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BEYOND FTS2000: A PROGRAM FOR CHANGE
Prepared by Bernard J.Bennington, U.S. General Services Administration, during his tenure as Visiting Fellow of the Board on Telecommunications and Computer Applications Commission on Engineering and Technical Systems National Research Council
Appendix A FTS2000 Case Study Bernard J.Bennington U.S. General Services Administration Washington, D.C. 1989
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The project is supported by Contract No. GS00K88AFC1200 between the General Services Administration and the National Academy of Sciences. This report has been printed in limited quantity. Board on Telecommunications and Computer Applications Commission on Engineering and Technical Systems National Research Council 2101 Constitution Avenue, N.W. Washington, D.C. 20418 Printed in the United States of America
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FOREWORD
iii
FOREWORD
This document was prepared to serve as background to the Federal Telecommunications System (FTS) and the FTS2000 project for non-government readers of the main report. In addition, this document was prepared as a self contained case study of the FTS2000 project conducted by the U.S. General Services Administration (GSA) to replace the Federal Telecommunications System—the largest private telecommunications system in the world. The FTS2000 project was the largest non-DOD procurement in the history of the U.S. government. From 1982 to 1988 the author was Deputy Commissioner for Telecommunications Services with the General Services Administration. His assigned task in taking that position was to replace the Federal Telecommunications System which had grown obsolete. In that role he directed the effort through all its phases and from every aspect, strategic, technical, procurement, relations with customers, industry, and government oversight, and other roles. As such he was able to personally observe the FTS2000 project through all of its phases at all levels. To avoid the intrusion of personal insights and opinions, however, the case has been drawn as far as possible from public documents. In addition to this precaution, the author asked several experts, well placed during various phases of the FTS2000 project, to review the text for the following: 1. It should give the reader not acquainted with the government an appreciation for the FTS system and the FTS2000 replacement project; 2. It should serve as a case study for teaching purposes, perhaps in schools of public policy or telecommunications policy, and also serve as a lessons learned document for the government; 3. It should serve as a true, unbiased history of the FTS and the FTS2000 project, and hence be factual. The reviewers' comments were accommodated in the final version. The author wishes to thank these reviewers for their review, input, and comments: • Frank J.Carr, (retired) Commissioner, Information Resources Management Service, GSA, 1977–1988; • Gary Kowalczyk, Comptroller, ACTION, (who was Associate Administrator for Policy with GSA, 1985–1989); • Eli Noam, Commissioner of the New York State Public Utilities Commission and Professor of Public Policy, Columbia University, NY, (who served on the Advisory Committee for the FTS2000 evaluation and award, 1988–1989); • Paul Trause, Deputy Secretary, Department of Social and Health Services, State of Washington (who was Deputy Administrator of GSA, 1985–1988).
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FOREWORD
iv
• Marty Wagner, Director of Telecommunications Management, U.S. Treasury (who was a staff officer with the Office of Management and Budget (OMB), 1984–1985, and served on the FTS2000 evaluation and award team, 1988–1989). The reviewers' help was invaluable, however, any flaws in the final product must remain the author's and he accepts entire responsibility for the final product. The case mentions only a few of the participants in the project by name. They were selected to add flavor and for their unique and key roles. However, the success of the FTS2000 project was due to hundreds of people, many of whom worked long hours under great stress, people not only from GSA but customers, industry, and oversight organizations. The taxpayers' thanks should go to them. The author would like to thank John M.Richardson, Director of the Board on Telecommunications and Computer Applications, National Research Council, for his support in developing the case, and to his staff Karen Laughlin, Lois A.Leak, and Linda Joyner for preparation of the document.
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For Nancy.
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vi
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CONTENTS
vii
CONTENTS
1
HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM The Development of the Federal Telecommunications System The FTS by 1980 Gradual Deregulation of the Industry A Time of Reaction and Uncertainty Satellite Circuits Provide a Hard Lesson Facing Up to Network Replacement
1 1 3 4 5 6 8
2
DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984 Searching for a Strategy The Strategy Forms The Strategy Is Set The Commitment Is Made and the Program Starts
10 10 13 14 18
3
THE FIRST YEAR OF SPECIFICATION DEVELOPMENT: JANUARY 1985 TO JANUARY 1986 The First Year, the First Draft Announcing the Project Inducting the Agencies A New Administrator Comes on Board An Independent Evaluation of the Strategy Work Continues in Parallel on Developing the Strawman
19 19 21 22 22 23 25
4
REACHING AGREEMENT WITH THE OFFICE OF MANAGEMENT AND BUDGET Earlier GSA and OMB Relationships Kalba Bowen, the Panel, and Gaining OMB Support
26 26 27
5
DEVELOPMENT OF THE FINAL SPECIFICATION AND RFP RELEASE: 1986 Continuing Development of the RFP A Change in the GSA Team Events Converge Towards Release of the RFP The RFP Is Released
31 31 33 34 35
6
THE LONG HOT SUMMER AND COLD HARD WINTER OF 1987 The Honeymoon Is Over The Importance of Winning Round One: How Fixed Can a Fixed Price Be? Round Two: The BOCs and Martin-Marietta Round Three: GSA Fights Brooks AT&T Did Not Trust GSA Two Awards or One The Cold, Hard Winter
36 36 37 39 43 44 46 47 49
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CONTENTS viii
7 EVALUATION AND AWARD The Source Selection Plan The Source Selection Organization and Responsibilities The Evaluation and Award Process Security Changing Teams Evaluation Proposals Negotiations Award Final Thoughts 52 52 52 55 56 58 59 60 63 63 64
NOTES ON TEXT 66
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CONTENTS
ix
FIGURES
FIGURE 1–1 FIGURE 1–2 FIGURE 1–3 FIGURE 1–4 FIGURE 2–1 FIGURE 2–2 FIGURE 2–3 FIGURE 2–4 FIGURE 2–5 FIGURE 3–1 FIGURE 4–1 FIGURE 4–2 FIGURE 6–1 FIGURE 7–1
Growth of the FTS in call minutes Annual cost of the FTS Cost per minute averages for the FTS Letter from Carr, GSA, to Gradle, AT&T, August 19, 1983 The economic dynamics of the old FTS: Its shutdown curves As a major user leaves, the average cost per minute goes up The difference is a real cost borne by the users The old FTS: You can pay for it inequitably The old FTS: You can pay for it equitably Letter Stockman, OMB, to Kline, GSA, February 15, 1985 Letter from Horner, OMB, to Carmen, GSA, December 14, 1983 Letter from Kline, GSA, to Stockman, OMB, May 10, 1984 FTS2000 networks designs: Unit costversus volume FTS2000 Source Selection Organization
67 68 69 72 74 75 76 77 78 81 83 84 91 53
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CONTENTS x
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
1
1 HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM In which the Federal Telecommunications system is build and grows, deregulation of the industry takes place, the system becomes obsolete, and GSA faces the reality of having to replace the system.
THE DEVELOPMENT OF THE FEDERAL TELECOMMUNICATIONS SYSTEM During the late 1950s, in the atmosphere of the Cold War and the growing awareness of the importance of communications, the U.S. federal government began formulating plans for a single telecommunications network capable of handling its day-to-day administrative needs as well as the emergency requirements of all civilian agencies. This network was to be a dedicated switched service through which the civilian (as opposed to military) government agencies would have a survivable communications system and also realize the economies of shared usage. Early in 1961, stimulated by events such as the Cuban missile crisis, authorization was given to the General Services Administration (GSA) to proceed with the implementation of the Federal Telecommunications System (FTS) (Note 1). Such events had overloaded Washington's communications, isolated the government, and revealed how inadequate the government's communications system was when it depended solely on public service available at that time. In March 1962, the Bell System received a commitment from GSA to establish Phase I of the FTS. On February 15, 1963, Phase I was officially initiated serving 42 cities. The first call on the system was made the previous day by Jack Brooks, U.S. representative (Democrat, Texas), and is best described in his own words at the time: At three minutes before 11 o'clock on the morning of February 14, 1963 I picked up the telephone in the General Services Administration's building in Washington D.C. and in 37 seconds I was talking on official government business with the man I wanted to reach, the Federal Aviation Agency's Assistant Administrator for FAA's Western Region in his office in Los Angeles, Calif. He supplied me with the information I needed and we completed the call. The call marked a highly significant turning point in government communications. It was the first call made on the new
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
2
Federal Telecommunications System. I dialed an FTS operator, was given an access line to the correct area and I dialed directly the man with whom I wished to talk. The service was fast and the cost was about one-half the former commercial rate (Note 2).
Phase I consisted of a network of four switches: a national center in Hillsboro, Kan.; two regional centers in Monrovia, Md. and Santa Rosa, Calif.; and a sectional center in Rockdale, Ga. Each center consisted of a major switching machine (a four-wire number five machine) and the centers were tied together by final trunks. The 42 cities were tied to the four switches by means of access lines (Note 3). The original cities served by the Phase I system were: Seattle
Minneapolis
Milwaukee
Detroit
Boston
Portland
Des Moines
Chicago
Cleveland
Newark
Berkeley
Omaha
Indianapolis
Pittsburgh
New York
San Francisco
Kansas City
St. Louis
Columbus
Philadelphia
Oakland
Oklahoma City
Louisville
Cincinnati
Baltimore
Sacramento
Fort Worth
Nashville
Atlanta
Washington
Los Angeles
Dallas
Memphis
Richmond
San Diego
Houston
Birmingham
Jacksonville
New Orleans
Miami
Phoenix Denver
Even as Phase I was being placed in service, plans for Phase II were being made to expand the network to serve 8,000 government locations in 350 cities. Five additional major switching machines (four-wire number five) at Rosendale, N.Y.; Faulkner, Va.; Norway, Mo.; Ennis, Tx.; and Yakima, Wash., and several smaller (two wire) machines were planned to be implemented by mid-1965 for Phase II. The modest concept represented by Phase I and the Phase II plan began, however, to change immediately by several orders of magnitude as major benefits were seen in allowing governmental bodies to communicate freely. During the months just prior to Phase II implementation, GSA offered all agencies unlimited on-net and off-net calling privileges at a flat monthly rate. Because of this, the number of subscribers for Phase II service greatly exceeded the number for which the network had been planned. So began a decade and a half of spectacular growth in response to user agency demand. Phase II, originally planned for service in mid-1965, was advanced by a full year. Service actually began on July 6, 1964, creating serious problems because of lack of facilities. Using any facilities that could be made available, Phase II was implemented by the American Telephone and Telegraph Company (AT&T) to provide service to the expected traffic level. However, at the start of the service participating agencies flooded the network with an unexpected number of calls and immediately the existing number of circuits was not adequate to handle the resulting demand.
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
3
At that time in mid-1964, it was estimated that approximately 1,000 additional circuits were needed to accommodate the traffic being offered. It was anticipated that another 3,000 to 4,000 circuits would be required by the end of 1965 to handle growth as well as additional cities and agencies desiring FTS service. Because of this unexpected demand and recognizing the expanded role that FTS was to play, the Bell System submitted a network plan in October 1966 (Note 4) for a major system describing an orderly growth to meet the projected traffic demand through 1971. This plan described an approximately linear growth of: • network trunks from 1,826 in 1964 to 13,517 in 1971; • total circuits from 6,889 in 1964 to 35,750 in 1971; and • major switches from 4 in 1963 to 33 in 1964 to 60 by 1971. A central strategy of this plan was to develop a system that could serve potential growth beyond 1971. This plan was implemented essentially as described and the network continued unchanged, except in capacity, into the early 1980s. By 1970 the network was handling more than 74,000,000 calls a year and linear growth during the 1970s more than trebled this figure to 233,000,000 calls handled in 1980 (Note 5). THE FTS BY 1980 By 1980 the FTS intercity network served the contiguous United States, Alaska, Puerto Rico, Hawaii, the Virgin Islands, and Guam. The final network had 52 major switching centers (rather than the 60 planned) and contained about 15,000 network trunks. In addition, there were about 35,000 access lines that connected the local switches to the 52 major switches, and 10,000 miscellaneous circuits (such as foreign exchange lines and offnetwork access lines). This brought the total to 60,000 circuits, which formed some 11 million miles of transmission. The system now served approximately 1.3 million users at over 4,000 locations through 1,655 local switchboards—of which about 400 were managed by GSA. The FTS supplied by AT&T offered similar features to those offered by the Bell direct distance dialing system. These included a uniform dialing plan, direct station-to-station dialing, on- and off-network calling, automatic alternate routing, and national teleconferencing. Network survivability was considered important, although to a somewhat lesser degree than for the military. The FTS shared special switches (SCAN switches) located in hardened facilities with the military voice system (AUTOVON), providing a measure of survivability for those portions. When selecting locations for establishing FTS major switching machines, the choice was weighted in favor of the sites affording the greater degree of survivability. All of this added up to a network bigger than the sum of the 17
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
4
largest private telephone systems in the United States including those of such corporations as General Motors, General Electric, and Westinghouse. The FTS had become the largest private telephone system in the world and had become a critical system in that it served the day-to-day administrative needs of more than half of the civilian work force of the U.S. government. GRADUAL DEREGULATION OF THE INDUSTRY The original FTS was conceived and built in the regulated, monopolistic world of AT&T and the Bell System. In parallel with the growth of the FTS, several events were taking place culminating in deregulation of the industry in the 1980s (Note 6). Beginning in 1956 the first event in the chain occurred. The Hush-a-Phone Decision of 1956–1957 and the later Carterfone Decision of 1968 established for the first time a general policy of allowing interconnection of terminal equipment to AT&T's facilities. In 1959, private line transmission also began to be affected when the “Above 890” Decision opened the portion of the radio spectrum above 890 megahertz to private microwave systems. This in turn led to the MCI Decision of 1969 that authorized Microwave Communications Inc. (MCI) to offer common carrier services between Chicago and St. Louis and intermediate points. This subsequently led to other milestone decisions favoring new entrants into the field of providing private line services (the Specialized Common Carrier Decision of 1971 and the Domestic Satellite Decision of 1972). The impact of these deregulated actions was first felt by the FTS in 1974, when RCA Alascom protested to the General Accounting Office (GAO) the award of a contract by GSA to the Anchorage Telephone Utility for the installation of a tandem switch. This was to lead to competition for switches, particularly for local service. The next significant event occurred in 1977 when MCI approached GSA with a proposal to provide connecting circuits between Washington, D.C., and New York to replace AT&T's circuits. After a competitive procurement this proposal was accepted and MCI became the first provider of non-AT&T long-distance connections in the FTS system. This presaged further competition for circuits as companies such as Western Union and RCA Communications began to offer competitive replacements for AT&T circuitry. As competition became a general stimulus for change to the FTS, the mid-1970s saw an event that boded an acceleration of this stimulus for change—an event that was to trigger the upheaval of the 1980s. AT&T had been traditionally loath to permit resale and sharing of its facilities, but in 1976 the FCC determined that restrictions on resale and sharing were unjust and unreasonable. This allowed companies such as MCI to resell services procured under AT&T's attractive bulk private line tariff known as Telpak—the tariff under which the FTS was leased and which saved the federal government some $1.25 billion during the 1970s. In 1977, to avoid MCI's ability to
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
5
purchase and resell Telpak, AT&T filed tariff revisions cancelling Telpak. After five years of judicial review (with efforts by government users to delay cancellation), Telpak was withdrawn in May 1981. This, and other similar tariff revisions, raised the price of the FTS to GSA and its users by approximately $100 million per year immediately. A TIME OF REACTION AND UNCERTAINTY The demise of Telpak became a major stimulus for GSA to take its own future into its hands and to change the network. It also was the shock event through which GSA began to face the fact that the current FTS was rapidly becoming obsolete. Although competition from deregulation was advancing rapidly, in 1981 it was still natural for any organization to turn to the Bell system for a solution to its telecommunications problems. Although GSA turned to the Bell system in 1981 for a solution to the increase in price no proposal or ideas were forthcoming. The shortfall of almost $100 million in agencies' budgets for use of FTS services not only focused customers' attention on the problem but also began to escalate telecommunications matters within the customer agencies. Traditionally the job of a telecommunications manager was a lower-grade and lower-paid job than equivalent automated data processing (ADP) jobs. Essentially all of the work and responsibility lay with Bell. Telecommunications managers also reported to a different part of an agency from ADP, usually reporting up the administrative services chain together with space management, buying of supplies, and personnel management rather than in any kind of technical infrastructure. However, no matter how ill-prepared technically or managerially agencies were, the problem quickly escalated through the budget process from telecommunications managers eventually to assistant secretaries— perhaps for the first time that anyone at that level had even heard of telecommunications. Pressure built and added to GSA's own concerns about the problem. Consequently, GSA increased the priority of its program to cut FTS costs through competition (Note 7). To a large extent GSA was locked into the existing architecture of the system which was designed to exploit the economies of scale of Telpak. As a result, cost cutting involved identifying where competition could be gained for network components (switches or circuits) with a view to competing them where possible to reduce costs. In addition, there was an immediate focus on where costs could be eliminated in the network. The former thrust led to circuit competitions and the latter to elimination of operators. Long-distance circuits were selected for competition as the only components for which competition was being offered at that time. In 1981 switches were essentially the province of the Bell system, whether at a national or local level, and were also highly complex components to experiment with because they existed where traffic was densest and
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
6
hence represented the highest risks. Access lines were not candidates for replacement either as they were almost entirely the province of Bell's local service companies. In the long-distance market, however, several competitors were beginning to parallel the Bell system plant and were offering similar circuits at competitive prices. The first major circuit competition encompassed approximately 8,000 circuits in a procurement known as Backbone I. This quantity represented just over half of the network trunks in the system and represented all of the trunks for which competition was available. Many circuits were awarded back to AT&T at reduced prices, but in addition new vendors came into the system such as Western Union, MCI, and GTE Sprint. As the circuits were implemented, the resulting costs averaged a 20 percent reduction under the original AT&T prices on a total of just over 10 percent of the total network costs. SATELLITE CIRCUITS PROVIDE A HARD LESSON At the same time that competition for terrestrial circuits was pursued, circuits using communications satellites were tried on a pilot basis between Washington, D.C., and San Francisco. Satellite circuits were very attractive from a cost point of view as they represented savings in excess of 60 percent under the existing AT&T circuits. The pilot effort was successful and subsequently 1,200 circuits were awarded to RCA for satellite circuits between such points as Washington, D.C., Houston, Denver, Hawaii, Alaska, and Los Angeles. This bigger effort was by no means as successful as the pilot effort. There were two problems. First, the inherent nature of satellite circuits meant that even when they worked correctly, two people could not talk at the same time and also there was a marked delay of almost one-quarter of a second in transmission. These two features interfered with normal human telephone protocol and raised acceptance problems with users. Second, there were substantial problems with the reliability of echo cancelers necessary in the circuits to make talking possible at all. The unreliable echo cancelers, coupled with a lack of proper quality monitoring, severely degraded performance in some cities—particularly the Washington, D.C., to Denver route. This was a serious problem that taxed the capabilities not only of GSA but also the supplier (RCA). In September 1982 communications between Washington, D.C., and Denver (a major federal center) degraded to a point where at times communication became impossible. During the fall of 1982 and spring of 1983 several generations of echo canceler were applied to the problem during which time immeasurable damage was done to GSA's reputation with its FTS users and the Office of Management and Budget (OMB). Before the Denver situation was solved, equally difficult problems began to emerge in communicating with Houston and the situation verged on being unmanageable. These events, occurring so soon after the shock of Telpak's demise and the budgetary embarrassment it caused GSA's customers, set the stage for hostile customer relations for the
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
7
following years (Note 8). It should be emphasized that not all of the network problems lay with the satellite provider. Problems existed in other components that were exacerbated by the introduction of different technology and vendors other than Bell. This was further exacerbated by relationships between vendors. Deregulation was speeding up and divestiture was imminent at the time of attempts to solve the Denver and Houston problems. AT&T as a corporation was faced with grass-roots resistance among its own staff to working with other competitive, deregulated vendors (perhaps as a result of impending layoffs, organizational changes, and the uncertainty of the upcoming divestiture). Also, at higher levels in AT&T the normal processes and procedures used for decades to work out problems between the long-distance and the local service companies were dying in preparation for divestiture. Neither party had experience in working smoothly with the new corporate structure or new competitive carriers—the industry was having a nervous breakdown. Escalation by GSA with all involved vendors resulted in additional resources being applied to the Denver and Houston problems and resulted eventually in acceptance by all companies that they had to work together more efficiently if the government as a customer was not to be damaged. In addition, it resulted in a change of AT&T representatives dealing with GSA in 1983. This hard-headed attitude, necessary though it was to preserve the continuity of government operations, became the scene setter in many ways for future relations between GSA and AT&T (Note 9). This was a difficult time for GSA (both centrally and in the regions), for its customers, and for the vendors. Relationships frequently polarized and in some cases (e.g., Denver customers) the memory lingered for many years. With the satellite circuit experience, it became apparent that the GSA technical organization was weak and that, while the organization may have been sufficient to operate with AT&T as a monopoly provider, it did not yet have the capability to manage complicated technology or major change (Note 10). Attempts to manage the satellite problem also highlighted that GSA's technical priorities did not mesh with the problems being faced, nor did GSA have the necessary systems and structures in place to deal with challenges of the newly deregulated and coming divesture world. The events of Denver, Houston, and problems with implementation of an upgrade to a separate GSA packet-switched network called the Advanced Record System (ARS), indicated that GSA would have to be very cautious as to what it could accomplish in the future with its own resources. Management became very conservative about any proposals made to change the network (Note 11). However, with the exception of satellite circuits, circuit competition in general was a success and well accomplished by the FTS organization. As a result, in 1984 a further major competition was organized called Backbone II. This encompassed 13,500 of the network trunks but excluded any offering of satellite facilities. In addition to circuit competitions, begun in earnest in 1981, GSA
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
8
also moved at the same time into a program of replacing manual operators with computer-like switches where Bell could provide this function. Operators had been required to handle calls that were destined for locations outside of the federal community—so called off-net calls. This program to replace operators was termed the automatic offnet program and it eventually resulted in the elimination of approximately $9 million per year in operator costs. This also was accomplished well by the FTS organization. Least successful of the cost cutting programs begun in 1981 was an effort to reduce the grade of FTS service to cut network costs. The grade of service reflects the probability that a caller will receive a busy signal indicating that no trunk is available to complete the call. Cutting circuits out of the system saves money but results in increasing this probability. Reduction of grade of service was firmly rejected by the users after implementation and in fact served only to add to the bad relationship with them. Various other projects aimed at modeling the network with a view to restructuring it to save costs were also unfruitful. FACING UP TO NETWORK REPLACEMENT In general, the cost cutting program was a success in that by fiscal year 1985 (FY) annual reductions were totaling $44.6 million on a base of $414 million. However, while creditable, this program could not hold out any hope of a solution to the future of the network as costs were rising faster than they could be reduced. Cost cutting by buying components competitively could only be an effort to extend the system life slightly until the overall problem of how to replace the network was resolved. The main value of the cost cutting program was, in fact, the experience it gave GSA in conducting competitive procurements, dealing with the emerging telecommunications industry and regulatory environment, and testing where their own strengths and weaknesses lay. It was a conscious decision therefore, as FY 1984 started, that while cost cutting and quality improvement programs would continue, the future lay in: • determining GSA's role in a deregulated and divested telecommunications world; and • changing the FTS network accordingly. Three things were needed to do this: (1) a head technical manager for the FTS, who did not have a vested interest in the way that the current FTS had evolved, to determine its future architecture, (2) a skilled contractor to provide support resources, and (3) an overall plan and direction. Accordingly, the first step in the replacement program would be to move into a thoughtful, high-level effort to
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HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM
9
determine the future of GSA's telecommunications program in a postdivestiture world (Note 12) and at the same time enter into a major recruiting program to fill the vacant position of head of the Network Services organization that handled technical management of the FTS. In addition, work began to procure competitively the services of an engineering company that would support Network Services in the development of the request for proposals (RFPs), the formal procurement specification for network replacement—the program that eventually became FTS2000 (Note 13). The FTS program branched at this point into two main efforts: (1) the replacement program, FTS2000; and (2) a program to extend the system life of the old system by quality and cost control while the replacement program was being developed. Consequently, plans were made to continue cost cutting and quality improvement in the old FTS to extend its life until the replacement was accomplished. These initiatives led in subsequent years to: • • • • • •
exploring the elimination of the topmost level of the network switching hierarchy; competitive procurement of tariffed tandem switching; implementation of a trouble handling system for quality control and improved customer relations; evaluation of handling off-net calls at the head end of the network rather than the tail end; moving network trunks and access lines to T-1 lines where economical and available; and reconfiguration of off-net egress under Feature Group A (Feature Group A tariff increases dominated FY 1985 and FY 1986 to an extent even greater than the original Telpak demise in 1981) (Note 14).
These activities had to be given some priority as customers focused on short-term costs and services and could not be expected to live only on promises of a future replacement. However, these activities became secondary as they held out no hope for the future other than as an interim support strategy. Consequently, the activities received little management attention. The only thing that would matter in the long run was replacing the network.
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
10
2 DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
In which a strategy is developed for the replacement of the FTS.
SEARCHING FOR A STRATEGY The FTS2000 strategy really began to develop as the result of two things: the hiring of a new head of the Network Services organization, the organization within the Office of Telecommunications Services responsible for long-distance services; and long-range planning sessions held in the first half of 1984. The newly hired head of Network Services was Robert Bushelle, and his key contribution to the project was the development of the replacement strategy. Bushelle had taken an early retirement from Illinois Bell after a 30 year career that had included a wide spectrum of responsibilities, from operating a system the size of the FTS in Chicago to being an aide on the chairman's personal staff. A tall, rangy individual whose youthful enthusiasm, humor, and bearing belied the grey hair and beard, he moved from Chicago to settle into an almost monastic existence in Arlington where replacing the FTS became his life. The strategy evolved from the interaction of complementary viewpoints in a small team stimulated by the long-range planning discussions. On one hand, there was the experience of the Bell system and the commoncarrier industry with a clear vision of the future as a digital network with integration of services. On the other hand, there was the experience of what might and might not work in the government and recent experience of where GSA's strengths and weaknesses lay. Also there was a conviction that an evolutionary approach would not work for a network of this size in the government because of the lack of internal experience and the slowness of procurements. Finally, there was recognition of the need to turn a theoretical strategy into an implementable plan, to draw into the project the resources needed, and to build a consensus among all parties. Basically, alternatives could be broken into three main categories: do nothing (which was unacceptable), engineer a private system of switches and circuits (as was the old FTS), or buy services. There were, of course, hybrids of these. Within each of the basic
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
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alternatives was a spectrum of sub-alternatives. For example, engineering a new private line system could, on one hand, proceed by evolving, component by component, from the existing system (the strategy that was being followed informally up to this time). On the other hand, the old system could be completely replaced in one effort. There was a host of other alternatives in between these extremes. Similarly, within the basic alternative of buying services there were sub-alternatives such as buying off public tariffs or, on the other hand, seeking new arrangements. There were also a variety of alternatives in determining the scope of the replacement such as: • • • • • •
the role of GSA staff versus customer agencies; size, reach, and scope of services; procurement schedule; life cycle cost, capital investment needed, front loading of funds; breadth of competition, viability of the competition; and, transition schedule.
In many ways the strategy was driven more by limits than opportunities—perhaps true of all government programs. Some of the obstacles to be overcome that began to shape the strategy were: • GSA did not have the staff, in numbers or experience, that could build the Bell vision of the future. They could not hope to attract them from outside the government due to the prevailing Office of Personnel Management (OPM) policies regarding pay and the OPM hiring process; • AT&T at that time was not able to help GSA, partly because it had not come to terms with the fact that deregulation had changed the world and was beginning to bring telecommunications under the laws governing competition and competitive regulations. This competitive environment constrained the opportunities GSA could pursue to those for which there was competition. AT&T on the other hand suggested an all-or-nothing approach as a solution to Telpak's demise. This approach was their proprietary Software Defined Network (SDN); • AT&T had little incentive to be creative, or be quick to help, as the business was locked up for them in the existing network; • the government procurement system took too long to accomplish very little and, hence, any approach that depended on many interrelated procurements would be impossible to achieve in practical terms; • OMB in the new climate of the Reagan administration was pro deregulation and felt that the time was right to question and rejustify the FTS;
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
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• to some extent OMB wanted to apply deregulation to a corporate network in the belief that what was good for an industry was equally applicable to its customers; • because of the rising cost of the current network and GSA's difficulties in responding, the customer agencies had little faith in GSA and wanted to get out of the current network and go their own way. OMB provided a sympathetic audience for such moves; • there was too much technical risk in interfering with the existing network to any large extent as the FTS was a critical system on which the whole of the government depended for day-to-day operation; • there was no resource and capability anywhere in the government or private sector with sufficient experience to design a new network of the FTS's size other than the common carriers themselves; • any replacement plan that required up-front funds would take many years to gain congressional approval and in all probability would fail in the world of tight budgets as the deficit rose; • it was logically impossible to determine requirements for future data usage, but the governmental procurement system was firmly rooted in a process that mandated the development of requirements estimates. Any attempt to deviate from this was met with resistance (Note 1); • the alternative of only buying voice services was technologically out of step with the development of digital telecommunications. In the growing digital common carrier networks, speed and capacity were the issues not whether the bits represented voice, data, or images. Buying only voice services would have provided a fertile ground for later problems as agencies created multiple data systems and then added their voice traffic to justify their systems economically; • the governmental procurement system was not only entrenched in the classical system development life cycle, but was also oriented toward the buying of hardware (the procurement of dedicated networks) not telecommunications services. Once again, any attempt to deviate from this was met with resistance; and • transition from or shutting down the existing network was a problem of such technological, management, and economic dimension as had never been attempted before in the industry (Note 2). During the first part of 1984, the various alternatives as to how the network might be replaced were tested against the obstacles. Slowly, as the process of dealing one by one with the obstacles progressed, the FTS2000 strategy began to form:
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
• • • •
13
offer services rather than a network; provide for service pricing and payment; offer integrated services rather than just voice; and choose a single responsible contractor.
As with all creative efforts, it did not proceed smoothly or sequentially. It was an iterative process. As frequently happens in such cases, the main players did not always realize what direction ideas were going or where they stood in the process. Indeed, often the main players felt they had a common understanding of the problem when further development showed that they had not. However, as the individual ideas matured, they matured in the same overall direction. At each step forward the ideas were discussed with vendors, and though vendors probably did not understand exactly what was being proposed, the team felt that their reactions were not negative to the idea (Note 3). No one on the team understood then just how innovative the evolving strategy was and hence how the communication of ideas would be a continuing problem. As each new constituency was drawn into the project, they saw the project in their own terms (for example engineers saw it as buying a network of switches and circuits) and tried to change it in their own image. Typically it would prove to take six months to get each new group to dispense with old ideas and embrace the new. In summary, perhaps the obstacle that formed the FTS2000 approach more than any other was the lack of experience within GSA to undertake a sophisticated effort in engineering and technical management. And perhaps the single most important item in providing energy to the process was AT&T's unhelpfulness. The latter highlighted for GSA in no uncertain terms that if they were ever to get out of the current network they had to do it themselves. It became a question of how and with what. THE STRATEGY FORMS On July 10, 1984, the first identifiable meeting took place that formally recognized the project that later came to be known as FTS2000. The session was held between the head of the Office of Telecommunications Services, the head of the Office of Network Services, and the head of the Office of Information Resources Procurement. Development of the annual operating plan was beginning and the session was to determine what was to be planned for the coming fiscal year. For the first time the plan for the FTS was described In terms of “FTS replacement” rather than “FTS evolution,” as a result of the development of the GSA Long-Range Telecommunications Plan. The purpose of the meeting was to formally initiate examining three main alternatives for replacing the network:
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
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1. Hire a SETAMS contractor to support design, engineering, and building of the new network; buy the component pieces (switches and circuits); and have GSA direct and manage the whole effort. This represented the strategy that had been unofficially followed by the Network Services organization since 1981. It was a legacy of the old FTS thinking and by that time really had been rejected as a viable alternative. 2. Hire a SETAMS contractor as with approach 1, but the contractor would buy the component pieces, would implement and manage the effort, and GSA would direct it. This appeared to answer some of the problems with approach 1 but it suffered from a major flaw that there were no experienced potential vendors who had dealt with networks of the size of FTS other than the common carriers. The way of doing business implied by this alternative was not that favored by the common carriers, who preferred alternative 3. It was however in accord with the way the government normally procured systems. 3. Specify services, letting service providers do everything needed to deliver these services. GSA's role would become one of contract oversight. This final alternative became FTS2000. Some key items came out of that meeting that would carry through the coming years, including: • establish an oversight committee composed of the customers, which resulted in the formation of the FTS2000 Interagency Steering Committee; and • the project would need a Federally Funded Research and Development Center (FFRDC) type of company for oversight of the main contractor, which resulted in the subsequent relationship with the MITRE Corporation. The estimated schedule at that point in time was unrealistic. It was quickly amended as the massive nature of the project began to be recognized. But at that initial meeting the targets were set for development of an RFP by January 1985, award by January 1987, and implementation by January 1989. The operating budget was seen as half a billion dollars a year. While this is the earliest record of the birth of FTS2000, it still had not completely gelled. The gelling took place between this meeting and formal decisions in November 1984, to go ahead (Note 4). THE STRATEGY IS SET During November 1984, the team had a complete meeting of the mind on the outline and merits of the final alternative 3 strategy. The problem had been reduced to replacing the existing FTS as it was no longer serving its users. This became the primary objective against which all other considerations would be subordinate.
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
15
The system had become obsolete not only because its cost advantage was trickling rapidly away after the death of Telpak, but also because more and more agencies needs were for data services that could not be met with the existing analog network. In addition, the old network contained much outdated plant and equipment and its quality was decaying. Finally, there was no provision for the sophisticated management information that customers needed in a deregulated world and no way to easily provide it. The replacement strategy had to address all four of these concerns. Because of this obsolescence, termination of the existing FTS would be inevitable no matter what future course was pursued. Transition from the existing system, irrespective of whether it was to a single or multiple provider, would be extremely complex. Transition to a single provider would be the simplest and safest alternative. Also, a single provider should be able to provide significant economies of scale and, hence, attractively low prices. In examining how to replace the old system, GSA's analysis of the telecommunications industry had shown that there were six competing common carriers all investing capital in plant and equipment for national networks. These were AT&T, MCI, GTE Sprint, Satellite Business Systems (SBS, a subsidiary of IBM at the time), U.S. Telcom, and U.S. Transmission Systems (a subsidiary of IT&T). Prognostications were that a shake out would take place in the industry but that at least three viable companies would remain at the end of the decade. Each would be capable of handling the total FTS traffic without it representing the majority of their business. In addition, the market strategy of all these companies (other than AT&T) was to take market share at the expense of profit and their common approach was to cut their costs by building their own networks. In all cases, their new network technology was predominantly digital—fiber optic transmission, digital switching, software control of networks—to cut the cost of voice transmission. However, a natural by-product of this was that all carriers intended to offer a full menu of services—data, voice, and video—all eventually delivered by the same digital network. In essence the time had come to buy integrated voice and data services as, by the time the FTS procurement was completed, services would be delivered together anyway. In addition, the carriers' strategy meant that they were already taking all the risks and building all the capacity necessary without a major customer like the U.S. government having to put up capital or having to guarantee very much traffic. Finally, as digital technology was less expensive than its analog counterpart and, as Telpak had been a cost-based tariff, there was every expectation that the $100 million increase in post-Telpak prices could be recouped. Probably even better prices were available if the government bought in such a way as to align with the business strategies of the common carriers. Basically, the approach would be to buy all services the common carriers anticipated delivering by their regular networks at special bulk rates. While this was a revolutionary new concept it was possible because of the unique point in the deregulation of the long-distance
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
16
industry and because of the government's unique size. Very rarely does one have an opportunity to have it all, but such an opportunity faced GSA. The strategy hence was to: • • • • • •
buy services, (not hardware) and reflect the service plans of the common carriers in the specification; thereby, shift technical activities to the service provider and get rid of the dedicated system; pay for services consumed, not hardware; make a single award to a single prime contractor; evaluate the bidding teams' capabilities to accomplish the transition safely; provide no up-front payments and make only minimum guarantees to avoid lock-in to the winning contractor; and • require a service oversight center to measure the quality and quantity of services delivered for payment and billing purposes.
One particular attraction of the approach was the competition that such a strategy would potentially bring— MCI, Sprint, and AT&T—though it was recognized at that time that they did not have to be the prime contractor. Prime contractors could potentially come from traditional system integration companies such as Electronic Data Systems, Martin-Marietta, Ford Aerospace, or TRW. They could also come from the manufacturers of network components such as IBM or Northern Telecom or they could be the common carriers themselves. In total, there were at least a dozen potential prime contractors. GSA also felt that, with the possible exception of AT&T, no single company had all of the capabilities to bid alone. All would have to form a consortium of some kind in order to bid. This was recognized as an obstacle that would have to be overcome to ensure competition. In addition, GSA recognized that bidding would be expensive and that getting such consortia formed and committed to major expenditures would take time. Finally, it was recognized that the development of a common specification for integrated services would have to heavily involve the potential bidders as GSA was not privy to what was on corporate drawing boards, in corporate investment plans, or in corporate research laboratories. Outside of the development of the strategy and procurement specification, there were even more important considerations of how such a major project might be constructed and might succeed. First, to have any chance of success, GSA had to run headlong into the project without any reservations. If GSA did not unreservedly believe in the project themselves and was not seen to sincerely believe in it by those whose cooperation they would need (OMB and the agencies as a minimum), it would never succeed. Also, such a large innovative project would have to be sold at all levels, not least of all within GSA itself. That meant that someone at the Senior Executive Service (SES) level had
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
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to visibly head the project if it was to have a chance to succeed. As the outline of the strategy developed, there were still many unanswered questions. In practical terms not enough was known to determine which issues would be pivotal and which would be trivial. Hence, the team felt that the classical system theory model of studying and determining feasibility, cost/benefit, and so on would not be particularly fruitful. What was important was to get the common carrier industry working as quickly as possible on the government's problem using their own tested methods for creating capacity against uncertain requirements. The only process that seemed promising for GSA in this unique situation was to press energetically ahead in the general strategic direction described, while at the same time revealing as openly as possible the proposed direction. The purpose of this deliberate openness was to allow the objections of outside parties to surface so that they could be accommodated and dealt with in the process as early as possible. In essence, GSA would be the leader of a debate—this debate involving the vendors, the customer agencies, and other interests such as OMB, the National Communications System (NCS), and the National Security Agency (NSA). GSA's most important role in the program would be to gradually obtain consensus among the widely disparate constituency of vendors, users, and central oversight bodies on an approach acceptable to all. This was no mean task considering the widely different interests and viewpoints that would have to be satisfied and the whole process taking place at a time when the industry was in turmoil. This philosophy of stimulating debate toward consensus also militated toward developing a strawman specification as soon as possible. By inviting industry to work with GSA on refining the strawman, GSA could get industry's resources involved in developing the approach. Another aim of developing a strawman specification was to get the common carriers and big system engineering companies spending money as quickly as possible toward solving the government's problem. The replacement project was seen by GSA as a multimillion dollar proposal effort for each vendor. It would need companies to draw together new teams in unfamiliar relationships. Potential bidders would only begin to do this if they saw it to be in their own self-interest. Essentially, FTS2000 would be a business decision not a marketing decision even for the largest corporations This implied that the bidding efforts had to be placed high in the vendors' organizations. Hence, GSA needed to get the attention of the chief executive officers (CEOs) of potential prime contractors. By suggesting potential revenues of $4 billion to the CEOs, GSA could begin to get industry's huge energy behind the project and build momentum that would become less stoppable by negative governmental and vendor interests. As a consequence, getting industry to understand the magnitude of the program, and getting them to believe that it really was going to happen, became a high priority. Finally, the press was seen as a means to begin to propagate an exciting picture of the program in order to catch industry's
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DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984
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interests. All of this would help get industry started while GSA began leading the development of the RFP. To help create a sense of urgency, GSA was deliberately optimistic about the procurement schedule in public announcements. THE COMMITMENT IS MADE AND THE PROGRAM STARTS At meetings on the November 8 and 19, 1984, senior GSA management were briefed regarding the essentials of the strategy and the proposed timetable. After close questioning and discussions in the intervening time with the head of Information Resources Procurement, authorization to proceed was given. The project was still called “network replacement” throughout these discussions and was not named FTS2000 until a month later. The year 1984 drew to a close as the team began to prepare for a formal announcement meeting as soon as possible in 1985. Meanwhile, the top-ten customer agencies were selected to form a FTS2000 Interagency Steering Committee and work started to get the interest of high-level members in these agencies and get them involved. The week before Christmas saw one last final strategic meeting before announcement of the project. The meeting showed a united front between the procurement staff and the program staff as they discussed the strategy in detail (Note 5). Plans were made for a big vendor conference to start the project so that GSA could begin to catch the attention of the right companies at the right levels.
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THE FIRST YEAR OF SPECIFICATION DEVELOPMENT: JANUARY 1985 TO JANUARY 1986
19
3 THE FIRST YEAR OF SPECIFICATION DEVELOPMENT: JANUARY 1985 TO JANUARY 1986 In which GSA developes a strawman request for proposal, the vendors become interested, and Terry Golden comes to GSA as its administrator.
THE FIRST YEAR, THE FIRST DRAFT And so the project was formally under way. On the positive side the team had a strategy that was to prove robust throughout and was led by people who not only believed passionately in it but were acutely aware that to do nothing, or even to delay, was a recipe for disaster. It was obvious, even at that time, that prices on the old FTS system would continue to escalate while service quality fell. The strongest customer agencies were already preparing to leave the system and the U.S. Postal Service, who did not at that time fall under GSA's regulations, was already in transition to a system of its own. Others would very quickly follow, unconcerned by the immense problems and costs of shutting down the old system they would leave behind. This scissor action of the appealing pull of the strategy and the push of the inevitable consequences of delay would prove to be the energizer for each successive player—from the administrator to the engineer—as they were drawn into the team. On the negative side the project already had opposition. Externally OMB, which thought little of GSA's telecommunications abilities, did not appreciate the complexity of the issues and perceived GSA's slow progress concerning FTS as ignoring its concerns. These bad relations were exacerbated by the weakness of GSA, which did not have an administrator at that time. The first administrator appointed by the Reagan administration was Gerald Carmen. He resigned in February 1984 and no successor was in sight. At such times conflict between agencies can escalate. GSA had no Reagan political appointee in the management chain of the FTS to provide stability, to appear publicly in support of the program, and to relate to other political appointees in the user agencies and OMB. The project also had opposition internally in GSA from a group within the Network Services staff, who were used to the central power of running a network, and felt their authority, and even jobs, threatened by the services approach represented by FTS2000. This
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THE FIRST YEAR OF SPECIFICATION DEVELOPMENT: JANUARY 1985 TO JANUARY 1986
20
opposition was exacerbated by the selection of an outsider, Bushelle, to head the organization rather than the promotion of one of their own. In addition, an innovative procurement such as suggested by the FTS2000 strategy constantly challenged the status quo of all GSA's telecommunications staff, so friction was inevitable. However, not all of the involved government interests were antipathetic. On the positive side, while the large customer agencies were not entirely happy with GSA and were still smarting from events such as Telpak and the satellite problems, they had seen progress being made with the cost cutting program and the ARS resolution and were willing to listen. They would prove later to become major collaborators. The vendors who potentially could bid on the replacement were skeptical about GSA's ability to accomplish a procurement of such size. Hence, they were wary of committing bid and proposal preparation money. Related projects undertaken by GSA, involving replacing local service in Washington, D.C., and other areas, had received much publicity several years earlier but were making little or no progress. In addition to having to overcome their skepticism, the vendors were not yet organized to respond to the FTS replacement project. As was pointed out earlier, FTS2000 was a business decision not a marketing decision for even the largest corporations. The federal marketing arms were not highly enough placed in their corporations to serve as leaders for such a large procurement. Resolving this would take time. This was the picture as 1985 began. The constituencies and problems were clear and the plan of action was equally clear. Regarding OMB opposition, it was clear that the political management of OMB would wait for a Republican political appointee in GSA to make the decisions on FTS2000. As a consequence, the fact was faced that little progress would be made with OMB until GSA had a new administrator. Meanwhile GSA should build up as much momentum as possible with vendors and agencies so that OMB's opposition would become less and less tenable. Regarding internal GSA antipathy to the project, the team felt that reason would eventually prevail among the reasonable, and among others nothing could be done. Hence little attempt would be made in the early days to integrate the project with the existing FTS staff. Consequently, the project was deliberately separated and isolated from the day-to-day operation of the existing network. In addition, it was staffed largely with outsiders supported by the SETAMS contractor. The laissez faire attitude accorded to OMB and the existing FTS staff would not extend to customers, however. It was planned that they would be given real participation and authority in developing the procurement. The agencies' senior representatives were all reasonable people with difficult jobs of their own, not enough budget money or resources, and with little time or propensity to play games. They could be counted on to support GSA as long as progress was being made. On the other hand, if they felt the project would not meet their agencies' needs, they would be among the first to cut their losses and go their own ways. Finally, regarding the vendors, the plan was to approach them at the highest levels, give them all the information possible as it became available, and use the press to get them to understand the magnitude of
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THE FIRST YEAR OF SPECIFICATION DEVELOPMENT: JANUARY 1985 TO JANUARY 1986
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the prize and to believe that it would really happen. There were so many overlapping activities in what was really a continuous two year process leading to the release of the RFP in January 1987 that any division of the intervening time has to be somewhat artificial. Although they were not related, three major events occurred in 1985: the public announcement of the project in February, Terry Golden's appointment as administrator of GSA in June, and the release by GSA of the first strawman version of the RFP in October. ANNOUNCING THE PROJECT The public meeting announcing the project was advertised in the Commerce Business Daily for February 13, 1985. In preparation, letters were sent to 19 CEOs of the companies who seemed the likeliest candidates to be prime contractors inviting them to the meeting, briefly explaining its purpose, and pointing out that the annual budget of the system being replaced was about $400 million (Note 1). Every press contact known was called and personally invited to the meeting as were the wire services and television networks. In the weeks preceding the meeting, the presentations to be delivered at the public announcement were reviewed with the FTS2000 Interagency Steering Committee, internal GSA staff, and OMB. The feeling that eventual teaming would bring together the unlikeliest of partners, both inside and between corporations, was confirmed by the variety of divisions from the big companies represented at the meeting and by the overall variety of attendees. As the public meeting was about to commence in the crowded hall with vendors' representatives standing in the aisles and television cameras ready to roll, OMB staff entered and advised GSA to stop the proceedings (Note 2). GSA declined to do so, but the next day GSA received a letter from David Stockman, the director of OMB, instructing them, “to take no further action towards the award of a contract” without his approval. While it was expected that OMB might stop GSA it was a surprise that this was done at Stockman's level (Note 3). No matter, the main aim was to get moving with the strawman specification and issue it as quickly as possible to begin to encourage industry and get them investing money and energy in the project. GSA chose to interpret Stockman's letter as not calling for work to cease but rather that a final RFP should not be released without OMB approval. In many ways, OMB's escalation helped the project by ensuring a very large press coverage. The drama created a corps of reporters who continued to track and write about progress. In terms of further damaging relations with OMB, in the leadership vacuum at GSA they were already as bad as they could be. Consequently, the team moved full speed ahead in developing the strawman specification promised to industry at the public meeting. The vendors were told that this would be the vehicle to include them in developing the procurement. GSA emphasized that it expected to work with them on refining the strawman into a final specification. The vendors were told to expect the strawman in August 1985. This was an estimate as GSA was not sure how long it would take. However, it seemed
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appropriate to create a climate of urgency to push the vendors to start thinking and applying resources. Meanwhile, three other activities continued while GSA awaited a new administrator, all aimed at advancing the project as far as possible and gaining momentum as quickly as possible. These included informing of agencies and gaining their support, informing the press of GSA's progress, and responding to OMB questions (Note 4). INDUCTING THE AGENCIES The FTS2000 Interagency Steering Committee was formed by approaching the highest career SES manager responsible for telecommunications in the 10 biggest user agencies (Note 5). Each was approached on a personal level and briefed as to the strategy and purpose of the project and their personal involvement sought. Each formal meeting of the assembled steering committee was given first-class treatment, and was well prepared, starting and finishing promptly with plenty of opportunity to interact and plenty of briefing materials. This was done to ensure that each member would feel it was good use of their time and would attend personally. Of the 10 members, several emerged as key almost immediately and became major participants and supporters of the project. It was said many times that FTS2000 was a team effort and these were not empty words regarding GSA's customer agencies. The FTS2000 strategy was presented in detail to the Steering Committee on February 4, 1985. The message from GSA was clear, GSA intended to close down the FTS because it was obsolete. Did the steering committee want GSA to aggregate their traffic and procure a replacement? If so, then FTS2000 would be the strategy for their procurement. The answer initially was a cautious accord that FTS2000 be pursued. In later years this became an enthusiastic commitment by most agencies. Meanwhile a general presentation was developed that described the strategy and dealt with the common concerns point-by-point (Note 6). This was given over 100 times at government seminars and to customer agencies, from the working to the management level, at the suggestion of the members of the Steering Committee. It was also turned into magazine articles for the technical and other press (Note 7). This information campaign became the vehicle to build visibility for the project and form a constituency of supporters. In addition, GSA met with assistant secretaries in the largest user agencies accompanied by the relevant Steering Committee member. Visits were also made to other influential bodies such as the telecommunications commands of the Air Force and Army, the Defense Communications Agency (DCA), NCS, and the NSA. A NEW ADMINISTRATOR COMES ON BOARD The effort of reaching out to the agencies paid off. When Terry Golden became administrator three months later on the June 26, 1985, FTS2000 was not just a controversial project that appeared on his briefing
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THE FIRST YEAR OF SPECIFICATION DEVELOPMENT: JANUARY 1985 TO JANUARY 1986
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list. He had heard enough positive opinions from enough individuals in the agencies that he too was ready to listen. Golden was by education an engineer from the Massachusetts Institute of Technology (MIT), intellectually capable of understanding the project and imbued with a constant curiosity, ready to be fascinated by this bold step into the future. Golden was to prove to be a key contributor to the project by personally making FTS2000 part of his agenda and personally leading the procurement to its close. Tall, slim, and athletic; ready to listen and having the right blend of humor and seriousness, he was a confident leader. Golden met within the first weeks of his administration with the senior team members and indicated he did not want to be briefed on the project yet. He asked instead that they teach him telecommunications without any reference to the FTS. To do this, he promised that he would make himself available for hour-long sessions and would call for them with an hour's notice. The team worked on a training agenda, pulling in as many of the team members as possible to give the new administrator a flavor of the team's capabilities and enthusiasm. A screen and overhead projector were set up for the sessions. True to his word, Golden would call and say he had time free, whereupon he would walk down in his shirt sleeves to the briefing room where he and the team would go through the presentations and discuss and question items. Typically he would request a speed up on some items with a brief, “I've got that,” and on others would ask penetrating questions, sometime extending a topic over more than one session. After many sessions over approximately a month's time, he said he was ready to hear about the FTS, but not yet about FTS2000. So, in a similar manner, the team briefed him on the existing network over the following two weeks. At that point Golden asked, “What next?,” and the team told him that nothing else had been prepared. Only then did he say, “Brief me on FTS2000.” It is typical for a new administrator in his early days to look for projects that will allow him to make a mark during his term of office—normally 18 months to 2 years. The team was very aware of this and that FTS2000 had to “catch the wave.” Consequently, it was a crucial time with the new administrator's decision likely to be based on a complex assessment of the importance and visibility of the project coupled with the likelihood of it succeeding. A pivotal point came at an informal meeting between Golden and the senior team members when he asked if they believed that the project would succeed. There was only one honest answer to this, “We are so confident that this has to be done and will succeed that we have bet our careers on it.” The message was clear—the team thought enough of FTS2000 that it was dedicated to it collectively and individually. From then on, Golden supported the project. On July 12, 1985, in one of his first public announcements concerning the focus of his administration, he said that FTS2000 was one of his priorities. AN INDEPENDENT EVALUATION OF THE STRATEGY In truth, while Golden was convinced that the replacement of FTS must
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take place, he was not yet 100 percent convinced about the team's approach and in fact the team recognized that. After consultation with OMB and GSA management he informed the team and OMB that he would hire a consulting firm to reexamine the alternatives and would make up his mind finally when they had completed their analysis. He also indicated that he intended to set up a blue-ribbon panel to listen to all inputs (the consulting firm, GSA, OMB, customer agencies, and any other interests) and would lean heavily on their advice in making his final decision. However, from the team's perspective his public statements of support were enough for the time being, it was now up to them to persuade him that the approach they were taking was the correct one. It was at this point that some of Golden's own staff became involved in the project—people who would become absolutely essential to progress of the project in later years. Of these, Gary Kowalczyk was his associate administrator for policy. Kowalczyk's key contributions to the project were twofold: first, he provided the link between the project team and the administrator to forge it into a single, smooth working unit; second, he later became manager of the evaluation and award process. Kowalczyk was quiet, serious, intelligent, hardworking, and easy to get on with. He had come to GSA with Golden from Treasury. Kowalczyk was tasked with working with the team to immediately establish the blue-ribbon panel and the consulting firm that would review FTS2000. This was a situation that could have caused difficulties as the team was understandably nervous about so many new participants—Golden's staff, a panel, and a consulting firm. However, Golden's staff were so reasonable and so obviously dedicated to achieving Golden's priorities (of which FTS2000 now formed an important part) that there could be no reason not to work wholeheartedly together. The blue-ribbon panel and consulting firm were more unsettling. One concern was that anyone being placed in a position of influence in a huge, visible procurement would have the opportunity to meddle and trade influence for their own ends. Also, it would take time and willingness to listen on the part of new players to understand what GSA was trying to achieve with the FTS2000 strategy. The selection of the consulting firm and the blueribbon panel was hence a very important step. In the case of the blue-ribbon panel, it had to be independant or it would not serve the purpose, as a selfinterested panel, would certainly not satisfy Golden. Panel members were selected for their unquestioned expertise nationally as well as, in some cases, their prior knowledge of the FTS. They also had no vested interest in the outcome of the procurement, but rather were practitioners from the user side of the industry and pragmatic representatives of academe. The MITRE Corporation was hired to form and manage the panel, to manage the proceedings, and to produce the final report (Note 8). In selecting the consulting firm, GSA felt that an engineering company would be unsuitable because its natural proclivity would be toward hardware and toward designing a network and replacing the FTS with a lookalike system. What was needed was a company skilled in telecommunications, but from a broad business and policy perspective, who would examine all alternatives with equal weight. So, the specification
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for the consulting firm was written to ensure a proper balance of policy and technical expertise. After an open competitive procurement, the contract was awarded to the winning company, Kalba Bowen Associates, Inc., with Economics and Technology, Inc. (ETI) as a subcontractor to advise them on policy and regulatory affairs (Note 9). WORK CONTINUES IN PARALLEL ON DEVELOPING THE STRAWMAN Meanwhile, work on the strawman specification proceeded, slowly if measured by the public schedule, but in fact quickly considering the level of detail and the novelty of specifying services. Services included a full menu from voice to data to video and included every feature and service that GSA could conceive as a starting point for negotiations. The strawman specification also included the standards for delivery of services and an outline of the terms and conditions of the contract. In early October 1985 GSA was able to issue the strawman (Note 10). Now industry had something tangible to analyze and a reason to start staffing proposal teams. The plan was that vendors would generate questions and suggestions from the specification and would work with GSA to refine it into a final RFP. The final RFP was to be a consensus product of the potential bidders and the government, and in many ways was to represent the common set of services planned by the carriers. In effect, industry was being given the opportunity to play a major role in specification development and to air their differences and problems before the RFP release to ensure a smooth, swift award process. Initial reaction from the community was that the strawman was far too broad but interestingly enough, as people grew comfortable with the specification, very little was excluded from the final RFP. The balancing act of keeping the momentum going and keeping the work directed toward an RFP continued to the end of the year. This involved developing consensus throughout the constituency: users, vendors, and the central agencies. During the rest of the year, GSA continued to court the customer agencies, the press, the vendors, and all concerned in order to build momentum. Reflections at the end of 1985 showed a fruitful year: GSA had released the strawman specification. As a consequence, companies such as MCI, IBM, GTE Sprint, Martin-Marietta, AT&T, U.S. Telcom, Contel, and Northern Telecom were actively working to analyze the project. In effect, they were helping GSA solve the problem of replacing the obsolete network (Note 11). Golden not only supported the project but was an active booster and was applying unique staff resources in its support. The customer agencies were more and more convinced that this approach would meet their needs. GSA's spectacular progress and Golden's commitment were quieting the agencies' push to go their own way and bringing their public support. Finally, mechanisms were under way that would eventually lead to resolution with OMB. In short, GSA had begun the year with a strategy and ended it with a project.
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4 REACHING AGREEMENT WITH THE OFFICE OF MANAGEMENT AND BUDGET In which GSA and OMB reach agreement to proceed but a seed is sown that will come back to haunt the project.
EARLIER GSA AND OMB RELATIONSHIPS The problems between GSA telecommunications and OMB predated the FTS2000 project and went back at least to the end of Telpak in 1981. At the time of Telpak's demise, GSA had gone to OMB acting as a spokesman for its customer agencies to seek a supplementary appropriation for the almost $100 million shortfall due to AT&T's tariff raises. OMB did not accede to that request, placing the shortfalls on the shoulders of the agencies, effectively causing them to question FTS cost and service. Deregulation had advanced enough that the climate was right for OMB to question GSA's role in providing telecommunications centrally to the government. OMB also questioned GSA's control over the fund used to operate the FTS. The Federal Telecommunications Fund was a revolving fund used to pay all costs associated with the system and it was reimbursed on a prorated usage basis by the customer agencies. Inevitably in time of centralization and monopoly, such funds can be loosely managed. OMB pressured GSA to undertake long-range telecommunications planning as early as 1981. For various reasons this was not accomplished until 1984 and annual pressure on GSA by OMB to reveal its plans brought little by way of answers or tangible results. Adding to this fertile ground for discord was the fact that the powers of the two agencies overlap. This conflict and overlap had been exacerbated in the area of information resources by passage of the Paperwork Reduction Act in 1980, which increased OMB's role in managing information technology. Also, as previously mentioned, the largest and most powerful customer agencies of the FTS, dissatisfied with GSA, had begun to petition OMB for permission to leave the FTS and go their own way. This situation had become acute with the major cost increase due to Telpak's termination. All of these interplaying forces set the stage for a rocky relationship between GSA and OMB in the early 1980s in the area of telecommunications policy and management.
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Things first came to a head at GSA's budget hearings with OMB in the fall of 1983. The OMB team was well organized and well prepared to question the telecommunications program. GSA was not well prepared to defend itself. This event was quickly followed in December 1983 with a letter from OMB to GSA indicating that the FY 1986 budget cycle would mark deregulation of FTS—in other words, terminate FTS and get out of the business (Note 1). It seems in retrospect that these disagreements were mainly contained to the permanent civil service level rather than initiated by the political appointees. The disagreement took on the characteristics of a civil service feud and, while GSA was leaderless from when Carmen left in February 1984 to June 1985 when Golden arrived, OMB staff took advantage of this vacuum (Note 2). The December letter was to be only one of many from OMB, though all were signed by highly placed political appointees ready to let their staff handle the FTS in the intervening time before GSA gained a new administrator (Note 3). GSA held many meetings with OMB to explain the complexities associated with shutting down the old FTS. However, no one at OMB seemed to appreciate the issue or to guide the staff, which had little, if any, background in telecommunications and management at that time. OMB pressed steadily onward, against the greater efforts and wishes of GSA, to issue in April 1984 a deregulation bulletin in the Federal Register. In response to this, GSA wrote directly to Stockman in May 1984 indicating that this action caused much apprehension and GSA had serious reservations that this would best serve the government or was appropriate (Note 4), but to no avail. This was the foundation of OMB/GSA relations on which the FTS2000 project was to be built. KALBA BOWEN, THE PANEL, AND GAINING OMB SUPPORT In retrospect, Kalba Bowen's project team, while being knowledgeable in telecommunications policy, were not experienced in the nature of large private networks. This made GSA's task in explaining their strategy very difficult. The blue-ribbon panel, on the other hand, was constituted of members with strong credentials in managing and running large networks for government and for private sector corporations. It included members from Westinghouse and General Electric, corporations that run two of the private networks nearest in size to the FTS. The panel also included the ex-head of telecommunications at the Department of State, and the retired head of the Defense Communications Agency (DCA) (who after his retirement was CEO of American Satellite and also sat on several National Research Council committees). Another member was the retired head of development of networks for AT&T, and no doubt the most knowledgeable person about state-of-the-art technology. The panel was rounded out with members from academe, one of whom acted as the chairman (Note 6).
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In many ways, during the intervening time of preparing the panel and the Kalba Bowan contract, Golden reached a high level of comfort with the FTS2000 approach. Consequently, while both served as an important mechanism for the checking, exploration, and debate that brought him to 100 percent confidence, their biggest contribution was probably their role in helping GSA reach agreement with OMB. Golden was a member of the Reagan administration's establishment and so he had access to, and the confidence of, decision makers at OMB. The process he described of independently evaluating FTS2000 for himself before reaching a conclusion satisfied the OMB management and provided a procedure for all parties to reach agreement, including a participatory mechanism for the OMB permanent staff. The panel was given access to all documentation concerning the FTS2000 project for their detailed analysis. It then first met for a two-day session on February 13 and 14, 1986. The first session was to hear from a variety of sources as to FTS replacement issues and alternative approaches. Golden attended the panel deliberations throughout their proceedings. There were several formal presentations: the stage was set with the history of the FTS, then the panel heard from Howard Anderson of the Yankee Group who in general terms endorsed the approach (particularly fully integrated services). BellCore discussed ISDN and endorsed FTS2000's integration of services. A speaker from the Gartner Group outlined various AT&T alternative approaches, such as the AT&T intelligent network and an Electronics Tandem Network based system. There were other speakers: General Motors/Electronic Data Systems (GM/EDS) described its approach to network replacement and ETI also made a presentation of unfolding public policy. The final presentation covered the GSA approach. Key steering committee members from Treasury, the Veterans Administration, and the Department of Energy attended in support of the project and to advise from the users' perspective. Golden invited OMB and it sent representatives from each of its three divisions: budget, regulatory affairs, and government-wide management. Meanwhile, Kalba Bowen began interviewing the FTS2000 team in January 1986, and the GSA team led them through the logic of the FTS2000 approach. In lengthy discussions, questions were answered and misconceptions were eliminated, leading to findings that began to parallel GSA's own. However, a bombshell was dropped in the draft final report at the end of April. Kalba Bowen presented four major conclusions. They had concluded (as had GSA) that the system should not be decentralized with each agency going its own way. Secondly, they rejected any approach that reduced the menu of services from the full menu of FTS2000 (endorsing GSA's move from only voice to integrated services). They also endorsed the FTS2000 general approach on a cost basis. But in a fourth recommendation, which was a surprise to GSA, they indicated that the best choice would be to take the FTS2000 approach but to make two awards to two independent vendors. The GSA team could not understand the origin of the recommendation or see how to implement it. Questions immediately were raised: How did two awards make better sense than one award when there were only
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three companies who had declared that they would definitely bid on FTS2000? Wouldn't this make the Government more captive to the vendors? How could GSA break up the requirements into two bid packages? When GSA ended up with two networks, how would they manage interconnection, both normally and in times of emergency? And, the most severe problem, how would they transition two systems with the attendant risk of adding complexity to an already risky transition? These questions were disturbing in themselves, but more so as Kalba Bowen was not able to address them and could not describe the basis for their recommendation. As a supplement to their draft report delivered on April 22, and in response to GSA concerns with the recommendation to make multiple awards, Kalba Bowen provided a detailed rationale for their decision in a May 30 memo to GSA (Note 7) at the time of delivering their final report. This memo indicated that the issue of competition was paramount in obtaining good service prices. They further indicated that in their opinion AT&T would enjoy an overwhelming competitive advantage over other potential bidders and that the procurement would thus not yield the low bids GSA expected. They also discounted the competitive pressure of agencies being voluntary participants in FTS2000 and thus being able to continuously seek better prices elsewhere. Hence, they said, there would be little pressure to maintain low rates throughout the contract life. In conclusion, they said that the multi-vendor strategy would ensure considerably more competitive bidding and increased competitive pressures on the winning vendors following contractor award. They admitted that the change would result in slowing the procurement and introducing new complexities which could reduce the efficiency of the procurement and the system transition. The effect of these complications and delays could be to reduce the overall benefit which the government would achieve from the FTS replacement. On August 17, the blue-ribbon panel met for their final session to listen to the Kalba Bowen findings and recommendations, to deliberate, then to advise the administrator on the proper course of action. Their reaction to Kalba Bowen was very much the same as GSA's: What is the advantage of doing this? How can it be implemented? The answers were not forthcoming. The panel retired to deliberate, then met with Golden and was unanimous in advising Golden that GSA proceed with FTS2000 as structured and that GSA should not consider breaking up the procurement into two awards. With the panel's recommendation and Golden's acceptance of it, GSA's relationship with OMB became positive, with each side communicating concerns and answers in a spirit of trying to reach agreement and get the RFP issued as soon as possible. OMB's remaining concerns were serious ones and ones that GSA also had deeply considered. The first of OMB's concerns was how GSA would manage FTS2000 once it was awarded. In correspondence with OMB, GSA formally proposed a solution that had been worked out with OMB staff in previous weeks. GSA would develop a tripartite management team consisting of: (1)
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GSA's own management and technical resources; (2) a federally funded research and development center consisting of multidisciplined experts in management and telecommunications to support GSA's management; and (3) reliance on a technical assistance and management services (TAMS) contractor for technical support. The second item that concerned OMB was the most difficult and serious. It became the heart of all remaining conflict in the program: How does the government avoid being locked-in to a single contractor and ensure ongoing competition within the program? This question had been recognized at the very beginning of the project as a pivotal issue. GSA's approach to ensure ongoing competition was rooted in a belief that agencies would make rational decisions about consuming FTS2000 services and that a free market would bring sensible actions on their part. It was also one that recognized the transition from the old network was a uniquely difficult problem, one that was complex enough to be considered paramount. Consequently, GSA's tack was to: 1. Award the contract to a single prime contractor. This would not only ensure the lowest possible initial prices but would make the program more manageable, particularly during the difficult transition, but also throughout the life of the contract; 2. Offer only a minimum guarantee to the successful contractor, namely, the traffic expected to be consumed during the transition period. Any revenues after that would have to be earned by the prime contractor keeping the customers satisfied and providing low-cost and high-quality service. This was possible because the industry had excess capacity and was highly competitive; and 3. Make participation in the FTS2000 service entirely voluntary so that customers could walk away from the service if they were not satisfied. This was feasible because there would no longer be a dedicated system. Voluntary participation would ensure competition from outside FTS2000 (Note 8). The focus of GSA's strategy for ensuring ongoing competition rested on these points. Experience with the old FTS had shown that a locked-in vendor was definitely harmful to the customers and did not ensure low-cost, high-quality service. However, GSA had observed that, even in the case of the old mandatory FTS, when user agencies suffered enough from high-cost and low-quality services they were prepared to take the drastic actions needed to remove themselves from the system. GSA felt that if this was true under the inflexible environment of a mandatory hardware system, it would be even easier under the proposed services contract. Agencies leaving the FTS2000 service would present minimal transition problems and minimum impact on remaining agencies. This was an important part of the strategy that was later to be changed by Congress. OMB was satisfied with GSA's approach to its concerns and, with minor modifications, accord was formally reached in a series of letters culminating in Golden's final notice to OMB that all issues were settled (Notes 9 and 10).
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5 DEVELOPMENT OF THE FINAL SPECIFICATION AND RFP RELEASE: 1986 In which the final specification is developed, the vendor teams come together, and the RFP is released.
CONTINUING DEVELOPMENT OF THE RFP Meanwhile, as the blue-ribbon panel process was leading to accord with OMB, GSA pressed on with developing the RFP. Releasing the strawman in October 1985 had been the first milestone to draw vendors into the project. It was significant enough to lead industry to believe FTS replacement would happen and vendors began to spend resources on bid and proposal preparation. The first vendor to publicly state its interest in the program was Martin-Marietta, in March 1986. Its enthusiastic public approach to bidding was a major asset in building up momentum (Note 1). Another major event was a public announcement by Martin-Marietta in July 1986 of a special teaming relationship with the Bell Operating Companies (BOCs) and Northern Telecommunications. They immediately set out to establish themselves as a credible bidder by meeting with agencies, presenting their credentials to bid on such a large contract in an area in which they were not particularly well known, and discussing with the agencies their probable future requirements. GSA had always felt that a common carrier would be at the heart of each bid, whether or not they were the prime contractor. GSA anxiously watched the activities of MCI, GTE Sprint, U.S. Telcom, Satellite Business Systems, and U.S. Transmission Systems, which, together with AT&T, represented the only companies with significant national networks. Other companies in the common-carrier business were either resellers or niche carriers with small specialized networks. Studies by GSA to assess competition indicated that the industry would probably shake out with mergers taking place between participants, so GSA also watched anxiously for such moves. The first merging move happened in December 1985 as IBM sold SBS to MCI and took a 16.5 percent position in the resultant company with an option to increase this to 32 percent. This merger did two things. First, it put GTE Sprint in an awkward position facing a much more powerful adversary in MCI. MCI not only had SBS's network assets and customers but had the financial backing of IBM.
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The second thing that the MCI/SBS merger did was take IBM out of the picture. GSA had hoped that one of the results of divestiture would be that IBM would become a strong competitor against AT&T and that each would begin to present major head-to-head competition in each other's markets. IBM formed a multidivision team to examine the bidding opportunity that FTS2000 represented and seriously wished to bid, win, and establish itself in one move as a major player in the government telecommunications market. However, a realistic analysis of the inventory of the corporate skills to undertake such a large voice communications proposal brought IBM to the conclusion that it could not be the best bidder. IBM met with GSA to announce informally that it would not be bidding. At that meeting, IBM discussed candidly with GSA the results of their strategic analysis including probable prices and major strategic issues. This was most helpful to GSA, particularly in confirming its estimates of prices and its competitive analysis. The MCI/SBS merger was followed by GTE Sprint and U.S. Telcom merging to form US Sprint. For the FTS2000 project, this turned out to have both positive and negative influences. The U.S. Telcom team had had a corporate commitment to building a national common-carrier fiber network. Its bidding team seemed smart, informed, well organized, and aggressive. The team of GTE Sprint, meanwhile, had not compared well with other companies in meetings with GSA. The GSA team privately felt that, based on its showing, GTE Sprint could not organize a bid. However, the merger with U.S. Telcom created a stronger company both in terms of network assets and finances and it also merged U.S. Telecom's bidding team with GTE's. On the down side, U.S. Telcom and GTE Sprint became immersed in the details of implementing their merger and so did not really pay attention to the FTS2000 RFP development process in 1986. So, they did not take advantage of the opportunity GSA presented to all vendors to resolve specification issues early. US Sprint did not address the importance of the opportunity until the RFP was issued in 1987. In addition to being concerned about who would actually bid, GSA was equally concerned with who would decide not to bid and who might decide that a strategy of upsetting the procurement was more to its market advantage. The most obvious vendor who might adopt this strategy was MCI, which showed little overt interest in bidding yet seemed to have much to lose. GSA worried for several months until MCI was announced as one of Martin-Marietta's teaming partners in September 1986 (Note 2). As with the announced participation of all companies, GSA took this as only a positive signal, not necessarily the whole picture. In procurements of this size with so much at stake, GSA recognized that “double agent” games were possible where companies with market interests could both appear publicly to support the procurement yet work assiduously behind the scenes to stop it. GSA watched carefully for any such signals. But in general the response by vendors to the strawman specification was as expected and companies began to come into GSA to submit formal comments. They took part in long meetings with GSA discussing points. Thus, they became part of the broad government and industry team that was collectively to accomplish the procurement.
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There were rumors in July 1986 that AT&T would be teaming with Boeing, but it remained until December before there was any kind of formal announcement (Note 3). US Sprint made no public announcement at all that year, but indicated to GSA that it was considering to bid. A CHANGE IN THE GSA TEAM At the end of 1985, with the strawman specification behind them, Bushelle resigned to return to Chicago. At the time, this looked like a severe blow to the project. Bushelle's creativity had been essential to getting FTS2000 structured and started. He appeared at the right time and was the right person to do the job. It is hard to imagine what would have happened to the FTS if he had not joined GSA when he did. Replacing him would be a problem, but the project was now at a different stage and hence it was a different kind of problem from when he had been hired. In his two-year tenure as head of Network Services, Bushelle had not only put in place the FTS2000 replacement strategy, but had also mapped out the possible initiatives that should be undertaken to extend the life of the current network. So he left GSA with a legacy of an interim plan as well as the strawman specification and FTS2000 strategy. So after the initial shock of his resignation, GSA's problems were reduced to needing: • A good implementing manager to run the old system, to carry out the cost-cutting and quality control program to extend the system life, and to begin to prepare the organization for FTS2000. This person did not need to be a strategist or even an engineer. The most important thing was the ability to carry out a plan. • Part-time access to Bushelle as a consultant to review any remaining changes to the FTS2000 strategy and to help think through integration problems. • A talented manager who could continue the development of the FTS2000 RFP. This person had to be a cut above normal, open to innovation, but did have to possess Bushelle's creativity. The first need was filled internally within GSA by an established line manager. The second need was easily filled by assigning Bushelle as an expert-consultant on the administrator's staff. This allowed him to work part time for GSA. For the third need, serendipity provided the right person at the right time. This was Walter Irvine, who had been recently hired as a key manager in a longer term project concerning meeting agencies requirements once the FTS2000 service was available. Irvine's key contribution to the project was developing a first-class RFP according to schedule. As with Bushelle, Irvine was also an early retiree from
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the Bell system, although unlike Bushelle his background was at AT&T rather than the Bell operating companies. Most recently he had been on AT&T's Datanet-1000 service team. He was a mature manager, experienced, hard working, knowledgeable about data and voice services, privy to AT&T service strategy, and he carried himself well—perfect for the job. EVENTS CONVERGE TOWARD RELEASE OF THE RFP As 1986 progressed, development of the RFP continued as GSA worked with any vendor organization that wanted to discuss the project, provide input and criticism to draft specifications, or in any way contribute to the development of the RFP. GSA fully intended that the final RFP would represent the efforts and interests of the anticipated competition and that consequently award would flow smoothly. GSA did expect some jockeying and positioning as the vendors suggested changes to the specification, but in general the concerns espoused were common to all and rarely did GSA have to take on the role of tie breaker. The rapid progress of 1986 was later to prove misleading. Two of the three main contenders had not been paying much attention and missed items in the specification that were later to cause them and GSA great concern. The year 1986 saw another major participant added to the GSA team as the MITRE Corporation was brought in to fill an important and expanding role. One area of concern that they were to address was the bid evaluation process, including the identification of evaluation factors, scores, and the evaluating scheme. The evaluating scheme consisted of a wide variety of tasks, from the organization of a team to the computerized cost evaluation models. There was also the question of bid security and how bid materials would be controlled. Early estimates had indicated that as many as 50 people would be required for the evaluation team, and GSA had asked the FTS2000 Interagency Steering Committee to provide resources for the evaluation team. The customer agencies indicated that they could not release people of sufficient calibre and recommended that GSA seek outside support. The MITRE Corporation as a noncompetitive entity was a candidate for such support because of its isolation from potential conflict of interests. In October 1986, one year after releasing the initial strawman, GSA was ready to release the final draft RFP. Allowing vendors access to drafts and concepts throughout the development of the document produced a specification of exceptional quality and one that was a pioneer in the industry in the way it addressed buying services, not hardware. The RFP spelled out specifications for all types of services from voice to data to video, it specified packet and circuit switching services as well as dedicated transmission, and it specified a service oversight center. With no surprises for the vendors in the final draft, 30 days proved adequate for review, allowing GSA 30 more days to make changes (Note 4).
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This was a delicate stage for GSA. Someone could emerge at the last minute and either stop the project or use the threat of stopping the project to negotiate some kind of major change. However, the only manifestation of outside interest apart from GSA's continued dialog with OMB was from the National Communications System. Its representatives appeared on November 24 with a demand that GSA include in the specification the requirements for their National Emergency Telecommunications System (NETS), a multibillion dollar effort. This request was described in approximately two paragraphs of technical specification and there was no identified source of funds (Note 5). This was addressed without delay as agreement was reached to omit NETS from the FTS2000 RFP. GSA reached the final days of agreement with OMB and on December 1, 1986, GSA presented the program to Joe Wright, deputy director of OMB, as part of his program of major system reviews. With the exception of very minor concerns, he indicated he was prepared to let GSA go ahead. Agreement was quickly reached with OMB staff. On December 22, in a final letter from GSA to OMB, Golden indicated that agreement had been reached on all items and that he intended to issue the RFP. THE RFP IS RELEASED The team had committed to Golden a year earlier that GSA would have the RFP ready for release before the end of 1986 and it was ready and printed for release on December 31. This was due to the exceptional efforts of Irvine, his team, and MITRE, all of whom worked through the Christmas holiday to ensure the release. All of the efforts with the customer agencies, the vendors, the press, OMB, and other interests had paid off. GSA was ready to release a first-class RFP for one of the most complicated replacement projects in the history of computers and telecommunications just two years after publicly announcing its intention to do so. The specification had been formed by means of a debate between all interested parties including the users, the vendors, and the central oversight agencies. The remaining schedule called for proposal submission in six months and all the expected teams, AT&T, Martin-Marietta, and US Sprint, had indicated that they could meet it. The submission of bids was to be followed by a six-month evaluation and award cycle leading to an award in January 1988. In the euphoria of having met the schedule for releasing the RFP, GSA felt that nothing could stop them meeting the award schedule. Administrator Golden called a press conference for January 7, 1987, at which the RFP was released officially and made available to the bidders (Note 6).
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6 THE LONG HOT SUMMER AND COLD HARD WINTER OF 1987 In which the honeymoon is over. The vendor battles for position begin. GSA fights Brooks and loses. Some of the vendors get their way. But three good proposals come in and success is in sight.
THE HONEYMOON IS OVER The spirit of the press conference, held at GSA on January 7, 1987, to release the RFP, was definitely one of a honeymoon. With hindsight, it is clear that the reporters and congressional staff in the audience were harbingers of future problems. The honeymoon lasted only one day. If the GSA team had had any experience with huge procurements, they would have known in advance that with so many dollars at stake, so much market position open, so many jobs to be won or lost, there would inevitably be a donnybrook of magnificent proportions. It has been said that nothing attracts a crowd as quickly as a fight and that in all political conflicts there are at least two groups—the actual participants and the audience. In Washington, perhaps more than in any other city, the audience is kept well supplied by the press. In the case of FTS2000, in the next 15 months the press, so carefully cultivated as a positive tool to build up momentum in the early days, demonstrated its double edge. As with real fights, there were other participants than the antagonists and the audience. There were those who would take advantage of the fight to rob the wounded or otherwise advance their own causes. Also, as with real fights, there were not only the visible soldiers but also snipers in the trees, hiding who they were and where their shots came from. There were also fifth columnists within organizations. As with the tactics of proper battles, these paper battles had diversions to hide real purposes, and exercises to keep GSA busy on one front while a second front was opened. Instead of rocketry and shells, the ordnance would prove to be a barrage of adverse press articles, a rain of aggressive letters from Congress, and the massive explosion of a descending report from GAO, the congressional General Accounting Office.
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Skirmishes kicked off the day after the press conference with headings in the Washington Times such as “Federal Offices to Get Police State Phones” and “That You Ivan?” implying that the RFP contained state secrets given to the Russians. FTS2000 was described as an espionage tool and the ever-present government official who “asked that he not be named” called FTS2000 “a police state security officer's dream.” Quickly seizing on this Rep. Don Edwards (Democrat, California), chairman of House Civil Rights Subcommittee, announced, “The concept they have in mind is frightening and really unacceptable.” Meanwhile, union officials at major federal employees unions also expressed concern about possible abuse. “We could have a system where Big Brother is going to move in.” Each article coincidently gave Golden bad publicity (Note 1). This initial skirmish should have alerted GSA to prepare for larger battles but everything quieted down again for almost four months. Instead of mentally preparing for the new climate, GSA continued by the book, collecting and answering questions from the vendors in expectation that they, the vendors, were vigorously writing their proposals against the June 30 submission date. GSA also worked with the agencies finalizing each side's commitments so that the transition could be properly planned and the requirements could be finalized. The Departments of the Army and Navy were the only customers of any size on the existing FTS system that indicated they did not wish to be included in FTS2000. Army and Navy prepared to leave the existing FTS system. Army proceeded to procure long distance services from public tariffs on a local switch basis. Navy proceeded to decentralize long distance communications to each base as a budgetary strategy. The long term future for both departments was seen as the Defense Switched Network being implemented by the Defense Communications Agency. With the exception of the Departments of Health and Human Services (HHS) and Treasury the civil agencies signed up for the transition and after some clarification and negotiation, HHS and Treasury joined too (Note 2). By April, over 1 million subscribers were voluntarily committed to the new service—all of the civilian agencies. Until this point Congress had not been a player. There had been little, if any, briefing of committees and staff, other than as potential users of the FTS system. The FTS2000 Steering Committee had several times raised the question of what strategy was being pursued by GSA to bring Congress into the project. This was discussed as these questions were raised, but the advice was to wait until Congress expressed interest, then respond to that specific interest. As a result, two committees (House Government Operations and Senate Government Affairs), which were to prove key to events before proposals would eventually be submitted, were neither consulted nor informed of the nature of the project. This was to be the first major miscalculation on the part of GSA. A second miscalculation concerned the vendors and their motivations. THE IMPORTANCE OF WINNING GSA had no idea just how important winning FTS2000 would be to AT&T.
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GSA knew that AT&T's annual revenues from the old FTS system would be an incentive to compete. However, GSA did not realize that FTS2000 would be a pivotal piece of competition for the AT&T corporation. In defense of this naivete, it is doubtful whether AT&T itself knew the importance until after the RFP was out and a broader corporate perspective came to bear. An AT&T senior manager was to admit later that year that AT&T had found itself behind in their preparations when it had actually begun to examine the RFP from a corporate point of view. First of all, 90 percent of AT&T's business service revenue, and nearly all of its profit from providing services to businesses, flow from less than 10 percent of the business customer base. Within this 10 percent, there is even more concentration, and in fact fewer than 300 giant customers generate fully 25 percent of AT&T's business revenues (Note 3). In essence, the largest portion of AT&T's business service profits come from its top 300 accounts and the largest of these was GSA. These accounts also were the ones most able to follow GSA's leadership if other arrangements than buying AT&T proved to be the least expensive. That was one reason AT&T had to win. If this fact was not recognized by GSA (and maybe not completely by AT&T Federal Systems) it was recognized by knowledgeable analysts in the industry. They felt that losing the contract would definitely hurt the AT&T stock, would be a big blow to AT&T's prestige all around the country, would badly damage its credibility, would be a major setback, and would imply that AT&T services were not up to those of other companies (Note 4). In addition, in early 1987 AT&T was a corporation under stress. When James Olsen became CEO in 1986 he had to face up to eliminating 27,400 members of the 321,000-member work force. Also, a $3.3 billion write-off nearly wiped out all 1986 earnings, and AT&T's share of the long-distance market slipped to 63 percent from nearly 68 percent after the 1984 breakup (Note 5). At some point early in 1987 the message came strong and clear from the corporation to its troops, win at all costs. An imposing set of resources could be set in motion: technically such entities as Bell Labs, and legally and politically the engines that had established dominance through the regulatory and political process over nearly a century. In addition to the resources it could muster, AT&T also in effect had a war chest that made delays, or even cancellation of the FTS2000 program, a no-risk situation for them. AT&T still recouped $225 million in revenue from the old FTS system which, even at average rates of return, represented a war chest of more than $30 million dollars a year in margin. Martin-Marietta, on the other hand, had already invested heavily in the program (later estimated by them at $50 million) with, as yet, no revenues coming in (Note 6). From a resource perspective there was no doubt that as a corporation it had major capabilities in data communications and had sufficient experience with the government competitive market to have major resources to devote to the political and legal process. The question later became, could they marshal them? US Sprint meanwhile was not having a good year and was behind in developing an FTS2000 strategy as it was still attempting to recover from the merger of its two component parts. US Sprint was small compared with
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AT&T, accounting for only 6.5 percent of total national minutes of usage compared with the 77.8 percent of AT&T. The revenue picture was similar, with US Sprint accounting for only 7.4 percent versus AT&T's 79.2 percent of total national revenues. In addition, Sprint suffered a $700 million loss in the prior year and securities industry forecasters predicted that US Sprint had lost probably half a billion dollars in the first half of 1987. To make matters worse, billing problems, fraud, and other collectibles comprised 32 percent of US Sprint's accounts receivable in the previous year (Note 7). Sprint also had trouble deciding who to team with and had a problem living with its eventual teammate, EDS. Following the RFP release on January 9, 1987, US Sprint and EDS made a public announcement that they would jointly bid and Sprint's senior vice-president even indicated that GSA had amended earlier drafts according to Sprint concerns and hence all objections had been lifted (Note 8). But US Sprint and EDS parted on June 9, 1987. Publicly, EDS blamed it on GSA's “recent changes in the rules” and the possibility of further disruptions, evolving regulatory policy, uncertainty in timing, and the finality of any contract awarded. US Sprint was unsure whether they could go it alone at that point. It was left with much work to do that it had not planned on doing (Note 9). Following a pretax charge of $260 million due to write-downs and $76 million pretax for uncollected bills, US Sprint said on July 8, 1987, that it would not bid. In that same week Charles Skibo, President of US Sprint, resigned (Note 10). US Sprint's withdrawal inevitably was trouble for GSA as it reduced potential bidders to two. Throughout the final phases of the program, the threat of either remaining vendor not to submit a proposal could be strong leverage to change the specification, as a single remaining vendor implied a sole source procurement—a politically unacceptable situation in this case. With this exposition of the vendor's positions as a backdrop, the events of the summer of 1987 began to unfold. Three sets of events took place. First, AT&T began to refine the terms and conditions in the RFP to ensure they could compete; second they began to attack the strategy of Martin-Marietta and their Bell subcontractors; and third, Rep. Jack Brooks, the chairman of the House Government Operations Committee, began to take a hand. ROUND ONE: HOW FIXED CAN A FIXED PRICE BE? On February 19, 1987, GSA received a letter from Martin-Marietta drawing attention to the fact that tariffs took precedence over contracts for regulated common carriers and that hence, as the RFP was written, AT&T would have unfair advantage in implicitly offering less than firm fixed prices. In response to this, GSA, on the advice of their legal staff, amended the RFP to require fixed prices (clause L.7.d; Note 11). This was not a change of intent on GSA's part. GSA had had a long-term concern (as had many users of telecommunications) regarding how prices could be fixed for telecommunications. Unlike the deregulated
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computer industry where a fixed price commitment by a company meant price protection for a customer, tariffs could be adjusted in transactions between the FCC and the regulated carrier without involving the customer in the decision. GSA had had experience with this in its business transactions on the old FTS and watched in dismay as prices rose out of their control. Fixed prices were a point GSA was particularly concerned about in FTS2000 for two reasons: first of all, a main objective was to get stable, predictable prices; and second, meaningful competition was impossible without evaluating bids bound by the same terms and equally fixed prices. The only company that raised a major issue was AT&T. Both Martin-Marietta and Sprint were able to enter into fixed price contracts similar in structure and commitment to contracts in the ADP industry. GSA, like other users of telecommunications, hoped and expected that deregulation and divestiture would bring the same abilities to the regulated AT&T and expected to be able to bind AT&T to the same kind of fixed prices. The state of deregulation and the interpretation of the Modified Final Judgment (MFJ) were still fluid at that time (and continue to be so). The MFJ, as with any complicated tampering with a major industry, though clear at the macro level but unclear at the micro level. Interpretation was proceeding slowly on a case-by-case basis and GSA had expected that FTS2000 might test the bounds of the MFJ and require interaction with the FCC or Judge Greene's court. Following divestiture, AT&T had moved closer and closer toward fixed price commitments. One major step had been Tariff FCC Number 12: Custom Designed Integrated Services, with the Defense Commercial Telecommunication Network (DCTN) as the first service in that tariff. More recently this had been extended in a contract with General Electric (GE) for an internal corporate network (Note 12). However, the DCTN agreement constituted a contract for plant and facilities rather than services. Not only that, the DCTN tariff fell far short of a fixed price commitment. As for the GE case, no public details were available. GSA was looking for more concrete fixed priced service terms than it had seen, fully recognizing that this would be new ground that was to be broken. The question was, who would break it, AT&T or GSA? GSA's tack in developing the procurement was to induce the bidders to do the detailed work. This was not reluctance on GSA's part to devote resources but rather a realistic view that the most knowledgeable resources to solve new problems lay with the vendors. Consequently, GSA expected AT&T, with their long experience and broad capabilities in the regulatory and legal area, to seek the resolution to the question of how fixed the prices could be. Once this had been determined, these terms would become the basic rules for all bidders to ensure that the playing field was level. AT&T expressed concerns to GSA's procurement staff on this point and discussions continued until May 6. However, AT&T could offer no alternative to a DCTN-type of business arrangement. GSA knew this was not satisfactory and kept pushing AT&T to find something better. It was not clear to GSA why AT&T could not bid fixed prices through a subsidiary, or
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by having their teaming partner Boeing serve as the prime contractor, or by some other arrangement. If it meant approaching the FCC or Judge Greene, then AT&T should do so—the onus was on them. These discussions were all held between AT&T and GSA's contracting officer. They were not escalated until AT&T submitted a letter on May 6, requiring GSA to confirm that a DCTN-type of tariff would be satisfactory. They indicated that if it was not they must hear by noon on May 11. A meeting was called for that day and senior management attended the meeting, appropriately headed by the contracting officer (Note 13). There seemed to be a failure to communicate as GSA left that meeting believing that AT&T would try again to determine a more suitable proposal for terms and conditions related to fixing prices. In fact, AT&T decided it was not getting what it needed through orthodox channels and that same day filed a protest with the General Services Board of Contract Appeals (GSBCA) that AT&T was being excluded from bidding (Note 14). Escalation then began in earnest. A GAO report based on a survey of GSA's telecommunications some 18 months earlier but never released was transmitted to GSA under a cover letter from Rep. Brooks (Note 15). GSA's attention was certainly caught and the message was unambiguous as the Washington Times headline, “Brooks Blasts GSA Over Phone Purchase” arrived ahead of GSA's copy of the letter (Note 16). Brooks' letter stated, “GAO concludes that projects designed to provide centrally managed telecommunications services, such as FTS2000, WITS, and ASP, are not supported by adequate analysis and, as a result, their successful implementation is highly questionable.” The letter went on to state, “it has recently come to my attention that AT&T, one of the major vendors interested in bidding on the FTS2000 contract, has filed a bid protest against the procurement. Apparently the company is alleging that it is being denied a fair opportunity to compete for this award. Needless to say, it is difficult for me to understand how GSA, after years of preparation, could be faced with this situation just two months before bids are due.” Finally, the letter said, “The GAO report coupled with this protest may undermine GSA's credibility with user agencies and the vendor community as well…. I urge you to take forceful action to deal with the problems at hand to ensure that this important project will be successfully implemented.” The House Government Operations Committee was now firmly in the loop. Meanwhile, the Senate Government Affairs Committee was also alerted and became publicly involved later (Note 17). The protest filed with the GSBCA said the FTS2000 RFP “improperly restricts competition by requiring an offeror to certify that its proposal does not constitute a common carrier service subject to regulation under Title II of the Communications Act of 1934 and that the offeror is able to enter into a binding and enforceable fixed price contract not subject to tariff precedence, tariff revision, or tariff pass throughs.” The protest went on to say, “GSA…violated applicable procurement statutes and regulations restricting full and open competition, …violated regulations requiring fair treatment, …violated regulations requiring that both tariffed and non-tariffed suppliers be permitted to submit offers, and…failed to provide time for offerors to respond to L.7.d
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before submission of proposals are required.” In essence, GSA demanded fixed prices. AT&T said they could be ordered to raise prices by the FCC and so were being excluded from bidding. The GSBCA, an independent body that hears contract disputes, scheduled a hearing quickly for June 15 and 16, and Judge LaBella said he planned to deliver a decision by July 15–15 days before the due date for FTS2000 bids. As a consequence, on May 18, GSA delayed the submission deadline to an unspecified date while the problem was sorted out with AT&T (Note 18). At this point the project was firmly escalated to the administrator's office rather than IRMS and the day-today strategy was formed by a team consisting of the administrator's staff and the IRMS staff, with the case being presented to, and the major decisions made by Golden. From the project perspective this was advantageous as it brought to the team the power to marshal legal, procurement policy, and congressional liaison resources. Discussions with AT&T centered around GSA's concerns about fixed prices, AT&T's concerns about clause L.7.d., and both agreeing on a process to determine an outcome satisfactory to both sides. This focused on two items: a set of terms that GSA was willing to fall back to if better ones were not approved by the FCC, and an agreement by AT&T that GSA would seek alternatives with the FCC. None of this was new, all of it was reasonable, and there should have been no reason for the same decisions not to have been made through normal and proper channels without the Brooks and GSBCA escalation. On May 20, GSA agreed with AT&T as follows: GSA would accept either a fixed price or a fixed price tariff. An acceptable fixed price tariff would be a 10-year-term tariff with fixed rates approved by the FCC, the carrier (AT&T) would agree to waive rights to seek tariff increases, and the carrier would oppose any increase in the fixed price tariff (at no additional cost to the government) if the FCC mandated a raise. If the FCC forced price increases the carrier would ensure that they would not be passed to government but come out of stockholders' profits. Finally, GSA could break the contract without penalty if the tariff was increased. In return, AT&T agreed to drop the protest with the GSBCA. GSA agreed that it (not AT&T) would ask the FCC to make a determination (an expedited declaratory ruling) that FTS2000 constituted non-common-carrier services and hence was not subject to Title II under the Communications Act. If FCC declared in GSA's favor, then AT&T would submit an orthodox fixed price bid (Note 19). GSA announced new submission dates of July 30 and then later August 30 to allow resolution of this and other miscellaneous items. The enforceability of the fallback clause was debatable. For example, the commitment not to seek an increase did not have much meaning as any party, not just AT&T, could initiate action to seek such an increase. Also, it was doubtful that in practice the customer, GSA, could ensure that losses came out of the stockholders' profits rather than being passed to GSA. Finally, cancelling the contract was very unlikely to happen once the government was relying on the services. GSA's concerns that the regulators could conceivably bail out AT&T if it underbid still remained. The action turned to the FCC, and to GSA's concern comments submitted
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by parties not directly involved pushed for making this a major test case for many significant remaining deregulation issues—a very long and involved process that could substantially delay FTS2000. However, the FCC ruled on July 28, turning down GSA's plea to have FTS2000 declared non-common carriage. The FCC could not rule at that time as issues were not sufficiently concrete to permit it to decide how regulatory authority might be implicated. The issues would not be concrete, in fact, until bids could be examined. So GSA was left with the fall-back clause and the government was left with a problem. ROUND TWO: THE BOCS AND MARTIN-MARIETTA Meanwhile, in a June 15 letter, AT&T asked the Department of Justice to investigate that Martin-Marietta's bid called for the BOCs to perform services that were not legally permissible (i.e., interLATA switched services which included interLATA traffic aggregation, and sorting and routing functions). AT&T claimed that these functions constituted providing interexchange services that Judge Greene's court (under the MFJ) had emphasized may not be undertaken by a BOC. This action was a continuing step in an old battle between AT&T and the BOCs in the area of long-distance switching. This had impacted the old FTS but, more seriously for AT&T and the BOCs, it concerned the dividing line between AT&T and the BOCs in the general long distance market. It also concerned the timing of the BOCs entry into that market at some date in the future. In the parallel, but lesser priority, program that GSA was pursuing to extend the life of the old FTS there had been contention about the BOCs ability to provide switches for the FTS following divestiture. An earlier letter from AT&T had asked the Department of Justice to investigate U.S. West providing illegal switching in the old FTS. Justice had not stopped U.S. West from providing the less costly switching arrangements in that case, but rightly termed it a very difficult issue (Note 20). Following a letter to Justice on July 17, 1987, AT&T filed a motion with the federal district court of Judge Greene asking for an emergency order barring the BOCs from providing certain switching services to FTS2000. This was another potential delay outside the control of GSA. However, a spokesperson for the court said they hoped to get a decision before the bidding deadline—which at that point in time was August 30 (Note 21). This action by AT&T highlighted an aspect of the vendor competition that GSA had missed. GSA had understood and anticipated that AT&T would be concerned about Martin-Marietta potentially getting a major start in its marketplace, but missed AT&T's concern that the BOCs equally could do so through Martin-Marietta's bid. This concern in keeping the BOCs out of its market as long as possible was probably much more serious from an AT&T corporate point of view, much more of a stimulus for winning, much more likely to cause a battle, and much more at the root of later actions by AT&T.
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The issue as to which switching services the BOCs could provide was difficult, as it seemed clear from prior rulings that if the customer determines where the traffic is routed then the BOC can provide the switch. AT&T indicated in their action that this might be all right for the customer but not for an integrator like Martin-Marietta. Martin-Marietta and the BOCs would claim that the customer was still, in this case, making these determinations. So began a spat with all of the characteristics of a family feud. Southwestern Bell indicated it had already proposed (at AT&T's request) a similar arrangement to be included in AT&T's bid and that this arrangement had been signed off on by AT&T. AT&T initially denied having sought such services, then recanted, saying there was confusion. Meanwhile Bell Atlantic directly accused AT&T of trying to get rid of its only FTS2000 competitor, MartinMarietta (Note 22). There was no doubt in the minds of the industry that AT&T was pushing hard to prevent regional access in order to protect its private network business. Caught in the midst of this dispute was the FTS2000 program and the easy target of GSA. AT&T's next move was to tell the FCC that Martin-Marietta should be regulated as a reseller when it bid on FTS2000. With AT&T the only regulated carrier in the business, this raised some eyebrows. Martin-Marietta in a reply letter to the FCC said that AT&T were trying to use the regulatory process as a barrier to marketplace competition (Note 23). As a further step in this dispute, on August 10, the Department of Justice, in comments submitted to Judge Greene, said the seven BOCs would not be violating the 1984 consent decree in providing certain switching functions as part of Martin-Marietta's bid and urged the court to disregard AT&T's request (Note 24). Judge Greene, however, declined to rule on the legality until, and unless, Martin-Marietta submitted a winning bid (Note 25). Then, in an unexpected move in November, Judge Greene authorized Martin-Marietta to use the long-distance switching services of regional telephone companies if it won its bid. He did not, however, rule whether the BOCs would violate the consent decree by providing switching services generally (Note 26). ROUND THREE: GSA FIGHTS BROOKS The activities previously described, while bringing discomfort and disorder and delaying the submission date, had no serious impact on GSA or the FTS2000 strategy as originally developed. The major impacts were: to initiate the escalation of the project within GSA's organization, to fail to produce a good way to ensure fixed prices, and to somewhat weaken Martin-Marietta by delaying the schedule and causing them to incur more bid and proposal expenses. The courts were not to be the arena for the main events of the summer. It was instead to be in the offices of Brooks and his staff in the Rayburn House Office Building on Capitol Hill. The antagonists were essentially to remain the same. The goals, however, were to unfold to
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reveal some new ones. Jack Brooks, then chairman of the House Government Operations Committee, was in some ways the main government watchdog (he now heads the House Judiciary Committee). In his wide-ranging jurisdiction as head of “Gov Ops” he could probe virtually any federal contract. This made him one of the most powerful men in the House. He was known for his forceful style. Brooks was also synonymous with information technology interests on the Hill. His 1965 Brooks Act remained for 15 years the major single piece of legislation concerning automated data processing. It gave GSA central authority for ADP and in many ways out of that Act came the view that GSA was Brooks's agency and information technology was his territory. He was joint architect of another important piece of legislation concerning information technology, the Paperwork Reduction Act of 1980, and was the prime mover behind the Competition in Contracting Act of 1985, which mandated full and open competition (Note 27). Brooks's key contribution to the project was to engineer the splitting of the procurement into two awards, controlling the process to help ensure that at least three proposals were submitted, and controlling the process to help ensure that the project was not derailed by other interests. Without him it is highly doubtful that the government would ever have closed the procurement. Brooks was drawn into the procurement by vendor concerns. Much influence came from AT&T, who had conducted a high-powered lobbying effort handled directly by the AT&T vice-president for legislative affairs (Note 28). US Sprint reentered the scene clandestinely at this point. Even before it officially withdrew from bidding, US Sprint started lobbying Brooks in hopes of getting back into the bidding. The Kansas City, Mo., based company had long cultivated ties to the Texas lawmaker. US Sprint had started as a Dallas-based company, U.S. Telephone Inc., hired Texans as lobbyists, and had teamed with Dallas-based EDS for the aborted bid (Note 29). These were not the only interested parties talking to Congress. Congress is intended to be the forum for representation and debate and all are encouraged to express themselves and participate. Consequently, there may have been many other participants and interests represented, all of whom could only be inferred by GSA by examining communications from the Brooks staff. Following the attention-getting action of sending the GAO report, the Brooks agenda quickly focused on a list of eight items provided to GSA in face-to-face meetings with his staff. After several exploratory meetings these were embodied in a letter from Brooks to Golden on July 27, 1987. The letter requested that GSA: 1. Provide for outside participation in the source selection board. 2. Refine the evaluation criteria to give the bidders a clearer understanding of the selection process. 3. Charter an in-depth, government-wide telecommunication requirements study. 4. Clarify those sections of the RFP concerning national security and emergency preparedness requirements.
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5.
Conduct a new bidders' conference to present and explain changes made in the procurement's approach. 6. Obtain, if possible, pre-award assurances from the bidders indicating their satisfaction that the procurement was conducted in a fair and open manner. The letter went on to say that there were two remaining issues that had not been resolved: the first was that Golden should become the source selecting official for the award of the contract; the second, and more troublesome, that the single vendor approach would not only concentrate enormous economic power in one company but would effectively lock the federal government into that one company's service for 10 years. In an attachment, the letter went on to say that this could reduce the number of competitors in the marketplace and arrest the growth of the entire industry. As a matter of public policy, the government should not let this happen. Breaking this contract up into multiple awards would reduce the risk of this occurring and promote a strong, diversified industry capable of meeting the government's needs in the future. These eight items presented various concerns to GSA, some simple and, to GSA, unimportant, some transparent as to their origin, some very obscure both as to intent and origin, and some of the utmost seriousness. GSA dispensed with the less important items quickly in a letter from Golden to Brooks on August 3. In it, he agreed to the six numbered items. The two unresolved items were serious and reflected two major concerns on the vendors' part: 1. AT&T did not trust GSA. 2. Both AT&T and US Sprint wanted the risk of losing decreased and the chances of winning increased. AT&T DID NOT TRUST GSA The merits of AT&T's distrust of GSA can be argued. Previous chapters have described the decaying relationship between both parties that stretched far into the past. AT&T could, and did, present a case that GSA made deliberate moves to disadvantage it and showed an anti-AT&T bias in a related procurement to obtain switches for the old FTS. GSA could, and did, present a case that the perceived bias was only the normal practice of requiring vendors to perform and compete within government regulations. (This is dealt with later in this chapter.) In fact, GSA made every effort to demonstrate a level playing field, a fair process, and a willingness to add any mechanisms that vendors felt added to this. As a consequence of AT&T's distrust, the project was moved out of IRMS into the immediate organization of Golden and all team members were instructed to report accordingly for project purposes. Golden agreed to become the selecting official. GSA had already, in the previous year, prepared plans for sunshine mechanisms in the form of an oversight committee composed of agency officials. This was expanded to include membership from outside of government. Chairmanship of this oversight
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board was also moved from inside GSA to an external member. GSA's evaluation and award plans already included the formal, rigorous, auditable process for scoring, evaluating, and awarding the contract; as well as the secure facility and security procedures for carrying out the control of bidding and evaluating documents. There had been little publicity given to these plans up to this time, as is the normal procurement procedure, but they were now given prominence to help address AT&T's concerns. Finally, the evaluation team was broadened to include not only GSA and its evaluation support contractor, the MITRE Corporation, but also representatives of the user agencies. In response to a personal appeal by Golden (reinforced by Brooks), agencies assigned many senior staff to the evaluation team. In terms of process and resources, the new arrangements represented the strongest team that the government as a whole could field. The remaining unresolved issue was whether to award a single contract or split FTS2000 between two providers. TWO AWARDS OR ONE From GSA's perspective, two awards were simply unacceptable. In his letter to Brooks of August 3, Golden said that dividing the procurement into two awards would result in: • • • • •
A delay of 12 to 24 months; Agencies moving off the system to satisfy their own needs (because of the delay); Additional costs of $150 million to $250 million by continuing the existing system longer than necessary; Numerous problems in managing a complex and difficult transition; and Lost economies of scale and increased overhead in having two vendors.
In addition, Golden was seriously concerned that only two bids would be received and that two awards to two bidders would mean no competition and hence very high prices. Sprint at that time had ruled themselves out of the competition and, with Sprint's recent corporate performance, GSA had severe reservations that it would be a viable competitor even if it bid. With Brooks reputation as a formidable opponent, the question has often been raised, “Why did GSA not just simply fold and immediately agree?” There has been speculation about this including the idea that it was an ideological thrust by the free marketers in the White House (Note 30). The fact was that Golden simply believed that two awards was the wrong answer for the government and would result in more costs and a more difficult management situation. This was not a new issue to Golden. He had studied it extensively himself in the prior year. Having thought the issue carefully through and come to his own decision, he saw no reason to change it and felt that proper presentation of clear arguments to Brooks would change his mind.
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Until this point, controversy over the project was largely limited to the Washington Times and the local trade and government press. However, a dispute between Golden and Brooks was something worth watching by everyone and so the press coverage went national. The situation was dramatically described by the Washington Post as, “one in which Brooks and Golden have each drawn a line in the sand and the one with more key players lined up behind him by the end of the week may force the other to yield” (Note 31). A senior official at OMB in the 1970s said that to win an argument in Washington depends on how good the substantive position is and how much elbow grease you can put behind it (Note 32). On the former point—the substantive position—there were technically and economically good arguments on both sides and an outside observer would have probably felt it was, in total, a judgment call. In most similar cases, particularly in industry, the organization that would actually have to implement the arrangement would have been given the benefit of the doubt. However, this was not a technical or project economics issue, this was a battle about money, markets, and the risks of losing them. Hence, there was no possible debate regarding “substantive positions” and the outcome clearly was to be determined by how much elbow grease could be mustered. In this, GSA (and Martin-Marietta who wanted the single award left intact) was completely and utterly outgunned by Brooks, AT&T, and US Sprint (who wanted to split the contract up) (Note 33). GSA did not have any way to marshal support in its favor and hence the only hope for maintaining a single award was if Martin-Marietta could counter-influence Congress against the influences of AT&T and US Sprint. Martin-Marietta could not marshal the support and so capitulation became inevitable (Note 34). The submission deadline slipped again to September 30 to allow time for negotiations and to buy time for a possible political compromise between GSA and Brooks (Note 35). Meanwhile GSA was kept busy on all fronts: • working with GAO concerning the damaging report it had issued to obtain a second version that said GSA should go ahead with FTS2000 (Note 36); • dealing with dozens of Congressional letters, meeting with Congressional staff, answering questions, and preparing documents (Note 37); • dealing with the emotional pressure of constant press criticism from the Washington Times, New York Times and the Wall Street Journal (Note 38); • Martin-Marietta threatening to withdraw (Note 39); and • dealing with questions concerning the resurrected Kalba-Bowen report. All of these were calculated to wear GSA's soldiers out. But Golden was a tireless leader and troop morale remained high even as they tired. In the
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last week of September the final shot came from Rep. Glenn English (Democrat, Oklahoma) saying “stop work and submit all your documents.” This was really a shot across GSA's bows implying that if the agency did not structure the bidding the way Brooks suggested, a congressional investigation was likely (Note 40). At the end of the day on September 25, 1987, FTS2000 was suspended and Golden agreed to split the awards per Brooks' direction. In a letter that day from Golden to Brooks, he said “it is apparent that we cannot secure congressional support for a new system unless we agree to adopt a multivendor strategy and it is our belief that their support is essential to a successful procurement.” Golden also said he continued to believe that choosing a single vendor for the project was the most efficient and economical approach. With this agreement several events happened: • GSA undertook engineering modeling of how to minimize the deleterious economic, operational, and transition effects of splitting the network (Note 41); • Brooks began to insist that GSA drop voluntary compliance with the system and compel the Pentagon and other hesitant agencies; • Martin-Marietta indicated that it felt disadvantaged (Note 42); • Sprint joined with EDS again and once more entered the fray (only to part company again before US Sprint submitted a proposal) (Note 43); • GSA committed to releasing a modified RFP for two systems by the end of January and in turn vendors committed to Brooks that they could bid by the end of April 1988 (Note 44); • Brooks said, “I fully support GSA's new plan for restructuring the FTS2000 procurement”; and • AT&T obtained most of what it wanted (Note 45). THE COLD, HARD WINTER As mentioned earlier, in parallel with the FTS2000 project, GSA had been soliciting competition for a number of its high-cost switches in the old FTS to determine if Electronic Tandem Network (ETN) switching arrangements from the BOCs would be less expensive than AT&T's. The latest of these efforts involved 12 switches totaling some $55 million over a 30-month period. This was large money on one hand, but a low-priority and low-profile project for GSA senior management, and one assigned little attention. This procurement became the most notorious of the events during this phase of the FTS2000 procurement by providing what every audience seems to love—scandal. On October 19, 1987, as the FTS2000 team was coming to terms with having conceded victory to Brooks in splitting up the procurement, GSA awarded contracts for several switches previously leased from AT&T to BOCs (Note 46). Immediately AT&T protested to the GSBCA the award of the switches (Note 47). AT&T charged that GSA had discriminated against AT&T
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in seven awards and that some were improperly and unlawfully made. It said that GSA had applied different evaluation standards to AT&T. Finally, they alleged that one or more GSA officials had leaked sensitive bid materials prior to the best and final offer. And so began an episode out of which no one emerged proud or unbloodied, an episode more characterized by the tastes of yellow journalism than the proceedings of major corporate and governmental organizations. It marked the nadir of AT&T's distrust of GSA and if the allegations of deliberate unfair and unlawful treatment had been true and had been extended to FTS2000, this would have marked the end of the FTS2000 project. It was the most unpleasant episode in the experience of all GSA staff concerned, as the press brought sensational slogans to breakfast tables nationwide: • “Rumor of private dinners, meetings and exchanges of sensitive bid information”; • “Bribery suspected in U.S. phone contract”; • “In return for information GSA officials received cash, promises of future employment, and in one case cocaine”; • “High GSA official vows to use fifth amendment”; • “Bell Atlantic, BellSouth admitted to getting secret bidding data”; • “AT&T also obtained confidential info”; and • “Grand jury to sift evidence of wrongdoing within GSA” (Note 48). For two months there was a fight between the pieces of the old Bell System in a battle rooted in AT&T's mistrust of GSA (Notes 49 and 50). The case eventually came to resolution. Whether there were, as AT&T's lawyer indicated in his opening statement, “[signs of GSA] bias against AT&T” or whether AT&T “didn't know how to compete in a competitive situation” as claimed by GSA's counsel, the judges ruling had something for everyone. AT&T had four wins and a possible win concerning the reversing of the award of the switches. The award of the Washington, D.C., switch (the largest switch by far) remained with Bell Atlantic. Most important for GSA and FTS2000, the board found “no specific intent to harm AT&T” but that “[GSA personnel] operated with less than a masterful understanding of solicitation terms and conditions” (Note 51). In other words, the definitive ruling after numerous weeks of investigation by GSA's inspector general, investigations by the Federal Bureau of Investigation, depositions and investigations by AT&T's lawyers, and by numerous other depositions, investigations, and hearings in the court was that GSA may have lacked competence but it was not corrupt. If this was a victory for GSA, it was a pyrrhic victory as the loss to the organization and to individuals would sustain indefinitely. Also, the public image it created meant GSA was at a constant disadvantage in any discussions with Congress in the unrelated, yet infinitely more important FTS2000 procurement. The ETN court case had a chilling effect on GSA's organizational dealing with FTS2000 that continued to its disadvantage.
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To some extent, this effect spread throughout the telecommunications community of the government. But with this last episode, the long, hot summer and cold, hard winter were over. The final version of the RFP for two contracts was issued at the end of January 1988 and three proposals were received by April 29, 1988.
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7 EVALUATION AND AWARD
In which the FTS2000 proposals are evaluated and awards are made to AT&T and US Sprint.
THE SOURCE SELECTION PLAN With the receipt of proposals from AT&T, Martin-Marietta, and US Sprint, the project now moved into the evaluation and award phase. Chapter 6 described the formation of the final RFP and the events leading up to the submission of the three proposals. GSA had also completed the source selection plan in parallel with this (Note 1). The source selection plan included: • the organization, responsibilities, and resources to undertake the evaluation and award process; • the evaluation method, including evaluation criteria, scoring system, and the scoring logistics; and finally • the plan for security during the evaluation process. THE SOURCE SELECTION ORGANIZATION AND RESPONSIBILITIES The source selection organization is as shown in Figure 7–1. The main components consist of: • the source selection authority; • the advisory committee; and • the source selection evaluation board. The source selection authority is required by government procurement regulations, and is the single official of the government who makes the award decision. This decision takes into account the recommendations of the evaluation board and the advisory committee. As was described in the last chapter, Golden had agreed to serve as the
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EVALUATION AND AWARD
FIGURE 7–1 FTS2000 Source Selection Organization. SOURCE: General Services Administration news release, “FTS2000 Procurement Advisory Committee Named by Golden,” April 22, 1988.
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source selection authority for the procurement. There were, however, administrator changes. Golden left GSA on March 4, 1988, having ensured the receipt of proposals, a viable procurement, and a robust RFP. The role of source selection authority now became the responsibility of the new acting administrator, and after his resignation later that summer, it became the responsibility of his successor. Continuity in keeping the project as one of GSA's highest priority was ensured by Rep. Brooks. The advisory committee was not a required part of the government regulations for evaluation and award of procurements. It was, however, one used successfully in very large procurements, for example, in NASA and the DOD. An advisory committee provides an independent body to oversee the selection. The committee was also to advise the administrator of GSA concerning the procurement, and the committee's key responsibility was to assure the administrator that the evaluation plan was adequate and, most important, that it was followed. The committee was composed of a mixture of senior government employees and experts from outside of government. As with all people on the selection organization, the members had to be cleared according to the security procedures. The source selection evaluation board, required by regulation, contained most of the resources devoted to the evaluation and award process. This was composed of a mixture of GSA staff, staff from GSA's customer agencies, and the MITRE Corporation. The major responsibilities of the source selection evaluation board was to actually evaluate the proposals and produce the evaluation reports, with recommendations for the awards of the two contracts. Proposals were to be submitted in four separate volumes: • a technical proposal, containing the executive summary, a checklist showing adherence to the mandatory and optional requirements, a cross-referenced chart showing compliance to evaluation criteria, analysis of the service requirements, and the detailed technical approach; • a management proposal, with the management response to the RFP, showing the ongoing management plan for network operations, the transition and implementation descriptions, the approach that was being taken to meeting NSEP requirements, and corporate qualifications; • a business proposal, with the government-required declaration forms, representations and certifications, qualification and financial information, and the vendor's annual report; and • the cost proposal, containing all of the elemental cost data that was to be delivered as a computer model. As a consequence of having four different proposal volumes to evaluate, the evaluation board consisted of four panels, each with defined responsibilities to evaluate certain sections of the proposals. The technical panel was responsible for evaluating the technical volume and the NSEP section of the management volume. The management and business
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panel was responsible for the remainder of the management volume and the business volume. The transition panel was responsible for the transition section of the management volume. The cost panel was responsible for the cost volume. Each of the four panels was headed by a chairman (a government employee) who was responsible for managing the individual panel effort. The panels were composed of government employees supported by MITRE. The complete evaluation board was headed by a chairman (a GSA employee) and the whole board was supported, as needed, by government employees, MITRE experts, and private consultants. All participants had to be cleared as described below under security. Finally, of major importance in the source selecting organization, there was the contracting officer. This is the single individual responsible for executing the contracts consistent with federal procurement law, policies, and regulations. The officer also acted as chief negotiator and served as the single point of contact with the vendors. THE EVALUATION AND AWARD PROCESS The evaluation process was broken into several tasks, the main ones of which were: • initial evaluation of proposals to screen proposals for completeness, roughly score the proposals, and generate questions. Also during this task, to develop raw scores, and apply weights, hence completing a first round ranking; • establishment of the competitive range to determine if it was reasonable that all proposals be considered. This would be done by the contracting officer and the advisory committee; • notification to the vendors and preparation for the site visits for operational and capability demonstrations and to validate claims in the proposals and complete a second round of scoring; • carry out negotiations with each vendor and develop any necessary amendments to clarify items; • develop the request for best and final offers, obtain submission of best and final offers; and • perform final evaluation, develop the source evaluation board reports, brief the source selecting official, select the winners, and award the contracts. This was planned to be accomplished in 26 weeks—a most ambitious schedule, one frequently taking as much as 18 months on large procurements. However, this schedule would bring the award into November 1988, when the presidential election was due. There is always a concern in major government efforts, that a new administration might change direction or halt a major project (like
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FTS2000) while it evaluates the benefits. There was little risk of this as the Republican administration supported the project and Brooks, the congressional supporter, was a powerful Democrat. However, Brooks was expected to move out of his role as chairman of the House Government Operations Committee after the election, into the more senior role of chairman of the House Judiciary Committee. Hence, his focus on FTS2000 would inevitably change. The evaluation process included a definition of the evaluation factors. By regulation, the evaluation factors, weights, and scoring mechanisms had to be determined before proposals were accepted. Technical, management, and business qualifications and cost were all accorded approximately equal weights in the evaluation. (Originally, before breaking up the contract into two awards, which put much of the transition responsibility on the government, the transition was about one-sixth the weight. This was now less.) As technical, management, and business scores became more equal, the importance of prices would increase. Pass/fail checklists had been developed for the team's use, from the RFP specification. Basically these asked: is the item there? Does it comply with the performance requirement? Is it up to the required standard? The technical subfactors that were scored were: an understanding of the requirements; are they all addressed; the soundness of the approach; the flexibility and growth potential of the architecture; network control and diagnostics; and migration to switched ISDN. The management and business subfactors were: quality of transition and implementation plan; experience in managing multisupplier projects; experience in managing large telecommunications systems; management and operations plans; the service oversight center; billing systems; and maintainance of system performance under stress and failure conditions (including emergency preparedness and national security requirements). In the evaluation of cost, the offeror was to make the calculations for the cost figures used in the award and they were to provide the pricing model and tables. The cost evaluation was based on total cost to the government of FTS, FTS2000, and temporary interconnections—more cost meant less points. The cost panel verified offerors' calculations and submission, but more than that, most of the effort went to ensure common understanding, common definition of items, and hence common costs. SECURITY With these products, GSA was now ready to move to the evaluation process. The transition from RFP development to evaluation and award involved establishing all the components of the source selection plan, handing over control and authority to the source selection organization, and “buttoning up” the secure facility in which the evaluation would be accomplished. Conceptually, GSA was creating a secure, self-contained bubble into which the proposals would be received and out of which would eventually
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come the award decisions. This concept of a secure bubble was very important as no information concerning the bids would be allowed to move between the bubble and the outside world until the award was made. Very soon, the implementors of the source selection plan were discussing actions, people, information, and transactions in terms of “in the bubble” or “out of the bubble.” Any competitive government procurement follows such principles. However, the size of the procurement and its controversy dictated much more visible, stringent, and serious measures than normal to ensure the bubble would not be breached. Prior even to release of the initial RFP, senior management had decided to establish a secure facility and protect the bid information according to procedures for information classified “secret.” The information could not legally be so classified, but it could be protected accordingly. These procedures were chosen as there are no established protection procedures for unclassified information of such sensitivity. New procedures, established for this procurement, were likely to be faulty. Hence, using established procedures that were well documented and well understood by many organizations, and being supported by an infrastructure of clearance organizations, cleared facilities, and so on, would be the most reliable and robust. The new team was to be housed in secure facilities on the premises of the MITRE Corporation. MITRE already undertook classified work and hence had facilities established already for this purpose. These were regularly audited by the Defense Investigative Service. The initial requirements for protection of FTS2000 bid materials were exactly the same as for secret materials, and the need to know principle was applied at all times. Security encompassed building security, the use of picture badges, and the use of safe files. Panel work areas were secured by locked entrances with changeable cipher locks and, in almost all cases, it was ensured that walls were true floor to ceiling. The room that would contain cost proposals was fitted with alarms and monitored continually from a central station. The rules of working with secret materials were followed, including, for example, no unofficial visitors, no shop talk outside of work areas, no phone calls to discuss materials, protection of notes and drafts (as were all documents) within the document control system, and no materials to be removed from work areas. Document control consisted of all sensitive materials being entered into a computerized registry with a receipt system utilized for checking materials in and out. MITRE secure document custodians kept all of the registered documents, inventories were kept and checked regularly, and safe files were used for after-hours use. Reproductions could only be made if approved by the contracting officer or chairman of the evaluation board and if carried out under security's supervision. All copies were entered into the document registry. Transmission of documents, for example, between buildings, could only be approved by the contracting officer using doublewrapped bags and a chain of receipts. Destruction of documents had to be reflected in the registry, with disposal of waste in burn bags and incineration by MITRE security staff. All staff in the selection organization were cleared to work on bid
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materials. As part of this process, all staff were briefed on the relevant government ethics laws and regulations and security procedures. Each had to document and declare no conflict of interest. This was done by means of a statement of employment and financial interests, certification regarding conflict of interest, and certification regarding nondisclosure of information. Most of the staff, however, who would be in the bubble and governed by these procedures had not worked under secret classification previously. As much of the effectiveness of the classification process is good work habits and a culture of protection, these had to be forcibly, and quickly, established with the team. In the classified arena, the quickest way to test procedures is to try and breach them and correct the mistakes that are found. This technique was utilized effectively. The button-up date was selected as April 27, 1988. Prior to that, senior team members attempted breaches to establish where there were holes and to reinforce the seriousness of the process. A security check of the special facility was made by the GSA's security management on April 26. On April 27 readiness to receive proposals was declared and the project was formally handed over from the old team to the source selection organization—the new team. Shaking down security, in the first few days, was not without its incidents. On the day of delivery of proposals, AT&T apparently tried to get access to the facility in an effort to assure themselves of the adequacy of procedures. They were rebuffed. Also at the same time a reporter tried and was rebuffed also. An alleged breaching incident (later proved to be without foundation) in the early days was brought to the attention of congressional interests. People on the new team were called to have depositions taken, with questioning about security and who had handled materials in the first few days. The MITRE guards and the people at the reception desk were also deposed (Note 2). Congressional staff also arrived and were denied entrance. They called MITRE officials to escort them into the premises and during escorted visits to nonsecure parts of the facility, they reviewed secure areas from their perimeter. Congressional suggestions for changes to the physical security based on these reviews were acted upon. All of these endeavors helped to ensure that security was taken seriously and was tight. As the evaluation progressed, additional measures were taken, including the sweeping of areas for bugs. After best and final offers came in, intermittent searches of briefcases were made by security officials. CHANGING TEAMS Everyone in the organization established inside the bubble was new to the project. The only person left in the project who had any length of experience of FTS2000 was Kowalczyk, who became the primary person interfacing with the bubble on behalf of the GSA administrator. As a consequence of this wholesale change to a new team, if the RFP
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had not been accurate and detailed, if the source selection plan had not been robust, and if the new team members had not been mature and highly motivated to reach contract award, the project could have broken down at this; point. Taking over this huge and complex task without the ability to reach outside the bubble for advice and help was a monumental task, and it is to the credit of all concerned that the process continued smoothly to a conclusion. As the team was formed and responsibilities were handed over from the old team, the new members refined the organization and supplemented their panels as they felt necessary. They then openly reached agreement that they would work to ensure that the intent of the specification was not changed. This was the greatest risk in enclosing a new team out of touch with the original team. However, the bubble had to be firmly closed. In the early stages, as the team looked to Kowalczyk to solve problems for them, he firmly pushed the problems back in the bubble to accelerate the new team's gelling as a self-contained unit. EVALUATION With the team and procedures in place, at the end of April 1988, just over three years after the announcement of the project, the proposals came in (Note 3). US Sprint's proposal arrived a day early, and AT&T's and MartinMarietta's arrived on the appointed day, April 29, 1988. The proposals were massive and this alone required immediate changes to the processes and procedures for handling documents. In total the proposals constituted 2,700 cubic feet of paper—enough to fill a room 9 feet high, 30 feet long, and 10 feet wide from floor to ceiling. Logging in, breaking the proposals up into segments for each panel, and moving the documents to the evaluation teams took three days longer than the four days planned. The receipt was not without its trying moments. For example, one vendor had labeled its volumes wrongly. Since the rigor of the government process could have voided its proposals for this simple mistake, the vendor had to scramble to relabel them for log-in and acceptance. The proposals included the cost models, which in turn included the hardware to run them. In AT&T's case, the cost model was presented on a personal computer. In the other two cases, the cost model was accessed by means of a terminal hooked up via communications to the vendors' off-site computer. This required additional security procedures that had been put in place before receipt, and all equipment was swept for possible bugs. The team worked hard throughout the evaluation. The only official day off from April to award in December was Thanksgiving. The official team schedule, covered in shifts, was a 14-hour day, 7 days a week. Hotel rooms were available in the vicinity of the evaluation facilities for people who could not make it home at key points, and in fact the chairman of the evaluation board lived in a hotel next to the site for a significant portion of the time. This was the kind of dedication it took to keep on schedule. It is to the credit of the new team, formed from a variety of people from different agencies, organizations, and affiliations
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that they met it all with good grace and camaraderie. The court actions of the prior year, the bad press over the winter, and the questioning and depositions which continued throughout the evaluation had a chilling but temporary effect upon the team. Some people bought liability insurance; some took a position that they would not give depositions to congressional staff; some said they would not talk to lawyers. Some panel members got their own lawyers and MITRE offered the service of lawyers for their people. To the end, people were loathe to sign some documents. But, as the bubble closed around them and they knit into a team, the chill subsided so that in no way did it hamper the government position in negotiations. The technical evaluation proved a smoother process than the cost evaluation and the schedule was adhered to although it took very long work hours. The cost evaluation was more problematic than the technical evaluation as dilemmas were created by bids being different in their interpretation of cost elements. An absolute need to establish a common understanding in all segments of the proposals was particularly true in the cost volumes. There was a need to ensure consistent understanding across all proposals of what was bid and a need to ensure absolutely that the competing vendors had bid the same things if the bottom-line prices were to be meaningful. There was also a need to check for errors and consistency. This was a long, slow process and it meant no firm indication of the relative positions of the price proposals until six weeks before award. Under the scheme for two awards, the bidding was structured in such a way that each bidder had to present proposals for each of the two sets of requirements, one representing 60 percent of the government's traffic (Network A) and one representing 40 percent (Network B). GSA evaluated the proposals for Network A and effectively eliminated the successful vendor for consideration of an award under Network B. No proposal was submitted for the entire requirement, thereby effectively preventing GSA from considering the trade-offs between a single award and a multiple award. Of course, the evaluation team and the Advisory Committee had access to information concerning the Network B proposal of the successful offeror for Network A. However, given the realities of the procurement, and the clear direction that two awards be made as a national policy, there was no ability to make an award to a single vendor. As a result, there was no ability to officially judge the potential impact of the competition on the total cost to the government of two awards versus one award. PROPOSALS The three proposals were different. There had been much speculation during development of the RFP as to how each vendor would configure their network. AT&T, with a large, national software-defined network, could have defined a virtual private network within its national net allowing the economy of scale of the large network to carry through. Rough modeling by GSA indicated that economics between major
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concentrations of government traffic would probably call for dedication of circuits. This indicated that a hybrid solution of dedicated and virtual facilities might be possible. Prior speculations about Martin-Marietta, which did not have a national network, had indicated different approaches from AT&T (though one of its subcontractors, MCI, had a national network allowing similar solutions to those of AT&T and US Sprint). Martin-Marietta's division of responsibilities between its major subcontractors (MCI, Northern Telecom, Tymenet, and the BOCs) was unknown. However, the events that took place in court the previous year indicated a high probability that the BOCs would provide switching. Consequently, GSA had conjectured a dedicated private line architecture with BOC switching, and perhaps MCI handling off-net traffic at the head of the network. US Sprint, with a new national fiber network which was software controlled, like AT&T, was in a position to offer a software-defined virtual network. The actual bids brought some surprises (Note 4). AT&T bid a dedicated private line fiber network with 18 nodes, each consisting of a #5ESS switch. On the surface this may seem to have a price disadvantage compared with a software-defined network. However, it did have the advantage that all costs associated with provision of FTS2000 services were easily identifiable. Hence, as a regulated company, the subsequent tariff would be more easily defendable against possible protest by the loser or by other common carriers. From GSA's point of view this architecture also had an advantage in that it meant an immediate financial commitment by AT&T in ordering the 18 switches. Hence, this would provide an incentive for AT&T to speed transition in order to generate revenues, as was proved after award. The AT&T proposal was simply outstanding. There were fewest questions about technical issues, fewest problems with cost, and fewest questions about possible misunderstandings developed from its proposal. One area where AT&T did recast its proposal was in the transition from the old FTS. Here, it had proposed a series of very large cutovers that, in response to the evaluation team's concerns, it modified to be a more gradual process. Martin-Marietta's and US Sprint's proposals were not of the same quality as AT&T's, although they were comparable in quality with each other. Martin-Marietta had proposed a situation not unlike GSA's role in the old FTS, that of an integrator of a dedicated private line network. Martin-Marietta's roles for its teaming partners were a surprise. Martin-Marietta had defined significant roles for itself but consequently, its staff proposed to lead teams were weak compared with equivalent staff from the common carriers. Also, compared with the common carriers, the experience Martin-Marietta demonstrated in telecommunications was shallow. Also, because of its use of subcontractors, the level of integration was not as strong in the whole design. For example, some information was to be moved by paper and magnetic tapes because no interface existed between components. The proposal showed that this would be worked out, but it inevitably raised questions as to the certainty of this. Finally, the company's prices were not as competitive, but this did
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not become clear until the end. During the evaluation, as weaknesses were identified and questions posed to all vendors, Martin-Marietta substantially redid their network design, unlike AT&T and US Sprint. This raised more questions, for example, about blockage rates that seemed unduly high in portions of the network. This, in turn, raised questions as to the validity of the design. In effect the company had recast the network to cut prices but this cut the technical quality. One aspect of Martin-Marietta's proposal that was excellent, however, was its transition plan. US Sprint, as had been anticipated by many, proposed a virtual software-defined network within its national net. This was a simpler and better strategy for them compared with AT&T's because Sprint had no problems of questions being raised about public tariffs. The initial quality of US Sprint's proposal was not high. As was described earlier, the company had to some extent always been playing catch up, first, due to the merger between GTE Sprint and U.S. Telcom, and, second, with the in-and-out relationship with its partner, EDS. EDS had finally left the teaming arrangement in February 1988, scarcely two months before submission of proposals. To some extent US Sprint's initial submission was a foot in the door. While every initial proposal had problems, its had the most. However, the company worked to substantially improve the bid over the duration of the evaluation. To summarize broadly: although Martin-Marietta was consistently below its competition, the differences between it and US Sprint were not very large compared with the differences between both of them and the leading AT&T proposal. However, it should be emphasized that there were three viable proposals even to the end, and any of the three vendors was eminently qualified to provide the government's telecommunications. Because of this, there were no problems with establishing the competitive range and passing all three proposals through for consideration up to negotiations and award. Hundreds of questions were generated by the team throughout the evaluation process. As soon as they were generated they were sent out to the vendors to keep the process moving. AT&T's answers were quick and clear. It was obvious that it had devoted many resources to the effort. Even though AT&T's answers were generated quickly, it continued the strategy of moving deliberately and cautiously and were most detailed as to the meaning of every word. It argued for delays when it felt they were necessary. Martin-Marietta, on the other hand, in clarifying questions, wanted quick response times even though it was recasting its network. It pushed to minimize delays. The evaluation team got the impression that MartinMarietta's bid team, which had been put together with people from all over the country, seemed to have been partly disbanded. Sprint proved very willing to respond quickly, but seemed to have fewer resources than AT&T. Thus it supported AT&T on delaying the schedule for answering some questions. However, all in all, the vendors were very responsive to the questions even though they frequently had only 24 hours to reply.
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NEGOTIATIONS With the establishment of competitive range, and with all proposals found worthy, the team then undertook site visits to verify certain aspects of the proposals. In some ways this was a welcome break even though the pace did not slacken. Initially there were discussions of how many team members should go and who they should be. Eventually it was decided that almost everyone should go except the cost panel. Following the site visits, further evaluation was accomplished and the government team was now ready for negotiations. It was a normal, although spirited, negotiation, complex more than anything else because of the difficulty in establishing a common understanding of cost elements. Negotiations, however, were a critical point in the life of the project. It was difficult to strike a balance between the amendments that would be issued to all three bidders for final resolution and the need to keep them all in the bidding process. If at any time a vendor had felt it was not likely to win, and had withdrawn, GSA would have been left with two awards to make and only two bidders. In this position, GSA would have had to abandon the project, resetting the clock back to 1985. Therefore the conduct of negotiations was the point at which project could break down. GSA was particularly concerned with AT&T. AT&T's mistrust had virtually died as the project was handed to the new team for evaluation and the security procedures were put in place. However, it was still difficult to establish a sense of trust and competence so AT&T would remain. Negotiations also presented some of the final opportunities for the vendors to jockey for position. They proceeded smoothly, even in sessions with as many as 60 people in a room and lasting several days. As the negotiations drew to a close, final amendments were drawn and the call was made to the vendors for best and final offers that would be finally evaluated for award. AWARD Due to delays principally in refining the pricing, the award date, originally October 30, was jeopardized. The team came under intense pressure from Congress to complete the award by November. It was at this point that the advisory committee came to the fore. The advisory committee had met several times and had been briefed on progress and issues. It was a major player in changing the early specificity of the scoring scheme to ensure that differences among bids would be more easily discernible at later stages. It had also advised on proceeding with the evaluations of best and final offers in parallel so that problems could surface quickly. The advisory committee now took a leadership role to advocate that the team take the necessary time to ensure a proper award. Otherwise the whole project would be in danger of making a mistake, which could result in a sustainable protest after the award. The committee provided a counter-force to congressional pressures, and the schedule publicly slipped to December 10.
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By December, the final evaluation was completed and preparation was made for award of the larger portion (60 percent of the requirements) to AT&T and the smaller portion (40 percent of the requirements) to US Sprint. To avoid speculation on the part of vendors or in the press, GSA called vendors to tell them to come in and see the contracting officer because of problems with the procurement. The vendors raced in on December 7, 1988, and to their surprise the award announcement was made (Note 5). FTS2000 was awarded only four years, to the week, after formal approval was given to go ahead within GSA; and this was only five years after GSA decided to replace the network and began to look for a suitable strategy. This was a very speedy schedule for the largest procurement ever undertaken by the civilian agencies of government and the largest replacement project ever in the history of information technology. GSA could be proud of its achievement. FINAL THOUGHTS A case study necessarily has to cut off at some point, though projects continue to develop and do not stop. The point of award was selected to mark the end of the case but the FTS2000 project continues to move through major activities which, in their turn, could provide interesting lessons. The most immediate event after award that should be mentioned in closing, is that Martin-Marietta chose not to protest the award though a protest on the part of the losing vendor had been anticipated from the beginning. This was to Martin-Marietta's credit as protests have become the norm rather than the exception. Had Martin-Marietta protested the award, this case would not have been published for perhaps another year. As stated in the Foreword, one of the purposes of this document is to serve as a case study for teaching purposes. Consequently, no conclusions are drawn (other than that success had an element of chance unique to the times). It is up to the individual reader to determine the lessons learned from the FTS2000 procurement. However, FTS2000 has demonstrated many things that should be pointed out. FTS2000 will impact the telecommunications industry, the taxpayer, and government operations as it is implemented and used. For the telecommunications industry: • FTS2000 has demonstrated that customers can obtain lower service prices outside of standard tariff offerings by use of market power and competition, instead of the traditional approach of engineering a private system. • FTS2000 has demonstrated the existance of a viable, competitive, common-carrier industry at large demand levels. It has also demonstrated that telecommunications needs can be met by a variety of organizations, not necessarily the traditional common carriers. Although Martin-Marietta's bid lost the competition,
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it was a viable proposal, and one with many advantages over public alternatives. • FTS2000 was the largest corporate award to a non-AT&T common carrier and demonstrated US Sprint's ability to bid and win large complicated arrangements. • FTS2000 is a major commitment by the world's largest organization, the U.S. federal government, to integrated services and ISDN. • FTS2000 was a deliberate insertion of the newest technology into government to help it face the challenges of the 1990s. • FTS2000 presents a unified source of supply and management method to the agencies of the government to meet voice, data, video, and integrated service needs. • FTS2000 provides a massive infrastructure on which government agencies can build new systems. • FTS2000 makes possible new applications such as: a national unified electronic mail system for government and highspeed fax between government locations. Both of these bode a new era of intragovernment communication. For the taxpayer, FTS2000 means annual savings well in excess of $150 million, enough to support a major government program to address education needs, skills upgrading, or homelessness. For the operations of government, FTS2000 has proved that: • agencies can buy the best, most advanced technology; and • agencies can undertake successful, speedy procurements. Events will continue to unfold for FTS2000 in the 1990's. The transition, the largest in the history of technology, is yet to be undertaken. Many issues remain still to be tested, such as: • • • •
mandatory versus voluntary use (Note 6); the effectiveness of competition within the contract at the fourth and seventh year; the cost versus benefit of two awards compared to one; whether, in spite of the Freedom of Information Act, prices can be kept secret as was desired by vendors (Note 7); and • whether the telecommunications user industry will really attempt to capitalize on the example of FTS2000.
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NOTES ON TEXT
Chapter 1 1. For a summary of the legislation concerning the FTS see: September 19, 1975, “Authority for Communication Activity,” Project LX-100, Office of General Counsel, General Services Administration 2. Quoted in Public Utilities Fortnightly, April 1963. 3. Access Lines, Switches, and Circuits: Telecommunications networks (phone networks in the days before data transmission) consist of three main types of components: access lines, which are electrical connections from the building to the local phone company's office; switches, which route calls according to the number dialed; and long-distance electrical connections between the switches. All these electrical connections are usually termed circuits (they go to and from a pair of locations). Hence, access lines are circuits but are usually termed access lines. The long-distance electrical connections are usually termed intermachine circuits or network trunks. There are many other kinds of circuits giving access to other services or locations, but these terms should be sufficient to give an understanding of the text. 4. AT&T Long Lines Department, 1966. Federal Telecommunications System: Network Plan 1965–1971. Washington, D.C.: AT&T. 5. Growth and size of the FTS: Figure 1–1 shows the growth in call minutes from inception of the system in 1963 to 1988. There was constant demand driven growth until escalating costs forced agencies who could to leave the system beginning in 1984. The U.S. Postal Service was first, and then in the subsequent years the departments of the Army and Navy and the U.S. Army Corps of Engineers left. Figure 1–2 shows the annual cost over the same period of time. The major increase due to the demise in 1981 of the Telpak tariffs is clearly seen. This event marked the beginning of the end of the old FTS. Figure 1–3 shows the resultant cost-per-minute average for the system. During the stable decades of the 1960s and 1970s, the average cost per minute was about half that available on the public system saving approximately $1.25 billion during the 1970s alone. The increase due to Telpak in 1981 is clearly seen. Cost cutting maintained the new level for a while, but then access charge increases after divestiture (plus adverse impacts on economies of scale as agencies left the system) caused a constant upward trend in the cost per minute. This continues to the projected time of transition to FTS2000 shown beginning in 1989. 6. See Chapter 5, Networks, in the main report for more detail of deregulation. 7. Cut FTS costs through competition: In 1982 Administrator Carmen formed a private sector task force to examine the FTS and GSA's management of it. The task force included the senior telecommunications managers from Westinghouse Electric Corporation,
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NOTES ON TEXT
FIGURE 1–1 Growth of the FTS in call minutes. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1987.
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FIGURE 1–2 Annual cost of the FTS. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1987.
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FIGURE 1–3 Cost per minute averages for the FTS. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1987.
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General Electric, Sears and Roebuck, Xerox Corporation, and North American Philips. All of these companies had been users of large private AT&T supplied networks similar to (though much smaller than) the FTS. Each company was pursuing strategies to cut costs and take advantage of deregulation and growing competition GSA was able to share information with them, and through them, share information with other corporations such as General Motors. The strategies followed varied considerably, for example, Westinghouse and General Electric built on their engineering strength to engineer new networks; Sears had not chosen the engineering route but had moved to service pricing provided by Satellite Business Systems; and General Motors bought EDS to be its resource to develop a new network future. The only common thread was one of building upon the organization's strengths in a time of great uncertainty. 8. Satellite communications to Denver and Houston: In September 1982, GSA's Network Services organization began cutting over satellite circuits to Denver. In September, user complaints reported to the GSA Denver region went from an average of 5 a month to 172. The problem did not surface at headquarters until late October. From a network management perspective, the problem was one of determining which vendor was responsible for the failed component so GSA could get them to fix it. The telecommunications chain from Washington, D.C., to Denver was a complex one with at least five different vendor organizations involved, and diagnosis of a single cause of the problem was difficult. Of the several vendors in the chain, GSA focused on RCA the satellite vendor as the responsible party on the basis that the system had worked until their circuits were implemented and, ruling out sabotage, it had to be some effect of integrating their plant. Major escalation took place with RCA in the week before Christmas 1982. An examination of the business arrangements, which were standard public tariffs—the only arrangement available—gave full benefit of protection to the vendor rather than the user. GSA therefore had little leverage over the vendor. It became obvious that all the resources RCA could muster were already working on the problem. In essence, GSA's problem was stretching the ability of a major corporation. In retrospect, this was typical of the time, with major companies extending into new areas, using untried technology, and doing so in an industry that was undergoing major organizational upheavals. 9. Relationships with AT&T: Although RCA had the main responsibility for the Denver difficulties, their facilities were not the only problem. The Bell system switch in Denver provided by the local company was a problem and contributed to the difficulties of diagnosis. GSA came out of the Denver exercise with two thoughts—first, that RCA had really done its best and done so willingly, and second, that AT&T, the largest single supplier in the network, with GSA representing its largest single customer nationwide, had done little to help. Before Denver was properly resolved, an equally severe degradation of service to and from Houston took place.
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It looked as if the network was falling apart and GSA was in a position of not knowing what was going to happen next. Frustration on GSA's part led to the letter in Figure 1–4. AT&T reacted swiftly, assigning substantial resources to solve the problems and a new team to deal with GSA. This event is important as it foreshadowed later activities. 10. GSA is not a cabinet agency and is headed by an administrator who is a political appointee reporting to the White House. GSA is divided into several separate services each headed by a commissioner, who is also a political appointee. Other management roles in the services are usually filled with permanent civil servants. The three major services are the Public Building Service ((PBS), the government's landlord; the Federal Supply Service (FSS), the government's supplies buyer; and the Information Resources Management Service (IRMS), the government's computer and telecommunications manager. IRMS has several operations headed by deputy commissioners, the largest of which is the Office of Telecommunications Services, which is responsible for long-distance and local telecommunications services and management of the FTS. Within that office, the Network Services organization is responsible for engineering and operating the long-distance service of the FTS. 11. The Advanced Record System (ARS): The ARS project provided a learning situation about the strengths and weaknesses of the FTS organization. The ARS was an old, out-of-date message system for text messages operated by GSA. It was used mainly for the Social Security Administration, the Veterans Administration, and GSA's own Federal Supply Service. It was a slow-speed, store-and-forward system serving about 400 locations. It had been a sole source contract with Western Union in the monopolistic days of telecommunications and the project to competitively replace the system had been under way since 1977. The replacement strategy suffered from many problems including: split procurements leaving GSA with integration responsibility yet no experience in that sphere, little GSA infrastructure or experience in project management and engineering, and a specification keying payments to delivered components rather than to working systems. The contract with the terminal vendor was eventually terminated and the whole system transferred to the Veterans Administration who successfully implemented it. The system became the basis for their VADATS system. 12. The Telecommunications plan of GSA: See Office of Information Resources Management, 1985, “The Telecommunications Program Plan of the GSA—Volumes I, II, and III,” Washington, D.C.: U.S. General Services Administration. 13. This first support contract was called the SETAMS I contract—Systems Engineering, Technical Assistance, and Management Services: Phase One—and was awarded to Telesynetics Corporation. 14. For more information on the interim cost and quality control initiatives, see internal GSA document, 1986, “Presentation to FTS2000 Interagency Steering Committee on Cost and Quality Control Programs,” Office of Telecommunications Services, General Services Administration.
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FIGURE 1–4 Letter from Carr, GSA, to Gradle, AT&T, August 19, 1983.
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Chapter 2 1. System life cycle: Slavish adherence to the classical system life cycle probably holds back more innovative efforts than any other procedural aspect of engineering. People forget that the life cycle (e.g., feasibility study, requirements study, preliminary design, detailed design) was invented as a convenient way of segmenting the continuous development process so that it could be more easily managed. In many ways the model is erroneous as the milestones described are entirely artificial and, as it was developed in the 1960s when activity was devoted to building new systems from scratch, it presents a limited viewpoint. The life cycle is weak in dealing with the most difficult and costly aspects of systems—their maintenance and replacement. Today most activities involve some measure of replacing systems, and these systems are entirely insinuated throughout the fabric of day-to-day operation of important organizations. Unfortunately, although the classical life cycle does not deal well with these situations, it has been institutionalized into “good management” processes and has been reflected in procurement methods and regulations. Because of this it can become a barrier to innovation by forcing rigorous, though irrelevant, structure on new problems. Such was the case in point. 2. Shutting down or transition to a network: Almost every issue that arises on the FTS is complicated by the unique size of the system and has to be examined for its own peculiar attributes. Shutting down or transition to a network is such an example. Figure 2–1 shows conceptually the economic dynamics of the FTS with the average cost of a minute of calling rising sharply as the volume goes down (later modeling showed this to occur at approximately 40 percent of the volume). One curve shows taking traffic off and not downsizing the network, the second shows an orderly reduction of traffic with carefully planned downsizing to minimize cost. The FTS was operating at 1.5 billion call minutes, that is, at an average of 30 cents/minute. Figure 2–2 shows that as a major user leaves the network the cost per minute goes up for the remaining users and that, in fact, the U.S. Postal Service pull out cost the remaining users $4 million a year. This principle would extend as the traffic reduces, giving increasingly poor costs per unit as the economy of scale disappeared. Figure 2–3 shows that the area above the average cost per minute at the current operating point is a real cost to be borne by the users as the system shuts down. As Figure 2–4 and 2–5 show, users can either pay for it inequitably with the first agency off paying least, then the last off paying most (the so-called $5 million per minute phone call), or equitably by levying an equal portion of the total amount on all users irrespective of when they leave. Inequitable shutdown would of course cause disruption and inequities in the rush to get off the system as early as possible, which would mean that any chances of minimizing the total cost would be out of the question. There are other aspects of shutting down the network. For example, if each user was allowed to determine when it left, the organization
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FIGURE 2–1 The economic dynamics of the old FTS: Its shutdown curves. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1986.
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FIGURE 2–2 As a major user leaves, the average cost per minute goes up. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1987.
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FIGURE 2–3 The difference is a real cost borne by the users. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1987.
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FIGURE 2–4 The old FTS: You can pay for it inequitably. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1987.
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FIGURE 2–5 The old FTS: You can pay for it equitably. SOURCE: Information Resources Management Service, General Services Administration, internal presentation materials, 1987.
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and management of each individual transition at each building would be unthinkable, and duplication of access lines to handle such uncoordinated transition could increase the cost of shutdown by orders of magnitude (amounts as much as $50 million to $100 million). There were at least a hundred issues and items as complex as this. Each had to be explained to each successive interest as they were drawn into the project. 3. Strategy was discussed with vendors: It is ironic that in fact AT&T was partly responsible for the strategy that allowed competition for the system they had dominated. In 1984, their focus was selling GSA their Software Defined Network (SDN) services. Hence, they were pushing GSA toward specifying services and paying for what was consumed—the essence of FTS2000. It can be speculated that if they had any competition in mind it was between their SDN services and MCI's V-Net offering. 4. Examining alternatives: Largely as a result of this July meeting, the FY 1985 Operating Plan, developed in August and September for the Office of Network Services, described a program of “FTS network replacement,” for the first time formally acknowledging the change from the old unspoken strategy of gradual evolution to a deliberate replacement of the network. The effort was known as SETAMS II in the Operating Plan—labels changing more slowly than ideas—and the plan called for a draft RFP by March 1985. Bushelle was convinced that alternative 2 was unworkable but all three alternatives were pursued in those early months. This was partly to let people begin to become comfortable with the strategy implied by alternative 3 and partly to be able to demonstrate that necessary homework had been done. In many ways, at that early stage it did not matter who favored what approach. The important thing was that evolution had been dispensed with and the organization had begun a formal process to detail the strategy for replacing the network and developing the subsequent procurement. 5. Procurement staff versus program staff: A common difficulty in government programs that depend on major procurements stems from deliberate separation of the procurement function from the programmatic. For many good reasons concerned with fairness and avoidance of fraud, the government keeps the right to sign and deal with contracts separate from programmatic activities. This is also done to ensure clear responsibility for the legal aspects of contracting and procurement activities. In general, it is necessary and proper and it can work very well if the individuals work as a team toward the same goal. Forming a team that works effectively in this regard is one of the keys to successful government procurements. The right balance is hard to achieve: if the procurement staff dominate, the program strategy may suffer and innovation be stifled; if the programmatic staff dominate, the procurement may be legally flawed.
Chapter 3 1. The CEOs contacted were those of American Satellite Company,
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AT&T Communications, Bell Atlantic Corporation, Bell Communications Research, Computer Sciences Corporation, Continental Telephone Company, Electronic Data Systems Corporation, Ford Aerospace and Communications Corporation, GTE Telecommunications, Inc., Honeywell, Inc., IBM Corporation, ITT Telcom, MCI Telecommunications Corporation, Mountain Bell, Pacific Telesis Group, Northern Telecom, Inc., Southern New England Telephone Company, United Telecommunications, Inc., and Western Union Telegraph Company. 2. A videotape of the vendor conference was prepared by GSA. In addition see typical press articles: Wilke, John, 1985, “Uncle Sam Plans the Biggest Phone Deal Ever,” Business Week, February 18; Tucker, Elizabeth, 1985, “Bidding to Open on U.S. Phone Contract,” Washington Post, February 12; Anderson, Kevin, 1985, “GSA Briefs Potential Phone Bidders,” USA Today, February 14. 3. OMB halting project: See Figure 3–1, letter from Stockman, OMB, to Kline, GSA, February 15, 1985. For typical press articles see: Tucker, Elizabeth, 1985, “OMB Halts Purchase of Phone System,” Washington Post, February 16; New York Times, 1985, “Agency Asks Phone Study,” February 18; Schreiber, Paul, 1985, “Phone Slowdown Ordered,” Newsday, February 20. 4. Three reports explaining aspects of the strategy were produced internally by GSA for communications with OMB. These were, “Economic Comparisons of FTS Alternatives 1987–1997,” “Government Policy Impact Comparisons of FTS Alternatives for 1987–1997,” “Future Telecommunications Markets.” 5. FTS2000 Interagency Steering Committee: Although the first meeting was February 14, 1985, and the committee met on the average once a month, it was not formally established until GSA Order ADM 5420.86, June 4, 1986. The original agencies represented were: Justice, NASA, Interior, Veterans Administration, Health and Human Services, Agriculture, Transportation, Treasury, the Army, and the Navy. The Department of Energy was added later in 1985, and Commerce, Labor, the Environmental Protection Agency, the FBI, and a small agency representative were added in 1986. 6. General presentation was developed: A color-slide presentation and script were prepared for this purpose and a simplified version was developed into a videotape. Copies of the slides and videotapes were made available to GSA's regional staff and to members of the Steering Committee to use with agency staff. A copy of the video ran regularly in GSA's entrance hall. 7. The three magazine articles that formed the basis of press releases were: Bennington, Bernard, 1985, “GSA Reaches Out,” Government Data Systems, March; Bennington, Bernard, 1985, “Replacement of the Federal Telecommunications System (FTS),” Communique, July; Bushelle, Robert J., 1986, “Opportunity: The Window is Open for FTS2000,” Government Executive, January. 8. See, MITRE, 1986, “Recommendations on Issues and Strategies for Federal Telecommunications System (FTS) Replacement: A Panel Report,” McLean, Va.: MITRE Corporation. 9. See, Kalba Bowen Associates, Inc., 1986, “Cost/Benefit Analysis of Alternatives for the Replacement of the Federal Telecommunications
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FIGURE 3–1 Letter Stockman, OMB, to Kline, GSA, February 15, 1985.
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System Intercity Network, Volumes 1–3,” Cambridge, Mass.: Kalba Bowen Associates. 10. Office of Information Resources Management, 1985. FTS2000 Services: A Request for Proposals to Replace the Federal Telecommunications System (draft RFP). Washington, D.C.: U.S. General Services Administration. 11. Vendor interest: For a good overview of the impact that FTS2000 was beginning to have see Tucker, Elizabeth, 1985, “Dialing for $4.5 Billion U.S. Dollars: Phone Firms Begin to Scramble for Huge Federal Phone Pact,” Washington Post, December 2. This article noted some important aspects such as the contract would mean business for everyone from long-distance companies to regional phone companies to network equipment manufacturers. It noted that AT&T for the first time may not be the natural winner, because even though they had dominated government communications, GSA was looking seriously at other companies. It said that FTS2000 could be a major break in the dike of AT&T dominance and could mean much to the other common carriers such as United Telcom and MCI. It noted that companies were trying to team up because no one had all the needed capabilities and because this could create a powerful new force in the industry and would push standardization. However, it also raised a commonly held viewpoint that only AT&T could win.
Chapter 4 1. See Figure 4–1, letter from Horner, OMB, to Carmen, GSA, December 14, 1983. 2. Leadership gap: From February 1984 to March 1985, GSA was managed by an acting administrator, Ray Kline. Kline had been deputy administrator to Carmen and was a member of the permanent civil service unconnected with the Reagan administration. From his retirement in April 1985 to Golden's arrival in June the acting administrator was Dwight Ink, a past deputy administrator and also a member of the permanent civil service unconnected with the Reagan administration. 3. For examples of correspondence between GSA and OMB at that time see: Letter from Ginsburg, OMB, to Kline, GSA, February 25, 1985; Letter from Carr, GSA, to Ginsburg, OMB, March 1, 1985; and Letter from Bedell, OMB, to Carr, GSA, March 28, 1985. 4. See Figure 4–2, letter from Kline, GSA, to Stockman, OMB, May 10, 1984. 5. The issue of deregulating FTS died as Rep. Brooks became involved. See Levine, Arnold S., 1984. “GAO hits OMB telecommunications plan.” Government Communications News (December). 6. List of panel members and affiliations: Robert E.Bennis, Westinghouse Electric Corporation; Edward Bowman (chairman), University of Pennsylvania; Stuart E.Branch, DiNucci, Branch and Associates; James L.McKenney, Harvard University; Billy Oliver, consultant; Lt. Gen. Lee Paschall, USAF (Retired); and William B.Pomeroy, General
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FIGURE 4–1 Letter from Horner, OMB, to Carmen, GSA, December 14, 1983.
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FIGURE 4–2 Letter from Kline, GSA, to Stockman, OMB, May 10, 1984.
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Electric Corporation. 7. See letter from Selwyn, ETI, and Vivian, Kalba Bowen, to Hubbard, GSA, May 30, 1986. 8. Ensuring ongoing competition: GSA management believed that centralized monopoly was bad. It had been bad, but inevitable, priorto deregulation. However, to continue the monopoly in a deregulated world where there now was sufficient competition appeared to make little sense. Consequently, GSA relied on a model whereby it would be one possible provider of telecommunications (through FTS2000) to agencies in competition with the rest of the common-carrier industry. Hence agencies were to be given free choice about participation in the contract. FIRMR Bulletin 29, Changes to Federal Telecommunications System (FTS) Inter-City Services—Advanced Notification and Request For Comments, October 15, 1985, was developed to relay this process and to notify all agencies using the old system of the intention to transition to FTS2000. It offered them the opportunity to take part or go their own way. Those that did not wish to subscribe—Army and Navy mainly —were moved off the system with costs assessed to avoid harm to the remaining agencies. The remaining agencies all signed up for the new service voluntarily. A draft agreement for service was developed by GSA and the steering committee (Service Agreement for FTS2000 Services-Draft FIRMR Bulletin, April 28, 1987). This approach was later terminated by Rep. Brooks. One major benefit seen to allowing voluntary participation was that there would be no cause for discord between parties during the upcoming transition, which would be difficult enough even with everyone on the same team. 9. For communications between OMB and GSA leading up to agreement see: Letter from Bedell, OMB, to Golden, GSA, June 20, 1986; Letter from Golden, GSA, to Bedell, OMB, July 30, 1986; Letter from Golden, GSA, to Gramm, OMB, September 2, 1986; Letter from Gramm, OMB, to Golden, GSA, September 26, 1986; Letter from Golden, GSA, to Gramm, OMB, October 30, 1986; Memo from Kowalczyk, GSA, to Golden, GSA, November 13, 1986; and Letter from Golden, GSA, to Gramm, OMB, December 22, 1986. 10. For the nongovernment reader two books worth reading concerning politics at large and the government's acquisition process are: Smith, Hedrick, 1988. The Power Game: How Washington Works. New York: Random House. A very readable, insider's view of how Washington really works, who the players are, what motivates them, and how politics has changed since the 1970s. Fox, Ronald J., 1988. The Defense Management Challenge: Weapons Acquisition. Boston: Harvard Business School Press. Though oriented towards defense and weapons systems this is one of the most complete yet readable reviews of the acquisition process. The civilian agencies have parallels for everything mentioned in the book.
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Chapter 5 1. Martin-Marietta announcement: Shrage, Michael, 1986, “Marietta seeks golden federal phone contract,” Washington Post, March 24; Roberts, John L., Janet Guyon, and Francine Schwadel, 1986, “Martin-Marietta, regional firms to bid against AT&T for big U.S. job,” Wall Street Journal, July 16; Shelsby, Ted, 1986, “Martin bids for 10-year U.S. pact,” The Baltimore Sun, July 16; Time, July 28, 1986, “Ganging up on old Ma Bell.” 2. Martin-Marietta and MCI team up: Washington Post, September 18, 1986, “Martin-Marietta to use MCI in phone bid”; Outerbridge, Laura, 1986, “Marietta, MCI to bid for federal phone service,” The Washington Times, September 18. 3. Boeing-AT&T announcement: White, Eileen, 1986, “Boeing venture will seek U.S. contract for phone system valued at $4.5 billion,” Wall Street Journal, July 25; Washington Post, December 10, 1986, “AT&T, Boeing join forces on phone contract bid”; The New York Times, December 10, 1986, “AT&T to join Boeing in bid.” 4. The final draft RFP released for comment was: Information Resources Management Service, 1986. FTS2000 Services: A Request for Proposals to Replace the Federal Telecommunications System (FTS)— Second Draft, Washington, D.C.: U.S. General Services Administration. 5. National security and emergency preparedness (NSEP): Dealing with NSEP requirements and the NSEP community presented one of the more subtle and difficult obstacles to overcome in replacing the network. There was no doubt that GSA had, as part of its mission, the provision of telecommunications in times of national emergencies. This in fact had been a stimulus for developing the FTS in 1962. However, there was no consensus in written law, regulation, or policy as to what that mission meant in engineering terms. In fact, GSA's role in emergency services had lost importance over the decades as other events transferred some responsibility to other bodies. Reaching agreement on GSA's role in telecommunications for emergencies was a difficult situation. The NSEP community is very fragmented with many interests varying from those of the NCS to the Federal Emergency Management Administration (FEMA) and the National Security Council (NSC). Even within the NCS there is fragmentation among both the agency interests represented and the NCS staff. In the case of the FTS and its role in NSEP, events were further complicated by other issues. For example, the SCAN switches in hardened sites were very expensive, yet if GSA abandoned them the cost of the hardened sites would probably be borne by the military AUTOVON system. The way the issue of national security and emergency preparedness was negotiated and solved could be a case history in itself and one of the many significant activities undertaken that never received public attention. Documents of interest are: “Assignment of NSEP Telecommunications Functions,” Executive Order 12472, April 1984; “Implementing GSA's NSEP and COMSEC Responsibilities in Replacing the FTS Intercity and Local Services,” GSA, 1984; “Task0005, FTS2000 NSEP Requirements, Subtasks 1, 2, and 3,” Telesynetics for GSA, November, 1985.
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6. The final RFP was: Information Resources Management Service, 1986, FTS2000 Services: A Request for Proposals to Replace the Federal Telecommunications System (FTS), Washington, D.C.: U.S. General Services Administration.
Chapter 6 1. All of the articles in question were from the Washington Times as was much of the initial press coverage in this phase. See: Vickery, Hugh, 1987, “Federal offices to get police state phones,” Washington Times, January 8; Washington Times, January 9, 1987, “That you Ivan?”; Vickery, 1987, “Rights panel chairman blasts U.S. phone plan,” Washington Times, January 9. 2. For Army and Navy leaving see Bonafield, Christine, 1987, “U.S. military branches drop from government's FTS2000 project,” Communications Week, April 6. For discussion of HHS and Treasury decisions see Bonafield, 1987, “Treasury chooses FTS2000,” Communications Week, May 4. 3. Communications Week, March 21, 1988, “Perspective.” 4. A good article describing the views of the financial community concerning AT&T's need to win FTS2000 is contained in M.J.Richter, June 15 1987, “AT&T Beyond FTS2000,” Federal Computer Week. 5. Wall Street Journal, August 25, 1987, “Ma Bell wants more room to wheel and deal.” 6. Gladwell, Malcom, 1987, “Change in U.S. phone contract may hurt Marietta,” Washington Post, November 2. 7. Bonafield, 1987, “Growth a major challenge for one-year-old US Sprint,” Communications Week, June 29. 8. McCloskey, Paul, 1987, “Sprint to join EDS in fed bid,” MIS Week, January 12. 9. Telecommunications Reports, June 15, 1987, “EDS says it will not bid on FTS2000.” 10. Telecommunications Reports, July 13, 1987, “US Sprint will not bid FTS2000 project.” 11. The initial RFP stated only, “The government contemplates award of an indefinite quantity fixed price with economic price adjustments type of contract resulting from this solicitation.” Amendment 1, March 31, 1987, clarified GSA's intentions and created clause L.7.d as follows:
Each offeror, at the time it submits its offer, must certify that its proposal does not constitute a common carrier service subject to the Federal Communications Commission (FCC) Title II regulation, and shall certify that the offeror is able to enter into a binding and enforceable fixed price contract not subject to tariff precedence, tariff revision, or tariff pass throughs. Alternatively, at the time it submits its offer, an offeror shall certify that it has filed an application or request with the FCC to obtain a determination that the offeror's FTS2000 proposal
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represents a non-common carrier service not subject to Title II regulation, thereby allowing the offeror to enter into a binding and enforceable fixed price contract not subject to tariff precedence, tariff revision, or tariff pass throughs. 12. An explanation of AT&T's position and the use of a DCTN type of tariff is contained in a letter from AT&T to GSA, “Follow-Up to Submission of Questions, Letter No. 87–06,” from Van Atta, AT&T, to Williams, GSA, May 6, 1987. 13. Previous notes have mentioned the deliberate separation in government procurements of the contracting function from the programmatic. Once an RFP is issued (and frequently at some point prior to that), all communication between a vendor and an agency must be formally through the contracting officer. Failure to do so can result in a flawed or illegal procurement. 14. Cauley, Leslie, 1987, “AT&T contends U.S. bars it from bidding,” Washington Times, May 13. 15. General Accounting Office, 1987. Information Management: Leadership Needed in Managing Federal Telecommunications, Report Number GAO/IMTEC-87–9. Washington, D.C.: General Accounting Office. 16. Cauley, 1987, “Brooks blasts GSA over phone purchase,” Washington Times, May 15. 17. The chairman of the Senate Committee on Government Affairs is Sen. John Glenn (Democrat, Ohio). Discussions by GSA with his chief of staff concerning the technical and business issues seemed to leave him neutral concerning the alternatives that were being presented to GSA's approach. As a result Government Affairs remained neutral, leaving congressional interests to be represented by Brooks, until later concerns arose about illegality in contract procedures. During the protest concerning the award of switches in a procurement outside of FTS2000, Government Affairs took the leadership role and Government Operations remained neutral. See Cauley, 1987, “Senate probing GSA phone contract,” Washington Times, July 15; and Bonafield, “Senate revisits FTS plan,” Communications Week, June 20. 18. For a variety of press versions of the same story and a sample of different perspectives, see Tucker, Elizabeth, 1987, “GSA delays deadline for phone bids,” Washington Post, May 19; Sims, Calvin, 1987, “U.S. delays phone unit bidding,” The New York Times, May 19; Cauley, 1987, “AT&T wins FTS bidding suspension,” Washington Times, May 19. 19. For a good summary of this issue see Telecommunications Reports, June 29, 1987, “FCC urged to address GSA declaratory ruling request in streamlined regulation docket.” 20. For a good summary of this issue and actions see Telecommunications Reports, June 22, 1987, “AT&T presses earlier complaint about U.S. West switching services for FTS in Denver.” 21. Cauley, 1987, “AT&T accused of going for the jugular,” Washington Times, July 21. 22. Bonafield, 1987, “AT&T and Regional Bells tangle over words, deeds and FTS2000,” Communications Week, July 27.
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23. One of the best descriptions of various points of views and submissions on this issue is found in Telecommunications Reports, August 10, 1987, “Responding to AT&T emergency motion.” 24. Cauley, 1987, “Justice says AT&T errs in FTS case”, Washington Times, August 11. See also Killette, Kathleen, 1987, “Justice supports Martin Marietta in dispute over FTS2000 bidding,” Communications Week, August 17. 25. Washington Post, September 1, 1987, “Judge requests data on phone bids.” 26. Davis, Bob, “Martin Marietta wins court ruling on using Bell lines,” Wall Street Journal, November 9. 27. Iehnowski, Tom, “Cigar-toting Capitol Hill curmudgeon calls the tune for FTS2000,” Data Communications, November 1987. 28. For a description of AT&T lobbying activities see Report on AT&T, October 5, 1987, “Government-wide, two-vendor contract for FTS2000 now in the works,”; and Coll, Steve, and Judith Havemann, 1987, “Dispute threatens USA phone contract,” Washington Post, July 31. 29. For a description of US Sprint lobbying activities see Davis, 1987, “Texan wants last word on U.S. contract,” Wall Street Journal, September 4. 30. For the free-marketer theory, see Epstein, Keith C., “Bribery suspected in U.S. phone contract,” Cleveland Plain Dealer, December 4, 1987. 31. Havemann, 1987, “Marietta: don't split phone work,” Washington Post, August 6. 32. Davis, 1987, “Texan wants last word on U.S. contract,” Wall Street Journal, September 4. 33. The reasons why Sprint and AT&T wanted the contract split and Martin-Marietta did not are as follows: A. Sprint's reason: If GSA acceded to Brooks's demands for two network winners, US Sprint would have time to find a partner and submit a bid. See Davis and Jeanne Saddler, 1987, “GSA reversal on phone pact revives bidding chances for EDS, US Sprint,” Wall Street Journal, September 28, which says “Sprint, which started as a Dallas based company, has been lobbying Rep. Brooks to get back into the bidding even before it formally withdrew.” B. AT&T's reason: One view was that AT&T had resigned itself to Rep. Brooks prevailing and now supported his views. This would be undeniably a practical viewpoint, but also AT&T was concerned with public image in Washington and wanted to be seen to be favoring competition. In separate proceedings with AT&T at that time, the FCC was proposing to scrap rate-of-return regulation and AT&T wanted that to happen badly. Because of this, they did not want to have adverse opinion building up in Congress. A third reason, entirely practical, was that with a split they would almost certainly get some of the business, with the opportunity to make it up later, in later competition with the FTS2000 contracts. Relevant quotes are: AT&T “brought out the guns…shipped in liaison specialists from the home states of several congressmen to help drive home the company's
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message.” And, “AT&T has also been lobbying fiercely against the original winner-take-all proposal. AT&T has been considering petitioning a GSA hearing Board to suspend the bid if the agency didn't change its plans.” As well as, “William Rich…said AT&T wanted to delay the bid in hopes that the GSA will eventually scrap it.” For these quotes see Report on AT&T, October 5, 1987, “Government-wide, two-vendor contract for FTS2000 now in the works”; Davis and Saddler, 1987, “Reversal on phone pact revives bidding chances for EDS, Sprint,” Wall Street Journal, September 28. C. Martin-Marietta's reason: Martin-Marietta's reason to oppose the split was based on the economics of building a network especially to meet the FTS2000 requirements in a company with no common-carrier infrastructure. They needed as much traffic as possible to be able to produce competitive prices against AT&T or Sprint. Two aspects of this were, first, network economy of scale factors, and, secondly, implementation overhead. Regarding the former, Figure 6–1 shows actual cost model of the economy of scale of the FTS traffic. Differences, no matter how large the network, tail off at about half the total FTS traffic. At reduced amounts, such as might occur winning only 40 percent and having that reduced in later internal competitions, costs would be a severe disadvantage. Concerning the second, as a rough approximation, in networks of this size the cost to set up half a network is essentially the same as a full one. 34. For a good survey of the various points of view of all parties on splitting the network see Telecommunications Reports, August 10, 1987, “Brooks advocacy of split contract.” For a good survey of the difference between Brooks' and Golden's positions see Havemann, 1987, “For phone contractors a busy signal,” Washington Post, August 26. For a good survey of the disagreement between them see Davis, 1987, “Texan wants last word on U.S. contract,” Wall Street Journal, September 4. 35. Coll, Steve, 1987, “GSA delays bidding on phone pact,” Business, Washington Post, August 25. 36. After the release of the first GAO report, seven sessions were held between GSA and GAO between June 16 and July 28, 1987, to cover later materials that GAO had missed in its audit. These were documented in: Sessions Conducted By the General Services Administration for the General Accounting Office Concerning GSA's Telecommunications Program, IRMS, GSA. The formal reply to the GAO report was not transmitted until December in a letter from Golden, GSA, to Bowsher, GAO, December 21, 1987. As a result of these deliberations, GAO issued a second report, Information Management: Status of GSA's FTS2000 Procurement, GAO/ IMTEC-87–42, Washington, D.C.: General Accounting Office. This was released by Sen. Glenn in a press statement on August 25, 1987. For comments see Sussman, Edward, 1987, “GSA amends plan for federal phone project,” Wall Street Journal, August 25, who saw it as critical of GSA. The report itself said, “current FTS2000 approach is reasonable as an interim solution” without specifying how long “interim” was. Specifically the report recommended, and Glenn reinforced, that GSA
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FIGURE 6–1 FTS2000 networks designs: Unit cost versus volume. SOURCE: SRA Corporation for General Services Administration, internal modelling results, 1987.
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should clarify the government's ability to purchase all or part of the FTS2000 services from less expensive alternate sources without penalty after the minimum contractual guarantees are met. In essence, this new report gave GSA permission to proceed with FTS2000. 37. The following letters are examples of some of the correspondence from Congress, other than from Brooks, concerning FTS2000 during the summer of 1987:
• • • • • •
Letter Collins (Democrat, Illinois) to Golden, GSA, July, 1987; Letter Collins, (Democrat, Illinois) to Golden, September 24, 1987; Letter Dixon, (Democrat, Illinois) to Golden, July 8, 1987; Letter English, (Democrat, Oklahoma), to Golden, GSA, September 23, 1987; Letter Pryor, (Democrat, Arkansas) to Golden, GSA, August 17, 1987; and Letter Rose, (Democrat, North Carolina) to Bowsher, GAO, August 13, 1987.
38. See August 6, 1987, “GSA is urged to change bid proposal for multibillion dollar U.S. phone pact,” Wall Street Journal. 39. As mentioned earlier, a withdrawal by a vendor could be serious leverage for GSA to change their approach. However, Martin-Marietta's threat to withdraw was seen as hollow as it consistently indicated the huge investment it had made in the bidding process (hard to walk away from) and also had no current revenues in the existing system to fortify it. GSA kept expecting Martin-Marietta to organize effective counterlobbying to the lobbying of US Sprint and AT&T since it was a major company in the defense industry and thus must have had major lobbying resources. Either its contacts did not wish to take on Brooks or their FTS2000 program organization was not able to marshal its corporate resources. There were only a few letters from Congress generated in its favor. See: Rahill, (Republican, West Virginia) to Golden, GSA, August 17, 1987; Wirth, (Democrat, Colorado) to Golden, GSA August 6, 1987. 40. See letter, English (Democrat, Oklahoma) to Golden, GSA, September 23, 1987; and see Saddler, Jeanne, 1987, “GSA pressured to clarify plan for phone bids,” Wall Street Journal, September 23. 41. GSA was fortunate in already having a contract with a company to model the existing FTS. This model was already loaded with the most recent traffic data, thus allowing GSA to get a quick start modeling different alternatives for splitting up the requirements. Various criteria were used, such as how much interagency traffic there was (in order to minimize internetwork traffic) and how many customers shared office facilities (and so were served by the same local switch, requiring provision of two sets of access lines). For a list of agencies in each system see, Miles, J.B., “GSA
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releases draft amendments to FTS2000 plan,” Government Computer News, January 8, 1988. 42. Martin-Marietta's feeling disadvantaged and Brooks desire to make the system mandatory were related. As stated above, Martin-Marietta was adversely affected in terms of ability to price competitively by breaking up the network. It complained orally to GSA and told GSA it had visited Brooks to indicate that it could not compete effectively even with 60 per cent of one million lines and that it needed Defense Department traffic added to the system as a minimum. It also requested guarantees. For a summary of how it was impacted see Gladwell, 1987, “Change in U.S. phone contract may hurt Marietta,” Washington Post, November 2. 43. See Davis and Saddler, 1987, “GSA reversal on phone pact revives bidding chances for EDS, Sprint,” Wall Street Journal, September 28; and Menninger, Bonar, “US Sprint, EDS rejoin the fray for big contract,” Washington Business Journal, November 23. 44. See Telecommunications Reports, November 2, 1987, “New RFP due out on Jan. 31.” 45. As described earlier under the section entitled “The Importance of Winning” and as described above, the split had met many AT&T goals and weakened its most obvious competitor, Martin-Marietta. 46. Foley, John, “GSA awards switching contracts to Bells and AT&T while it thinks about FTS2000,” Communications Week, October 26. 47. Foley, 1987, “AT&T protests GSA award of FTS contracts to BOCs,” Communications Week, November 9; and Washington Post, November 20, 1987, “GSA sets stage for probe into phone equipment.” 48. Sources of quotes in order, see: Cauley, 1987, “GSA granted delay in bid protest,” Washington Times, November 24; Epstein, 1987, “Bribery suspected in U.S. phone contract,” Cleveland Plain Dealer, December 4; Sims, 1987, “Federal investigators looking into charges of corruption: U.S. inquiry on phone bids said to look at top officials,” New York Times, December 14; Cauley, 1988, “High GSA official vows to use Fifth Amendment,” Washington Times, January 15; Davis, 1988, “…Bell Atlantic, BellSouth admitted to getting secret bidding data,” Wall Street Journal, January 19; Rockwell, Mark, 1988, “GSA contracts: AT&T also obtained confidential info,” MIS Week, February 8; and Cauley, 1988, “Grand jury to sift evidence of wrongdoing within GSA,” Washington Times, January 20. 49. Hays, Laurie, and Mary Lu Carnevale, 1988, “Battling Bells,” Wall Street Journal, March 9. 50. One of AT&T's objectives was to remove all managers who participated in the ETN procurement from FTS2000. See Sims, 1988, “AT&T has doubts about phone project,” New York Times, January 25. 51. See Telecommunications Reports, February 22, 1988, “With pointed opening statements by AT&T and GSA counsel, ETN protest trial commences.”
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Chapter 7 1. The material on the source selection plan is taken from April 6, 1988, “Roles and Responsibilities of the FTS2000 Source Selection Organization,” General Services Administration; August 14, 1987, “FTS2000 Source Selection Plan: Briefing,” MITRE Corporation; March 14, 1988, “FTS2000 Procurement Advisory Committee Named by Golden,” General Services Administration, News Release; and April 22, 1988, “Major Responsibilities of the Source Selection Evaluation Board: Presentation to the Advisory Committee,” General Services Administration. The section on security is based on Taylor, Robert, March, 1988, “Security Procedures GSA Project FTS2000” (presentation), McLean, Va.: MITRE Corporation. 2. AT&T questioning security: Cauley, Leslie, 1988, “AT&T questions safeguards on bids,” Washington Times, April 15; Telecommunications Reports, April 18, 1988, “AT&T representatives continuing concern about FTS2000 security procedures.” 3. See: Telecommunications Reports, May 2, 1988, “Voluminous proposals filed by three contenders:”; Brooks, Rep. Jack, April 29, 1988, “FTS2000 Telecommunication Procurement,” Washington, D.C. 4. May 7, 1989, Session Fed-03 presentations by AT&T and US Sprint, Eastern Communications Forum, Washington D.C. 5. See, Davis, Bob, 1988, “U.S. divides huge contract for FTS2000,” Wall Street Journal, December 8; Burgess, John, 1988, “US Sprint, AT&T win phone deal,” Washington Post, December 8; Telecommunications Reports, December 12, 1988, “AT&T team, US Sprint sign record contracts for FTS2000 networks”; Jackson, Kelly, 1988, “AT&T, Sprint victors in FTS2000 contest,” Communications Week, December 12; Rivenbark, Leigh, 1988, “Sprint, AT&T win FTS2000,” Federal Computer Week, December 12; Taff, Anita, 1988, “AT&T, US Sprint win coveted fed net deal,” Network World, December 12. 6. For explanation of the mandatory use issue see: Conference Report on Public Law 100–202, December 22, 1987, House No. 100–498, p. 1166; Telecommunications Reports, April 11, 1988, “Carlucci tells Brooks that decision on plans to use FTS2000 network would be premature”; Federal Register, Vol. 53, No. 146, “Mandatory Federal Telecommunications System (FTS) 2000 Network.” 7. For description of the revealing of prices see: Grimm, Vanessa, 1988, “FTS costs may be kept under wraps,” Government Computer News, May 13.