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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 o

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: The project is supported by Contract No. GSOOKS8AFC1200 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 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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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. iv

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For Nancy. v

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CONTENTS 1 HISTORY OF THE FEDERAL TELECOMMUNICATIONS SYSTEM . . . The Development of the Federal Telecommunications System /1 The FTS by 1980 /3 Gradual Deregulation of the Industry /4 A Time of Reaction and Uncertainty /5 Satellite Circuits Provide a Hard Lesson /6 Facing Up to Network Replacement /8 DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984 . . Searching for a Strategy /10 The Strategy Forms /13 The Strategy Is Set /14 The Commitment Is Made and the Program Starts /18 THE FIRST YEAR OF SPECIFICATION DEVELOPMENT JANUARY 1985 TO JANUARY 1986 . . . . . . The First Year, the First Draft /19 1 . . . . . . 10 Announcing the Project /21 Inducting the Agencies /22 A New Administrator Comes on Board /22 An Independent Evaluation of the Strategy /23 Work Continues in Parallel on Developing the Strawman /25 4 REACHING AGREEMENT WITH THE OFFICE OF MANAGEMENT AND BUDGET . ~ ~ e ~ ~ ~ e e ~ e e ~ 26 Earlier GSA and OMB Relationships /26 Kalba Bowen, the Panel, and Gaining OMB Support /27 5 DEVELOPMENT OF THE FINAL SPECIFICATION AND RFP RELEASE: 1986 . .31 Continuing Development of the RFP /31 A Change in the GSA Team /33 Events Converge Towards Release of the RFP /34 The RFP Is Released /35 6 THE LONG HOT SUMMER AND COLD HARD WINTER OF 1987 The Honeymoon Is Over /36 The Importance of Winning /37 Round One: How Fixed Can a Fixed Price Be? /39 Round Two: The BOCs and Martin-Marietta /43 Round Three: GSA Fights Brooks /44 AT&T Did Not Trust GSA /46 Two Awards or One /47 The Cold, Hard Winter /49 vii

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EVALUATION AND AWARD . . . . . . . . . . . . . . . The Source Selection Plan /52 The Source Selection Organization and Responsibilities /52 The Evaluation and Award Process /55 Security /56 Changing Teams /58 Evaluation /59 Proposals /60 Negotiations /63 Award /63 Final Thoughts /64 NOTES ON TEXT viii . 52 . . . 66

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FIGURES FIGURE 1-1 Growth of the FTS in call minutes . . . . . . . . 67 FIGURE 1-2 Annual cost of the FTS . . . . . . . . . . . . . 68 FIGURE 1-3 Cost per minute averages for the FTS . . . . . . 69 FIGURE 1-4 Letter from Carr, GSA, to Gradle, AT&T, August 19, 1983 . . . . . . . . . . . . . . . . . 72 FIGURE 2-1 The economic dynamics of the old FTS: Its shutdown curves . . . . . . . . . . . . . . . 74 FIGURE 2-2 As a major user leaves, the average cost per minute goes up . . . . . . . . . . . . . . . 75 FIGURE 2-3 The difference is a real cost borne by the users 76 FIGURE 2-4 The old FTS: You can pay for.it inequitably . . . 77 FIGURE 2-5 The old FTS: You can pay for it equitably . . . . 78 FIGURE 3-1 Letter Stockman, OMB, to Kline, GSA, February 15, 1985 . . . . . . . . . . . . . . . . 81 FIGURE 4-1 Letter from Homer, OMB, to Carmen, GSA, December 14, 1983 . . . . . . . . . . . . . . . . 83 FIGURE 4-2 Letter from Kline, GSA, to Stockman, OMB, May 10, 1984 . . . . . . . . . . . . . . . . . . 84 FIGURE 6-1 FTS2000 networks designs: Unit cost versus volume . . . . . . . . . . FIGURE 7-1 FTS2000 Source Selection Organization ix 91 53

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