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

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.

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."

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.