FTS 2000 Overhead

In 1988 the General Services Administration (GSA) awarded the Federal Telecommunications System (FTS) 2000 contracts to two vendors--AT&T and U.S. Sprint--to provide state-of-the-art telecommunications services to federal agencies. GSA's oversight costs for the program, which totaled more than $53 million in fiscal year 1991, are billed to the agencies in the form of an overhead charge. The direct costs of GSA's oversight of the program account for nearly two-thirds--about $34 million--of the total overhead. GAO questions the worth of some of the management and oversight duties demanded of GSA in the FTS 2000 contracts. For instance, GSA is required--at an annual cost of more than $4 million for facilities and more than $16 million for personnel--to run separate service oversight centers for each vendor. Consolidating these centers could slash operating and personnel costs. Additionally, GSA monitors network operations--a function that vendors essentially do already. In its upcoming management review of the FTS 2000 program, GSA has an opportunity to revisit the original program requirements and decide their present validity. GSA could also reduce overhead costs by streamlining some operations. For example, GSA's contract for reporting service trouble, which adds $1 million annually to the program overhead tab, may be unnecessary because the FTS 2000 vendors can provide the same service. Lastly, GSA's processing of vendor bills is inefficient and has led to unnecessary billing disputes.

GAO found that: (1) the FTS 2000 program incurs about $34 million in overhead costs to support management, operational, and oversight requirements; (2) consolidating oversight centers and eliminating overlapping network monitoring programs could reduce operating and personnel costs by $13 million; (3) increasing vendors' responsibility, eliminating unnecessary information systems, and streamlining the reporting service could save $1 million annually; (4) GSA could realize additional savings of $1.4 million by closing its Fairview Heights, Illinois, regional office; and (5) GSA inefficiency in processing vendor bills leads to unnecessary billing charges and disputes.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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