FEATURES & COMMENTARY
Washington, D.C. — Jim Wolf reports that the U.S. Navy awarded Electronic Data Systems Corp. a huge contract for data services in a deal that could be worth more than $10 billion and change the face of government computing.
EDS will build a seamless, secure “intranet”, or private Web on Internet standards, to replace the current mish-mash of more than 200 Navy and Marine Corps electronic gateways.
The awarding of the five-year contract Friday, with an option to extend for three, was hailed as pivotal by the Defense Department, which spent $289 billion in the fiscal year that ended Sept. 30.
“It gets the government out of the business of owning and operating information technology systems,” Deputy Defense Secretary Rudy de Leon said. “The potential for increased efficiency, standardization, interoperability and better business practices is tremendous.”
Under the contract, EDS will take over in phases the ownership, upkeep and updating of about 360,000 desktop computers throughout the United States.
The initial five-year contract was for $6.9 billion. The optional three years are said by Navy officials to be worth at least $1 billion a year, bringing the potential combined value to at least $9.9 billion. Navy officials said options to add telephone, video-conferencing, cell phones and personal digital assistants could swell the deal beyond that.
As in much of the government, the Navy’s networks grew piecemeal into a hodge podge of incompatible networks. Every shore command had its own. In some cases, e-mail attachments could not even be sent among commands.
The new system, called the Navy-Marine Corps Intranet, or NMCI, will tie together all shore commands and provide voice, video and data services in a more easily secured environment, Navy Secretary Richard Danzig told a Pentagon briefing.
The Navy, which is spending about $1.6 billion a year on information services and “connectivity”, expects its costs to drop to about $1.2 billion a year under the contract thanks to economies of scale and centralized management, he said.
The system would also be more secure, with system administrators able to see any unusual usage patterns, Danzig said.
Art Money, the civilian who serves as the Pentagon’s chief information officer, told the briefing the Navy contract marked, “the most revolutionary idea so far in re-engineering how we do business.”
The Navy overestimated by 30 percent or more the cost of the contract, expecting it to be as high as $2 billion a year, Daniel Porter, the Navy’s chief information officer, told Reuters. At that rate, the five-year contract, with an option to extend for three more years, could have been worth up to $16 billion, the figure cited in many accounts of the deal.
The losing bidders were two of the world’s three other computer services suppliers – International Business Machines Corp. and Computer Sciences Corp. – plus General Dynamics Corp., the Pentagon’s No. 4 supplier in fiscal 1999.
Even at $6.9 billion for the five-year term, the deal would be, “the biggest information contract that we know of that’s been awarded anywhere,” Danzig told the briefing.
The deal is part of a government trend to buy computer services just as corporations do in an effort to boost efficiency, save money and keep up with the rapid pace of change in information technology.
Computer services, “will be purchased from the commercial sector just as we buy other types of utilities (e.g. water, telephone, gas and electricity) paying for the service as it is delivered,” the Navy said in a report to Congress.
The ultra-secretive U.S. National Security Agency, an arm of the Pentagon, said in June it planned to turn to the private sector for the overhaul of most of its non-spying support technology in what could be a 10-year contract valued at up to $5 billion.
The Navy has specified that the prime contractor use small businesses for at least 35 percent of the work and has included incentives for topping that figure.