GAO: Networx transition costs overestimated

The General Services Administration based its estimated costs for the transition from the FTS 2001 to the Networx contracts on a worst-case assumption, and the analysis overall is neither accurate, comprehensive, documented or validated, according to a Government Accountability Office report.

The GAO found that the agency assumed that 76 percent of the services provided under the current contracts would be moved to other providers as agencies shift to Networx. Yet program officials told GAO that number was what they considered the most extreme possibility and is not likely to actually occur.

The GAO also found that GSA may have counted one cost twice, and had not updated its analysis to account for delays in awarding the contract. GSA also did not document the assumptions and data sources it used in making its analysis, nor validate it.

As a result, GSA runs the risk of holding far more money in reserve for the transition than is needed, rather than spending it on other needs. GSA was holding about $142 million in a transition reserve as the end of fiscal 2006, according to GAO.

The agency estimates the entire transition cost it will have to bear to be about $151.5 million, but according to GAO, once the contracts are awarded, GSA should recalculate that estimate using the more accurate data that will then be available.

GSA is expected to announce the first Networx contracts, under the Networx Universal program, on March 29.

About the Author

Technology journalist Michael Hardy is a former FCW editor.

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