Is AT&T's sole-source DCTN song, to a tune of $1.5b saved, valid?

My friends at AT&T Corp. thought I really bollixed it up when I wrote that the
Defense Information Systems Agency should go ahead and break up its Defense Information
Systems Network (DISN) procurement into about a dozen contracts [GCN, Feb. 5,
Page 31].

AT&T folks complained that I got a couple of facts wrong. I said that AT&T
estimates a winner-take-all integrated approach would save DISA at least $100 million. No,
AT&T said--by permitting vendors to bid for the whole shebang, the government would
save $1.5 billion over the life of the procurement.

They also said I was wrong when I wrote that the Defense Commercial Telecommunications
Network (DCTN), supplied by AT&T and to be replaced by DISN, is worth about a billion
bucks a year to AT&T. Technically speaking, there really is no more DCTN. Instead, we
have the DISN Transition Contract, awarded sole-source to AT&T because DISA vacillated
between one strategy and another and couldn't get a follow-on contract in place in time.

Anyhow, DCTN/DTC is not worth anywhere near the billion-dollar figure, AT&T said;
it's more like one-fourth of that.

Whether DISA should allow one mammoth bid for all the DISN components is now up to the
General Accounting Office to decide. The entire matter could stay there--if it weren't for
documents DISA and AT&T have filed before GAO.

DISA is saying things to GAO that are the exact opposite of what it has said in the
past about AT&T, its favorite telecom vendor. Hard to believe this is the same DISA
whose chief a year ago told a DCTN user conference that "DCTN has provided complete
end-to-end services plus accountability around the corner and around the globe. We expect
a lot from the folks at AT&T [and] I guarantee they won't let us down."

DISA now is singing a different tune, telling GAO that although DCTN was a
"satisfactory contractual vehicle in its earlier years," it now is characterized
by high prices, sluggish innovation, delays and service interruption. What a difference a
year makes.

DISA now admits that when it did a price comparison of DCTN with the FTS 2000 network,
it found DCTN prices for replacing services were higher, although DCTN service initiation
fees were lower.

The price comparison was done in March 1995--back when DISA was saying good things
about AT&T but before FTS 2000 prices were reduced dramatically after a closed price
competition between suppliers AT&T and Sprint Corp.

DISA also revealed that last year, when it lowered DCTN prices after an annual rate
review, a quid pro quo was demanded: namely, that DISA curtail, maybe eliminate, buying
onesy-twosy circuits via a bulletin board system.

DISA subsequently canceled 22 solicitations for which it already had received quotes.
For six of the procurements, AT&T itself bid lower prices than under DCTN, according
to DISA documents.

Here's how the DISN procurement is broken up and what's bugging AT&T. By the time
you read this, DISA probably will have awarded a $2 billion contract for DISN Support
Services-Global. Just about any vendor that has a piece of that contract cannot, under the
rules, bid for the upcoming $400 million DISN Switched/Bandwidth Manager Service-CONUS
contract (DS/BMS). Or the $125 million DISN Video Services-Global (DVS-G) contract. Or the
$5 billion DISN Transmission Service-CONUS (DTS-C) contract.

That last one is nine separate contracts for transmission services that provide access
to and connection of switches/multiplexers bought through the DISN Switched/Bandwidth
Manager Service-CONUS buy.

Almost all of these contracts will be awarded by late summer or early fall. Maybe.
Unless you're an optimist, you could bet this will bear out my prediction that the DCTN
buy will run beyond its 15-month contract period that ends May 31, 1997.

Roll the three--DS/BMS, DVS-G, DTS-C--contracts into one, says AT&T, and we'll save
the taxpayers $1.5 billion.

Should DISA do it? Should it marry DISN to the prices and the technology of one company
for several years? I don't claim to know the answer. It's now GAO's call.

What this dispute means is that DISA and AT&T have irreconcilable differences. DISA
has wised up to the fact that the telecom market is diversified and competitive now.

My friends at AT&T have to realize that their company still might be the biggest
and possibly the best, but it's going to have to share government and commercial markets
with other capable companies.

It's the way things are from now on. Play the game as long as you have a level playing
field. It's asking too much to be allowed to set the rules.

Sam Masud is GCN's senior editor for communications.

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