Neal Fox | Contracting in Perspective: GSA's Networx'Will it connect with users?

Contracting in Perspective

This is the third in an ongoing series of 'Contracting in Perspective' columns written exclusively for GCN and GCN.com by Neal Fox, former General Services Administration assistant commissioner for commercial acquisition.


Look for Fox's next installment when he will discuss the Navy Seaport program.

GSA Networx, the next-generation telecom and networking contract from the General Services Administration, has garnered its share of news. That's good for magazine sales, but bad for GSA, which announced a surprising eight-month delay in the contract award shortly after proposals were received. That is more than 16 long months from receipt of proposals to anticipated award. And that could easily slip again given the track record on this contract. What gives?

Networx is another in a series of governmentwide telecom contracts from GSA. Its predecessors, including the current FTS 2001, were very successful, and are credited with bringing down the cost of phone service for the federal government, and by extension, for other telecom customers as well. For example, the cost of a long-distance phone call on GSA contracts has fallen from over 25 cents per minute to about a penny per minute during the life of these contracts. That is a good definition of success.

But times have changed. Telecom is converging into the realm of IT, which is to say telecom is fast becoming just another component of IT. Indeed, most telecom is already within the scope of GSA's IT Schedule and existing Government Wide Acquisition Contracts such as Millennia and ANSWER. Over the next few years, much of telecom will become IT-based, such as VOIP and other internet-based networking, as customers focus on IT services integrated with their telecom. So with the price of long-distance service hovering at that penny-per-minute level, plus the convergence of telecom into IT, a new approach to telecom contracting was in order.

Despite this, Networx took the worn path of least resistance, attempting to maintain telecom as a separate entity for another 10 years. But why?

GSA telecom and IT contracting folks were in separate parts of GSA when Networx was hatched, so that much-needed internal integration did not happen. The result was an old-government-style request for proposals that attempts to keep telecom separate from GSA IT contracts in spite of the rapid onset of convergence.

In this isolated state, Networx became an eclectic mix of offerings that maintains the separation between GSA telecom and IT contracts.

Networx is actually two contracts, Universal and Enterprise. Universal is for the big telecom companies, and Enterprise was supposed to do what Networx Universal could not, such as bring integrators and small businesses into the game.

To be sure, one can find IT services embedded in Networx. But it is not a governmentwide acquisition contract, which would have made it truly IT, and would have allowed customers the flexibility to mix and match telecom and IT. Instead, Networx has been defined by GSA as a government multiple-agency contract, which effectively isolates it from GSA IT contracts. There is the side benefit of not requiring approval by the Office of Federal Procurement Policy, but at the expense of integration with IT services that would have benefited the customer.

At the same time, GSA approved and then unapproved putting switched voice telecom on the GSA IT Schedule, where customers could have bought routine telecom services as a commodity, which they have certainly become. This was an unusual decision given that wireless phone service, VOIP and many other forms of telecom are already on the IT Schedule. Recall that the IT Schedule can be used self-service by agencies, but customers will be required to pay GSA additional assisted-services fees when using Networx. Such GSA restrictions on the types of telecom services customers can buy on the IT Schedule without paying GSA the extra fees for buying those same services through Networx have raised some eyebrows.

But why all the Networx contract delays? The key is found in the complexity of the RFP put out for bid by GSA, which led to vendor proposals that must rival NSA-type encryption. The Statement of Work for Networx Universal was 621 pages, and tried to tell vendors how to do everything in excruciating detail. Apparently acquisition reform and performance-based contracting has not reached GSA telecom. Vendors were unable to decipher what GSA wanted, so their proposals are almost certainly full of if/or/but provisions. GSA also made the mistake of not having a page limit on proposals.

Interestingly, GSA was actually surprised by the complexity of the proposals it received, as shown by adding eight months to their source selection timeline after receipt of those proposals. GSA officials publicly stated that they needed to delay Networx award dates due to the overwhelming number of responses from vendors. Although the number of proposals received against an RFP is generally public information, GSA has refused to divulge the number. But according to industry polls regarding who submitted proposals, it appears that GSA only received four proposals for Networx Universal and maybe seven proposals for Networx Enterprise. Overwhelmed by the response? Hmmm.

Integrators and most small players found Enterprise unworkable and high risk, and refused to bid. The RFP was too complicated, required huge investments in a burdensome government billing process and the requirement to compete with Universal chased many away. All this makes the effectiveness of Enterprise highly questionable. In fact, Enterprise is shaping up to be a colossal failure. IT integrators were supposed to be able to bid on it. Apparently none did. Small businesses were supposed to be able to bid on it. Apparently none did. So GSA will end up with two contracts having virtually the same large telecom vendors. GSA need only look as far as their complicated RFP to understand why this happened.

GSA also took the unusual step of making significant modifications to the Networx Universal solicitation in both February and April 2006, months after vendor proposals had already been submitted, and after GSA had reviewed those proposals. Over 398 changes were made, including addition of new scope, changing many standards and technical requirements from mandatory to optional, easing minimum requirements, changing pricing requirements in numerous tables, adding new hardware, and on and on.

For any government solicitation, such significant changes after receipt of proposals is hazardous, since it raises the difficult question as to why those changes were made. And since some vendors likely benefit from those changes more than others, it brings the protest issue into play since the government had first read the proposals, then changed the solicitation.

So will Networx be successful? The answer has several components. First, one has to ask whether it can be awarded as it currently stands. I do not know the answer, but some major issues loom.

The Enterprise contract may not work in view of the limited number of bidders, the significant overlap with Universal and the guaranteed-minimum-revenues provision. That minimum-revenue guarantee means that GSA would be bound to pay the Enterprise vendors big bucks if the contract is a bust. Recall that GSA no longer has the luxury of bailing out failed contracts with overages from its Schedules program.

Also, those significant changes to the Universal RFP after all proposals were received could be viewed as a major reinterpretation during the course of a source selection. The Federal Acquisition Regulation prohibits such actions as unfair to vendors. GSA may have tainted the source selection by making significant changes after it had already read through the proposals, since some vendors will benefit more than others will from those changes. And vendor discussions during source selection will also continue to be vigorous, as GSA tries to decipher those complex proposals.

Given the level of confusion by vendors regarding what the RFP actually said, the confusion by GSA over what the vendors proposed, and the jeopardy regarding those minimum revenue guarantees on Enterprise, the answer regarding ability to award is not a slam-dunk.

But if one or both of the Networx contracts can be awarded, it can aggregate government telecom buying to some extent. However, bring in the developing issue of GSA loss of customers, and especially Defense Department customers, that aggregation argument is slipping a few notches. GSA also missed the opportunity to truly embrace the convergence of telecom into IT, which is what customers will be looking for.

Networx will probably be useful for about half the contract award period before customers decide that telecom has become just another part of IT, and either develop their own contract or use a GSA GWAC where they can ensure total solutions that integrate telecom with their IT infrastructure.

Also, GSA GWACs allow direct customer ordering without paying assisted-services fees. Since customers must pay GSA assisted-services fees to use Networx, this will increase the cost to Networx customers.

As a result of Networx' failure to embrace telecom convergence into IT, and GSA insistence that customers cannot order telecom without paying GSA extra fees, we could easily see an increase in the number of agency-specific telecom contracts, and further erosion of business from GSA.

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