Pressure Builds to Open FTS2001 to More Competitors

The General Services Administration's FTS2001 telecommunications contract is facing increasingly strong attacks from Capitol Hill and industry critics who want the contract opened up to more competition. The FTS2001 contract to provide long distance and other services to federal agencies was awarded more than two years ago to Sprint Corp. and WorldCom Inc. GSA envisioned that other companies eventually would be allowed to compete for FTS2001 work, but the delays in getting the program off the ground have kept the contract limited to Sprint and WorldCom.Pointed questioning from Rep. Tom Davis, R-Va., and other House members at an April 26 congressional hearing made clear that the Virginia lawmaker intends to use his clout as chairman of the House Government Reform subcommittee on technology and procurement policy to push the GSA to open up the contract as soon as possible. Responding to Davis' questions, Sandra Bates, commissioner of GSA's Federal Technology Service, said the FTS2001 contract would be opened up to other competitors this summer.The day after the hearing, AT&T Corp., the losing bidder on that contract, pressured GSA on another front by filing a protest with the agency. It is asking that the FTS2001 contract be overturned and re-bid for competition. In the protest, AT&T contended that GSA relaxed some of the performance requirements in the contract after selecting Sprint and WorldCom.Davis views the AT&T protest as evidence of GSA's poor management of the FTS2001 program. The protest "is the unfortunate result of a contracting program gone awry, of the delays in the transition process that have dampened competition and increased costs to taxpayers," Davis said April 30.Testimony at the April 26 hearing ? sparked in part because of a critical General Accounting Office report on delays in transition from the old FTS2000 contract to the FTS2001 contract ? revealed federal agencies have spent $74 million in additional costs because of delays in making the transfer from the previous providers, Sprint and AT&T.Davis, who chaired the hearing before the subcommittee, told Bates he considers FTS2001 to be less than successful to date."It is clear to me that the goal of competition in the program has not been realized," Davis said.Under questioning, Bates said the transition has not gone smoothly, and some work remains to be done. But there were a lot of mitigating factors, she said, which the GAO included in its report as reasons for the problems. "It was not through lack of effort on the part of everyone involved," she said.At the time of the award, the contract's potential value was estimated at $5 billion over eight years, with each contractor guaranteed at least $750 million. The GAO, however, said the contract's potential value has fallen to $2.3 billion, making it increasingly difficult for Sprint and WorldCom to achieve the guaranteed minimum revenue. And until they do, the GSA is reluctant to allow other companies to compete for FTS2001 business, GAO said.Bates defended the minimum guarantees to Sprint and WorldCom. Without the guarantees, she said, prospective bidders would have been reluctant to consider investing in the systems and infrastructure changes needed under FTS2001.Also testifying at the hearing were representatives from Sprint of Westwood, Kan., WorldCom of Clinton, Miss., AT&T of New York and Qwest Communications International Inc. of Denver.AT&T and Qwest hold several Metropolitan Area Acquisition contracts for local telecommunications services in cities across the United States, which make them eligible to compete for long-distance services when GSA opens FTS2001 to competition.John Doherty, vice president of government markets for AT&T, and James Payne, senior vice president of government systems for Qwest, charged that GSA's decision to give Sprint and WorldCom minimum revenue guarantees has led the agency to delay introducing long-distance competition within FTS2001.But Sprint's Tony D'Agata, vice president and general manager of the government systems division, and Jerry Edgerton, senior vice president of WorldCom federal systems, vigorously defended their companies' actions. Both said that AT&T, which along with Sprint held the predecessor FTS2000 contract, has contributed to delays and jacked up long-distance rates during the transition period. They pointed to AT&T's requirement that GSA pay the company a one-time fee of $8 million, when the agency had to negotiate a bridge contract in December 2000 because the transition was not yet completed, as an example of the company making the transition more difficult for the government.Davis said after the hearing it was clear that AT&T had been milking the transition, but there wasn't anything wrong with that. "That's just the marketplace," he said.After the hearing, D'Agata said he was disappointed it concentrated on the negative aspects of the transition rather than its accomplishments. FTS2001 has saved $400 million in telecommunications charges since its award, he said. "There are thousands of federal contracts every year, and I challenge you to tell me which have saved $400 million in the past three years," he said.D'Agata contended the purpose of the hearing, to pressure GSA into opening up FTS2001 to additional competition, "was a foregone conclusion." "Since the end game was already known, he [Davis] didn't need to badger GSA," he said.After the hearing, Davis expressed satisfaction that GSA would take steps to open FTS2001 to more competitors. "GSA did not crack the whip, [and] no one focused on what a delay would mean, [but] there's no corruption here, just good people trying to get their jobs done," he said.The day after the hearing, however, AT&T filed its protest of the award of FTS2001 to Sprint and WorldCom, charging that GSA relaxed the performance requirements outlined in the original request for proposal to accommodate the winners. AT&T is asking that the awards be overturned and the solicitation reopened with modifications reflecting the contract's true requirements, according to Wayne Jackson, an AT&T spokesman. AT&T's Doherty said the company's bid on the contract would have been significantly different if the company had known the true performance requirements. Information in a GAO report, "FTS2001: Transition Challenges Jeopardize Program Goals," released April 26, coupled with testimony at the hearing triggered the protest.Doherty said he was astonished to see the GAO report categorically state the FTS2001 contract "waives numerous service performance requirements placed on the contractors during the transition period."Adding to his surprise, Doherty said, Bates testified that in the contract, some performance requirements had been waived. Bates' pledge that the contract would be opened up to competition this summer was not satisfactory, Doherty said. He said Bates did not make it clear whether she meant that additional telecom providers would be al-lowed to compete, or merely that the GSA would make available the criteria for their participation.GSA spokesman Bill Bearden said the agency has received a copy of the protest and is "reviewing their concerns." Asked about the long time lag between the award of the contract ? more than two years ? and the filing of the complaint, Bearden said there are some timeliness concerns on all contracts, generally speaking, but he could not speak to any limitations that might apply to FTS2001, because it now is in the protest process.