Federal Government to Award Networx Contracts This Spring

Nearly two years have passed since the federal government announced a $20 billion network infrastructure initiative, called Networx, spanning the communications systems of 135 of its bureaus. The goal of the initiative is to upgrade the networks and capabilities of the various federal agencies — some of which, like the National Weather Service and the Nuclear Regulatory Commission, still use outdated analog data services — to include standards laid out in the late 1990s, wireless technology and a broader selection of IP services. This enormous opportunity set the communications industry ablaze. Now, the feds almost are ready to award the contracts.

Qwest's Diana Gowen

The first step is for the government to settle on the right carriers. Winners of the Universal contract will be announced this month, while awardees of the Enterprise contract will be named in May. Until then, service providers anxiously will await the government’s ruling on both the Enterprise and Universal contracts which, all told, could net winning bidders up to $1 billion per year — possibly more if agencies opt to add non-transport services such as storage area networks and call center services, says Warren Suss, president of Suss Consulting Inc., a firm that helps corporations pursue federal government contracts.

It’s not just carriers who stand to benefit from Networx, either. Networx lets bidders include CPE on their bids, and, Suss speculates equipment vendors such as Alcatel-Lucent, Avaya Inc., Cisco Systems Inc., Nortel Networks, and Siemens “will all have a piece of the action.”

Sprint Nextel's Tony D'Agata

The Enterprise contract applies to domestic services and contains fewer requirements than the more complicated and internationally focused Universal contract. Vying for the government’s business are AT&T Inc., Level 3 Communications Inc. (which only is able to bid on the Enterprise contract because it doesn’t have the facilities or services to meet all of the mandatory requirements), Qwest Communications International Inc., Sprint Nextel Corp. and Verizon Business. These latter two carriers probably have the most at stake, considering they’re the current contractors.

But things are looking good for all of the above, because if the bidders’ prices fall pretty much in line with one another, the General Services Administration (GSA) likely will give everyone a piece of the pie, according to carriers and consultants who have worked on past government telecom contracts. That way, each of the agencies — and their roughly 1,800 subagencies — will be able to choose from four (or, in the case of the Enterprise contract, five) providers.

“I think they will be inclined to make [multiple] awards,” says Diana Gowen, senior vice president and general manager of Qwest government services. Gowen worked on the previous transition of government telecom contracts, from 1988’s FTS2000 to 1998’s FTS2001, while at MCI (which is now Verizon Business). “Choice is a good thing,” she adds. “It drives competition, it drives solutions, it drives price, and that is a good thing for the federal customer.”

Suss also thinks the GSA will ask all bidders to provide services under Networx. “The odds are high that all bidders will receive contracts,” he says.

Converting agencies from FTS2001 to Networx will entail extensive planning and careful implementation.

“There isn’t any reason to believe it’ll be any easier this time around” than 1998-1999, says Tony D’Agata, vice president of federal government business within the public sector for Sprint Nextel. Agencies and providers face a number of challenges, from conducting accurate inventories to knowing budget limitations to ensuring providers’ billing systems are compatible with their federal counterparts. The transition will start with conducting accurate inventories, bidders say. This means taking into account every circuit, every computer, every phone and every mobile device. The resulting information will help offices decide which services they will need from the Universal or Enterprise contracts, as well as the best providers for those services, D’Agata says. Gowen agrees, but notes those inventories might have to be re-done once the contracts are handed out. “If they did it six months ago, I would suggest to you that nothing is static, and so many things will have changed in that six months,” she says.

Once assets are tracked, federal offices have to decide whether to switch providers. It’s a dilemma everyone faces, says Jerry Edgerton, group president for Verizon Federal, the sales division of Verizon Business that serves the federal government. “It’s a hard decision,” he says. “What would make me change? Is it price, is it high-speed service? It’s an interesting process if you take it to a personal level.”

However, many agencies don’t actually have to transition from FTS2001 to Networx until 2010, the year to which dozens of FTS2001 contracts have been extended. That means offices can put off upgrades for two or three more years. “It’s a human-being issue,” Qwest’s Gowen says. “We’re all resistant to change. It takes a lot of planning and a lot of effort, and if you are staying with the same technology, you just sort of keep putting it off.” Those agencies need a pivotal event to induce them to make the switch sooner to Networx, she says, and if technology needs aren’t enough to do that, sales techniques could be. “If I’m the incumbent, I’m going to try really hard to keep my customer with me, and if I’m not the incumbent, I’m going to be trying really hard to move that agency over to me,” says Gowen.

When the time does come to make the move to Networx, it will be a migration rather than a quick change. The government is working with carriers to ensure “parallel operations,” says John Johnson, assistant commissioner for integrated technology services within the GSA’s federal acquisition service. “We intend to create gateways to make sure that as we move the network from the legacy environment to the new environment, [we can conduct] parallel operations until we can do the cutover to the new networks.” That way, if something goes wrong, Johnson says, backup plans are in place to shift back to the legacy network.

As the largest of the federal government’s three telecommunications procurements, Networx will see agencies through at least the next 10 years. It might even be the last massive communications contract the government seeks, since the GSA has structured the terms in such a way that individual agencies can buy new technologies, in whole, as needed over the years. However, the fact that Networx will allow the government to purchase products and services on a turnkey, rather than a piecemeal, basis is important to agencies such as the Social Security Administration and the IRS, because both maintain large call centers, says Gowen. (On FTS2001, agencies could not buy entire off-the-shelf solutions for those call centers.) With Networx, those bureaus can not only obtain a complete turnkey call center system, they also can get equipment and Internet and toll-free service, and even fund outsourced agents. “Networx is just far broader and [more] flexible,” Gowen says.

GSA’s John Johnson

At the same time, Networx will build on one of the best parts of FTS2001, which was the ability to modify contracts. FTS2001 so far has more than 600 modifications under its belt, and Networx likely will surpass that number. “We don’t believe we’ve created an environment that will ever be obsolete,” Johnson says.

Winning carriers expect to start working on the Networx Universal and Enterprise contracts this summer. The timeline really depends on the additional bureaucratic hurdles vendors face once the contracts are awarded. The GSA then will require providers to prove their systems capabilities, such as how they handle order-taking and billing.

And, not long after the Networx contractors are named, agencies — and their divisions — will start soliciting bids, meaning there will end up being hundreds of mini-contracts under the Networx umbrella. Once that is done, volume will depend on how many, and how soon, agencies are willing and able to migrate to Networx.