Treasury turns around on TCE

Competition reopens for <@SM>$1 billion contract after agency shuns GSA vehicles

The story of TCE so far



The Treasury Department issues a request for proposals for a secure enterprise WAN for data, voice and video. The contract would be for three years with seven option years.


Ira Hobbs becomes Treasury's CIO.


Treasury and the General Services Administration propose a draft plan, stating that the Treasury Department would migrate to Networx, the governmentwide acquisition contract for telecommunications, when TCE's base period expires if analysis shows Networx would be a better value.


GSA drafts an agreement that defines steps for Treasury to switch to Networx.


Treasury enters into memorandum of understanding with the offices of Federal Procurement Policy and E-Government and IT, and with GSA's Federal Technology Service. It agrees to migrate to Networx when TCE's base period expires if Networx is shown to be a better value.


Treasury awards TCE contract to AT&T Corp., one day after signing the Networx memorandum of understanding. Five bidders file a protest to the award with the Government Accountability Office.



GAO sustains bidders' protest based on the Treasury Department taking part in the memorandum of understanding, which materially changed the basis upon which vendors prepared their proposals. It finds that Treasury's evaluation understated the cost of AT&T's proposal.


Treasury notifies GAO that it intends to pull the award to AT&T and use GSA's FTS2001 telecommunications service provider until Networx becomes available in 2006.


Treasury says it will reopen TCE competition to original bidders, because no FTS2001 provider can meet its needs. Contract with Northrop Grumman expires at end of September for Treasury Communications System, but Treasury officials say they plan to extend it.

The Treasury Department's recent about-face on its $1 billion network communications contract has left some federal officials and industry-watchers unable to explain it ? and Treasury officials unwilling to.

The agency has reverted to its original plan following an eight-month series of events, including a contract award to AT&T Corp. for the Treasury Communications Enterprise program, a five-vendor protest and an apparent agreement to use a governmentwide vehicle instead.

"This whole procurement had gotten to a point where it had no easy ending. None of the alternatives were without problems," said Bob Woods, former commissioner of the General Services Administration's Federal Technology Service and now president of Topside Consulting Inc. of McLean, Va.

After AT&T won the contract last December, other bidders protested, and the Government Accountability Office sustained the protest. But instead of following GAO's recommendation to reopen the contract, Treasury officials said in May they would use a governmentwide FTS2001 telecom service provider until GSA's upcoming Networx contract became available. The Office of Management and Budget and Congress had heavily pressured the department to choose that option.

But earlier this month, Treasury decided to follow GAO's recommendation to recompete the TCE contract.

"Treasury determined it was unable to meet its communications needs with any existing GSA contract," said Treasury spokeswoman Brookly McLaughlin.


The Treasury Department will give the vendors that previously submitted proposals -- AT&T, Broadwing Communications LLC, Level-3 Communications Inc., MCI Inc., Northrop Grumman Corp., Qwest Communications International Inc. and Sprint Corp. -- the chance to submit revised offers. Treasury Chief Information Officer Ira Hobbs would not comment on the decision.

GSA said Treasury's problem with its FTS2001 program was in the timing, not the technology. "GSA was capable of meeting technical requirements. However, the time to compete the task order within the framework of the FTS program was not acceptable to the Treasury Department," said GSA spokeswoman Mary Alice Johnson.

OMB made it clear during the contracting process that it would steer agencies toward Networx instead of letting them strike their own deals to overhaul their networks.

Rep. Tom Davis (R-Va.), chairman of the Government Reform Committee and a vocal critic of Treasury's decision to go forward with TCE, said there are ways Treasury could meet its immediate needs and still transition to Networx. He thinks agencies have to consider what's best for the government as a whole.

Committee spokesman David Marin said: "That's how you remain accountable to taxpayers. In this case, while going forward with TCE may -- and I emphasize that's a big may -- be most cost-effective for Treasury in the short run, doing so undoubtedly will be more costly for the government as a whole by undermining Networx."

Treasury officials also could not convince OMB that TCE made sense, especially from a cost perspective.

"As is the case in any contract negotiation, public or private, larger volume from the buyer generates lower prices from bidders," said Scott Milburn, an OMB spokesman. "As a result, from a financial standpoint, standalone contracts are often not in the best financial interest of the government or the taxpayer, as they may fractionalize the buying power of the government as a whole."

Marin said it is a "mystery" that the Treasury Department claims there weren't other options that met its requirements. For example, Marin said, the agency could shorten the TCE contract from 10 years to four years and include a one-year continuity-of-service provision. The contract could state that the Treasury Department would move to Networx at the end of the contract period.

"This may not be ideal, and it still carries the risk of future protests, but it gets them out of the TCE concept and into Networx, which is far better for the government," he said.


One reason for reopening TCE, Woods said, could be that the department did not want to pay the vendor's bid and proposal costs if it canceled the contract. The average bid and proposal costs for a contract of this size ranges from $1 million to $1.5 million for each company.

"On the other hand, the problem they've created is that they have lowered the government's aggregate buying power," he said. "They have, in effect, gone back on what people thought was an agreement with Hill staffs to move their requirements to the governmentwide Networx contract. ... It's not going to be an easy outcome. They've painted themselves into a corner that is very hard to get out of, no matter which way you go."

One reason Treasury early on wanted a separate contract was that its requirements were urgent, and its contract with Northrop Grumman was expiring in late September.

Others said it's better to vie openly for products and services where the market is so competitive.

Treasury officials would not say whether the agency planned to move to Networx eventually or stick with the TCE contract. If the agency was to move to Networx, it could get a different vendor after it competed under the Networx umbrella.

"That means you've got to turn around and have another transition in a short period of time, after you just put an entire department through a transition," Woods said. "Operationally, it's a nightmare. And it's economically not pretty, because it's expensive."

Mary Mosquera is a staff writer with Government Computer News. She can be reached at

About the Author

Mary Mosquera is a reporter for Federal Computer Week.

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