Let the game begin
Teams gird for battle over huge Networx deal<@VM>NETWORX PROS AND CONS
- By Roseanne Gerin, Arshad Mohammed
- Oct 08, 2005
"It is a must-win kind of a deal." ? Lou Addeo, AT&T
It's "the mother of all competitions." ? Jerry Edgerton, MCI
Henrik G. de Gyor
"I hate to even think of losing" the contract. ? Tony D'Agata, Sprint Nextel
"Anybody who wants to be in the federal telecom integration market has got to be on the Networx deal." ? Diana Gowen, Qwest Communications
They've spent years and millions of dollars preparing for this moment, and now the four teams chasing the federal government's largest ever telecommunications contract are ready to go head to head.
AT&T Corp., MCI Inc., Sprint Nextel Corp. and Qwest Communications International Inc. are leading teams seeking a share of the General Services
Administration's 10-year, $20 billion Networx contract.
Proposals were due by Oct. 5 for Universal, the largest and most lucrative portion of the contract. The second part, Enterprise, has an Oct. 24 deadline.
"It is a must-win kind of a deal," said Lou Addeo, president of AT&T Government Solutions Inc. The company has invested millions to win a Networx contract. Over the past five years, AT&T has spent more than $10 billion on its nationwide network that is used by government, commercial and residential customers, he said.
Universal's awards are expected in late July, to be followed by Enterprise in late September.
Under Networx, federal agencies can buy a wide range of telecom and IT products and services, some of which are not offered under the current governmentwide telecom contract. New converged Internet protocol solutions, applications services and satellite services are some of what Networx will offer, said John Johnson, assistant commissioner of service development and service delivery for GSA's Federal Technology Service.
Gaining a spot on Networx will not end the battling, though. The winning teams will continue to compete for task orders.
[IMGCAP(2)]Jerry Edgerton, senior vice president of MCI's government markets and systems integrator business, called it "the mother of all competitions." MCI and Sprint Nextel hold FTS2001, the 10-year contract for government phone services that expires in 2006.
"Anybody who wants to be in the federal telecom integration market has got to be on the Networx deal," said Diana Gowen, senior vice president and general manager of Qwest's government services division.
"Let's face it, Networx is a substantial opportunity for any company that has the bandwidth to compete for the services," GSA's Johnson said.
Under Networx's two-part structure, Universal will offer government locations a wide range of telecom services nationwide, and Enterprise will offer a blend of specialized Internet protocol and wireless services in specific geographical areas.
Networx will be the government's primary contract for telecommunication services. Under FTS2001, the federal government has spent almost $3.9 billion on telecom products and services through this fiscal year, GSA said. GSA estimates that services purchased through Networx will reach $20 billion over its 10-year life.
[IMGCAP(3)]Networx could represent about one-third of Sprint Nextel's roughly $1 billion a year in annual federal government work, said Tony D'Agata, vice president of federal government, public sector.
Sprint Nextel has been working on the contract for more than a year and has spent several million dollars on it.
"I hate to even think of losing" the contract, D'Agata said.
The contract's scope and multibillion-dollar ceiling have the government proceeding carefully. Due dates for bids from interested vendors have been postponed twice.
"All the teams are going to have to do a lot of work in order to have all the boxes checked, so it's not a slam dunk," said Warren Suss, president of Suss Consultants Inc., a federal telecom networks and IT consultancy in Jenkintown, Pa.
All four stand a good chance of winning a spot on the contract, Suss said, but they must prove they can fulfill the procurement's long list of mandatory services for Universal. Enterprise has a shorter list of requirements.
GSA expects to make two or three awards for Universal and up to five for Enterprise, although Johnson said the agency is keeping its options open and will make a final decision when evaluating the bids.
Though the competition for the Universal portion is among just four teams, at least four other companies are joining the fray for the Enterprise portion. GSA designed the procurement to give systems integrators and medium and small IT and telecom companies a chance to work under Networx.
Enterprise "is a great opportunity for us to offer solutions for the government that they can't buy today," said Jeff Storey, president and chief executive officer of WilTel Communications Group Inc. of Tulsa, Okla., one of the companies on MCI's team and leader of its own team for Enterprise.
"These Enterprise contracts are a very good idea to get not only the big players, but also the smaller players that can generate more innovative solutions and be more flexible to meet the government's networking needs," Storey said.
Confirmed bidders for Enterprise include the four carrier-led Universal teams as well as WilTel, Cingular Wireless LLC of Atlanta, Level 3 Communications Inc. of Broomfield, Colo., and Verizon Communications Inc. of New York.
All four teams competing for Networx Universal are expected to base their strategies on price, once they prove that they comply with the procurement's detailed technical and management requirements.
"In Universal, that's absolutely the case. It's a price shootout," Qwest's Gowen said. "The government always figures out how to get us all pretty close from a technical and management perspective. Then it becomes a price game."
Executives at AT&T, MCI and Sprint Nextel were loathe to tip their hands about their strategies or pricing plans, but they gave some sense of their sales pitches to the government.
For AT&T, the contest is a grudge match, having lost the FTS2001 contract to MCI. Executives said they have spent two years preparing the Networx bid.
MCI also emphasized its FTS2001 experience, and the strength it will draw from Verizon, a $70 billion, local telephone company that plans to buy MCI and is expected to invest in upgrading its network.
Sprint Nextel executives stressed that the company has served the federal government for the last 16 years on FTS2000 and FTS2001 and with its expertise in wireless networks, which it expects to be a big part of the Networx contract.
[IMGCAP(4)]Qwest will rely on the experience it has gained winning contracts that didn't fall under FTS2001.
Not landing a spot on the Networx contract will mean reworking strategies. Sprint and MCI executives said they would try to win other business or redeploy workers. AT&T's Addeo said the company had to slim down after it lost the FTS2001 contract and as a result was now relatively lean.
Qwest's plan is to partner with systems integrators for government business and make the most of telecommunications contracts, such as its Metropolitan Area Acquisition vehicle, which runs another five years, Gowen said.
With its size and scope, the Networx procurement has attracted a lot of attention from industry and lawmakers.
The House Government Reform Committee, which has oversight of GSA, held three hearings on Networx in 2004 and 2005 in which witnesses voiced concerns that systems integrators and smaller IT companies would not have a fair chance to win business under Networx.
Industry officials called for GSA to reduce the program's numerous initial requirements for plans, reports and billing, as well as increase the minimum revenue guarantees.
Fueling lawmakers' anxiety were problems GSA had managing other contracts and the misuse of its IT Fund. A major concern on Capitol Hill was whether GSA, which is undergoing a reorganization, could juggle Networx along with the other multibillion-dollar contracts it plans to issue, a few of them in the works for 2006.
GSA's Alliant program is worth $50 billion and is scheduled to be awarded in 2006. An accompanying small-business contract, called Alliant Small Business, is worth $15 billion.
"The more awards they make [for Networx], the more administrative overhead they have," said Charles Viator Jr., vice president of the government group at Rivulet Communications Inc., Portsmouth, N.H. He also is chairman of the shared interest group on networks and telecommunications at the Industry Advisory Council, a Fairfax, Va., group of IT professionals that provides products and services to the government. "We're talking about an organization that is already stretched."
At the same time, industry players competing for Networx are going through their own turmoil as they complete huge mergers.
SBC Communications Inc. is in the process of acquiring AT&T, and Verizon is buying MCI. Both deals are still awaiting federal regulatory approval, and the companies may be required to divest some of their business lines. Sprint recently merged with Nextel, but the two companies are still blending their operations and cultures.
The government market can expect some impact from the mergers of SBC and AT&T and Verizon and MCI, Suss said. "In both cases, you're going to have an incumbent local-exchange carrier eventually in the driver's seat in terms of top-level management decisions."
Local phone companies generally are known for being more cautious, so decision-making may slow down, Suss said.
Another factor is that the pending mergers may not clear all of their regulatory hurdles until after Networx is awarded, he said.
Although GSA is reviewing proposals for Universal, some vendors fret that there won't be enough time to transition services from the old contract to the new one without disruptions.
Johnson said that fears of the Y2K date-code issue, questions about service access availability and a lack of clarity about selecting a carrier complicated the transition from FTS2000 to FTS2001. GSA was not assertive in ensuring there was an accurate accounting of inventories for each agency, he said.
The transition to Networx potentially could be the largest in history, Johnson said. GSA formed an Interagency Management Council to draft a document that describes transition functions and who should pay for them. A transition management plan also is in the works.
"We've learned the lessons in planning for the transition from FTS2001 to Networx to ensure that we've done everything we can to put things in order," he said.
Congress also will be watching. Rep. Tom Davis (R-Va.) said the Government Accountability Office will monitor and report to him on GSA and user agencies and transition preparation activities.
"It is imperative that GSA and the user agencies be prepared for the upcoming transition, so that we do not have a repeat performance of the FTS2001 transition fiasco," Davis said.
Staff Writer Roseanne Gerin can be reached at email@example.com. Arshad Mohammed is a staff writer with the Washington Post.AT&T CORP.Teammates:
Cingular Wireless, EDS Corp., Global Crossing Ltd., GTSI Corp., Northrop Grumman IT, SRA International Inc. Other small and midsize companiesAdvantages:
AT&T already has the necessary investments in place for Networx from its previous bid for FTS2001. It has increased significantly its presence in the federal market and won some business through Crossover contracts.Disadvantages:
It lost out to MCI and Sprint Corp. on the bid for FTS2001 and may get distracted by its merger with SBC Communications Inc. Both AT&T and SBC have laid off a good portion of their federal sales forces.MCI INC.Teammates:
Anteon International Corp., Computer Sciences Corp., Comtech Telecommunications Corp., G2 Satellite Solutions Corp., Hewlett-Packard Co., Protus IP Solutions Inc., Proxim Wireless Networks, TeleTech Government Solutions LLC, WilTel Communications Group Inc., Verizon WirelessAdvantages:
MCI is one of two incumbents on the FTS2001 contract, and it has big government clients and a nationwide fiber-optic network.Disadvantage:
Its pending acquisition by Verizon and the meshing of their operations may be a distraction.SPRINT NEXTEL INC.Teammates:
Lockheed Martin Corp., More than 40 other companiesAdvantages:
Sprint is the other incumbent on FTS2001, with a large bevy of federal customers already in place.Disadvantage:
Although its merger with Nextel Corp. is complete, Sprint may have a tougher time blending the two corporate cultures.QWEST COMMUNICATIONS INTERNATIONAL INC.Teammates:
BearingPoint Inc., BellSouth Corp., Science Applications International Corp., Others including Akamai Technologies Inc., Comcast Corp., Cox Communications Inc., Istonish Holding Co., Hawaiian Telecom Services Co., Lucent Technologies Inc., Nortel Networks Corp., Time Warner Telecom Inc., Wire One Communications Inc., and other small businesses.Advantages:
Qwest came from behind the other contenders to be fully compliant with Networx. It is out in front of other carriers in developing and offering Internet protocol services.Disadvantages:
Qwest failed in its attempt to buy MCI and has an enormous amount of debt. It is not known for innovation in telecommunications. Its strong position in the West, where it's the incumbent local exchange carrier, means it has limited geographical reach. If all four bidders win Networx awards, Qwest will have to continue to come from behind to win agency business.