for our customers and a better deal for the
taxpayer.
I indicated that we have competed both successfully and
unsuccessfully against AT&T, SBC and Winstar for local services
via the MAA Program. In each case, we were the incumbent local
exchange carrier. The opportunities that the MAA presents would
be even more attractive if vendor partners knew they could
bundle voice, data, long distance and Internet services on the
same contract platform.
Verizon values our partnership with GSA and our successes
within the MAA Program. We have found the representatives from
national GSA, as well as those from the regions, have been more
than willing to talk through issues seek feedback and discuss
process improvement. The MAA is a good strategy for achieving
the primary objectives. Can it be improved? Certainly, it can.
It is a new process. In my 19 years of serving this market, I
have found precious few things that cannot be improved.
I thank the committee for the opportunity to discuss the
MAA Program. I would be glad to answer any questions you may
have.
[The prepared statement of Mr. Lucas follows:]
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Mr. Tom Davis of Virginia. Mr. Hogge.
Mr. Hogge. My name is Jerry Hogge, vice president of
Winstar Government Solutions. I appreciate the opportunity to
discuss the Metropolitan Area Acquisition Program. I am here to
request your support in accelerating the pace of its
implementation.
As reported in GSA's press statements, this $4 billion-plus
program has the potential to save taxpayers millions of dollars
this year and over $1 billion going forward if it is
implemented expediently.
Winstar is a broadband services company and is one of only
two competitive local exchange carriers participating in the
MAA Program, and is the holder of more MAA contracts than any
other vendor. Winstar is also the only vendor offering local
dial tone to its customers primarily using a 38 gigahertz
wireless technology.
As a competitive local exchange carrier, Winstar views
GSA's MAA Program as an ideal business channel offering the
opportunity to provide substantial and concentrated amounts of
local voice and data services in major metropolitan areas.
Winstar has competed for 17 MAA contracts, won 12 and 2 are
pending decision.
Our presence in this process has undoubtedly been a key
factor behind the vigorous competition that has taken place and
a key part of the dramatic price reductions seen in the MAA
contract prices.
As you may have read recently Winstar has voluntarily filed
for reorganization under Chapter 11 of the Bankruptcy Code. We
have received our initial funding, continue to provide services
to our customers, are adding new customers daily and intend to
emerge from this process with GSA and the Federal agencies as a
prominent and strategic part of our long run business plan.
Winstar regards the MAAs as a tremendous success from a
contract award perspective. However, only a minuscule part of
the promised savings has been realized because most of the
business promised in the contracts has yet to be implemented.
Simply put, Federal customers are not being transitioned to the
MAAs at an acceptable pace. Processes are lengthy, basic
paperwork is slow to get done, fair consideration is inherently
unfair in certain instances and conflicts exist with in-place
contracts.
As of today, well over a year into Winstar awarded
contracts, we have received orders for only 5 percent of the
promised lines. Further, since most orders have been received
very recently, only 1.7 percent of the lines forecast by GSA
for the first year in our 12 cities have been installed. We
believe these statistics are not uniquely loaded to Winstar but
instead represent programwide failures. In fact, most of the
promised MAA business remains with the incumbent RBOCs.
The drastically slow revenue flow from the MAA contracts
has had a significant impact on Winstar and will ultimately
impact our ability and willingness to participate in the
program. The main impediments we have experienced in
transitioning MAA business include administrative impediments
such as slow receipt of notice to proceed, fair consideration
of requests and responses, and ultimately service orders.
The average delay between the date we received a notice to
proceed and our first order is almost 4 months and some cities
like Indianapolis have yet to place their first order with us,
resulting in the passage of an entire year where customers
cannot take advantage of Winstar's reduced MAA prices.
The fair consideration process is somewhat a misnomer.
Certain GSA regions apply very rigid guidelines to how vendor
priced proposals are to be presented and then take months to
arrive at seemingly simple buying decisions. Other local GSA
offices specify which technologies can be used to satisfy a
requirement such as an in-ground fiber deployment. This
violates the contract as the specifications are to be expressed
in terms of service requirements, not a definition of a
specific technology or solution.
The MAA contracts are purposely uniform in their product
and service content. All MAA providers are presumed to be equal
in terms of technical and management merit as a result of the
RQS process. Thus, post-award buying decisions should be a
simple matter of comparison shopping and choosing a vendor. To
date, this is not the case.
Finally, in certain MAA cities, fair consideration
decisions do not always appear to be communicated. In several
instances, we have not yet been notified of the outcome of fair
consideration proposals we submitted in November 2000. Either
we lost and haven't been notified as to why or GSA has taken
more than 8 months to make a simple price comparison. Neither
reason is acceptable.
The fair consideration process is further confounded by
apparent conflicts with existing contracts. In Dallas, for
example, Winstar's MAA service price must offset a termination
fee that SBC charges GSA to disconnect its service. This
external cost works against all nonincumbent MAA winners and
destroys the level playing field envisioned by the fair
consideration process.
Indeed, because of the incumbent's disconnect charge, GSA
apparently and wrongly concludes that we are not a competitive
choice since it will take many months just to break even with
respect to this disconnect fee.
The MAAs are 8 year contracts and we believe we provide a
better life cycle value and savings that is not being properly
considered.
To the best of our knowledge, less than 10 percent of the
lines forecast for our 12 cities have been transitioned. We
propose a few changes to improve these results.
Simplify the transition process; speed it up; communicate
the results and track performance. Transition and fair
consideration are extremely measurable. A scorecard such as the
one on the display that begins with the baseline circuit
forecast represented to industry by GSA should be immediately
implemented and tracked monthly. On the screen is a card which
shows the percentage of forecast lines that have had orders
placed with an MAA provider and the percentage of forecast
lines that have been installed. This sort of scorecard would
highlight cities that are on target and compare them to those
that are not, hopefully spurring action, fixing process
problems and eliminating delays.
GSA can utilize the IT fund to help defray initial one-time
transition costs to a nonincumbent's network as well as other
external and equipment changeout costs that otherwise bias the
purchase decision in favor of incumbent providers.
GSA's forecasts of their requirements in each city are the
basis for the bargain. Millions of dollars were not invested in
winning these MAA contracts just to share a $100,000 minimum
revenue guarantee. Instead, we relied on GSA's detailed
forecast of business and the expectation that GSA would meet
those forecasts and the savings touted in its own press
statements.
GSA received substantial price reductions based on the
promised business. We are prepared to deliver the rates
promised in our proposals and it is time for GSA to live up to
the lines promised in their forecasts.
I would be happy to answer any questions you have. I
appreciate the opportunity to appear.
[The prepared statement of Mr. Hogge follows:]
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Mr. Tom Davis of Virginia. Mr. Page.
Mr. Page. My name is Dave Page. I am vice president
responsible for BellSouth's business with the Federal
Government. I represent a staff dedicated to ensuring our
Federal customers receive the best technology available.
I have previously submitted my full statement to the
subcommittee which I ask to be a part of the hearing record.
During my 32-year career at BellSouth and predecessors I
have held various positions in sales and customer support. I am
fortunate to have had the opportunity to see telecommunications
become the most exciting industry in the world.
BellSouth is actively capitalizing on the changes in the
industry to provide our customers with leading edge services.
Building on the most sophisticated network infrastructure in
the southeastern United States, our challenge is to maintain
our perennial receipt of the industry's highest award for
customer satisfaction, while simultaneously expanding our
business into the global marketplace.
GSA's FTS Program and the MAAs are key opportunities for
BellSouth to achieve this growth. BellSouth has won 3 MAA
competitions--Atlanta, Miami and New Orleans. The 1-year
forbearance period for the Atlanta and Miami contracts expired
April 26, 2001. We look forward to being able to offer enhanced
and emerging services such as frame relay, ATM, SONET and long
distance. Unfortunately, there have only been limited
opportunities to expand the contracts.
I have heard all the reason why we haven't been able to
move forward and add new optional services. Some folks are
concerned about commitments to FTS2001 contractors but is the
government keeping its commitment to BellSouth and the millions
of customers we serve.
It is not my intention to raise issues to which I have no
solution, so I won't sit here and grumble about the transition
and how it slowed my ability to implement services under my
contracts. In many cases, there has been a lack of creativity.
I recognize this may be caused by too few people in the field
and not enough support from headquarters. It is our
understanding that processing contract modifications to add new
services might take a back seat to basic transition. I
understand that priorities sometimes change and we all have to
be flexible in the process.
Nevertheless, Mr. Chairman, BellSouth has been a good
corporate citizen when dealing with all the stakeholders. We
find we too have competing obligations for our people, our
customers, our agencies and our shareholders. In the end, the
approach to any problem that seems this complex is to get to
the root and find a common solution.
I was reminded that industry, government and Congress had
already solved the problem. The best solution to move us
forward is to return to the guiding principles. These
principles are maps that tell us how to proceed.
We aggressively lowered prices to win these MAAs. Our
intent was to do more than just retain the business we have. It
was an opportunity to expand into markets we won't enter and
offer new and enhanced services. In fact, one of the primary
reasons BellSouth bid on the MAAs was to be a partner with GSA
moving from a low price bid war style of competition to a best
value partnership. This is not a merge. Partners should take my
interests to heart and protect me from FTS2000 transition
delays and difficulties. Partners should allow us to work
together to facilitate meaningful discussions at all levels.
Partners should be fulfilling their obligations to increase
opportunity for competition rather than taking an opportunity
my team develops and giving it to a competitor. Partners should
live up to their commitments to all FTS program stakeholders.
To their customers, GSA owes the economic relief of the
competitions that have already been conducted. The MAA should
not subsidize GSA at the customer expense. To their contractor,
GSA owes full, open, head to head competition. To the taxpayer,
GSA owes more efficient government enabled by ruthless
competition in the local and long distance services.
BellSouth appreciates this opportunity to share its views
and welcomes any questions you may have.
[The prepared statement of Mr. Page follows:]
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Mr. Tom Davis of Virginia. Ms. Davis.
Mrs. Jo Ann Davis of Virginia. Mr. Hogge, you stated in one
city you waited 4 months before you got the notice to proceed
and in Minneapolis it has been a year.
Mr. Hogge. No. I talked about an average period of time
from contract award to when we received a notice to proceed,
kind of the administrative point in time when you are
responsible for delivering contract deliverables and can start
working business under the contract.
In Indianapolis, we won the contract on April 27, 2000; the
notice to proceed came on July 11, roughly 2\3/12\ months
later. It is getting to that first order that has taken to this
day.
Mrs. Jo Ann Davis of Virginia. Your contracts when you bid
was based on dollars for a year ago?
Mr. Hogge. Right. What we did in assessing each of these
contracts city by city, we looked at the forecast of business,
where the buildings were, how they matched our developing
network and bid based on that forecasted business which was
very specific, year by year, by service, by product and
represented that in a business evaluation that we assessed and
decided to go forward with each bid.
Mrs. Jo Ann Davis of Virginia. I would like to ask the same
of each of you. Did you experience the same delay and cause you
a loss in revenue?
Mr. Doherty. Yes. From an AT&T perspective, similar to
Winstar, a robust business case was put together looking at the
actual customers, the lines, the timing of the announcement of
the award. In my testimony, we talked about untimely and
inaccurate information. There is quite a bit of frustration if
you are not the monopoly where you have all those
infrastructures sunken costs in there for years. You have to
plan when you are going to put infrastructure in to all your
new customers and each of those delays delays not only
implementing the capital expense but also the operational
people you have in that city where you have targeted them to
implement a program and they may be sitting around for 3, 4, 5
or 6 months waiting for the first order. There as been a large
degree of frustration for AT&T.
Mr. Payne. I have the chart in front of me showing award
dates and notice to proceed. Typically it has taken 3 months
but in Boise, it took 7 months. You are not authorized to do
any work until you have notice to proceed. In each case, we
have hired staff ready to go, to move forward, so that is cost
we have absorbed is for 7 months until you are allowed to work
with the end users.
Mr. Lucas. Of the three situations I describe in the
testimony, there is still one that the wait time between the
contract award and when we first got orders that was quite
lengthy but we had to submit some interim proposals in that
process as a part of the Fair Consideration Act. From the time
we submitted the second round of proposals to the time we got
the orders, it doesn't appear very lengthy at all.
Mr. Page. There is a very big difference between the two
regions I support. Region 7 in New Orleans was a very rapid
process and region 4, Atlanta and Miami it has been a longer
process and seems to be some confusion in how they are supposed
to notify you, when they are supposed to notify you and there
just seems to be some methods and procedures they are lacking
there. I don't know that it has been 2 months though.
Mrs. Jo Ann Davis of Virginia. Am I to get from most of you
that the problem is the communications because it is a new
program. I don't understand why two different regions would
have such a significant difference. Do you get notification
from the Washington office or the regional offices?
Mr. Page. It comes from the regional office.
Mrs. Jo Ann Davis of Virginia. Same for all of you?
Mr. Payne. I want to emphasize something Winstar indicated.
In Boise, it took 7 months to get the notice to proceed. We
have not yet received the first orders. That was awarded in
August 2000, last year. The point is there is a notice to
proceed and then there is subsequent process and then you get
the orders. So it isn't just the notice to proceed issue that
is the delay. It is that interim between notice to proceed that
the fair consideration process, which varies city by city, will
determine when you get your first order. So you must first get
your notice to proceed and then at some point there is a
description separate from what was in the RFP, that region
determines how they will define fair consideration.
Mrs. Jo Ann Davis of Virginia. Do you think as a vendor you
understand the definition of how they determine fair
consideration?
Mr. Payne. Since it is not in the RFP, it is absolutely at
the discretion of the local city.
Mrs. Jo Ann Davis of Virginia. It is not in the RFP?
Mr. Payne. There is a reference to fair consideration but
the process is not broken out, so each city takes their own
definition of it. One of the reasons Minneapolis transitioned
so quickly is they went to the notice to proceed and had a
straightforward, fair consideration process. We went right into
transition. As I sit here, we are 100 percent transitioned in
Minneapolis.
Mr. Tom Davis of Virginia. Mr. Turner.
Mr. Turner. I find this whole process, even though I know
it is designed to be an improvement over past practices, quite
confusing. I get the impression that the vendors find it quite
frustrating. It seems you aggressively pursue trying to make a
proposal and then you are told you have been awarded the
contract and then it takes months for anything to ever happen
with regard to what you thought you got.
Mr. Doherty, I am interested about the suggestion you made
about moving to telecommunications services schedules. Explain
to me exactly what that means and how that would differ from
what we are currently doing. I also want to see if everyone on
the panel agrees that would be a very positive change?
Mr. Doherty. It is our position that we believe all vendors
should be able to market services to the agencies when and if
they have the capability, whether it is local, long distance or
end to end service. It is our belief these contracts with the
forbearance periods which have not been met and a number of us
have relied on these dates where they said you have a contract
for a year and then you have a crossover, these programs are
too hard to manage.
It is our position if you allowed industry to look at where
you have a footprint--AT&T has capacity in 84 cities across the
United States--we could offer the GSA a schedule of services we
offer to those agencies and they could be free to buy those
services at will.
It would do two things. One, they would compare those
services without any hidden fees with whatever is available to
the market. Two, I don't think you would experience some of
these lengthy delays mentioned here because the agencies would
have all the information in front of them, I presume there
would be multiple vendors who would enter services on that
schedule and the process would be much quicker, therefore
turning over savings to the agencies and taxpayers in a much
quicker fashion.
Mr. Turner. Does everyone agree that would be an
improvement.
Mr. Payne. To go back to what we are supposed to achieve,
it is best practices, best service and maximize competition.
From a business perspective, you constantly look at your
methods and procedures to make certain you are doing the right
thing to achieve your goals. I believe the great frustration
here is the process is not designed to evolve with the
competitive process.
In the city I described, Boise, we are landlocked into how
do we interpret fair consideration. I am looking for some
uniformity. If you spend a year of delaying, we have heard $1
million a month. That is not a good use of anyone's time. Go
back and revisit the process.
The overhead rate on schedules is 1 percent. Therefore the
process is very expedited and off you go.
Mr. Lucas. I don't disagree with the schedule being another
alternative. I would have some mechanical issues with local
services being provided on a schedule where every State is
ruled by a different public service commission. I am not sure
if we were going to mechanically create a schedule that could
provide local services in 50 States what that price might look
like once we take into consideration a balance across the
country.
A schedule would certainly be an easier vehicle. We have a
GSA schedule where we sell equipment and labor services. That
works very good. From my view, that is another channel, just as
MAA is another channel to the Federal customer. It becomes a
channel conflict question as well. How many channels do you
need to provide the same kind of service.
On the surface, the schedule would be a probably easier
managed option but it would have some mechanical issues we
would have to work through.
Mr. Hogge. I would echo a good bit of Mr. Lucas' comments.
Winstar also has a Federal supply schedule but we have a
program that can work, we have a fair consideration process
that is very loosely drafted, I think purposely so, and each
GSA region has taken their own interpretation of how they
implement that language. To us it should be a businesslike
process. It is intended to be a process essentially of
comparison shopping. These are nonmandatory contracts, in most
cases multiple award, and you had a prequalification process
through the RQS process that took some 2 years to complete, to
evaluate all bidders on the basis of their technical and
management capabilities.
After you have gotten the notice to proceed and are into a
site by site or agency by agency specification of requirements,
you lay Winstar's proposal next to the other providers and make
a decision. We view it as a process that is fixable but the FSS
provides another means for doing it.
Mr. Page. I would like to echo some of what Mr. Lucas said
and say it would be a different channel. I do not think the MAA
is above being fixed. I think it would be a wonderful
contractual platform for us to use. Ms. Bates said earlier that
the difficulty on local service is trying to determine exactly
what people need for today and into the future. That is not a
cookie cutter kind of process where you order from column two
and one from column three. If you really know what you need,
you can do it off a schedule. I think the MAA can be more than
that.
Mr. Turner. Ms. Bates, do you have a comment regarding my
question? What do you think about moving to a schedule?
Ms. Bates. First of all, I would like to indicate that in
thinking about this, I think this is a very complex issue. I
would say regarding schedules that it is easy to say but very
difficult to do and requires some in-depth study.
The problems we have been addressing today in the large
part would not go away with the schedules. There has been much
discussion of fair consideration. Fair consideration is a key
component to buying off the schedule, so that does not change.
In terms of implementation problems that we have spoken
about today and the issues of plowing new ground in a
deregulated market with many forces and contradictory
definitions of success relative to business success, scheduled
contracts do not change that. Those forces in the local market
are there and are very dynamic, and are the byproduct of
competition.
The complexities of today are the complexities of
competition and not the good old days of a single choice, one
could say.
The other area addresses the fees and I do not want my
remarks to be construed in any way as defensive about a fee. We
need to be mindful of our fee and that is what you hold us
accountable for. I don't think we need to let the fact that
FTS/GSA is fee for service obviate other issues. Many of the
issues we are facing today and have been discussing this
afternoon are here on the table ahead of us, fee or no fee. In
the case of where a fee is 80 percent, it is $4, so I am not
wanting to take attention from it but I don't think we ought to
let it take our eye off the ball of some of the real hard
issues we are facing.
Mrs. Jo Ann Davis of Virginia [assuming Chair]. We will
take a short recess to go vote and we will be right back.
[Recess.]
Mr. Tom Davis of Virginia [resuming Chair]. My first
questions will be for AT&T.
We understand effective coordination with the incumbent
local providers is a critical success factor in the
implementation process. You mentioned that as one of the
problem areas. What steps have you taken to obtain that
cooperation and what additional steps does GSA need to take to
ensure that coordination? What steps do we need?
Mr. Doherty. Let me say I agree with Ms. Bates and the
testimony as far as we are working through the issues of the
program. I understand that. I also understand depending on your
comments that the regulatory environment in different parts of
the country and the issues are different.
However, I do believe that the accurate and timely
information shared with the winning vendors as well as those
vendors who competed for those services, particularly the ILECs
and who have contracts, the time to work out how you are going
to support the winning vendors is before those contracts are
awarded.
For example, in New York the riser cable issue became a
major delay for AT&T in working with Verizon in New York to
move forward to get access to buildings. That is cable inside a
building that takes you from floor to floor.
Mr. Tom Davis of Virginia. That is Verizon's cable?
Mr. Doherty. It was GSA's position it was their cable,
Verizon went to the PUC and it sided with Verizon and said it
is Verizon's cable. That was a lengthy process. We also were
told to use several different tariffs, both the wholesale and
retail tariff and all of that is very time consuming.
If some of those logistics had been worked out prior to the
award, the implementation in New York would have been much
quicker.
Mr. Tom Davis of Virginia. That is also in a State where
Verizon has been able to go across lines, so you don't have the
local issues you would in other areas in terms of local
competition?
Mr. Lucas. Yes. That was the first State we were granted
long distance relief and one of the check marks of being able
to do that is that we have adequate local competition.
Mr. Tom Davis of Virginia. Which should have incentivized
you to get these guys in as fast as you could.
Mr. Lucas. We believe we have cooperated with all those
that want to get into the local service business.
Mr. Tom Davis of Virginia. In New York.
Mr. Lucas. In New York.
Mr. Doherty. In cooperation with GSA, we are writing a
document to describe the roles and responsibilities of the
agencies, the government, the vendors, vendors who may support
the agencies and that has been incorporated into our contracts.
I think that has been very helpful in streamlining who is
supposed to do what and when.
When an agency orders something, what is it they are
ordering and do they understand what they are ordering and what
will be delivered by the program. Spreading that across all the
MAA contracts for the different vendors would be helpful.
Mr. Tom Davis of Virginia. You are on both sides of this,
Qwest is?
Mr. Payne. Yes, sir. We have talked about the management
fee and I realize it is only a couple dollars here and there
but it does frustrate the agencies. I want to be clear there
has been specific guidance given to me here in Washington and
to my representatives in the field. I have my program manager
sitting here behind me and we were instructed not to discuss,
not disclose the overhead rate.
I think many of us at this table have gone through
multimillion dollar, billing system upgrades so that management
fee can be embedded in a line cost and not broken out
separately. In the FTS 2000 world, the contract ended in 1998.
There was a line item so every month you were reminded or you
could see what the management fee was. I do think that
frustrates some of the selling process.
I don't understand why we can't deal directly with the
agencies. Some cities do allow it but three of the four will
not. I heard one of the achievements in the first panel was
moving from analog to digital. Many customers I am dealing with
did that 15 years ago. I don't consider that progress. In
Australia, it is against the law to sell something that is an
analog interface.
When you talk directly to a customer, you are going to get
the advanced technology and all the implementation advantages
that come with it. Qwest is very anxious to bring DSL----
Mr. Tom Davis of Virginia. What happens in the translation?
Mr. Payne. If you went down this line, when someone is
carrying the water for you, someone is interpreting what your
selling proposition, I think it is a much better deal to say
are you aware of hosting opportunities Qwest has in this area,
are you aware of the DSL product, so the end user agency is
starting to design their solutions to leap frog right into
advanced technology.
Mr. Tom Davis of Virginia. It expands their whole universe.
Mr. Payne. Absolutely. That kind of dialog I witness
everyday. It has been mentioned that the agencies in many cases
want to use tools to make evaluations. My understanding is the
minor tech pricing tools are not available and haven't been for
months, so the agencies are out there without a mechanism to
make those evaluations. The agencies are caught without a tool
to make the evaluation. I am not clear why that is but that is
what I understand.
My most important issue is in a business environment, I
learned a long time ago nothing happens because you work hard.
That is a nice thing but you have to have a schedule and manage
to the schedule. At this hearing on April 26, we were told long
distance services will be available by the end of the summer. I
proposed a schedule. I am looking forward to September 22
providing long distance services under FTS2000 in one contract.
That was the obligation I thought I heard. I am looking for a
schedule of dates as we run most of our business there.
The field is very much voice centric. We need an education
process. When we go out and talk about our solutions, we are
finding the field doesn't have basic training, neither GSA nor
the agency. We have to figure a way to bring them into the new
century about how telecommunications works. It is hard to get
into advanced technology without that.
Mr. Tom Davis of Virginia. You recommend that the MAA
Program adopt the use of telecommunications service schedules
and also reduce the GSA program administration fees and in turn
a reduced role for GSA in managing the agency's
telecommunications acquisitions.
Under that proposed scenario, how would those agencies that
rely heavily on GSA today because they don't have the staff to
plan and implement these services manage their requirements?
How would you envision the roles of GSA, the contractors, the
customer agencies would be redefined?
Mr. Doherty. I think one of the things our position
supports is the fact we can't live in how we used to do things.
If we are truly going to open up and are committed to bringing
local competition throughout the United States to all the
agencies, we have to look at doing things differently than we
did in the past. If you currently look at the way the schedule
exists for GSA for agencies to buy services, it is take all or
nothing. There isn't a way you can say what I really need is
technical information on this particular item and that is what
you pay, kind of a fee for service type thing.
I would encourage the GSA to look at different approaches
to support the agencies in making buying decisions. I
completely support the testimony of Ms. Bates earlier about a
number of technical folks have left the agencies and a number
of them do rely on GSA. We believe there could be a different
proposition on how they are supported instead of having a fee
that supports all that.
Mr. Tom Davis of Virginia. There was a recent Federal
Computer Week story that noted the Gov Works Program at the
Minerals Management Service is exploring the establishment of a
telecommunications services schedule to sell to Federal
agencies. Is that a good idea? Would you support that?
Mr. Doherty. We would absolutely support that.
Mr. Payne. Let me add, I think competition always enhances
choices and better prices. I think it should certainly have an
effect on these programs.
The critical difference is the GSA schedule does not allow
any services that compete with the FTS services. There is a
restriction of competition on the schedule side. I assume
Interior is not going to take that approach. That will open an
array of competition against FTS2000.
Mr. Tom Davis of Virginia. That could undermine FTS2001,
their minimum guarantees and everything else?
Mr. Payne. It will encourage the prices to fall. The
minimum revenue guarantee is a separate set of problems and I
don't think it is related to prices.
Mr. Tom Davis of Virginia. That is not the Minerals
Management Service's problem?
Mr. Payne. That is correct.
Mr. Lucas. We would have the same issue. A schedule is
something a little easier to manage but the mechanics of having
a schedule that would be able to provide local services in all
50 States would be mechanically a challenge because we would
have to make sure we met all the needs of the 50 individual
public service commissions. It is a regulatory issue for us as
far as the way Verizon looks at it. It is a different
proposition for the end user agencies. There is a value add in
the GSA's program on the GSA side that would be a distinction
with the schedule approach.
Mr. Page. I don't disagree. It is a good additional channel
for people to use but I have to emphasize what Mr. Lucas said,
the regulatory battles you would have to run to try to come up
with a 50 State price for something would be enormous.
Mr. Tom Davis of Virginia. Although it has only been
exercised in one instance to date, it is my understanding the
MAA contracts do have a direct order, direct billing option
that would seem to promote the kind of direct customer,
provider interface relationship you find missing. Have you
looked at that and does it meet your needs?
Mr. Payne. Indeed we are aware of that. The delta between
the direct bill versus full service--in Denver the full service
fee is 44 percent management fee, the direct bill is 39
percent. That is still pretty hefty overhead. We are not
allowed at this stage in any of these four cities, the agencies
are not allowed to come to us directly. That has to be
separately authorized so we have not had an agency to select
the direct approach. All of my agencies are at the full service
level.
Mr. Tom Davis of Virginia. Would it be helpful to a speedy
transition if there was an Interagency Management Council for
the MAA Program as we have for the long distance component of
FTS2001?
Mr. Doherty. Yes. I think anytime you can sit down and talk
with all the principals, you are likely to get faster results.
We all have our different motivations and different agendas but
we also share the same sizable number of problems. Getting
everyone's opinion on the table and talking through it is the
fastest way as opposed to sending letters back and forth and
GSA being in the position of having to filter everyone's
differences.
Mr. Tom Davis of Virginia. You identified the slow pace of
orders as a factor in the transition delays noting to date you
have received orders for only 5 percent of the identified
lines. What steps have you taken by yourself or with GSA to try
to facilitate contract marketing and service ordering
processes?
Mr. Hogge. Like all the other MAA winners, you start out
with an initial event, kick off the city, get things going and
try to work through the regional GSA office assigned to
managing that specific MAA market to get out awareness, get
customer interest and to start motivating the service order
process.
We have been actively doing that, we have been actively
working with Sandy and Margaret who have instituted periodic
meetings with each region to assess and track performance.
In our testimony we suggest shining the light of day on
where we are with respect to those forecasts. You get
visibility on something and results tend to follow. We know
with great detail what the GSA felt the requirements would be
by city, by product by year. That is what we stepped up to the
plate for and that is what we would like to see tracked.
Whether it comes to Winstar or not, we know where we stand with
respect to the fair consideration process in the multiaward
cities as well as the single award cities like Baltimore and
Cincinnati.
Mr. Tom Davis of Virginia. I understand agencies didn't
budget for one-time transition related costs such as
termination fees. Given GSA did not collect funds from the
agencies in advance to fund these one-time charges, what should
we do now to address the issue?
Mr. Hogge. As I suggested, perhaps the IT fund could be
used to defray those one-time costs as well as taking a longer
view of things. I understand how agencies do their fiscal year
budgeting but Winstar has a built-in value proposition in the
fixed 8 year pricing we proposed to take a life cycle view of
things, to adjust the fair consideration process, to remove any
kind of external factors that otherwise bias the decision
toward the incumbent. Any combination of those could be used to
remedy a situation.
Mr. Doherty. It is my understanding that prior to going
into the MAA Program, GSA had somewhere around 22 to 24 percent
of the agencies used GSA for local services. I think GSA needs
to take a much longer view of what would happen to the
overheads if that was driven to the 55, 60, 65 percent
capturing market share and instead of having some of these
rates we have heard, from 23 to 84 percent, to lower those and
take some of those fees and let the vendors use that as a short
term service initiation charge. Increase our fees, that money
goes to the vendors, the vendors now would take care of upfront
capital costs and over a period of time, that would go away.
If GSA looked at a model, I think those fees could be used
in some type of transition fund.
Mr. Tom Davis of Virginia. Mr. Page, you talked about the
importance of niche contracting as a component of the overall
FTS2001 strategy. It appears that concept really isn't being
utilized by GSA. Would you agree, and if you do, what can be
done to improve that utilization?
Mr. Page. The only what I would call niche contract--a
trilogy of contracts, FTS, MAA and the niche contract--all
should be able to intermingle and compete with each other as we
proceed--the only one I am aware of is the DSL contract
recently awarded nationwide. I would consider that a niche
contract for GSA. I don't know of any others.
Mr. Tom Davis of Virginia. As far as you see, they are not
utilizing it to the extent they could?
Mr. Page. It is underutilized I would think.
Mr. Tom Davis of Virginia. Have you had any difficulty
marketing to customer agencies?
Mr. Page. I have two extremes. In New Orleans where I am
the sole provider, I have a relationship with GSA in region 7
where we developed a marketing plan, we are actively going
after customers not presently GSA customers and doing it in a
uniform manner. We have worked with Margaret and her people to
get some attractive, one-time looks at the market. That is a
different world than my region 4 marketplace. I am having a
very difficult time marketing in region 4. GSA wants to be
between me and the customer.
Mr. Tom Davis of Virginia. Ms. Davis.
Mrs. Jo Ann Davis of Virginia. I believe Mr. Payne you
stated you were forced to work with GSA rather than going
directly to the Federal agencies.
Mr. Payne. I think we all said it.
Mrs. Jo Ann Davis of Virginia. I thought I heard the first
panel that the agencies had a choice, either work directly with
the vendor or go through GSA. What is your understanding?
Mr. Payne. It varies from city to city. We have
instructions to work through GSA. The pricing is done through
GSA. We are not allowed to tell the end user what our bid price
is, it has to have the overhead rate. One way they can control
that is if the overhead rate is applied to the proposal
responses coming out of the GSA. We are not in the position in
some cases to know that.
We should be with the agencies making their plans. At
Treasury, we sat down with them with their 5 year plan, we know
where they are going, we look at where the technology is taking
us and them, make our plans accordingly and we are there when
we need to be there with that new technology as it evolves in
whatever prescribed direction. We will probably never go
through an intermediary even though we are a sub to a contract.
TRW has realized the best value is bring the two together,
stand by and see what happens. That is always the best
proposition, bring them to our facilities in Sterling to see
our ``cybercenter,'' or to Minneapolis to see our managed care
environment. It is a learning process. Our presentations are
learning tools.
Mrs. Jo Ann Davis of Virginia. Do you think it would have
sped up the process which has dragged out for over a year in
some cases?
Mr. Payne. Yes. I think some of the solutions you can skip
some of the intermediate technology and directly to the more
advanced technology when you see the cost break points. Those
are the tools we should be working, how do we proceed here.
Mrs. Jo Ann Davis of Virginia. Do you all agree?
Mr. Doherty. I think the broader issue is GSA should run
this program as the public or private sector would run the
program. I think there clearly is a role for the GSA in
supporting the agencies, in helping them buy telecommunications
services.
The question is should the GSA have a marketing role? Our
position is that is not a role for the GSA. The GSA should get
contracts out there, get pricing in place, get policies in
place and then let the marketplace rule, let the different
vendors go out and market directly to the agencies, let the
agencies make informed decisions and hold the vendor community
responsible for the things they have said and commitments they
have made. I don't think GSA needs to be in a role to get
between the end user agencies and industry trying to provide
services.
Mr. Lucas. If I may offer a dissenting opinion. GSA is a
distribution channel as far as we view the world and the MAA
contract is one mechanism. To the extent GSA can market that
value added to those agencies where they don't have the staff
to do their own telecommunications planning and implementation,
GSA provides the value. That is something I am willing to
market through.
GSA is also not mandatory, so if there appears to be some
difficulty in a particular city or State where it doesn't look
like GSA is a solution, there are other alternatives that we
have to market directly to those customers.
In the communications I have with GSA there is an
understanding we can work together to where we are both
successful and where we can't agree, there are other options.
Mr. Hogge. I agree. There clearly is a value add. The GSA
provides services to agencies that would not be equipped to
respond to a bombardment of proposals from Qwest, AT&T, Winstar
and the incumbent provider but other agencies are more
sophisticated. I think there is a solution along the spectrum
depending upon particular situations. That is the difference
here on the local contracts versus the long distance contracts.
Local service is inherently local, the agencies have specific
needs at a specific site.
We are open to working through GSA. It is a viable channel.
That is why we pursued the program in the first place. To the
extent there are agencies equipped to deal with the industry
coming directly to them, there is clearly a subclass for those
opportunities.
Mr. Page. I personally think we could do both. Where I go
out and develop a prospect and need and go through some
elaborate design work, where that customer or agency has no
procurement vehicle readily available to utilize, the MAA
should be a platform I can bring that customer to and we can
establish that process and because I have done the marketing,
done some of the upfront work, then GSA might be able to
negotiate with that customer on fees because there is less they
have had to do.
Clearly there is a need for GSA to be a marketing channel
also. I see it as being more than just a two fee process where
one fee is direct and one if GSA is involved. I think GSA is
smart enough and savvy enough to figure out a way to have a
sliding scale that allows for both. If I go out and kill it, I
want to be able to eat it. You end up not having that desire to
bring that in unless you know you can partake.
Mr. Tom Davis of Virginia. You mentioned the MAA contracts
are uniform in their product and service content, GSA's
implementation and administration is not. Are there specific
contract administration practices that ought to be made
uniform?
Mr. Hogge. I think there are administrative processes that
should be made more simple and more straightforward. Fair
consideration is the one we have chosen to focus on. Winstar
began as a company focused on providing local broadband
services to small and mid-sized businesses.
When we decided to pursue government business through the
MAA Program, you have about a 24 month period where there is a
lot of expense and zero revenue. That was the RQS process. Then
there is an additional period of time where you go through city
by city competition and there is expense and zero revenue until
you get to the point where you have a contract vehicle in
place, a requirement in this market, it seems to me after that
point you then get into more of a normal sort of business
blocking and tackling, head to head competition for this
business. That is where we think our recommendations about fair
consideration can turn the post-award buying process into a
more businesslike transaction.
Mr. Tom Davis of Virginia. In your collective experience,
if agencies have to provision for additional equipment in order
to transition, do they know the options available to them such
as buying from the Federal Supply Service Schedule?
Mr. Payne. The sales process is actually one about training
technically and giving the agency the contractual alternatives.
We all know the rules and are very much aware of the vehicles
and alternatives, and are aware in some instances an upgrade is
required or necessary or maybe advantageous, so when you sit
down with that agency directly, you start looking at that
longer term vision, making those plans, then start realizing
their capital investments and requirements. You can bring to
the table some creative alternatives. That is part of the
selling process.
None of this is charged. This is inherent in what you do
when you sell so some call it planning, some call it selling
but basically the agency is getting the benefit of a consultant
who comes in and will provide alternatives. Part of that is
looking at the alternative contract vehicles.
My concern is the agencies are making decisions not knowing
what those alternatives are and not knowing what the costs are
and we go out to deploy it and they are surprised because we
didn't present the solution that there is more equipment
necessary or more upgrades or riser cable.
Mr. Tom Davis of Virginia. Ms. Bates, do you want to say
anything? We will talk to you informally when this is over. I
don't want this to go unrebutted if you want to say anything.
Ms. Bates. I don't intend to rebut because it is too late
in the day. I think on a positive note, I appreciate the fact
we have come here today and I have heard and you have asked
questions of this panel on ways GSA/FTS can improve. I think
anytime we can all come together and talk about ways to improve
it is positive.
I would ask each of the panel members while they have spent
much time thinking of ways we can improve, and we will look at
that, they also need to think about how they can improve this
process because we are in it together. If only one of us
implements all the improvements, this many-legged stool will
still fall over. I think we all need to take that to heart.
I also think we have talked about many things that have
different meanings. The big thing is communications. We have
all identified that as an area of complexity that we need to do
better. I think the testimony, questions and answers really
elevate that to a new level.
We have spoken of fees, marketing, many things where apples
and oranges have been thrown into this fruit basket. It is a
very complex issue and while we always choose to take the high
road in trying to explain it, many times the devil lives in the
details and we have to get down there to make sure we are
comparing apples to apples.
I will commit to work hard with GAO over the next several
months as they complete the study you have requested to make
sure as we make recommendations and discuss very important
issues of this program and the FTS2001, we are making an apples
to apples comparison so we can all come out with a common
understanding. We have a long way to go to get there.
We did talk about alternate contracting methods. While we
need to look at that, I think we need to be aware the contract
vehicles are not so much the problem but we are dealing in a
deregulated market now where competition is new to many of our
customers, ourselves and our industry and we cannot deny that
we need competition along the way. That is threaded throughout
in our discussion somewhat mixed of fair consideration.
I intend to push ahead. I think we have a good program in
place and everybody here has said they are committed to a rapid
implementation of the current program, bringing on new
customers, getting new customers over and getting that savings
to the taxpayer. I believe I can speak for everyone here, we
all intend to push ahead and do that.
I appreciate the opportunity.
Mr. Tom Davis of Virginia. Thank you.
Ms. Davis.
Mrs. Jo Ann Davis of Virginia. You are right, Ms. Bates,
the devil is in the details. It sounded like the hearing today
and all the testimony that communication is the answer to
making this program work. I think it involves not only GSA here
in Washington and all your regional offices as well as each of
the vendors. I think if everyone could work on the
communication, we can make a good program out of this.
Thank you all for coming.
Mr. Tom Davis of Virginia. I want to take a moment to thank
everyone for attending the subcommittee's important oversight
hearing. Thanks to all the witnesses, Congressman Turner and
other members for participating, thank my staff for organizing
this and I think it has been productive.
Ms. Bates, this is a tremendous complex procurement on the
cutting edge of new technologies. I understand how difficult
this is even for the most seasoned private sector entrepreneurs
who are going under every day in some cases. You have some very
solid ones here that we will see through this contract and I
think the spirit with which you have approached this is very
encouraging.
As long as we can keep talking to each other, try to learn
from it and improve it as we move on, at the end of the day our
goal is to give the taxpayers their best bang for the buck and
for the agencies to allow them to operate most efficiently.
I applaud the way you have approached this and working with
us. We obviously have a way to go but we want to be there with
you. I think the hearings help everyone to understand we are
going to oversee these things. It allows everyone to utilize
what they have to get together.
To all the vendors, we want this to work for you as well.
I am going to enter in the record the briefing memo
distributed to subcommittee members.
We will hold open the record for 2 weeks from this date for
those who may want to forward submissions for possible
inclusion or if there is some thought you want to get into the
record before we proceed. You would be most welcome to do that.
I am going to close the proceedings. Thank you.
[Whereupon, at 4:48 p.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[Additional information submitted for the hearing record
follows:]
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