Carriers to feds: Show me the money on massive telecom deal

U.S. government's Networx program —dubbed world's largest — isn't meeting $20 billion sales projection

By Carolyn Duffy Marsan, Network World
April 17, 2009 03:42 PM ET

Two years ago, the U.S. General Services Administration awarded a 10-year, $20 billion program called Networx that was touted as the world's largest-ever telecom deal.

But with federal agencies spending only a fraction of the projected dollars on Networx so far, carriers are asking: Where's the money?

GSA designed Networx as a soup-to-nuts telecom deal, providing domestic and international voice, data, video and wireless services to all federal agencies. GSA awarded Networx contracts in spring 2007 to AT&T, Verizon Business, Qwest Communications, Sprint Nextel and Level 3 Communications.

When Networx was awarded, federal agencies said they would choose carriers through a competitive process dubbed "fair opportunity" by Sept. 30, 2008. That deadline came and went, with only a handful of agencies such as the Department of Homeland Security and Treasury making moves to migrate from their predecessor FTS 2001 telecom contracts to the new Networx program.

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As of April 15, only 26% of the largest federal agencies have made awards under the Networx program, GSA said. Not even half of them – 41% – have begun transitioning to the new contract, according to GSA. This is significant because the top 25 agencies that GSA tracks represent 95% of the business volume expected on Networx.

In a March report, GSA identified less than $650 million in Networx contract awards -- a small share of the $4 billion that should have gone to Networx contractors by now.

"Where we are right now is not where we thought we'd be when we awarded the contract," admits Karl Krumbholz, director of Network Services Programs in the Office of Integrated Technology Services at GSA's Federal Acquisition Service. "The agencies are now saying that all of their orders are going to be in by April 1, 2010."

Lessons Learned from Networx
Two years into the largest-ever telecom deal, U.S. General Services Administration officials offered four tips for corporate IT officials based on their experience with Networx:

1.	Prepare an accurate network inventory. Software is available that can help you conduct a complete network inventory, which should be done before you begin your acquisition. This will speed up the time it takes to transition from one carrier to another, says Mike Sade, Deputy Assistant Commissioner for Integrated Technology Services at GSA’s Federal Acquisition Service.
2.	Prepare for the unanticipated. You have to have a contract that’s flexible enough to allow you to respond to new corporate initiatives, Sade says.
3.	Carefully articulate your requirements. You must be very specific about your requirements, says Karl Krumbholz, director of network services programs for Integrated Technology Services at GSA’s Federal Acquisition Service.
4.	Engage more than one telecom provider. The only way to keep prices down over a lengthy contract is to have ongoing competition between the carriers, Krumbholz said.

Click to see: Networx lessons learned

Carriers say GSA's Networx sales figures are too conservative, and that they have won three or four times more Networx business than GSA is reporting. But the carriers agree that the Networx transition is running way behind schedule, and that they haven't earned anywhere near the revenues that they originally envisioned.