Make sure FTS 2001 is continuously competitive

The General Services Administration currently has the solicitation for the successor to
the FTS 2000 telecommunications program on the street.


FTS 2000, conceived in the mid-1980s, was a great success. It saved the taxpayer lots
of money, provided good service and demonstrated a model of continuing competition between
two winning vendors.


The idea behind mandatory use of the contract, the corollary of the dual contracts, was
to maintain enough government volume to continue giving the winning contractors,
particularly the smaller network vendor, the incentive to improve service and pricing. The
dual-vendor, mandatory-use model served its purpose, but times have changed, and that
model does not need to be replicated.


What does need to be maintained is the principle of continuous competition.


It is an extremely awkward time to award comprehensive follow-on contract. Telecom
reform legislation, passed by Congress just last year, promises to again transform the
industry. But it's not clear when competition for local phone service will become a
reality. Clearly, the government needs to adopt new acquisition strategies to take
advantage of still-unfolding changes in the marketplace and allow the kind of choices
agencies need. The strategies need to stay flexible, bending with the market winds as the
industry transforms.


GSA adds a markup for the service of conducting telecom business for the agencies. It
used to be aptly called SLUC, for standard line user charge. Spurred in part by howls of
protest from government customers, and in part by thoughtful consideration by
GSA--particularly its current Federal Telecommunications Service commissioner, Bob
Woods--the SLUC charge has been reduced. That is the good news.


The bad news is that SLUC is still in the neighborhood of 8 percent for long distance
and, improbably, a multiple of that for local service contract administration.


Are such contract administration charges justifiable? For example, is one part of GSA,
in this case FTS, justified in charging so much more for its services than, say, the
Federal Supply Service, which charges 1 percent to administer the Multiple-Award Schedule
program?


The MAS program reportedly has a positive cash flow after expenses. If that is the case
with FSS' 1 percent, then the FTS folks at GSA should be fully prepared to describe the
additional services they provide to justify an 8 percent overhead charge.


In the bad old days, designing government-unique requirements and running
government-unique procurements caused this kind of overhead. But given the mandates of
procurement reform, that is not a justification today. In all the bidders' conferences and
the congressional hearings before the former House Government Operations Committee, the
seminal issue of government administrative costs, and how they relate to acquisition
strategies, does not appear to have been fully aired.


For example, telecom on the MAS program could be a ready means for agencies to buy new
services, permitting healthy competition and market-driven price changes.


In fact, the MAS program's success in acquiring commercial products offers valuable
benchmarks, with its dynamic of easily changing prices and services. A schedule-type,
multivendor approach seems to be the type of modular contracting needed in a period of
uncertainty about the direction and rate of change of the telecom industry's products and
prices. The government cannot cost-justify or demonstrate public policy alignment if,
instead, it unnecessarily builds government-unique systems and contracts.


Acquisition plans should let industry do what industry does best, with the government
benefiting from private-sector economies of scale. Schedule-type contracts may not be the
sole answer to the government's telecom needs, at least today. But some of what is bought
in the telecom world is clearly a commodity, such as big city switched-voice service,
whether local or long distance, within or between well established markets.


Market-driven, commercial-product contracts and specialized government networks, where
required, aren't necessarily in conflict. Taking advantage of both telecom reform and
procurement reform could create unbeatable competitive vehicles to keep prices low and
vendors on their toes.


The time to evaluate this question is before awarding FTS 2001, not after.


I'd like to disclose that I have done legal work for one of the FTS 2000 contract
holders.


Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell & Ryan. He
has long experience in federal information technology issues. E-mail him at smr@blrlaw.com.


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