Federal agencies that rely on the nation’s long distance carriers for voice and data services face continuing billing and service problems years after the problems began. Though federal officials say much has improved, the problems created delays in implementing new contracts, which resulted in more money going to the contractors that helped create the delays. As the Federal Technology Service (FTS) moves to create the next generation of contracts—known as Networx—the old behaviors remain a problem.
The FTS2001 contracts, administered by the General Services Administration
(GSA), pay Sprint, MCI and AT&T to provide long distance wireless, wireline
and other telecom services for the Department of Justice, the Department of
Agriculture, NASA, the Red Cross and other agencies that have thousands of
field offices nationwide.
In March 2001, the Government Accounting Office (GAO), the investigative body of the U.S. Congress, looked into complaints that the transition to the contracts was delayed because of poor service provisioning, incorrect billing and slack customer service. At the request of the House Committee on Government Reform, the GAO looked into all aspects of the contracts to discover why some agencies were canceling their participation in the contracts and to look into failures by the carriers to get service up and running.
A Short History
The FTS2001 contracts, which are now in effect, use two of the same long distance
carriers that took part in the FTS2000 contracts, namely Sprint, and AT&T.
The carriers were to transition from one contract to another, but with new
services, better rates and on a larger scale. MCI came on board in the FTS2001
contracts.
GSA awarded FTS2001 long distance service contracts to Sprint in December 1998 (the contracts are awarded years before the name on the contracts imply) and to MCI WorldCom in January 1999. Under the terms of the contracts, each carrier was guaranteed minimum revenues of $750 million. Over the life of the contracts, which consists of four base years and four, one-year options, for a total of eight years, the revenues run into the billions of dollars.
The federal government began transitioning from FTS2000 contracts to FTS2001
contracts in 1999. Linda Koontz, director of information management issues
at the GAO, testified before a House Government Reform subcommittee in March
2001 to detail problems surrounding the contracts. “This transition has been a sizable and complex undertaking, involving a variety of voice, data and video communications services provided to more than 1.7 million users across the country,” she began. “Delays
lengthened the FTS2001 transaction period beyond the original target date [Dec.
6, 2000].”
Although the GSA managed transition programs for 20 small agencies, it was up to the other, larger agencies to work with the IXCs to get their telecom services switched over.
What Went Wrong?
One of the biggest issues the GSA faced in the transition involved the IXCs
and their billing organizations. For example, Sprint, MCI and AT&T faced billing staff shortages, enormous billing mistakes and ordering problems. At the same time, ILECs such as Verizon—crippled by a strike and forced to use managers to run its billing systems (see Regulatory Watch, Billing World, January 2001 p. 50)—were
slow in provisioning access to
the network.
One huge headache in transitioning to the FTS2001 contracts was keeping track
of provisioning and service installations. The GSA set up an automated Transition
Status and Monitoring System so the GSA and agency managers could keep track
of the provisioning and installation of network elements, lines and other aspects
of service. The GSA monitoring system was set up to create status reports by
agency and location that would track completed and missed transactions, determine
who was at fault and why, the cost of missed transactions and other relevant
management information and statistics. The carriers were supposed to set up online
versions of their transition plans and update them daily. They didn’t.
“This system could not be used as planned, however, because the GSA could not obtain usable and complete transaction management information from the contractors to populate the system,” Koontz told the subcommittee. Though Sprint had completed transition plans for 37 agencies by January 2000, its transition database at that time contained information on only two agencies, “making it impossible for the GSA to verify transition status information.” WorldCom
also failed to provide the same kind of information. The carriers eventually
got their databases up and running, though not perfectly.
The carrier’s inability to provide the information meant the government had no
way to determine what had been provisioned, so no accurate inventory existed
for planning and budget purposes. In an effort to play catch-up, the government
agreed to let the IXCs install services and then modify the contracts to match
them.
Billing problems also cost the government money. “A lack of accurate, current billing information and improper billing of services have forced agencies to take resources available for the FTS2001 transition and redirect them toward solving these problems,” Koontz told the House panel. “In
some instances contractors have billed agencies at higher commercial rates; such
incorrect bills have sometimes resulted in collection actions against agencies,
and in a few cases services were erroneously disconnected for non-payment.”
In another attempt to play catch-up, the GSA again accommodated the IXCs. “WorldCom
was required to have a contract-compliant service ordering and billing system
in place before services were ordered, but that requirement was waived in order
to permit WorldCom to accept and process transition orders.”
In the upside-down world of federal contracts, the delays in transitioning between
the FTS2000 and 2001 contracts—due in part to the IXCs’ poor performance—resulted in the carriers receiving more money though contract extensions. Whether intentional or not, the carriers reaped the benefits of the delays because the GSA had to pay them for extensions under the old contracts because the carriers couldn’t
make it to the FTS2001 contracts.
First, the delays increased the cost of services. Sprint, an FTS2000 contract
holder, had offered discounts on long distance to the agencies. Delays in the
transition exceeded the date of the discount offerings, so Sprint increased its
rates by 20 percent to 25 percent. AT&T offered discounts of 20 percent to 65
percent under its FTS2000 contract, and those discounts subsequently were taken
off the table. The two IXCs also reinstated volume-sensitive prices for select
services. As the volume of calls under the old contract decreased, the IXCs charged
more for the minutes.
The contract modification that allowed AT&T to extend its FTS2000 agreement (because
of delays in starting the 2001 contracts) called for a one-time payment of $8
million from the government. To raise that money, the GSA added a 20-percent
surcharge to agency phone bills. The surcharge was removed once the $8 million
had been raised.
The GSA, despite the carriers’ poor performance, had to postpone evaluation of the program. “These performance requirements include such things as the timeliness of service delivery, the availability of services, the quality or grade of service and the restoration of failed and or degraded service,” Koontz said. “Thus,
the government will not be able to ensure that it gets the best service until
the transition is complete.”
As the carriers failed to transition onto the FTS2001 contracts, the GSA still
had to shovel money to them under the previous contracts. Sprint received $7.5
million—part of a total $221 million paid in extensions to carriers as they failed
to move onto the new contracts.
One other unwelcome result of the IXCs’ poor performance was the delay in bringing in competing carriers to make the playing field more equitable. One of the goals of the FTS2001 contracts was to create a competitive arena required under the Telecom Act of 1996. “Before opening the FTS2001 program to further competition (and enabling customer agencies to reap the potential benefits), the GSA needs assurance that it can meet the FTS2001 contracts’ needs,
Koontz said.
Federal agencies, frustrated by the IXC’s inability to provide them with service,
went elsewhere for their telecom needs. As of April 2001, some 16 federal departments
or agencies fled the FTS program, some seeking other carriers and spending $77
million outside of the contract program.
Carrier Bills Often Wrong
Roger Oustecky, vice president of MSS Group, makes a living catching mistakes
on telecom bills for dozens of government agencies and hundreds of large commercial
enterprises. MSS receives its clients’ bills every month from the carriers and then enters them into its automated reconciliation system. The bills are analyzed on a monthly basis, looking for inconsistencies in inventory, price and usage alignment. The company also analyzes the contracts against other contracts to see if the customer is getting the best deal from the carrier. Government contracts can be complex, Oustecky says. “They rely on the range of services … off-peak
and on-peak rates, dedicated 800 numbers, switched 800, local, long distance,
ATM, frame relay, pagers, IP access and equipment leases.”
“The problems that the GAO found that surround billing problems in contract changes is true of any large customers,” Oustecky says. “At the phone companies, the billing systems are still legacy, they’ve
never really been able to adapt those to the competitive environment; the billing
systems were never equipped to handle that in a competent manner.”
“Every time they do make a change in the billing system it makes problems in other areas of the system,” Oustecky says. “One IXC about a year and a half ago, made changes in federal line charges, changing the charge to $3.57, but they messed up the decimal point. All of a sudden it went from $3.57 to $357. It took a lot to convince them that they had made that mistake. We got millions of dollars back from that single mistake. Another IXC’s
billing change quadrupled the USF line fee per customer. They were telling us
it would take a year to fix that. The more complex the contract gets, the more
difficult it is for the billing system to get it right.”
The federal agencies that are under the FTS contracts have to dispute incorrect
charges like everyone else in corporate America, he says. “A lot of the government agencies are under the same terms as the corporate customer. If they don’t
pay, they face the threat of cut-off. Because billing problems went unresolved,
it affected the transition.”
Agencies Not Trained in Catching Mistakes
Agencies, sub-agencies and departments under the FTS2001 contracts are billed
in various ways. Depending on the agreement, an agency’s headquarters may get the primary bill, and then hand it out to its sub-agencies and field offices. Or, the sub-agencies and departments may get their own bills, typical of hierarchical billing relationships (for more on FTS billing processes see “How
the FTS Handles Billing Disputes”).
Because the bill flow is fragmented, the smaller offices may not understand the
telecom agreements made at the top of the agency. For instance, if a carrier
tells the agency headquarters that it will reduce its wireless per-minute charges
to 2.5 cents a minute, the field office that gets a bill for 4 cents a minute
in Oklahoma City doesn’t know the change is supposed to be on their bill. So
agencies continue to pay the old rate.
“I think the knowledge of bills is going to be proportional to the amount of time that they receive training on the changes,” Oustecky says. “The changes happen on a daily basis. There are different options to an organization … it’s difficult for them to stay on top of it. That makes the telecom groups extremely valuable groups … their talents are wasted when you see all the dirty work to resolve issues with the vendor. They’re
spending time on that instead of doing the strategic management of the organization.”
Billed for Lost Lines
GSA officials and carriers refused to give details of the problems they face in the FTS2001 contracts. But Oustecky, who handles government telecom bills at his company, outlined the problems he has seen.
One insight has to do with long distance line transferal, a key element in the FTS2001 contracts.
“It’s not unusual that we find lines that a customer is paying for that belong to someone else,” he says. “When you unhook a line, it may take two years to get it off the bills. If that person picks the same long distance provider, and the previous company didn’t
take that line out of their inventory, the original subscriber pays it. You have
to re-verify lines.”
For instance, the USDA closed a number of its sub-offices, but was still being billed for 212 modems that were out of commission.
“In another instance,” Oustecky says, “we had a client that owned a building, vacated that building and leased it to a corporation. The new corporation took over the lines, and the company got free service because it was being billed to the old tenants.” One of Oustecky’s clients, Amtrak, sees about a 7 percent return on successful disputes. The largest refund Oustecky has seen was $3.5 million. “The customer would start a call, that call would hang up and the billing would continue for about 36 hours and replicate it, so you’d have hundreds of calls from the same line and the exact same number for 36 hours—at
long distance charges.”
Contractor Improves Process
Though Sprint declined to comment for this story and wouldn’t discuss its problems with federal contracts, AT&T’s customer service manager for federal contracts did. Stephen Robinson, director of customer care at AT&T Government Solutions, described how AT&T
deals with its contract agencies.
His group’s job is to support its federal agencies and state governments in all
50 states, managing frame relay, data, switched voice, calling cards, circuits
such as T1s and professional services.
A chief aspect of his job is to handle billing complaints. To try to prevent
problems from biting back, Robinson’s group checks the bills before they go to the agency. “We implement a first bill review before the bill goes out to a customer,” Robinson
says.
“At that front end, we engage our contracts, and discuss with the pricing organization
what we need to do at a process standpoint to get an order in clean.
“We get together the functional groups. We deal with great complexity. The American Red Cross, for instance, has chapters around the country and the globe. When you’re initiating a large, complex agency agreement, you really have to look at every aspect of the bill.” The bill for one government agency Robinson’s group oversees is 27,000 pages long—each month. “You really peel it back, check the billing codes to ensure that you’re
tagging things to the right billing code every month.”
AT&T also can’t afford to pay adjustments and refunds and move on, Robinson says. Because the contracts are so large and complex, his group has to find the problem and fix it—or else it comes back again and again. “At the tail end of billing issues we do a deep dive on the adjustments we issue and drill down in metrics—you
have a number of root cause issues that result in a billing error. From the backend,
we look at how there might have been a bad price table, or in an order, did we
have a late disconnect? We manage by fact, rather than by just going off and
reacting to one issue.”
New Contracts Ahead
As FTS2001 agencies and contract holders try to fix billing and service problems under the present contracts, the next generation of telecom contracts are already in the making.
The GSA is designing its Networx contracts, which will succeed the FTS2001 and
Metropolitan Area Acquisition (MAA) program when it comes online in 2006 (see “GSA
Telecom Contract Process Flawed”). The commissioner of the FTS approved
the general terms of the contracts in March and began taking general comments
from the agencies. The final MAA contract expires in 2008. Networx will let contractors
bundle local and long distance services under a single contract for
the first time.
Perhaps as a result of past problems, the Networx architects say the contract will be in place well before the present contracts expire to allow for a smooth transition.
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GSA Telecom Contract Process Flawed The Government Services Administration’s (GSA) inconsistent bid
process for local telecom services may be giving ILECs an advantage in
the battle
for the lucrative contracts. • GSA personnel failed to properly weigh whether competing carriers charged
a service initiation fee or one-time contract termination price. Not
having to charge for installing new equipment or circuits gave incumbent carriers
an advantage over carriers that would have to include start-up fees in
their bids The GSA looked at whether equipment, such as circuits, switches and network elements were already in place or had to be installed to meet the contract requirements—also known as reconfiguration costs. Only the Dallas office included that information—and not uniformly. The Dallas GSA office used a different formula to determine that cost. Because of that, five of 10 contracts would have been awarded to a different carrier than those that ended up with the job. For instance, according to the GAO, Southwestern Bell won three contracts when reconfiguration charges were added in; if the charge hadn’t been included, the job would have gone to AT&T. “ The GSA permitted its regional offices to define and follow their own fair consideration processes in order to encourage innovation and to learn which process yields the best results,” the report says. But one of the results was an inconsistent bidding process. To determine whether a carrier’s bid was in the ballpark, GSA personnel review previous contracts the carrier held and review that job’s cost. But the GSA didn’t compare contracts of the same length when comparing prices. “ The GSA management has not established a common process for fair consideration decisions,” the report says. Because there is no uniform system of measuring bids, methods to pick winning vendors “varied among cities, and in some cases, within cities.” In three cities, Cleveland, Indianapolis and Minneapolis, the GSA considered contract life as the evaluation period, while in Denver, the GSA measured a one-month contract price. Not only that, the reason for choosing the lengths of time comparisons wasn’t explained in the decision documentation. “If the GSA had used a contract lifecycle timeframe in its price comparisons, then the decisions reached might have been different in half of those cases.” The GSA personnel also failed to award the contracts to the lowest bid. In Dallas, Denver and Indianapolis, eight task orders were justified by price comparisons that did not support the decisions reached, the GAO report says. “Although price was the sole factor considered in these cases,” the report says, “the lowest-priced contractors as revealed by the price comparisons, were not awarded the task orders.” Nor did documentation exist to explain the decisions. The MAA contracts were also awarded based on technical expertise, skill and ease of accomplishment. In four of the cities, technical factors tipped in the favor of award contracts. But the GSA didn’t determine how the technical attributes were applied or document those technical advantages in several of the decisions. In short, the GSA awarded the local contracts to carriers that didn’t
necessarily have the best price, or the best technical experience. Because
such contracts are worth a lot of money, competition is tough. In response to the report, the GSA admits things were rocky during the contract awards process, which used a new formula. “The MAA program broke new ground,” GSA Administrator Stephen A. Perry explained in a letter to the GAO. “This environment was new for the FTS, our customers and our industry partners. The application of fair consideration in the service order process was a significant operational change.” He promised to improve the awards process. The GAO includes recommendations to fix such problems in its reports. It urged the GSA to establish a common process when reaching “fair consideration” decisions for MAA contracts, and urged the Federal Technical Service chief to make sure the process is fair. Other recommendations include using a uniform time frame for comparing contractor prices and to specify reconfiguration and equipment costs. Most importantly, perhaps, the GAO wants GSA personnel to keep the competing carriers in the loop to reduce the perception of unfairness. |
How the FTS Handles Billing Disputes The FTS has sharpened and improved the way it monitors and disputes billing problems with its long distance carriers, according to FTS billing specialists. Agencies that buy telecom services under the FTS contract have a choice
of getting billed by the carriers directly, or through the FTS billing
office. Dick Bohnet, the branch chief for FTS customer service, says
most agencies choose to be billed directly. “In most cases, they’ve
chosen to be billed directly because they think they have the expertise
to deal with the problems they may have,” he says. The FTS found an organization inside the federal government that could help it with creating interfaces with the various carriers and help solve other electronic billing issues. “As for large invoices,” Sather says, “we use our computer contractor, the U.S. Department of Agriculture National Computer Center. We get bills on tape, CDs and the USDA processes them for us. That’s what we use to produce our monthly statements that go to the agencies and the MORRIS (Monthly Online Records and Reports of Information) Web site.” One of Bohnet’s tasks is to manage the data processing and other aspects of the MORRIS site (https://ftsbilling.gsa.gov). The centralized Web site lets agencies look at billing detail records. Access to the bills is, of course, limited to users with passwords. The person or people in each agency responsible for monitoring telecom
bills—sometimes
at every sub-office or department within an agency (each agency is different)—peruses
call data and other details on the Web site. “We have a whole hierarchy
coding situation, which some agencies use in robust form,” Bohnet says. “If
you were to have access to the MORRIS Web site, you would see thousands of statements,
depending on the agencies and subsets.” Each agency can see only its billing
records. Credits and charge backs have to be handled carefully, because the carrier might create the adjustment for the agency, and the credit doesn’t make it down to the sub-office that should be credited with the money. “
When you have the electronic transfer of funds and an agency disagrees with a
portion of the bill, they have an option to charge some of it back to the GSA,” Bohnet
says. The GSA then handles the request for a charge back. “Our preference
is to pay the bill and handle it in the dispute process.” In the case of network issues such as outages, agencies go to Harrison’s
department to find answers; Harrison then acts as a go-between with the carriers. “We
look to see if there was a trouble ticket open, and what’s going on with
that. We plead the case with the vendor to get it resolved.” The Billing Issues Team, or BIT continues to clean up FTS2001 issues. “It’s designed to close out the issues that the GAO outlined,” Sather says. They are still in existence for problems that pop up.” |
