GAO: MAA Companies Might Face Unfair Competition

Companies that provide telecommunications services to federal agencies under the Metropolitan Area Acquisition program are potentially disadvantaged when they compete for business against incumbent providers, according to the General Accounting Office.

Contracts between some federal agencies and local telecom companies are structured such that the agencies suffer termination penalties or other costs when they shift to MAA providers, the GAO said in a July 27 letter to Rep. Tom Davis, R-Va.

Although some MAA contractors have said these contract terms put them at a competitive disadvantage by reducing the incentive to move to MAA contracts, GAO officials said the terms were "an indication or appearance" of unfair competition.

The MAA program, administered by the General Services Administration's Federal Technology Service, provides local telecommunications services to federal employees in selected metropolitan areas. Since May 1999, GSA has awarded 37 contracts in 20 metropolitan areas, including New York, Chicago, San Francisco and most recently Philadelphia.

Among the major holders of MAA contracts are AT&T Corp., SBC Communications Inc., Qwest Communications International Inc., Verizon Communications Inc. and Winstar Communications Inc.

Taken together, the MAA contracts are worth several billion dollars; but federal agencies have been slow to make the transition from existing contracts with local providers.

As of June 1, for example, the transition to MAA contracts in New York was less than 12 percent complete, although the first of two contracts was awarded to AT&T in May 1999. The other New York contract holder, Verizon, was added in March.

The GAO was uncertain whether termination penalties and other disincentives had contributed to delays. The agency also said the delays and other problems experienced by MAA holders would recede as the existing contracts expired.

The GAO's conclusions were detailed in a letter to Davis from Linda Koontz, GAO's director of information management issues. Davis had asked the congressional watchdog agency to answer some questions following a June 13 hearing before the Government Reform subcommittee on technology and procurement policy, which he chairs.

Industry officials who testified at the hearing complained about the delays and advocated better management by GSA.

In her letter, Koontz recommended GSA regularly provide updated information on the Web about the progress of the program. She said GSA is now looking at how to make MAA status information publicly available.

Koontz also recommended GSA disclose the rates it charges to federal agencies for its services in managing MAA contracts. Industry officials complained that the hidden fees also hampered the transition to MAA contracts.