The FDIC’s Local Telecommunications Service
December 17, 2004
Evaluation Report 05-001
To: Russell A. Rau, Assistant Inspector General for Audits
From: Michael E. Bartell, Chief Information Officer and Director, Division of Information Resources Management
Arleas Upton Kea, Director, Division of Administration
Subject: Draft Evaluation Report Entitled, The FDIC's Local Telecommunications Service (Assignment No. 2004-047)
The Division of Information Resource Management (DIRM) and Division of Administration (DOA) have completed their review of the subject Office of Inspector General (OIG) report. We would like to thank the OIG for agreeing to take on this timely evaluation when DIRM made the request to the OIG in July 2004. We also appreciate the efforts by the OIG to revise the original draft report. We believe the revised draft report, dated November 23, provides a more accurate representation and history of the telecom issues and recognizes the positive efforts made to date by both DIRM and DOA.
We have evaluated the report recommendation, and have provided a detailed "Management Response" that includes planned corrective actions and expected completion dates as appropriate. You will also find a section entitled "General Comments," where we have proposed certain language changes be made and incorporated into the final report.
Management Response.
OIG Recommendation: We recommend that the Chief Information Officer and Director, DIRM, in conjunction with the Director, DOA, implement a strategy for local telecommunications service that includes:
- working with ASB personnel to review all contracting options available to the FDIC;
- performing market research and surveillance in the commercial marketplace along with contacting GSA officials to discuss and review local calling plans and rates that are available to the FDIC through the GSA at sites that GSA has under contract; and
- comparing the FDIC's current monthly local calling rates for headquarters, field, and regional locations with rates obtainable through (a) long-term contracts such as 3 to 5 years, (b) competitive bids for local service where two or more service providers offer service, and (c) GSA's local service plans that are available to the FDIC. The comparison should also consider potential savings from consolidating invoice processing for telecommunications services.
As discussed earlier, we estimated that the FDIC could save $130,000 to $325,000 annually by entering into long-term, competed service agreements. Accordingly, we will report funds put to better use of $390,000 to reflect recurring savings over a 3-year period (i.e., $130,000 x 3) in our next Semiannual Report to the Congress.
DIRM and DOA Response: DIRM and DOA concur with the recommendation made by the OIG. Although we agree with the recommendation, we believe that projecting the potential cost savings is premature. The amount of savings generated, if any, can only be determined once the actions undertaken are in place. As such, we cannot agree or disagree with the OIG estimate at this time. In addition, it should be noted that the potential cost savings may be difficult to ascertain. The competitive environment and deregulation in the industry have resulted in extreme variability in pricing and a multitude of options offered through bundled services. As a result, if asked to determine the specific savings achieved, identification of such savings may be difficult and blurred because of the inability to isolate the local telecommunications service costs as industry business changes occur. The subparts of the recommendation are addressed below:
Recommendation. DIRM should work with ASB personnel to review all contracting options available to the FDIC;
Response. DIRM's Voice and Video Operations Unit (VVOU) and DOA ASB plan to complete work related to the competition of the SOW / proposals now in ASB, identify more cost effective options where applicable and implement appropriate contract revisions by 12/31/05.
Recommendation. DIRM, in conjunction with DOA, should perform market research and surveillance in the commercial marketplace along with contacting GSA officials to discuss and review local calling plans and rates that are available to the FDIC through the GSA at sites that GSA has under contract
Response. Completed. DIRM VVOU has performed market research and discussed the various procurement options for local calling service with DOA Acquisition Services Branch (ASB). DIRM has researched the possibility of entering into longer term agreements, including entering into 2 and 5 year contracts, to compete local telecommunications agreements to obtain the best value for the Corporation. DIRM has also evaluated potential savings under the GSA local service options under scheduled contracts. The research included assessing the merits of competition and risks of awarding to the lowest cost vendor (e.g. contracting with a reputable service provider and preserving phone number portability).
Recommendation. DIRM, in conjunction with DOA, should compare the FDIC's current monthly local calling rates for headquarters, field, and regional locations with rates obtainable through (a) long-term contracts such as 3 to 5 years, (b) competitive bids for local service where two or more service providers offer service, and (c) GSA's local service plans that are available to the FDIC. The comparison should also consider potential savings from consolidating invoice processing for telecommunications services.
Response. Beginning in July 2004, DIRM analyzed the FDIC's local telecommunications program and teamed with DOA ASB to resume work on implementing procurement strategies and options concurrent with DIRM review of the telecommunications market. Subparts (a) and (c) above have been completed. As part of this effort, the VVOU has forwarded several Statements of Work (SOW) to ASB for Regional, Area and Virginia Square offices. The outcome of these competitive contracts will assist DIRM in making future strategic decisions for moving forward to other field offices. This action is in process and will address subpart (b) above. DIRM is also evaluating consolidated billing utilizing GSA's Metropolitan Area Acquisition (MAA) program. This work will be completed in conjunction with those identified in the response to bullet one on the first page of this response.
General Comments:
- Page 1, 2nd paragraph, 5th sentence: Please insert the word "related" following the word "telecommunications" and prior to "services" to accurately state the services provided.
- Statement from middle of page 2 of the OIG report: The FDIC has monthly service agreements with various regional telecommunications carriers nationwide that should be reviewed for additional consolidation.
- DIRM Voice & Video Operations Unit (VVOU) has been aggressively working towards billing consolidation since 2000. Each year, the number of monthly payment authorization vouchers (PAV) continues to decline due to invoice consolidation. We continue to work with the telecommunication carriers to further consolidate the bills, but further consolidation is not possible at this time. This is due to the disparate billing systems of telecommunication carriers when covering large geographical areas.
- Page 4, 2nd full paragraph, last sentence should read: However, FDIC will delay competing local telecommunications service for the Washington, D.C., locations until the Corporation can determine service requirements for employees that are moving to Virginia Square.
If you have any questions regarding the response, the points of contact for this matter are: Rack Campbell, DIRM Audit Liaison (703-516-1422) and Andrew Nickle, DOA Audit Liaison. (202-942-3190).
cc: James H. Angel Jr., OERM
Russ Pittman, DIRM ISB
Steve Anderson, DIRM BAB
Dan Mahoney, DIRM BAB
Ann Bridges Steely, DOA ASB
David McDermott, DOA ASB