Networx casts big shadow

The Networx contract for telecommunicationsservices, like its predecessor, FTS2001, is not mandatory for agencies' use,but it may as well be.Analysts and other industry observerssay that for agencies' fundamental networkand telecommunications needs, there arenot many alternatives.Niche contracts exist for specialty services,such as satellite communications, andagencies can purchase some network servicesand hardware through GeneralServices Administration schedule contracts.Agencies also can negotiate theirown stand-alone contracts with providers ifthey wish."There are a lot of costs and risks associatedwith that," Warren Suss, president ofSuss Consulting in Jenkintown, Pa., said ofthe latter option. "And it's not likely they'dend up with anything better than Networx."Contracts bear costs for oversight andadministration, which are minimized whenthey're paid once on a governmentwidecontract, Suss said. Agencies have little reasonto undertake those costs themselvesand hire extra employees when Networx isavailable instead."It would be difficult for users to make achange, and I don't believe there's a bigincentive," he said.Smaller companies benefit from beingpart of the teams of partners and subcontractorsthat orbit around the prime contractors,said Mike Cook, senior vice presidentfor North America at HughesNetwork Systems LLC, of Germantown,Md. But they also are wise to cultivate theirown prime contracting relationshipsthrough other contracts or partnerships fortimes when agencies need the more specializedofferings.GSA's forthcoming Satcom II contract,for example, will specialize in satellite services,making it a potential rival to Networxfor agencies that need only those services."We market directly to the federal government.We have our own contract vehicles," Cook said. "So as we'reout and about talking to people,when we get to a pointwhere an agency has an interestor need for the services weprovide, we have to discusswhat is the appropriate contractvehicle."For niche players, the key isto offer the customers choices."We are trying to establish asmany contract vehicles as wecan to allow the agencies tomake their life easy," Cook said.For Sprint Nextel Corp., thesole losing bidder on NetworxUniversal, the question is particularlyacute. Tony D'Agata,vice president of Sprint's federalgovernment business, saidNetworx is going to be the preferredvehicle for the services itprovides.Although Sprint is still hopefulof getting a spot on the less-expansiveNetworx Enterprisecontract, which GSA will awardin May, he said there are otherpossibilities. D'Agata emphasizedthat much of Sprint's federalbusiness is not throughFTS 2001 and may not beaffected by the loss of NetworxUniversal."Depending on theagency, there [are] anumber of ways onemight choose to buy offof other vehicles," hesaid. "Some agenciesmight feel their requirementsare so unique thatthey would like to havetheir own solicitation." TheDefense Department, in particular,has not used FTS 2001 asextensively as the civilian side ofgovernment, he said."Wire line services will continueto be purchased off ofFTS 2001 and Networx,"D'Agata said. "Wireless, whichis a growth area, is a lot moredisparate."It is possible that a seriousrival to Networx will emergeduring the contract's lifetime,said Joe Shilgalis, vice presidentof telecom infrastructure firmTellabs Inc., based in Naperville,Ill.The Treasury Department,after a couple of years of wrangling,bowed in late 2006 topressure from GSA andCongress to kill the TreasuryCommunications Enterprisecontract and fold its requirementsinto Networx. That ledsome to speculate that there isno room for Networx competitors.Shilgalis said that is true,but it may not stay that way."A lot of it has to do with theposition of the GSA folks, whattheir political backing is," hesaid. "In the short term, thenext three to four years, I don'tsee any effort to do that. Inthree or four years, there'salways the potential for anagency to say, 'Networx isn't fulfillingmy needs in the way Irequire,'" and create somethingnew.Agencies that are already satisfiedwith services through FTS2001 will probably slide easilyto Networx, he said."For those that haven'trelied on FTS, it's an openfield on the way they'regoing to go," Shilgalis said."The GSA team is outthere very aggressivelypushing [Networx], andit's going to bring to theforefront of everyone'smind that this is an option.We're in the initial steps of avery long process.""What happened with TCEprovides a poster child for theproblems agencies can run intowhen they try to do their ownthing," Suss said. "It's not just aquestion of cost, it's a questionof the political backlash they'relikely to run into. If there's onething agencies like to avoid, it'sacrimonious hearings on theHill."

Mike Cook, of Hughes Network Systems LLC, said smaller companies benefit from being partners and subcontractors that orbit around the prime contractors.

Rick Steele








































































CAUTIOUSLY OPTIMISTIC













































POLITICAL CHESS GAME































































Associate editor Michael Hardy
can be reached at mhardy@1105govinfo.com.
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