The Networx contract for telecommunications services, like its predecessor, FTS 2001, is not mandatory for agencies’ use, but it may as well be.

Analysts and other industry observers say that for agencies’ fundamental network and telecommunications needs, there are not many alternatives.

Niche contracts exist for specialty services, such as satellite communications, and agencies can purchase some network services and hardware through General Services Administration schedule contracts. Agencies also can negotiate their own stand-alone contracts with providers if they wish.

“There are a lot of costs and risks associated with that,” Warren Suss, president of Suss Consulting in Jenkintown, Pa., said of the latter option. “And it’s not likely they’d end up with anything better than Networx.”

Contracts bear costs for oversight and administration, which are minimized when they’re paid once on a governmentwide contract, Suss said. Agencies have little reason to undertake those costs themselves and hire extra employees when Networx is available instead.

“It would be difficult for users to make a change, and I don’t believe there’s a big incentive,” he said.

Smaller companies benefit from being part of the teams of partners and subcontractors that orbit around the prime contractors, said Mike Cook, senior vice president for North America at Hughes Network Systems LLC, of Germantown, Md. But they also are wise to cultivate their own prime contracting relationships through other contracts or partnerships for times when agencies need the more specialized offerings.

GSA’s forthcoming Satcom II contract, for example, will specialize in satellite services, making it a potential rival to Networx for agencies that need only those services.

“We market directly to the federal government. We have our own contract vehicles,” Cook said. “So as we’re out and about talking to people, when we get to a point where an agency has an interest or need for the services we provide, we have to discuss what is the appropriate contract vehicle.”

For niche players, the key is to offer the customers choices. “We are trying to establish as many contract vehicles as we can to allow the agencies to make their life easy,” Cook said.

CAUTIOUSLY OPTIMISTIC
For Sprint Nextel Corp., the sole losing bidder on Networx Universal, the question is particularly acute. Tony D’Agata, vice president of Sprint’s federal government business, said Networx is going to be the preferred vehicle for the services it provides.

Although Sprint is still hopeful of getting a spot on the less-expansive Networx Enterprise contract, which GSA will award in May, he said there are other possibilities. D’Agata emphasized that much of Sprint’s federal business is not through FTS 2001 and may not be affected by the loss of Networx Universal.

“Depending on the agency, there [are] a number of ways one might choose to buy off of other vehicles,” he said. “Some agencies might feel their requirements are so unique that they would like to have their own solicitation.” The Defense Department, in particular, has not used FTS 2001 as extensively as the civilian side of government, he said.

“Wire line services will continue to be purchased off of FTS 2001 and Networx,” D’Agata said. “Wireless, which is a growth area, is a lot more disparate.”

POLITICAL CHESS GAME
It is possible that a serious rival to Networx will emerge during the contract’s lifetime, said Joe Shilgalis, vice president of telecom infrastructure firm Tellabs Inc., based in Naperville, Ill.

The Treasury Department, after a couple of years of wrangling, bowed in late 2006 to pressure from GSA and Congress to kill the Treasury Communications Enterprise contract and fold its requirements into Networx. That led some to speculate that there is no room for Networx competitors. Shilgalis said that is true, but it may not stay that way. “A lot of it has to do with the position of the GSA folks, what their political backing is,” he said. “In the short term, the next three to four years, I don’t see any effort to do that. In three or four years, there’s always the potential for an agency to say, ‘Networx isn’t fulfilling my needs in the way I require,’” and create something new.

Agencies that are already satisfied with services through FTS 2001 will probably slide easily to Networx, he said. “For those that haven’t relied on FTS, it’s an open field on the way they’re going to go,” Shilgalis said. “The GSA team is out there very aggressively pushing [Networx], and it’s going to bring to the forefront of everyone’s mind that this is an option. We’re in the initial steps of a very long process.”

“What happened with TCE provides a poster child for the problems agencies can run into when they try to do their own thing,” Suss said. “It’s not just a question of cost, it’s a question of the political backlash they’re likely to run into. If there’s one thing agencies like to avoid, it’s acrimonious hearings on the Hill.”

Associate editor Michael Hardy can be reached at mhardy@1105govinfo.com.