Draft GAO report skewers FTS 2001

Delays in switching federal agencies to the FTS 2001 telecommunications contract jeopardize the government's ability to get the best service for the best price, according to a draft General Accounting Office report obtained by Federal Computer Week.

The draft, titled "FTS 2001: Transition Challenges Jeopardize Program Goals," cites several reasons for the delays that involve the General Services Administration, FTS 2001 contractors WorldCom Inc. and Sprint, agencies and local exchange carriers. Those problems may prevent the government from receiving maximum cost savings and quality service, the report stated. A GSA spokesman said the agency would not comment because it is a draft restricted to official use, open to review and comment, and subject to change.

GSA awarded FTS 2001 contracts to Sprint in December 1998 and to WorldCom in January 1999. The transition deadline was Dec. 6, 2000, but 27 agencies failed to make the cut, forcing GSA to extend its FTS 2000 contracts with AT&T until Dec. 6, 2001, and with Sprint until June 6, 2001.

Although participation in FTS 2001 is not mandatory, the program guarantees each contractor minimum revenue of $750 million through the eight-year deals.

Because the contractors did not provide updated transition information to GSA or meet billing requirements in the contract, GAO's draft report recommends that GSA begin negotiating with the vendors by March 30 to reduce the $750 million guarantees.

Issues raised in the report include:

FTS 2001 waives numerous service performance requirements placed on the contractors during the transition period, so they are not being held accountable for service during the extended transition. Federal telecommunications costs rose because contract extensions with Sprint and AT&T excluded discounts offered earlier. AT&T also charged $8 million to cover administrative declines. GSA's lengthy process for adding services to FTS 2001 that were needed to complete the transition and the pullout of 17 agencies from parts of the contract mean the contractors will receive their guaranteed revenue more slowly. If the guarantees are not met, GSA will be hampered in adding contractors to FTS 2001 to increase competition. Sprint spokesman John Polivka said the company would comment after the final report is issued and the company has reviewed the contents. WorldCom also declined comment because the report is still in draft form, said Natasha Haubold, WorldCom spokeswoman.

Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee's Technology and Procurement Policy Subcommittee, has told GSA he's concerned about FTS 2001's effect on competition. "I find it troublesome to learn that this has resulted in a limited competitive opportunity for young, cutting-edge companies," he said.

GSA is making progress on many of the problems cited, said Warren Suss, president of Suss Consulting Inc., a federal IT consulting firm. Suss said he had not seen the report, but based on details provided, it seemed inappropriately skewed in a negative direction. "Government is saving a tremendous amount of money with FTS 2001 because they leveraged market forces to negotiate extraordinarily low prices," he said. "The high cost of the bridge contract is motivating agencies to finish the transition quickly."