Critics: Little Profit in Telecom Deal

The General Services Administration's new $200 million Connections telecommunications program is drawing fire from critics who say its scope of services is so broad that few companies will profit from winning a spot on the contract.With its request for proposals slated for release Dec. 16, Connections is designed to provide a wide range of telecom infrastructure equipment and services for what is often called "the last mile," the connection from the telephone lines outside the office building all the way to the desktop.The contract vehicle replaces several smaller contracts that either have expired or will soon, said GSA spokesman Bill Bearden. Because Connections includes so many different products and services ranging from telephones and switches to call centers, help-desk services and Web hosting ? it is attracting hundreds of prospective bidders. As a result, critics said, slices of the $200 million Connections pie, which will be spread over an eight-year contract, will be too small to satisfy most contractors.This is what worries Rep. Tom Davis, R-Va., chairman of the House Government Reform subcommittee on technology and procurement policy, who questions whether there's a need for the Connections contract."It's so broad that everyone is trying to get their piece of it," said Davis spokesman David Marin. "By designing something this broad that is not a schedule, we run the risk of vendors spending a tremendous amount of money to get on the contract with no actual marketplace for services."Davis, who in the past has been critical of GSA's approach to telecommunications contracts, has asked for a briefing from the agency's Federal Technology Services, which is running the Connections program.Telecom analyst Warren Suss, president of Suss Consulting Inc., Jenkintown, Pa., shares some of Davis' concerns. Suss said Connections is a "cats and dogs" program that includes a little bit of everything, but which likely will be an "empty bag" for successful bidders."It will be easy to win and hard to use," he said.The large contingent of prospective bidders is giving some vendors doubts as to whether it's worthwhile to pursue Connections. "We're not sure how many people in that mess are even going to bid, or even sure that it's going to be a fruitful contract," said one official with a systems integrator registered to bid.Suss said the demand for Connections comes not so much from federal customers as it does from vendors that have been denied spots on the federal government's other major telecom contracts, FTS2001 and the Metropolitan Area Acquisition program.FTS2001 is the eight-year long-distance services contract awarded to Sprint Communications Corp. and WorldCom Corp. in late 1998 and early 1999, and now estimated to be worth about $2.3 billion, according to an April General Accounting Office report.The Metropolitan Area Acquisition program covers contracts for local telecommunications services in more than 20 major metropolitan areas, such as New York, Chicago, San Francisco and Dallas. The various MAA contracts collectively have an estimated value of $1 billion, with each regional contract lasting up to eight years."FTS is faced with a challenge. If they don't loosen up their requirements, these other vendors that were shut out will use other channels to market, which means FTS will lose its monopoly on federal telecom," Suss said, pointing to the Interior Department's upcoming governmentwide acquisition contract for telecom.At least some vendors, however, see Connections as the logical third leg of the FTS telecom plan. "It's pretty much a vehicle that bridges the gap between our customers' desktops and the network they would be hooking up to," said Tony D'Agata, vice president and general manager of Sprint's government systems division.The contract covers a variety of services, such as call-center and help-desk services, Web hosting, managed solutions, PBXs and wiring.These are "things that are more premises-focused rather than transport-based," D'Agata said.GSA issued a draft RFP Nov. 5 for Connections, and a vendor conference was held Nov. 28.Industry comments were due Dec. 4, and Dec. 16 was slated for the release of the final RFP.Under the contract, companies will provide services in three categories: equipment, labor and turnkey solutions. Unlike FTS2001 and the MAAs, which require vendors to provide all the services, Connections allows contractors to bid on any combination and in any geographic areas they want. Among the companies closely following the contract are AT&T Corp., Avaya Inc., CACI International Inc., General Dynamics Corp., Lockheed Martin Corp., Lucent Technologies Inc., Qwest Communications International Inc., SBC Communications Inc., Science Applications International Corp., Siemens AG, Sprint and WorldCom. Neither Sprint nor WorldCom have bid on the MAA contracts, but both are interested in Connections. Lisa Crawford, head of the Crawford Group, a Washington consulting company, said the two companies probably did not bid on the MAAs because any revenue generated through an MAA would apply toward the minimum revenue guarantees under their FTS2001 contracts. Both companies are contractually guaranteed at least $750 million over the life of the FTS2001 program.If the two companies are chosen for Connections, revenue generated through that contract is not included in the minimum revenue guarantee, Crawford said.WorldCom is still deciding whether to pursue Connections. "We're looking at the draft RFP, and we may comment on it, but we may not bid," said Rick Slifer, director of WorldCom's FTS2001 programs. "We view this as complementary to FTS2001 only in the sense that we cannot sell equipment through FTS2001."