November 05, 2012, 1:22 PM — Originally billed as the world's largest telecommunications purchase, the U.S. government's Networx contract is turning out to be chump change for the five carriers involved in the deal. Halfway through its 10-year term, the contract has driven around $2 billion in revenue compared to projections as high as $34 billion for this stage of the program.
Networx is an umbrella program that allows federal agencies to buy voice, data and video services from five carriers: AT&T, Verizon, CenturyLink (formerly Qwest), Sprint and Level 3. Created by the General Services Administration (GSA), Networx has a 10-year ceiling of $68.2 billion in revenue. However, due to delayed purchasing by agency customers, Networx total revenue through September 2012 is at $2.18 billion, GSA concedes. [See chart]
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"There's no question that Networx is not living up to GSA's expectations," says Ray Bjorklund, vice president and chief knowledge officer with Deltek, a Herndon, Va., consultancy. "It's not configured in a flexible way. It's harder to accommodate new services and new ways of buying than it should be. And the transition to Networx is many years behind schedule and still isn't done."
Networx "has not been successful," agrees Bob Woods, a former commissioner of GSA's Federal Telecommunications Service who runs Topside Consulting in Vienna, Va. "The ceiling number was artificially high to start with. It shouldn't have been $68 billion; $30 billion would have been plenty. They made the contract so complicated that the transition became impossible to do in a graceful amount of time. Agencies have taken forever to get there."
Experts say Networx has failed to reach its revenue goals because it is too complicated, causing transition from the predecessor contract to fall several years behind schedule. On Sept. 28, the GSA released a report indicating that U.S. agencies disconnected 99% of their services from the previous telecom services contract, which was called FTS 2001. This milestone should have been reached in 2009, according to original GSA estimates.