Running The Numbers: The Networx ROI

Accelerating the Networx Transition
Running The Numbers: The Networx ROI

By Beth Aluise

If you’re the federal government, you don’t award the largest telecommunications contract in history without first being certain that agencies can save money and boost the functionality of their operations with more advanced products and services.  But when it comes to quantifying the return on investment (ROI), ferreting out those numbers is easier said than done.

“It is clear because of the budget battles that IT cost optimization and alternative delivery models – which is another term for Cloud – are really the two most pressing issues facing federal decision makers moving forward,” Rishi Sood, vice president, Gartner told 1105 Government Information Group Custom Media. “I think Networx  modernization allows you to go down the tactical roadmap of IT cost optimization, as well as build a strategic framework for IT cost optimization.  When we’re talking about the effectiveness of their IT operations and cost savings within their operations, the Networx transition can certainly help with that.”

As a result, the modernization of the federal telecom network is fast becoming a vital component to driving some of the cost savings that are necessary to run government operations moving forward.  “I think the Networx modernization inspired how we get to more cost-effective technology service delivery across government,” Sood said.

The goal of Networx is to provide federal agencies with comprehensive, best value telecommunications – including new technologies – that will lay the foundation for a more efficient and effective government. The overall objective is to enable agencies to focus their resources on building seamless, secure operating environments while ensuring access to the best technology industry has to offer.

Specifically, Networx provides continuity for all current services to all locations that are on the FTS2001 and Crossover contracts and prices that overall are lower than the current FTS2001 rates.  It includes a broad menu of services and offers the flexibility to expand those services throughout the life of the contracts.  Agencies have access to a wide range of service providers, including the major telecom firms, operations and transition support, and quality of service and Service Level Agreements sufficient to meet each agency’s needs.

“Government is getting an extraordinarily good deal on Networx – even better than on FTS 2001,” said Warren Suss, president, Suss Consulting Inc.  “I think the real story here is how much government could save if agencies weren’t so behind in transitioning to Networx.”

While all agencies should expect efficiencies after transitioning to Networx, the hard numbers are not likely to be uniform across departments.  Actual numbers will vary depending upon which services agencies choose and how effective they are at cutting deals with the contractors.  The pricing and savings could differ from agency-to-agency because although Networx vendors are not permitted to charge more than the Networx pricing, they can and do offer deals below that mark.

According to Karl Krumbholz, deputy assistant commissioner of network services at GSA, agencies can save anywhere from 10-40 percent off their current telecommunications costs under the existing contract vehicle, FTS2001. “The prices on Networx are all preset; the offerers were required to bid prices out to the end, so the prices are not going to vary,” Krumbholz told Washington Technology.   “Now, they could vary if an agency put out a statement of work and rebid. Then prices could be competed again.”

With savings like that, delays can be costly.  Krumbholz has estimated that taxpayers are coughing up $18 million a month because agencies have not yet transitioned to Networx.  This is not the first time that delays have cost dollars.  During the previous transition to FTS2001, delays in transitioning to the new contract increased the cost of telecommunications and resulted in the loss of $74 million in savings that the federal government could have realized.

Carrot or Stick?
With numbers that big, someone is bound to notice.  Enter the Senate Homeland Security and Governmental Affairs Committee, which recently sent a letter to several key departments, chiding them for dragging their feet in implementing the telecommunications program.

Committee Chairman Joe Lieberman, (I-CT) and Ranking Member Susan Collins (R-ME) demanded that the secretaries of Homeland Security, Defense, Labor, Justice, Health and Human Services, Commerce, and Agriculture update the panel on what steps their departments are taking to speed up the transition to Networx.

“As potentially the largest telecommunications services transition ever undertaken by the federal government, this transition has experienced significant challenges,” the letter said.  “We understand that GSA has been working with agencies to address those challenges; however, the cost savings projected by this transition have not been realized as some agencies have been slow to take appropriate steps to ensure a smooth transition.”

Now the Senate subcommittee wants to know why, and gave the major departments a deadline of April 9 to spell out their Networx transition plans to the committee and specify any challenges that have slowed them down.  “We believe that agencies should be taking advantage of the newest technologies provided by Networx instead of solely using the same or similar services from their existing contracts,” the letter said.   “[T]his of particular concern given the security of federal networks and the opportunities to use new technologies to assist agencies in strengthening their cyber defenses.” 

The U.S. Senate is not alone in wanting answers about the Networx transition.  Oversight and Government Reform Committee Chairman Edolphus “Ed” Towns (D-NY) scheduled a hearing on the delays for April 29.  Witnesses scheduled for the hearing were: GSA Administrator Martha Johnson, Sanjeev Bhagowalia, Department of the Interior’s CIO and chairman, Interagency Management Council, as well as representatives from the five Networx contractors: AT&T Government Solutions, Qwest Government Services, Level 3 Federal, Verizon Federal, Inc. and Sprint Nextel Corp.

Because there is a top-down mandate to transition to Networx and time is running out on the clock, agencies are under the gun to get the job done quickly.  And the best way to execute efficiently at this point is to break down the savings each agency can realize.  “There needs to be a cost benefit analysis – cost containment calculator if you will – over how Networx transition really saves agencies money operationally,” Gartner’s Sood said. 

This cost containment calculator also should highlight the benefits that can be realized by building a better technology infrastructure to support challenges such as cybersecurity and compliance.  “I think it really is a two-sided coin of what is the cost-savings attached to Networx modernization, and then what are the security and operational benefits attached to it as well,” Sood said.