Networx numbers: The good and the unknown

Determining the value of awards remains a challenge

This is a test. When the Veterans Affairs Department made fair-opportunity awards to three telecommunications companies under the General Services Administration’s Networx contract, the total cost was: A) $119,881,000, B) $200,000,000, C) No one knows, but whatever it is, it’s probably less than what the agency has been paying. Maybe.

Transient totals are largely the nature of the beast when the beast is an indefinite-delivery, indefinite-quantity contract such as Networx.

“The contract vehicle itself is like a Sears catalog of approved services at approved prices,” said Warren Suss, president of Suss Consulting Inc. GSA put the catalog together, but “the customer decides what and how much to buy,” he said.

“Government is getting an extraordinarily good deal on Networx, even better than on FTS 2001, and FTS 2001 was a great deal,” Suss said. “I think the real story here is how much government could save if agencies weren’t so behind in transitioning to Networx.”

Ironically, one factor slowing the transition is the success of FTS 2001, Suss said. Under that contract, carriers took responsibility for many network functions, allowing agencies to trim staff. “Now agencies are running lean and trying to handle the transition,” he said. “In that sense, agencies are almost a victim of their success.”

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In fact, depending on the services involved and agencies’ negotiating success, new bills are likely between 10 percent and 40 percent cheaper than bills under FTS 2001, Networx's predecessor, said Karl Krumbholz, deputy assistant commissioner of network services at GSA. “We believe that what we do is of enormous value to the agencies,” Krumbholz said.

One reason that Networx prices are so low, Suss said, is because they’ve been monitored twice. First, GSA “did extreme due diligence” in negotiating millions of price points for services, software and equipment, and “got superb rates out of industry, not just for plain-vanilla services, but also for those tailored to the unique needs of government.”

Prices are monitored a second time when agencies have carriers compete to make their fair-opportunity decisions. “By contract, carriers are not permitted to go above Networx prices; they can only go down in price, which they do, whether by forgiving installation charges or giving agencies a better deal in other ways,” Suss said.

Going into transition to Networx, prospects may look good, but the bottom line is as distant as the horizon line. What services agencies are contracting for and what they will cost is difficult, perhaps impossible, to estimate.

For example, in September, VA made fair-opportunity awards to AT&T Inc., Qwest Communications Inc. and Verizon Communications Inc. for voice and wide-are network services and to transition VA's National Automated Response System interactive voice response system to Networx.

Here are the award values as stated by GSA and also by the winning carriers: 

                            GSA                         Carrier
° AT&T:         $49,818,000             $120,000,000
° Qwest:       $68,395,000             $60,000,000
° Verizon:      $1,668,000               $20,900,000

In conversations with Networx contractors, they have been cagey about revealing how they arrived at their award numbers.

“The information we provided [in GSA’s posted list of fair-opportunity decisions] is based on two sources,” said Richard Williams, the agency’s Networx transition manager. One source is data GSA has collected during conversations with officials at the 22 largest agencies, which represent about 95 percent of Networx services.

The second source is information the agencies must provide to GSA when they make a fair-opportunity decision.

“In general, there are many fair-opportunity decisions for which agencies did not provide us a value,” Krumbholz said. In those instances, values are based on GSA billing records of what the agency annually spent on the same or similar services under FTS 2001. Gradually, GSA will get more information, he added.

“They’re all just estimates, and there’s not really any consistency in how that value is determined,” Krumbholz said. “It’s determined based on how much the agency thinks it’s going to be using the service, in most cases over the 10 years of the contract.”

The lack of specificity by agencies in notifying GSA of fair-opportunity decisions — even a description of the services awarded is not required — does not represent a failure by agencies to provide necessary data, Krumbholz said.

“We didn’t anticipate any need for this information, and therefore, the information wasn’t initially required or requested,” he said. Additionally, “it was never a requirement to be specific about what it is that agencies were making this fair-opportunity decision on."

And the information is neither necessary nor important for GSA to know until the work is done, he added. The fair-opportunity decisions are not an order for services; orders will come individually for specific items or services.

For example, Krumbholz said, a fair-opportunity award might be for dedicated or private line services. Each time an agency orders a T1 line, it would constitute a separate order. If billing for the ordering agency is centralized, the agency orders the service, and the winning carrier delivers the service and bills GSA. At that point, he said, “GSA will pay the bill and go to the agency for the money for the service and [GSA’s] fee.”

Finding a total number of awards is no cinch, either. GSA has a list of fair-opportunity decisions that agencies have made, but additional, apparent fair-opportunity decisions show up in press releases and announcements by Networx Universal and Enterprise contract holders, as noted in Washington Technology’s list of awards (see sidebar).

However, GSA will be asking agencies about those additional awards, Krumbholz said. “What we’ll eventually do, as we reinstitute our transition working group [meetings began again May 21] dialog with our agencies, is ask for more specific information,” he said. “So we can say, ‘Well, there was a press release, but we didn’t receive anything on it. Was that an oversight or what happened?’ ”

Reporters aren’t the only ones asking questions, Krumbholz said. An accurate account of agencies’ progress in making fair-opportunity decisions “is also of tremendous interest to the carriers,” he said. “They want to know what’s been done so they” know where the opportunities remain.

Incorporating emerging security and technology requirements of government agencies may be slowing some agencies, Williams and Krumbholz said. “But I think each agency has its own story in terms of what may or may not be causing delays,” Krumbholz said.

Because of the number of statements of work and fair-opportunity decisions — and the detail in both — that agencies have communicated to GSA, “we believe that it possible that the orders process and the transition process will be much more efficient and may go quickly once it starts moving,” he said. “We’re talking continuously with our carriers to alert them on what we know about what the agencies are doing so they can be prepared to move the services quickly when they receive orders.”

“We’re meeting with everybody involved with this process,” Krumbholz said, “and we’ll continue to push.”

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