The U.S. government is now seeking bids on a 10-year, US$20 billion telecommunications services buy that is believed to be the largest pending network deal in the world, and carriers say they're ready to respond.
The Networx program will provide legacy and leading-edge voice, data and video services to all U.S. federal agencies. Most major U.S. telecom carriers -- AT&T, MCI, SBC, Sprint, Qwest and Verizon -- are planning to bid on it.
The General Services Administration, which is running the Networx procurement, last week issued requests for proposals. The Networx bids are due in early August.
"We view Networx as an important part of our future overall," says Ed Bursk, vice president, government, for Global Crossing. "We do expect to make a major play into it. We have team that has been working on this for almost a year now. We've been looking at the RFPs...and there are no real surprises from our perspective."
"Qwest is still very interested in Networx," says Jim Payne, senior vice president and general manager of Qwest Government Services Division. "This has been at the CEO level from almost the beginning. What everyone including Qwest will be doing now is refining their business cases and validating their approaches."
The GSA plans to award multiple contracts under its Networx program, which is divided into two parts: Universal and Enterprise.
Networx Universal covers 37 domestic and international telecom services ranging from older frame relay and asynchronous transfer mode to cutting-edge VPNs and VOIP. Likely universal bidders include AT&T, MCI, Sprint, SBC and Qwest.
Networx Enterprise, which is geared toward smaller carriers, includes a core set of IP and wireless services in particular geographic regions. Likely Enterprise bidders include Global Crossing, Verizon, Level 3 Communications, WilTel Communications, IDT and Broadwing Communications.
While GSA estimates that it will spend as much as $20 billion on Networx over the next decade, the winner bidders are guaranteed significantly less revenue. As is common in federal contracting, the government has committed to spend only $525 million on the Universal contracts and $50 million on the Enterprise contracts.
The GSA expects to announce the Networx winners in April 2006.
Networx will replace a series of contracts known as FTS2001 that will expire in 2007. MCI and Sprint hold the main FTS2001 contracts, but Qwest, AT&T, SBC and other rivals hold what are called crossover contracts that allow them to bid on federal network jobs.
It appears the GSA is sticking with the same goals in the Networx RFPs as in its predecessor FTS2001 contracts. All services provided on FTS2001 and its crossover contracts must be included in Networx. Networx bidders must offer a broad array of services and they must guarantee low prices.
"Prices on the Networx program must continue to be better than prices available elsewhere in the telecommunications marketplace," according to a GSA statement released on Friday.
GSA also wants carriers to provide high quality services from multiple sources. "The contracts must include enforceable agreements that will ensure high quality service is delivered throughout the term of the contracts," the GSA statement said.
Telecom industry executives spent the weekend pouring over the massive Networx RFPs -- which total more than 18 megabytes online -- to see if the government has made any major changes from draft RFPs issued last November.
Qwest has 15 people reviewing the RFPs and plans to make a decision this week about whether it will bid on one or both parts of Networx. Payne said he was pleased that the government has reduced some of its requirements for carriers to provide special billing, back office and operations systems.
"The government has made some progress in attempting to reduce the unique systems requirements that have been traditionally required," Payne says.
However, Global Crossing says it would have liked to see the government go further in easing its billing and reporting requirements.
"We have billing systems in place that we can adapt to [Networx], but even on the Enterprise side of the program they have almost as many requirements as the Universal side in terms of billing, reporting and provisioning," Bursk says. "I think it will be hard for systems integrators to bid on this program."
The RFPs don't provide answers to some questions that carriers have about Networx. For example, the government hasn't said how many Networx contracts it will award. Telecom executives predict at least two companies will win Universal contracts and four or five companies will win Enterprise contracts.
The RFPs fail to clarify the process individual federal agencies will use to choose among the winning Networx contractors. The RFPs also provide no information about whether Congress will require all federal agencies to use Networx to purchase telecom services during the next decade.
"Another variable not addressed in the RFPs is...mandatory use. Is that the policy involved in Networx or not?" Payne says. "That may be a legislative issue."
Telecom executives expect a great deal of behind-the-scenes maneuvering between now and the first week of August when Networx bids are due. Teaming arrangements are likely to remain secret, as even the largest carriers will need to line up wireless, satellite and fiber providers as subcontractors to meet the demands of the Universal contract.
"I doubt you'll see carriers announcing their Networx teams," Payne predicts. "Things will be dynamic up to the end."
"Our strategy is not to divulge our entire strategy," Bursk agrees. "Enterprise is a very obvious play for us to make, but on the Universal side, it's not beyond the realm of possibility for us to bid. We would certainly need to construct our team carefully."
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