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66 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 'tine ' 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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67 1 600 1400 1 200 1000 z J 800 600 400 200 ~ . . / 1962 1964 1966 1968 1970 1-972 1974 1976 1978 1-980 1982 1984 1986 1988 ,. .. FISCAL YEAR FIGURE 1-1 -Growth of'the FTS recall minutes'. SOURCE: Information Resources Management Servic'e', General Servic-es Administration, internal presentation materials, 1987. '

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68 500 450 400 350 300 250 200 150 100 50 r ~_, / / / l O ~ , ., . , . , , , , , , i, . . . . 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 FISCAL YEAR FIGURE I-2 Annual cost of the FTS. SOURCE: Information Resources Management- Service, General Services Administration, internal presentation materials, 1987.

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69 it, 40 35 30 Z~ 25 cn By llJ 10 20 5 O ~ . ,1 , l, ,,1 1. I I I 1963 196S 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 /- / l J FISCAL YEAR 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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' 70 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''Hous ton: 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're'sponsible party' on the basis that tine' 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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71 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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72 ~~ Administration Cff'ce of Information Resources Management Washington. DC 20405 AUG 19 1983 Mr. Robert E. Grad le Vice President, Government Communications American Telephone ant Telegraph Company 1120 20th Street, NW Washington, DC 20036 Dea r M - e: Thank you for your prompt reply to my letter. Bowever, I must tell you in all frankness I do not feel at all comfortable with your response. Bob, you do not seem to be Informed of the severity of the situation ant, hence, are not on top of it. For example, you stated at the start of your letter that "the Bell provided services and equipment have been completely tested during June and July.- Yet, in only two hours of testing from Congressman Pauls' office Ire Washington on August 4, 28 bad/weak lines had been identified and all were in the same access group- GP 63307-001 through 28. I need not point out to you that the GP indicates Bell system circuits. You go on to state that, Since March of this year, the Houston CCSA has been under the supervision of Long Lines" and that the service maintenance of the switch at Houston is well within the Bell System performance limits. I do not know whether I should be comforted or alarmed since you then any that "there is no history of service af fecting troubles. The fact is that the Houston CCSA and the Denver CCSA have historically been the two worst actors on the FTS. This sounta like the same run around your staff gave us for many months on your Denver switch saying there were no problems. Only our pressure brought you to acknowledge the management deficiency and to bring in another manager f ram Phoenix. The truth is your people are not informed or cooperative, their attitudes lying somewhere between disinterest and arrogant adherence to bureaucratic procedure. This is somehow summed up by your trouble desk in Houston as recently as two weeks ago telling our regional staff to "go and get f et" when requesting tracing of a held line; and by your Houston staff refusing to respond to any request without say so from your Mr. Iloake. Mr. Boake' a constant, arrogant stance at the monthly meetings that he is right and our concerns are of no consequence give us no confidence in this organization. IS this regard, however, he only reflects the general attitude of all ATST staff at the meeting. You should be aware that this kind of behaviour is peculiar to ATST and we receive great cooperation from all of our other vendors. From an organizational point of view, just who is it in AT&T whose job is in jeopardy if Satisfactory FTS service to Bouaton is not restored? It doesn't seem to be Mike Becnel or Ken Masters. They, in fact, are less informed about the details of what is occurring in Houston than I am. Your people In Houston don't understand the urgency, your people in D. C. don't know what's going on, and your technical ant operations people reflect unconcern or an attitude of drawing lines and to hell with the customer. By way of conclusion, Bob, I suggest you get personally informed and involved or 50 percent of your livelihood is going to walk away, as I have no intention of moving into the future FTS with companies that will not cooperate, are incapable of providing proper service, arid who ignore the legitimate concerns of major clients. Be assured this will not stop here . Sincerely, FRANK J. CARR Assistant Administrator FIGURE 1-4 Letter from Carr, GSA, to Gradle, AT&T, August 19, 1983 .

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73 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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74 180 160 140 120 100 80 60 40 20 o \ \ \ \ \ \No Downsizing Downsizing - , 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 CALL MINUTES (Billions/Year) 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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75 180 160 140 120 100 80 6Q 40 20 a ~ : I~llilIiI+'IIi-- Q 0.2 0.4 0.6 08 1.0 1.2 1~4 C^1L ~INUlES ~ ~~ ~ U.S. Postal Serge U.S. Postal Seance = $4.0 minion FIGURE 232 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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76 180 160 140 ~1~ 1 20 z 100 - cn it 80 to 60 4~ O- ~ 1 1 1 1 1 1 1 1 1 1 1 0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 CALL MINUTES (Billions/Year) 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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84 (1~ Services MAY 10 t984 Honorable David A. Stockman Director Office of Management and Budget Washington, D.C. 20503 Dear Mr. Stockman: Washington, DC 20405 I would like to bring to your attention a matter that is causing apprehension in this agency. Recently, Mrs. Homer's office published a notice in the Federal Register relating to individual agencies' procurements of long distance telecommunications services. As the attached correspondence indicates, GSA has serious reservations that the course of action outlined in the notice win best serve the overall government-wide interests of the Federal Government, or is appropriate in light of this agency's responsibilities. During the OMB budget review, GSA objected strenuously to the proposed plan of action. ~ Light of the potential disruption to agencies' future plans for communications services, we believe it is incumbent upon the proposers of the plan to adequately justify this course of action. Under the circumstances, ~ wanted you to be aware of our concerns in this matter. ^Ily,1 1~7 Ray/~1ine - ~ . AcUng Admit Enclosures cc: Mrs. Constance Homer FIGURE 4- 2 Letter from Kline, GSA, to Stoc~nan, OMB, May 10, 1984.

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85 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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86 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 teem 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, n 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," Call 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 REP 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; "TaskO005, FTS2000 NSEP Requirements, Subtasks 1, 2, and 3," Telesynetics for GSA, November, 1985.

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87 6. The final REP 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 Reek, March 21, 1988, "Perspective." 4. A good article describing the views of the financia: concerning AT&T's need to win FTS2000 is contained in M.J. June 15 1987, "AT&T Beyond FTS2000," Federal Computer Reek. 5. Wall Street Journal, August 25, 1987, "Ma Bell wants 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 . Tel ecommunications 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 REP stated only, "The ~ ~ ~ ~ _- 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: 1 community Richter, more government contemplates award with economic price adjustments 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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88 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 REP 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, n 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 Tel ecommunications 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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89 23. One of the best descriptions of various points of views and submissions on this issue is found in Tel ecommunications Reports, August 10, 1987, "Responding to AT&T emergency motion. n 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 Seek, 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," Cal l Street Journal , November 9. 27. Iehnowski, Tom, "Cigar-toting Capitol Hill curmudgeon calls the tune for FTS2000, n Data Communications, November 1987. 28. For a description of AT&T lobbying activities see Report on AT&T, October 5, 1987, "Govern~ent-wide, two-vendor contract for FTS2000 now in the works,n; and Call, 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," Cal l 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," Call 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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go message. n 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. n 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," Call 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. Call, Steve, 1987, "GSA delays bidding on phone pact," Bus Anus, 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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91 24 23 22 21 IIJ by 20 he , 1 8 19 17 16 15 14 O Standard Tariff . Cost Based \ - \_ _N 3% - 10 30 50 TRAFFIC PERCENT 70 90 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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92 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," Call 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 counter-lobbying 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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93 releases draft amendments to FTS2000 plan, n 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 Pos c , November 2. 43. See Davis and Saddler, 1987, "GSA reversal on phone pact revives bidding chances for EDS, Sprint," Sal l 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 REP due out on Jan. 31. n 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 Reek, 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, n 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," Hal l 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 Tel ecommunications Reports , February 22, 1988, "With pointed opening statements by AT&T and GSA counsel, ETN protest trial commences."

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94 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," Call 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 Seek, 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. l