Should Telcos Be Primes?

After being plagued by delays, the largest federal telecommunications contract ever--Networx Universal--was awarded to AT&T, Qwest Communications and Verizon.

Jill R. Aitoro is senior editor at GovernmentVAR.

The 10-year program is worth up to $48 billion, with the three providers splitting $525 million initially, then competing with each other for the business of federal agencies that want products and services to enhance the quality and security of voice, video and data communications, according to the General Services Administration (GSA).

Federal agencies can procure IP-based systems, wireless and satellite communications services or update network infrastructures through the contract. The Department of Homeland Security is among the agencies already moving forward on their own telecom initiatives through Networx. No doubt, a lot of money will filter through this deal.

Much of the response to the award has focused on the fact that Sprint Nextel was left out of the deal--a significant blow to a company that really can't afford another black eye as far as investors are concerned. But in terms of the approach by the GSA, here's my question: Should this massive and far-reaching contract be awarded to telecom carriers in the first place?

Telecom carriers hold an interesting position in the realm of federal contracting. They're not exactly vendors, which manufacture products that they either sell directly to end users or sell through the channel. By the same token, they're not resellers in the traditional sense.

While some might claim otherwise, telco providers aren't systems integrators either. And, let's face it, it's the integrators that should be leading this kind of contract. For one, the prime contractor should have top-notch expertise in program management, given that it will be overseeing project logistics, ensuring that procurement requirements are met and communicating directly with the customer regarding expectations. In that management role, the contractor shouldn't be influenced by its own offerings. Instead, it should be gauging the capabilities of its team and deciding on the most appropriate strategy for the customer.

Northrop Grumman or Lockheed Martin, for example, is more apt to do just that, relying on the portfolios, services and expertise of its contract partners, which would obviously include a telecom provider, but not being shackled to its own methods and offerings. For that matter, the contractor could even opt to look outside its own team if the customer requires capabilities that can't be offered by any of the companies listed on the contract.

That's what systems integrators do; they bring an unbiased perspective to the project. Granted, integrators are members of the winning teams (though not Lockheed Martin, which was among the 30-plus companies unfortunate enough to partner with Sprint Nextel on its bid), but I wonder whether their standard role will be realized with the telecom carriers themselves acting as the primes.

This isn't a slam on carriers. The truth is, telcos have experience with these types of contracts, having held the two consecutive governmentwide telecom contracts prior to Networx, in fact. (Sprint and AT&T held the first contract; Sprint and MCI WorldCom held the second). Rather, it's an argument for channel companies as the integral players in government contracting. I would argue against a manufacturer as the prime for the same reason: If federal agencies are seeking "best value" from their industry partners, there needs to be a contract lead that is willing to think outside of the box--not about its own arsenal of products and services--to fill requirements.

That said, this is the first of two parts of a contract, with the second, Networx Enterprise, expected to be worth up to $20 billion over 10 years and target smaller companies. Whether telecom carriers will dominate those awards as well remains to be seen.

Also, while the GSA encourages agencies to purchase telecom services from the three winning companies, they can look elsewhere--whether to Sprint Nextel or to a prime systems integrator that partners with a carrier. Why they would, with prices offered through the contract likely tough to beat, is anyone's guess.