GAO spreads the blame for FTS 2001 delays

GAO spreads the blame for FTS 2001 delays

Delays in moving telecommunications services to FTS 2001 contracts have cost agencies millions of dollars and delayed the introduction of new competition for long-haul services, according to the General Accounting Office.

A draft of a GAO report, not yet formally released, recommended that the General Services Administration negotiate reductions in the $1.5 billion minimum revenue guarantees for FTS 2001 vendors in light of their failure to meet the requirements of the contract.

GAO found plenty of blame to go around for transition problems:

  • Contractors Sprint Corp. and WorldCom Inc. failed to provide GSA with data needed to track transition progress and did not devote adequate resources to the changeover.

  • GSA, which awarded the contracts, did not quickly add transition-critical new services to the contracts.

  • Agencies were slow to place orders for transition services.

  • Local service providers did not cooperate in providing facilities.

Almost there

GSA's Federal Technology Service, which administers the FTS 2001 contracts, has reported that transition to the new contracts is more than 80 percent complete. But transition now is more than three months overdue, and completion is not expected until June.

'While it cannot unilaterally dictate the progress of the FTS 2001 transition, GSA can facilitate the transition and the program's goals by addressing management information shortcomings, more accurately measuring transition progress, expeditiously processing contract modifications and resolving billing disputes,' GAO said.

Jerry Edgerton, WorldCom senior vice president for government markets, acknowledged some of the problems cited in the report but said it was not a comprehensive look at the program.
'We're rounding the corner and heading for home on FTS,' he said.

GSA and Sprint officials declined to comment on the draft report.

All aboard

FTS 2001 is the major vehicle for providing long-distance voice and data communications to federal users. Although FTS 2001 is not mandatory, members of the Interagency Management Council committed their agencies to the program, which guarantees contractors $750 million each in revenue over the eight-year life of the contracts.

Delays in awarding FTS 2001'the contracts were awarded in December 1998 and January 1999'resulted in two-year extensions of the old FTS 2000 contracts with Sprint and AT&T Corp. The last of those extensions expired in December.

Sprint discounts under the contract extension expired in September 2000, increasing the cost of services by 20 percent to 25 percent. AT&T discounts expired in December, increasing prices by 20 percent to 65 percent. The AT&T contract extension also required a one-time payment of $8 million, which GSA is raising with a 20 percent surcharge against FTS 2000 bills through June.

Revenue under the contract extensions did not apply toward revenue guarantees for FTS 2001. During fiscal 2000, more than $425 million was paid out for services under the FTS 2000 contracts, the report said. Concerns about meeting revenue guarantees were a major factor in the decision not to open FTS 2001 to additional competition, GAO concluded.

The blame game

GAO faulted GSA for not providing adequate planning and management of the transition process. On the contractor side, Sprint and WorldCom had problems with customer support and billing, GAO said.

The IMC's Transition Task Force identified billing as the top transition problem in September 2000, the report said. GAO found that the National Park Service, Bureau of Land Management, Tennessee Valley Authority and parts of the Agriculture Department were billed by WorldCom at higher commercial rates after the transition to FTS 2001.

'In some cases these commercial bills led to collection activities against the agency for nonpayment and, in a few instances, actually resulted in the disconnection of service,' the report found.

Edgerton admitted to some billing problems. 'Guilty,' he said, and added that some problems were inevitable in a program this complex. But the rate problems cited by GAO were the fault of agency mistakes, he said. After selecting WorldCom as their FTS 2001 supplier, some agencies ordered services through regular commercial channels thinking they would be billed at FTS 2001 rates, he said.

GAO blamed much of the agency delay on year 2000 efforts, which consumed resources during much of 1999.

'After February 1, 2000, the pace of agency order submissions increased significantly,' the report said.

In addition to reducing minimum revenue guarantees, GAO recommended GSA demand better management information from the vendors and speed its contract modification process. The congressional watchdog agency also recommended that GSA catalog and track all billing problems and develop a plan for correcting them.


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