Transition to Networx telecom contract cost $395M more than planned

Tuesday - 1/7/2014, 12:50pm EST

The government spent $329 million more on the transition to the Networx telecommunications contract than it had to over the last six years.

The Government Accountability Office found the 33-month delay in moving to the Networx contract from the FTS2001 vehicle caused agencies to miss out on potentially tens of millions of dollars in savings and spend hundreds of millions more dollars than planned.

On top of the $329 million spent by agencies, the General Services Administration needed to extend contracts with vendors to support program management and other staffing expenditures, which cost it an additional $66.4 million than it initially planned pushing the total cost overrun to $395.4 million.

"[T] he complexity of the process for transitioning to Networx, which was compounded by a decline in telecommunications expertise at the agencies as well as weaknesses in project planning, contributed to delays in agencies' transition to Networx," GAO auditors wrote in the report released Monday. "This in turn resulted in increased transition costs, missed savings, and delays in implementing new technologies."

GSA announced in April 2013 it had completed the transition to Networx from FTS2001.

The reasons for the delays were numerous, GAO found.

One of the biggest ones was the confusion by agencies over which contract to use. GSA split Networx into Enterprise and Universal vehicles, but GAO found agencies were unsure which contract to use because they were so similar. Additionally, the dual contracting strategy ended up costing GSA more to run both vehicles.

"[B] ecause of industry consolidation by the time the contracts were awarded, the strategy was not as effective as had been envisioned. Specifically, three of the five contractors awarded Enterprise contracts were also awarded Universal contracts, and most services are provided on both contracts," the report said. "GSA agreed that the Universal/Enterprise construct should not be repeated in the follow-on NS2020 program."

Networx line items grow from 5,100 to 13,400 by June 2011

Another reason for the delay was the complexity of Networx as compared to FTS2001. GAO found Networx initially included 5,100 line items and increased to 13,400 as of June 2011. Networx also included 54 services as compared to 26 under FTS2001.

The increase in the number of services and line items coupled with the lack of telecommunications and contracting expertise among federal workers were among the biggest root causes of the transition delay, GAO found.

The lack of expertise was one of the major recommendations coming from the report.

"We have noted that agencies should work with the Office of Personnel Management, the central human resources agency for the federal government, to pursue a strategic, governmentwide approach to addressing these critical skills gaps," GAO said. "GSA has yet to fully study this issue, and agreed that understanding expertise shortfalls would be useful for future transition planning purposes; however, it has not established a plan to do so. These skills include contract expertise, legal expertise, asset management, and program management. Identifying current and projected shortfalls in critical telecommunication specialist roles early in the process of planning the next transition could better position GSA to assist customer agencies and help avoid future delays."

GAO issued the report as GSA is planning the next generation of telecommunications contracts under the Network Services 2020 strategy to replace Networx. That transition, GAO stated, may take even longer as GSA already plans to extend Networx three more years to expire in 2020.

Auditors recommended GSA implement the lessons learned from Networx more aggressively, especially those factors that contributed to the delays and increased costs.

"The rocky transition to the Networx contracts was, unfortunately, a lesson in lost opportunities," said Sen. Tom Carper (D-Del.), chairman of the Homeland Security and Governmental Affairs Committee, in a statement. "Given that we are trying to do more with fewer resources in every part of the government, it is essential that programs like Networx reach their full potential and garner all possible savings. One of my core values is if it isn't perfect, make it better, and I believe that the General Services Administration must look at these lessons learned and perfect its process so the transition to the next suite of telecommunications contracts does not veer off-course as the Networx transition did."

Sen. Tom Coburn (R-Okla.), the ranking member of the committee, blamed the Networx problems on the systemic contracting problems the government faces.

"Too often we've seen poor planning, unnecessary duplication, and inadequate management at GSA," Coburn said in a statement. "Even worse, as the report shows, it cost taxpayers $329 million more than if GSA had adequately transitioned to Networx on schedule. Such mismanagement and waste is simply unacceptable, especially at a time of increasing debts and limited resources. GAO has made a number of recommendations to GSA, including that GSA establish better transition plans with detailed time frames to get this program back on track. GSA should implement these recommendations and take immediate steps to prevent future delays and wasteful and unnecessary spending."