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2 DEVELOPMENT OF THE STRATEGY FOR FTS2000: 1984 In which a strategy is developed for the replacement of the FTS. SEARCHING FOR A STRATEGY The FTS2000 strategy really began to develop as the result of two things: the hiring of a new head of the Network Services organization, the organization within the Office of Telecommunications Services responsible for long-distance services; and long-range planning sessions held in the first half of 1984. The newly hired head of Network Services was Robert Bushelle, and his key contribution to the project was the development of the replacement strategy. Bushelle had taken an early retirement from Illinois Bell after a 30 year career that had included a wide spectrum of responsibilities, from operating a system the size of the FTS in Chicago to being an aide on the chairman's personal staff. A tall, rangy individual whose youthful enthusiasm, hector, and bearing belied the grey hair and beard, he moved from Chicago to settle into an almost monastic existence in Arlington where replacing the FTS became his life. The strategy evolved from the interaction of complementary viewpoints in a small team stimulated by the long-range planning discussions. On one hand, there was the experience of the Bell system and the common-carrier industry with a clear vision of the future as a digital network with integration of services. On the other hand, there was the experience of what might and might not work in the government and recent experience of where GSA's strengths and weaknesses lay. Also there was a conviction that an evolutionary approach would not work for a network of this size in the government because of the lack of internal experience and the slowness of procurements. Finally, there was recognition of the need to turn a theoretical strategy into an implementable plan, to draw into the project the resources needed, and to build a consensus among all parties. Basically, alternatives could be broken into three main categories: do nothing (which was unacceptable), engineer a private system of switches and circuits (as was the old FTS), or buy services. There were, of course, hybrids of these. Within each of the basic 10

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11 alternatives was a spectrum of sub-alternatives. For example, engineering a new private line system could, on one hand, proceed by evolving, component by component, from the existing system (the strategy that was being followed informally up to this time). On the other hand, the old system could be completely replaced in one effort. There was a host of other alternatives in between these extremes. Similarly, within the basic alternative of buying services there were sub-alternatives such as buying off public tariffs or, on the other hand, seeking new arrangements. There were also a variety of alternatives in determining the scope of the replacement such as: the role of GSA staff versus customer agencies; size, reach, and scope of services; procurement schedule; life cycle cost, capital investment needed, front loading of funds; breadth of competition, viability of the competition; and, transition schedule. In many ways the strategy was driven more by limits than opportunities--perhaps true of all government programs. Some of the obstacles to be overcome that began to shape the strategy were: . GSA did not have the staff, in numbers or experience, that could build the Bell vision of the future. They could not hope to attract them from outside the government due to the prevailing Office of Personnel Management (OPM) policies regarding pay and the OPM hiring process; AT&T at that time was not able to help GSA, partly because it had not come to terms with the fact that deregulation had changed the world and was beginning to bring telecommunications under the laws governing competition and competitive regulations. This competitive environment constrained the opportunities GSA could pursue to those for which there was competition. AT&T on the other hand suggested an all-or-nothing approach as a solution to Telpak's demise. This approach was their proprietary Software Defined Network (SDN); AT&T had little incentive to be creative, or be quick to help, as the business was locked up for them in the existing network; the government procurement system took too long to accomplish very little and, hence, any approach that depended on many interrelated procurements would be impossible to achieve in practical terms; OMB in the new climate of the Reagan administration was pro deregulation and felt that the time was right to question and rejustify the FTS;

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12 . . to some extent OMB wanted to apply deregulation to a corporate network in the belief that what was good for an industry was equally applicable to its customers; because of the rising cost of the current network and GSA's difficulties in responding, the customer agencies had little faith in GSA and wanted to get out of the curren* network and go their own way. OMB provided a sympathetic audience for such moves; there was too much technical risk in interfering with the existing network to any large extent as the FTS was a critical system on which the whole of the government depended for day-to-day operation; there was no resource and capability anywhere in the government or private sector with sufficient experience to design a new network of the FTS's size other than the common carriers themselves; any replacement plan that required up-front funds would take many years to gain congressional approval and in all probability would fail in the world of tight budgets as the deficit rose; it was logically impossible to determine requirements for future data usage, but the governmental procurement system was firmly rooted in a process that mandated the development of requirements estimates. Any attempt to deviate from this was met with resistance (Note 1~; the alternative of only buying voice services was technologically out of step with the development of digital telecommunications. In the growing digital common carrier networks, speed and capacity were the issues not whether the bits represented voice, data, or images. Buying only voice services would have provided a fertile ground for later problems as agencies created multiple data systems and then added their voice traffic to justify their systems economically; the governmental procurement system was not only entrenched in the classical system development life cycle, but was also oriented toward the buying of hardware (the procurement of dedicated networks) not telecommunications services. Once again, any attempt to deviate from this was met with resistance; and transition from or shutting down the existing network was a problem of such technological, management, and economic dimension as had never been attempted before in the industry (Note 2~. During the first part of 1984, the various alternatives as to how the network might be replaced were tested against the obstacles. Slowly, as the process of dealing one by one with the obstacles progressed, the FTS2000 strategy began to form:

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13 offer services rather than a network; provide for service pricing and payment; ~ offer integrated services rather than just voice; and choose a single responsible contractor. As with all creative efforts, it did not proceed smoothly or sequentially. It was an iterative process. As frequently happens in such cases, the main players did not always realize what direction ideas were going or where they stood in the process. Indeed, often the main players felt they had a common understanding of the problem when further development showed that they had not. However, as the individual ideas matured, they matured in the same overall direction. At each step forward the ideas were discussed with vendors, and though vendors probably did not understand exactly what was being proposed, the team felt that their reactions were not negative to the idea (Note 3~. No one on the team understood then just how innovative the evolving strategy was and hence how the communication of ideas would be a continuing problem. As each new constituency was drawn into the project, they saw the project in their own terms (for example engineers saw it as buying a network of switches and circuits) and tried to change it in their own image. Typically it would prove to take six months to get each new group to dispense with old ideas and embrace the new. In summary, perhaps the obstacle that formed the FTS2000 approach more than any other was the lack of experience within GSA to undertake a sophisticated effort in engineering and technical management. And perhaps the single most important item in providing energy to the process was AT&T's unhelpfulness. The latter highlighted for GSA in no uncertain terms that if they were ever to get out of the current network they had to do it themselves. It became a question of how and with what. THE STRATEGY FORMS On July 10, 1984, the first identifiable meeting took place that formally recognized the project that later came to be known as FTS2000. The session was held between the head of the Office of Telecommunications Services, the head of the Office of Network Services, and the head of the Office of Information Resources Procurement. Development of the annual operating plan was beginning and the session was to determine what was to be planned for the coming fiscal year. For the first time the plan for the FTS was described in terms of "FTS replacement" rather than "FTS evolution," as a result of the development of the GSA Long-Range Telecommunications Plan. The purpose of the meeting was to formally initiate examining three main alternatives for replacing the network:

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14 1. Hire a SETAMS contractor to support design, engineering, and building of the new network; buy the component pieces (switches and circuits); and have GSA direct and manage the whole effort. This represented the strategy that had been unofficially followed by the Network Services organization since 1981. It was a legacy of the old FTS thinking and by that time really had been rejected as a viable alternative. 2. Hire a SETAMS contractor as with approach 1, but the contractor would buy the component pieces, would implement and manage the effort, and GSA would direct it. This appeared to answer some of the problems with approach 1 but it suffered from a major flaw that there were no experienced potential vendors who had dealt with networks of the size of FTS other than the common carriers. The way of doing business implied by this alternative was not that favored by the common carriers, who preferred alternative 3. It was however in accord with the way the government normally procured systems. 3. Specify services, letting service providers do everything needed to deliver these services. GSA's role would become one of contract oversight. This final alternative became FTS2000. Some key items came out of that meeting that would carry through the coming years, including: . establish an oversight committee composed of the customers, which resulted in the formation of the FTS2000 Interagency Steering Committee; and the project would need a Federally Funded Research and Development Center (FFRDC) type of company for oversight of the main contractor, which resulted in the subsequent relationship with the MITRE Corporation. The estimated schedule at that point in time was unrealistic. It was quickly emended as the massive nature of the project began to be recognized. But at that initial meeting the targets were set for development of an REP by January 1985, award by January 1987, and implementation by January 1989. The operating budget was seen as half a billion dollars a year. While this is the earliest record of the birth of FTS2000, it still had not completely gelled. The gelling took place between this meeting and formal decisions in November 1984, to go ahead (Note 4~. THE STRATEGY IS SET During November 1984, the team had a complete meeting of the mind on the outline and merits of the final alternative 3 strategy. The problem had been reduced to replacing the existing FTS as it was no longer serving its users. This became the primary objective against which all other considerations would be subordinate. . .

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15 The system had become obsolete not only because its cost advantage was trickling rapidly away after the death of Telpak, but also because more and more agencies needs were for data services that could not be met with the existing analog network. In addition, the old network contained much outdated plant and equipment and its quality was decaying. Finally, there was no provision for the sophisticated management information that customers needed in a deregulated world and no way to easily provide it. The replacement strategy had to address all four of these concerns. Because of this obsolescence, termination of the existing FTS would be inevitable no matter what future course was pursued. Transition from the existing system, irrespective of whether it was to a single or multiple provider, would be extremely complex. Transition to a single provider would be the simplest and safest alternative. Also, a single provider should be able to provide significant economies of scale and, hence, attractively low prices. In examining how to replace the old system, GSA's analysis of the telecommunications industry had shown that there were six competing common carriers all investing capital in plant and equipment for national networks. These were AT&T, MCI, GTE Sprint, Satellite Business Systems (SBS, a subsidiary of IBM at the time), U.S. Telcom, and U.S. Transmission Systems (a subsidiary of IT&T). Prognostications were that a shake out would take place in the industry but that at least three viable companies would remain at the end of the decade. Each would be capable of handling the total FTS traffic without it representing the majority of their business. In addition, the market strategy of all these companies (other than AT&T) was to take market share at the expense of profit and their common approach was to cut their costs by building their own networks. In all cases, their new network technology was predominantly digital--fiber optic transmission, digital switching, software control of networks--to cut the cost of voice transmission. However, a natural by-product of this was that all carriers intended to offer a full menu of services--data, voice, and video--all eventually delivered by the same digital network. In essence the time had come to buy integrated voice and data services as, by the time the FTS procurement was completed, services would be delivered together anyway. In addition, the carriers' strategy meant that they were already taking all the risks and building all the capacity necessary without a major customer like the U.S. government having to put up capital or having to guarantee very much traffic. Finally, as digital technology was less expensive than its analog counterpart and, as Telpak had been a cost-based tariff, there was every expectation that the $100 million increase in post-Telpak prices could be recouped. Probably even better prices were available if the government bought in such a way as to align with the business strategies of the common carriers. Basically, the approach would be to buy all services the common carriers anticipated delivering by their regular networks at special bulk rates. While this was a revolutionary new concept it was possible because of the unique point in the deregulation of the long-distance

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16 industry and because of the government's unique size. Very rarely does one have an opportunity to have it all, but such an opportunity faced GSA. The strategy hence was to: buy services, (not hardware) and reflect the service plans of the common carriers in the specification; thereby, shift technical activities to the service provider and get rid of the dedicated system; pay for services consumed, not hardware; make a single award to a single prime contractor; evaluate the bidding teams' capabilities to accomplish the transition safely; provide no up-front payments and make only minimum guarantees to avoid lock-in to the winning contractor; and require a service oversight center to measure the quality and quantity of services delivered for payment and billing purposes. One particular attraction of the approach was the competition that such a strategy would potentially bring--MCI, Sprint, and AT&T--though it was recognized at that time that they did not have to be the prime contractor. Prime contractors could potentially come from traditional system integration companies such as Electronic Data Systems, Martin-Marietta, Ford Aerospace, or TRW. They could also come from the manufacturers of network components such as IBM or Northern Telecom or they could be the common carriers themselves. In total, there were at least a dozen potential prime contractors. GSA also felt that, with the possible exception of AT&T, no single company had all of the capabilities to bid alone. All would have to form a consortium of some kind in order to bid. This was recognized as an obstacle that would have to be overcome to ensure competition. In addition, GSA recognized that bidding would be expensive and that getting such consortia formed and committed to major expenditures would take time. Finally, it was recognized that the development of a common specification for integrated services would have to heavily involve the potential bidders as GSA was not privy to what was on corporate drawing boards, in corporate investment plans, or in corporate research laboratories. Outside of the development of the strategy and procurement specification, there were even more important considerations of how such a major project might be constructed and might succeed. First, to have any chance of success, GSA had to run headlong into the project without any reservations. If GSA did not unreservedly believe in the project themselves and was not seen to sincerely believe in it by those whose cooperation they would need (OMB and the agencies as a minimum), it would never succeed. Also, such a large innovative project would have to be sold at all levels, not least of all within GSA itself. That meant that someone at the Senior Executive Service (SES) level had

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17 to visibly head the project if it was to have a chance to succeed. As the outline of the strategy developed, there were still many unanswered questions. In practical terms not enough was known to determine which issues would be pivotal and which would be trivial. Hence, the tear felt that the classical system theory model of studying and determining feasibility, cost/benefit, and so on would not be particularly fruitful. What was important was to get the common carrier industry working as quickly as possible on the government's problem using their own tested methods for creating capacity against uncertain requirements. The only process that seemed promising for GSA in this unique situation was to press energetically ahead in the general strategic direction described, while at the same time revealing as openly as possible the proposed direction. The purpose of this deliberate openness was to allow the objections of outside parties to surface so that they could be accommodated and dealt with in the process as early as possible. In essence, GSA would be the leader of a debate--this debate involving the vendors, the customer agencies, and other interests such as OMB, the National Communications System (NCS), and the National Security Agency (NSA). GSA's most important role in the program would be to gradually obtain consensus among the widely disparate constituency of vendors, users, and central oversight bodies on an approach acceptable to all. This was no mean task considering the widely different interests and viewpoints that would have to be satisfied and the whole process taking place at a time when the industry was in turmoil. This philosophy of stimulating debate toward consensus also militated toward developing a strawman specification as soon as possible. By inviting industry to work with GSA on refining the strawman, GSA could get industry's resources involved in developing the approach. Another aim of developing a strawman specification was to get the common carriers and big system engineering companies spending money as quickly as possible toward solving the government's problem. The replacement project was seen by GSA as a multimillion dollar proposal effort for each vendor. It would need companies to draw together new teams in unfamiliar relationships. Potential bidders would only begin to do this if they saw it to be in their own self-interest. Essentially, FTS2000 would be a business decision not a marketing decision even for the largest corporations This implied that the bidding efforts had to be placed high in the vendors' organizations. Hence, GSA needed to get the attention of the chief executive officers (CEOs) of potential prime contractors. By suggesting potential revenues of $4 billion to the CEOs, GSA could begin to get industry's huge energy behind the project and build momentum that would become less stoppable by negative governmental and vendor interests. As a consequence, getting industry to understand the magnitude of the program, and getting them to believe that it really was going to happen, became a high priority. Finally, the press was seen as a means to begin to propagate an exciting picture of the program in order to catch industry's

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18 interests. All of this would help get industry started while GSA began leading the development of the REP. To help create a sense of urgency, GSA was deliberately optimistic about the procurement schedule in public announcements. THE COMMITMENT IS MADE AND THE PROGRAM STARTS At meetings on the November 8 and 19, 1984, senior GSA management were briefed regarding the essentials of the strategy and the proposed timetable. After close questioning and discussions in the intervening time with the head of Information Resources Procurement, authorization to proceed was given. The project was still called "network replacement" throughout these discussions and was not named FTS2000 until a month later. The year 1984 drew to a close as the term began to prepare for a formal announcement meeting as soon as possible in 1985. Meanwhile, the top-ten customer agencies were selected to form a FTS2000 Interagency Steering Committee and work started to get the interest of high-level members in these agencies and get them involved. The week before Christmas saw one last final strategic meeting before announcement of the project. The meeting showed a united front between the procurement staff and the program staff as they discussed the strategy in detail (Note 51. Plans were made for a big vendor conference to start the project so that GSA could begin to catch the attention of the right companies at the right levels.