No easy way out for Treasury in TCE decision

The Treasury Department's recent about-face on its $1 billion network communications contract has left some federal officials and industry-watchers unable to explain it'and Treasury officials unwilling to.Treasury, following an eight-month series of events including a contract award for the Treasury Communications Enterprise program, a five-vendor protest and an apparent agreement to use a governmentwide vehicle instead, has reverted to its original plan for TCE.'This whole procurement had gotten to a point where it had no easy ending. None of the alternatives were without problems,' said Bob Woods, a former commissioner of the General Services Administration's Federal Technology Service and now president of Topside Consulting Inc. of McLean, Va.Last December, Treasury awarded TCE to AT&T Corp. Other bidders protested, and the Government Accountability Office sustained the protest. But instead of following GAO's recommendation to reopen the contract, Treasury officials announced in May they would use a governmentwide FTS 2001 telecom service provider until GSA's upcoming Networx contract, designed to replace FTS 2001, became available. The Office of Management and Budget and Congress had heavily pressured the department to choose that option.But earlier this month, Treasury decided to follow the GAO recommendation to recompete the TCE contract.'Treasury determined it was unable to meet its communications needs with any existing GSA contract,' said Treasury spokeswoman Brookly McLaughlin.Treasury will give the vendors who previously submitted proposals'AT&T Corp., Broadwing Communications LLC, Level-3 Communications Inc., MCI Inc., Northrop Grumman Corp., Qwest Communications International Inc. and Sprint Corp.' the opportunity to submit revised offers. Treasury CIO Ira Hobbs would not comment on the decision.GSA said Treasury's problem with its FTS 2001 program was in the timing, not the technology.'GSA was capable of meeting technical requirements. However, the time to compete the task order within the framework of the FTS program was not acceptable to the Treasury Department,' said GSA spokeswoman Mary Alice Johnson.OMB had made it clear during the contracting process that it would steer agencies toward the Networx contract instead of letting them strike their own deals to overhaul their networks [GCN, April 4, Page 18].Rep. Tom Davis (R-Va.), chairman of the Government Reform Committee, who has been a vocal critic of Treasury's decision to go forward with TCE, said there were ways Treasury could meet its immediate needs and still transition to Networx. He thinks agencies have to consider what's best for the government as a whole.Committee spokesman David Marin said: 'That's how you remain accountable to taxpayers. In this case, while going forward with TCE may'and I emphasize that's a big may'be most cost-effective for Treasury in the short run, doing so will undoubtedly be more costly for the government as a whole by undermining Networx.'Treasury officials also were not able to convince OMB that TCE made sense, especially from a cost perspective.'As is the case in any contract negotiation'public or private'larger volume from the buyer generates lower prices from bidders,' said Scott Milburn, an OMB spokesman. 'As a result, from a financial standpoint, standalone contracts are often not in the best financial interest of the government or the taxpayer as they may fractionalize the buying power of the government as a whole.'Marin termed it a 'mystery' that Treasury claims there weren't other options that met its requirements. For example, Marin said, Treasury could shorten the TCE contract from 10 years to four years, with a one-year continuity-of-service provision. The contract could state that Treasury would move to Networx at the end of the contract period.'This may not be ideal, and it still carries the risk of future protests, but it gets them out of the TCE concept and into Networx, which is far better for the government,' he said.One reason for reopening TCE, Woods said, could be that the department did not want to pay the vendor's bid and proposal costs if it cancelled the contract. The average bid and proposal costs for a contract of this size ranges from $1 million to $1.5 million for each company.'On the other hand, the problem they've created is that they have lowered the government's aggregate buying power,' he said. 'They have in effect gone back on what people thought was an agreement with Hill staffs to move their requirements to the governmentwide Networx contract. ... It's not going to be an easy outcome. They've painted themselves into a corner that is very hard to get out of, no matter which way you go.'One of the reasons Treasury early on wanted a separate contract was that its requirements were urgent and the department's existing contract with Northrop Grumman Corp. was expiring in late September.Others said it's better to vie openly for products and services where the market is so competitive.Treasury officials would not say whether it planned to move to Networx eventually or stick with the TCE departmentwide contract. If Treasury were to move to Networx, the department could get a different vendor after it competed under the Networx umbrella.'That means you've got to turn around and have another transition in a short period of time after you just put an entire department through a transition. Operationally, it's a nightmare. And it's economically not pretty because it's expensive,' Woods said.